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FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 333-72245



GOLDEN NORTHWEST ALUMINUM, INC.
(Exact name of registrant as specified in its charter)


|                                                                      |  |                                                
|--------------------------------------------------------------------- |  | -----------------------------------------------
|Oregon
(State or other jurisdiction of
incorporation or organization) |  | 93-1249606
(I.R.S. Employer Identification No.)



3313 West Second Street
The Dalles, Oregon  97058
(Address of principal executive offices)   (Zip Code)




(541) 296-6161
(Registrants telephone number, including area code)


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

YES  [X]     NO  [   ].

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date:

|             |  |                                 |        | 
|------------ |  | ------------------------------- | ------ | 
|CLASS        |  | OUTSTANDING AT OCTOBER 26, 2001
|             |  |                                
|Common Stock |  |                                 | 1,000. | 





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TABLE OF CONTENTS



|                             |                                                                                               |                                                                    |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                             |                                                                                               | CONSOLIDATED BALANCE SHEETS                                       
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                             
|                             |                                                                                               | NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS                
|                             | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                             | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II OTHER INFORMATION   
|                             | ITEM 1. LEGAL PROCEEDINGS.                                                                   
|                             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                    
|SIGNATURES                  
|EXHIBIT INDEX               
|EXHIBIT 10.1                
|EXHIBIT 10.2                



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This quarterly report on Form 10-Q also constitutes a quarterly report pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the following
subsidiaries of Golden Northwest Aluminum, Inc.:

|                                     |  |             |              |                 |  |                |  |                 |            |  |  | 
|------------------------------------ |  | ----------- | ------------ | --------------- |  | -------------- |  | --------------- | ---------- |  |  | 
|                                     |  |             |              |                 |  | State of       |  | I.R.S. Employer
|                                     |  | Commission  |              | incorporation   |  | Identification
|Company                              |  | file number |              | or organization |  | Number        
|                                     |  |             |              |                 |  |               
|Goldendale Holding Company           |  |             | 333-72245-04 |                 |  | Delaware       |  |                 | 91-1785763 | 
|Goldendale Aluminum Company          |  |             | 333-72245-05 |                 |  | Delaware       |  |                 | 91-1380241 | 
|Northwest Aluminum Company           |  |             | 333-72245-02 |                 |  | Oregon         |  |                 | 93-0905834 | 
|Northwest Aluminum Specialties, Inc. |  |             | 333-72245-01 |                 |  | Oregon         |  |                 | 93-1019176 | 
|Northwest Aluminum Technologies, LLC |  |             | 333-72245-03 |                 |  | Washington     |  |                 | 93-1196863 | 

The address of the principal executive offices for each of these entities is
3313 West Second Street, The Dalles, Oregon 97058 and their telephone number is
(541) 296-6161.





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PART I  FINANCIAL INFORMATION




ITEM 1.  FINANCIAL STATEMENTS




GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares)

ASSETS

|                                                                 |                                                                                            |                            |         |              |         |               |         |             |         | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------- | ------- | ------------ | ------- | ------------- | ------- | ----------- | ------- | 
|                                                                 |                                                                                            |                            |         | December 31, |         | September 30,
|                                                                 |                                                                                            |                            |         | 2000         |         | 2001         
|                                                                 |                                                                                            |                            |         |              |         |              
|                                                                 |                                                                                            |                            |         |              |         |               |         | (unaudited)
|Current assets:                                                  |                                                                                            |                            |         |              |         |               |         |            
|                                                                 | Cash and cash equivalents                                                                  |                            | $       | 1,982        |         |               | $       | 24,282      |        
|                                                                 | Trade accounts receivable, less allowance for doubtful accounts of $100                    |                            |         | 41,768       |         |               |         | 22,391      |        
|                                                                 | Reimbursement receivable                                                                   |                            |         | 40,795       |         |               |         | 18,753      |        
|                                                                 | Current portion of receivable due from related company                                     |                            |         | 2,141        |         |               |         | 917         |        
|                                                                 | Inventories                                                                                |                            |         | 89,316       |         |               |         | 68,312      |        
|                                                                 | Income taxes refundable                                                                    |                            |         | 811          |         |               |         | 1,311       |        
|                                                                 | Deferred income taxes                                                                      |                            |         | 2,825        |         |               |         | 2,185       |        
|                                                                 | Other current assets                                                                       |                            |         | 2,149        |         |               |         | 3,253       |        
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|                                                                 |                                                                                            | Total current assets       |         |              | 181,787 |               |         |             | 141,404 | 
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|Property, plant and equipment, net                               |                                                                                            |                            | 139,147 |              |         |               | 131,769 |            
|Goodwill, net of accumulated amortization of $18,829 and $22,185 |                                                                                            |                            | 74,186  |              |         |               | 70,830  |            
|Advances to shareholder                                          |                                                                                            |                            | 2,000   |              |         |               | 2,000   |            
|Receivable due from related company, less current portion        |                                                                                            |                            | 1,985   |              |         |               | 3,778   |            
|Other assets, net                                                |                                                                                            |                            | 9,388   |              |         |               | 11,295  |            
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|                                                                 |                                                                                            | $                          | 408,493 |              |         | $             | 361,076 |            
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS EQUITY           
|Current liabilities:                                             |                                                                                            |                            |         |              |         |               |         |            
|                                                                 | Current portion of long-term debt                                                          |                            | $       | 47,233       |         |               | $       | 25,851      |        
|                                                                 | Trade accounts payable                                                                     |                            |         | 21,744       |         |               |         | 13,286      |        
|                                                                 | Accrued expenses                                                                           |                            |         | 16,986       |         |               |         | 18,322      |        
|                                                                 | Accrued curtailment expenses                                                               |                            |         | 42,833       |         |               |         | 14,889      |        
|                                                                 | Current portion of dividends payable                                                       |                            |         | 8,500        |         |               |         | 1,400       |        
|                                                                 | Consolidation timing difference                                                            |                            |         | 4,241        |         |               |         | 26,306      |        
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|                                                                 |                                                                                            | Total current liabilities  |         |              | 141,537 |               |         |             | 100,054 | 
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|Long-term debt, less current portion                             |                                                                                            |                            | 170,000 |              |         |               | 170,000 |            
|Deferred income taxes                                            |                                                                                            |                            | 15,498  |              |         |               | 14,130  |            
|Other long-term liabilities                                      |                                                                                            |                            | 1,893   |              |         |               | 1,893   |            
|Dividends payable                                                |                                                                                            |                            | 8,311   |              |         |               | 16,112  |            
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|                                                                 |                                                                                            | Total liabilities          |         |              | 337,239 |               |         |             | 302,189 | 
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|Commitments and contingencies (Notes 5 and 6)                    |                                                                                            |                            |         |              |         |               |         |            
|Preferred stock of subsidiary                                    |                                                                                            |                            | 29,663  |              |         |               | 26,542  |            
|Shareholders equity:                                            |                                                                                            |                            |         |              |         |               |         |            
|                                                                 | Common stock, no par value; 350,000 shares authorized; 1,000 shares issued and
outstanding |                            |         |             |         |               |         |            |        
|                                                                 | Additional paid-in capital                                                                 |                            |         | 63,628       |         |               |         | 63,628      |        
|                                                                 | Accumulated other comprehensive loss                                                       |                            |         |             |         |               |         | (839        | )      
|                                                                 | Accumulated deficit                                                                        |                            |         | (22,037      | )       |               |         | (30,444     | )      
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|                                                                 |                                                                                            | Total shareholders equity |         |              | 41,591  |               |         |             | 32,345  | 
|                                                                 |                                                                                            |                            |         |              |         |               |         |            
|                                                                 |                                                                                            | $                          | 408,493 |              |         | $             | 361,076 |            
|                                                                 |                                                                                            |                            |         |              |         |               |         |            

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

1



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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE LOSS (Unaudited)

|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |        |         |  
|-------------------------------------------------- | -------------------------------------------------- | --------------------------- | ------- | -------------------------------- | ------ | ------------------------------- | ------- | ---- | ------ | ---- | ------- | - | ------- | - | ------- | ------ | ------- | -
|                                                   |                                                    |                             |         | Three Months ended September 30, |        | Nine Months ended September 30,
|                                                   |                                                    |                             |         |                                  |        |                                
|                                                   |                                                    |                             |         | 2000                             |        | 2001                            |         | 2000 |        | 2001
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |     
|                                                   |                                                    |                             |         | (in thousands)                  
|Revenues                                           |                                                    | $                           | 102,369 |                                  |        | $                               | 43,362  |      |        | $    | 335,654 |   |         | $ | 132,062 |       
|Cost of revenues                                   |                                                    |                             | 92,629  |                                  |        |                                 | 63,144  |      |        |      | 308,286 |   |         |   | 195,704 |       
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Gross margin (loss)                                |                                                    |                             | 9,740   |                                  |        |                                 | (19,782 | )    |        |      | 27,368  |   |         |   | (63,642 | )     
|Net gains on power sales                           |                                                    |                             |        |                                  |        |                                 | 3,472   |      |        |      |        |   |         |   | 57,435  |       
|Reimbursement of expenditures                      |                                                    |                             |        |                                  |        |                                 | 17,708  |      |        |      |        |   |         |   | 50,383  |       
|Curtailment expenses                               |                                                    |                             |        |                                  |        |                                 | (4,997  | )    |        |      |        |   |         |   | (13,079 | )     
|General and administrative expenses                |                                                    |                             | (6,521  | )                                |        |                                 | (4,822  | )    |        |      | (14,716 | ) |         |   | (14,923 | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Operating income (loss)                            |                                                    |                             | 3,219   |                                  |        |                                 | (8,421  | )    |        |      | 12,652  |   |         |   | 16,174  |       
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Other income (expense):                            |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|                                                   |                                                    | Interest expense            |         |                                  | (5,561 | )                               |         |      | (5,685 | )    |         |   | (17,390 | ) |         |        | (17,689 | )
|                                                   |                                                    | Other income (expense), net |         |                                  | (96    | )                               |         |      | 329    |      |         |   | (341    | ) |         |        | (167    | )
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Net other expense                                  |                                                    |                             | (5,657  | )                                |        |                                 | (5,356  | )    |        |      | (17,731 | ) |         |   | (17,856 | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Loss before income taxes                           |                                                    |                             | (2,438  | )                                |        |                                 | (13,777 | )    |        |      | (5,079  | ) |         |   | (1,682  | )     
|Income tax expense (benefit)                       |                                                    |                             | 580     |                                  |        |                                 | (2,733  | )    |        |      | 2,118   |   |         |   | (274    | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Net loss                                           |                                                    | $                           | (3,018  | )                                |        | $                               | (11,044 | )    |        | $    | (7,197  | ) |         | $ | (1,408  | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Net loss                                           |                                                    | $                           | (3,018  | )                                |        | $                               | (11,044 | )    |        | $    | (7,197  | ) |         | $ | (1,408  | )     
|Dividends accrued on preferred stock of subsidiary |                                                    |                             | (914    | )                                |        |                                 | (817    | )    |        |      | (2,737  | ) |         |   | (2,579  | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Net loss available to common shareholder           |                                                    | $                           | (3,932  | )                                |        | $                               | (11,861 | )    |        | $    | (9,934  | ) |         | $ | (3,987  | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Net loss                                           |                                                    | $                           | (3,018  | )                                |        | $                               | (11,044 | )    |        | $    | (7,197  | ) |         | $ | (1,408  | )     
|Other comprehensive loss, net of tax:              |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|                                                   | Unrealized loss on derivative financial instrument |                             |         |                                 |        |                                 |         | (598 | )      |      |         |  |         |   |         | (1,291 | )      
|                                                   | Tax benefit on unrealized loss                     |                             |         |                                 |        |                                 |         | 210  |        |      |         |  |         |   |         | 452    |        
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       
|Comprehensive loss                                 |                                                    | $                           | (3,018  | )                                |        | $                               | (11,432 | )    |        | $    | (7,197  | ) |         | $ | (2,247  | )     
|                                                   |                                                    |                             |         |                                  |        |                                 |         |      |        |      |         |   |         |   |         |       

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

2



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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents

|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |          |        |         |  
|--------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------- | ------------------------------- | -------- | ------------------------------- | ------- | ------- | -------- | ------ | ------- | -
|                                                    |                                                                                 |                                          |                                 |          | Nine Months Ended September 30,
|                                                    |                                                                                 |                                          |                                 |          |                                
|                                                    |                                                                                 |                                          |                                 |          | 2000                            |         | 2001   
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |        
|                                                    |                                                                                 |                                          |                                 |          | (in thousands)                 
|Cash flows from operating activities:               |                                                                                 |                                          |                                 |          |                                 |         |         |         
|                                                    | Net loss                                                                        |                                          | $                               | (7,197   | )                               |         | $       | (1,408   | )     
|                                                    | Adjustments to reconcile net loss to net cash provided
by operating activities: |                                          |                                 |          |                                 |         |         |          |       
|                                                    |                                                                                 | Depreciation and amortization            |                                 |          | 17,907                          |         |         |          | 20,107 |        
|                                                    |                                                                                 | Amortization of financing costs          |                                 |          | 794                             |         |         |          | 794    |        
|                                                    |                                                                                 | Provision for bad debts                  |                                 |          | 2,000                           |         |         |          |       |        
|                                                    |                                                                                 | Loss on disposal of assets               |                                 |          | 524                             |         |         |          | 355    |        
|                                                    |                                                                                 | Realized loss on aluminum call options   |                                 |          |                                |         |         |          | 2,295  |        
|                                                    |                                                                                 | Unrealized loss on aluminum call options |                                 |          |                                |         |         |          | 1,632  |        
|                                                    |                                                                                 | Premiums paid for aluminum call options  |                                 |          |                                |         |         |          | (2,183 | )      
|                                                    |                                                                                 | Deferred income taxes                    |                                 |          | (315                            | )       |         |          | (276   | )      
|                                                    |                                                                                 | Change in assets and liabilities:        |                                 |          |                                 |         |         |          |        |        
|                                                    |                                                                                 |                                          | Trade accounts receivable       |          |                                 | 6,316   |         |          |        | 19,377  |  
|                                                    |                                                                                 |                                          | Reimbursement receivable        |          |                                 |        |         |          |        | 22,042  |  
|                                                    |                                                                                 |                                          | Inventories                     |          |                                 | (13,160 | )       |          |        | 21,004  |  
|                                                    |                                                                                 |                                          | Other current assets            |          |                                 | 468     |         |          |        | (2,848  | )
|                                                    |                                                                                 |                                          | Income taxes refundable         |          |                                 | 174     |         |          |        | (500    | )
|                                                    |                                                                                 |                                          | Other assets                    |          |                                 | 962     |         |          |        | (2,713  | )
|                                                    |                                                                                 |                                          | Trade accounts payable          |          |                                 | (17,458 | )       |          |        | (8,458  | )
|                                                    |                                                                                 |                                          | Accrued expenses                |          |                                 | 1,998   |         |          |        | 2,270   |  
|                                                    |                                                                                 |                                          | Accrued curtailment expenses    |          |                                 |        |         |          |        | (27,944 | )
|                                                    |                                                                                 |                                          | Consolidation timing difference |          |                                 | 11,354  |         |          |        | 22,065  |  
|                                                    |                                                                                 |                                          | Other liabilities               |          |                                 | 13      |         |          |        |        |  
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Net cash provided by operating activities           |                                                                                 |                                          | 4,380                           |          |                                 |         | 65,611  |         
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Cash flows from investing activities:               |                                                                                 |                                          |                                 |          |                                 |         |         |         
|                                                    | Acquisition of property, plant and equipment                                    |                                          |                                 | (21,714  | )                               |         |         | (9,716   | )     
|                                                    | Net payments from (credit to) related company                                   |                                          |                                 | 46       |                                 |         |         | (569     | )     
|                                                    | Proceeds from sale of equipment                                                 |                                          |                                 | 44       |                                 |         |         |         |       
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Net cash used in investing activities               |                                                                                 |                                          | (21,624                         | )        |                                 |         | (10,285 | )       
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Cash flows from financing activities:               |                                                                                 |                                          |                                 |          |                                 |         |         |         
|                                                    | Borrowings under revolving credit facilities                                    |                                          |                                 | 303,922  |                                 |         |         | 255,356  |       
|                                                    | Repayments under revolving credit facilities                                    |                                          |                                 | (287,608 | )                               |         |         | (276,738 | )     
|                                                    | Redemption of preferred stock                                                   |                                          |                                 |         |                                 |         |         | (3,121   | )     
|                                                    | Dividends paid on preferred stock                                               |                                          |                                 |         |                                 |         |         | (1,878   | )     
|                                                    | Dividends paid on common stock                                                  |                                          |                                 |         |                                 |         |         | (4,420   | )     
|                                                    | Principal payments on deferred compensation notes                               |                                          |                                 | (357     | )                               |         |         | (660     | )     
|                                                    | Increase (decrease) in bank overdraft                                           |                                          |                                 | 1,297    |                                 |         |         | (1,565   | )     
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Net cash provided by (used in) financing activities |                                                                                 |                                          | 17,254                          |          |                                 |         | (33,026 | )       
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Net increase in cash and cash equivalents           |                                                                                 |                                          | 10                              |          |                                 |         | 22,300  |         
|Cash and cash equivalents, beginning of period      |                                                                                 |                                          | 1,929                           |          |                                 |         | 1,982   |         
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         
|Cash and cash equivalents, end of period            |                                                                                 | $                                        | 1,939                           |          |                                 | $       | 24,282  |         
|                                                    |                                                                                 |                                          |                                 |          |                                 |         |         |         

Supplemental Disclosures of Cash Flow Information (Note 7)

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

3



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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)



|1. |  | Basis of Presentation
|-- |  | ---------------------

The foregoing unaudited interim consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by
the Securities and Exchange Commission. Accordingly, these financial
statements do not include all of the disclosures required by accounting
principles generally accepted in the United States of America for complete
financial statements. These unaudited interim consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 2000. In the opinion of
management, the unaudited interim consolidated financial statements furnished
herein include all adjustments, all of which are of a normal recurring nature,
necessary for a fair statement of the results for the interim periods
presented.

The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist as
of the date the financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties with respect
to such estimates and assumptions are inherent in the preparation of the
Companys (defined below) consolidated financial statements; accordingly, it is
possible that the actual results could differ from these estimates and
assumptions, which could have a material effect on the reported amounts of the
Companys consolidated financial position and results of operations.

Operating results for the nine-month period ended September 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.



|2. |  | Operations and Principles of Consolidation
|-- |  | ------------------------------------------

Golden Northwest Aluminum, Inc. (the Company) was incorporated in the
state of Oregon on June 3, 1998 for the purpose of becoming the holding company
of Northwest Aluminum Company and Northwest Aluminum Specialties, Inc.
(collectively Northwest), Goldendale Holding Company and its wholly owned
subsidiary, Goldendale Aluminum Company (collectively Goldendale) and
Northwest Aluminum Technologies, LLC (Technologies). The consolidated
financial statements include the accounts of Northwest, Goldendale and
Technologies.

The operations of the Company consist primarily of the smelting conversion
of alumina to aluminum, processing of aluminum into primary products, and the
sale of those products within one business segment. The operations are located
in the Pacific Northwest on the Columbia River.

Approximately 72% of the labor force of the Companys subsidiaries was
subject to collective bargaining agreements that expired on September 30, 2001.
The Company and the collective bargaining units have been unable to reach
agreement on new labor contracts. The labor agreements have
been

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

extended on a
day-to-day basis and the Goldendale unionized labor force is engaged in a work
stoppage with respect to commercial operations. Without long-term labor
agreements, the Company may be unable to resume normal smelting operations.

The Company has curtailed substantially all of its smelting operations
since late 2000. The Companys operating subsidiaries smelting operations
were under tolling agreements with aluminum suppliers through December 1999.
In December 1999, Northwest chose not to continue its tolling arrangement with
Glencore Ltd. (Glencore) and allowed it to expire. Goldendales smelting
operations are subject to a tolling agreement with Norsk Hydro USA, Inc.
(Hydro) that has been amended and expires December 31, 2013. In October
2001, the Company notified Hydro of an event of force majeure. The event of
force majeure was declared as a result of 1) a governmental agency, Bonneville
Power Administration (BPA), forcing Goldendale to curtail operations; and 2)
the work stoppage at Goldendale by its unionized labor force. The Company
believes that these events excuse its contractual obligations for the duration
of the force majeure.

The Company is in discussions with Hydro about the force majeure and
tolling agreement. The Company may not be able to reach agreement with Hydro.
While the Company believes it is on sound legal footing with respect to its
claim of force majeure under the Hydro tolling agreement, the Company may not
prevail if it were engaged in a legal dispute over whether an event of force
majeure had occurred. Were Hydro to prevail, the Company could be found to be
in breach of the Hydro tolling agreement, which could have a material adverse
effect on the Companys business.

The Company, Goldendale and Technologies report on a calendar year basis;
Northwest reports on a September 30 fiscal year basis. All significant intercompany accounts and transactions have
been eliminated. Current liabilities include a consolidation
difference of $4,241 at December 31, 2000 and $26,306 at September 30, 2001, primarily representing the net repayments on the revolving
credit facility by Northwest during the three month periods ended
December 31, 2000 and September 30, 2001, which do not eliminate due
to the differing year ends.



|3. |  | Effect of Recently Issued Accounting Standards
|-- |  | ----------------------------------------------

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 (SFAS No. 138), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and No. 138 are effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. Effective January 1,
2001, the Company adopted SFAS No. 133 and 138. The Company reflected the
difference between the fair market value of the derivative instruments and the
recorded book value of the derivative instruments as a cumulative effect type
adjustment to accumulated other comprehensive income. The Company believes
that the majority of its non-trading derivative contracts, power purchase
agreements and aluminum purchase and sale agreements qualify for the normal
purchases and sales exception of SFAS No. 133 and therefore would not be
recognized at fair value on the balance sheet. The Company does however use
certain derivative instruments to limit its exposures to commodity price risk
and interest rate risk. The Companys interest rate swap agreement permits it
to limit exposure to interest rate risk and meets the requirements for hedge
accounting under SFAS No. 133. The Company recorded the changes in the fair
value of this contract in accumulated other comprehensive income on the balance
sheet. Aluminum call options entered into to limit exposure to commodity price
risk are not accounted for as hedging instruments under SFAS No. 133 and as a
result, changes in fair value of these instruments are immediately recognized
in income.

The financial statement impact of recording the SFAS No. 133 transition
adjustment on January 1, 2001 is as follows:

|                                                                       |  |   |     | 
|---------------------------------------------------------------------- |  | - | --- | 
|Fair value of interest rate swap (liability)                           |  | $ | 783 | 
|Increase in accumulated other comprehensive income, net of
tax of $122 |  | $ | 228 | 

Upon initial adoption of the standard, the Company recorded $228, net of tax,
cumulative effect adjustment to accumulated other comprehensive loss. This
adjustment relates to the fair value of the interest rate swap contract that
qualified for cash flow hedge accounting prior to the initial adoption of SFAS
No. 133. This amount will reduce interest expense when the related hedged
transaction occurs.

In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 141 (SFAS 141),
Business Combinations. This standard eliminates the pooling method of
accounting for business combinations initiated after June 30, 2001. In
addition, SFAS 141 addresses the accounting for intangible assets and goodwill
acquired in a business combination. This portion of SFAS 141 is effective for
business combinations completed after June 30, 2001. The Company does not
expect SFAS 141 to have a material effect on the Companys financial position
or results of operations.

In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 142 (SFAS 142),
Goodwill and Intangible Assets, which revises the accounting for purchased
goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets
with indefinite lives will no longer be amortized, but will be tested for
impairment annually and also in the event of an impairment indicator. SFAS 142
is effective for fiscal years beginning after December 15, 2001, with early
adoption permitted for companies with fiscal years beginning after March 15,
2001 if their first quarter financial statements have not previously been
issued. The Company is currently analyzing the financial impact that the
adoption of SFAS 142 will have on its consolidated

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

financial statements. The
Company will adopt SFAS 142 in the first quarter of 2002. The tests for
impairment of assets could require a write-down of the carrying value of
goodwill and intangible assets, which would adversely affect the Companys
ability to meet the covenants of its debt agreements.

In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standard No. 143 (SFAS 143),
Accounting for Asset Retirement Obligations, which addresses the accounting for
legal obligations associated with the retirement of tangible long-lived assets.
Under SFAS 143, the fair value of a liability for an asset retirement
obligation shall be recognized in the period in which the obligation is
incurred. SFAS 143 is effective for fiscal years beginning after June 15,
2002, with early adoption permitted. The Company is currently analyzing the
financial impact that the adoption of SFAS 143 will have on its consolidated
financial statements. The Company will adopt SFAS 143 on or before January
2003.

In August 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 144 (SFAS 144),
Accounting for the Impairment or Disposal of Long-lived Assets. SFAS 144
supersedes Statement of Financial Accounting Standards No. 121, Accounting for
Impairment of Long-lived Assets and Assets to be Disposed of, and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. The provisions of SFAS 144 will be effective for
fiscal years beginning after December 15, 2001. The most significant changes
made by SFAS 144 are that it: (1) removes goodwill from its scope and,
therefore, eliminates the requirements of SFAS 121 to allocate goodwill to
long-lived assets to be tested for impairment, and (2) describes a
probability-weighted cash flow estimation approach to deal with situations in
which alternative courses of action to recover the carrying amount of
long-lived assets are under consideration or a range is estimated for the
amount of possible future cash flows. The Company is currently analyzing the
financial impact that the adoption of SFAS 144 will have on its consolidated
financial statements. The Company will adopt SFAS 144 on or before January
2002.



|4. |  | Inventories
|-- |  | -----------

Inventories consist of the following:

|                                        |  |              |        |               |  |   |        | 
|--------------------------------------- |  | ------------ | ------ | ------------- |  | - | ------ | 
|                                        |  | December 31, |        | September 30,
|                                        |  | 2000         |        | 2001         
|                                        |  |              |        |              
|Purchased metals and tolling in process |  | $            | 60,425 |               |  | $ | 39,911 | 
|Supplies and alloys                     |  |              | 15,303 |               |  |   | 15,270 | 
|Carbon plant materials                  |  |              | 4,844  |               |  |   | 3,499  | 
|Alumina                                 |  |              | 8,744  |               |  |   | 9,632  | 
|                                        |  |              |        |               |  |   |        | 
|                                        |  | $            | 89,316 |               |  | $ | 68,312 | 
|                                        |  |              |        |               |  |   |        | 

As a result of the continued curtailment of smelting operations and
uncertainties related to the estimated restart date of smelting operations,
adjustment to the valuation of certain raw materials and

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

finished goods
inventory was necessary. Accordingly, at September 30, 2001, inventory has
been written down to its estimated net realizable value.



|5. |  | Long-term Debt
|-- |  | --------------

Long-term debt consists of the following:

|                                    |  |              |         |               |  |   |         | 
|----------------------------------- |  | ------------ | ------- | ------------- |  | - | ------- | 
|                                    |  | December 31, |         | September 30,
|                                    |  | 2000         |         | 2001         
|                                    |  |              |         |              
|First mortgage notes                |  | $            | 150,000 |               |  | $ | 150,000 | 
|Subordinated credit agreement       |  |              | 20,000  |               |  |   | 20,000  | 
|Revolving credit facility           |  |              | 47,233  |               |  |   | 25,851  | 
|                                    |  |              |         |               |  |   |         | 
|Long-term debt                      |  |              | 217,233 |               |  |   | 195,851 | 
|Less current portion                |  |              | 47,233  |               |  |   | 25,851  | 
|                                    |  |              |         |               |  |   |         | 
|Long-term debt less current portion |  | $            | 170,000 |               |  | $ | 170,000 | 
|                                    |  |              |         |               |  |   |         | 

In December 1998, the Company issued $150,000 of 12% first mortgage notes
due on December 15, 2006. Interest is payable semi-annually on June 15 and
December 15, commencing June 15, 1999. Payment of the notes is guaranteed by
all of the Companys subsidiaries. The debt is collateralized by substantially
all of the real property, plant and equipment of the Companys subsidiaries and
by a pledge of all of the issued and outstanding capital stock of the Companys
subsidiaries. On or after December 15, 2002, the notes are redeemable at the
option of the Company at specified redemption prices. There are no sinking
fund requirements. The indenture agreement limits principal payments on
subordinated debt, dividends or shareholder distributions, and investments in
subsidiaries. In connection with the issuance of the notes, each of the
Companys direct and indirect wholly owned subsidiaries has jointly and
severally guaranteed the notes on a full and unconditional basis.

In December 1998, the Company entered into a $75,000 bank revolving credit
facility, which matures on December 20, 2003 and is collateralized by
inventory, accounts receivable and related intangibles, including a security
interest in the Companys tolling agreement. Borrowings under the credit
facility bear interest at a floating base rate plus from 0.50% to 1.00% (7.25%
at September 30, 2001) or the LIBOR rate plus from 2.00% to 2.50% (5.81% at
September 30, 2001). The additional margin is dependent upon the consolidated
ratio of earnings before interest, income taxes, depreciation and amortization
to interest expense. The credit facility provides for the payment of a
commitment fee of 0.50% per annum based on the unused portion of the credit
facility. The credit agreement contains restrictive covenants, including a
minimum net worth requirement, a minimum excess availability requirement and
limitations on capital expenditures, dividends, additional indebtedness,
mergers and other business combinations, assets sales, encumbrances,
investments and transactions with affiliates. The Company was in compliance
with these covenants at September 30, 2001.

The Administrative Agent for the bank revolving credit facility increased
the borrowing base reserve from $15,000 to $21,000 during 2001, thus reducing
the amount which the Company is eligible to borrow under the credit agreement.
In August 2001, two of the lenders under the revolving credit facility notified
the Company of their desire to discontinue their participation in the
facility. The

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

Company is negotiating with other lenders to replace the credit facility,
or replace these two lenders and retain the existing credit facility.

Also in December 1998, the Company entered into a subordinated credit
agreement with Hydro pursuant to which $20,000 was advanced. The debt bears
interest at LIBOR plus two percent (7.25% at September 30, 2001) and is due in
December 2005. The debt is secured by a second lien and a pledge on the
collateral securing the first mortgage notes and is guaranteed by the Companys
subsidiaries. Except for the collateral security, the guarantees by the
Company are subordinate to the indebtedness under the bank revolving credit
facility. The credit agreement provides for additional borrowings of $10,000
on or prior to December 31, 2001, however the Company does not intend to borrow
this additional $10,000.

On January 21, 1999, the Company entered into an interest rate swap
agreement that expires in 2003. The fixed interest rate paid on the swap
agreement is 6.4% and covers $20,000 of notional principal amount of floating
rate (LIBOR) indebtedness of the Company. Although the Company is exposed to
credit loss on the interest rate swap in the event of nonperformance by the
counterparties, the Company estimates the likelihood of such nonperformance to
be remote. At December 31, 2000, the fair value of the interest rate swap was
approximately $350, and at September 30, 2001 the fair value of the contract
was approximately $1,291. These amounts reflect the estimated amount that the
Company would pay to terminate the contracts. The interest rate swap agreement
is accounted for as a cash flow hedge. Changes in fair value are recognized as
a component of other comprehensive loss.



|6. |  | Commitments and Contingencies
|-- |  | -----------------------------

The Company, in the regular course of business, is involved in
investigations and claims by various regulatory agencies. The Company is also
engaged in various legal proceedings incidental to its normal business
activities. The Companys management does not believe that the ultimate
resolution of these investigations, claims and legal proceedings will have a
material effect on its financial position, results of operations or cash flows.

During 1999, the Company contracted for the design and construction of a
bath reclaim facility at Goldendale. In connection therewith, a dispute has
arisen over contract change orders to an engineering and construction contract.
The Company has accrued an estimate of the costs to settle the claim in the
amount of $520, of which $303 has been placed in an escrow account. The
dispute is to be resolved by an arbitrator in November 2001. If the Company is
not successful, the ultimate cost to the Company may exceed the amount accrued.

As of September 30, 2001, the Company had a liability of approximately
$1,895 ($1,893 at December 31, 2000), for estimated environmental remediation
activities to be taken at the Companys Goldendale facility. The Companys
estimate of this liability is based on a remediation study conducted by
independent engineering consultants. The total cost of remediation is
estimated at $3,253; however, under a court decree the Company is only
responsible for approximately one-half of the total. The remaining cost is the
responsibility of prior owners. No accrual has been provided for the Northwest
facility, as the Company is unaware of any current condition that would give
rise to remedial action.

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

In December 2000, the Company was designated as a potentially responsible
party (PRP) by the U.S. Environmental Protection Agency under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, and by the
State of Oregon under applicable state laws with respect to the
Portland Harbor Superfund site in Portland, Oregon. Other PRPs also have
been so designated. The Company, along with other PRPs, is participating in
the funding of a remedial investigation/feasibility study. The Company has
been contractually designated as a de minimus PRP. Management does not
anticipate selection of a remedy for several years and is of the opinion that
the Company will be found to have a de minimus liability, if any, in the
outcome of the matter.

The Company has entered into various agreements for the purchase of power,
alumina, and aluminum, including agreements with the Bonneville Power
Administration (BPA) for the purchase of electrical power at fixed rates.

Future estimated minimum payments under non-cancelable agreements at
December 31, 2000 are as follows:

|                         |  |   |         | 
|------------------------ |  | - | ------- | 
|Year Ending December 31, |  |   | Amount 
|                         |  |   |        
|2001                     |  | $ | 66,781  | 
|2002                     |  |   | 32,022  | 
|2003                     |  |   | 32,022  | 
|2004                     |  |   | 32,022  | 
|                         |  |   |         | 
|                         |  | $ | 162,847 | 
|                         |  |   |         | 

In October 2000, the Company entered into a new power sales agreement with
BPA that will be effective from October 1, 2001 through September 30, 2006.
The contract will allow the Company to direct available power to either or both
of the operating facilities. Approximately 50% of the Companys power
requirements can be met through the contract. The contract is a take or pay
contract, meaning that the Company is obligated to pay for the power, whether
it takes the power or not. BPA has requested, however, that all direct service
industrial customers not take the power available to them under the contract
until October 2003. Consequently, the Company does not expect BPA to require
payment for power during such a period of curtailment. The base rate adopted
by BPA was $23.50 per megawatt-hour. The rate adopted by BPA includes a Cost
Recovery Adjustment Clause, which allows BPA to adjust rates under certain
defined circumstances. In March 2001, BPA proposed a revised and expanded
Cost Recovery Adjustment Clause that would give BPA broad discretion to
adjust rates every six months to ensure that it could recover all its costs and
repay its obligations to the U.S. Treasury under almost any circumstances. The
rate, including cost recovery adjustments, adopted by BPA as a result of these
proceedings for the period October 1, 2001 through March 31, 2002 is a maximum
of $34.00 per megawatt-hour plus the Companys transmission charges of
approximately $3.50 per megawatt-hour. The Federal Energy Regulatory
Commission (FERC) approved this rate proceeding in September 2001, and the
Company did not exercise its option to terminate the contract. Under this
contract, the Company will not be able to reshape or have BPA remarket this
power entitlement. In addition, the BPA Administrator may have broad
discretion to temporarily or permanently limit or terminate the Companys
purchases of power in circumstances in which the Administrator determines
10Table of ContentsGOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIESNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Amounts in thousands, except percentages and share data)that
the Company is not in compliance with all applicable federal, state and local
laws and regulations. The Company does not expect to receive any cost-based
firm power service directly from BPA after the new contract expires on
September 30, 2006.On April 18, 2001, a Petition for Review under the Northwest Power Act and
Suit for Declaratory and Injunctive Relief under 28 U.S.C. Section 2201(a) for
Violation of 42 U.S.C. Sections 4321, et seq. was filed against BPA in the
United States Court of Appeals for the Ninth Circuit by individuals and the
Utility Reform Project. The plaintiffs seek review of contracts that obligate
BPA to pay industrial customers for not purchasing or not using power the
customer might otherwise purchase from BPA. The Companys modified electrical
power contract with BPA (the Remarketing Addendum) may be included in this
group of contracts. The plaintiffs also seek to enjoin BPA from performing or
attempting to implement these contracts on the basis that BPAs conduct in
executing these contracts violated the Bonneville Project Act of 1937 and other
statutes. The Company intervened in the case on May 14, 2001. The Company
does not expect the plaintiffs lawsuit to have any impact on BPAs ability to
perform under the Remarketing Addendum due to the passage of the applicable
statute of limitations, prior favorable court decisions and other factors.
Notwithstanding the foregoing, if BPA were enjoined from performing the
Remarketing Addendum, the Companys business, financial condition and results
of operations would be materially and adversely affected.In June 2001, at BPAs request the Company entered into an Amendment to
the Block Power Sales Agreement with BPA. Under the Amendment, for the period
October 1, 2001 through March 31, 2002, BPA agreed to
purchase 236 megawatts of power each hour from the Company and the Company agreed not to take delivery
of those 236 megawatts each hour that the Company is entitled to under the Block
Power Sales Agreement. These payments will be made directly to the Company in
return for not taking delivery of power and do not constitute remarketing
proceeds. Additionally, the Company agreed to maintain full-time and part-time
wages and benefits of union and non-union employees that are affected by the
Amendment.On May 8, 2001, the Company entered into a Plan and Agreement for
Construction of Resources to Provide Power for Future Operations of Goldendale
Aluminum Company and Northwest Aluminum Company (the Plan) with Northwest
Energy Development, LLC, a related company (Northwest Energy), and the United
Steelworkers of America. Northwest Energy is an affiliate owned by the sole
shareholder of the Company. Under the Plan, the Company agreed to enter into a
power purchase agreement giving it the right, but not the obligation, to
purchase up to 100% of the output from power generation facilities to be
developed or owned by Northwest Energy or to receive the financial benefits
from the sale of the power from the resources. The purchase price for the
power to be charged to the Company will be the generating facilitys cost of
fuel, direct operations and maintenance, financing, distributions to pay taxes
and reasonable general and administrative expenses. The items included in each
of these categories will be negotiated when the Company enters into power sale
agreements with the generating facilities. The Companys right to purchase
power will last for 20 years commencing on commercial operation of the
projects. The Company has the option to use this power in its operations,
cause the power to be remarketed at market prices on the Companys behalf, or
do a combination of both. If the Company causes the power to be remarketed, it
generally will be entitled to any financial benefits in excess of the powers
cost. These benefits will be applied to reduce the financing debt
of the11Table of ContentsGOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIESNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Amounts in thousands, except percentages and share data)facilities if Northwest Energy needs to do so to obtain project financing.
Reducing the debt would result in reducing the future cost of power from the
facilities, which may result in a lower cost of power to the Company. In the
short term, the Company does not anticipate purchasing all of the output from
the facilities. As a result, the facilities will be able to sell their power
on the open market and use the profits to obtain project financing and reduce
project debt. The provisions of the Plan are based on assumptions
made at the time the Plan was approved. The Companys ability to follow the
Plan will be affected by economic and other conditions impacting the power
markets at the times the Company is able to execute on the various provisions
of the Plan. For example, it may not be possible to enter into a power
purchase agreement on the terms described above if Northwest Energy enters into
joint ventures with partners who are unwilling to agree to the those terms. If
the Company is not able to enter into power purchase agreements, it may need to
purchase power on the open market to cover its requirements that cannot be met
by BPA or its local PUDs.Under the Plan, the Company designated Northwest Energy as the recipient
of $25,000, of which $17,500 has been paid, in BPA remarketing
proceeds to reimburse it for expenditures incurred or to be incurred in
connection with the development of the power generation facilities. In
accordance with the Plan and the amendment to the Remarketing Addendum that the
Company entered into with BPA in June, 2001, $159,700 of the BPA
remarketing proceeds has been directed to, and will be held in, an escrow
account until October 1, 2006. Those funds will be invested in notes issued by
Northwest Energy to the escrow agent and in other investments agreed to by BPA
and the escrow agent. Upon termination, the funds held in escrow are to be
distributed to BPA to reimburse qualified expenditures. Northwest Energy has
agreed to use these funds for the initial development of the power generation
facilities described in Management's Discussion and Analysis of
Financial Condition and Results of OperationsEnergy
Development and to use commercially reasonable best efforts to
obtain permanent financing unsupported by BPA credit support at the earliest
opportunity. Northwest Energy may use the proceeds from the sale of notes for
other purposes only with the approval of the Companys board of directors. The
remaining $107,800 of remarketing proceeds has either been applied to or
remains available for other qualified expenditures, including debt service and
costs related to the Companys continued curtailment.On June 28, 2001, the Company entered into Amendment No. 1 to the
Remarketing Addendum (the Amendment). The Remarketing Addendum, dated
December 29, 2000, was a modification of the Companys existing electrical
power contracts with BPA. Under the Addendum, approximately $285,000 will be
available for reimbursement of qualified expenditures. Through September 30,
2001 the Company has requested reimbursement of $89,979 in qualified
expenditures. The Amendment stipulates that a portion of the proceeds from the
remarketing of power be directed and held in an escrow account until October 1,
2006, and that the funds held in escrow be invested in notes issued by
Northwest Energy and other investments agreed to by BPA and the escrow agent.
Through September 30, 2001, $91,070 of the remarketing proceeds have been
deposited into escrow, of which $62,197 have been released in exchange for
notes issued by Northwest Energy. Upon termination, the funds held in escrow
are to be distributed to BPA.In June 2001, the Company received a letter asserting possible breaches of
the indenture for the Companys first mortgage notes from a committee claiming
to represent a majority of the noteholders. The alleged breaches of the
indenture stem from the efforts by Northwest Energy to develop power12Table of ContentsGOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIESNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Amounts in thousands, except percentages and share data)generation
facilities and the use of remarketing proceeds for this purpose. The Company
does not believe any of these activities breach the indenture. The Company is
discussing these issues with the noteholders committee.7.
   
   Supplemental Disclosures of Cash Flow InformationSupplemental disclosures of cash flow information is as follows:

|                                             |                                      |  |                   |        |      |  |   |        | 
|-------------------------------------------- | ------------------------------------ |  | ----------------- | ------ | ---- |  | - | ------ | 
|                                             |                                      |  | Nine Months Ended
|                                             |                                      |  | September 30,    
|                                             |                                      |  |                  
|                                             |                                      |  | 2000              |        | 2001
|                                             |                                      |  |                   |        |     
|Cash paid during the period for:             |                                      |  |                   |        |      |  |   |       
|                                             | Interest                             |  | $                 | 11,992 |      |  | $ | 13,727 | 
|                                             | Income taxes                         |  | $                 | 1,669  |      |  | $ | 500    | 
|Non-cash investing and financing activities: |                                      |  |                   |        |      |  |   |       
|                                             | Dividends accrued on preferred stock |  | $                 | 2,737  |      |  | $ | 2,579  | 
|Acquisition contingency accrual:             |                                      |  |                   |        |      |  |   |       
|                                             | Goodwill                             |  | $                 | 2,574  |      |  | $ |       | 
|                                             | Deferred income tax                  |  | $                 | 2,574  |      |  | $ |       | 



|8. |  | Preferred Stock of Subsidiary
|-- |  | -----------------------------

Goldendale Holding Company (GHC) has 150,000 authorized shares of $.01
par value Series A cumulative, nonconvertible preferred stock. At December 31,
2000 and September 30, 2001, 131,836.1 and 118,101.346 shares, respectively,
were issued, outstanding and held by the Goldendale Retirement Plan. The
Company owns all of GHCs outstanding common stock. GHC, in turn, is the sole
owner of all outstanding shares of common stock of Goldendale
Aluminum Company. The Series A
Preferred Stock pays cumulative dividends and has one vote per share on all
matters submitted to a vote of shareholders of GHC and votes together with the
common stock as a single class on such matters. Under the terms of the Series
A Preferred Stock, GHC has the right to redeem the Series A Preferred Stock for
cash at any time for $227.25 (plus all accrued but unpaid dividends) per share
if redeemed before January 1, 2002, or $225.00 (plus all accrued but unpaid
dividends) per share if redeemed on or after January 1, 2002. If GHC fails to
redeem the Series A Preferred Stock before January 1, 2002, each holder of the
Series A Preferred Stock will, upon request, receive additional shares of
Series A Preferred Stock equal in value to any accrued and unpaid cash
dividends. The liquidation preference of the Series A Preferred Stock is
$225.00 per share.

At December 31, 2000 and September 30, 2001, dividends payable on
preferred stock were $16,811 ($127.53 per share) and $17,512 ($148.28 per
share), respectively. The indenture governing the terms of our first mortgage
notes does not allow GHC to pay cash dividends on the Series A
Preferred Stock

13



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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

unless there is a simultaneous redemption. Because the shares of Series A
Preferred Stock vote as a class with the common stock of GHC, an in-kind
payment to the holders of the Series A Preferred Stock of all accrued dividends
would result in a change of voting control of GHC unless the rights and
preferences of the Series A Preferred Stock are modified. Such a change in
control would result in a default under the Companys bank credit agreement and
indenture.

In May 2001, the Company redeemed 13,734.754 shares of preferred stock for
$227.25 per share. The total redemption, including payment of accrued
dividends on redeemed stock, amounted to $5,000. The Goldendale
Retirement Plan lacks liquidity to fund projected distributions and needs $4,000 of Series A Preferred Stock redeemed to be able to fulfill obligations
for 2001 and additional funds for obligations in future years. The Goldendale
Retirement Plan has indicated that, rather than exercising its rights to
payment in kind, it would prefer to have the Company or a related party purchase all
outstanding Series A Preferred Stock at fair market value. The Company anticipates that
the fair market value would be significantly less than the
Series A Preferred Stocks
redemption price, although there can be no assurance that this is the case
until a valuation is performed. The Company is considering whether it is legally
permitted to make, or to cause an affiliate to make, such a purchase and, if
so, whether it makes sense to do so from a business perspective.
Alternatively, GHC may redeem $4,000 or more worth of the Series A
Preferred Stock to provide the liquidity required by the Goldendale Retirement
Plan.



|9. |  | Derivative Financial Instruments
|-- |  | --------------------------------

The Company uses derivative financial instruments principally to manage
the risk that changes in interest rates will affect the amount of its future
interest payments and that changes in aluminum prices will affect the cost of
its future purchases. The following is a summary of the Companys risk
management strategies and the effect of these strategies on the consolidated
financial statements.

Commodity Price Risk Management

The Company holds aluminum call options for the purpose of limiting
exposure to price fluctuations of anticipated aluminum purchases. These
options require the payment of an upfront premium in return for the right to
receive the amount, if any, by which the price at the settlement date exceeds
the strike price. At December 31, 2000 and September 30, 2001, the Company had
option contracts that established a price range for 3,400 to 6,800 metric tons
of primary aluminum per month over a 16-month period beginning January 1, 2001.
Although these options are intended to hedge the risk of market price
fluctuations, the Company elected not to apply hedge accounting. As such,
pursuant to SFAS No. 133, the call options are in the no hedging designation
category. Accordingly, the Company recognized a non-cash decrease in fair
market value of call options of $1,632 in the period ended September 30, 2001.
The fair value of these options at December 31, 2000 and September 30, 2001 is
$2,008 and $263, respectively, and is included in other current assets.

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

Interest Rate Risk Management

The Company uses an interest rate swap contract to manage the amount of
total debt that is subject to variable interest rates. Under the interest rate
swap contract, the Company agrees to pay amounts equal to a specified
fixed-rate of interest multiplied by a notional principal amount, and to
receive amounts in return equal to a variable rate of interest multiplied by
the same notional principal amount. The notional amount of the contract is not
exchanged. No other cash payments are made unless the contract is terminated
prior to maturity, in which case the amount paid or received in settlement is
established by agreement at the time of termination and represents the market
quotation, at current rates of interest, of the remaining obligation to
exchange payments under the terms of the contract. The differential between
the variable interest rate and the fixed interest rate, which is to be paid or
received, is recognized in interest expense. Pursuant to SFAS No. 133, the
Company accounts for its interest rate swap contract as a cash flow hedging
instrument. With the adoption of SFAS 133, these swaps resulted in the
recognition of a liability of $1,291 at September 30, 2001 and a loss in
accumulated other comprehensive income for the period ended September 30, 2001
of $839 (net of tax of $452).



|10. |  | Accrued Curtailment Expenses
|--- |  | ----------------------------

As a result of entering into
the Amendment to the Companys Block Power Sales Agreement with BPA, the Company
became obligated to maintain full-time and part-time wages and benefits of union
and non-union employees that are affected by the Amendment. On October 3, 2001,
the Company entered into a Memorandum of Understanding
with the United Steelworkers of America setting forth specified benefits to be paid to
employees. Under the agreement, the Company agreed to pay
compensation and medical benefits for certain employees that continue to be
employed as well as compensation and medical benefits for certain employees
that have been laid off. The Company estimates that the costs related to the
employees affected by the extended curtailment that are currently
laid off,
will amount to $3,685. This estimate was accrued in this quarter.

Since October 2000, in connection with the curtailment of substantially
all smelter operations, the Company has accrued related employee severance
costs and contract change fees. For the initial curtailment in 2000, the
Company accrued $42,944. An additional $13,079 was accrued in the nine months
ended September 30, 2001 as a result of the curtailment of additional smelter
operations. The Company has paid $41,134 in curtailment costs, leaving a
balance of $14,889 payable at September 30, 2001.



|11. |  | Northwest Aluminum Company and Northwest Aluminum Specialties, Inc.
and Goldendale Holding Company and Subsidiary
|--- |  | -----------------------------------------------------------------------------------------------------------------

Financial statements and financial statement schedules for Northwest and
Goldendale have been omitted because the 12% first mortgage notes issued by the
Company and its subsidiaries and registered under the Securities Act of 1933,
of which the subsidiaries are guarantors (thus subjecting them to the reporting
requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934),
are fully and unconditionally guaranteed by the subsidiaries. Financial
information relating to these companies is presented herein in accordance with
Staff Accounting Bulletin 53 as an addition to the footnotes to the financial
statements of Golden Northwest Aluminum, Inc. Summarized unaudited financial
information is as follows:

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

Northwest Aluminum Company and Northwest Aluminum Specialties, Inc.

|                                   |                                     |                                            |              |         |                   |         |         |         |         |         | 
|---------------------------------- | ----------------------------------- | ------------------------------------------ | ------------ | ------- | ----------------- | ------- | ------- | ------- | ------- | ------- | 
|                                   |                                     |                                            |              |         | Nine Months Ended
|                                   |                                     |                                            |              |         | June 30,         
|                                   |                                     |                                            |              |         |                  
|                                   |                                     |                                            |              |         | 2000              |         | 2001   
|                                   |                                     |                                            |              |         |                   |         |        
|Condensed Statement of Operations: |                                     |                                            |              |         |                   |         |         |        
|Revenues:                          |                                     |                                            |              |         |                   |         |         |        
|                                   | Customers                           |                                            | $            | 187,743 |                   |         | $       | 108,091 |        
|                                   | Parent and related companies        |                                            |              | 62      |                   |         |         | 2,197   |        
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   |                                     |                                            | 187,805      |         |                   |         | 110,288 |        
|                                   | Cost of revenues                    |                                            |              | 177,697 |                   |         |         | 129,135 |        
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   | Gross margin (loss)                 |                                            |              | 10,108  |                   |         |         | (18,847 | )      
|                                   | Net gains on power sales            |                                            |              |        |                   |         |         | 28,960  |        
|                                   | Reimbursement of expenditures       |                                            |              |        |                   |         |         | 23,240  |        
|                                   | Curtailment expenses                |                                            |              |        |                   |         |         | (9,798  | )      
|                                   | General and administrative expenses |                                            |              | (6,742  | )                 |         |         | (5,691  | )      
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   | Operating income                    |                                            |              | 3,366   |                   |         |         | 17,864  |        
|                                   | Net other expense                   |                                            |              | (9,653  | )                 |         |         | (11,367 | )      
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   | Net income (loss)                   |                                            | $            | (6,287  | )                 |         | $       | 6,497   |        
|                                   |                                     |                                            |              |         |                   |         |         |        
|Condensed Balance Sheet:           |                                     |                                            |              |         |                   |         |         |        
|                                   | Current assets                      |                                            | $            | 92,165  |                   |         | $       | 102,886 |        
|                                   | Non-current assets                  |                                            |              | 44,625  |                   |         |         | 44,340  |        
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   |                                     |                                            | Total assets |         | $                 | 136,790 |         |         | $       | 147,226 | 
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   | Current liabilities                 |                                            | $            | 69,943  |                   |         | $       | 75,258  |        
|                                   | Non-current liabilities             |                                            |              | 66,872  |                   |         |         | 66,871  |        
|                                   | Stockholders equity                |                                            |              | (25     | )                 |         |         | 5,097   |        
|                                   |                                     |                                            |              |         |                   |         |         |        
|                                   |                                     | Total liabilities and stockholders equity |              | $       | 136,790           |         |         | $       | 147,226 |        
|                                   |                                     |                                            |              |         |                   |         |         |        

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GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except percentages and share data)

Goldendale Holding Company and Subsidiary

|                                   |                                     |                                            |              |         |                   |         |        |         |         |         | 
|---------------------------------- | ----------------------------------- | ------------------------------------------ | ------------ | ------- | ----------------- | ------- | ------ | ------- | ------- | ------- | 
|                                   |                                     |                                            |              |         | Nine Months Ended
|                                   |                                     |                                            |              |         | September 30,    
|                                   |                                     |                                            |              |         |                  
|                                   |                                     |                                            |              |         | 2000              |         | 2001  
|                                   |                                     |                                            |              |         |                   |         |       
|Condensed Statement of Operations: |                                     |                                            |              |         |                   |         |        |        
|Revenues:                          |                                     |                                            |              |         |                   |         |        |        
|                                   | Customers                           |                                            | $            | 147,911 |                   |         | $      | 23,971  |        
|                                   | Parent and related companies        |                                            |              | 861     |                   |         |        | 1,485   |        
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   |                                     |                                            | 148,772      |         |                   |         | 25,456 |        
|                                   | Cost of revenues                    |                                            |              | 131,512 |                   |         |        | 66,323  |        
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   | Gross margin (loss)                 |                                            |              | 17,260  |                   |         |        | (40,867 | )      
|                                   | Net gains on power sales            |                                            |              |        |                   |         |        | 28,475  |        
|                                   | Reimbursement of expenditures       |                                            |              |        |                   |         |        | 27,143  |        
|                                   | Curtailment expenses                |                                            |              |        |                   |         |        | (3,281  | )      
|                                   | General and administrative expenses |                                            |              | (7,702  | )                 |         |        | (8,154  | )      
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   | Operating income                    |                                            |              | 9,558   |                   |         |        | 3,316   |        
|                                   | Net other expense                   |                                            |              | (6,975  | )                 |         |        | (7,338  | )      
|                                   | Income tax expense (benefit)        |                                            |              | 2,118   |                   |         |        | (274    | )      
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   | Net income (loss)                   |                                            | $            | 465     |                   |         | $      | (3,748  | )      
|                                   |                                     |                                            |              |         |                   |         |        |        
|Condensed Balance Sheet:           |                                     |                                            |              |         |                   |         |        |        
|                                   | Current assets                      |                                            | $            | 43,821  |                   |         | $      | 38,391  |        
|                                   | Non-current assets                  |                                            |              | 177,273 |                   |         |        | 170,460 |        
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   |                                     |                                            | Total assets |         | $                 | 221,094 |        |         | $       | 208,851 | 
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   | Current liabilities                 |                                            | $            | 34,195  |                   |         | $      | 29,200  |        
|                                   | Non-current liabilities             |                                            |              | 139,721 |                   |         |        | 110,463 |        
|                                   | Stockholders equity                |                                            |              | 47,178  |                   |         |        | 69,188  |        
|                                   |                                     |                                            |              |         |                   |         |        |        
|                                   |                                     | Total liabilities and stockholders equity |              | $       | 221,094           |         |        | $       | 208,851 |        
|                                   |                                     |                                            |              |         |                   |         |        |        

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

This section should be read in conjunction with the financial statements
in Part I, Item 1 of this report.

Overview

Before the current energy crisis in the western United States described
below, our revenues historically came from two primary sources:



| | 1) |  | Fees received from smelting alumina into aluminum and casting
that aluminum into primary and value-added aluminum products under
tolling contracts with Norsk Hydro USA, Inc. (Hydro) and, until December 31,
1999, with Glencore, Ltd. (Glencore), and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | The sale of non-tolled value-added aluminum products to other
customers.                                                                                                                                                                                   

Revenue from fees for the conversion of alumina and processing of aluminum
under tolling arrangements is recognized upon completion of the tolling
process. Under the tolling arrangements, alumina suppliers deliver their
alumina to us. The alumina is converted to aluminum in reduction cells by
putting it in liquid form by dissolving it in an electrolyte solution and
then passing electric current through the electrolyte to separate the alumina
into its two parts, aluminum and oxygen. The molten aluminum is withdrawn from
the cells and cast or formed into finished products. Revenue from the sale of
non-tolled value-added aluminum products is recognized upon shipment to the
customer. Our revenues include sales of finished products produced by
remelting aluminum material obtained from other sources or produced in our
operations and casting that aluminum into finished products. This remelting
and casting activity has provided a significant portion of our production
historically and has allowed us to continue producing finished aluminum
products despite the curtailment of our smelting operations described below.

Because our tolling fees are a percentage of prices of aluminum on the
London Metal Exchange (LME), the amount of revenue from tolling activities
varies depending on market aluminum prices, especially LME prices, and gross
smelter production volumes. The tolling fees are based on prior three-month
average LME prices and not current market aluminum prices. Additional revenue
for tolled value-added products is dependent on the volume of value-added
production and the cost of production versus the dollar amount of pricing
premiums. The amount of revenue from non-tolled value-added sales varies
depending on market aluminum prices, demand for our value-added products and
the pricing premiums we are able to realize for these products above the cost
of the aluminum material. Our revenues from non-tolled value-added products
may not be as strongly affected by lower LME prices, as is the case with
tolling fees, because the margin on these products does not vary significantly
with aluminum prices.

The aluminum industry is highly cyclical, with market prices for aluminum
fluctuating widely based on global supply and demand factors, most of which are
beyond our control. As shown below, for 2000, the average price per pound of
aluminum on the London Metal Exchange was higher than the
average price in 1999 and 1998. The average three-month LME prices per
pound of aluminum over the last six years were as follows:

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|                        |  |           |      | 
|----------------------- |  | --------- | ---- | 
|                        |  | Price Per
|Year Ended December 31, |  | Pound    
|                        |  |          
|1995                    |  | $         | 0.83 | 
|1996                    |  | $         | 0.70 | 
|1997                    |  | $         | 0.74 | 
|1998                    |  | $         | 0.63 | 
|1999                    |  | $         | 0.63 | 
|2000                    |  | $         | 0.71 | 

For the nine months ended September 30, 2001, and the month ended September 30,
2001, the three-month LME price for aluminum has averaged $.68 per pound and
$.62 per pound, respectively. On October 23, 2001, the three-month LME price
per pound of aluminum was $0.59. The timing and magnitude of an increase or
decrease in aluminum prices is uncertain.

Because of the decline in and the generally cyclical nature of aluminum
prices, and the increase, and volatility, of power prices discussed below, we
are modifying our historic business strategy. Rather than focusing primarily
on cost minimization in order to operate our facilities at full capacity
throughout the business cycle, we believe we must be able to vary our
production levels more frequently. Our new business strategy is to try to
operate our smelters and sell aluminum when metal prices are high and/or power
costs are low, and curtail operations and sell electricity when aluminum prices
are low and/or power costs are high. This requires increased flexibility in
our operations and our contractual arrangements for the supply of power,
alumina and labor. We may not be able to attain the needed flexibility in
operations or to negotiate more flexible arrangements with respect to these
supplies.

Historical Electricity Supply, Production Curtailment and Power Remarketing

One of our primary costs is electrical power. Before 2000, those costs
had been relatively stable. The source of the majority of our power has been
through the Bonneville Power Administration (BPA). In addition to service
directly from BPA, we have contracts with our local public utility districts
(PUDs) to provide to each of our smelters up to 9.9 megawatts per year of
power supplied to them by BPA. We have supplemented the BPA and PUD power with
purchases of market power during time periods that have historically had lower
cost than our cost through BPA and the PUDs.

Beginning in the summer of 2000, the market price of electric power began
to increase dramatically because of an extreme shortage of supply and other
factors. As an example, our average cost of power per pound of aluminum
produced was $0.16 and $0.18 in 1999 and 2000, respectively, while the average
market price of power for October 2000 through March 2001 equated to $1.95 per
pound of aluminum produced. These changes in power prices made it apparent
that we needed to change our strategies to obtain affordable power long-term.

While most of our power supply during the fourth quarter of 2000 and the
first three quarters of 2001 was under fixed price contracts with BPA, a
portion was not covered during the late spring of 2001. Market power prices in
the Pacific Northwest historically have been very low in the late spring.
Because of the dramatic increase in forward power prices that occurred in 2000,
it became uneconomical to

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purchase power to meet our open requirements during
that period. We therefore chose to reduce our production level to
approximately 60% of normal beginning in October 2000, reshape or sell power
that exceeded what we needed for our operations as a result of our reduced
production level and reshape or buy power for the open periods. Our
contracts with BPA that expired on September 30, 2001 allowed us to cause BPA
to remarket power we did not need for operations and to pay us the excess
proceeds from those sales over the cost we would have been required to pay
under the contracts. This right was subject to minimum notice provisions and
other terms that made it impractical to make forward sales of greater than one
month.

By mid December 2000, market prices for electrical power had further
escalated to the point that the financially prudent option was to have
electrical power available to us remarketed by BPA instead of producing
aluminum with it. Late in December, we shut down essentially all remaining
smelter production capacity, leaving only approximately 25,000 metric tons of
capacity on-line at the Goldendale Aluminum Company (Goldendale) facility and
none at Northwest Aluminum Company (Northwest).

To facilitate sales of our excess power in forward periods of more than a
month, in December 2000 we entered into a Remarketing Addendum (Addendum)
with BPA, which allows BPA to remarket the power available to us and use the
resulting proceeds to reimburse us for defined qualified expenditures.
Additionally, we entered into agreements with the United Steelworkers of
America (USWA) in regard to employee layoffs, with Hydro in regard to
readjusting our tolling agreement and with Glencore in regard to readjusting
our alumina supply contract.

Under the Addendum, our operating subsidiaries, Goldendale and Northwest,
agreed to curtail smelter production and assist BPA in remarketing the electric
power that Goldendale and Northwest had the right to purchase. BPA agreed to
use the proceeds from the remarketing to reimburse Goldendale and Northwest or
their designees for specified qualified expenditures, including, among others,
expenses associated with debt service and workforce reductions resulting from
the curtailment and expenditures for the planning, licensing, siting,
acquisition and/or construction of conventional or renewable resources to
provide power for future operations of our smelters. For a given sale of
remarketed power, the net proceeds are equal to the revenue received by BPA on
the sale, minus the price we would have been obligated to pay had we purchased
the power, minus a specified amount retained by BPA, plus any interest costs
BPA avoids as a result of receipt of the net proceeds. From December 29, 2000
through September 30, 2001, which is the date on which our right to have BPA
remarket power under our old power agreements with BPA terminated, remarketing
had resulted in total net proceeds of approximately $285 million available for
reimbursement of qualified expenditures.

The Addendum is effective through the earlier of the date on which all of
the net proceeds have been paid by BPA or September 30, 2010. In June 2001, we
entered into an amendment to the Addendum that stipulates that a portion of the
proceeds from the remarketing of power be directed to and held in an escrow
account until October 1, 2006, and that the funds held in escrow be invested in
notes issued by Northwest Energy Development, LLC (Northwest Energy), a
related company, and other investments
agreed to by BPA and the escrow agent. Upon termination, the funds held
in escrow are to be distributed to BPA for reimbursement of qualified
expenditures of Goldendale and Northwest. This escrow arrangement maximizes the
amount of remarketing proceeds used to develop the power projects and increases
the likelihood that those remarketing proceeds are ultimately distributed to
Goldendale and Northwest as reimbursement for qualified expenditures.

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Beginning May 1, 2001 smelter production was further reduced to 5% of
capacity, allowing us to sell directly into the open market 25 megawatts of BPA
supplied electrical power. The sale of this power generated $9.4 million of
net proceeds to the Company. The remaining smelter production and open market
purchases of aluminum were sufficient to allow us to fulfill our tolling
obligations to Hydro through September 30, 2001. Our continuing operations are
supplied with power, which we cannot remarket, under our PUD contract with the
Klickitat Public Utility District. Klickitat PUD obtains this power from BPA.
BPA has begun a rulemaking process to decide whether it will allow publicly
owned utilities, such as Klickitat PUD, to buy power from it at its lowest
rates to serve the aluminum and other industries. This rulemaking process and
any related judicial review may take several years to complete. We are
negotiating a standstill agreement with BPA and Klickitat PUD under which the
PUD would be able to continue supplying this power at BPAs lowest rate. In
return, we would not place additional load on the PUD until BPAs rulemaking
process is complete and any court challenges are resolved. Depending on the
outcome of the rulemaking process, we may not be able to obtain electricity
from Klickitat PUD at BPAs lowest rate.

Our new Block Power Sales Agreement with BPA, which we entered into in
October 2000, became effective on October 1, 2001, is for 236 megawatts of
power and has a term that runs through September 30, 2006. The contract will
allow us to direct available power to either or both of our operating
facilities. Approximately 50% of our power requirements can be met through the
contract. The contract is a take or pay contract, meaning that we are
obligated to pay for the power, whether we take it or not. BPA has requested,
however, that all direct service industrial customers not take the power
available to them under their respective contracts until October 2003.
Consequently, we would not expect BPA to require us to pay for power during
such a period of curtailment, however, we cannot assure you of this. The base
rate under the contract is $23.50 per megawatt-hour. The rate adopted by BPA
includes a Cost Recovery Adjustment Clause in addition to the base rate,
which allows BPA to adjust rates under certain defined circumstances. In March
2001, BPA proposed a revised and expanded Cost Recovery Adjustment Clause
that gives BPA broad discretion to adjust rates every six months to ensure that
it can recover all of its costs and repay its obligations to the U.S. Treasury
under almost any circumstances. The rate, including cost recovery
adjustments, adopted by BPA as a result of these proceedings for the period
October 1, 2001 through March 31, 2002 is approximately $34.00 per
megawatt-hour plus our transmission charges of approximately $3.50 per
megawatt-hour. The Federal Energy Regulatory Commission (FERC) approved this
rate proceeding in September 2001, and we did not exercise our option to
terminate the contract. Under this contract, we are unable to reshape or have
BPA remarket our power entitlement. As a result, we would be unable to sell
BPA power during periods when it is uneconomical to produce and sell aluminum,
and could be subject to take-or-pay charges for power we cannot economically
use. In addition, the BPA Administrator may have broad discretion to
temporarily or permanently limit or terminate our purchases of power in
circumstances in which the Administrator determines that we are not in
compliance with all applicable federal, state and local laws and regulations.
Moreover, BPA has indicated we may not receive any cost-based firm power
service directly from BPA after this contract expires on September 30, 2006.

In June 2001, at BPAs request we entered into an Amendment to the Block
Power Sales Agreement (the Amendment). Under the Amendment, for the period
from October 1, 2001 through March 31, 2002 we agreed not to take delivery of
the 236 megawatts each hour
that we are entitled to under the Block Power Sales
Agreement and BPA agreed to purchase those 236 megawatts each hour

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from us.
These payments will be made directly to us for not taking delivery of power and
do not constitute remarketing proceeds. Additionally, we agreed to maintain
full-time and part-time wages and benefits of union and non-union employees
that are affected by the Amendment. We estimate based on our present
operations that the total cost of wages and benefits above those for active
employees could approximate $3.7 million out of the proceeds BPA will pay us
for not taking delivery of the power from October 1, 2001 through March 31,
2002.

Energy Development

Because of the instability in power markets and the uncertainty of future
BPA service, our long-term power strategy is now one of increasing
self-reliance, reducing, and possibly eliminating, our dependence on BPA. We
believe this strategy will allow us to realize the economic value of either
producing aluminum or selling power and therefore provide us with more stable
operating results.

The Remarketing Addendum with BPA requires us to dedicate at least $100
million of the remarketing proceeds to the development of new power generation
resources. The development and operation of power generation facilities are
not now part of our core business and require financing independent of that
available under our current financing arrangements. For these reasons and
because the terms of the indenture governing our first mortgage notes and our
bank credit agreement effectively do not allow us to invest directly in the
development of power generation facilities, our sole shareholder formed
Northwest Energy for this purpose.

On May 8, 2001, we entered into a Plan and Agreement for Construction of
Resources to Provide Power for Future Operations of Goldendale Aluminum Company
and Northwest Aluminum Company (the Plan) with Northwest Energy and the USWA.
Under the Plan, we agreed to enter into a power purchase agreement giving us
the right, but not the obligation, to purchase up to 100% of the output from
power generation facilities to be developed or owned by Northwest Energy or to
receive the financial benefits from the sale of the power from the resources.
Our purchase price for the power will be the generating facilitys cost of
fuel, direct operations and maintenance, financing, distributions to pay taxes
and reasonable general and administrative expenses. The items included in each
of these categories will be negotiated when we enter into power purchase
agreements with the facilities. Our right to purchase power will last for 20
years commencing on commercial operation of the projects. We will be able to
use this power in our operations, cause the power to be remarketed at market
prices on our behalf, or do a combination of both. If we cause the power to be
remarketed, we generally will be entitled to any financial benefits in excess
of the powers cost. These benefits will be applied to reduce the financing
debt of the facilities if we need to do so to obtain project financing.
Reducing the debt would result in reducing the future cost of power from the
facilities, which would result in a lower cost of power for us.
In the short term, we do not anticipate purchasing all of the output from
the facilities. As a result, the facilities will be able to sell their power
on the open market and use the profits to obtain project financing and reduce
project debt. The provisions of the Plan are based on assumptions made at the
time the Plan was approved. Our ability to follow the Plan will be affected by
economic and other conditions impacting the power markets at the times we are
able to execute on the various provisions of the Plan. For example, it may not
be possible to enter into a power purchase agreement on the terms described
above if Northwest Energy enters into joint ventures with partners who are
unwilling to agree to the those terms.

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If we are not able to enter into power
purchase agreements, we may need to purchase power on the open market to cover
our requirements that cannot be met by BPA or our local PUDs.

Northwest Energy is actively pursuing development of the following power
projects, which will be subject to the Plan and our power purchase rights under
the Plan.



| | 1) |  | A natural gas-fired power plant to be located at the Goldendale
smelter facility (Cliffs).                                                                                                                                           
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | A 520 megawatt natural gas-fired combined cycle combustion
turbine project near Clatskanie, Oregon (Summit/Westward).                                                                                                                
|
| | 3) |  | Wind projects to be developed in south central Washington and
north central Oregon. The first phase is a 24 megawatt wind turbine
project in Sherman County, Oregon (Klondike). We expect Klondike
to be operational in January 2002.

We are also negotiating to purchase power from, or obtain an interest in,
a natural-gas-fired combined cycle combustion turbine project near Goldendale,
Washington (GEI). These power projects, other than Klondike, are in the
early stages of development. They may not be completed. The completion of
these projects may take longer than we currently anticipate, which would delay
and reduce the anticipated benefits under the Plan. Although we expect to be
able to purchase power from some or all of these facilities at cost, that cost
could be too high to economically produce aluminum. For example, if the price
of natural gas increased sharply, this would result in increased cost to
produce electricity at two of the above listed facilities. If this occurs in
conjunction with a decrease in the market price of power generally, we may be
unable to produce aluminum or remarket power. Finally, depending on the price
of power when these facilities are ready to begin operating, the facilities may
not be able to operate profitably.

Under the Plan, we designated Northwest Energy as the recipient of $25.0
million, of which $17.5 million has been paid, in BPA remarketing proceeds to
reimburse it for expenditures incurred or to be incurred in connection with the
development of the power generation facilities. In accordance with the Plan and
the amendment to the Remarketing Addendum that we entered into with BPA in
June, 2001, $159.7 million of the BPA remarketing proceeds has been directed
to, and will be held in, an escrow account until October 1, 2006. Those funds
will be invested in notes issued by Northwest Energy to the escrow agent and in
other investments agreed to by BPA and the escrow agent. Upon termination, the
funds held in escrow are to be distributed to BPA to reimburse qualified
expenditures. Northwest Energy has agreed to use these funds for the initial
development of the power generation facilities described above and to use
commercially reasonable best efforts to obtain permanent financing unsupported
by BPA credit support at the earliest opportunity. Northwest Energy may use the
proceeds from the sale of notes for other purposes only with the approval of
our board of directors. The remaining $107.8 million of remarketing proceeds
has either been applied to or remains available for other qualified
expenditures, including debt service and costs related to our continued
curtailment.

We will be eligible to receive liquidated damages from Northwest Energy if
at least 484 megawatts of generation capacity is not available by October 1,
2006. The liquidated damages would be equal to (1) the percentage by which
energy available to the smelters as of October 1, 2006 is less than

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484
megawatts multiplied by (2) the amount of remarketing proceeds paid to
Northwest Energy to support development of the facilities. To secure payment
of this potential obligation of Northwest Energy, we have taken a security
interest in the assets of Northwest Energy and its subsidiary project
companies. If we foreclose on the assets, the sales proceeds resulting from
the foreclosure may not cover the amount of liquidated damages. In addition,
we have agreed to subordinate or release our security interest in a specific
project company if requested by a project lender in connection with project
financing through which remarketing proceeds would be released to another
project.

In June 2001, FERC issued an
order imposing price caps on the price of electricity in the western United
States. BPA and other utilities also entered into agreements with aluminum and
other customers to reduce their demands for electricity. For example, we agreed
with BPA not to take delivery of power from BPA from October 1, 2001 through
March 31, 2002. Several factors, including the FERC order, the reductions in
BPAs load through curtailments by industrial customers, additional supply of
power, reduced demand resulting from higher electricity prices and energy
conservation efforts, the general economic slowdown and cooler than expected
weather in California, have reduced market power prices from over $250.00 per
megawatt-hour in mid-May 2001 to less than $30.00 per megawatt-hour in
mid-October 2001. Future demand, supply and prices for electricity are
uncertain.

This change in the market price for electricity has caused us and
Northwest Energy to reassess our strategies for power supply and resource
development. In terms of our power supply, lower prices may allow us to
purchase some power on the open market to meet our future needs, rather than
relying on BPA or resources developed by Northwest Energy. We may not,
however, be able to purchase a supply of electricity that would allow us to
produce aluminum profitably. In the area of resource development, the steep
reduction in the market price for electricity makes it harder for Northwest
Energy to finance its power project development. Northwest Energy therefore is
actively exploring joint venture opportunities with prospective partners
through which those other partners would purchase or subscribe for a
significant interest, which could include a majority interest, in some or all
of the power projects and the financing of their development. This could allow
remarketing proceeds to be available for non-energy related qualified
expenditure because of a reduced need for funding of energy projects. Northwest
Energy, however, may be unable to find development partners, it may not be
possible to finance the projects and remarketing proceeds may not be available
to us for non-energy related qualified expenditures.

Of the approximately $285.0 million of remarketing proceeds, $17.5 million
was paid directly to Northwest Energy as reimbursement for expenses incurred or
to be incurred in connection with the development of the power projects, $159.7
million was placed in escrow for continued financing of the development of the
power projects and the remaining amount of approximately $107.8 million is and
has been available for qualified expenditures not related to the development
of the projects. Based on assumptions we have made about our operating costs,
we believe, but cannot assure you, that this $107.8 million, together with
other available sources of capital, will be sufficient to fund our operations,
debt service and employment obligations through the next 12 months. By that
time, we expect, although we cannot assure you, that additional remarketing
proceeds will have become available for non-energy related qualified
expenditure for the reasons discussed above. If remarketing proceeds do not
become available, our business could be adversely affected unless we are able
to restart our smelter operations, obtain additional financing, or both. Our
ability to restart those operations profitably is dependent, among other
things, on the cost of power, the LME price of aluminum, the terms of our alumina supply and
Hydro tolling agreements

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and negotiation of new labor agreements. We estimate
that aluminum prices would need to be above the mid-70 cent per pound range in
order to cover operating costs at current BPA power rates. Finally, we may not
be able to obtain financing on commercially reasonable terms, or at all. See
Liquidity and Capital Resources below.

Execution of the Plan is subject to many risks and uncertainties. We do
not assure you that Northwest Energy will be successful in developing, either
alone or through joint ventures, the resources discussed above in a timely
manner or at all. Remarketing proceeds used for development of power resources
may not be available for the repayment of debt or for other non-energy-related
qualified expenditures.

Labor Issues

Our long-term collective bargaining agreements and our agreement
concerning the January through September 2001 curtailment with the unions at
both smelters all expired on September 30, 2001. While we were able to reach a
new understanding with the USWA with respect to the amendment to our Block
Power Sales Agreement with BPA affecting the period of October 2001 through
March 2002, we were not able to reach agreement on new long-term collective
bargaining agreements. We proposed significant changes and concessions that we
believe are necessary to allow us to produce aluminum economically. The
collective bargaining units refused to agree to these concessions, and stated
that should we attempt to negotiate to impasse and implement the concessions in
our last proposal, the unionized employees would refuse to work under those
terms and conditions. The collective bargaining units offered, and we agreed,
to extend the existing collective bargaining agreements on a day-to-day basis.
This extension allows for the performance of maintenance and other
non-production work related to the smelters, as well as the continued
operations of specialty casting business, including the production of aluminum
through remelting. The extension would not allow us to resume normal smelting
operations. The absence of new collective bargaining agreements makes it
extremely difficult for us to resume operations at the smelters or to operate
profitably even if a power supply were available.

Hydro Tolling Agreement

On October 2, 2001, we notified Hydro of an event of force majeure
pursuant to the Hydro tolling agreement with Goldendale. The reasons for
declaring this event of force majeure were:



| | 1) |  | Goldendale has been forced by BPA to curtail operations through
March 31, 2002, and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | Goldendales employees are engaged in a work stoppage with
respect to commercial operations. This work stoppage arose because
the collective bargaining agreement between Goldendale and its
employees expired on September 30, 2001. Even though Goldendale and
the USWA conducted good faith negotiations, the USWA refused to make
various concessions that would be necessary for Goldendale to operate
regardless of the curtailment demanded by BPA and stated that its
members would not work if Goldendale were to bargain to impasse and
attempt to impose a new agreement.

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While we are making reasonable efforts to overcome the event of force
majeure, we cannot predict when or whether our efforts will be successful. We
believe that under the terms of our tolling agreement with Hydro, this event of
force majeure excuses our performance obligations to convert alumina into
aluminum for the duration of the force majeure. Hydro has the option to extend
the term of the tolling agreement for the period of the force majeure or to
terminate the tolling agreement if the force majeure is reasonably expected to
continue for more than 180 days.

We are in discussions with Hydro about the force majeure and tolling
agreement. Subject to the restrictions contained in our debt agreements, these
discussions may include changes to our $20.0 million subordinated note that
Hydro holds. We may not be able to reach agreement with Hydro. While we
believe we are on sound legal footing with respect to our claim of force
majeure under the Hydro tolling agreement, we may not prevail in a legal
dispute. Were Hydro to prevail, we could be found to be in breach of the Hydro
tolling agreement, which could have a material adverse effect on our business.

We also are in discussions with Glencore about adjusting our obligations
under our alumina purchase agreement. We may not be able, however, to reach
agreement with Glencore.

Other Developments

In August 2001, Fleet Capital Corporation and National Bank of Canada
informed us of their desire to discontinue their participation in our revolving
credit facility. We are having discussions with a number of financial
institutions about the possibility of their replacing these participants. We
may not be able to reach agreement with any of these financial institutions
that would allow us to obtain financing on acceptable terms and conditions or
at all.

In June 2001, we received a letter asserting possible breaches of the
indenture for our first mortgage notes from a committee claiming to represent a
majority of the noteholders. The alleged breaches of the indenture stem from
the efforts by Northwest Energy to develop power generation facilities and the
use of remarketing proceeds for this purpose. We do not believe any of these
activities breach the indenture. We are discussing these issues with the
noteholders committee.

As a result of the terrorist attacks of September 11, 2001 and the current
state of the aluminum industry in the Pacific Northwest, our property and
machinery insurance carrier informed us that it would

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not be able to renew our existing policy. We are seeking a new policy. Based
on our discussions with several carriers, the amount of coverage is likely to
be substantially less than under our current policy.

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Results of Operations

The following table sets forth the combined statement of income data as a
percentage of revenues for the three-month and the nine-month periods ended
September 30, 2000 and 2001.

|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   
|----------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  |  | ----- | -- |  |  | ----- | --
|                                    |  | Three Months Ended |       | Nine Months Ended
|                                    |  | September 30,      |       | September 30,    
|                                    |  |                    |       |                  
|                                    |  | 2000               |       | 2001              |  | 2000 |       | 2001
|                                    |  |                    |       |                   |  |      |       |     
|Revenues                            |  |                    | 100.0 | %                 |  |      | 100.0 | %    |  |  | 100.0 | %  |  |  | 100.0 | % 
|Cost of revenues                    |  |                    | 90.4  |                   |  |      | 145.6 |      |  |  | 91.7  |    |  |  | 148.2 |   
|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   
|Gross margin (loss)                 |  |                    | 9.6   |                   |  |      | (45.6 | )    |  |  | 8.3   |    |  |  | (48.2 | ) 
|Net gains on power sales            |  |                    | 0.0   |                   |  |      | 8.0   |      |  |  | 0.0   |    |  |  | 43.4  |   
|Reimbursement of expenditures       |  |                    | 0.0   |                   |  |      | 40.8  |      |  |  | 0.0   |    |  |  | 38.2  |   
|Curtailment expenses                |  |                    | 0.0   |                   |  |      | (11.5 | )    |  |  | 0.0   |    |  |  | (9.9  | ) 
|General and administrative
expenses |  |                    | (6.4  | )                 |  |      | (11.1 | )    |  |  | (4.5  | )  |  |  | (11.3 | ) 
|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   
|Operating income (loss)             |  |                    | 3.2   |                   |  |      | (19.4 | )    |  |  | 3.8   |    |  |  | 12.2  |   
|Interest expense                    |  |                    | (5.5  | )                 |  |      | (13.1 | )    |  |  | (5.3  | )  |  |  | (13.4 | ) 
|Other income (expense), net         |  |                    | (0.1  | )                 |  |      | 0.7   |      |  |  | (0.1  | )  |  |  | (0.1  | ) 
|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   
|Net other expenses                  |  |                    | (5.6  | )                 |  |      | (12.4 | )    |  |  | (5.4  | )  |  |  | (13.5 | ) 
|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   
|Loss before income taxes            |  |                    | (2.4  | )                 |  |      | (31.8 | )    |  |  | (1.6  | )  |  |  | (1.3  | ) 
|Income tax expense (benefit)        |  |                    | 0.6   |                   |  |      | (6.3  | )    |  |  | 0.6   |    |  |  | (0.2  | ) 
|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   
|Net loss                            |  |                    | (3.0  | )%                |  |      | (25.5 | )%   |  |  | (2.2  | )% |  |  | (1.1  | )%
|                                    |  |                    |       |                   |  |      |       |      |  |  |       |    |  |  |       |   

The Three Months and Nine Months Ended September 30, 2000 Compared to The Three
Months and Nine Months Ended September 30, 2001

Total revenuesdecreased from $102.4 million to $43.4 million in the three
months ended September 30, 2000 and September 30, 2001, respectively, a
decrease of $59.0 million, or 57.6%. Total revenues decreased from $335.7
million to $132.1 million in the nine months ended September 30, 2000 and
September 30, 2001, respectively, a decrease of $203.6 million, or 60.7%.
Revenues were primarily influenced by the cessation of the Glencore tolling
agreement, by the curtailment of significantly all of our smelter operations to
facilitate the opportunity to sell electrical power into the marketplace and by
changes in the market price of aluminum and power.

The cessation of the Glencore tolling agreement eliminated 500,000 pounds
per day of production billable under tolling arrangements beginning January 1,
2000. Because of Northwests September 30 year-end, the impact on our
consolidated financial statements was reported beginning April 1, 2000. For
the nine months ended September 30, 2001 compared to the nine months ended
September 30, 2000, tolling revenues decreased $20.7 million due to the
cessation of this agreement. Tolling revenues continued to be earned under our
Hydro tolling contract, decreasing from $47.1 million to $6.2 million for the
three-month periods, and decreasing from $147.9 million to $24.0 million for
the nine-month periods, ended September 30, 2000 and
September 30, 2001,
respectively. Total revenues from tolling agreements decreased from $47.1
million to $6.2 million for the three-month periods ended September 30, 2000 and

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September 30, 2001, respectively, a decrease of $40.9 million, or 86.8%.
Tolling revenues decreased from $168.6 million to $24.0 million for the
nine-month periods ended September 30, 2000 and September 30, 2001,
respectively, a decrease of $144.6 million, or 85.8%.

Volumes produced under tolling contracts decreased from 86.4 million
pounds to 10.6 million pounds for the three months ended September 30, 2000 and
September 30, 2001, respectively, and decreased from 308.6 million pounds to
40.2 million pounds for the nine months ended September 30, 2000 and September
30, 2001, respectively. The decrease in production volume due to the
non-renewal of the Glencore tolling agreement was 44.5 million pounds, with a
related decrease in revenue of $20.7 million. Other than the decrease due to
the non-renewal of the Glencore tolling agreement, the decreases in production
level under tolling arrangements was due to the curtailment of significantly
all of our smelter production capacity to facilitate electrical power
remarketing. The production levels at the Goldendale facility were cut to
approximately 15% of normal capacity by early January of 2001, and further cut
to approximately 7.5% of normal capacity by early May of 2001, resulting in a
decrease in production volume of 75.8 million pounds for the three-month period
and a decrease in production volume of 223.9 million pounds for the nine-month
period ended September 30, 2001. These volume changes, excluding the impact of
the cessation of the Glencore tolling agreement, caused revenues from tolling
to decrease by $41.3 million for the three months ended September 30, 2001 over
the same period ended September 30, 2000 and caused revenues from tolling to
decrease by $125.4 million for the nine months ended September 30, 2001 over
the same period ended September 30, 2000.

In addition to the impact of volume changes, increases in the average
tolling charge of $.04 per pound for the three-month periods ended September 30
increased revenues from tolling contracts by $400,000. The average tolling
charge for the nine-month periods ended September 30 increased by $.05 per
pound causing a $1.4 million increase in revenues from tolling contracts for
those periods. The increases in the average tolling charge were due primarily
to changes in product mix produced under tolling contracts.

Sales of non-tolled products decreased from $53.3 million to $32.9 million
in the three months ended September 30, 2000 and September 30, 2001,
respectively, a decrease of $20.4 million, or 38.2%, and decreased from $161.0
million to $105.7 million in the nine months ended September 30, 2000 and
September 30, 2001, respectively, a decrease of $55.4 million, or 34.4%. The
primary factors affecting revenues from sales of non-tolled products were the
softening of the economy and demand, the curtailment of smelter production
capacity at the Northwest facility, which could only partially be offset by
remelt activity, and a slight increase in average premiums attained for
value-added products.

Shipments of non-tolled aluminum products decreased from 68.0 million
pounds to 44.1 million pounds in the three months ended September 30, 2000 and
September 30, 2001, respectively, a decrease of 23.9 million pounds, or 35.2%,
with a corresponding decrease in revenues of $18.8 million. For the nine-month
periods ended September 30, shipments of non-tolled aluminum products decreased
from 205.5 million pounds in 2000 to 138.3 million pounds in 2001, a decrease
of 67.3 million pounds, or 32.7%, with a corresponding decrease in revenues of
$52.7 million. The curtailment of smelting activity at Northwest reduced the
volume of non-tolled product smelted by us from 39.8 million pounds to zero for
the three-month periods ended September 30, 2000 and September 30, 2001,
respectively, and from 128.4 million pounds to 23.5 million pounds for the
nine-month periods ended September 30, 2000 and

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September 30, 2001, respectively. These reductions were partially offset
with additional pounds of aluminum made available through our remelt
operations. Aluminum production from remelt operations increased 15.9 million
pounds for the three-month periods ended September 30, and increased 37.7
million pounds for the nine-month periods ended September 30.

In addition to the impact of volume changes, a decrease in the average
selling price of $.04 per pound for the three-month periods ended September 30
decreased non-tolling revenues by $1.6 million. The average selling price for
the nine-month periods ended September 30 decreased by $.02 per pound causing a
$2.7 million decrease in non-tolling revenues for those periods. The decreases
in the average selling prices were due primarily to the downward trend of
market aluminum prices and product mix.

Other revenues increased from $2.0 million to $4.2 million for the
three-month periods, and decreased from $6.0 million to $2.4 million for the
nine-month periods ended September 30, 2000 and September 30, 2001,
respectively.

Cost of revenuesdecreased from $92.6 million to $63.1 million in the
three months ended September 30, 2000 and September 30, 2001, respectively, a
decrease of $29.5 million, or 31.9%. Cost of revenues decreased from $308.3
million to $195.7 million in the nine months ended September 30, 2000 and
September 30, 2001, respectively, a decrease of $112.6 million, or 36.5%. As
a percentage of revenues, cost of revenues increased from 90.4% to 145.6% for
the three-month periods and increased from 91.7% to 148.2% for the nine-month
periods ended September 30, 2000 and 2001, respectively. The primary
influences on cost of revenues were the cessation of the Glencore tolling
agreement, a partial curtailment of production to facilitate the opportunity to
have BPA remarket electrical power in the marketplace, an increase in market
aluminum prices and an increase in our cost of power.

Smelting production capacity was curtailed and averaged approximately 5%
of normal for the three months ended September 30, 2001 and averaged
approximately 13% of normal for the nine months ended September 30, 2001. The
production capacity of the Goldendale facility was approximately 15% of its
normal capacity from January 1, 2001 through April 30, 2001, and approximately
7.5% of its normal capacity from May 1, 2001 through September 30, 2001. The
production capacity of the Northwest facility was approximately 50% of its
normal capacity for the first three months of its fiscal year and completely
curtailed for the next six months of its fiscal year. This resulted in a
decrease in production volume of 82.8 million pounds for the three-month
periods ended September 30, with a related decrease in cost of revenues of
$23.0 million, and a decrease in production volume of 282.1 million pounds for
the nine-month periods ended September 30, with a related decrease in cost of
revenues of $82.5 million.

Additional aluminum was made available through our remelt operations.
This resulted in an increase of 15.9 million pounds in the amount of purchased
aluminum material used in our operations, with a related cost of $9.9 million
for the three-month period ended September 30, 2001, and 37.7 million pounds,
with a related cost of $24.5 million for the nine-month period ended September 30, 2001.

Gross margindecreased from $9.7 million in the three months ended
September 30, 2000 to a gross loss of $19.8 million in the three months ended
September 30, 2001, a decrease of $29.5 million, or 304.1%. Gross margin
decreased from $27.4 million in the nine months ended September 30, 2000 to a
gross loss of $63.6 million in the nine months ended September 30, 2001, a
decrease of $91.0 million, or

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332.1%. As a percentage of revenues, gross margin fell from 9.6% to
(45.6)% for the three-month periods, and fell from 8.3% to (48.2)% for the
nine-month periods, ended September 30, 2000 and 2001, respectively. These
decreases in gross margin resulted primarily from the changes in revenues and
the cost of revenues discussed above.

Net gains on power salesmade available from the curtailment that began in
October 2000 and ended in January 2001 (the First Curtailment) and the
curtailment that began in May 2001 and ended in September 2001 (the Third
Curtailment) generated net proceeds of $3.5 million for the three months ended
September 30, 2001 and $57.4 million for the nine months ended September 30,
2001. The First Curtailment made available net gains on power sales of $46.6
million for the nine months ended September 30, 2001. The Third Curtailment
made available net gains on power sales of $3.5 million for the three months
ended September 30, 2001 and $10.6 million for the nine months ended September 30, 2001.

Reimbursement of expendituresof $17.7 million for the three months ended
September 30, 2001, and $50.3 million for the nine months ended September 30,
2001 relate to the curtailment that began in January 2001 and will end in
September 2001 (the Second Curtailment).

Curtailment expensesof $1.3 million for the three months ended September 30,
2001 and $9.4 million for the nine months ended September 30, 2001 relate
to the Second Curtailment. Curtailment expenses of $3.7 million for the three
months and the nine months ended September 30, 2001, reflect wage and
benefit payments to be made to laid-off affected
employees from October 1,
2001 through March 31, 2002. These payments are required by the
Amendment to our Block Power
Sales Agreement with BPA.

General and administrative expensesdecreased from $6.5 million to $4.8
million in the three months ended September 30, 2000 and September 30, 2001,
respectively, a decrease of 26.1%. General and administrative expenses
increased slightly from $14.7 million to $14.9 million for the nine months
ended September 30, 2000 and September 30, 2001, respectively, an increase of
1.4%. As a percentage of revenues, general and administrative expenses
increased from 6.4% to 11.1% for the related three-month periods, and increased
from 4.5% to 11.3% for the related nine-month periods.

Interest expenseincreased slightly from $5.6 million to $5.7 million in
the three months ended September 30, 2000 and September 30, 2001, respectively,
an increase of 1.8%. Interest expense increased slightly from $17.4 million
to $17.7 million in the nine months ended September 30, 2000 and September 30,
2001, respectively, an increase of 1.7%.

Income tax expensedecreased from $600,000 to an income tax benefit of
$2.7 million in the three months ended September 30, 2000 and September 30,
2001, respectively. Income tax expense decreased from $2.1 million to an
income tax benefit of $300,000 for the nine months ended September 30, 2000 and
September 30, 2001, respectively. These changes were due primarily to a
decrease in taxable income of Goldendale Aluminum Company, a C corporation, for
the three months and nine months ended September 30, 2001 compared to the
corresponding periods in 2000.

Net losswas $11.0 million in the three months ended September 30, 2001
compared to a net loss of $3.0 million in the three months ended September 30,
2000 as a result of the foregoing factors. For the

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nine months ended September 30, 2001, net loss was $1.4 million, compared
to a net loss of $7.2 million for the nine months ended September 30, 2000.

Liquidity and Capital Resources

During the period in which our smelter operations have been curtailed, our
cash flow and liquidity from operations have been supplemented by net proceeds
on power sales and reimbursements for qualified expenditures from the
remarketing proceeds received by BPA. For the nine months ended September 30,
2001, net proceeds on power sales have totaled $57.4 million. Qualified
expenditures include reimbursements for curtailment related employee costs and
contract breakage fees, for capital expenditures and for debt service.
Reimbursements of qualified expenditures from remarketing proceeds through
September 30, 2001 totaled $50.4 million. Additionally, reimbursements of
qualified expenditures from remarketing proceeds for Northwest for the three
months ended September 30, 2001, not yet reported because of Northwests
differing fiscal year-end, totaled $27.7 million. We are dependent upon net
proceeds of power sales and distribution of remarketing proceeds for continued
funding of operations.

Historically, our cash and capital requirements have been satisfied
through cash generated from operating activities and borrowings under our
primary credit facilities.

Our liquidity and capital needs relate primarily to payment of principal
and interest on borrowings, capital expenditures, including our facilities
investment program, and distributions to our sole shareholder to pay income
taxes. The first stage of the facilities investment program, consisting of an
expansion of the Goldendale casthouse and a 34-cell demonstration of new
cell-line technology, has been completed. We have temporarily suspended the
second stage of the facilities investment program because of our recent
curtailments and uncertainties in our long-term supply of competitively priced
electric power. Our liquidity and capital needs also relate to working capital
and other general corporate requirements. Furthermore, we are subject to a
number of contingencies and uncertainties.

Of the approximately $285.0 million of remarketing proceeds, $17.5 million
was paid directly to Northwest Energy as reimbursement for expenses incurred or
to be incurred in connection with the development of the power projects, $159.7
million was placed in escrow for continued financing of the development of the
power projects and the remaining amount of approximately $107.8 million is and
has been available for qualified expenditures not related to the development of
the projects. Based on assumptions we have made about our operating costs, we
believe, but cannot assure you, that this $107.8 million, together with cash
flow from operations, available borrowings under our revolving credit
facilities and cash on hand, will be sufficient to fund our operations, debt
service and employment obligations through the next 12 months. By that time,
we expect, although we cannot assure you, that additional remarketing proceeds
will have become available for non-energy related qualified expenditures. If
remarketing proceeds do not become available, our business could be adversely
affected unless we are able to restart our smelter operations, obtain
additional financing, or both. Our ability to restart those operations
profitably is dependent, among other things, on the cost of power, the LME
price of aluminum, the terms of our alumina supply and Hydro tolling agreements and negotiation
of new labor agreements. We estimate that aluminum prices would need to be
above the mid-70 cent per pound range in order to cover operating

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costs at current BPA power rates. Finally, we may not be able to obtain
financing on commercially reasonable terms, or at all.

Our ability to fund
operations, make planned capital expenditures, make principal and interest
payments on our first mortgage notes, and remain in compliance with all of the financial covenants under our
debt agreements will depend on our future operating performance and the success
of our power development strategy. Our future operating performance depends on
a number of factors, including aluminum prices and power costs, many of which
are beyond our control. These factors include prevailing economic conditions
and financial, competitive, regulatory and other factors affecting our business
and operations, and may depend on the availability of borrowings under our
revolving credit facility or other borrowings. We do not assure you our cash
flow from operations, together with other sources of liquidity, will be
adequate to:



| |  | Make required payments of principal and interest on our first mortgage notes and other debt;
|- |  | --------------------------------------------------------------------------------------------
| 
| |  | Finance anticipated capital expenditures;                                                   
| 
| |  | Fund working capital requirements; or                                                       
| 
| |  | Fund the possible redemption of all outstanding shares of the Goldendale preferred stock.   

If we do not have sufficient available resources to repay any of our
indebtedness when it becomes due and payable, we may need to refinance the
indebtedness. We do not assure you refinancing will be available or available
on reasonable terms.

Remarketing Proceeds

Of the approximately $285.0 million of remarketing proceeds, $17.5 million
was paid directly to Northwest Energy as reimbursement for expenses incurred or
to be incurred in connection with the development of the power projects, $159.7
million was placed in escrow for continued financing of the development of the
power projects and the remaining amount of approximately $107.8 million is and
has been available for qualified expenditures not related to the development of
the projects. Based on assumptions we have made about our operating costs, we
believe, but cannot assure you, that this $107.8 million, together with other
available sources of capital, will be sufficient to fund our operations, debt
service and employment obligations through the next 12 months. Before that
time, we expect, although we cannot assure you, additional remarketing proceeds
will be available for non-energy related qualified expenditure for the reasons
discussed in -Energy Developments above. If remarketing proceeds do not
become available, our business could be adversely affected unless aluminum
prices, power rates and other factors allow us to profitably restart our
smelter operations.

Revolving Credit Facility

Our credit facility with Fleet Capital Corporation is a $75.0 million
senior secured revolving credit facility collateralized by all of the
inventory, accounts receivable and other rights to payment of our subsidiaries.
Availability under the revolving line of credit is controlled by a borrowing
base formula based on eligible receivables and inventory, subject to a
borrowing base reserve that is presently set at

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$21.0 million. Based on this formula, we had net availability of $48.3
million under the revolving line of credit at September 30, 2001, against which
we had borrowed $25.9 million. At October 21, 2001, the net availability under
the revolving line of credit was $45.2 million, against which we had borrowed
$14.0 million.

In August 2001, Fleet Capital Corporation and National Bank of Canada
informed us of their desire to discontinue their participation in our revolving
credit facility. We are having discussions with a number of financial
institutions about the possibility of their replacing these participants. We
may not be able to reach agreement with any of these financial institutions
that would allow us to obtain financing on acceptable terms and conditions or
at all.

Redemption of Goldendale Preferred

Our subsidiary, Goldendale Holding Company (GHC), has outstanding
118,101.35 shares of nonconvertible Series A Preferred Stock held by the
Goldendale Retirement Plan. We own all of GHCs outstanding common stock.
GHC, in turn, is the sole owner of all outstanding shares of common stock of
Goldendale Aluminum Company. The Series A Preferred Stock pays cumulative dividends and has
one vote per share on all matters submitted to a vote of shareholders of GHC
and votes together with the common stock as a single class on such matters.
Under the terms of the Series A Preferred Stock, GHC has the right to redeem
the Series A Preferred Stock for cash at any time for $227.25 (plus all accrued
but unpaid dividends) per share if redeemed before January 1, 2002, or $225.00
(plus all accrued but unpaid dividends) per share if redeemed on or after
January 1, 2002. If GHC fails to redeem the Series A Preferred Stock before
January 1, 2002, each holder of the Series A Preferred Stock will, upon
request, receive additional shares of Series A Preferred Stock equal in value
to any accrued and unpaid cash dividends. The liquidation preference of the
Series A Preferred Stock is $225.00 per share.

Accrued and unpaid dividends on the Series A Preferred Stock totaled $17.5
million as of September 30, 2001. The indenture governing the terms of our
first mortgage notes does not allow GHC to pay cash dividends on the Series A
Preferred Stock unless there is a simultaneous redemption. Because the shares
of Series A Preferred Stock vote as a class with the common stock of GHC, an
in-kind payment to the holders of the Series A Preferred Stock of all accrued
dividends would result in a change of voting control of GHC unless the rights
and preferences of the Series A Preferred Stock are modified. Such a change in
control would result in a default under our indenture and bank credit
agreement.

In addition, the Goldendale Retirement Plan lacks liquidity to fund
projected distributions and needs $4.0 million of Series A Preferred Stock
redeemed to be able to fulfill obligations for 2001 and additional funds for
obligations in future years. The Goldendale Retirement Plan has indicated
that, rather than exercising its rights to payment in kind, it would prefer to
have us or a related party purchase all outstanding Series A Preferred Stock at
fair market value. We anticipate that the fair market value would be
significantly less than the Series A Preferred Stocks redemption price, although there
can be no assurance that this is the case until a valuation is performed. We
are considering whether we are legally permitted to make, or to cause an
affiliate to make, such a purchase and, if so, whether it makes sense to do so
from a business perspective. Alternatively, GHC may redeem $4.0 million or more
worth of the Series A Preferred Stock to provide the liquidity required by the
Goldendale Retirement Plan.

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Senior Notes

Entities affiliated with us or Brett Wilcox, who is our chairman of the
board and chief executive officer and sole shareholder, may invest in an entity
that would purchase some of our first mortgage notes. Whether such an
investment is made depends on tax and legal considerations as well as
economic analysis.

Analysis of Cash Flows

Our statement of cash flows for the periods indicated are summarized
below:

|                                                    |  |                   |         |      |  |   |         |  
|--------------------------------------------------- |  | ----------------- | ------- | ---- |  | - | ------- | -
|                                                    |  | Nine Months Ended
|                                                    |  | September 30,    
|                                                    |  |                  
|                                                    |  | 2000              |         | 2001
|                                                    |  |                   |         |     
|Net cash provided by operating activities           |  | $                 | 4,380   |      |  | $ | 65,611  |  
|Net cash used in investing activities               |  |                   | (21,624 | )    |  |   | (10,285 | )
|Net cash provided by (used in) financing activities |  |                   | 17,254  |      |  |   | (33,026 | )
|Increase in cash                                    |  |                   | 10      |      |  |   | 22,300  |  

Net cash provided by operating activities was $65.6 million for the nine
months ended September 30, 2001, and $4.4 million for the nine months ended
September 30, 2000. The net cash provided by operating activities during the
nine months ended September 30, 2001 was primarily attributable to cash
provided by our net income, as adjusted for non-cash charges, of $21.6 million.
For the nine months ended September 30, 2001, our net loss was $(1.4) million,
depreciation and amortization was $20.9 million and other non-cash adjustments
totaled $2.1 million. Additionally, changes in working capital provided net
cash of $44.0 million, of which $41.4 million related to receivables and $21.0
million related to inventories, and offsetting was $34.1 million related to
payables, all of which were due to the partial curtailment of operations.

The net cash used in operating activities during the nine months ended
September 30, 2000 of $4.4 million was attributable to cash provided by our net
income, as adjusted for non-cash charges of $14.0 million. In addition,
changes in working capital used net cash of $9.6 million. The increase in
working capital was primarily due to the transition from the Glencore tolling
arrangement with related impacts on receivables, inventories and payables.

Net cash used in investing activities was $10.3 million and $21.6 million
in the nine months ended September 30, 2001 and September 30, 2000,
respectively. Cash used in investing activities in the nine months ended
September 30, 2001 was primarily attributable to capital expenditures of $9.7
million, of which $700,000 related to the facilities investment program, $2.8
million related to capitalization of cell-relining costs, and $6.2 million
related to routine, ongoing maintenance of the facilities. Cash used in
investing activities in the nine months ended September 30, 2000 was primarily
attributable to capital expenditures of $21.7 million.

Net cash used in financing activities was $33.0 million in the nine months
ended September 30, 2001, compared to net cash provided by financing activities
of $17.3 million in the nine months ended

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September 30, 2000. Net cash used in financing activities in the nine
months ended September 30, 2001 was primarily attributable to net repayments of
$21.4 million under our credit facility, redemption of preferred stock and
payment of the related dividends of $5.0 million, and a distribution to our
sole shareholder of $4.4 million for payment of income taxes. Net cash
provided by financing activities in the nine months ended September 30, 2000
was primarily attributable to net borrowings of $16.3 million under our credit
facility.

Seasonality and Inflation

Our results of operations can be affected by seasonal factors, such as
substantial increases in the cost of electricity caused by weather related
factors. We do not believe inflation has had a material effect on our results
for the periods presented.

Effect of Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 (SFAS No. 138), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and No. 138 are effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. We reflected the difference between
the fair market value of the derivative instruments and the recorded book value
of the derivative instruments as a cumulative effect type adjustment to
accumulated other comprehensive income.

We believe that the majority of our non-trading derivative contracts,
power purchase agreements and aluminum purchase and sale agreements qualify for
the normal purchases and sales exception of SFAS No. 133 and therefore would
not be recognized at fair value on the balance sheet. We do, however use
certain derivative instruments to limit our exposures to commodity price risk
and interest rate risk. Our interest rate swap agreement permits us to limit
exposure to interest rate risk and meets the requirements for hedge accounting
under SFAS No. 133. We recorded the changes in the fair value of this contract
in accumulated other comprehensive income on the balance sheet. Aluminum
call options entered into to limit exposure to commodity price risk are not
accounted for as hedging instruments under SFAS No. 133 and as a result,
changes in fair value of these instruments are immediately recognized in
income.

The financial statement impact of recording the SFAS No. 133 transition
adjustment on January 1, 2001 is as follows:

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|                                                                             |  |   |         | 
|---------------------------------------------------------------------------- |  | - | ------- | 
|Fair value of interest rate swap (liability)                                 |  | $ | 783,000 | 
|Increase in accumulated other comprehensive income, net of tax of $122,000 |  | $ | 228,000 | 

Upon initial adoption of the standard, we recorded a $228,000, net of tax,
cumulative effect adjustment to accumulated other comprehensive income. This
adjustment relates to the fair value of the interest rate swap contract that
qualified for cash flow hedge accounting prior to the initial adoption of SFAS
No. 133. This amount will reduce interest expense when the related hedged
transaction occurs.

In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 141 (SFAS 141),
Business Combinations.This standard eliminates the pooling method of
accounting for business combinations initiated after June 30, 2001. In
addition, SFAS 141 addresses the accounting for intangible assets and goodwill
acquired in a business combination. This portion of SFAS 141 is effective for
business combinations completed after June 30, 2001. We do not expect SFAS 141
to have a material effect on our financial position or results of operations.

In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 142 (SFAS 142),
Goodwill and Intangible Assets,which revises the accounting for purchased
goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets
with indefinite lives will no longer be amortized, but will be tested for
impairment annually and also in the event of an impairment indicator. SFAS 142
is effective for fiscal years beginning after December 15, 2001, with early
adoption permitted for companies with fiscal years beginning after March 15,
2001 if their first quarter financial statements have not previously been
issued. We are currently analyzing the financial impact that the adoption of
SFAS 142 will have on our consolidated financial statements. We will adopt
SFAS 142 in the first quarter of 2002. The tests for impairment of assets
could require write-down of the carrying value of goodwill and intangible
assets, which would adversely affect our ability to meet the covenants of our
debt agreements.

In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standard No. 143 (SFAS 143),
Accounting for Asset Retirement Obligations,which addresses the accounting for
legal obligations associated with the retirement of tangible long-lived assets.
Under SFAS 143, the fair value of a liability for an asset retirement
obligation shall be recognized in the period in which the obligation is
incurred. SFAS 143 is effective for fiscal years beginning after June 15,
2002, with early adoption permitted. We are currently analyzing the financial
impact that the adoption of SFAS 143 will have on our consolidated financial
statements. We will adopt SFAS 143 on or before January 2003.

In August 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 144 (SFAS 144),
Accounting for the Impairment or Disposal of Long-lived Assets.SFAS 144
supersedes Statement of Financial Accounting Standards No. 121, Accounting for
Impairment of Long-lived Assets and Assets to be Disposed of,and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, Reporting the Results of Operations Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions.The provisions of SFAS 144 will be effective for
fiscal years beginning after December 15, 2001. The most significant changes
made by SFAS 144 are that it: (1)

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removes goodwill from its scope and, therefore, eliminates the requirements of
SFAS 121 to allocate goodwill to long-lived assets to be tested for impairment,
and (2) describes a probability-weighted cash flow estimation approach to deal
with situations in which alternative courses of action to recover the carrying
amount of long-lived assets are under consideration or a range is estimated for
the amount of possible future cash flows. We are currently analyzing the
financial impact that the adoption of SFAS 144 will have on our consolidated
financial statements. We will adopt SFAS 144 on or before January 2002.

Forward-Looking Statements

This report contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements appear in a number of places in this report (see,
for example, -Overview, -Historical Electricity Supply, Production
Curtailment and Power Remarketing, -Energy Development, -Labor Issues,
-Hydro Tolling Agreement -Other Developments, -Results of Operations, and
-Liquidity and Capital Resources). Such statements can be identified by the
use of forward looking terminology such as believes, expects, may,
estimates, will, should, plans, or anticipates or comparable
terminology, or by discussions of strategy. Readers are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties, and that actual results may vary
materially from those in the forward-looking statements as a result of various
factors. These factors include the following:



| |  | Fluctuations in the price of primary aluminum;                                                                                                                  
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Fluctuations in the market price of electricity;                                                                                                                
| 
| |  | Fluctuation in the price of natural gas necessary for the production of electricity at one or more Northwest Energy
projects:                                   
| 
| |  | Our ability to obtain an affordable and reliable supply of electricity;                                                                                         
| 
| |  | Our ability to obtain remarketing proceeds from BPA;                                                                                                            
| 
| |  | Servicing our substantial indebtedness;                                                                                                                         
| 
| |  | The incurrence of future indebtedness;                                                                                                                          
| 
| |  | Redemption of preferred stock and providing liquidity to the Goldendale Retirement Plan, and the potential consequences if
that cannot occur in a timely manner;
| 
| |  | Restrictions on our ability to operate our business imposed by the terms of our indebtedness;                                                                   
| 
| |  | The effects of federal and state environmental laws and regulations;                                                                                            
| 
| |  | The continued viability of the technology used in our smelters;                                                                                                 

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| |  | Our ability to operate effectively with and without tolling agreements;                                                                                               
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Retaining and recruiting key personnel, particularly when both smelters have curtailed operations and when continuing
severance benefits may be reduced or terminated;
| 
| |  | Changes in labor relations with the unions representing our employees and the ability to negotiate new labor agreements
that provide operational flexibility;         
| 
| |  | Possible claims and damages associated with an extended curtailment, including, but not limited to, potential breaches of
our tolling agreement with Hydro;           
| 
| |  | The timing of the restart of our smelter operations; and                                                                                                              
| 
| |  | The ability of Northwest Energy to enter into joint ventures with suitable partners for development and operation of the
various power projects.                      

Other factors include the effectiveness of managements strategies and
decisions, general economic and business conditions, developments in
technology, new or modified statutory or regulatory requirements, and changing
prices and market conditions. No assurance can be given that these are all of
the factors that could cause actual results to vary materially from the
forward-looking statements.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We manage interest rate risk through the strategic use of fixed and
variable interest rate debt and, to a limited extent, interest rate
derivatives. At September 30, 2001, our derivative instrument consisted of an
interest rate swap agreement that expires in 2003 and effectively fixes our
interest rate at 6.4% on a notional principal amount of $20.0 million on our
floating rate long-term debt. The agreement requires quarterly cash
settlements for interest rate fluctuation outside of the fixed rate.

In order to manage the risk of market aluminum prices and continue to
service our customer commitments, the strategic use of options on aluminum have
been employed. During the curtailment, we are purchasing 7,500 tons per month
of aluminum that normally would be provided through our Northwest smelter
operation. Options covering from 3,400 to 6,800 tons per month have been
employed to protect against high aluminum prices.

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PART II  OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS.

From time to time, we are involved in various legal proceedings arising
from our normal business activities. We believe these legal proceedings,
individually or in the aggregate, will not have a material adverse effect on
our financial condition, results of operations or cash flows.

In December 2000, we were designated as a potentially responsible party
("PRP") by the U.S. Environmental Protection Agency under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, and by the
State of Oregon under applicable state laws with respect to the Portland Harbor
Superfund site in Portland, Oregon. Other PRPs also were so designated. We,
along with other PRPs, are participating in the funding of a remedial
investigation/feasibility study. We have been contractually designated as a de
minimus PRP. We do not anticipate selection of a remedy for several years. We
believe any liability of the Company, if any, associated with this matter will
be de minimus.

On April 18, 2001, a Petition for Review under the Northwest Power Act and
Suit for Declaratory and Injunctive Relief under 28 U.S.C. Section 2201(a) for
Violation of 42 U.S.C. Sections 4321, et seq. was filed against BPA in the
United States Court of Appeals for the Ninth Circuit by individuals and the
Utility Reform Project. The plaintiffs seek review of contracts that obligate
BPA to pay industrial customers for not purchasing or not using power the
customer might otherwise purchase from BPA. Our Remarketing Addendum may be
included in this group of contracts. The plaintiffs also seek to enjoin BPA
from performing or attempting to implement these contracts on the basis that
BPAs conduct in executing these contracts violated the Bonneville Project Act
of 1937 and other statutes. We intervened in the case on May 14, 2001. We do
not expect the plaintiffs lawsuit to have any impact on BPAs ability to
perform under the Remarketing Addendum due to the passage of the applicable
statute of limitations, prior favorable court decisions and other factors.
Notwithstanding the foregoing, if BPA were enjoined from performing the
Remarketing Addendum, our business, financial condition and results of
operations would be materially and adversely affected.




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits

|     |  |                                                                   
|---- |  | ------------------------------------------------------------------
|10.1 |  | Form of Indemnity Agreement between the Company and its
directors.
|10.2 |  | Third Amendment to Glencore Alumina Supply Agreement.             

(b)  Reports on form 8-K.

No reports on Form 8-K were filed during the period.

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SIGNATURES

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



| | GOLDEN NORTHWEST ALUMINUM, INC.
NORTHWEST ALUMINUM COMPANY
NORTHWEST ALUMINUM SPECIALTIES, INC.
GOLDENDALE HOLDING COMPANY
GOLDENDALE ALUMINUM COMPANY
NORTHWEST ALUMINUM TECHNOLOGIES, LLC
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       |  |     |  |                                        
|---------------------- |  | --- |  | ---------------------------------------
|Date: November 2, 2001 |  | By: |  | /s/ William R. Reid                    
|                       |  |     |  |                                        
|                       |  |     |  | William R. Reid
Chief Financial Officer

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EXHIBIT INDEX

|     |  |                                                                   
|---- |  | ------------------------------------------------------------------
|10.1 |  | Form of Indemnity Agreement between the Company and its directors.
|10.2 |  | Third Amendment to Glencore Alumina Supply Agreement.             

42