<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549

                               FORM 10-K

         [X]  Annual Report Pursuant to Section 13 or 15(d) of the
                    Securities Exchange Act of 1934
              FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

       [ ]  Transition Report Pursuant to Section 13 or 15(d) of the
                     Securities Exchange Act of 1934

                      Commission File No. 1-7170

                         IMCO Recycling Inc.
          (Exact name of registrant as specified in its charter)

                               Delaware
      (State or other jurisdiction of incorporation or organization)

                              75-2008280
                   (I.R.S. Employer Identification No.)

                    5215 North O'Connor Blvd., Suite 940
                      Central Tower at Williams Square
                           Irving, Texas 75039
                  (Address of principal executive offices)

                             (972) 869-6575
            (Registrant's telephone number, including area code)


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class                Exchange on Which Registered
-------------------                ----------------------------
Common Stock, $0.10 Par Value      New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:   NONE

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

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

As of March 21, 1997, the aggregate market value of voting stock held by 
nonaffiliates of the Registrant was $167,261,985.

Indicate the number of shares outstanding of each of the issuer's classes of 
common stock, as of March 21, 1997. 

               Common Stock, $0.10 par value,  12,532,865
               ------------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement relating to its 1997 
Annual Meeting of Stockholders are incorporated by reference into Part III 
hereof.

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ITEM                                                                PAGE
----                                                                ----
PART I

Item 1. Business                                                      3

Item 2. Properties                                                   13

Item 3. Legal Proceedings                                            15

Item 4. Submission of Matters to a Vote of Security Holders          15

PART II

Item 5. Market for Registrant's Common Equity and Related
        Stockholder Matters                                          15

Item 6. Selected Financial Data                                      16

Item 7. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                          16

Item 8. Financial Statements and Supplementary Data                  22

Item 9. Changes in and Disagreements With Accountants
        on Accounting and Financial Disclosure                       40

PART III

Item 10. Directors and Executive Officers of the Registrant          40

Item 11. Executive Compensation                                      40

Item 12. Security Ownership of Certain Beneficial Owners and
         Management                                                  40

Item 13. Certain Relationships and Related Transactions              40


PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on
         Form 8-K                                                    41

Signatures                                                           44

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PART I

ITEM 1. BUSINESS

GENERAL

The principal business of IMCO Recycling Inc. (the "Company") is owning and 
operating aluminum recycling plants.  The Company believes it is the world's 
largest recycler of secondary aluminum, which includes used aluminum beverage 
cans ("UBCs"), scrap and dross (a by-product of aluminum production).  The 
Company converts UBCs, scrap and dross into molten metal in furnaces, then 
delivers it to customers in molten form or ingots.  The Company recovers 
magnesium via a relatively similar process and also recycles zinc.  Except 
where the context otherwise requires, the term "Company" as used herein refers 
to IMCO Recycling Inc. and its subsidiaries.

The Company's strategy is to participate in sectors of the nonferrous metals 
recycling industry in which it believes it can provide customers with a 
technology-based, value-added service and in which it can develop significant 
market share.  A large percentage of the Company's processing capacity is 
utilized to recycle scrap material and to charge a fee for this service (a 
service called "tolling").  The Company intends to continue to expand its 
business, both in the United States and abroad, (i) by establishing additional 
aluminum recycling facilities which would be dedicated to one or more major 
customers, (ii) by expanding its existing facilities, and (iii) by acquiring 
or partnering with other similar recycling businesses.  There can be no 
assurance, however, that any such expansions or acquisitions will be 
accomplished.  See "SALES AND MARKETING" below.

The Company's business has benefited from the trend to include recycled 
materials in finished products, and in particular, from the growth in the 
production and use of aluminum beverage cans and their recycling.  The 
recycling of UBCs in the United States has increased because of economic, 
legislative and environmental factors.  According to industry estimates, the 
number of aluminum beverage cans produced has increased from 34.7 billion in 
1979 to approximately 100 billion, and the number of UBCs recycled increased 
from 8.5 billion to approximately 60 billion. 

The Company's principal customers include Aluminum Company of America 
("Alcoa"), Commonwealth Aluminum Corporation ("Commonwealth"), formerly Barmet 
Aluminum Corporation, Doehler Jarvis, Hunter Douglas, Majestic Metals and 
Ravenswood Aluminum Corporation ("Ravenswood"), all of whom use aluminum 
recycled by the Company to produce can sheet, building construction materials 
or automotive products.  

For the year ended December 31, 1996, approximately 83% of the Company's total 
pounds of metal processed involved tolling.  Tolling operations do not expose 
the Company to the risk of commodity price fluctuations and impose relatively 
low working capital demands; consequently, the Company prefers to utilize its 
capacity where practicable for tolling.  The balance of the Company's 
processing is principally derived from dross and scrap purchased, recycled and 
then sold by the Company ("buy/sell" business). See "OPERATIONS" below.

                                     3
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BACKGROUND

The Company was organized in 1985 as Frontier Texas Corporation under the 
corporate laws of Delaware.  In September 1986, the Company acquired its 
aluminum and magnesium recycling business through its purchase of 
International Metal Co., an Oklahoma corporation.  In September 1988, 
International Metal Co. merged with and into the Company, and the Company 
changed its name to IMCO Recycling Inc.

Since 1992, the Company has grown its number of plant facilities and capacity 
through acquisitions of existing facilities and construction of new 
facilities.  Beginning in 1995, this growth strategy was accelerated.

In September 1995, the Company purchased all of the assets of an aluminum 
recycling facility in Bedford, Indiana ("Bedford").  In addition, in October 
1995, the Company acquired Metal Mark, Inc. ("Metal Mark"), which owned and 
operated aluminum recycling facilities located in Chicago Heights, Illinois 
and Sikeston, Missouri.  See ITEM 2. "PROPERTIES."

In December 1995, the Company formed a joint venture, VAW-IMCO Guss 
und Recycling GmbH ("VAW-IMCO"), with VAW aluminium AG, the largest aluminum 
company in Germany.  The Company has a 50% interest in this German venture 
which owns and operates two recycling and foundry alloy facilities.  The 
plants principally serve the European automotive markets. 

In January 1996, the Company completed the construction of its salt cake 
processing facility which is located adjacent to the Company's Morgantown, 
Kentucky plant. This new facility processes salt cake, a nonhazardous 
by-product generated from the Company's aluminum recycling plants, through use 
of materials separation technology and recovers additional amounts of aluminum 
for resale that would otherwise be landfilled.

In 1996, the Company began construction of an aluminum recycling facility in 
Coldwater,  Michigan through its joint venture, IMCO Recycling of Michigan 
L.L.C. ("IMCO of Michigan").   The Company is a 75% managing member of the 
venture, which will have a long-term supply agreement for the delivery of hot 
metal to its 25% member, Alchem Aluminum, Inc. ("Alchem").  Alchem 
manufactures specification aluminum alloys that are sold principally to 
automotive manufacturers.  IMCO of Michigan started production during the 
first quarter of 1997.

In 1996, the Company announced plans to construct an aluminum recycling 
facility in Swansea, Wales, U.K. under its 100%-owned subsidiary IMCO 
Recycling (UK) Ltd. ("Wales").  Construction of the Wales facility is expected 
to be completed in the third quarter of 1997.  The plant site is adjacent to 
its principal customer, Alcoa Manufacturing (GB) Limited.

At year-end 1996, the Company owned and operated 11 domestic recycling plants 
that have an aggregate annual processing capacity of approximately 1.4 billion 
pounds of aluminum and approximately 50 million pounds of other metals.  As 
noted above, in addition to these wholly owned facilities, the Company is a 
50% owner of (i) a facility in East Chicago, Indiana which has the ability to 
process 80 million pounds of aluminum, and (ii) VAW-IMCO which has a 
processing capacity of 280 million pounds of aluminum. 

                                     4
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RECENT DEVELOPMENTS

In January 1997, the Company completed the acquisitions of (i) IMSAMET, Inc. 
("IMSAMET") a wholly owned subsidiary of EnviroSource, Inc. and (ii) Rock 
Creek Aluminum, Inc. ("Rock Creek").  IMSAMET owns or has a majority interest 
in three aluminum recycling plants located in Goodyear, Arizona; Post Falls, 
Idaho and Wendover, Utah which together have an annual processing capacity of 
approximately 440 million pounds.  In addition, IMSAMET owns a 50% interest in 
a joint venture facility, adjacent to the Utah plant, which uses a proprietary 
process to reclaim materials from salt cake.  Rock Creek operates three 
facilities in Cleveland, Elyria and Rock Creek, Ohio. These facilities utilize 
milling, shredding, blending, testing and packaging equipment to process 
various types of raw materials, including aluminum dross and scrap, various 
minerals and slags.  Rock Creek's facilities have a total annual capacity of 
approximately 150 million pounds.  See NOTE J--SUBSEQUENT EVENTS of Notes 
to the Consolidated Financial Statements.

PRODUCTS AND SERVICES

The Company recycles aluminum and delivers the recycled metal to customers as 
ingot or molten aluminum.  The Company's customers include most of the major 
United States aluminum producers, aluminum diecasters, extruders, and other 
processors of aluminum products.  A principal element of the Company's 
strategic plan calls for entering into new markets, specifically the expanding 
aluminum automotive market.  In 1995, the Company entered this market with the 
acquisition of Metal Mark.  In 1996, the Company commenced construction of the 
Coldwater, Michigan plant, which will also serve this market.  

In addition, the Company plans to increase its emphasis on seeking foreign 
locales for its recycling facilities where market conditions warrant.  General 
political and economic conditions in these countries could affect the overall 
financial prospects of the Company.  Foreign operations are generally subject 
to several risks, including foreign currency exchange rate fluctuations, 
strict environmental regulations, changes in the methods and amounts of 
taxation, foreign exchange controls and government restrictions on the 
repatriation of hard currency.

The Company recycles magnesium dross for primary magnesium producers.  It also 
produces a line of magnesium anodes that are recycled from post-consumer scrap 
and sold to end users and independent distributors for corrosion protection of 
steel structures.

The Company believes that its Interamerican Zinc, Inc. subsidiary ("IZI") is 
the largest recycler of hot-dip zinc dross for continuous galvanizers in the 
U.S.  IZI's principal customers during 1996 consisted of most of the major 
U.S. steel companies.

IMCO's Rock Creek subsidiary manufactures a variety of aluminum products and 
manufactures products that are eventually used as metallurgical additions in 
the steel making process such as slag conditioners, deoxidizers, steel 
desulfurizers and hot topping compounds. Rock Creek utilizes milling, 
shredding, blending, testing and packaging equipment to process various types 
of raw materials including aluminum dross and scrap, various minerals and 
slags.  In addition, Rock Creek manufactures a wide range of proprietary 
briquetted products and offers toll briquetting services.

                                     5
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THE RECYCLING PROCESS

The raw material received for aluminum processing is loaded into furnaces 
where natural gas heat is applied along with a flux mixture (salt and potash). 
Some of the Company's aluminum facilities operate rotary furnaces of a unique 
design (which are somewhat more flexible than reverberatory furnaces) which 
can process UBCs, dross and various types of aluminum scrap.  The Company 
believes that these rotary furnaces are more efficient and cleaner than, and 
provide rates of recovery superior to, conventional rotary furnaces.

The Loudon, Bedford and Metal Mark facilities operate conventional rotary 
furnaces which are somewhat larger than the Company's rotary furnaces.  The 
Bedford facility's rotary furnace is unique in that it also features automated 
material charging mechanisms. 

Materials are melted in the furnaces, and the recovered metal is poured 
directly into an ingot mold or hot metal crucible for delivery to customers. 
Magnesium is recycled by the same method in a rotary furnace at the Sapulpa, 
Oklahoma plant.  Some of the Company's plants deliver molten aluminum in 
crucibles directly to their customers' manufacturing facilities.  The molten 
aluminum is poured directly into the customer's furnace, saving the customer 
the time and expense of remelting aluminum ingot.  The Company normally 
charges an additional fee for transportation and handling of molten aluminum.  
The Sapulpa and Metal Mark plants are restricted, due to the geographical 
locations of their customers, to delivering the aluminum in ingot form.  

The Company's principal type of aluminum and magnesium rotary furnace was 
developed by a former shareholder of International Metal Co.  The Company has 
a nonexclusive right to use this furnace, subject only to the Company's 
maintaining the confidentiality of the furnace design. There can be no 
assurances that others will not purchase or develop similar furnaces, that the 
process will not be transferred to or obtained by others, or that other metal 
producers will not develop a similar metal recovery process.

The aluminum recycling process from the Company's rotary furnaces produces a 
by-product called "salt cake," which is formed from the contaminants and 
coatings on aluminum scrap and dross and the salts added during the aluminum 
recycling process.  (The by-product of the reverberatory furnaces is dross.)  
Salt cake is composed of salts, metallic aluminum, aluminum oxide and small 
amounts of other materials.

The Company disposes of its salt cake and certain airborne contaminants  
("baghouse dust") in landfills with cells dedicated for use exclusively by 
the Company or that separately encapsulate the Company's material.  Salt cake 
is not currently listed as a "hazardous waste" under the Resource Conservation 
and Recovery Act of 1976 ("RCRA") or as a "hazardous substance" under the 
Comprehensive Environmental Response, Compensation and Liability Act of 1980  
("CERCLA"). The Company has built and operates a lined landfill at its 
Morgantown facility  meeting RCRA Subchapter "C" hazardous waste standards.

In 1996, the Company completed the construction of a facility adjacent to its 
Morgantown plant to further process the salt cake through the use of materials 
separation technology and extract additional aluminum that is left after the 
melting process. This salt cake processing facility is the first step needed 
for closed loop recycling.  The process involves crushing the salt cake and 

                                     6
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separating the aluminum contained therein.  The residual product is then 
landfilled in the Company's Morgantown landfill. See "ENVIRONMENTAL MATTERS."

The IMSAMET Arizona facility processes aluminum scrap and turnings and 
recycles concentrates from purchased dross and salt cake that are first 
treated in the facility's patented wet milling process, which reduces the 
volume of material handled, thus allowing for more efficient utilization of 
capacity. Aluminum oxide, a by-product of the wet milling process, is further 
treated and sold for use in production of Portland cement.

Located near the Bonneville Salt Flats, the IMSAMET Utah facility processes 
aluminum concentrates from the adjacent 50% owned joint venture, Solar 
Aluminum Technology Services ("SALTS"), and produces ingot.  SALTS recycles 
salt cake from the IMSAMET Idaho and Utah plants into aluminum concentrates, 
aluminum oxide and salt brine.  The clear brine is delivered to the venture's 
partner, Reilly Industries, where its chemical content is recycled for 
multiple uses, including reuse as a flux.

In IZI's zinc recycling process, dross is first melted in an electric 
induction furnace and then transferred to a reactor which removes the 
impurities (iron and zinc oxide, which are sold as a by-product).  The 
remaining molten zinc is poured into a reverberatory holding furnace from 
which it is blended and cast into ingots which are returned to the customer.  
IZI holds patent rights to its process in the United States and 13 other 
countries.

OPERATIONS

In its aluminum tolling operations, the Company accepts UBCs, dross and scrap 
owned by its customers and processes this material for a tolling charge per 
pound of incoming weight.  In order to retain control of their metal supplies, 
customers have typically desired to toll, rather than sell, their scrap 
materials.  Tolling requires no metal inventory to be purchased or held by the 
Company.  In addition, tolling does not expose the Company to the risk of 
fluctuating metal prices since the Company does not own the material being 
processed.  The Metal Mark acquisition has changed the Company's historical 
ratio of tolling to buy/sell business. Only about 50% of Metal Mark's business 
has traditionally involved tolling; the remainder is buy/sell business.  See 
ITEM 7.  "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS."

When purchasing metals in the open market for its buy/sell business, the 
Company attempts to reduce the risk of fluctuating metal prices by arranging 
for the sale of the aluminum anticipated to be recovered and by avoiding large 
inventories of ingot or scrap material except to the extent necessary to allow 
its plants to operate without interruption. 

Rock Creek processes a wide variety of materials--see "PRODUCTS AND SERVICES."

SALES AND MARKETING

The Company's principal customers (see "GENERAL" above) use recycled aluminum 
to produce can sheet, building, automotive and other products.  The Company 
provides products 

                                     7
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and services to a number of primary and fabricating facilities of 
Alcoa.  During 1996, 1995 and 1994, Alcoa accounted for approximately 13%, 23% 
and 30%, respectively, of revenues.  Commonwealth accounted for approximately 
8%, 9% and 12% of revenues in 1996, 1995 and 1994, respectively.  The loss of 
either Alcoa or Commonwealth as customers would have a material adverse effect 
upon the business of the Company and its future operating results.  

Agreements with customers in the recycling industry have customarily been 
short-term agreements.  These usually result from a bidding process where 
aluminum producers and metal traders offer to sell materials or to have 
materials tolled.  Consequently, the Company historically has maintained no 
significant backlog of orders.  However, the Company has secured some longer 
term commitments for its recycling services with Alcoa, Commonwealth, Alchem 
and Ravenswood.

In 1992, the Company was successful in obtaining a 10 year contract with 
Commonwealth to process all of Commonwealth's scrap aluminum, UBCs and dross 
at the Company's Uhrichsville plant.  See ITEM 2. "PROPERTIES--ALUMINUM 
RECYCLING"  below.  In early 1994, the Company entered into a three-year 
processing agreement with Alcoa whereby the Company's Rockwood plant provides 
secondary metal for its Alcoa, Tennessee facility.  This agreement was 
modified in 1995 to reflect greater volumes and to include the Company's 
Loudon plant as an approved supplier under the terms of the contract.  This 
agreement will extend for additional one year terms at the end of each 
contract year unless terminated by either party.  If terminated by either 
party, the agreement will continue in effect until the second anniversary date 
of the last day of the contract year during which the termination notice was 
given.  The agreement obligates the Company to indemnify Alcoa for certain 
environmental liabilities which Alcoa may incur in connection with the 
transactions contemplated by the agreement. 

These agreements contain escalation provisions which are intended to cover 
increases in certain of the Company's processing costs.  The Company may seek 
similar dedicated long-term arrangements with customers in the future.  
Increased emphasis on dedicated facilities to customers and dedicated 
contracts with customers carries the inherent risk of increased dependence on 
a single or few customers with respect to a particular Company facility.  In 
such cases, the loss of such a customer could have a material adverse affect 
on the Company's financial condition and results of operation, and any timely 
replacement of volumes attributable to such a customer could prove difficult.

The primary metals industry and the metals recycling industry are subject to 
cyclical fluctuations, depending upon the availability and price of 
unprocessed scrap metal and demand in the metal consuming industries. 
Temporary reductions in can stock production by one of the Company's customers 
have previously affected the Company's revenues.  See ITEM 7.  "MANAGEMENT'S 
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

COMPETITION

The aluminum recycling industry is fragmented and highly competitive.  The 
Company believes that its position as the largest U.S. recycler of secondary 
aluminum is a positive competitive factor. The principal factors of 
competition in the industry are price, recovery rates, environmental and 
safety regulatory compliance, and services (e.g., the ability to deliver 
molten 

                                     8
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aluminum).  Freight costs also limit the geographic areas in which the Company 
can effectively compete.

The major aluminum producers, some of which are the Company's largest 
customers, have generally discontinued processing dross, instead focusing 
their resources on other aspects of aluminum production.  UBCs and other scrap 
are processed by both the secondary recycling industry and the major 
producers.  The Company competes with both other secondary recyclers and their 
customers when purchasing and processing scrap for the buy/sell business.

The amount of the Company's tolling business can also vary depending upon the 
extent that the major aluminum producers' used metal materials are internally 
recycled.  The aluminum producers generally vary their rate of internal 
recycling depending upon furnace availability, inventory levels, the price of 
aluminum, and their own internal demand for metal.  The major aluminum 
producers are larger and have greater financial resources than the Company.  A 
decision by these producers to expand their recycling operations could reduce 
demand for certain of the Company's products and services. 

SOURCE AND AVAILABILITY OF RAW MATERIALS AND ENERGY

The Company has historically not had, and does not anticipate having, 
difficulties in obtaining raw materials for its operations.  In the case of 
buy/sell business, the primary sources of aluminum and magnesium for recycling 
are dross and scrap, which are purchased from both the major aluminum 
producers and metal traders.

Prior to 1996, fluctuations in market prices for both aluminum and magnesium 
had not significantly affected the availability of these metals to the 
Company.  However, during 1996, the Company had difficulty obtaining 
significant quantities of UBC's to operate at a profitable level at its 
Corona, California and Bedford, Indiana facilities, as these plants were 
designed to process solely UBC material.  As a result, management decided to 
close the Corona facility.  At the Bedford facility, the Company is presently 
modifying one of the existing furnaces and installing an additional furnace 
which will enable it to process a greater variety of aluminum scrap in the 
future.

The availability of zinc dross is dependent upon the demand for galvanized 
steel, which has historically paralleled fluctuations in customer demand in 
the automotive, appliance and construction industries.

The Company's operations are fueled by natural gas, which represents the 
second largest component of operating costs.  In an effort to acquire the most 
favorable natural gas costs, the Company has, at times, secured long-term 
commitments for its natural gas requirements.  Occasionally, when deemed 
necessary, the Company purchases its natural gas on a spot-market basis. All 
of the Company's long-term contracts with its customers contain natural gas 
price escalators.  See ITEM 7.  "MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."  The Company understands that 
most of its competitors' operations also are fueled by natural gas; therefore, 
it believes that increases in the prices for natural gas do not adversely 
affect the Company's competitive position.  The Company believes it will 
continue to have access to adequate energy supplies to meet its needs for the 
foreseeable future.

                                     9

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SEASONALITY

UBC collections have historically been highest in the summer months and lower 
in the winter months.  Therefore, the Company has at times experienced lower 
volumes during the winter.  In recent years, however, the Company's 
processing volumes have fluctuated mostly due to its startup of additional 
capacity rather than the seasonality of UBC collections.

TRANSPORTATION

The Company receives UBCs, dross and scrap, and ships its recycled metal by 
both rail and truck.  Most of the Company's plants own their own rail siding 
or have access to rail lines nearby.  The Company owns and leases various 
trucks and trailers to support its business.  Customarily, the transportation 
costs of scrap materials to be tolled are paid by the customer, while the 
transportation costs of aluminum and magnesium purchased and sold by the 
Company may be paid either by the customer or the Company.  The Company 
contracts with third-party transportation firms for hauling some of its solid 
waste for disposal.

EMPLOYEES

As of December 31, 1996, the Company had 917 employees, consisting of 204 
employees engaged in administrative and supervisory activities and 713 
employees engaged in production and maintenance.  The production and 
maintenance employees at the Rockwood plant are represented by the United 
Steelworkers of America under a five-year collective bargaining agreement 
that expires in August 2000.  The production and maintenance workers at the 
Uhrichsville plant are represented by the United Mine Workers of America.  
This contract expires on November 30, 1998.  The production and maintenance 
workers at the Bedford plant are represented by the International Brotherhood 
of Electrical Workers.  This agreement expires in April 1997.  The production 
and maintenance workers at the Sikeston plant are also represented by the 
United Steelworkers of America union under an agreement which expires in 
March 1997.  Labor relations with employees have been satisfactory.

ENVIRONMENTAL MATTERS

The processing of UBCs, dross and scrap generates solid waste in the form of 
salt cake and baghouse dust.  At the Sapulpa and Morgantown plants, the 
Company disposes of its solid waste at its own permitted disposal sites.  The 
Rockwood, Loudon and Bedford plants currently dispose of the majority of 
their solid waste by transporting it to the Morgantown plant where the 
Company, in 1996, began operating a salt cake processing facility which 
prepares salt cake for landfilling.  See ITEM 2. "PROPERTIES - SOLID WASTE 
DISPOSAL".  Under the Company's supply agreement with Commonwealth, the 
disposal of all salt cake generated by the Company as a result of its 
processing for Commonwealth is the responsibility of Commonwealth.  Salt cake 
from all other material processed at the Uhrichsville plant is either shipped 
to the Morgantown plant for disposal or landfilled with a local solid waste 
management 


                                      10

<PAGE>

firm.  In 1996, the Chicago Heights and Sikeston plants disposed of the 
majority of their salt cake with third party landfills; however, a portion of 
their salt cake was shipped to Morgantown.

If salt cake were ever classified as a hazardous waste or substance under 
RCRA or CERCLA, the Company's handling and disposal of salt cake would be 
required to be modified.  To dispose of its salt cake, the Company may then 
be required to take other actions including obtaining a RCRA Subchapter "C" 
permit for its Morgantown landfill, obtaining other permits (including 
transportation permits), and consider landfilling additional amounts of salt 
cake with third parties not under the Company's direct control.  Based on 
current annual processing volumes and remaining landfill capacity, the 
estimated remaining life of the landfill at the Sapulpa plant is four years.  
The Company recently built additional landfill space at its Morgantown plant 
and estimates its remaining useful life (not including future designed 
expansion capacity) to be approximately 2 years.  Landfill closure costs for 
the Company-owned landfills are currently estimated to exceed $4,000,000.  
The Company is currently providing for this expenditure by accruing, on a 
current basis, these estimated costs as the landfills are used.  See ITEM 2.  
"PROPERTIES."

In recent years, the Company's operations, like those of other basic 
industries, have become subject to stringent legislation and regulations 
regarding the protection of human health and the environment.  It can be 
anticipated that more rigorous laws and regulations will be enacted that 
could require the Company to make substantial expenditures in addition to 
those referred to herein.  

The Clean Air Act provides for federal, state and local regulation of the 
emission of air pollutants.  As a result of the Clean Air Act amendments in 
1990, the Company may have to obtain additional permits, install additional 
pollution control equipment and otherwise incur additional capital 
expenditures.  The Company does not currently believe that foreseeable costs 
of compliance will have a material adverse effect on the Company's financial 
position.

The Company believes that it is in material compliance with applicable 
environmental regulations.  Due to relatively high costs and limited 
coverage, the Company does not carry environmental impairment liability 
insurance.  The Company made capital expenditures for environmental control 
facilities of approximately $3,800,000 in 1996, most of which was for 
landfill capacity additions.  Estimated environmental expenditures for 1997 
and 1998 are approximately $4,700,000 and $4,900,000, respectively.


                                      11

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EXECUTIVE OFFICERS

The executive officers of the Company are listed below, together with brief 
accounts of their experience and certain other information.  Executive 
officers are appointed by the Board of Directors.

NAME                 AGE  POSITION 
----                 ---  -------- 

Don V. Ingram        61   Chairman of the Board and Chief Executive Officer

Richard L. Kerr      54   President and Chief Operating Officer

Paul V. Dufour       57   Executive Vice President - Finance and Administration,
                          Chief Financial Officer and Secretary

Thomas W. Rogers     50   Senior Vice President, Sales and Marketing

C. Lee Newton        53   Senior Vice President, Operations

Don V. Ingram was appointed Chief Executive Officer effective February 7, 
1997.  He has served as a director since 1988 and as Chairman of the Board 
since 1994.  He served as acting Chief Executive Officer of the Company from 
August to December 1994. Mr. Ingram played a major role in the Corporation's 
formation in 1986.  

Richard L. Kerr was promoted to President  of the Company on February 7, 
1997.  Previously, he served as Executive Vice President since July 1988 and 
has been Chief Operating Officer since 1991. In 1994, he became President of 
the Company's Metals Division. Mr. Kerr joined International Metal Co. in 
April 1984, and became Executive Vice President of International Metal Co. in 
April 1987.

Paul V. Dufour has served as Vice President, Chief Financial Officer and 
Secretary of the Company since March 1987.  He was promoted to Senior Vice 
President in May 1988 and to Executive Vice President in October 1994.  He is 
principally responsible for the Company's financial and administrative 
functions.

Thomas W. Rogers has served as Senior Vice President of the Company since 
July 1988.  Mr. Rogers was employed as Plant Manager of the Sapulpa, Oklahoma 
plant in October 1986 and became Senior Vice President of International Metal 
Co. in April 1987.

C. Lee Newton was promoted to Senior Vice President of the Company in 1993.  
Mr. Newton was named Vice President in 1990 and was the General Manager of 
the Morgantown, Kentucky plant from 1989 to 1993.  He was originally employed 
by the Company as Plant Manager of its Rockwood, Tennessee plant in 1987.


                                      12

<PAGE>

ITEM 2. PROPERTIES

ALUMINUM RECYCLING

During 1996, the Company owned and/or operated the following processing 
plants as detailed below:

<TABLE>
--------------------------------------------------------------------------------------------------------
                                             ESTIMATED
                                   NUMBER      ANNUAL                                           MOLTEN
                          OWNED      OF       CAPACITY      YEAR       YEAR      MATERIALS     DELIVERY
   PLANT                 ACREAGE  FURNACES  (MILLION LBS)   BUILT    ACQUIRED    PROCESSED    CAPABILITY
--------------------------------------------------------------------------------------------------------
<S>                        <C>       <C>         <C>         <C>       <C>          <C>          <C>
                                                                                   Alum,
Sapulpa, OK.               64         7          185        1962        --         Mag.          No
--------------------------------------------------------------------------------------------------------
Rockwood, TN.             238         6          200        1985        --         Alum          Yes
--------------------------------------------------------------------------------------------------------
Morgantown, KY.           552 (a)     6          200        1989        --         Alum          Yes
--------------------------------------------------------------------------------------------------------
Uhrichsville, OH.          42        10          335        1992        --         Alum          Yes
--------------------------------------------------------------------------------------------------------
Corona, CA. (b)            20         3          100 (b)     --        1993        Alum          No
--------------------------------------------------------------------------------------------------------
Loudon, TN.               173         3          180         --        1994        Alum          Yes
--------------------------------------------------------------------------------------------------------
Bedford, IN.               19         2          150         --        1995        Alum          Yes
--------------------------------------------------------------------------------------------------------
Chicago Hts., IL.           9         2          100         --        1995        Alum          No
--------------------------------------------------------------------------------------------------------
Sikeston, MO.              31         3           60         --        1995        Alum          No
--------------------------------------------------------------------------------------------------------
Morgantown, KY.           (a)        --          400        1996        --       Salt Cake       No
--------------------------------------------------------------------------------------------------------
Adrian, MI.               (c)         2           40         --        1992        Zinc          No
--------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:

(a) Acreage includes both the aluminum and salt cake processing facilities in 
    Morgantown, KY.

(b) The Corona plant was closed during 1996.  See ITEM 7. "MANAGEMENT'S 
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

(c) The 50,000 sq. ft. Adrian facility is leased by IZI.  This lease, which 
    includes both the operations and office space, expires in September 1997.  
    This facility will be relocated to a company owned site adjacent to the new 
    Coldwater, Michigan facility in August 1997.

The Company also owns 50% of a recycling facility located in East Chicago, 
Indiana.  This facility has annual capacity to process 80 million pounds of 
aluminum.

Commonwealth has an option to acquire up to a 49% equity interest in the 
Uhrichsville plant at a price equal to that equity percentage multiplied by 
the depreciated book value of the plant, or the subsidiary owning the plant, 
plus a premium to compensate the Company for its recycling technology.  The 
option price may be above or below the fair value of the Uhrichsville plant.  
Should Commonwealth exercise its option, there can be no assurance that the 
production or earnings attributable to the purchased interest could be 
replaced, and the Company's net earnings and cash flow could be adversely 
affected.

In 1996, the Company began its 50% participation in its VAW-IMCO Gu-beta ray- 
und Recycling GmbH joint venture in Germany.  The venture owns and operates 
two recycling and foundry alloy 

                                      13

<PAGE>

facilities located at Grevenbroich and T ging, Germany.  Annual capacity for 
these two plants is approximately 280 million pounds. 

In the first quarter of 1997, the Company began operation of a new aluminum 
recycling facility in Coldwater, Michigan.  This facility is 75% owned by the 
Company and 25% owned by the plant's largest customer, Alchem.  The facility, 
when fully completed, will have three furnaces with rated annual capacity of 
150 million pounds and will primarily serve the automotive market.  The 
Company will be the operator of the facility and will deliver molten aluminum 
to its customer-partner.  Alchem will have certain rights to purchase 
additional equity interests not to exceed 40% of the total joint venture 
equity if the facility is expanded or if Alchem increases its supply 
commitments.

In 1996, the Company announced plans to construct an aluminum recycling 
facility in Swansea, Wales, U.K. called IMCO Recycling (UK) Ltd. ("Wales").  
Construction of the Wales facility is expected to be complete in 1997. The 
facility will have 2 furnaces and will have a rated annual capacity of 100 
million pounds.

In January 1997, the Company acquired 6 additional facilities in Ohio, Idaho, 
Utah, and Arizona.  See ITEM 1.  "BUSINESS--RECENT DEVELOPMENTS."

During 1996, the Rockwood, Morgantown, Uhrichsville and Chicago Heights 
plants all operated at rates in excess of their stated capacities.

SOLID WASTE DISPOSAL

The Company completed a new landfill cell adjacent to its plant in 
Morgantown, Kentucky in 1996. All of the waste generated from the new salt 
cake processing facility at the Morgantown site is deposited in this 
landfill.  Management anticipates that this new landfill cell, which is 
designed to be expanded several times throughout its life, will serve the 
Company's landfilling needs for the majority of the salt cake generated by 
facilities currently owned by the Company in the United States.  The Company 
also owns a landfill at its Sapulpa plant which is estimated to have four 
years useful life remaining.  See ITEM 1.  "BUSINESS--ENVIRONMENTAL MATTERS."

The IMSAMET Arizona facility recycles its own salt cake and sells the 
by-products to third parties, and the Utah and Idaho facilities ship their 
salt cake to the 50% owned SALTS joint venture for further processing.  See 
ITEM 1.  "BUSINESS--THE RECYCLING PROCESS."

ADMINISTRATIVE

In Irving, Texas, the Company leases approximately 21,700 square feet of 
office space for certain of its executive, financial and management 
functions.  This lease expires in January 2000.

The Company believes that its plants and equipment are maintained in good 
operating condition.  Substantially all of the properties and equipment at 
the Company's plants are mortgaged to secure senior indebtedness.  See NOTE 
F--LONG TERM DEBT AND CREDIT LINES and NOTE K--SUBSEQUENT EVENTS of Notes to 
Consolidated Financial Statements.


                                      14

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Company is not aware of any material pending legal proceedings against 
the Company or its operations.  The Company is a party from time to time to 
what it believes are routine litigation and proceedings considered part of 
the ordinary course of its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders of the Company during 
the quarter ended December 31, 1996.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock trades on The New York Stock Exchange (trading 
symbol: IMR).  The following table sets forth, for the fiscal quarters 
indicated, the high and low sales prices for the Company's Common Stock, as 
reported on The New York Stock Exchange composite tape from January 1, 1995 
through December 31, 1996, and the dividends declared per share during the 
periods indicated.

     ------------------------------------------------------
                                                DIVIDENDS
                           HIGH        LOW      DECLARED
     ------------------------------------------------------
     Calendar Year 1996
     ------------------------------------------------------
         First Quarter    $24 5/8    $18 1/2    $  0.05
     ------------------------------------------------------
         Second Quarter    24 3/8     17 5/8       0.05
     ------------------------------------------------------
         Third Quarter     18 1/4     15           0.05
     ------------------------------------------------------
         Fourth Quarter    17 3/4     14 3/8       0.05
     ------------------------------------------------------
     ------------------------------------------------------
     Calendar Year 1995
     ------------------------------------------------------
         First Quarter    $16 3/8    $13 3/8    $    --
     ------------------------------------------------------
         Second Quarter    19 1/4     15 1/4      0.035
     ------------------------------------------------------
         Third Quarter     23 3/4     17 7/8      0.035
     ------------------------------------------------------
         Fourth Quarter    24 1/2     20 1/2      0.035
     ------------------------------------------------------


In late 1994, the Board of Directors declared a special year-end $0.10 per 
share cash dividend, payable on January 26, 1995 to holders of record of 
Common Stock as of December 29, 1994.  This was the first dividend declared 
by the Company.  The Company subsequently commenced paying a quarterly 
dividend and in 1996 paid a quarterly dividend of $.05 per share for a total 
of $.20 per share.  Dividends as may be determined by the Board of Directors 
may be declared and paid on the Common Stock from time to time out of any 
funds legally available therefor.  The Company's long-term debt instruments 
limit the amount of cash dividends the Company can 


                                      15

<PAGE>

pay.  The annual limitations are as follows:  $3.5 million for 1997 and 1998, 
$4.0 million for 1999 and 2000 and $6.0 million after the year 2000.  The 
Company intends to continue paying dividends on its Common Stock, although 
future dividend declarations are at the discretion of the Company's Board of 
Directors and will depend upon the Company's level of earnings, cash flow, 
financial requirements, economic and business conditions and other relevant 
factors, including the restrictions contained in the Company's long-term debt 
instruments.  See ITEM 7.  "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS" and NOTE F--LONG TERM DEBT AND CREDIT 
LINES of Notes to the Consolidated Financial Statements.

On March 14, 1997, the outstanding shares of Common Stock were held of record 
by 556 stockholders.

During the fourth quarter of 1996, the Company made no unregistered sales of 
its securities.  However, in January 1997, the Company acquired all of the 
outstanding common stock of Rock Creek Aluminum, Inc. in exchange for 618,137 
shares of the Company's common stock. The value of the shares of the common 
stock issued in this transaction was approximately $9,500,000.  See ITEM 1.  
"BUSINESS--RECENT DEVELOPTMENTS."

ITEM 6. SELECTED FINANCIAL DATA

(In thousands, except per share data)

<TABLE>
--------------------------------------------------------------------------------------------------
                                                        FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
                                                  1996      1995       1994       1993     1992
--------------------------------------------------------------------------------------------------
<S>                                             <C>       <C>         <C>       <C>       <C>
Revenues                                        $210,871  $141,167   $101,116   $74,216   $60,223  
--------------------------------------------------------------------------------------------------
Net Earnings                                       6,720    12,470      8,471     8,022     7,475 
--------------------------------------------------------------------------------------------------
Net Earnings per Common Share                       0.55      1.03       0.73      0.70      0.67 
--------------------------------------------------------------------------------------------------
Total Assets                                     164,707   139,877     96,791    79,427    68,871 
--------------------------------------------------------------------------------------------------
Long-term Debt (Excluding Current Maturities)     48,202    29,754     11,860     8,000    10,500 
--------------------------------------------------------------------------------------------------
Dividends Declared per Common Share                0.200     0.105      0.100        --        --   
--------------------------------------------------------------------------------------------------
</TABLE>

See ITEM 7.  "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS" and Notes to the Consolidated Financial Statements. 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

GENERAL

Most of the Company's processing consists of aluminum, magnesium and zinc 
tolled for its customers.  To a lesser extent, the Company also purchases 
scrap metal and dross for processing and resale.  Both the Company's tolling 
fees and the selling price of metal it buys, recycles and sells for its own 
account are included in sales revenue.  Accordingly, tolling business 
produces a 


                                     16

<PAGE>

lower amount of revenues and cost of sales than does the buy/sell business.  
Variations in the mix of these two businesses can cause revenues to change 
significantly from period to period while not significantly affecting gross 
profit, because both types of transactions generally have the same gross 
profit per pound of metal processed.  As a result, the Company considers 
processing volume to be a more important determinant of performance than 
revenues.

During the 1990's, aluminum inventories on the worldwide commodity exchanges 
fluctuated from severe excesses to relatively balanced positions.  In times 
of excess, aluminum prices dropped, negatively impacting the profitability of 
the major aluminum producers who are some of the Company's largest customers. 
This environment of low profitability for the Company's customers has made 
it difficult to pass cost increases through to these customers.  In early 
1994, worldwide inventories began falling for a number of reasons, including 
an increase in demand for aluminum, particularly in the United States, and 
prices for aluminum began to rise.  During 1995, worldwide aluminum prices 
declined from their 1994 levels, particularly in the fourth quarter. During 
1996, the combination of higher energy and refuse disposal costs and weather 
related disruptions, which affected volumes processed, negatively impacted 
the Company's results.  It is not possible to predict the future price of 
aluminum or the level of worldwide inventories of aluminum and whether, or to 
what extent, such factors will affect the Company's future business.

The following table shows the total pounds of material processed (aluminum, 
magnesium and zinc), the percentage of total pounds processed represented by 
tolled aluminum, purchased aluminum, magnesium and zinc, total revenues, 
total gross profits and gross profit percentages:

(In thousands, except percentages)

------------------------------------------------------------------------------
                                      FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
                                        1996         1995         1994
------------------------------------------------------------------------------
Pounds Processed                     1,451,408     1,323,282    1,012,600 
------------------------------------------------------------------------------

Percent of Total Pounds Processed:   
------------------------------------------------------------------------------
  Tolled Aluminum                           82%           92%          93%
------------------------------------------------------------------------------
  Purchased Aluminum                        15%            5%           3%
------------------------------------------------------------------------------
  Magnesium                                  *             *            1%
------------------------------------------------------------------------------
  Zinc                                       3%            3%           3%
------------------------------------------------------------------------------

Revenues                            $  210,871    $  141,167   $  101,116
------------------------------------------------------------------------------
Gross Profit                        $   25,538    $   30,939   $   22,638
------------------------------------------------------------------------------
Gross Profit %  **                        12.1%         21.9%        22.4%
------------------------------------------------------------------------------

*    Less than 1 percent.
**   See NOTE I-OPERATIONS of Notes to the Consolidated Financial Statements 
     and RESULTS OF OPERATIONS--Fiscal Year 1996 vs. Fiscal Year 1995 below.



                                     17

<PAGE>

RESULTS OF OPERATIONS

FISCAL YEAR 1996 VS. FISCAL YEAR 1995

The Company processed 1.45 billion pounds of metal in 1996 which represented 
an increase of 10% over the 1.32 billion pounds processed in 1995.  Increases 
from the Bedford and Metal Mark plants acquired late in 1995 accounted for 
the majority of the increase in production.  Revenues in 1996 were 
$210,871,000 which represented an increase of 49% over 1995's revenue of 
$141,167,000.  The percentage increase in revenues was greater than the 
relative increase in volumes processed because the amount of buy/sell 
business was greater in 1996 compared to 1995, principally as a result of the 
Metal Mark acquisition in October 1995.  The Company's increased buy/sell 
business was principally attributed to the acquisition of the Metal Mark 
facilities, which have historically maintained an approximate one-to-one 
ratio of tolling to buy/sell business.  As discussed above, this causes the 
Company's increases in revenues to outpace its relative increases in 
processing volumes.

Gross profit of $25,538,000 was 17% below the $30,939,000 reported in 1995.  
During the third quarter of 1996,  the Company recorded charges in cost of 
sales totaling $4,177,000, resulting from management decisions to shut down 
the Company's Corona, California recycling facility and to accelerate the 
closure of the first cell of the Company's landfill in Morgantown, Kentucky.  
The California facility had operated far below its capacity and had recorded 
losses throughout 1996.  As of September 1996, year-to-date processing was 
50% lower than in the comparable period of 1995, and third quarter volumes 
were 62% below last year's total.  While operating efficiency had improved, 
demand for aluminum from the Far East, the plant's largest market, had 
virtually disappeared.

Before these third quarter charges to cost of sales, 1996's gross profit of 
$29,715,000 was 4% lower than 1995's gross profit.  The decline in gross 
profit was due to higher energy and refuse disposal costs and because the 
Corona and Bedford plants experienced lower operating rates than anticipated. 
In addition, gross profit was negatively impacted by the declining market 
prices for aluminum during 1996.  As discussed above, the Company currently 
has more buy/sell pounds in its product mix, and declining aluminum prices 
tend to decrease the level of revenues and gross profit the Company receives 
for the metal it owns, processes and sells.  

Selling, general and administrative costs increased 17% to $11,774,000 
compared to the $10,027,000 reported in 1995.  This increase occurred because 
of the addition of key personnel required to manage the Company's accelerated 
growth and because of selling, general and administrative costs associated 
with recent acquisitions.

Interest expense in 1996 of $3,421,000 more than tripled 1995's interest 
expense of $1,073,000. The increase was the result of additional long-term 
debt outstanding during 1996 which was used to fund the fourth quarter 1995 
acquisitions of the Metal Mark and Bedford facilities, the first quarter 1996 
investment in VAW-IMCO and the 1996 construction of the new Coldwater, 
Michigan facility.  Interest income rose to $623,000 compared to $424,000 in 
1995.  This increase was due to higher average balances of invested cash 
during 1996.

The Company's income before income taxes of $10,852,000 fell  47% compared to 
$20,363,000 in 1995.  As discussed above, approximately 44% of this decline 
was due to the third quarter charges to cost of sales totaling $4,177,000, 
resulting from management decisions to shut down 


                                      18

<PAGE>

the Company's Corona, California facility and to accelerate the closure of 
the first cell of the Company's landfill in Morgantown, Kentucky.  Excluding 
these items, 1996's net income before income taxes would have been $15,029,000,
or 26% lower than 1995's net income before income taxes.  This 26% decline in 
net income before income taxes was greater than the 4% decline in gross 
profit (excluding the third quarter charges to cost of sales) due to higher 
selling, general and administrative costs and higher interest expense in 
connection with the Metal Mark and Bedford acquisitions.

The Company's lower income before tax caused the tax expense to fall to 
$4,132,000 compared to $7,893,000 in 1995.  The effective tax rate was 
approximately 38% in 1996 compared to 39% in 1995.

FISCAL YEAR 1995 vs. FISCAL YEAR 1994

The Company processed 1.3 billion pounds of metal in 1995 which represented 
an increase of 31% over the 1.0 billion pounds processed in 1994.  Increases 
from the Bedford and Metal Mark plants acquired late in 1995, and the Loudon 
plant which was acquired in September of 1994 and expanded in 1995, along 
with increased volume from all plant locations, accounted for the favorable 
variances.  Revenues in 1995 were $141,167,000 which represented an increase 
of 40% over 1994's revenue of $101,116,000.  The percentage increase in 
revenues was greater than the increase in volumes processed because the 
amount of buy/sell business was greater in 1995 compared to 1994.

Gross profit of $30,939,000 was 37% above the $22,638,000 reported in 1995.  
Most of this resulted from the increased pounds processed during 1995.

Selling, general and administrative costs increased 56% to $10,027,000 
compared to the $6,440,000 reported in 1994.  This increase occurred because 
of the addition of key personnel required to manage the Company's rapid 
growth and because of selling, general and administrative costs associated 
with acquisitions carried out during the year.

Interest expense was about the same in 1995 as it was in 1994, while interest 
income rose to $424,000 compared to $154,000 in 1994.  This increase was due 
to higher average balances invested in cash.

The Company's income before taxes of $20,363,000 rose 49% compared to 1994.  
In 1994 the Company recorded nonrecurring litigation expense related to a 
lawsuit which reduced 1994's income before taxes by $1,635,000.  Excluding 
this item, 1995's increase would have been approximately 33% or very similar 
to the increases recorded in volume processed and gross profits. 

The Company's increased income before tax and higher tax rates caused income 
tax expense to rise to $7,893,000 compared to $5,232,000 in 1994.  The 
effective tax rate was approximately 39% in 1995 compared to 38% in 1994.


                                      19

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Operations provided cash of $6,744,000 in 1996, compared with $25,716,000 of 
cash provided by operations in 1995.  Decreased earnings, along with an 
increase in working capital requirements in 1996, were the primary factors 
causing the decline in cash provided from operations.  Changes in operating 
assets and liabilities resulted in a decrease in cash of $15,291,000 in 1996, 
compared to an increase in cash of $2,591,000 in 1995.  The 1996 decline was 
principally the result of increased buy/sell activities which caused an 
increase in inventory levels and accounts receivable.  At December 31, 1996, 
the Company's current ratio increased to 2.58 as compared to December 31, 
1995's current ratio of 2.41.  The Company's working capital requirements are 
expected to increase in 1997 due to an anticipated higher level of buy/sell 
business and increased volumes due to the January 1997 acquisitions and the 
initial operations at two new plants.

Capital spending, excluding acquisitions, amounted to $16,711,000 in 1996 and 
$15,538,000 in 1995.  The construction of the new facility in Coldwater, 
Michigan was the most significant capital spending project in 1996.  Capital 
spending in 1995 was primarily for construction of the new salt cake 
processing facility and the expansion of the landfill in Morgantown, 
Kentucky.  In 1996, the Company also invested approximately $14,000,000 in 
the VAW-IMCO German joint venture.  In 1995, the acquisitions of Bedford and 
Metal Mark required $20,137,000.

In September 1995, the Company borrowed $5,000,000, under terms it had 
previously negotiated with a commercial lending institution, in order to take 
advantage of expansion opportunities and to acquire the Bedford and Metal 
Mark facilities.  This Variable Rate Converting Revolving Loan interest rate 
as of December 31, 1996 was 6.75%.  In addition, in November 1995, the 
Company borrowed $15,000,000 of unsecured debt, representing half of the 
commitment the Company received from a private placement of notes.  The 
remaining $15,000,000 of notes were issued on April 1, 1996 with the proceeds 
primarily used to fund the Company's investment in the VAW-IMCO joint 
venture.  The notes issued in 1995 and 1996 had fixed annual interest rates 
of 7.28% and 7.41%, respectively.  Both of these notes were paid in full in 
January 1997 with funds from a new credit agreement described below.  

In 1995, the Company increased its borrowing limit to $10,000,000 under a 
restated revolving credit facility (the "Revolving Facility").  On May 31, 
1996, the Company further increased its limit to $12,000,000.  Under the 
Revolving Facility, the Company has a subfacility for the issuance of standby 
letters of credit.  To meet working capital needs, on December 30, 1996, the 
Company drew $2,000,000 under this Revolving Facility at an interest rate of 
8.25%.  This note was subsequently repaid in January 1997. See NOTE F--LONG 
TERM DEBT AND CREDIT LINES and NOTE J--SUBSEQUENT EVENTS of Notes to the 
Consolidated Financial Statements.

On May 8, 1996, in conjunction with the construction of the Morgantown, 
Kentucky salt cake processing plant, the Company received the proceeds of a 
$5,740,000 City of Morgantown revenue bond issuance.  The bonds mature on 
May 1, 2016 and carry an interest rate of 7.65%.  The bonds were issued at a 
1% discount which will be amortized over the life of the loan.

In connection with acquisitions of IMSAMET and Rock Creek in January 1997, 
the Company entered into a $125,000,000 credit agreement ("Credit Agreement") 
with certain lenders.  The Credit Agreement is comprised of a $105,000,000 
term loan and a $20,000,000 revolving credit 


                                      20

<PAGE>

agreement.  Of the $20,000,000 revolving credit agreement, $4,000,000 is to 
be used, as needed, by the Company for standby letters of credit.  As of 
January 31, 1997, the Company had approximately $1,800,000 standby letters of 
credit outstanding. The Company received $110,000,000 at the closing and used 
approximately $61,000,000 for the acquisitions of IMSAMET and Rock Creek.  
The remaining $49,000,000 of the proceeds was used to retire substantially 
all of the Company's outstanding debt as of December 31, 1996. The new Credit 
Agreement limits the amount of cash dividends the Company can pay.  The 
annual limitations are as follows:  $3,500,000 for 1997 and 1998, $4,000,000 
for 1999 and 2000 and $6,000,000 after the year 2000.  The early debt 
retirement generated a loss of approximately $1,318,000 (net of income taxes) 
and will be reported as an extraordinary item in the first quarter of 1997.  
See NOTE F--LONG TERM DEBT AND CREDIT LINES and NOTE J--SUBSEQUENT EVENTS of 
Notes to the Consolidated Financial Statements.

Capital expenditures for property, plant and equipment in 1997 are currently 
estimated to total approximately $35,000,000.  The significant 1997 capital 
spending projects are the construction of the Wales facility, completion of 
the Coldwater, Michigan facility, relocation of the zinc recycling facility, 
and the expansion of the Kentucky landfill.  The Company believes that its 
cash on hand, the resources available under the terms of the Credit Agreement 
and anticipated 1997 cash provided by operations should provide the financial 
resources necessary to fund its capital requirements and to meet its 
obligations in 1997 and for the foreseeable future.


CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD-LOOKING STATEMENTS

Certain information contained herein in ITEM 1.-- "BUSINESS" and in ITEM 7.
--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS" may be deemed to be forward-looking statements within the 
meaning of The Private Securities Litigation Reform Act of 1995 and are 
subject to the "Safe Harbor" provision in that enacted legislation.   These 
statements are based on current expectations and involve a number of risks 
and uncertainties.  Actual results could differ materially from those 
described in the forward-looking statements as a result of various factors 
including, but not limited to the following:  expectations of operating 
levels at the Company's facilities, expectations of the future mix of 
buy/sell business as opposed to tolling business, retention of major 
customers, effects of future costs, the price of aluminum on world markets 
and future levels and timing of capital expenditures. Such statements are 
qualified by the following:

     Estimates of future operating rates at the Company's plants are based on 
     current expectations by management of the Company of future levels of 
     volumes and prices for the Company's services or metal, and are subject
     to fluctuations in customer demand for the Company's services and 
     prevailing conditions in the metal markets, as well as certain components
     of the Company's cost of operations, including energy costs.  Many of the 
     factors affecting revenues and costs are outside of the control of the 
     Company, including weather conditions such as those that prevailed in the
     first quarter of 1996, and general economic and financial market 
     conditions.  The future mix of buy/sell vs. tolling business is dependent
     on customers' needs and overall demand, world and U.S. market conditions
     then prevailing in the respective metal markets, and the operating levels
     at the Company's various facilities at the relevant time.


                                      21

<PAGE>

ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

INDEX OF FINANCIAL STATEMENTS OF IMCO RECYCLING INC. AND SUBSIDIARIES


                                                                           PAGE
                                                                           ----

Report of Ernst & Young LLP, Independent Auditors                           23

Consolidated Balance Sheets at December 31, 1996 and 1995                   24

Consolidated Statements of Earnings for the three years ended 
  December 31, 1996                                                         25

Consolidated Statements of Cash Flows for the three years ended
  December 31, 1996                                                         26

Consolidated Statements of Changes in Stockholders' Equity for the 
  three years ended December 31, 1996                                       27

Notes to Consolidated Financial Statements                               28-39



All schedules for which provision is made in the applicable accounting 
regulation of the Securities and Exchange Commission are not required under 
the related instructions or are inapplicable, and therefore have been omitted.





                                      22

<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

 
Stockholders and 
Board of Directors
IMCO Recycling Inc.


We have audited the accompanying consolidated balance sheets of IMCO 
Recycling Inc. and subsidiaries as of December 31, 1996 and 1995, and the 
related consolidated statements of earnings, stockholders' equity, and cash 
flows for each of the three years in the period ended December 31, 1996.  
These financial statements are the responsibility of the Company's 
management.  Our responsibility is to express an opinion on these financial 
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position 
of IMCO Recycling Inc. and subsidiaries at December 31, 1996 and 1995, and 
the consolidated results of their operations and their cash flows for each of 
the three years in the period ended December 31, 1996, in conformity with 
generally accepted accounting principles.



                                       ERNST & YOUNG LLP


Dallas, Texas
January 30, 1997







                                     23

<PAGE>
                                       
                      IMCO RECYCLING INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                                      DECEMBER 31,
                                                 ---------------------
                                                   1996         1995
                                                 --------     --------
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                      $  5,070     $  8,678 
  Accounts receivable                              33,655       27,442 
  Inventories                                      11,847        9,146 
  Deferred income taxes                             1,462        1,298 
  Other current assets                              1,282        1,353 
                                                 --------     --------
    Total Current Assets                           53,316       47,917 
Property and equipment, net                        86,308       78,769 
Intangible assets
 Excess of acquisition cost over the 
   fair value of net assets acquired, 
   net of accumulated amortization 
   of $4,607 and $3,866 at December 31, 
   1996 and 1995, respectively.                     9,362       10,968 
 Patents, net                                         171          233 
                                                 --------     --------
    Total Intangible Assets                         9,533       11,201 
Investments in joint ventures                      14,187            - 
Other assets, net                                   1,363        1,990 
                                                 --------     --------
                                                 $164,707     $139,877 
                                                 --------     --------
                                                 --------     --------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                 14,351       10,691 
  Accrued liabilities                               2,192        7,059 
  Short-term debt                                   2,000            - 
  Current maturities of long-term debt              2,124        2,169 
                                                 --------     --------
    Total Current Liabilities                      20,667       19,919 
Long-term debt                                     48,202       29,754 
Other long-term liabilities                         1,647        1,412 
Deferred income taxes                               5,856        5,516 

STOCKHOLDERS' EQUITY
Preferred stock; par value $.10; 8,000,000 
  shares authorized; none issued                        -            - 
Common stock; par value $.10; 20,000,000 
  shares authorized; 12,017,914 issued at 
  December 31, 1996; 11,964,911 issued at 
  December 31, 1995                                 1,202        1,196 
Additional paid-in capital                         27,553       27,282 
Retained earnings                                  61,021       56,672 
Treasury stock, at cost; 118,551 shares 
  at December 31, 1996; 207,972 shares at 
  December 31, 1995                                (1,441)      (1,874)
                                                 --------     --------
    Total Stockholders' Equity                     88,335       83,276 
                                                 --------     --------
                                                 $164,707     $139,877 
                                                 --------     --------
                                                 --------     --------

See Notes to Consolidated Financial Statements.



                                      24

<PAGE>
                                       
                      IMCO RECYCLING INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
                                                            FOR THE YEAR ENDED DECEMBER 31,
                                                      -------------------------------------------
                                                          1996            1995            1994
                                                      -----------     -----------     -----------
<S>                                                   <C>             <C>             <C>
REVENUES                                              $   210,871     $   141,167     $   101,116 
  Cost of sales                                           185,333         110,228          78,478 
                                                      -----------     -----------     -----------

GROSS PROFIT                                               25,538          30,939          22,638 
  Selling, general and administrative expenses             11,774          10,027           6,440 
  Interest expense                                          3,421           1,073           1,014 
  Interest income                                            (623)           (424)           (154)
  Nonrecurring litigation expense                               -               -           1,635 
  Equity in (earnings) loss of joint ventures                 114            (100)              - 
                                                      -----------     -----------     -----------

INCOME BEFORE PROVISION FOR 
  INCOME TAXES                                             10,852          20,363          13,703 

  Provision for income taxes                                4,132           7,893           5,232 
                                                      -----------     -----------     -----------

NET EARNINGS                                          $     6,720     $    12,470     $     8,471 
                                                      -----------     -----------     -----------
                                                      -----------     -----------     -----------

NET EARNINGS PER COMMON SHARE                         $      0.55     $      1.03     $      0.73 
                                                      -----------     -----------     -----------
                                                      -----------     -----------     -----------

Dividends declared per common share                   $      0.20     $     0.105     $      0.10 
                                                      -----------     -----------     -----------
                                                      -----------     -----------     -----------

Weighted average common and common
  equivalent shares outstanding                        12,308,904      12,108,216      11,643,846 
                                                      -----------     -----------     -----------
                                                      -----------     -----------     -----------
</TABLE>


See Notes to Consolidated Financial Statements. 



                                      25
<PAGE>

                     IMCO RECYCLING INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in thousands)

<TABLE>
                                                    FOR THE YEAR ENDED DECEMBER 31,
                                                    -------------------------------
                                                        1996     1995     1994
                                                      -------  --------  -------
<S>                                                   <C>      <C>       <C>
OPERATING ACTIVITIES
Net earnings                                          $ 6,720  $ 12,470  $ 8,471
Depreciation and amortization                          11,316     9,353    7,367 
Provision for deferred income taxes                       176     1,167    1,859 
Equity in (earnings) loss of joint ventures               114      (100)       - 
Other noncash charges                                     132       235      647 
Provision for plant closure                             3,577         -        - 
Changes in operating assets and liabilities
 (excluding investing and financing transactions):
  Accounts receivable                                  (6,282)    3,330   (5,829)
  Inventories                                          (3,728)   (1,756)      95 
  Other current assets                                     72      (546)    (121)
  Accounts payable and accrued liabilities             (4,289)    1,383      553 
  Accrued landfill closure costs                       (1,064)      180      572 
                                                      -------  --------  -------
NET CASH FROM OPERATING ACTIVITIES                      6,744    25,716   13,614 

INVESTING ACTIVITIES
Purchases of property and equipment                   (16,711)  (15,538)  (6,646)
Proceeds from sale of property and equipment              204        69        - 
Acquisitions of businesses and investments
 in joint ventures                                    (13,681)  (20,137)  (5,325)
Other                                                    (157)     (800)    (997)
                                                      -------  --------  -------
NET CASH USED BY INVESTING ACTIVITIES                 (30,345)  (36,406) (12,968)

FINANCING ACTIVITIES
Net proceeds from (repayments of)
 short-term borrowings                                  2,000         -   (1,800)
Proceeds from issuance of long-term debt               20,517    20,000    5,000 
Principal payments of long-term debt                   (2,162)   (1,477)  (2,751)
Dividends paid                                         (2,371)   (2,371)       - 
Tax benefit from the exercise of stock options            806       183        - 
Other                                                   1,203       179       94 
                                                      -------  --------  -------
NET CASH FROM FINANCING ACTIVITIES                     19,993    16,514      543 
                                                      -------  --------  -------
Net increase (decrease) in cash and cash equivalents   (3,608)    5,824    1,189 
Cash and cash equivalents at January 1                  8,678     2,854    1,665 
                                                      -------  --------  -------
Cash and cash equivalents at December 31              $ 5,070  $  8,678  $ 2,854 
                                                      -------  --------  -------
                                                      -------  --------  -------
SUPPLEMENTARY INFORMATION
Cash payments for interest                            $ 3,083  $  1,357  $ 1,271 
Cash payments for income taxes                        $ 7,440  $  6,440  $ 3,411 
</TABLE>

See Notes to Consolidated Financial Statements. 

                                     26
<PAGE>
                                       
                     IMCO RECYCLING INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>

                                                 COMMON STOCK     ADDITIONAL                TREASURY STOCK
                                                 ------------      PAID-IN    RETAINED      --------------
                                              SHARES     AMOUNT    CAPITAL    EARNINGS    SHARES      AMOUNT
                                            ----------   ------   ----------  --------   --------    -------
<S>                                         <C>          <C>       <C>        <C>        <C>         <C>
BALANCE AT DECEMBER 31, 1993                11,501,708   $1,150    $20,059    $38,102    (334,537)   $(2,255)

Net earnings                                         -        -          -      8,471           -          - 
Cash dividend                                        -        -          -     (1,152)          -          - 
Litigation agreement                                 -        -         67          -      25,000        185 
Exercise of stock options                            -        -         20          -      19,735        (81)
Purchase of Phoenix Smelting                   254,990       26      3,207          -      44,892        333 
Tax benefit from the exercise of 
  nonqualified stock options                         -        -        158          -           -          - 
                                            ----------   ------    -------    -------    --------    -------
BALANCE AT DECEMBER 31, 1994                11,756,698    1,176     23,511     45,421    (244,910)    (1,818)

Net earnings                                         -        -          -     12,470           -          - 
Cash dividend                                        -        -          -     (1,219)          -          - 
Exercise of stock options                            -        -        234          -      36,938        (56)
Purchase of Alumar Associates                  208,213       20      3,354          -           -          - 
Tax benefit from the exercise of 
  nonqualified stock options                         -        -        183          -           -          - 
                                            ----------   ------    -------    -------    --------    -------
BALANCE AT DECEMBER 31, 1995                11,964,911    1,196     27,282     56,672    (207,972)    (1,874)

Net earnings                                         -        -          -      6,720           -          - 
Cash dividend                                        -        -          -     (2,371)          -          - 
Issuance of common stock for 
  services                                       3,003        1         51          -           -          - 
Exercise of stock options                            -        -       (586)         -      89,421        433 
Tax benefit from the exercise of 
  nonqualified stock options                         -        -        806          -           -          - 
Exercise of warrants                            50,000        5          -          -           -          - 
                                            ----------   ------    -------    -------    --------    -------
BALANCE AT DECEMBER 31, 1996                12,017,914   $1,202    $27,553    $61,021    (118,551)   $(1,441)
                                            ----------   ------    -------    -------    --------    -------
                                            ----------   ------    -------    -------    --------    -------
</TABLE>


See Notes to Consolidated Financial Statements. 



                                      27
<PAGE>
                                      
                    IMCO RECYCLING INC. AND SUBSIDIARIES 
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                             DECEMBER 31, 1996 
        (dollars in tables are in thousands, except per share data)   

NOTE A-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  

BASIS OF CONSOLIDATION:  

The accompanying consolidated financial statements include the accounts of 
IMCO Recycling Inc. and all of its subsidiaries (the "Company").  All 
significant intercompany accounts and transactions have been eliminated upon 
consolidation.  Investments in affiliated companies, owned 50% or less,  are 
recorded by the Company on the equity method.  

The Company's principal business involves the owning and operating of 
aluminum recycling facilities.  The Company recycles scrap material for a fee 
and returns the material to its customers, some of whom are the world's 
largest aluminum companies.  The Company also buys scrap on the open market, 
recycles and sells it.

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

CASH EQUIVALENTS:

The Company considers all highly liquid investments with a maturity of three 
months or less when purchased to be cash equivalents.  The carrying amount 
approximates fair value because of the short maturity of those instruments.

INVENTORIES:

Inventories are stated at the lower of average cost or market.

CREDIT RISK:

A majority of the Company's accounts receivable are due from companies in the 
aluminum industry.  Credit is extended based on evaluation of the customers' 
financial condition and, generally, collateral is not required.  Credit 
losses are within management's expectations and historically have been very 
low.

PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost.  Major renewals and improvements 
are capitalized, while maintenance and repairs are expensed when incurred.  
Depreciation is computed using the straight-line method over the estimated 
useful lives of the related assets.

                                     28 
<PAGE>

Landfill closure costs are currently estimated to be in excess of  $4,000,000 
and are being accrued as space in the landfill is used.  Landfill costs are 
depreciated as space in the landfill is used.  

The Company reviews its property and equipment for impairment when changes in 
circumstances indicate that the carrying amount of an asset may not be 
recoverable.  Impairment is measured as the amount by which the carrying 
amount of the asset exceeds the estimated fair value of the asset less 
disposal costs.

Interest is capitalized in connection with the construction of major facilities.
Capitalized interest costs for 1996, 1995 and 1994 were $237,000, $438,000 and 
$309,000 respectively.  

AMORTIZATION OF INTANGIBLES:

The excess of original acquisition cost over the fair value of net assets 
acquired is amortized on a straight-line basis over their expected life, 
currently from 7-40 years.  Management regularly reviews the remaining 
goodwill with consideration toward recovery through future operating results. 
Goodwill is evaluated by the Company on an undiscounted basis.  Deferred debt 
issuance costs, included in other assets, are being amortized over the term 
of the long-term debt based upon the average amount of debt outstanding.  
Patents are amortized over their remaining legal lives.

NET EARNINGS PER SHARE:

Earnings per common share are based upon the weighted average number of 
common and common equivalent shares outstanding in each period.  Common 
equivalent shares relate solely to outstanding warrants and stock options. 

STOCK-BASED COMPENSATION:

The Company follows Accounting Principles Board Opinion No. 25, "Accounting 
for Stock Issued to Employees" (APB 25) and related interpretations in 
accounting for its employee stock options.  Under APB 25, if the exercise 
price of employee stock options equals the market price of the underlying 
stock on the date of grant, no compensation expense is recorded.

NOTE B-ACQUISITIONS AND INVESTMENTS

In May 1996, the Company contributed approximately $14,000,000 for a 50% 
interest in VAW-IMCO Gu-beta ray- und Recycling GmbH, a German joint venture. 
 This joint venture was formed to own and operate two aluminum recycling 
facilities previously owned by VAW aluminium AG, an aluminum products 
manufacturing company in Germany.  The plants primarily serve the European 
automotive market.

During 1996, the Company began construction of an aluminum recycling facility 
in Coldwater, Michigan through its joint venture, IMCO Recycling of Michigan 
L.L.C.  The Company is a 75% managing member of the venture, which will have 
a long-term supply agreement for the delivery of hot metal to its 25% member, 
Alchem Aluminum, Inc.  The Company's share of the total cost of the plant is 
expected to be approximately $12,000,000, of which approximately 

                                     29 
<PAGE>

$7,200,000 had been expended as of December 31, 1996. The plant commenced 
operations in February 1997.

In October 1995, the Company acquired all of the outstanding stock of Alumar 
Associates, Inc., which owned Metal Mark, Inc.  Metal Mark owned and operated 
three aluminum recycling plants located in Chicago Heights, Illinois; 
Sikeston, Missouri; and Pittsburg, Kansas and owned 50% of a fourth facility 
in East Chicago, Indiana.  The value of the transaction, which was accounted 
for as a purchase, was approximately $16,745,000, including the assumption of 
$8,245,000 of long-term debt of Alumar.  The remainder of the purchase price 
consisted of $4,000,000 in cash and 208,213 shares of the Company's common 
stock.

In September 1995, the Company purchased all of the assets of an aluminum 
recycling facility located in Bedford, Indiana from a private aluminum 
company.  The transaction was accounted for as a purchase for approximately 
$8,500,000 in cash.

In September 1994, the Company purchased the stock of Phoenix Smelting 
Corporation which operated an aluminum recycling facility in Loudon, 
Tennessee through its wholly owned subsidiary, Metal Resources, Inc. 
("Loudon").  The value of the transaction, which was accounted for as a 
purchase, was approximately $10,000,000, including the Company's repayment of 
approximately $5,100,000 of debt and the issuance of 299,882 shares of the 
Company's common stock. 

See Note J--SUBSEQUENT EVENTS for acquisitions consummated subsequent to 
December 31, 1996.

NOTE C--INVENTORIES

The components of inventories are:

                                     December 31,   
                                  ----------------- 
                                    1996      1995  
                                  -------    ------ 
Finished goods                    $ 8,642    $6,839 
Raw materials                       2,974     1,986 
Supplies                              231       321 
                                  -------    ------ 
                                  $11,847    $9,146 
                                  -------    ------ 
                                  -------    ------ 







                                      30 
<PAGE>

NOTE D--PROPERTY AND EQUIPMENT

The components of property and equipment are:

                                                 December 31,     
                                             -------------------- 
                                               1996        1995   
                                             --------    -------- 
Land, buildings and improvements             $ 68,890    $ 58,280 
Production equipment and machinery             55,102      49,236 
Office furniture, equipment and other           4,907       4,242 
                                             --------    -------- 
                                              128,899     111,758 
Accumulated depreciation                      (42,591)    (32,989)
                                             --------    -------- 
                                             $ 86,308    $ 78,769 
                                             --------    -------- 
                                             --------    -------- 

Depreciation expense for 1996, 1995 and 1994 was $10,249,000, $8,590,000 and 
$6,750,000, respectively.

Estimated useful lives for buildings and improvements range from 15 to 39 
years, machinery and equipment range from 3 to 15 years and office furniture 
and equipment range from 3 to 10 years.

In March 1992, the Company entered into an agreement with Commonwealth 
Aluminum Corporation ("Commonwealth"), formerly Barmet Aluminum Corporation, 
to construct, own and operate the Uhrichsville plant adjacent to Commonw 
ealth's rolling mill in Uhrichsville, Ohio and to supply Commonwealth with 
all of its recycled aluminum needs.  The Uhrichsville plant, including costs 
for capitalized interest and for the 1994 expansion, cost approximately 
$20,750,000.  Commonwealth has an option to acquire up to a 49% equity 
interest in the IMCO subsidiary owning the Uhrichsville plant.

NOTE E--INCOME TAXES

 The provision for income taxes was as follows:

                         For the Year Ended December 31, 
                         ------------------------------- 
                          1996        1995         1994  
                         ------      ------       ------ 
CURRENT:
  Federal                $3,587      $5,241       $2,690 
  State                     369       1,485          683 
                         ------      ------       ------ 
                          3,956       6,726        3,373 

DEFERRED:
  Federal                     7       1,678        1,955 
  State                     169        (511)         (96)
                         ------      ------       ------ 
                            176       1,167        1,859 

                         ------      ------       ------ 
                         $4,132      $7,893       $5,232 
                         ------      ------       ------ 
                         ------      ------       ------ 

                                      31 

<PAGE>

The income tax expense computed by applying the federal statutory tax rate to 
earnings before income taxes differed from the provision for income taxes as 
follows:
                                                       FOR THE YEAR ENDED
                                                           DECEMBER 31,
                                                     ------------------------ 
                                                      1996     1995     1994  
                                                     ------   ------   ------ 
Income taxes at the federal statutory rate           $3,690   $7,127   $4,659 
Goodwill amortization, nondeductible                    168       91       59 
State income taxes, net                                 355      633      387 
Other, net                                              (81)      42      127 
                                                     ------   ------   ------ 
Provision for income taxes                           $4,132   $7,893   $5,232 
                                                     ------   ------   ------ 
                                                     ------   ------   ------ 


Deferred income taxes reflect the net tax effects of temporary differences 
between the carrying amounts of assets and liabilities for financial 
reporting purposes and the amounts used for income tax purposes.  Significant 
components of the Company's deferred tax liabilities and assets are as 
follows: 

                                                                DECEMBER 31,  
                                                              --------------- 
                                                               1996     1995  
                                                              ------   ------ 
DEFERRED TAX LIABILITIES: 
  Accelerated depreciation                                    $8,139   $7,902 
  Federal effect of state income taxes                           473      516 
  Other                                                          224      199 
                                                              ------   ------ 
Total Deferred Tax Liabilities                                 8,836    8,617 
 
DEFERRED TAX ASSETS: 
  Net operating loss carryforwards                             1,130      919 
  Tax credit carryforwards                                     1,470    1,709 
  Expenses not currently deductible: 
    Accrued landfill closure costs                               188      593 
    Accrued vacation                                             326      396 
    Accrued stock option expense                                 178      322 
    Accrued environmental expenses                               323      447 
    Other accruals                                               804        - 
  Federal effect of state income taxes                           488      473 
  Other                                                           91      230 
                                                              ------   ------ 
Total deferred tax assets                                      4,998    5,089 
Valuation allowance                                             (556)    (690)
                                                              ------   ------ 
Net deferred tax assets                                        4,442    4,399 

                                                              ------   ------ 
Net deferred tax liability                                    $4,394   $4,218 
                                                              ------   ------ 
                                                              ------   ------ 

At December 31, 1996, the Company had a $556,000 valuation allowance to 
reduce certain deferred tax assets to amounts that are more likely to be 
realized.  The allowance includes $237,000 net operating loss assets 
generated by Loudon prior to its acquisition by the Company.  The majority of 
the remaining $319,000 relates to the Company's ability to utilize state 

                                      32 
<PAGE>

investment tax credits generated by the Company's Corona, California facility 
which was closed in 1996.   

At December 31, 1996, the Company had $1,470,000 of unused income tax credit 
carryforwards, $168,000 of which expire in 1998, $96,000 of which expire in 
2010, and $1,206,000 of which do not expire. The unused tax credits are 
comprised of $838,000 in state investment tax credits and $632,000 in various 
federal income tax credits.

At December 31, 1996, the Company had approximately $1,472,000 of unused net 
operating loss carryforwards for federal purposes, which expire in the year 
2008, and had approximately $8,776,000 for state purposes which expire in 
2008 to 2011.  The majority of the net operating loss carryforwards were 
generated by Loudon.

NOTE F--LONG-TERM DEBT AND CREDIT LINE

Long-term debt is summarized as follows:

                                                             DECEMBER 31,   
                                                          ----------------- 
                                                           1996       1995  
                                                          -------   ------- 

11.18% MONY Senior Notes                                  $ 8,000   $ 8,000 
7.28% MONY Senior Notes                                    15,000    15,000 
7.41% MONY Senior Notes                                    15,000         - 
7.65% Morgantown, Kentucky Solid Waste Disposal 
  Facilities Revenue Bonds                                  5,526         - 
Variable Rate Term Loan                                     2,750     3,750 
Variable Rate Converting Revolving Loan                     3,750     4,750 
Other                                                         300       423 
                                                          -------   ------- 
Subtotal                                                   50,326    31,923 
Less current maturities                                     2,124     2,169 
                                                          -------   ------- 
Total                                                     $48,202   $29,754 
                                                          -------   ------- 
                                                          -------   ------- 

In January 1997, the Company entered into a new $125,000,000 credit 
agreement. The Company used a portion of the proceeds from borrowings under 
the new credit agreement to repay all of the MONY Senior Notes, the Variable 
Rate Term Loan, the Variable Rate Converting Revolving Loan and $2,000,000 in 
borrowings outstanding under a short-term Revolving Promissory Note.  See 
NOTE J--"SUBSEQUENT EVENTS" for a description of the terms of the new credit 
agreement.

The 7.65% Morgantown, Kentucky Solid Waste Disposal Facilities Revenue Bonds 
are due on May 1, 2016.  The bonds were issued in conjunction with the 
Company's construction of its salt cake processing plant in Morgantown, 
Kentucky.  The bonds were issued at a 1% discount which is being amortized 
over the life of the loan.


                                      33 
<PAGE>

The Variable Rate Term Loan and the Variable Rate Converting Revolving Loan 
had fluctuating interest rates based on the Company's ratio of total debt to 
earnings before interest, tax, depreciation and amortization. At December 31, 
1996, the interest rate on both loans was 6.75%.

In 1995, the Company increased its short-term working capital line of credit 
borrowing limit to $10,000,000 under a restated revolving credit facility 
(the "Revolving Facility").  On May 31, 1996, the Company further increased 
its limit to $12,000,000. Under the Revolving Facility, the Company had a 
subfacility for the issuance of standby letters of credit.  To meet working 
capital needs, on December 30, 1996, the Company borrowed $2,000,000 under 
this Revolving Facility at an interest rate of 8.25%. 

The fair value of the Company's debt approximates its carrying value due to 
its recent issuance, floating rate and relatively short maturity.

NOTE G-EMPLOYEE BENEFIT PLANS

The Company has a profit-sharing retirement plan covering most of its 
employees who meet defined service requirements.  Contributions are 
determined annually by the Board of Directors and may be as much as 15% of 
covered salaries.  Contributions for 1996, 1995 and 1994 were $1,366,000, 
$1,331,000, and $1,039,000, respectively.

In July 1996, the Company amended and restated the profit-sharing retirement 
plan to allow elective contributions as described in the Internal Revenue 
Code Section 401(k).  Subject to certain dollar limits, employees may 
contribute a percentage of their salaries to this plan, and the Company will 
match a portion of the employees' contributions.  The Company's match of 
employee contributions totaled $189,000 for 1996.

NOTE H--STOCK OPTION PLANS

In 1990, the Company adopted an amended and restated stock option plan.  This 
plan provides for the granting of nonqualified and incentive stock options.  
The number of shares of common stock authorized for issuance under the plan 
is 1,200,000 shares. Options granted under the plan have various vesting 
periods and are exercisable for a period of 10 years from the date of grant, 
although options may expire earlier because of termination of employment.

In 1992, the Company adopted the 1992 Stock Option Plan, which provides for 
the granting of nonqualified and incentive stock options to employees, 
officers, consultants and nonemployee members of the Board of Directors.  
Options granted to employees under this plan have various vesting periods.  
Annually, nonemployee directors will be granted nonqualified stock options 
exercisable after six months from the date of grant, equal to that number of 
shares determined by dividing the annual director fee amount by the fair 
market value of a share of common stock as of the date of grant.  All options 
granted under this plan, once vested, are exercisable for a period of up to 
10 years from the date of grant, although options may expire earlier because 
of termination of employment or service.

In 1996, the Company adopted the Annual Incentive Program, which provides 
certain of the Company's key employees with annual incentive compensation 
tied to the achievement of pre-

                                      34 
<PAGE>

established and objective performance goals.  This plan provides for the 
granting of stock options to key management employees, pursuant to the plan 
formula, in the event that the Company's return on total assets (as defined 
in the plan) for any bonus year exceeds 15%.  Nonqualified and incentive 
stock options may be granted, and the terms of the plan concerning the stock 
options are substantially the same as the corresponding terms of the 1992 
Stock Option Plan.

The 1992 Stock Option Plan and the 1996 Annual Incentive Program allow for 
the payment of all or a portion of the exercise price and tax withholding 
obligations in shares of the Company's common stock delivered and/or 
withheld.  Such payment or withholding will be valued at fair market value as 
of the date of exercise.  Participants making use of this feature will 
automatically be granted a reload stock option to purchase a number of shares 
equal to the number of shares delivered and/or withheld.  When a reload stock 
option is granted, a portion of the shares issued to the participant will be 
designated as restricted stock for a period of five years, although the 
restriction may be removed earlier under certain circumstances.  Reload stock 
options have an exercise price equal to the fair market value as of the date 
of exercise of the original options and will expire on the same date as the 
original options.

In 1996, 1995, and 1994 the Company acquired from employees and placed in the 
treasury, 48,806, 40,652 and 27,665 shares, respectively, pursuant to 
provisions of the Company's stock option plan.  Such shares were tendered or 
withheld in satisfaction of those employees' federal and state withholding 
taxes on compensation resulting from the exercise of nonqualified stock 
options and for the aggregate exercise cost of certain of the options.

Transactions under the option plans are as follows:

<TABLE>
                                      1996                   1995                    1994         
                              --------------------   --------------------    -------------------- 
                                          WEIGHTED               WEIGHTED                WEIGHTED 
                                          AVERAGE                AVERAGE                 AVERAGE  
                                          EXERCISE               EXERCISE                EXERCISE 
                               OPTIONS     PRICE      OPTIONS     PRICE       OPTIONS     PRICE   
                              ---------   --------   ---------   --------    ---------   -------- 
<S>                           <C>         <C>        <C>         <C>         <C>         <C>      
Options outstanding Jan. 1    1,291,364    $12.05    1,172,402    $10.19       833,555    $ 8.63 
Options granted                 395,422     16.25      200,473     22.55       389,847     13.17 
Options exercised              (138,227)     6.00      (77,590)    11.09       (47,400)     7.29 
Options forfeited                (6,600)    17.64       (3,921)    13.55        (3,600)    13.63 
                              ---------              ---------               ---------           

Options outstanding 
 at Dec. 31                   1,541,959     13.65    1,291,364     12.05     1,172,402     10.19 
                              ---------              ---------               ---------           
                              ---------              ---------               ---------           

Options exercisable at 
 Dec. 31                        776,732     11.17      714,991      8.19       580,355      7.00 
                              ---------              ---------               ---------    
                              ---------              ---------               ---------    

Options available for 
 grant at Dec. 31               499,821                391,646                  38,198    
                              ---------              ---------               ---------    
                              ---------              ---------               ---------    
</TABLE>





                                      35 

<PAGE>


Information related to options outstanding at December 31, 1996, is 
summarized below:


                           OPTIONS OUTSTANDING          OPTIONS EXERCISABLE
                    ---------------------------------   -------------------
                                WEIGHTED
                                 AVERAGE     WEIGHTED              WEIGHTED
                                REMAINING    AVERAGE               AVERAGE
   RANGE OF                    CONTRACTUAL   EXERCISE              EXERCISE
EXERCISE PRICES     OPTIONS        LIFE        PRICE     OPTIONS     PRICE
---------------     -------    -----------   --------    -------   --------
    $0.10              8,850      1 Year      $ 0.10       8,850    $ 0.10
$4.57 - $7.55        349,100      4 Years       6.51     349,100      6.51
$12.38 - $14.75      596,114      7 Years      13.36     309,526     13.42
$16.25 - $23.75      587,895     10 Years      18.38     109,256     22.21
                   ---------                             -------
                   1,541,959                             776,732
                   ---------                             -------
                   ---------                             -------

Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for 
Stock-Based Compensation" requires disclosure of pro forma net earnings and 
net earnings per common share information computed as if the Company had 
accounted for its employee stock options granted subsequent to December 31, 
1995 under the fair value method set forth in SFAS No. 123.  The fair value 
of the Company's outstanding stock options was estimated at the date of grant 
using a Black-Scholes option pricing model with the following weighted 
average assumptions:

                                           1996        1995
                                          -----       -----
Expected option life in years               3.9         4.0
Risk-free interest rate                   6.11%       5.59%
Volatility factor                         0.305       0.242
Dividend yield                            1.22%       0.89%

The Black-Scholes option valuation model was developed for use in estimating 
the fair value of traded options which have no vesting restrictions and are 
fully transferable.  In addition, option valuation models require the input 
of highly subjective assumptions including the expected stock price 
volatility. Because the Company's employee stock options have characteristics 
significantly different from those of traded options, and because changes in 
the subjective input assumptions can materially affect the fair value 
estimate, in management's opinion, the existing models do not necessarily 
provide a reliable single measure of the fair value of its employee stock 
options.  For purposes of pro forma disclosures, the estimated fair value of 
the options is amortized to expense over the option's vesting period.  In 
addition, because SFAS No. 123 is applicable only to options granted 
subsequent to December 31, 1994, the pro forma information does not reflect 
the pro forma effect of all previous stock option grants of the Company.  
Therefore, the pro forma information is not necessarily indicative of future 
amounts until SFAS No. 123 is applied to all outstanding stock options.


                                      36

<PAGE>

The Company's pro forma information is as follows:

                                                     DECEMBER 31,
                                                 ------------------
                                                  1996        1995
                                                 ------     -------
Net earnings--as reported                        $6,720     $12,470
Net earnings--pro forma                          $6,406     $12,455

Net earnings per common share-- as reported      $ 0.55     $  1.03
Net earnings per common share-- pro forma        $ 0.52     $  1.03

Weighted-average fair value of options
    granted during the year                      $ 4.83     $  5.88


NOTE I--OPERATIONS

During 1996, 1995 and 1994, sales to Aluminum Company of America ("Alcoa") 
totaled 13%, 23% and 30%, respectively, of revenues. Sales to Commonwealth 
Aluminum totaled 12% of revenues in 1994.  No other customer accounted for 
more than 10% of revenues in 1996, 1995 and 1994.  The loss of Alcoa or 
Commonwealth would have a material adverse effect upon the business of the 
Company and its future operating results;  however, the Company has secured 
long-term supply agreements with these customers.

During the third quarter of 1996, the Company recorded a charge to cost of 
sales of $3,577,000 resulting from management's decision to close the 
Company's Corona, California aluminum recycling plant.

NOTE J--SUBSEQUENT EVENTS

ACQUISITIONS:

In January 1997, the Company acquired all of the outstanding common stock of 
IMSAMET, Inc. ("IMSAMET"), a wholly owned subsidiary of EnviroSource Inc., 
for $58,000,000 in cash, not including acquisition costs.  IMSAMET operates 
and owns or has a majority interest in three aluminum recycling plants 
located in Goodyear, Arizona, Post Falls, Idaho and Wendover, Utah.  In 
addition, IMSAMET has a 50% interest in a joint venture facility, adjacent to 
the Utah plant, which uses a proprietary process to reclaim materials from 
salt cake.  

The acquisition will be accounted for using the purchase method of 
accounting.  Accordingly, the purchase price will be allocated to the net 
assets acquired based on their estimated fair values.  

Also in January 1997, the Company acquired all of the outstanding common 
stock of Rock Creek Aluminum, Inc. in exchange for 618,137 shares of the 
Company's common stock valued at approximately $9,500,000. The acquisition 
will be accounted for using the purchase method of 


                                      37

<PAGE>

accounting.  Rock Creek owns and operates three Ohio facilities located in 
Cleveland, Elyria and Rock Creek.  These facilities utilize milling, 
smelting, blending, testing and packaging equipment to process various types 
of raw materials, including aluminum dross and scrap, various minerals and 
slags.

CREDIT AGREEMENT:

In connection with the above acquisitions, the Company entered into a new 
$125,000,000 credit agreement ("Credit Agreement") with certain lenders, 
including Merrill Lynch (syndication agent) and Texas Commerce Bank National 
Association (administrative agent).  The Company received $110,000,000 at the 
closing and used approximately $61,000,000 for acquisitions.  The remaining 
$49,000,000 of the proceeds was used to retire substantially all of its 
outstanding debt as of December 31, 1996. The early debt retirement generated 
a loss of $1,318,000 (net of income taxes) and will be reported as an 
extraordinary item in the first quarter of 1997.

The credit agreement provides for $125,000,000 of senior secured credit 
facilities consisting of a $105,000,000 term loan and a $20,000,000 revolving 
credit agreement. Of the $20,000,000 revolving credit agreement, $4,000,000 
is to be used, as needed, by the Company for standby letters of credit.  In 
January 1997, the Company had $1,800,000 of standby letters of credit 
outstanding. The credit facilities bear a fluctuating interest rate based on 
LIBOR or the prime rate, plus a credit margin which is based on the Company's 
rate of total debt to earnings before interest, taxes, depreciation and 
amortization.

A summary of long-term debt following these transactions is as follows:

New Credit Agreement                                                $110,000
Debt outstanding at December 31, 1996 not repaid in January 1997       5,826
                                                                    --------
                                                                    $115,826
                                                                    --------
                                                                    --------

The term loan has a final maturity of seven years, and the revolving credit 
agreement has a final maturity of five years.  Scheduled maturities of 
long-term debt following the borrowings under the Credit Agreement and 
repayments of long-term debt in January 1997 are as follows:

        1997                       $  5,624
        1998                         10,507
        1999                         15,000
        2000                         17,169
        2001                         18,000
        After 2001                   49,526
                                   --------
        Total                      $115,826
                                   --------
                                   --------

The new Credit Agreement imposes certain restrictions, including: (i) a 
prohibition of other indebtedness, (ii) maintenance of certain financial 
ratios, and (iii) limitations on investments, dividends, and capital 
expenditures.  The annual limitations on cash dividends are as follows:  
$3,500,000 for 1997 and 1998, $4,000,000 for 1999 and 2000 and $6,000,000 
after the year 


                                      38


<PAGE>

2000.  The Credit Agreement is secured by substantially all of the Company's 
assets, as well as a pledge of the capital stock of substantially all of the 
Company's subsidiaries.

NOTE K--QUARTERLY FINANCIAL DATA (Unaudited)

<TABLE>
                                     1ST        2ND       3RD       4TH       TOTAL
              1996                 QUARTER    QUARTER   QUARTER   QUARTER     YEAR
--------------------------------   -------    -------   -------   -------   --------
<S>                                  <C>         <C>      <C>       <C>        <C>
Revenues                           $50,718    $50,465   $53,689   $55,999   $210,871
Gross profit                         7,890      7,807     2,625     7,215     25,538
Income (loss) before tax             4,750      4,293    (1,005)    2,814     10,852
Net earnings (loss)                  2,963      2,598      (798)    1,958      6,720
Earnings (loss) per common share      0.24       0.21     (0.07)     0.16       0.55

                                     1ST        2ND       3RD       4TH       TOTAL
              1995                 QUARTER    QUARTER   QUARTER   QUARTER     YEAR
--------------------------------   -------    -------   -------   -------   --------
Revenues                           $30,746    $29,725   $32,105   $48,591   $141,167
Gross profit                         7,435      7,315     7,783     8,406     30,939
Income before tax                    4,824      4,933     5,543     5,063     20,363
Net earnings                         2,894      2,959     3,327     3,290     12,470
Earnings (loss) per common share      0.24       0.25      0.27      0.27       1.03
</TABLE>

During the third quarter of 1996, the Company recorded a charge of $4,177,000 
resulting from management decisions to close the Company's Corona, California 
aluminum recycling plant and to accelerate the closure of the first cell of 
the Company's landfill in Morgantown, Kentucky.








                                      39

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

None.


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item with respect to directors of the 
Company appears under the caption "Election of Directors" in the definitive 
Proxy Statement (herein so called) of the Company relating to the Company's 
1997 Annual Meeting of Stockholders, to be filed with the Securities and 
Exchange Commission (the "Commission") pursuant to Regulation 14A of the 
Securities Exchange Act of 1934, which information is incorporated herein by 
reference.  It is currently anticipated that the Proxy Statement will be 
publicly available and mailed to stockholders in April 1997.  Certain 
information as to executive officers is included herein under PART I,  ITEM 
1.  "BUSINESS--EXECUTIVE OFFICERS."


ITEM 11. EXECUTIVE COMPENSATION

The information required by this item appears under the caption "Remuneration 
of Directors and Officers" in the Proxy Statement, which information is 
incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item appears under the caption "Voting and 
Principal Stockholders" in the Proxy Statement, which information is 
incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item appears under the caption "Remuneration 
of Directors and Officer--Directors Compensation" in the Proxy Statement, 
which information is incorporated herein by reference.



                                      40

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

  (a) The following documents are filed as part of this Annual Report on 
      Form 10-K:

   1. Consolidated Financial Statements:  See index to Consolidated Financial 
      Statements and Financial Statement Schedules on Page 22 hereof.

   2. Consolidated Financial Statement Schedules:  See index to Consolidated 
      Financial Statements and Financial Statement Schedules on Page 22 hereof.

   3. Exhibits:
      --------

   3.1        Certificate of Incorporation of IMCO Recycling Inc., as 
              amended, filed as Exhibit 4.6 to the Company's Registration 
              Statement on Form S-2 (No. 33-48571) and incorporated herein 
              by reference.

   3.2        By-laws of IMCO Recycling Inc., as amended, filed as Exhibit  
              4.7 to the Company's Registration Statement on Form S-2 (No.  
              33-48571) and incorporated herein by reference.               

   4.1        Specimen Stock Certificate of the Common Stock, $0.10 par    
              value, of IMCO Recycling Inc., filed as Exhibit 4.1 to the   
              Company's Registration Statement on Form S-2 (No. 33-48571)  
              and incorporated herein by reference.                        

  10.6        Amended and Restated Registration Agreement, dated September  
              30, 1988, among IMCO Recycling Inc., Merrill Lynch            
              Interfunding Inc., Don V. Ingram, Larry Thrasher, and PTX     
              Partners, filed as Exhibit 10.6 to the Company's 1993 Form    
              10-K and incorporated herein by reference.                    

  10.7        Amendment No. 1 to Amended and Restated Registration          
              Agreement, dated as of December 30, 1988, filed as Exhibit    
              10.7 to the Company's 1994 Form 10-K and incorporated herein  
              by reference.                                                 

  10.8        Amendment, dated as of September 5, 1990, to Registration      
              Agreement between Merrill Lynch Interfunding Inc. and Don V.   
              Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K  
              and incorporated herein by reference.                          

  10.9        IMCO Recycling Inc. Amended and Restated Stock Option Plan,    
              filed as Exhibit 10.11 to the Company's Annual Report on Form  
              10-K for the fiscal year ended December 31, 1992 (the "1992    
              Form 10-K") and incorporated herein by reference.              

  10.16       Assignment, dated September 16, 1986, from Clarence W. Haack    
              and Genevieve Haack to International Metal Co., filed as        
              Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated  
              herein by reference.                                            



                                      41

<PAGE>

  10.17       Agreement, dated as of August 26, 1995, between IMCO Recycling  
              Inc., Rockwood, Tennessee Facility, and International Union,    
              United Steelworkers of America, and filed as Exhibit 10.17 to   
              the Company's Annual Report on Form 10-K for the fiscal year    
              ended December 31, 1995 (the "1995 Form 10-K"), and incorporated
              herein by reference.                                            

  10.19       Split-Dollar Life Insurance Agreement, dated as of November 5,  
              1990, between Thomas W. Rogers and IMCO Recycling Inc., filed   
              as Exhibit 10.19 to the Company's 1994 Form 10-K and            
              incorporated herein by reference (The Company is a party to     
              virtually identical Split-Dollar Life Insurance Agreements      
              with Paul V. Dufour, C. Lee Newton and Richard L. Kerr.  These  
              agreements have been omitted since they are substantially       
              identical to Mr. Rogers' in all material respects).             

  10.22       Supply Agreement between Barmet Aluminum Corporation (now    
              Commonwealth Aluminum Corporation) and the Company, dated    
              March 2, 1992, filed as Exhibit 10.25 to the Company's 1991  
              Form 10-K and incorporated herein by reference.              

  10.23       Right of First Refusal Agreement between Barmet Aluminum       
              Corporation (now Commonwealth Aluminum Corporation) and the    
              Company, dated March 2, 1992, relating to Commonwealth's       
              Indiana recycling plant, filed as Exhibit 10.23 to the         
              Company's 1994 Form 10-K and incorporated herein by reference. 

  10.24       Agreement, effective as of December 1, 1995, between IMCO       
              Recycling of Ohio Inc. and the United Mine Workers of America,  
              and filed as Exhibit 10.24 to the Company's  1995 Form 10-K     
              and incorporated herein by reference.                           

  10.25       Consulting Agreement, dated as of May 31, 1985, between Don V.  
              Ingram and Frontier Texas Corporation, filed as Exhibit 10.25   
              to the Company's 1994 Form 10-K and incorporated herein by      
              reference.                                                      

  10.26       IMCO Recycling Inc. 1992 Stock Option Plan, as amended          
              December 15, 1994, filed as Exhibit 10.1 to the Company's       
              Quarterly Report on Form 10-Q for the quarterly period ended    
              June 30, 1995, and incorporated herein by reference.

  10.27       IMCO Recycling Inc. 1992 Bonus Participation Plan filed as 
              Exhibit 10.32 to the 1992 Form 10-K and incorporated herein 
              by reference.                                                   

  10.29       Agreement, effective as of January 1, 1994, between IMCO        
              Recycling Inc. and Aluminum Company of America, filed as        
              Exhibit 10.34 to the Company's 1993 Form 10-K and incorporated  
              herein by reference.                                            

  10.35       First Amendment to processing agreement by and among the Rigid  
              Packaging division of Aluminum Company of America, the Company  
              and Metal Resources Inc., filed as Exhibit 10.2 to the          
              Company's Quarterly Report on Form 10-Q for the quarterly       
              period ended June 30, 1995, and incorporated herein by          
              reference.                                                      

  10.36       Agreement and Plan of Merger, dated as of October 1, 1995,    
              among IMCO Recycling Inc., IMCO Recycling of Illinois Inc.,   
              Alumar Associates, Inc., and the Shareholders, filed as       
              Exhibit 1 to the Company's Current Report on Form 8-K, 



                                      42

<PAGE>

              dated October 3, 1995, and incorporated herein by reference.

  10.37       Registration Rights Agreement, dated as of October 1, 1995,    
              among IMCO Recycling Inc. and the former Alumar Shareholders,  
              filed as Exhibit 2 to the Company's Current Report on Form 8-K,
              dated October 3, 1995, and incorporated herein by reference.

  10.41       Stock Purchase Agreement by and among IMCO Recycling Inc.,      
              EnviroSource, Inc. and IMSAMET, Inc. dated November 26, 1996.   
              (In accordance with Item 601 of Regulation S-K, the copy of     
              the IMSAMET Agreement filed with the Securities and Exchange    
              Commission (the "Commission") does not include the Schedules 
              or exhibits thereto.  The Company agrees to furnish such        
              information supplementally to the Commission upon request).     
              Filed as Exhibit 2.1 to the Company's Current Report on Form    
              8-K, dated January 21, 1997, and incorporated herein by         
              reference.                                                      

  10.42       Amendment No. 1 to Stock Purchase Agreement by and among IMCO  
              Recycling Inc., EnviroSource, Inc. and IMSAMET, Inc. dated     
              January 21, 1997.  Filed as Exhibit 2.2 to the Company's       
              Current Report on Form 8-K, dated January 21, 1997, and        
              incorporated herein by reference.                              

  10.43       Credit Agreement by and among IMCO Recycling Inc., the          
              Subsidiary Guarantors named therein, the Lenders thereunder,    
              Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith      
              Incorporated, and Texas Commerce Bank National Association,     
              dated January 21, 1997.  (In accordance with Item 601 of        
              Regulation S-K, the copy of the Credit Agreement filed with     
              the Commission does not include the schedules or exhibits       
              thereto.  The Company agrees to furnish such information        
              supplementally to the Commission upon request).  Filed as       
              Exhibit 2.3 to the Company's Current Report on Form 8-K, dated  
              January 21, 1997, and incorporated herein by reference.         

  10.44       Security Agreement by and among IMCO Recycling Inc., the        
              Subsidiary Guarantors named therein and Texas Commerce Bank     
              National Association as Administrative Agent for the Lenders,   
              dated January 21, 1997.  Filed as Exhibit 2.4 to the Company's  
              Current Report on Form 8-K, dated January 21, 1997, and         
              incorporated herein by reference.                               

 *21          Subsidiaries of IMCO Recycling Inc. as of March 25, 1997.

 *23          Consent of Ernst & Young LLP.

 *27          Financial Data Schedule.

----------------
* Filed herewith.

  (b) Reports on Form 8-K filed in fourth quarter 1996:
      None.

  (c) See sub-item (a) above.

  (d) See sub-item (a) above.



                                      43
<PAGE>

SIGNATURES

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

Dated:     March 25, 1997            IMCO Recycling Inc.


                                     By: /s/ Robert R. Holian
                                        ----------------------------------------
                                        Robert R. Holian,  Vice President and
                                        Controller, Principal Accounting Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated:

     Signature                           Title                        Date
     ---------                           -----                        ----

/s/ Don V. Ingram            Director, Chairman of the Board,     March 25, 1997
----------------------       Chief Executive Officer
Don V. Ingram                


/s/ Jack M. Brundrett        Director                             March 25, 1997
----------------------       
Jack M. Brundrett 


/s/ Ralph L. Cheek           Director                             March 25, 1997
----------------------       
Ralph L. Cheek


/s/ John J. Fleming          Director                             March 25, 1997
----------------------       
John J. Fleming


/s/ Thomas A. James          Director                             March 25, 1997
----------------------       
Thomas A. James


/s/ Don Navarro              Director                             March 25, 1997
----------------------       
Don Navarro


/s/ Jack C. Page             Director                             March 25, 1997
----------------------       
Jack C. Page


/s/ Paul V. Dufour           Executive Vice President Finance     March 25, 1997
----------------------       and Administration (Principal 
Paul V. Dufour               Financial Officer)


/s/ Robert R. Holian         Vice President and Controller        March 25, 1997
----------------------       (Principal Accounting Officer)
Robert R. Holian



                                      44
<PAGE>

                               INDEX TO EXHIBITS

EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
   3.1        Certificate of Incorporation of IMCO Recycling Inc., as 
              amended, filed as Exhibit 4.6 to the Company's Registration 
              Statement on Form S-2 (No. 33-48571) and incorporated herein 
              by reference.

   3.2        By-laws of IMCO Recycling Inc., as amended, filed as Exhibit  
              4.7 to the Company's Registration Statement on Form S-2 (No.  
              33-48571) and incorporated herein by reference.               

   4.1        Specimen Stock Certificate of the Common Stock, $0.10 par    
              value, of IMCO Recycling Inc., filed as Exhibit 4.1 to the   
              Company's Registration Statement on Form S-2 (No. 33-48571)  
              and incorporated herein by reference.                        

  10.6        Amended and Restated Registration Agreement, dated September  
              30, 1988, among IMCO Recycling Inc., Merrill Lynch            
              Interfunding Inc., Don V. Ingram, Larry Thrasher, and PTX     
              Partners, filed as Exhibit 10.6 to the Company's 1993 Form    
              10-K and incorporated herein by reference.                    

  10.7        Amendment No. 1 to Amended and Restated Registration          
              Agreement, dated as of December 30, 1988, filed as Exhibit    
              10.7 to the Company's 1994 Form 10-K and incorporated herein  
              by reference.                                                 

  10.8        Amendment, dated as of September 5, 1990, to Registration      
              Agreement between Merrill Lynch Interfunding Inc. and Don V.   
              Ingram, filed as Exhibit 10.8 to the Company's 1994 Form 10-K  
              and incorporated herein by reference.                          

  10.9        IMCO Recycling Inc. Amended and Restated Stock Option Plan,    
              filed as Exhibit 10.11 to the Company's Annual Report on Form  
              10-K for the fiscal year ended December 31, 1992 (the "1992    
              Form 10-K") and incorporated herein by reference.              

  10.16       Assignment, dated September 16, 1986, from Clarence W. Haack    
              and Genevieve Haack to International Metal Co., filed as        
              Exhibit 10.16 to the Company's 1994 Form 10-K and incorporated  
              herein by reference.                                            



                                      45

<PAGE>

  10.17       Agreement, dated as of August 26, 1995, between IMCO Recycling  
              Inc., Rockwood, Tennessee Facility, and International Union,    
              United Steelworkers of America, and filed as Exhibit 10.17 to   
              the Company's Annual Report on Form 10-K for the fiscal year    
              ended December 31, 1995 (the "1995 Form 10-K"), and incorporated
              herein by reference.                                            

  10.19       Split-Dollar Life Insurance Agreement, dated as of November 5,  
              1990, between Thomas W. Rogers and IMCO Recycling Inc., filed   
              as Exhibit 10.19 to the Company's 1994 Form 10-K and            
              incorporated herein by reference (The Company is a party to     
              virtually identical Split-Dollar Life Insurance Agreements      
              with Paul V. Dufour, C. Lee Newton and Richard L. Kerr.  These  
              agreements have been omitted since they are substantially       
              identical to Mr. Rogers' in all material respects).             

  10.22       Supply Agreement between Barmet Aluminum Corporation (now    
              Commonwealth Aluminum Corporation) and the Company, dated    
              March 2, 1992, filed as Exhibit 10.25 to the Company's 1991  
              Form 10-K and incorporated herein by reference.              

  10.23       Right of First Refusal Agreement between Barmet Aluminum       
              Corporation (now Commonwealth Aluminum Corporation) and the    
              Company, dated March 2, 1992, relating to Commonwealth's       
              Indiana recycling plant, filed as Exhibit 10.23 to the         
              Company's 1994 Form 10-K and incorporated herein by reference. 

  10.24       Agreement, effective as of December 1, 1995, between IMCO       
              Recycling of Ohio Inc. and the United Mine Workers of America,  
              and filed as Exhibit 10.24 to the Company's  1995 Form 10-K     
              and incorporated herein by reference.                           

  10.25       Consulting Agreement, dated as of May 31, 1985, between Don V.  
              Ingram and Frontier Texas Corporation, filed as Exhibit 10.25   
              to the Company's 1994 Form 10-K and incorporated herein by      
              reference.                                                      

  10.26       IMCO Recycling Inc. 1992 Stock Option Plan, as amended          
              December 15, 1994, filed as Exhibit 10.1 to the Company's       
              Quarterly Report on Form 10-Q for the quarterly period ended    
              June 30, 1995, and incorporated herein by reference.

  10.27       IMCO Recycling Inc. 1992 Bonus Participation Plan filed as 
              Exhibit 10.32 to the 1992 Form 10-K and incorporated herein 
              by reference.                                                   

  10.29       Agreement, effective as of January 1, 1994, between IMCO        
              Recycling Inc. and Aluminum Company of America, filed as        
              Exhibit 10.34 to the Company's 1993 Form 10-K and incorporated  
              herein by reference.                                            

  10.35       First Amendment to processing agreement by and among the Rigid  
              Packaging division of Aluminum Company of America, the Company  
              and Metal Resources Inc., filed as Exhibit 10.2 to the          
              Company's Quarterly Report on Form 10-Q for the quarterly       
              period ended June 30, 1995, and incorporated herein by          
              reference.                                                      

  10.36       Agreement and Plan of Merger, dated as of October 1, 1995,    
              among IMCO Recycling Inc., IMCO Recycling of Illinois Inc.,   
              Alumar Associates, Inc., and the Shareholders, filed as       
              Exhibit 1 to the Company's Current Report on Form 8-K, 



                                      46

<PAGE>

              dated October 3, 1995, and incorporated herein by reference.

  10.37       Registration Rights Agreement, dated as of October 1, 1995,    
              among IMCO Recycling Inc. and the former Alumar Shareholders,  
              filed as Exhibit 2 to the Company's Current Report on Form 8-K,
              dated October 3, 1995, and incorporated herein by reference.

  10.41       Stock Purchase Agreement by and among IMCO Recycling Inc.,      
              EnviroSource, Inc. and IMSAMET, Inc. dated November 26, 1996.   
              (In accordance with Item 601 of Regulation S-K, the copy of     
              the IMSAMET Agreement filed with the Securities and Exchange    
              Commission (the "Commission") does not include the Schedules 
              or exhibits thereto.  The Company agrees to furnish such        
              information supplementally to the Commission upon request).     
              Filed as Exhibit 2.1 to the Company's Current Report on Form    
              8-K, dated January 21, 1997, and incorporated herein by         
              reference.                                                      

  10.42       Amendment No. 1 to Stock Purchase Agreement by and among IMCO  
              Recycling Inc., EnviroSource, Inc. and IMSAMET, Inc. dated     
              January 21, 1997.  Filed as Exhibit 2.2 to the Company's       
              Current Report on Form 8-K, dated January 21, 1997, and        
              incorporated herein by reference.                              

  10.43       Credit Agreement by and among IMCO Recycling Inc., the          
              Subsidiary Guarantors named therein, the Lenders thereunder,    
              Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith      
              Incorporated, and Texas Commerce Bank National Association,     
              dated January 21, 1997.  (In accordance with Item 601 of        
              Regulation S-K, the copy of the Credit Agreement filed with     
              the Commission does not include the schedules or exhibits       
              thereto.  The Company agrees to furnish such information        
              supplementally to the Commission upon request).  Filed as       
              Exhibit 2.3 to the Company's Current Report on Form 8-K, dated  
              January 21, 1997, and incorporated herein by reference.         

  10.44       Security Agreement by and among IMCO Recycling Inc., the        
              Subsidiary Guarantors named therein and Texas Commerce Bank     
              National Association as Administrative Agent for the Lenders,   
              dated January 21, 1997.  Filed as Exhibit 2.4 to the Company's  
              Current Report on Form 8-K, dated January 21, 1997, and         
              incorporated herein by reference.                               

 *21          Subsidiaries of IMCO Recycling Inc. as of March 25, 1997.

 *23          Consent of Ernst & Young LLP.

 *27          Financial Data Schedule.

----------------
* Filed herewith.



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