<PAGE>
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 2004.
                                                  REGISTRATION NO. 333-_________
================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                       -----------------------------------

                                    FORM F-10
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933

                       -----------------------------------

                          GERDAU AMERISTEEL CORPORATION
             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                    <C>                               <C>
            ONTARIO                               3312                              59-0792436
(Province or other Jurisdiction       (Primary Standard Industrial       (I.R.S. Employer Identification
of Incorporation or Organization)      Classification Code Number)                Number, if any)
</TABLE>

                              HOPKINS STREET SOUTH
                             WHITBY, ONTARIO L1N 5T1
                                 (905) 668-3535
   (Address and telephone number of Registrant's principal executive offices)

                           GERDAU AMERISTEEL US INC.,
     5100 WEST LEMON STREET, SUITE 312, TAMPA, FLORIDA, UNITED STATES, 33609
                                 (813) 286-8383
    (Name, address (including zip code) and telephone number (including area
                code) of agent for service in the United States)
                       -----------------------------------


                                   COPIES TO:

<TABLE>
<S>                         <C>                                <C>                             <C>
ANDREW J. BECK, ESQ.            KARRIN POWYS-LYBBE, ESQ.        CHRISTOPHER W. MORGAN, ESQ.         BRENDAN D.G. REAY, ESQ.
    TORYS LLP                          TORYS LLP               SKADDEN, ARPS, SLATE, MEAGHER     BLAKE, CASSELS & GRAYDON LLP
  237 PARK AVENUE              79 WELLINGTON STREET WEST                 & FLOM LLP             199 BAY STREET, COMMERCE COURT
NEW YORK, NY 10017                     SUITE 3000                222 BAY STREET, SUITE 1750            WEST, SUITE 2800
  (212) 880-6000            TORONTO, ONTARIO, CANADA M5K 1N2       P.O. BOX 258, TORONTO,      TORONTO, ONTARIO, CANADA M5L 1A9
                                     (416) 865-7380               ONTARIO, CANADA M5K 1J5               (416) 863-2400
                                                                       (416) 777-4700
</TABLE>
                       -----------------------------------


        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this Registration Statement becomes effective.

                           PROVINCE OF ONTARIO, CANADA
                (Principal jurisdiction regulating this offering)

                       -----------------------------------

It is proposed that this filing shall become effective (check appropriate box
below):

A.   [ ] upon filing with the Commission, pursuant to Rule 467(a) (if in
     connection with an offering being made contemporaneously in the United
     States and Canada).

B.   [X] at some future date (check appropriate box below)

     1.   [ ] pursuant to Rule 467(b) on ( ) at ( ) (designate a time not sooner
          than seven calendar days after filing).

     2.   [ ] pursuant to Rule 467(b) on ( ) at ( ) (designate a time seven
          calendar days or sooner after filing) because the securities
          regulatory authority in the review jurisdiction has issued a receipt
          or notification of clearance on ( ).

     3.   [ ] pursuant to Rule 467(b) as soon as practicable after notification
          of the Commission by the Registrant or the Canadian securities
          regulatory authority of the review jurisdiction that a receipt or
          notification of clearance has been issued with respect hereto.

     4.   [X] after the filing of the next amendment to this Form (if
          preliminary material is being filed).

   If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus
offering procedures, check the following box. [ ]

                       -----------------------------------


                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>

====================================================================================================================================
 TITLE OF EACH CLASS OF          AMOUNT TO BE        PROPOSED MAXIMUM OFFERING     PROPOSED MAXIMUM       AMOUNT OF REGISTRATION FEE
    SECURITIES TO BE            REGISTERED (1)          PRICE PER SHARE (2)       AGGREGATE OFFERING
       REGISTERED                                                                     PRICE (2)
-------------------------- ------------------------- ---------------------------  ----------------------  --------------------------
<S>                        <C>                       <C>                         <C>                       <C>
Common Shares                     40,250,000                   $4.87                   $196,017,500                $24,835
========================== ========================= ===========================  ======================  ==========================
</TABLE>

----------------------------------------------

(1) Includes common shares that the Underwriters have the option to purchase to
cover over-allotments, if any. Excludes common shares to be purchased from the
Registrant by Gerdau S.A. or its affiliates.

(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act of 1933, as
amended based on the average of the high and low prices of the Registrant's
common shares on the Toronto Stock Exchange on October 4, 2004 converted into
U.S. dollars at the inverse of the noon buying rate in the city of New York for
cable transfers in Canadian dollars as certified for customs purposes by the
Federal Reserve Bank of New York on October 4, 2004.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES ACT OF 1933
OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A) OF THE ACT,
MAY DETERMINE.
================================================================================


<PAGE>

                                     PART I

         INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS


                                EXPLANATORY NOTE

     The prospectus contained in this Registration Statement describes an
offering by the Registrant of an aggregate of 70,000,000 common shares,
35,000,000 of which will be offered to the public in the United States and
Canada (the "Public Offering") and the remaining 35,000,000 of which will be
purchased from the Registrant by Gerdau S.A. or its affiliates (the "Gerdau
Purchase"). The underwriters of the Public Offering may also purchase up to an
additional 5,250,000 common shares from the Registrant to cover over-allotments,
if any (the "Over-allotment Option"). Gerdau S.A. has agreed to purchase from
the Registrant the same number of additional common shares purchased by the
underwriters pursuant to the Over-allotment Option (the "Gerdau Additional
Commitment") within two days after the exercise by the underwriters of their
Over-allotment Option. The maximum aggregate number of additional common shares
that the Registrant may issue pursuant to the Over-allotment Option and the
Gerdau Additional Commitment is 10,500,000.

     Pursuant to the U.S./Canada Multi-jurisdictional Disclosure System, the
prospectus contained in this Registration Statement has been prepared in
accordance with Canadian disclosure standards, with such additions or deletions
as are required or permitted by Form F-10. Under applicable Canadian securities
laws, the prospectus qualifies the distribution of all 80,500,000 common shares
issuable pursuant to the Public Offering, the Gerdau Purchase, the
Over-allotment Option and the Gerdau Additional Commitment. However, this
Registration Statement only covers the offer and sale of the 40,250,000 common
shares pursuant to the Public Offering and the Over-Allotment Option, because
the offer and sale of common shares by the Registrant to Gerdau S.A. or its
affiliates is exempt from registration under the Securities Act of 1933, as
amended, pursuant to the exemption provided by Rule 903 of Regulation S
thereunder.



                                      I-1
<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                             SUBJECT TO COMPLETION

                  PRELIMINARY PROSPECTUS DATED OCTOBER 4, 2004

PROSPECTUS

                               70,000,000 SHARES

                                 (GERDAU LOGO)

                         GERDAU AMERISTEEL CORPORATION
                                 COMMON SHARES
                             ----------------------

       Gerdau Ameristeel Corporation is offering 70,000,000 of its common
shares. Of these shares, 35,000,000 common shares are being offered to the
public through the underwriters referred to below and the remaining 35,000,000
common shares will be purchased from us by Gerdau S.A. or its affiliates,
collectively referred to as Gerdau S.A., at the public offering price, pursuant
to the exemption from registration under the U.S. Securities Act provided by
Regulation S.

       Our common shares are listed on the Toronto Stock Exchange under the
symbol "GNA." We have applied to list our common shares on the New York Stock
Exchange under the symbol "GNA." On October 4, 2004, the closing price of our
common shares on the Toronto Stock Exchange was Cdn$6.18.

       INVESTING IN OUR COMMON SHARES INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 12 OF THIS PROSPECTUS.
                             ----------------------

       WE ARE PERMITTED TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN
DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES.

       OWNING OUR COMMON SHARES MAY SUBJECT YOU TO TAX CONSEQUENCES IN BOTH THE
UNITED STATES AND CANADA. THIS PROSPECTUS MAY NOT DESCRIBE THESE TAX
CONSEQUENCES FULLY. YOU SHOULD READ THE TAX DISCUSSION UNDER "CERTAIN TAX
CONSIDERATIONS FOR U.S. SHAREHOLDERS" AND CONSULT YOUR OWN TAX ADVISOR.

       YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER UNITED STATES FEDERAL
SECURITIES LAWS MAY BE ADVERSELY AFFECTED BECAUSE WE ARE INCORPORATED UNDER THE
LAWS OF THE PROVINCE OF ONTARIO, CANADA, SOME OF OUR OFFICERS AND DIRECTORS AND
SOME OF THE EXPERTS NAMED IN THIS PROSPECTUS ARE RESIDENTS OF A FOREIGN COUNTRY,
AND SOME OF OUR ASSETS AND SOME OF THE ASSETS OF THOSE OFFICERS, DIRECTORS AND
EXPERTS MAY BE LOCATED OUTSIDE THE UNITED STATES.

<Table>
<Caption>
                                                                PER SHARE                TOTAL
                                                                ---------                -----
<S>                                                           <C>                    <C>
Public offering price.......................................       US$                    US$
Underwriting commission.....................................       US$                    US$
Price to Gerdau S.A. .......................................       US$                    US$
Proceeds, before expenses, to Gerdau Ameristeel
  Corporation...............................................       US$                    US$
</Table>

       The public offering price for our common shares offered in Canada is
payable in Canadian dollars, and the public offering price for our common shares
offered outside Canada is payable in Canadian or U.S. dollars. The U.S. dollar
price is the equivalent of the Canadian dollar price for the common shares based
on the prevailing exchange rate on the date of this prospectus.

       The underwriters also have an option to purchase up to an additional
5,250,000 common shares from us at the public offering price, less the
underwriting commission, within 30 days after the date of closing of the
offering to cover overallotments, if any. We refer to this option in this
prospectus as the overallotment option. Gerdau S.A. has agreed to purchase from
us, within two days after the exercise of the overallotment option, a number of
additional common shares equal to the number of common shares purchased by the
underwriters pursuant to the overallotment option, at the public offering price.
We refer to this commitment in this prospectus as the Gerdau S.A. additional
commitment. The maximum aggregate number of additional common shares that we may
issue pursuant to the overallotment option and the Gerdau S.A. additional
commitment is 10,500,000 common shares. Underwriting commission will not be
payable on the 35,000,000 common shares purchased by Gerdau S.A. or on any
additional common shares purchased by Gerdau S.A. pursuant to the Gerdau S.A.
additional commitment.

       Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

       The common shares will be ready for delivery in New York, New York on or
about         , 2004.
                             ----------------------
                          Joint Book-Running Managers

MERRILL LYNCH & CO.                                            BMO NESBITT BURNS
                             ----------------------

CIBC WORLD MARKETS                    JPMORGAN                    MORGAN STANLEY
                             ----------------------
                The date of this prospectus is           , 2004.
<PAGE>












                            [GERDAU AMERISTEEL LOGO]




                                    [PHOTOS]



<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................    1
Risk Factors................................................   12
Cautionary Statement Regarding Forward-Looking Statements...   20
Exchange Rate Information...................................   21
Use of Proceeds.............................................   21
Dividend Policy.............................................   21
Price Range and Trading Volume..............................   22
Capitalization..............................................   23
Selected Historical Consolidated Financial and Operating
  Data......................................................   24
Selected Pro Forma Condensed Consolidated Financial Data....   28
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   30
Industry....................................................   44
Business....................................................   45
North Star Acquisition......................................   63
Management..................................................   71
Principal Shareholders......................................   74
Related Party Transactions..................................   76
Description of Share Capital................................   77
Certain Tax Considerations for U.S. Shareholders............   78
Underwriting................................................   82
Sale to Gerdau S.A. ........................................   85
Legal Matters...............................................   85
Independent Registered Certified Public Accounting Firm,
  Transfer Agent and Registrar..............................   85
Experts.....................................................   85
Documents Incorporated by Reference.........................   85
Where You Can Get More Information..........................   86
Documents Filed as Part of the Registration Statement.......   87
Index to Financial Statements...............................  F-1
</Table>

                             ----------------------

       You should only rely on the information contained or incorporated by
reference in this prospectus. Neither we nor the underwriters have authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it.
Neither we nor the underwriters are making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing or incorporated by reference in this prospectus
is accurate only as of the date on the front cover of this prospectus. Our
business, operating results, financial condition and prospects may have changed
since that date.

       Gerdau Ameristeel Corporation (formerly Co-Steel Inc.) was incorporated
under the laws of the Province of Ontario on September 10, 1970. The Company is
the result of a combination of the North American operations of Brazilian
steelmaker Gerdau S.A. and Canadian steelmaker Co-Steel Inc. on October 23,
2002. Our registered office is located at Hopkins Street South, Whitby, Ontario,
L1N 5T1, Canada. Our executive office is located at 5100 West Lemon Street,
Suite 312, Tampa, Florida, United States, 33609.

       Our historical financial and operational results for the periods prior to
October 23, 2002 are the financial and operational results for Gerdau S.A.'s
operations in North America referred to as Gerdau North America, the predecessor
company for accounting purposes, with the results of the former Co-Steel Inc.,
including Gallatin Steel Company, our 50%-owned joint venture with Dofasco Inc.,
added for the
                                        i
<PAGE>

period since the combination on October 23, 2002. This accounting treatment
results from the use of reverse take-over purchase accounting for the
combination.

       Unless we state otherwise or the context otherwise requires, all
references to "we", "us", "our" and "the Company" refer to Gerdau Ameristeel
Corporation, its subsidiaries and its 50%-owned joint ventures, all references
to "$" or "US$" are to United States dollars, all references to "Cdn$" are to
Canadian dollars, and all references to the "offering" and "common shares"
assume that Gerdau S.A. acquires 35,000,000 common shares from us, the
overallotment option is not exercised, Gerdau S.A. does not purchase any
additional common shares pursuant to the Gerdau S.A. additional commitment, and
we have not completed the proposed acquisition of the assets referred to in this
prospectus as North Star.

       Market data and certain industry forecasts used throughout this
prospectus and the documents incorporated by reference herein were obtained from
market research, publicly available information and industry publications.
Industry publications generally state that the information contained therein has
been obtained from sources believed to be reliable, but that the accuracy and
completeness of such information is not guaranteed. Similarly, industry
forecasts and market research, while believed to be reliable, have not been
independently verified, and neither we nor the underwriters make any
representation as to the accuracy of the information.

       Unless otherwise specified, our financial results and information in this
prospectus are presented in United States dollars and in accordance with United
States generally accepted accounting principles, or U.S. GAAP. Financial results
for periods prior to 2004 were originally presented in accordance with Canadian
generally accepted accounting principles, or Canadian GAAP. As a result, our
audited consolidated financial statements as at and for the two years ended
December 31, 2003 included and incorporated by reference in this prospectus are
presented in accordance with Canadian GAAP. See note 20 to our audited
consolidated financial statements and note 12 to our unaudited consolidated
financial statements included in this prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Material
Differences between Canadian GAAP and U.S. GAAP" for more information on the
differences between Canadian GAAP and U.S. GAAP as they relate to our financial
results. Selected financial information for periods prior to 2004 in this
prospectus is presented in accordance with U.S. GAAP for comparative purposes.

       In this prospectus, EBITDA refers to earnings before interest, taxes,
depreciation and amortization. Our EBITDA is calculated by adding income (loss)
before income taxes and interest expense, depreciation, amortization and cash
distributions from joint ventures and deducting earnings from joint ventures.
Under U.S. GAAP, we equity account for our joint ventures so EBITDA does not
reflect the results of our joint ventures but does include cash distributions
from joint ventures. When our financial results were presented in accordance
with Canadian GAAP, EBITDA included income, interest, depreciation and
amortization associated with our joint ventures, because joint ventures are
proportionately consolidated under Canadian GAAP. We believe EBITDA, a non-GAAP
measure, is a useful supplemental measure of cash available prior to debt
service, capital expenditures and income tax. The reader is cautioned that
EBITDA should not be construed as an alternative to net income determined in
accordance with U.S. GAAP or Canadian GAAP as a performance indicator or to cash
flows from operations as a measure of liquidity and cash flows.

                                        ii
<PAGE>

                               PROSPECTUS SUMMARY

       The following is a summary only and is qualified in its entirety by the
more detailed information appearing elsewhere or incorporated by reference in
this prospectus. You should read this prospectus in its entirety, including the
"Risk Factors" section and the documents incorporated in this prospectus by
reference.

OUR COMPANY

       We are the second largest minimill steel producer in North America with
annual manufacturing capacity of over 6.4 million tons of mill finished steel
products. Through a vertically integrated network of 11 minimills (including one
50%-owned minimill), 13 scrap recycling facilities and 32 downstream operations,
we primarily serve customers in the eastern half of North America. Our products
are generally sold to steel service centers, steel fabricators or directly to
original equipment manufacturers, or OEMs, for use in a variety of industries,
including construction, automotive, mining, cellular and electrical
transmission, metal building manufacturing and equipment manufacturing.

       Our operations are segmented into two operating divisions, minimills and
downstream operations.

       Minimills.  We own and operate seven minimills in the United States and
three in Canada and also have a 50% interest in an eleventh minimill located in
Kentucky, a joint venture with Dofasco Inc. We manufacture and market a wide
range of steel products, including reinforcing steel bar (rebar), merchant bars,
structural shapes, beams, special sections, coiled wire rod (rod), and, through
our joint venture, flat rolled sheet. For the year ended December 31, 2003, our
mill external shipments were approximately 4.9 million tons and for the six
months ended June 30, 2004, our mill external shipments were approximately 2.6
million tons. Over 90% of the raw material feed for our minimill operations is
recycled steel scrap, making us the second largest steel recycler in North
America. Four of our minimills are provided scrap from an internal network of 13
scrap recycling facilities. We believe our recycling operations provide a stable
supply of these minimills' primary raw material.

       Downstream operations.  We have secondary value-added steel businesses
referred to as downstream operations. These steel fabricating and product
manufacturing operations process steel principally produced in our minimills.
For the year ended December 31, 2003, our downstream shipments were
approximately 631,000 tons of fabricated steel products and represented
approximately 11.3% of our 5.6 million tons of total finished steel shipments.
For the six months ended June 30, 2004, our downstream shipments were
approximately 366,000 tons of fabricated steel products and represented
approximately 12.3% of our 3.0 million tons of total finished steel shipments.
Our downstream operations consist of rebar fabrication and epoxy coating,
railroad spike operations, cold drawn plants, super light beam and elevator
guide rails processing, and production of wire mesh and collated nails.

  COMPETITIVE STRENGTHS

       We believe the following strengths will enable us to compete more
effectively in our strategic markets.

       Leading market position.  We are the second largest minimill steel
producer in North America. Through a network of minimills and downstream
operations strategically located throughout the eastern half of the United
States and Canada, we are able to efficiently service customers on a local basis
over a broad geographical segment of the North American steel market. Our
manufacturing capacity and wide range of shapes and sizes of bar steel products
enable us to meet a wide variety of customers' steel and fabricated product
needs. Our broad geographic reach and product diversity, combined with our
centralized order management system, is particularly well suited to serve larger
steel service centers and other customers that are increasingly seeking to
fulfil their steel supply requirements from a small number of suppliers. We have
entered into agreements to purchase the assets of four long steel product mills
and four downstream facilities collectively referred to in this prospectus as
North Star. We believe this proposed acquisition will enable us to more
effectively and efficiently service our customers throughout the

                                        1
<PAGE>

midwestern U.S. market, enhance our geographic reach west of the Mississippi
River and broaden the range of products we offer to our customers.

       Vertically integrated operations.  Our minimills are integrated with 32
downstream steel fabricating facilities and 13 upstream scrap raw material
recycling facilities. Downstream integration provides a captive market for a
significant portion of our mill production and valuable market information on
the end-use demand for steel products. The downstream operations have
historically produced a high return on investment, been less capital intensive
and been subject to less import competition compared to our minimill operations.
Our downstream operations also balance some of the cyclicality and volatility of
the base minimill business and enable us to capture additional value-added
margins on the steel produced at our minimills. In the year ended December 31,
2003, our downstream businesses accounted for approximately 11.3% of our
shipments of total finished steel shipments and generated approximately 15% of
our net sales. In the six months ended June 30, 2004, our downstream businesses
accounted for approximately 12.3% of our shipments of total finished steel
shipments and generated approximately 14.2% of our net sales. We also have 13
upstream scrap recycling facilities that provide approximately 30% of our
minimill scrap needs, thereby decreasing our dependency on third-party scrap
suppliers.

       Scope for future operational improvement.  We have achieved significant
cost savings from the integration of the operations of Co-Steel and Gerdau North
America through the sharing of best operating practices, freight optimization,
minimill production scheduling efficiencies, consolidated procurement activities
and efficiencies in administrative and management functions. We believe we may
achieve additional cost savings over the mid- to long-term from these sources,
as well as from operational improvements through the coordination of
manufacturing technologies, knowledge-sharing and the fostering of an operating
culture focused on continuous improvement. We expect to achieve similar cost
savings from the proposed integration of our operations with the operations of
North Star.

       Disciplined business system platform.  We believe that our employees are
our most valuable resource and are key to maintaining a competitive advantage.
Our corporate culture is geared toward engaging all employees in a common,
disciplined business system focused on continuous improvement. We have
implemented a business system which identifies global industry benchmarks for
key operational and safety measures. This system includes training and safety
programs and performance-based incentives that are designed to improve
performance and motivate employees.

       Strong sponsorship.  We have access to the knowledge base of, and
sponsorship from, our parent company, Gerdau S.A., one of the largest long steel
producers in the world with a history of over 100 years in the steel industry.
We expect to continue to benefit from Gerdau S.A.'s management experience and
its expertise in manufacturing. Gerdau S.A. and its subsidiaries, including us,
have global annual manufacturing capacity of 12.3 million tons of mill finished
steel products with 22 steel plants, two strategic shareholdings and
approximately 74 commercial units in Brazil. With the talent depth, technical
support and financial strength of Gerdau S.A., we believe we are strategically
positioned to grow and succeed within the North American steel industry.

       Experienced management team.  We have a growth-oriented senior management
team that has an average of over 25 years of experience in the steel industry.
Management's extensive experience has been instrumental in our historical growth
and provides a solid base on which to expand our operations. For instance, our
management has a proven track record in successfully managing and integrating
acquisitions. We intend to apply this experience to the pending North Star
acquisition and any subsequent acquisitions.

  OUR STRATEGY

       Our strategy involves the following components:

       Continue to offer extensive product capabilities to our customers.  We
believe that we distinguish ourselves from our competitors through our product
diversity and quality, delivery performance, centralized order management system
and ability to fill orders quickly from multiple inventory sources. We have one

                                        2
<PAGE>

of the widest long steel product ranges in North America and we regularly add to
our product mix in response to our customers' requirements. We believe many of
our customers consider us one of their key suppliers for a wide range of their
product needs. Through our network of minimills and downstream facilities, we
believe that we can distinguish our company by offering one of the broadest
ranges of long steel products in the eastern half of North America, our
extensive geographic coverage and our commitment to providing market-leading
customer service.

       Promote sharing of best practices and pursue opportunities for
synergies.  We promote the sharing of best practices throughout the worldwide
operations of the Gerdau group in order to enhance and improve operational
efficiencies. Drawing on the operational experience of Gerdau S.A., we will
continue to regularly pursue opportunities for operational synergies between
each of our minimills and vertical integration synergies between our scrap
recycling facilities, our minimills and our downstream operations. As part of
our integration of Co-Steel, we have been rationalizing our rolling mill
production schedules, improving our inventory management, exploring common
procurement opportunities and pursuing logistical efficiencies.

       Selectively pursue strategic acquisitions.  We believe that there is
significant opportunity for future growth through selective acquisitions, given
the pace of consolidation in the steel industry and the increasing trend of our
customers to focus on fewer key suppliers. We intend to continue to pursue a
selective and disciplined acquisition strategy, such as the proposed acquisition
of North Star, which is focused on improving our financial performance in the
long-term and expanding our product lines and geographic reach. In our
downstream business we are focused on enhancing our product offering and
strengthening our market position. As a result of our scale and prior successes
in managing and integrating acquisitions, we believe we are strategically
positioned to take an active role in the continuing consolidation of the North
American steel industry.

       Focus on employee communication and participation.  We believe that a
high level of employee involvement is a key factor in the success of our
operations and our dedication to continuous improvement. We intend to continue
to foster a corporate culture that encourages our employees to communicate with
management in order to achieve operational improvement. Through open and
effective communication, we promote the sharing of best operating practices
throughout our organization and the creation of a learning environment geared
toward attaining escalating performance benchmarks. In addition, we regularly
review our incentive-based compensation arrangements for employees and senior
management to ensure that our employees' financial interest is aligned with that
of our shareholders and competitive within the marketplace.

RECENT DEVELOPMENTS

       On March 19, 2004, we acquired the operating assets of Potter Form & Tie
Co., a rebar fabricator in the midwest United States, for $11.1 million in cash.

       On April 16, 2004, we issued 26.8 million common shares to Gerdau S.A.
through a private placement for total proceeds of $97.9 million. This
transaction increased Gerdau S.A.'s ownership to approximately 72% of our common
shares.

       On August 3, 2004, we released our interim consolidated financial
statements for the three and six months ended June 30, 2004. The results for the
first six months of 2004 set a record for us. We reported net income of $105.5
million, or $0.48 per share fully diluted, on net sales of $733.8 million for
the three months ended June 30, 2004, compared to a net loss of $6.9 million, or
$0.03 per share fully diluted, on net sales of $440.8 million for the three
months ended June 30, 2003. For the six months ended June 30, 2004, we reported
net income of $127.0 million, or $0.60 per share fully diluted, on net sales of
$1,352.7 million, compared to a net loss of $13.2 million, or $0.07 per share
fully diluted, on net sales of $857.4 million for the six months ended June 30,
2003. EBITDA for the three months ended June 30, 2004 was $168.8 million and was
$228.0 million for the six months ended June 30, 2004, compared to EBITDA for
the three months ended June 30, 2003 of $21.1 million and $33.4 million for the
six months ended June 30, 2003.
                                        3
<PAGE>

ACQUISITION OF NORTH STAR

       On September 9, 2004, we entered into definitive agreements with Cargill,
Incorporated and certain of its subsidiaries to purchase the land, fixed assets
and working capital of four long steel product minimills and four downstream
facilities. We refer to these operations in this prospectus collectively as
North Star. The purchase price for the acquired assets is $266 million in cash
plus the assumption of certain liabilities of the businesses being acquired,
including specific contractual obligations and selected employee liabilities.
$181 million of the purchase price is for working capital and is subject to
adjustment as of the closing date. The remaining $97 million of the purchase
price (including approximately $12 million in assumed liabilities) will be
allocated to the land and fixed assets at the four minimills and downstream
facilities based on our estimate of market values. On September 27, 2004, we
received regulatory approval for the proposed acquisition under U.S. antitrust
laws. Subject to satisfaction of certain other conditions, we expect the
transaction to close before the end of 2004. The closing of this offering of
common shares is not conditional upon the closing of the North Star acquisition.
If the closing of the North Star acquisition does not occur, the proceeds of
this offering will be used for other purposes. See "Use of Proceeds."

       North Star is one of the largest minimill steel producers in North
America with annual mill manufacturing capacity of approximately 2.0 million
tons of finished long steel products. North Star's products are generally sold
to steel service centers, steel fabricators or directly to OEMs, for use in a
variety of industries including construction, automotive, mining, cellular and
electrical transmission, metal building manufacturing and general manufacturing.

  BENEFITS OF THE ACQUISITION

       We expect to realize a number of benefits in connection with the proposed
acquisition of North Star, including the following:

       Economies of scale.  Following the acquisition of North Star, we will
have a combined vertically integrated network of 15 minimills (including one
50%-owned minimill), 15 scrap recycling facilities and 36 downstream facilities
with an annual manufacturing capacity of approximately 8.4 million tons of mill
finished steel products. As a result of our greater size, operational
efficiencies, financial strength and increase in market presence, we believe we
will be able to compete more effectively for additional business in strategic
markets.

       Product and geographic diversification.  Through North Star's network of
four minimills and four downstream facilities in the midwestern United States,
we will be able to more effectively and efficiently service our customers
throughout the midwestern U.S. market and enhance our geographic reach west of
the Mississippi River, with a competitive range of long steel products.

       Increased steel production capacity.  We expect our steel production
capacity to increase by approximately 31% as a result of our acquisition of
North Star. We expect this increased production to help us capture a larger
market share of the steel industry, expanding and strengthening our position in
the North American steel market.

       Cost savings.  We expect to realize cost savings as a result of the
proposed acquisition of North Star through sharing of best operating practices,
freight optimization, minimill product manufacturing and scheduling
efficiencies, consolidated procurement activities and efficiencies in selling,
administrative and general functions. We believe we may achieve additional cost
savings over the mid- to long-term from these sources, as well as from
operational improvements through the coordination of manufacturing technologies,
knowledge-sharing and the fostering of an operating culture focused on
continuous improvement.

                                        4
<PAGE>

  SUMMARY COMBINED FINANCIAL DATA

       The summary combined financial data presented below as at and for the
fiscal year ended May 31, 2004 have been derived from North Star's audited
combined financial statements included elsewhere in this prospectus and should
be read in conjunction with North Star's audited combined financial statements
and the related notes.

       North Star's financial information is presented in U.S. dollars and in
accordance with U.S. GAAP. The differences between Canadian GAAP and U.S. GAAP
as they relate to the combined financial results of North Star are described in
note 10 to North Star's audited combined financial statements included elsewhere
in this prospectus.

<Table>
<Caption>
                                                               FISCAL YEAR ENDED
                                                                 MAY 31, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
STATEMENT OF EARNINGS:
  Revenue...................................................        $696.5
  Income from operations....................................          35.8
  Net income................................................        $ 22.6
OTHER DATA:
  EBITDA(1).................................................        $ 49.4
  Net cash provided by operating activities.................          39.6
  Net cash used in investing activities.....................         (17.3)
  Net cash used in financing activities.....................         (22.3)
  Capital expenditures......................................        $ 17.5
</Table>

<Table>
<Caption>
                                                                     AS AT
                                                                 MAY 31, 2004
                                                               -----------------
<S>                                                            <C>
BALANCE SHEET DATA:
  Cash and cash equivalents.................................        $   --
  Working capital...........................................         114.9
  Property, plant and equipment.............................         103.5
  Total assets..............................................         332.9
  Total indebtedness........................................        $  5.2
</Table>

------------

(1) EBITDA for North Star is earnings before interest, taxes, depreciation and
    amortization. The following table reconciles EBITDA with net income for the
    fiscal year ended May 31, 2004:

<Table>
<Caption>
                                                               FISCAL YEAR ENDED
                                                                 MAY 31, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
EBITDA......................................................        $ 49.4
Depreciation and amortization...............................         (12.4)
Interest and other expense on debt..........................          (1.0)
Income tax expense..........................................         (13.4)
                                                                    ------
Net income..................................................        $ 22.6
                                                                    ------
</Table>

                                        5
<PAGE>

                                  THE OFFERING

Common shares offered...........   70,000,000 common shares, including
                                   35,000,000 common shares that will be offered
                                   to the public through the underwriters and
                                   35,000,000 common shares that will be
                                   purchased directly from us by Gerdau S.A. See
                                   "Underwriting" and "Sale to Gerdau S.A."

Common shares outstanding after
the offering....................   295,089,337(1)

Overallotment option and Gerdau
S.A. additional commitment......   The underwriters have an option to purchase
                                   up to an additional 5,250,000 common shares
                                   from us at the public offering price, less
                                   the underwriting commission, to cover
                                   overallotments, if any. This option is
                                   exercisable in whole or in part, for a period
                                   of 30 days from the date of the closing of
                                   the offering. Gerdau S.A. has agreed to
                                   purchase from us, within two days after the
                                   date of the exercise of the overallotment
                                   option, a number of additional common shares
                                   equal to the number of common shares
                                   purchased by the underwriters pursuant to the
                                   overallotment option, if any, at the public
                                   offering price. The maximum aggregate number
                                   of additional common shares we may issue
                                   pursuant to the overallotment option and the
                                   Gerdau S.A. additional commitment is
                                   10,500,000 common shares.

Use of proceeds.................   We will use the net proceeds for the
                                   following purposes: (i) to finance the
                                   proposed North Star acquisition (assuming
                                   satisfaction of applicable closing conditions
                                   and completion of the acquisition); (ii) for
                                   capital expenditures and working capital; and
                                   (iii) for general corporate purposes, which
                                   may include repurchasing a portion of our
                                   outstanding senior notes, repaying amounts
                                   owed under our senior secured credit facility
                                   or selectively pursuing strategic
                                   acquisitions. While we intend to use a
                                   majority of the proceeds of this offering to
                                   pay the purchase price in connection with the
                                   proposed North Star acquisition, that
                                   acquisition is subject to a number of
                                   conditions and we cannot assure you that it
                                   will be completed. If the North Star
                                   acquisition is not completed, we will have
                                   broad discretion to use such proceeds for the
                                   other purposes described above. See "Use of
                                   Proceeds."

TSX trading symbol..............   GNA

Proposed NYSE trading symbol....   GNA
------------

(1) Common shares outstanding after the offering does not include 3,159,283
    common shares issuable upon the exercise of options to purchase common
    shares outstanding as of June 30, 2004.

                                  RISK FACTORS

       Investment in our common shares is subject to certain risks. Prospective
investors should carefully consider the information set out under "Risk Factors"
and all other information in this prospectus and the documents incorporated by
reference herein before purchasing our common shares.

                                        6
<PAGE>

          SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

       The summary historical consolidated financial data presented below for
the years ended December 31, 2002 and 2003 have been derived from our audited
Canadian GAAP consolidated financial statements included and incorporated by
reference in this prospectus, adjusted for differences between Canadian GAAP and
U.S. GAAP. The summary historical consolidated financial data presented below
for the year ended December 31, 2001 have been derived from our audited Canadian
GAAP consolidated financial statements filed with securities regulatory
authorities, adjusted for differences between Canadian GAAP and U.S. GAAP, which
are not included or incorporated by reference in this prospectus. The summary
historical consolidated financial data presented below for the six months ended
June 30, 2003 and 2004 have been derived from our unaudited U.S. GAAP
consolidated financial statements as at June 30, 2004 and for those periods,
included and incorporated by reference in this prospectus. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the interim periods have been
included. Results for the six months ended June 30, 2003 and 2004 are not
necessarily indicative of results to be expected for the full year or any future
period. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes, included and
incorporated by reference in this prospectus.

       Unless otherwise specified, our financial results and information are
presented in accordance with U.S. GAAP. Financial results for periods prior to
2004 were originally presented in accordance with Canadian GAAP and our audited
consolidated financial statements included and incorporated by reference in this
prospectus are presented in accordance with Canadian GAAP. The material
differences between Canadian GAAP and U.S. GAAP as they relate to our financial
results are described in note 20 to our audited consolidated financial
statements for the year ended December 31, 2003 and note 12 to our unaudited
consolidated financial statements for the three and six months ended June 30,
2004 and under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Material Differences Between Canadian
GAAP and U.S. GAAP" in this prospectus. All of the financial data in the
following tables are presented in accordance with U.S. GAAP.

<Table>
<Caption>
                                                                               SIX MONTHS ENDED
                                               YEAR ENDED DECEMBER 31,(1)          JUNE 30,
                                             ------------------------------   -------------------
                                               2001       2002       2003       2003       2004
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
<Caption>
                                               (DOLLARS IN MILLIONS, EXCEPT EARNINGS PER SHARE)
<S>                                          <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
  Net sales................................  $  885.0   $1,053.8   $1,811.2   $  857.4   $1,352.7
  Operating income (loss)..................      41.6       46.9       (9.3)      (4.2)     174.9
  Net (loss) income........................      (6.4)      11.0      (26.7)     (13.2)     127.0
  (Loss) earnings per share -- Basic.......  $  (0.04)  $   0.08   $  (0.04)  $  (0.07)  $   0.61
  (Loss) earnings per share -- Diluted.....  $  (0.04)  $   0.08   $  (0.04)  $  (0.07)  $   0.60
OTHER DATA:
  EBITDA(2)................................  $  100.7   $  102.1   $   65.5   $   33.4   $  228.0
  Net cash provided by (used in) operating
     activities............................     116.5       25.5       36.9      (19.2)      51.6
  Net cash used in investing activities....     (84.4)     (22.2)     (52.5)     (21.7)     (37.6)
  Net cash (used in) provided by financing
     activities............................     (32.9)       4.3       13.3       54.5       (6.8)
  Capital expenditures.....................      28.0       34.3       55.2       21.8       26.4
</Table>

                                        7
<PAGE>

<Table>
<Caption>
                                                                               SIX MONTHS ENDED
                                               YEAR ENDED DECEMBER 31,(1)          JUNE 30,
                                             ------------------------------   -------------------
                                               2001       2002       2003       2003       2004
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
OPERATIONAL DATA:(3)
Production (thousands of tons)
  Melt shops...............................     2,529      3,314      5,531      2,774      3,165
  Rolling mills............................     2,417      3,100      5,264      2,576      2,979
Finished steel shipments (thousands of
  tons)
  Rebar....................................       784        838      1,523        792        698
  Merchant/special sections................     1,061      1,424      2,030        984      1,144
  Rod......................................        62        166        642        293        397
  Flat rolled (joint venture)..............        --        120        744        365        380
                                             --------   --------   --------   --------   --------
     Total mill external...................     1,907      2,548      4,939      2,434      2,619
  Fabricated steel.........................       588        566        631        318        366
                                             --------   --------   --------   --------   --------
     Total.................................     2,495      3,114      5,570      2,752      2,985
Selling prices ($/ton)
  Mill external shipments..................  $    283   $    290   $    309   $    299   $    450
  Fabricated steel shipments...............  $    425   $    440   $    436   $    430   $    534
Scrap charged ($/ton)......................  $     88   $     89   $    110   $    109   $    171
Metal spread (selling price less scrap)
  ($/ton)
  Mill external shipments..................  $    195   $    200   $    199   $    189   $    280
  Fabricated steel shipments...............  $    337   $    350   $    326   $    321   $    363
Mill manufacturing cost ($/ton)............  $    132   $    155   $    174   $    169   $    191
</Table>

<Table>
<Caption>
                                                                      AS AT JUNE 30, 2004
                                                           ------------------------------------------
                                                                                         PRO FORMA
                                                            ACTUAL    AS ADJUSTED(4)   AS ADJUSTED(5)
                                                           --------   --------------   --------------
                                                                     (DOLLARS IN MILLIONS)
<S>                                                        <C>        <C>              <C>
BALANCE SHEET DATA:
  Cash and cash equivalents..............................  $   16.9      $  348.3         $   46.6
  Working capital........................................     399.7         731.1            634.3
  Property, plant and equipment..........................     780.5         780.5            881.5
  Total assets...........................................   1,862.4       2,193.8          2,261.2
  Total indebtedness(6)..................................     532.2         532.2            537.5
  Shareholders' equity...................................  $  755.5      $1,086.8         $1,086.8
</Table>

------------

(1) Our historical financial and operational results for the periods prior to
    October 23, 2002 are the financial and operational results of Gerdau North
    America, our predecessor company for accounting purposes, with the results
    of the former Co-Steel Inc., including Gallatin Steel Company, our joint
    venture with Dofasco Inc., added for the period since the combination on
    October 23, 2002. This accounting treatment results from the use of reverse
    take-over purchase accounting for the combination.

                                           footnotes continued on following page
                                        8
<PAGE>

(2) EBITDA is earnings before interest, taxes, depreciation and amortization,
    and includes cash distributions from joint ventures, but excludes earnings
    from joint ventures.

    The following table reconciles EBITDA with net (loss) income for the periods
indicated:

<Table>
<Caption>
                                                                                               SIX MONTHS
                                                                  YEAR ENDED DECEMBER 31,    ENDED JUNE 30,
                                                                  ------------------------   ---------------
                                                                   2001     2002     2003     2003     2004
                                                                  ------   ------   ------   ------   ------
                                                                            (DOLLARS IN MILLIONS)
    <S>                                                           <C>      <C>      <C>      <C>      <C>
    EBITDA......................................................  $100.7   $102.1   $ 65.5   $ 33.4   $228.0
    Cash distribution from joint ventures.......................      --       --     (3.6)    (1.8)   (15.8)
    Earnings from joint ventures................................     1.0      5.0      7.7      4.9     45.7
    Depreciation and amortization...............................   (61.3)   (56.5)   (76.4)   (38.7)   (39.1)
    Interest and other expense on debt..........................   (49.7)   (40.4)   (59.9)   (26.0)   (28.1)
    Income tax expense (benefit)................................     3.9      2.5     39.8     14.8    (63.7)
    Minority interest...........................................    (1.0)    (1.7)     0.2      0.2       --
                                                                  ------   ------   ------   ------   ------
    Net (loss) income...........................................  $ (6.4)  $ 11.0   $(26.7)  $(13.2)  $127.0
                                                                  ------   ------   ------   ------   ------
</Table>

(3) Includes 50% of Gallatin Steel Company, our joint venture with Dofasco Inc.,
    as of October 23, 2002.

(4) As adjusted to give effect to our sale of 70,000,000 common shares in this
    offering (based on an assumed public offering price of $4.86 per share,
    which was the U.S. dollar equivalent of the closing price of our common
    shares on the Toronto Stock Exchange on October 4, 2004, expressed in
    Canadian dollars and converted to U.S. dollars based on the noon buying rate
    on that date) after deducting the estimated expenses of this offering and
    the underwriting commission.

(5) Pro forma as adjusted to give effect to this offering as described in the
    preceding footnote as well as the proposed acquisition of North Star.

(6) Total indebtedness includes convertible debentures of $74.8 million at June
    30, 2004.

                                        9
<PAGE>

            SUMMARY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

       The following summary unaudited pro forma condensed consolidated
financial data gives effect to this offering of our common shares and our
proposed acquisition of North Star and is based on our historical Canadian GAAP
consolidated financial statements, adjusted for differences between U.S. GAAP
and Canadian GAAP, our historical U.S. GAAP consolidated financial statements
and the historical U.S. GAAP combined financial statements of North Star,
included elsewhere in this prospectus. The unaudited pro forma condensed
consolidated balance sheet as at June 30, 2004 has been prepared by combining
our consolidated balance sheet as at June 30, 2004 and the combined balance
sheet of North Star as at May 31, 2004, and gives effect to our acquisition of
North Star as if it had occurred on June 30, 2004. The unaudited pro forma
condensed consolidated income statement for the twelve months ended June 30,
2004 has been prepared by combining (i) our consolidated income statement for
the twelve months ended June 30, 2004, which was prepared by combining our
consolidated income statement for the year ended December 31, 2003 and our
consolidated income statement for the six months ended June 30, 2004, less our
consolidated income statement for the six months ended June 30, 2003, and (ii)
the combined income statement of North Star for the fiscal year ended May 31,
2004, and gives effect to our acquisition of North Star as if it had occurred on
July 1, 2003.

       The summary unaudited pro forma condensed consolidated financial data
have been prepared based upon currently available information and assumptions
that we deem appropriate, including the assumption that the North Star
acquisition is financed through this offering of common shares. The summary
unaudited pro forma condensed consolidated financial data are for informational
purposes only and are not necessarily indicative of either the financial
position or the results of operations that would have been achieved had the
transactions for which we are giving pro forma effect actually occurred on the
dates referred to above, nor are such pro forma data necessarily indicative of
the results of future operations, because such unaudited pro forma condensed
consolidated financial data are based on estimates of financial effects that may
prove to be inaccurate.

       The summary unaudited pro forma condensed consolidated financial data
have been prepared in accordance with U.S. GAAP, which has been reconciled to
Canadian GAAP. The material differences between Canadian GAAP and U.S. GAAP are
described in note 5 to the unaudited pro forma condensed consolidated financial
data, included elsewhere in this prospectus.

<Table>
<Caption>
                                                                   PRO FORMA
                                                                 TWELVE MONTHS
                                                                     ENDED
                                                                 JUNE 30, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
STATEMENT OF EARNINGS:
  Net Sales.................................................       $3,003.1
  Income from operations....................................          231.2
  Net income................................................       $  152.5
OTHER DATA:
  EBITDA(1).................................................       $  330.7
</Table>

<Table>
<Caption>
                                                                PRO FORMA AS AT
                                                                 JUNE 30, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
BALANCE SHEET DATA:
  Cash and cash equivalents.................................       $   46.6
  Working capital...........................................          634.3
  Property, plant and equipment.............................          881.5
  Total assets..............................................        2,261.2
  Total indebtedness........................................       $  537.5
</Table>

                                                     footnotes on following page
                                        10
<PAGE>

------------

(1) EBITDA is earnings before interest, taxes, depreciation and amortization,
    and includes cash distributions from joint ventures, but excludes earnings
    from joint ventures. The following table reconciles pro forma EBITDA with
    pro forma net income for the twelve months ended June 30, 2004:

<Table>
<Caption>
                                                                   PRO FORMA
                                                                 TWELVE MONTHS
                                                                     ENDED
                                                                 JUNE 30, 2004
                                                               -----------------
<S>                                                            <C>
EBITDA......................................................       $  330.7
Earnings from joint ventures................................           48.5
Cash distribution from joint ventures.......................          (17.6)
Depreciation and amortization...............................          (85.9)
Interest and other expense on debt..........................          (62.3)
Income tax expense..........................................          (60.9)
                                                                   --------
Net income..................................................       $  152.5
                                                                   --------
</Table>

                                        11
<PAGE>

                                  RISK FACTORS

       You should carefully consider the following risks, as well as the other
information contained in this prospectus and the documents incorporated by
reference herein before investing in our common shares. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties, including risks that we currently consider immaterial, may
also adversely affect our business.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

  EXCESS GLOBAL CAPACITY IN THE STEEL INDUSTRY AND THE AVAILABILITY OF
  COMPETITIVE SUBSTITUTE MATERIAL HAS RESULTED IN INTENSE COMPETITION, WHICH MAY
  EXERT DOWNWARD PRESSURE ON THE PRICES OF OUR PRODUCTS.

       We compete with numerous foreign and domestic steel producers, largely
minimill producers that produce steel by melting scrap in electric arc furnaces,
but also integrated producers that produce steel from coke and iron ore.
Competition is based on price, quality and the ability to meet customers'
product specifications and delivery schedules. Global overcapacity in steel
manufacturing has in the past had a negative impact on steel pricing and could
adversely affect our sales and profit margins in the future. The construction of
new mills, expansion and improved production efficiencies of existing mills,
restarting of currently idled facilities and the expansion of foreign steel
production capacity all contribute to an increase in global steel production
capacity. Increases in global steel production capacity combined with high
levels of steel imports into North America could exert downward pressure on the
prices of our products, which would adversely affect our sales and profit
margins.

       In the case of certain product applications, we also compete with
manufacturers of other materials, such as aluminum, cement, composites, glass,
plastic and wood. Increased use of these materials in substitution for steel
products could exert downward pressure on the prices of our products or cause a
reduction in sales volumes, either of which would adversely affect our sales and
profit margins.

  OUR PROFITABILITY CAN BE ADVERSELY AFFECTED BY INCREASES IN RAW MATERIAL AND
  ENERGY COSTS.

       Our operating results are significantly affected by the cost of steel
scrap and scrap substitutes that are the primary raw material for our minimill
operations. Prices for steel scrap are subject to market forces largely beyond
our control, including demand by U.S. and international steel producers, freight
costs and speculation. The increasing rate of worldwide steel scrap consumption,
especially in China, has placed significant upward pressure on the price of
steel scrap. A combination of a weaker U.S. dollar, strong global demand for
steel scrap and lower production of domestic steel scrap due to a weaker
domestic manufacturing economy have reduced the domestic steel scrap supply
resulting in steel scrap prices which are currently at a ten-year high. Metal
spread, the difference between mill selling prices and scrap raw material cost,
is also currently well above previous ten-year highs. We do not know how long
these levels can be maintained and if scrap prices increase significantly
without a commensurate increase in finished steel selling prices, our profit
margins could be materially adversely affected. We may not be able to pass on
higher scrap costs to our customers by increasing mill selling prices and prices
of downstream products. Further increases in the prices paid for scrap and other
inputs could also impair our ability to compete with integrated mills and cause
our production to decline and adversely affect sales and profit margins.

       Most of our minimill operations have long-term electricity supply
contracts with either major utilities or energy suppliers. The electric supply
contracts typically have two components: a firm portion and an interruptible
portion. The firm portion supplies a base load for the rolling mill and
auxiliary operations. The interruptible portion supplies the electric arc
furnace power demand and represents the majority of the total electric demand
and, for the most part, is based on spot market prices of electricity.
Therefore, we have significant exposure to the variances of the electricity
market that could materially adversely affect operating margins and results of
operations. Generally, we do not have long-term contracts for natural gas and
oxygen and therefore are subject to market supply variables and pricing that
could materially adversely affect operating margins and results of operations.

                                        12
<PAGE>

  IMPORTS OF STEEL INTO NORTH AMERICA HAVE ADVERSELY AFFECTED AND MAY AGAIN
  ADVERSELY AFFECT STEEL PRICES, AND DESPITE TRADE REGULATION EFFORTS, THE
  INDUSTRY MAY NOT BE SUCCESSFUL IN REDUCING STEEL IMPORTS.

       Imports of steel into North America have exerted in recent years, and may
again in the future exert, downward pressure on steel prices, which adversely
affects our sales and profit margins. Competition from foreign steel producers
is strong and may increase due to increases in foreign steel production
capacity, the relative strengthening of the U.S. dollar compared to foreign
currencies and the reduction of domestic steel demand in the economies of the
foreign producers. These factors encourage higher levels of steel exports to
North America at lower prices. In the past, protective actions taken by the U.S.
government to regulate the steel trade, including import quotas and tariffs,
have been temporary in nature and have been found by the World Trade
Organization to violate global trade rules. Protective actions may not be taken
in the future and, despite trade regulation efforts, unfairly priced imports
could enter into the North American markets in the future resulting in price
depression which would adversely affect our ability to compete and maintain our
sales levels and profit margins.

  OUR PARTICIPATION IN CONSOLIDATION OF THE STEEL INDUSTRY COULD ADVERSELY
  AFFECT OUR BUSINESS.

       We believe that there continues to be opportunity for future growth
through selective acquisitions, given the pace of consolidation in the steel
industry and the increasing trend of our customers to focus on fewer key
suppliers. As a result, we intend to continue to apply a selective and
disciplined acquisition strategy. Future acquisitions, investments in joint
ventures or strategic alliances, including our proposed acquisition of North
Star, will likely involve some or all of the following risks, which could
materially and adversely affect our business, results of operations or financial
condition:

       -     the difficulty of integrating the acquired operations and personnel
             into our existing business;

       -     the potential disruption of our ongoing business;

       -     the diversion of resources, including management's time and
             attention;

       -     incurrence of additional debt;

       -     the inability of management to maintain uniform standards,
             controls, procedures and policies;

       -     the difficulty of managing the growth of a larger company;

       -     the risk of entering markets in which we have little experience;

       -     the risk of becoming involved in labor, commercial or regulatory
             disputes or litigation related to the new enterprise;

       -     the risk of contractual or operational liability to our venture
             participants or to third parties as a result of our participation;

       -     the risk of environmental or other liabilities associated with the
             acquired business;

       -     the inability to work efficiently with joint venture or strategic
             alliance partners; and

       -     the difficulties of terminating joint ventures or strategic
             alliances.

       Many of the available acquisition targets have incurred operating losses
in recent years and may require significant capital and operating expenditures
to return them to, or sustain, profitability. Financially distressed steel
companies typically do not maintain their assets adequately. Such assets may
need significant repairs and improvements. We may also have to buy sizeable
amounts of raw materials, spare parts and other materials for these facilities
before they can resume, or sustain, profitable operation. Many potential
acquisition candidates are financially distressed steel companies that may not
have maintained appropriate environmental programs. These problems also may
require significant expenditures by us or expose us to environmental liability.

                                        13
<PAGE>

       Future acquisitions may be required for us to remain competitive, but we
cannot assure you that we can complete any such transactions on favorable terms
or that we can obtain financing, if necessary, for such transactions on
favorable terms. We also cannot assure you that future transactions will improve
our competitive position and business prospects as anticipated; if they do not,
our results of operations may be adversely affected.

  OUR PROPOSED ACQUISITION OF AND INTEGRATION WITH NORTH STAR MAY NOT BE
  SUCCESSFUL AND MAY REDUCE OUR PROFITABILITY.

       The proposed acquisition of North Star involves risks, including that the
acquisition may not be completed. If the acquisition is completed, there may be
risks relating to the difficulty of integrating our business, operations,
products and services with those of North Star, as well as any unanticipated
expenses related to such integration. Completion of the acquisition and the
subsequent integration will require a substantial amount of our time. Diversion
of our attention from our existing businesses, as well as problems that may
arise in connection with our integration of the operations, may have a material
adverse impact on our revenues and results of operations after completion of the
acquisition. Integration may result in additional expenses, which could
negatively affect our results of operations and financial condition. In
addition, following our acquisition of North Star, we may discover that we have
acquired undisclosed liabilities. Although we have conducted what we believe to
be a prudent investigation in connection with our proposed acquisition of North
Star, an unavoidable level of risk remains regarding any undisclosed or unknown
liabilities or issues concerning the North Star assets that we are acquiring.
While the agreements relating to our proposed acquisition of North Star contain
indemnification provisions, such provisions may not be sufficient to indemnify
us for all costs associated with any undisclosed or unknown liabilities. We may
not succeed in addressing these risks or any other problems encountered in
connection with the proposed acquisition of North Star. We may not successfully
integrate our business, operations or product lines with those of North Star, or
realize any of the anticipated benefits of the proposed acquisition. If the
proposed acquisition of North Star is not completed or the benefits of the
proposed acquisition do not exceed the costs associated with the acquisition,
our results of operations and financial condition could be adversely affected.

  THE CYCLICAL NATURE OF THE STEEL INDUSTRY AND THE INDUSTRIES WE SERVE AND
  ECONOMIC CONDITIONS IN NORTH AMERICA AND WORLDWIDE MAY CAUSE FLUCTUATIONS IN
  OUR REVENUE AND PROFITABILITY.

       The North American steel industry is cyclical in nature and is affected
significantly by prevailing economic conditions in the major world economies. In
particular, the North American steel industry is influenced by a combination of
factors, including periods of economic growth or recession, strength or weakness
of the U.S. or Canadian dollar relative to other currencies, worldwide
production capacity and levels of steel imports and applicable tariffs. Future
economic downturns, stagnant economic conditions or currency fluctuations could
decrease the demand for our products or increase the amount of imports of steel
into our markets, any of which could cause fluctuations in our revenue and
profitability.

       Market conditions for steel products in the U.S. and Canadian market have
fluctuated over the years. We are particularly sensitive to trends in cyclical
industries such as the North American construction, transportation, appliance,
machinery and equipment industries, which are significant markets for our
products. A significant portion of our products is also destined for the steel
service center industry. Many of our markets are cyclical in nature and affect
the demand for our finished products. A disruption or downturn in any of these
industries could negatively impact our financial condition, production, sales,
margins and earnings. We are also sensitive to trends and events that may impact
these industries, including strikes and labor unrest.

                                        14
<PAGE>

  STEEL OPERATIONS REQUIRE SUBSTANTIAL CAPITAL INVESTMENT AND MAINTENANCE
  EXPENDITURES WHICH MAY ENCOURAGE PRODUCERS TO MAINTAIN PRODUCTION IN PERIODS
  OF REDUCED DEMAND WHICH MAY IN TURN EXERT DOWNWARD PRESSURE ON PRICES FOR OUR
  PRODUCTS.

       Steel manufacturing is very capital intensive, requiring us and other
steel producers to maintain a large fixed-cost base requiring substantial
maintenance expenditures. The high levels of fixed costs of operating a minimill
encourage mill operators to maintain high levels of output, even during periods
of reduced demand, which may exert additional downward pressure on selling
prices and profit margins in those periods.

  UNEXPECTED EQUIPMENT FAILURES MAY LEAD TO PRODUCTION CURTAILMENTS OR
  SHUTDOWNS.

       Interruptions in our production capabilities would increase our
production costs and reduce our sales and earnings for the affected period. In
addition to periodic equipment failures, our facilities are also subject to the
risk of catastrophic loss due to unanticipated events such as fires, explosions
or violent weather conditions. Our manufacturing processes are dependent upon
critical pieces of steelmaking equipment, such as our electric arc furnaces,
continuous casters, gas-fired reheat furnaces, rolling mills and electrical
equipment, including high-output transformers, and this equipment may, on
occasion, incur downtime as a result of unanticipated failures. We have
experienced and may in the future experience material plant shutdowns or periods
of reduced production as a result of such equipment failures. Unexpected
interruptions in our production capabilities would adversely affect our
productivity and results of operations. Moreover, any interruption in production
capability may require us to make significant capital expenditures to remedy the
problem, which would reduce the amount of cash available for our operations. Our
insurance may not cover our losses. In addition, long-term business disruption
could harm our reputation and result in a loss of customers, which could
adversely affect our business, results of operations and financial condition.

  OUR LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR ABILITY TO RAISE
  ADDITIONAL CAPITAL TO FUND OUR OPERATIONS, LIMIT OUR ABILITY TO REACT TO
  CHANGES IN THE ECONOMY OR OUR INDUSTRY AND PREVENT US FROM MEETING OUR
  OBLIGATIONS UNDER OUR DEBT AGREEMENTS.

       We had $532.2 million of indebtedness as of June 30, 2004. Our degree of
leverage could have important consequences for you, including the following:

       -     it may limit our ability to obtain additional financing for working
             capital, capital expenditures, product development, debt service
             requirements, acquisitions and general corporate or other purposes;

       -     it may limit our ability to declare dividends on our common shares;

       -     a portion of our cash flows from operations must be dedicated to
             the payment of interest on our indebtedness and is not available
             for other purposes, including operations, capital expenditures and
             future business opportunities;

       -     certain of our borrowings, including borrowings under our senior
             secured credit facility, are at variable rates of interest,
             exposing us to the risk of increased interest rates;

       -     it may limit our ability to adjust to changing market conditions
             and place us at a competitive disadvantage compared to our
             competitors that have less debt;

       -     we may be vulnerable in a downturn in general economic conditions;
             and

       -     we may be unable to make capital expenditures that are important to
             our growth and strategies.

       Under the terms of our existing senior notes and senior secured credit
facility, we are permitted to incur additional debt in certain circumstances;
doing so could increase the risks described above.

                                        15
<PAGE>

  BY SEEKING PROTECTION UNDER BANKRUPTCY LAWS, SOME OF OUR COMPETITORS HAVE BEEN
  RELIEVED OF DEBT BURDENS AND LEGACY COSTS, WHICH MAY ENABLE THEM TO OPERATE
  MORE COMPETITIVELY THAN US.

       Many U.S. and Canadian steel companies have sought bankruptcy protection
over the last few years. Several of these companies have continued to operate,
while reducing prices to maintain volumes and cash flow, and have obtained
concessions from their employees, suppliers and lenders. Upon emerging from
bankruptcy, these companies, or new entities that purchased their facilities
through the bankruptcy process, have been relieved of many obligations including
debt, environmental, employee and retiree benefits and other obligations,
commonly referred to as legacy costs. As a result, they may be able to operate
more competitively than us and other producers that have remained solvent.

  ENVIRONMENTAL AND OCCUPATIONAL HEALTH AND SAFETY LAWS AND REGULATIONS AFFECT
  US AND COMPLIANCE MAY BE COSTLY AND REDUCE PROFITABILITY.

       Our business units are required to comply with an evolving body of
environmental and occupational health and safety laws and regulations. These
laws and regulations concern, among other things, air emissions, discharges to
soil, surface water and ground water, noise control, the generation, handling,
storage, transportation, and disposal of hazardous substances and wastes, the
clean-up of contamination, indoor air quality and worker health and safety.
These laws and regulations vary by location and can fall within federal,
provincial, state or municipal jurisdictions. There is a risk that we have not
been or will not be in the future in compliance with all such requirements.
Violations could result in penalties or the curtailment or cessation of
operations, any of which could have a material adverse effect on us.

       Our operations involve the use of large and complex machinery and
equipment and exposure to various substances. As a consequence, there is an
inherent risk to our workers' health and safety. From time to time, workplace
illnesses and accidents, including serious injury and fatalities, do occur. Any
serious occurrences of this nature may have a material adverse effect on our
operations.

       We generate certain wastes, primarily electric arc furnace dust (EAF
dust), that are classified as hazardous wastes and must be properly managed
under applicable environmental laws and regulations. In the United States and
Canada, certain environmental laws and regulations impose joint and several
liability on certain classes of persons for the costs of investigation and
clean-up of contaminated properties. Liability may attach regardless of fault or
the legality of the original disposal. Some of our present and former facilities
have been in operation for many years and, over such time, have used substances
and disposed of wastes that may require clean-up. We could be liable for the
costs of such clean-ups. Clean-up costs for any contamination, whether known or
not yet discovered, could be substantial and could have a material adverse
effect on our results of operations and financial condition.

       Our estimate of remediation costs is based on our review of each site and
the nature of the anticipated remediation activities to be undertaken. Although
the ultimate costs associated with the remediation are not precisely known, we
have estimated the present value of the total remaining costs as of December 31,
2003 to be approximately $13.6 million, with these costs recorded as a liability
in our financial statements.

       Changes, such as new laws or enforcement policies, including currently
proposed restrictions on the emissions of mercury and other pollutants, a
currently proposed interpretation of existing rules applicable to the disposal
of scrap metal shredder residue or an incident at one of our properties or
operations, could have a material adverse effect on our business, financial
condition, or results of operations. Our business units are required to have
governmental permits and approvals. Any of these permits or approvals may be
subject to denial, revocation or modification under various circumstances.
Failure to obtain or comply with the conditions of permits and approvals may
adversely affect our results of operations and financial condition and may
subject us to penalties. In addition, we may be required to obtain additional
operating permits or governmental approvals and incur additional costs. We may
not be able to meet all applicable regulatory requirements. Moreover, we may be
subject to fines, penalties or other liabilities arising from actions imposed
under environmental and occupational health and safety laws
                                        16
<PAGE>

or regulations. In addition, our environmental and occupational health and
safety capital expenditures could materially increase in the future.

       North Star is required to comply with the same body of environmental and
occupational health and safety laws and regulations as described above. While
our agreements relating to the proposed acquisition of North Star contain
indemnification provisions for environmental matters that exceed $5 million up
to a maximum amount of $25 million, such indemnification may not be adequate and
we may be exposed to more remediation costs than we anticipate. The existence of
any undisclosed environmental liabilities of North Star and our responsibility
for any environmental matters relating to North Star could have a material
adverse effect on our business, financial condition and results of operations.

  THE POTENTIAL PRESENCE OF RADIOACTIVE MATERIALS IN THE SCRAP THAT WE MELT IN
  OUR ELECTRIC ARC FURNACES IN OUR MINIMILLS PRESENTS A SIGNIFICANT ECONOMIC
  EXPOSURE AND MAY PRESENT A RISK TO OUR WORKERS.

       The potential presence of radioactive materials in our scrap supply
presents a significant economic exposure and may present a health and safety
risk to our workers. If we fail to detect radioactive material in the scrap we
receive, we may incur significant costs to clean up the contamination of our
facilities and to dispose of the contaminated material. The cost to clean up the
contaminated material and the loss of revenue resulting from the loss in
production time may both be material. While we have several detection devices at
each of our minimills, occasionally radioactive scrap may go undetected. For
example, in July 2001, a small amount of cesium was included among scrap
material we received from a scrap supplier and accidentally melted in our
Jacksonville minimill furnace. Melt shop activities at that mill were halted for
over three weeks until approximately 700 tons of contaminated material had been
removed for proper disposal and equipment had been cleaned. The cost of clean-up
and business interruption was approximately $10.5 million. Our insurance may not
be sufficient to cover all of our losses in such instances.

  OUR PENSION PLANS ARE CURRENTLY UNDERFUNDED.

       We have several pension plans that are currently underfunded and adverse
market conditions could require us to make substantial cash payments to fund the
plans which could reduce cash available for other business needs. As of December
31, 2003, the aggregate value of plan assets of our pension plans (including
supplemental retirement plans of the former Co-Steel) was $278.2 million, while
the aggregate projected benefit obligation was $359.6 million, resulting in an
aggregate deficit of $81.4 million for which we are responsible. We have made
cash payments of $13.7 million to our defined benefit pension plan for the six
months ended June 30, 2004. We expect to contribute an additional $6.5 million
during our 2004 fiscal year. Funding requirements in future years may be higher,
depending on market conditions, and may restrict the cash available for our
business. Our funding requirements may also be significantly higher commencing
in 2005 if temporary relief provisions enacted by the United States Congress are
not extended.

  WE MAY NOT BE ABLE TO SUCCESSFULLY RENEGOTIATE COLLECTIVE BARGAINING
  AGREEMENTS WHEN THEY EXPIRE AND OUR FINANCIAL RESULTS MAY BE ADVERSELY
  AFFECTED BY LABOR DISRUPTIONS.

       Approximately 25% of our employees are represented by the United
Steelworkers of America (USWA) under four collective bargaining agreements. The
agreements have different expiration dates beginning in 2005. Approximately 76%
of North Star's employees are represented by the USWA under four collective
bargaining agreements, which agreements also have various expiration dates
beginning in 2005. We may be unable to successfully negotiate new collective
bargaining agreements for these employees without any labor disruption. A labor
disruption could, depending on the operations affected and the length of the
disruption, have a material adverse effect on our operations. Labor organizing
activities could occur at one or more of our other facilities or at other
companies upon which we are dependent for raw materials, transportation or other
services. Such activities could result in a significant loss of

                                        17
<PAGE>

production and revenue and have a material adverse effect on our results of
operations or financial condition.

  WE ARE EXPOSED TO FLUCTUATIONS IN INTEREST RATES.

       Certain of our borrowings, primarily borrowings under our senior secured
credit facility, are at variable rates of interest and expose us to interest
rate risk. If interest rates increase, our debt service obligations on the
variable rate indebtedness would increase and our net income would decrease.
Significant changes in interest rates can increase our interest expense and have
a material adverse effect on our results of operations or financial condition.

  CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS OR
  COMPETITIVE POSITION.

       We report our results in U.S. dollars. For the year ended December 31,
2003 and the six months ended June 30, 2004, approximately 30% and 29%,
respectively, of our net sales and 34% and 37%, respectively, of our operating
costs were in Canadian dollars. As a result, fluctuations in the exchange rate
between the U.S. and Canadian dollar will affect our reported results. The
percentage of our costs that are denominated in Canadian dollars is greater than
the percentage of our net sales, which means our results are negatively affected
when the Canadian dollar strengthens compared to the U.S. dollar. In addition,
our Canadian operations compete with U.S. producers and are less competitive as
the Canadian dollar strengthens relative to the U.S. dollar. Similarly, our U.S.
and Canadian operations are more susceptible to the threat of imports during
times when the U.S. and Canadian dollars strengthen relative to the currencies
of exporting countries. To the extent we have borrowings that are denominated in
Canadian dollars, our results of operations are also negatively affected by a
strengthening in the Canadian dollar compared to the U.S. dollar.

  WE DEPEND ON OUR SENIOR MANAGEMENT AND WE MAY BE UNABLE TO REPLACE KEY
  EXECUTIVES IF THEY LEAVE.

       Our operations and prospects depend in large part on the performance of
our senior management team. We do not have employment contracts with any of our
executive officers and we cannot assure you that these individuals will remain
with us as employees. In addition, we cannot assure you that we would be able to
find qualified replacements for any of these individuals if their services were
no longer available. The loss of the services of one or more members of our
senior management team or our difficulty in attracting, retaining and
maintaining additional senior management personnel could have a material adverse
effect on our business, financial condition and results of operations.

  WE RELY ON OUR JOINT VENTURES FOR A PORTION OF OUR INCOME AND CASH FLOWS, BUT
  WE DO NOT CONTROL THEM OR THEIR DISTRIBUTIONS.

       We have three 50%-owned joint ventures that contribute to our financial
results but that we do not control. These joint ventures contributed $45.7
million to our net income for the six months ended June 30, 2004 and $7.7
million to our net income for the year ended December 31, 2003. We received
$15.8 million of cash distributions from our joint ventures in the six months
ended June 30, 2004 and $3.6 million of cash distributions for the year ended
December 31, 2003. However, we do not control the joint ventures and cannot,
without agreement from our partner, cause any joint venture to distribute its
income from operations to us. In addition, Gallatin's existing financing
agreement prohibits it from distributing cash to us unless specified financial
covenants are satisfied. Additionally, since we do not control our joint
ventures, they may not be operated in a manner that we believe would be in the
joint ventures', or our, best interests. To the extent that we enter into other
joint ventures as part of our acquisition strategy, these risks may have a
greater impact on us.

                                        18
<PAGE>

RISKS RELATED TO THE OFFERING

  GERDAU S.A. AND ITS CONTROLLING SHAREHOLDERS CONTROL US AND THEIR INTERESTS
  MAY BE DIFFERENT FROM YOURS.

       Gerdau S.A. currently beneficially owns approximately 72% of our
outstanding common shares and, after completion of this offering, will
beneficially own approximately 67% of our outstanding common shares. Gerdau
S.A., in turn, is controlled by the Gerdau Johannpeter family. Although five of
the nine directors on our board of directors are independent, three of the
directors, one of whom is also our Chief Operating Officer, are members of the
controlling family. As a result, Gerdau S.A. and the controlling family
significantly influence decisions affecting us, including the election of our
board of directors, control of our management and policies, and determination of
the outcome of any corporate transactions or other matters that require
shareholder approval (such as mergers, consolidations or the sale of all or
substantially all of our assets). The interests of Gerdau S.A. and the
controlling family may be different from your interests and they may exercise
their control over us in a manner inconsistent with your interests.

  THE PRICE OF OUR COMMON SHARES MAY BE VOLATILE AND THE VALUE OF YOUR
  INVESTMENT COULD DECLINE.

       The trading price of our common shares has been and could in the future
be volatile in response to industry developments and business-specific factors
such as variations in quarterly operating results, general economic conditions,
changes in securities analysts' recommendations regarding our securities and
other factors. These factors could cause the market price of our common shares
to decline, which would diminish the value of your investment.

  WE MAY ISSUE ADDITIONAL EQUITY SECURITIES WHICH MAY REDUCE OUR EARNINGS PER
  SHARE.

       We have in the past issued and may continue to issue equity securities to
finance our activities. If we issue additional common shares, you will
experience dilution in our earnings per share. Moreover, as our intention to
issue additional equity securities becomes publicly known, our share price may
be adversely affected.

  BECAUSE WE ARE A CANADIAN COMPANY, CERTAIN CIVIL LIABILITIES AND JUDGMENTS MAY
  NOT BE ENFORCEABLE AGAINST US.

       We are incorporated under the laws of Ontario, Canada. Some of our
directors and officers and certain of the experts named elsewhere in this
prospectus are residents of countries other than the United States, including
Canada. A portion of our assets and the assets of these persons are located
outside of the United States. As a result, it may be difficult for a shareholder
to initiate a lawsuit within the United States against these non-U.S. residents,
or to enforce in the United States judgments that are obtained in a U.S. court
against us or these persons. It may also be difficult for shareholders to
enforce a U.S. judgment in Canada, or to succeed in a lawsuit in Canada, based
solely on violations of U.S. securities laws.

                                        19
<PAGE>

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

       Some statements included and incorporated by reference in this prospectus
constitute forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. The words "anticipate," "intend,"
"believe," "estimate," "plan," "seek," "project," "expect," "may," "will," or
"should" and similar expressions, as they relate to us or our management, often
identify forward-looking statements. Forward-looking statements may also be
included in various filings that we make with Canadian securities regulatory
authorities and the SEC.

       These forward-looking statements are not historical facts but reflect our
current expectations concerning future results and events. While we always
intend to express our best judgment when we make statements about what we
believe will occur in the future, and although we base these statements on
assumptions that we believe to be reasonable when made, these forward-looking
statements are not a guarantee of performance, and you should not place undue
reliance on these statements. Forward-looking statements are subject to many
uncertainties and other variable circumstances, many of which are outside of our
control, that could cause our actual results and experience to differ materially
from those we thought would occur, including the following which are discussed
in greater detail under the heading "Risk Factors":

       -     the highly competitive nature of the global steel industry and the
             availability of competitive substitute materials;

       -     increases in the cost of steel scrap, energy and other raw
             materials;

       -     steel imports and trade regulations;

       -     our participation in consolidation of the steel industry;

       -     risks relating to our proposed acquisition of North Star;

       -     the cyclical nature of the steel industry and the industries we
             serve;

       -     the substantial capital investment and similar expenditures
             required in our business;

       -     unexpected equipment failures and plant interruptions or outages;

       -     our level of indebtedness;

       -     our costs relative to competitors who have sought bankruptcy
             protection;

       -     the cost of compliance with environmental and occupational health
             and safety laws;

       -     the accidental melting of radioactive scrap metal;

       -     our ability to fund our pension plans;

       -     our ability to renegotiate collective bargaining agreements and
             avoid labor disruptions;

       -     interest rate risk;

       -     currency exchange rate fluctuations;

       -     the loss of key employees; and

       -     our reliance on joint ventures that we do not control.

       Any forward-looking statements that we make in this prospectus speak only
as of the date of such statement, and we undertake no ongoing obligation to
update such statements, except as required by law. Comparisons of results for
current and any prior periods are not intended to express any future trends or
indications of future performance, unless expressed as such, and should only be
viewed as historical data.

                                        20
<PAGE>

                           EXCHANGE RATE INFORMATION

       The following table sets forth, for each period indicated, the low and
high exchange rates for United States dollars expressed in Canadian dollars, the
exchange rate at the end of such period and the average of such exchange rates
for each day during such period, based on the noon buying rate in the city of
New York for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York. These rates are presented for
information purposes and are not the same as the rates that are used for
purposes of translating Canadian dollars into U.S. dollars in our consolidated
financial statements:

<Table>
<Caption>
                                                                             SIX MONTHS ENDED
                                                 YEAR ENDED DECEMBER 31,         JUNE 30,
                                               ---------------------------   -----------------
                                                2001      2002      2003      2003      2004
                                               -------   -------   -------   -------   -------
    <S>                                        <C>       <C>       <C>       <C>       <C>
    Low......................................  $1.4933   $1.5108   $1.2923   $1.3348   $1.2690
    High.....................................   1.6023    1.6128    1.5750    1.5750    1.3970
    Period End...............................   1.5925    1.5800    1.2923    1.4532    1.3390
    Average..................................   1.5487    1.5704    1.4008    1.3558    1.3407
</Table>

       On October 4, 2004, the noon buying rate was Cdn$1.2726 = $1.00.

                                USE OF PROCEEDS

       We estimate that our net proceeds of this offering, after deducting the
underwriting commission and the estimated expenses of the offering, will be
approximately $331,400,000, based on an assumed public offering price of $4.86
per share, which was the U.S. dollar equivalent of the closing price of our
common shares on the Toronto Stock Exchange on October 4, 2004 (expressed in
Canadian dollars and converted to U.S. dollars based on the noon buying rate on
that date). If the overallotment option is exercised in full and Gerdau S.A.
purchases all of the common shares issuable under the Gerdau S.A. additional
commitment, we estimate that our net proceeds will be approximately
$380,000,000. We will use the net proceeds for the following purposes: (i) to
finance the proposed North Star acquisition (assuming satisfaction of applicable
closing conditions and completion of the acquisition); (ii) for capital
expenditures and working capital; and (iii) for general corporate purposes,
which may include repurchasing a portion of our outstanding senior notes,
repaying amounts owed under our senior secured credit facility or selectively
pursuing strategic acquisitions. While we intend to use a majority of the
proceeds of this offering to pay the purchase price in connection with the
proposed North Star acquisition, that acquisition is subject to a number of
conditions and we cannot assure you that it will be completed. If the North Star
acquisition is not completed, we will have broad discretion to use such proceeds
for the other purposes described above.

       While we intend to spend the funds available to us as stated above, there
may be circumstances where, for sound business reasons, a reallocation of funds
may be necessary or advisable.

                                DIVIDEND POLICY

       We do not currently pay dividends on our common shares. The payment of
any dividends in future will be considered by our board of directors having
regard to, among other things, our profitability, our capital requirements,
industry conditions, our financial condition and other factors. The terms of our
existing senior notes and senior secured credit facility may limit our ability
to declare dividends in the future.

                                        21
<PAGE>

                         PRICE RANGE AND TRADING VOLUME

       Our common shares are listed and trade on the Toronto Stock Exchange
under the symbol "GNA." We have applied to list our common shares on the New
York Stock Exchange under the symbol "GNA." The volume of trading and the price
ranges of our common shares on the Toronto Stock Exchange are set forth in the
following table for the periods indicated.

<Table>
<Caption>
                                                     HIGH     LOW
                                                    (CDN$)   (CDN$)     VOLUME
                                                    ------   ------   ----------
<S>                                                 <C>      <C>      <C>
2002
Fourth Quarter....................................   3.60     1.85    12,242,911
2003
First Quarter.....................................   2.84     1.60     4,783,390
Second Quarter....................................   1.95     1.33    15,708,010
Third Quarter.....................................   3.70     1.84    15,534,674
Fourth Quarter....................................   4.85     3.03     7,793,498
2004
First Quarter.....................................   5.45     4.00    11,052,189
Second Quarter....................................   5.43     4.60    15,266,634
Third Quarter.....................................   6.64     4.87    15,062,273
</Table>

       On October 4, 2004, the closing price of our common shares as reported on
the Toronto Stock Exchange was Cdn$6.18 ($4.86 based on the noon buying rate on
that date). On June 30, 2004, there were 225,089,337 common shares issued and
outstanding.

                                        22
<PAGE>

                                 CAPITALIZATION

       The following table sets forth our cash and capitalization as at June 30,
2004 on an actual basis, as adjusted to give effect to the offering (based on an
assumed public offering price of $4.86 per share, which was the U.S. dollar
equivalent of the closing price of our common shares on the Toronto Stock
Exchange on October 4, 2004, expressed in Canadian dollars and converted to U.S.
dollars based on the noon buying rate on that date) and pro forma as adjusted to
give effect to the offering and our proposed acquisition of North Star. The
table should be read in conjunction with our consolidated financial statements
and the related notes included and incorporated by reference in this prospectus.

<Table>
<Caption>
                                                                      AS AT JUNE 30, 2004
                                                           ------------------------------------------
                                                                                        PRO FORMA AS
                                                            ACTUAL     AS ADJUSTED        ADJUSTED
                                                           --------   --------------   --------------
                                                                     (DOLLARS IN MILLIONS)
<S>                                                        <C>        <C>              <C>
Cash and cash equivalents................................  $   16.9      $  348.3         $   46.6
                                                           ========      ========         ========
Bank indebtedness and current portion of long-term
  borrowings.............................................  $   29.2      $   29.2         $   30.2
Long-term borrowings, less current portion(1)............     503.0         503.0            507.3
                                                           --------      --------         --------
  Total indebtedness(2)..................................     532.2         532.2            537.5
Shareholders' equity
  Capital stock (authorized common shares -- unlimited;
     outstanding -- actual -- 225,089,337, as adjusted
     and pro forma as adjusted -- 295,089,337)...........     645.7         977.0            977.0
  Retained earnings......................................     101.2         101.2            101.2
  Accumulated other comprehensive income.................       8.6           8.6              8.6
                                                           --------      --------         --------
     Total shareholders' equity..........................  $  755.5      $1,086.8         $1,086.8
                                                           --------      --------         --------
       Total capitalization..............................  $1,287.7      $1,619.0         $1,624.3
                                                           ========      ========         ========
</Table>

------------

(1) Long-term borrowings include total commitments under our senior secured
    credit facility of $350 million. As of June 30, 2004, our borrowing base
    supported borrowings of approximately $298 million under our senior secured
    credit facility.

(2) Total indebtedness includes convertible debentures of $74.8 million at June
    30, 2004.

       The table above excludes 3,159,283 common shares issuable upon exercise
of options to purchase common shares outstanding as at June 30, 2004.

                                        23
<PAGE>

         SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

GERDAU AMERISTEEL CORPORATION

       The selected consolidated financial data presented below as at and for
the years ended December 31, 2002 and 2003, have been derived from our audited
Canadian GAAP consolidated financial statements, adjusted for differences
between Canadian GAAP and U.S. GAAP, included and incorporated by reference in
this prospectus. The selected consolidated financial data presented below as at
and for the year ended December 31, 2001 have been derived from our audited U.S.
GAAP consolidated financial statements, filed with securities regulatory
authorities, which are not included or incorporated by reference in this
prospectus. The selected consolidated financial data presented below as at June
30, 2004 and for the six months ended June 30, 2003 and 2004 have been derived
from our unaudited U.S. GAAP consolidated financial statements as at June 30,
2004 and for those periods, included and incorporated by reference in this
prospectus. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
interim periods have been included. Results for the six months ended June 30,
2003 and 2004 are not necessarily indicative of results to be expected for the
full year or any future period. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes,
included and incorporated by reference in this prospectus.

       Unless otherwise specified, our financial results and information are
presented in accordance with U.S. GAAP. Financial results for periods prior to
2004 were originally presented in accordance with Canadian GAAP and our audited
consolidated financial statements included and incorporated by reference in this
prospectus are presented in accordance with Canadian GAAP. The material
differences between Canadian GAAP and U.S. GAAP as they relate to our financial
statements are described in note 20 to our audited consolidated financial
statements for the year ended December 31, 2003 and note 12 to our unaudited
consolidated financial statements for the three and six months ended June 30,
2004 and under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Material Differences Between Canadian GAAP
and U.S. GAAP" in this prospectus. All of the financial data in the following
tables are presented in accordance with U.S. GAAP.

<Table>
<Caption>
                                                                               SIX MONTHS ENDED
                                               YEAR ENDED DECEMBER 31(1),          JUNE 30,
                                             ------------------------------   -------------------
                                               2001       2002       2003       2003       2004
                                             --------   --------   --------   --------   --------
                                               (DOLLARS IN MILLIONS, EXCEPT EARNINGS PER SHARE)
<S>                                          <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
  Net sales................................  $  885.0   $1,053.8   $1,811.2   $  857.4   $1,352.7
  Operating income (loss)..................      41.6       46.9       (9.3)      (4.2)     174.9
  Net (loss) income........................      (6.4)      11.0      (26.7)     (13.2)     127.0
  (Loss) earnings per share -- Basic.......  $  (0.04)  $   0.08   $  (0.04)  $  (0.07)  $   0.61
  (Loss) earnings per share -- Diluted.....  $  (0.04)  $   0.08   $  (0.04)  $  (0.07)  $   0.60
OTHER DATA:
  EBITDA(2)................................  $  100.7   $  102.1   $   65.5   $   33.4   $  228.0
  Net cash provided by (used in) operating
     activities............................     116.5       25.5       36.9      (19.2)      51.6
  Net cash used in investing activities....     (84.4)     (22.2)     (52.5)     (21.7)     (37.6)
  Net cash (used in) provided by financing
     activities............................     (32.9)       4.3       13.3       54.5       (6.8)
  Capital expenditures.....................  $   28.0   $   34.3   $   55.2   $   21.8   $   26.4
</Table>

                                        24
<PAGE>

<Table>
<Caption>
                                                                               SIX MONTHS ENDED
                                               YEAR ENDED DECEMBER 31(1),          JUNE 30,
                                             ------------------------------   -------------------
                                               2001       2002       2003       2003       2004
                                             --------   --------   --------   --------   --------
<S>                                          <C>        <C>        <C>        <C>        <C>
OPERATIONAL DATA:(3)
Production (thousands of tons)
  Melt shops...............................     2,529      3,314      5,531      2,774      3,165
  Rolling mills............................     2,417      3,100      5,264      2,576      2,979
Finished steel shipments (thousands of
  tons)
  Rebar....................................       784        838      1,523        792        698
  Merchant/special sections................     1,061      1,424      2,030        984      1,144
  Rod......................................        62        166        642        293        397
  Flat rolled (joint venture)..............        --        120        744        365        380
                                             --------   --------   --------   --------   --------
     Total mill external...................     1,907      2,548      4,939      2,434      2,619
  Fabricated steel.........................       588        566        631        318        365
                                             --------   --------   --------   --------   --------
     Total.................................     2,495      3,114      5,570      2,752      2,985
Selling prices ($/ton)
  Mill external shipments..................  $    283   $    290   $    309   $    299   $    450
  Fabricated steel shipments...............  $    425   $    440   $    436   $    430   $    534
Scrap charged ($/ton)......................  $     88   $     89   $    110   $    109   $    171
Metal spread (selling price less scrap)
  ($/ton)
  Mill external shipments..................  $    195   $    200   $    199   $    189   $    280
  Fabricated steel shipments...............  $    337   $    350   $    326   $    321   $    363
Mill manufacturing cost ($/ton)............  $    132   $    155   $    174   $    169   $    191
</Table>

<Table>
<Caption>
                                        AS AT DECEMBER 31,                   AS AT JUNE 30, 2004
                                  ------------------------------   ----------------------------------------
                                                                                               PRO FORMA AS
                                    2001       2002       2003      ACTUAL    AS ADJUSTED(4)   ADJUSTED(5)
                                  --------   --------   --------   --------   --------------   ------------
                                                            (DOLLARS IN MILLIONS)
<S>                               <C>        <C>        <C>        <C>        <C>              <C>
BALANCE SHEET DATA:
  Cash and cash equivalents.....  $    5.1   $   12.5   $   10.0   $   16.9      $  348.3        $   46.6
  Working capital...............     117.1      194.6      302.7      399.7         731.1           634.3
  Property, plant and
     equipment..................     528.3      765.6      795.1      780.5         780.5           881.5
  Total assets..................   1,058.6    1,513.7    1,677.1    1,862.4       2,193.8         2,261.2
  Total indebtedness(6).........     725.1      564.5      643.8      532.2         532.2           537.5
  Shareholders' equity..........  $   47.7   $  493.2   $  533.6   $  755.5      $1,086.8        $1,086.8
</Table>

------------

(1) Our historical financial and operational results for the periods prior to
    October 23, 2002 are the financial and operational results of Gerdau North
    America, our predecessor company for accounting purposes, with the results
    of the former Co-Steel Inc., including Gallatin Steel Company, our joint
    venture with Dofasco Inc., added for the period since October 23, 2002.

                                           footnotes continued on following page
                                        25
<PAGE>

(2) EBITDA is earnings before interest, taxes, depreciation and amortization,
    and includes cash distributions from joint ventures, but excludes earnings
    from joint ventures.

    The following table reconciles EBITDA with net (loss) income for the periods
indicated:

<Table>
<Caption>
                                                                                               SIX MONTHS
                                                                  YEAR ENDED DECEMBER 31,    ENDED JUNE 30,
                                                                  ------------------------   ---------------
                                                                   2001     2002     2003     2003     2004
                                                                  ------   ------   ------   ------   ------
                                                                            (DOLLARS IN MILLIONS)
    <S>                                                           <C>      <C>      <C>      <C>      <C>
    EBITDA......................................................  $100.7   $102.1   $ 65.5   $ 33.4   $228.0
    Cash distribution from joint ventures.......................      --       --     (3.6)    (1.8)   (15.8)
    Earnings from joint ventures................................     1.0      5.0      7.7      4.9     45.7
    Depreciation and amortization...............................   (61.3)   (56.5)   (76.4)   (38.7)   (39.1)
    Interest and other expense on debt..........................   (49.7)   (40.4)   (59.9)   (26.0)   (28.1)
    Income tax expense (benefit)................................     3.9      2.5     39.8     14.8    (63.7)
    Minority interest...........................................    (1.0)    (1.7)     0.2      0.2       --
                                                                  ------   ------   ------   ------   ------
    Net (loss) income...........................................  $ (6.4)  $ 11.0   $(26.7)  $(13.2)  $127.0
                                                                  ======   ======   ======   ======   ======
</Table>

(3) Includes 50% of Gallatin Steel Company, our joint venture with Dofasco Inc.,
    as of October 23, 2002.

(4) As adjusted to give effect to our sale of 70,000,000 common shares in this
    offering (based on an assumed public offering price of $4.86 per share,
    which was the U.S. dollar equivalent of the closing price of our common
    shares on the Toronto Stock Exchange on October 4, 2004, expressed in
    Canadian dollars and converted to U.S. dollars based on the noon buying rate
    on that date) after deducting the estimated expenses of this offering and
    the underwriting commission.

(5) Pro forma as adjusted to give effect to this offering as described in the
    preceding footnote as well as the proposed acquisition of North Star.

(6) Total indebtedness includes convertible debentures of $74.8 million at June
    30, 2004.

                                        26
<PAGE>

NORTH STAR

       The selected combined financial data presented below as at and for the
fiscal year ended May 31, 2004 have been derived from North Star's combined
financial statements included elsewhere in this prospectus and should be read in
conjunction with North Star's audited combined financial statements and the
related notes.

       North Star's financial information is presented in U.S. dollars and in
accordance with U.S. GAAP. The differences between Canadian GAAP and U.S. GAAP
as they relate to the combined financial results of North Star are described in
note 10 to North Star's audited combined financial statements included elsewhere
in this prospectus.

<Table>
<Caption>
                                                               FISCAL YEAR ENDED
                                                                 MAY 31, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
STATEMENT OF EARNINGS:
  Revenue...................................................        $696.5
  Income from operations....................................          35.8
  Net income................................................        $ 22.6
OTHER DATA:
  EBITDA(1).................................................        $ 49.4
  Net cash provided by operating activities.................          39.6
  Net cash used in investing activities.....................         (17.3)
  Net cash used in financing activities.....................         (22.3)
  Capital expenditures......................................        $ 17.5
</Table>

<Table>
<Caption>
                                                                     AS AT
                                                                 MAY 31, 2004
                                                               -----------------
<S>                                                            <C>
BALANCE SHEET DATA:
  Cash and cash equivalents.................................        $   --
  Working capital...........................................         114.9
  Property, plant and equipment.............................         103.5
  Total assets..............................................         332.9
  Total indebtedness........................................        $  5.2
</Table>

------------

(1) EBITDA for North Star is earnings before interest, taxes, depreciation and
    amortization. The following table reconciles EBITDA with net income for the
    fiscal year ended May 31, 2004:

<Table>
<Caption>
                                                                   FISCAL YEAR ENDED
                                                                     MAY 31, 2004
                                                                   -----------------
                                                                      (DOLLARS IN
                                                                       MILLIONS)
    <S>                                                            <C>
    EBITDA......................................................        $ 49.4
    Depreciation and amortization...............................         (12.4)
    Interest and other expense on debt..........................          (1.0)
    Income tax expense..........................................         (13.4)
                                                                        ------
    Net income..................................................        $ 22.6
                                                                        ------
</Table>

                                        27
<PAGE>

            SELECTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

       The following selected unaudited pro forma condensed consolidated
financial data gives effect to this offering of our common shares and our
proposed acquisition of North Star and is based on our historical Canadian GAAP
consolidated financial statements, adjusted for differences between U.S. GAAP
and Canadian GAAP, our historical U.S. GAAP consolidated financial statements
and the historical U.S. GAAP combined financial statements of North Star,
included elsewhere in this prospectus. The unaudited pro forma condensed
consolidated balance sheet as at June 30, 2004 has been prepared by combining
our consolidated balance sheet as at June 30, 2004 and the combined balance
sheet of North Star as at May 31, 2004, and gives effect to our acquisition of
North Star as if it had occurred on June 30, 2004. The unaudited pro forma
condensed consolidated income statement for the twelve months ended June 30,
2004 has been prepared by combining (i) our consolidated income statement for
the twelve months ended June 30, 2004, which was prepared by combining our
consolidated income statement for the year ended December 31, 2003 and our
consolidated income statement for the six months ended June 30, 2004, less our
consolidated income statement for the six months ended June 30, 2003, and (ii)
the combined income statement of North Star for the fiscal year ended May 31,
2004, and gives effect to our acquisition of North Star as if it had occurred on
July 1, 2003.

       The selected unaudited pro forma condensed consolidated financial data
have been prepared based upon currently available information and assumptions
that we deem appropriate, including the assumption that the North Star
acquisition will be financed through this offering of common shares. The
selected unaudited pro forma condensed consolidated financial data are for
informational purposes only and are not necessarily indicative of either the
financial position or the results of operations that would have been achieved
had the transactions for which we are giving pro forma effect actually occurred
on the dates referred to above, nor are such pro forma data necessarily
indicative of the results of future operations, because such unaudited pro forma
condensed consolidated financial data are based on estimates of financial
effects that may prove to be inaccurate.

       The selected unaudited pro forma condensed consolidated financial data
have been prepared in accordance with U.S. GAAP, which has been reconciled to
Canadian GAAP. The material differences between Canadian GAAP and U.S. GAAP are
described in note 5 to the unaudited pro forma condensed consolidated financial
data, included elsewhere in this prospectus.

<Table>
<Caption>
                                                                   PRO FORMA
                                                                 TWELVE MONTHS
                                                                     ENDED
                                                                 JUNE 30, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
STATEMENT OF EARNINGS:
  Net sales.................................................       $3,003.1
  Income from operations....................................          231.2
  Net income................................................       $  152.5
OTHER DATA:
  EBITDA(1).................................................       $  330.7
</Table>

<Table>
<Caption>
                                                                PRO FORMA AS AT
                                                                 JUNE 30, 2004
                                                               -----------------
                                                                  (DOLLARS IN
                                                                   MILLIONS)
<S>                                                            <C>
BALANCE SHEET DATA:
  Cash and cash equivalents.................................       $   46.6
  Working capital...........................................          634.3
  Property, plant and equipment.............................          881.5
  Total assets..............................................        2,261.2
  Total indebtedness........................................       $  537.5
</Table>

                                                     footnotes on following page
                                        28
<PAGE>

------------

(1) EBITDA is earnings before interest, taxes, depreciation and amortization and
    includes cash distributions from joint ventures, but excludes earnings from
    joint ventures. The following table reconciles pro forma EBITDA with pro
    forma net income for the twelve months ended June 30, 2004:

<Table>
<Caption>
                                                                   PRO FORMA
                                                                 TWELVE MONTHS
                                                                     ENDED
                                                                 JUNE 30, 2004
                                                               -----------------
<S>                                                            <C>
EBITDA......................................................       $  330.7
Earnings from joint ventures................................           48.5
Cash distribution from joint ventures.......................          (17.6)
Depreciation and amortization...............................          (85.9)
Interest and other expense on debt..........................          (62.3)
Income tax expense..........................................          (60.9)
                                                                   --------
Net income..................................................       $  152.5
                                                                   --------
</Table>

                                        29
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

       The following discussion contains forward-looking statements that involve
numerous risks and uncertainties. Our actual results could differ materially
from those discussed in such forward-looking statements as a result of these
risks and uncertainties, including those set forth in this prospectus under
"Cautionary Statement Regarding Forward-looking Statements" and under "Risk
Factors." You should read the following discussion in conjunction with the
sections of this prospectus entitled "Selected Historical Financial and
Operating Data -- Gerdau Ameristeel Corporation" and "Selected Pro Forma
Condensed Consolidated Financial Data," and our consolidated financial
statements and related notes appearing elsewhere and incorporated by reference
in this prospectus.

       Unless otherwise specified, our financial information is presented in
accordance with U.S. GAAP. Financial results for periods prior to 2004 were
originally presented in accordance with Canadian GAAP and our audited
consolidated financial statements included and incorporated by reference in this
prospectus are presented in accordance with Canadian GAAP. The material
differences between U.S. GAAP and Canadian GAAP as they relate to our financial
statements are described in note 20 to our audited consolidated financial
statements and note 12 to our unaudited consolidated financial statements
included and incorporated by reference in this prospectus and in the following
discussion. The amounts referred to in the following discussion are all
presented in accordance with U.S. GAAP for comparative purposes.

OVERVIEW

       We are the second largest minimill steel producer in North America with
annual manufacturing capacity of over 6.4 million tons of mill finished steel
products. Through our vertically integrated network of 11 minimills (including
one 50%-owned minimill), 13 scrap recycling facilities and 32 downstream
operations, we primarily serve customers in the eastern half of North America.
Our products are generally sold to steel service centers, steel fabricators, or
directly to OEMs for use in a variety of industries, including construction,
automotive, mining, cellular and electrical transmission, metal building
manufacturing and equipment manufacturing.

       Our results of operations are largely dependent on the level of
construction and general economic activity in the North American market. The
factors that influence our net sales are tons shipped, product mix and related
pricing. Our net sales are determined by subtracting product returns, sales
discounts, return allowances and claims from total sales. We charge premium
prices for certain grades of steel, dimensions of product, or in some cases, for
smaller volumes. Our sales are seasonal, with sales in the fiscal quarters
ending June 30 and September 30 generally being stronger than in the rest of the
year.

       Our operations are segmented into two operating divisions, minimills and
downstream operations. We own and operate seven minimills in the United States
and three in Canada and also have a 50% interest in an eleventh minimill,
Gallatin Steel, located in Kentucky, a joint venture with Dofasco Inc. We
manufacture and market a wide range of steel products, including rebar, merchant
bars, structural shapes, beams, special sections, rod, special bar quality, or
SBQ, and flat rolled sheet. Over 90% of the raw material feed for the minimill
operations is recycled steel scrap, making us the second largest steel recycler
in North America. Four of our minimills are provided scrap from an internal
network of 13 scrap recycling facilities. Our downstream operations are
secondary value-added steel businesses. The downstream division consists of
rebar fabrication, railroad spikes, cold drawn products, super light beam
processing, elevator guide rails, and processing and production of wire mesh and
collated nails. These steel fabricating and product manufacturing operations
process steel principally produced in our minimills.

       Our cost of sales includes the cost of our primary raw material, scrap
metal and the cost of converting the scrap to finished steel products, including
the cost of natural gas and electricity we use and labor, maintenance and
repairs, warehousing and freight costs. Natural gas and electricity represented
approximately 8% and 14%, respectively, of our production costs for the six
months ended June 30, 2004. We assign our production costs to our inventory
produced. When that inventory is sold, those costs are reflected in costs of
sales. Accordingly, there is a timing difference, typically one to three months,
between
                                        30
<PAGE>

when we incur our production costs and when we record them in our cost of sales
for any given product. Most of our facilities operate under long-term
electricity supply contracts with major utilities. These contracts typically
have two components to them: a firm portion and an interruptible portion. The
interruptible portion represents up to 70% to 90% of the total load, and, for
the most part, is based on a spot-market price of electricity at the time it is
being used. We therefore have significant exposure to the variances of the
electricity spot market. Furthermore, we do not have any long-term contracts for
natural gas, and are therefore subject to market variables and pricing swings
for that energy source that have in the recent past, and could in the future,
materially affect operating margins and results of operations.

       The prices of scrap metal, natural gas and electricity have demonstrated
significant historical volatility. Although the deregulation of both natural gas
and wholesale electricity have afforded opportunities for lower costs resulting
from competitive market forces, prices for both of these energy sources have
become even more volatile in the recent past. We try to pass increases in our
costs to our customers; however, the market prices of our products do not always
track fluctuations in the prices of our raw materials and energy, and price
increases, even when achieved, can lag the cost increases we experience.

       Electricity represents a significant component of our cost of sales. The
price of electricity is mainly driven by regional markets and each of our
minimills has a separate electricity supply contract negotiated with its local
utility provider.

       After the costs of scrap and energy, the largest contributor to our cost
of sales is our labor costs, followed by the cost of maintaining and repairing
our mill equipment and the cost of warehousing, handling and delivering our
finished steel products. Sales are made based on local market prices. Freight
costs charged to customers are limited to the freight costs that are charged by
competitors who may be in closer proximity to our customers' locations. Our
sales are reported net of our freight costs.

       We primarily compete with other steel producers based on the delivered
price of finished products to our customers. Although freight costs for steel
can often make it uneconomic for distant steel producers to compete with us, to
the extent that they have had lower costs of sales, such as lower labor or
energy costs, they have successfully competed with us. Our labor and energy
costs are higher than many foreign and some domestic producers. For example,
energy costs in the northeastern United States, where two of our minimills are
located, are typically significantly higher than in other parts of North
America. Although we are continually striving to improve our operating costs, we
may not be successful in achieving lower labor and energy costs or gaining
operating efficiencies that may be necessary to remain competitive.

       On October 23, 2002, we combined our operations with the operations of
Co-Steel Inc. As a result, our historical financial results are the financial
results for Gerdau North America, our predecessor company for accounting
purposes, with the results of the former Co-Steel Inc., including Gallatin Steel
Company, our 50%-owned joint venture with Dofasco Inc., for the period since
October 23, 2002.

OUTLOOK

       Our results for the first six months of 2004 set a record for us. This
earnings performance also highlights the unpredictable and volatile nature of
today's North American steel industry. The effects of globalization and domestic
industry consolidation have drastically changed the traditional market dynamics
for steel. These emerging factors present new challenges in defining strategic
decisions and in projecting the magnitude and duration of market cycles.

       This swing in earnings performance in 2004 from 2003 is a clear reminder
of the cyclical and unpredictable nature of our business. Beginning in the
second half of 2003 and continuing into the first half of 2004, the industry
experienced rampant raw material cost escalation and pursued progressive steel
price relief to restore reasonable margins. The opportune timing of the Co-Steel
merger in late 2002 and notable improvements in those acquired mills can be
credited as a contributing factor, but the magnitude of the earnings turnaround
in the first half of 2004 is primarily attributable to very favorable changes in
gross margins and market conditions.

                                        31
<PAGE>

       For the future, the key unknown is the sustainability of this positive
industry trend in an uncertain political, economic and globally competitive
environment. Our manufacturing facilities have significantly increased steel
production, and our overall steel capacity utilization is running at optimum
levels. Currently, North American steel demand is firm and steel prices and
margins are well above historical levels. Despite current favorable steel market
conditions, we expect that the industry will remain vulnerable to cyclical
downturns as previously experienced.

CRITICAL ACCOUNTING POLICIES

       The following accounting policies affect the preparation of our
consolidated financial statements:

       Revenue Recognition:  Our products are usually sold on credit terms. The
credit terms, which are established in accordance with local and industry
practices, typically require payment within 30 days of delivery and may allow
discounts for early payment. Revenue is recognized at the time products are
shipped to customers.

       Allowances for Doubtful Accounts:  The allowance for doubtful accounts is
evaluated on a regular basis and adjusted based upon management's best estimate
of probable losses inherent in accounts receivable. In estimating probable
losses, we review accounts that are past due, non-performing or in bankruptcy.
We also review accounts that may be at risk using information available about
the customer, such as financial statements and published credit ratings. General
information regarding industry trends and the general economic environment is
also used. We determine an estimated loss for specific accounts and estimate an
additional amount for the remainder of receivables based on historical trends
and other factors. Adverse economic conditions or other factors that might cause
deterioration of the financial health of customers could change the timing and
level of payments received and necessitate a change in estimated losses.

       Accounting for Goodwill:  In assessing the recoverability of goodwill and
other intangible assets with indefinite lives, management must make assumptions
regarding estimated future cash flows and other factors to determine the fair
value of the respective assets. If these estimates and related assumptions
change in the future, we may be required to record impairment charges not
previously recorded. We have adopted Standard Financial Accounting Standard
(SFAS) No. 142, Goodwill and Other Intangible Assets, and are required to assess
goodwill for impairment at a minimum annually, using a two-step process that
begins with an estimation of the fair value of the reporting unit. The first
step is a screen for impairment and the second step measures the amount of any
impairment. These tests utilize fair value amounts that are determined by
estimated future cash flows developed by management.

       Long-lived Assets:  We are required to assess potential impairments of
long-lived assets in accordance with SFAS No. 144, Accounting for Impairment of
Long-lived Assets, if events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impaired asset is written
down to its estimated fair value based upon the most recent information
available. Estimated fair market value is generally measured by discounting
estimated future cash flows developed by management. Long-lived assets that are
held for disposal are recorded at the lower of the carrying value or the fair
market value less the estimated cost to sell. Our long-lived assets primarily
include property, plant and equipment used in operations and property held for
sale.

       Accounting for Income Taxes:  We account for income taxes in accordance
with the Financial Accounting Standards Board (FASB) Statement No. 109,
Accounting for Income Taxes. Significant judgment is required in determining the
provision for income taxes and related accruals, deferred tax assets and
liabilities. In the ordinary course of business, there are transactions and
calculations where the ultimate tax outcome is uncertain. Additionally, our tax
returns are subject to audit by various domestic and foreign tax authorities.
Although we believe our estimates are reasonable, we cannot assure you that the
final tax outcome will not be materially different from that which is reflected
in the income tax provisions and accruals.

                                        32
<PAGE>

       We have recorded deferred tax assets related to domestic and foreign tax
loss carry-forwards. Limitations on the utilization of these tax assets may
apply and we may in the future provide a valuation allowance to reduce certain
of these deferred tax assets if we conclude that it is more likely than not that
the deferred tax assets will not be fully realized.

       Environmental Remediation:  We are subject to environmental laws and
regulations established by federal, state, provincial and local authorities and
make provisions for the estimated cost of remediation based on relevant facts,
laws and regulations, and proven technology. The liability estimates are
reviewed periodically and, as investigations and remediation proceed, we make
necessary adjustments to the estimates. The liability estimates are not reduced
by possible recoveries from insurance or other third parties.

       Post Retirement Benefits:  Primary actuarial assumptions are determined
as follows:

       -     The expected long-term rate of return on plan assets is based on
             our estimate of long-term returns for equities and fixed income
             securities weighted by the allocation of assets in the plans. The
             rate is impacted by changes in general market conditions, but
             because it represents a long-term rate, it is not significantly
             impacted by short-term market swings. Changes in the allocation of
             plan assets would also impact this rate.

       -     The assumed discount rate is used to discount future benefit
             obligations back to today's dollars. The U.S. discount rate is as
             of the measurement date, December 31. A similar process is used to
             determine the assumed discount rate for the non-U.S. plans. This
             rate is sensitive to changes in interest rates. A decrease in the
             discount rate would increase our obligation and expense.

       -     The expected rate of compensation increase is used to develop
             benefit obligations using projected pay at retirement. This rate
             represents average long-term salary increases and is influenced by
             our long-term compensation policies. An increase in the rate would
             increase our obligation and expense.

       -     The assumed health care trend rate represents the rate at which
             health care costs are assumed to increase and is based on
             historical and expected experience. Changes in projections of
             future health care costs due to general economic conditions and
             those specific to health care will impact this trend rate. An
             increase in the trend rate would increase our obligation and
             expense.

       Other Matters:  In January 2003, FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements (FIN 46). In
December 2003, the FASB issued a revised version of FIN 46 (FIN 46R). Other than
non-cancelable operating lease commitments, we do not have off-balance sheet
arrangements, financings or other relationships with unconsolidated entities or
other persons (also known as "special purpose entities") that require
consolidation and we believe we are in compliance with FIN 46R. The consolidated
financial statements include our accounts and those of our subsidiaries.
Intercompany items and transactions are eliminated in consolidation.

                                        33
<PAGE>

RESULTS OF OPERATIONS

       The following table summarizes our results of operations for the years
ended December 31, 2002 and 2003 and the six month periods ended June 30, 2003
and 2004, presented in accordance with U.S. GAAP.

<Table>
<Caption>
                                              YEAR ENDED DECEMBER 31,        SIX MONTHS ENDED
                                              -----------------------   ---------------------------
                                                                          JUNE 30,       JUNE 30,
                                                 2002         2003          2003           2004
                                              ----------   ----------   ------------   ------------
                                                             (DOLLARS IN THOUSANDS)
<S>                                           <C>          <C>          <C>            <C>
Net sales...................................  $1,053,760   $1,811,171     $857,360      $1,352,727
Operating expenses
  Cost of sales.............................     898,918    1,668,478      791,279       1,097,545
  Selling and administrative................      58,285       81,565       35,272          43,819
  Depreciation..............................      55,305       71,951       35,152          37,887
  Other operating (income)..................      (5,661)      (1,480)        (179)         (1,471)
                                              ----------   ----------     --------      ----------
                                               1,006,847    1,820,514      861,254       1,177,780

Income (loss) from operations...............      46,913       (9,343)      (4,164)        174,947
Earnings from joint ventures................       5,011        7,667        4,862          45,695
                                              ----------   ----------     --------      ----------
Income before other expenses and income
  taxes                                           51,924       (1,676)         698         220,642
Other expenses
  Interest, net.............................      40,371       59,880       25,923          28,059
  Foreign exchange loss (gain)..............          90          726         (571)            675
  Amortization of deferred financing
     costs..................................       1,172        4,399        3,578           1,248
                                              ----------   ----------     --------      ----------
                                                  41,633       65,005       28,930          29,982
Income (loss) before income taxes...........      10,291      (66,681)     (28,232)        190,660
Income tax expense (benefit)................      (2,465)     (39,770)     (14,818)         63,689
                                              ----------   ----------     --------      ----------
Income (loss) before minority interest......      12,756      (26,911)     (13,414)        126,971
Minority interest...........................      (1,707)         217          217              --
                                              ----------   ----------     --------      ----------
Net income (loss)...........................  $   11,049   $  (26,694)    $(13,197)     $  126,971
                                              ==========   ==========     ========      ==========
</Table>

  SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO SIX MONTHS ENDED JUNE 30, 2003

       Net sales:  Finished tons shipped for the six months ended June 30, 2004
increased 233,224 tons, or 8.5%, compared to the six months ended June 30, 2003.
The increase in tons reflects stronger steel demand from the prior year. Average
mill finished goods selling prices increased $152 per ton, or 50.7%, from the
average selling prices for the six months ended June 30, 2003. Selling price
increases were partially offset by scrap raw material costs that increased 56.1%
for the six months ended June 30, 2004, compared to the six months ended June
30, 2003. In 2004, we and other minimill producers have increased steel selling
prices in response to higher scrap and other manufacturing costs. Strong demand
for scrap materials from China, combined with the relative valuation of the U.S.
dollar versus the currencies of Europe, Japan, Canada and other steel producing
countries has increased the attractiveness of scrap material exports pushing the
cost of scrap raw material up dramatically. Also, resurgence in domestic steel
capacity utilization and declines in global scrap supply have added volatility
to scrap prices.

       Cost of sales:  Cost of sales as a percentage of net sales decreased
11.2% for the six months ended June 30, 2004 compared to the six months ended
June 30, 2003. The decrease is primarily attributable to sales revenue
increasing greater than the increase in raw materials and production costs.
Historically, scrap costs typically account for approximately 35% to 45% of mill
production costs. In the six months ended June 30, 2004, average scrap costs
represented approximately 54% of mill production costs, compared to
approximately 44% for the same period in 2003. Mill manufacturing costs were
approximately

                                        34
<PAGE>

13.0% higher as a result of increased yield costs due to the higher cost of
scrap, higher energy cost and higher maintenance expenses.

       Selling and administrative:  Selling and administrative expenses for the
six months ended June 30, 2004 increased $8.5 million compared to the six months
ended June 30, 2003. Included in selling and administrative expenses for the six
months ended June 30, 2004 is a non-cash pretax expense of $3.6 million to
mark-to-market outstanding stock appreciation rights (SARs) and other equity
based compensation held by employees. Other selling and administrative expenses
increased $4.9 million for the six months ended June 30, 2004 compared to the
six months ended June 30, 2003. The increase is due to increased professional
service fees and increased salaries and benefits due to an increase in
headcount.

       Depreciation:  Depreciation for the six months ended June 30, 2004
increased $2.7 million compared to the six months ended June 30, 2003. The
increase in depreciation for the six months ended June 30, 2004 reflects normal
increases in depreciation expense from routine equipment additions placed in
service during the last twelve months.

       Other operating (income) expense:  Other operating income for the six
months ended June 30, 2004 was $1.5 million primarily from an insurance
settlement relating to a power interruption claim from a prior year and a gain
from mark-to-market of trading securities. Other operating income for the six
months ended June 30, 2003 was approximately $0.2 million, which includes a $1.8
million charge for a settlement of environmental warranties from the May 2000
sale of Co-Steel's Mayer Parry Recycling unit in England, asset write-downs and
fabricating plant shutdown expense of $1.1 million and a $0.5 million charge
relating to start-up costs associated with new process automation controls at
the Knoxville rolling mill.

       Income (loss) from operations:  As a percentage of net sales, operating
income for the six months ended June 30, 2004 was 13.0% compared to an operating
loss of 0.5% for the six months ended June 30, 2003. Metal spread, the
difference between mill selling prices and scrap raw material cost, increased
47.6% to $280 per ton for the six months ended June 30, 2004 from $189 per ton
for the six months ended June 30, 2003. The operating profit per ton for the six
months ended June 30, 2004 was $67 per ton compared to a loss of $2 per ton for
the six months ended June 30, 2003. The improvement in metal spread is the
primary factor for the increase in operating income in the first six months of
2004, along with better operating performance at the Whitby, Perth Amboy and
Sayreville minimills.

       Earnings from joint ventures:  Earnings from our 50%-owned joint ventures
were $45.7 million for the six months ended June 30, 2004 compared to $4.9
million for the six months ended June 30, 2003. Our share of operating income of
the joint ventures was $47.1 million, or $124 per ton of finished steel, for the
six months ended June 30, 2004 compared to $5.8 million, or $16 per ton of
finished steel, for the six months ended June 30, 2003. Our share of the joint
ventures' EBITDA was $51.9 million for the six months ended June 30, 2004,
compared to $9.9 million for the six months ended June 30, 2003. Increased metal
spread at Gallatin Steel is the primary contributor to the increase in joint
venture earnings in the first six months of 2004.

       Interest expense and amortized deferred financing costs:  Interest
expense and other expense on debt, primarily amortized deferred financing costs,
decreased $0.2 million for the six months ended June 30, 2004 compared to the
six months ended June 30, 2003. Included in the deferred finance costs for the
six months ended June 30, 2003 was a charge of $2.1 million relating to the
write-off of unamortized costs of the extinguished debt. The net decrease in
expense for 2004 reflects the favorable effect of mark to market on interest
rate swaps and lower interest expense on reduced debt levels.

       Income taxes:  Statutory income tax rates in the United States (including
both federal and state) and Canada (including federal and provincial) are
approximately 40% and 35%, respectively, for the six months ended June 30, 2004
and 2003. Income tax credits decreased income tax expense approximately $6.0
million in the six months ended June 30, 2004 and increased income tax benefit
approximately $5.2 million in the six months ended June 30, 2003 reflecting a
consolidated provision of approximately 35% for the six months ended June 30,
2004 and approximately 52% for the six months ended June 30, 2003.

                                        35
<PAGE>

       Segments:  We are organized with two business unit segments, minimills
and downstream.

       Minimills segment sales increased to $1,403.6 million for six months
ended June 30, 2004 from $863.4 million for the six months ended June 30, 2003.
Minimills segment sales include sales to the downstream segment of $272.3
million and $151.6 million for the six months ended June 30, 2004 and 2003,
respectively. Mills segment operating income for six months ended June 30, 2004
was $181.9 million compared to $3.6 million operating loss for the six months
ended June 30, 2003, an increase of $185.5 million. The increase in operating
income in the second quarter of 2004 is primarily the result of higher selling
prices, higher shipment volumes and improved operating performance at the Perth
Amboy, Sayreville and Whitby minimills.

       Downstream segment sales increased to $221.5 million for the six months
ended June 30, 2004 from $145.4 million for the six months ended June 30, 2003.
Downstream segment operating income for the six months ended June 30, 2004 was
$14.0 million compared to $7.4 million for the six months ended June 30, 2003,
an increase of $6.6 million. The increase in profit is primarily due to
increases in average selling prices of $104 per ton to $534 per ton for the six
months ended June 30, 2004 compared to $430 per ton for the six months ended
June 30, 2003.

       See note 11 to our unaudited interim comparative consolidated financial
statements for the three and six month periods ended June 30, 2004 for a
reconciliation of segment sales and income to consolidated results.

  YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

       Net sales:  Finished tons shipped for the year ended December 31, 2003
increased 2,455,574 tons, or 78.8%, compared to the year ended December 31,
2002. Net sales for the year ended December 31, 2003 were $1,811.2 million
compared to $1,053.8 million for the year ended December 31, 2002, an increase
of $757.4 million, or 71.9%. The operations acquired as a result of the October
2002 merger with Co-Steel contributed additional net sales of $640.1 million for
the year ended December 31, 2003.

       Average mill finished goods selling prices increased $19 per ton, or
6.7%, for the year ended December 31, 2003 from the average selling prices for
the year ended December 31, 2002. However, selling price increases were
partially offset by scrap raw material costs that increased $21 per ton, or
23.6%, to $110 per ton for the year ended December 31, 2003 compared to $89 per
ton for the year ended December 31, 2002.

       Cost of sales:  Cost of sales as a percentage of net sales increased to
92.1% for the year ended December 31, 2003 compared to 85.3% for the year ended
December 31, 2002. Cost of sales for the year ended December 31, 2003 was
$1,668.5 million compared to $898.9 million for the year ended December 31,
2002, an increase of $769.6 million, or 85.6%.

       Higher cost of goods sold reflects a sharp increase in scrap raw material
and energy costs. Scrap costs typically account for approximately 35% to 45% of
mill production costs. In the year ended December 31, 2003, average scrap costs
were approximately $21 per ton higher than in the year ended December 31, 2002
and represented approximately 44% of mill production costs in the year ended
December 31, 2003, compared to approximately 41% for the year ended December 31,
2002. For the 2003 financial year, energy costs averaged $35 per ton of steel
produced, an increase of approximately 12% compared to 2002.

       Selling and administrative:  Selling and administrative expenses as a
percentage of net sales for the year ended December 31, 2003 were 4.5% compared
to 5.5% for the same period in the year ended December 31, 2002. Selling and
administrative expenses for the year ended December 31, 2003 were $81.6 million
compared to $58.3 million for the year ended December 31, 2002, an increase of
$23.3 million. Included in selling and administrative expenses for the year
ended December 31, 2003 is a non-cash pretax charge of $9.4 million for equity
based compensation expense to mark-to-market outstanding stock appreciation
rights (SARs) held by employees. The SARs were issued over the last five years
and represent the predominant form of our equity based compensation. The expense
reflects the
                                        36
<PAGE>

mark-to-market accounting for the appreciation in our common shares from $1.46
per share on December 31, 2002 to $3.63 per share on December 31, 2003. The
$23.3 million increase in selling and administrative expenses for the year ended
December 31, 2003 includes selling and administrative expenses associated with
the addition of the Co-Steel locations for the full year.

       Depreciation:  Depreciation for the year ended December 31, 2003 was
$72.0 million compared to $55.3 million for the year ended December 31, 2002, an
increase of $16.7 million.

       Other operating (income) expense:  Other operating income for the year
ended December 31, 2003 was approximately $1.5 million which primarily consists
of income of $3.5 million in electric power rebates from the Province of Ontario
and a $1.8 million charge from a settlement of environmental warranties from the
May 2000 sale of Co-Steel's Mayer Parry Recycling unit in England. Other
operating income for the year ended December 31, 2002 included $6.1 million
insurance settlement offset by $1.0 million relating to the closing of certain
of our fabricating plants.

       Income (loss) from operations:  As a percentage of net sales, operating
loss for the year ended December 31, 2003 was 0.5% compared to an operating
income of 4.5% for the year ended December 31, 2002. Metal spread, the
difference between mill selling prices and scrap raw material cost, decreased
0.8% to $199 per ton for the year ended December 31, 2003 from $200 per ton for
the year ended December 31, 2002. The decline in metal spread is a contributing
factor to the decrease in operating income in 2003.

       Earnings from joint ventures:  Earnings from our 50%-owned joint ventures
were $7.7 million for the year ended December 31, 2003 compared to $5.0 million
for the year ended December 31, 2002. The increase in joint venture earnings in
2003 is due to the inclusion of the Co-Steel joint venture, Gallatin Steel, for
the full year.

       Interest expense and amortized deferred financing costs:  Interest
expense and amortized deferred financing costs were $64.3 million for the year
ended December 31, 2003 compared to $41.5 million for the year ended December
31, 2002. Included in deferred financing costs for the year ended December 31,
2003 was a charge of $2.1 million relating to the write-off of unamortized costs
relating to debt extinguished in the June 2003 refinancing.

       Income taxes:  Statutory income tax rates in the United States (including
both federal and state) and Canada (including federal and provincial) are
approximately 40% and 35%, respectively, for the year ended December 31, 2003
and 2002 and provide a blended provision of approximately 36% and 38%,
respectively, for the year ended December 31, 2003 and 2002. Tax credits
increased income tax benefit approximately $15.2 million in the year ended
December 31, 2003 and reduced income tax expense approximately $8.2 million in
the year ended December 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

  CASH FLOWS

       Operating activities:  Net cash provided by operations for the six months
ended June 30, 2004 was $51.6 million compared to net cash used by operations of
$19.2 million for the six months ended June 30, 2003 and $36.9 million for year
ended December 31, 2003. As at June 30, 2004, accounts receivable increased by
$102.3 million from December 31, 2003 as a result of increased sales volumes and
higher selling prices. Inventories have increased in the six months ended June
30, 2004 by $75.3 million as a result of higher cost inventories of scrap,
billets and finished products caused by the dramatic increase in scrap costs.
Also, as a result of the increased cost of scrap, accounts payable has increased
by $34.1 million as of June 30, 2004.

       Investing activities:  Net cash used in investing activities was $37.6
million in the six months ended June 30, 2004 compared to $21.7 million in the
six months ended June 30, 2003 and $52.5 million for year ended December 31,
2003. For the six months ended June 30, 2004, capital expenditures totaled $26.4
million. On March 19, 2004, we acquired the operating assets of Potter Form &
Tie Co., a rebar
                                        37
<PAGE>

fabricator in the midwest United States, for $11.1 million in cash. Also, in the
six months ended June 30, 2004, we received a $1.8 million cash dividend and $14
million return of capital from Gallatin Steel Company.

       Financing activities:  Net cash used in financing activities was $6.8
million in the six months ended June 30, 2004 compared to net cash provided by
financing activities of $54.5 million in the six months ended June 30, 2003 and
net cash provided by financing activities of $13.3 million for year ended
December 31, 2003. Revolving credit payments were $130.1 million in the six
months ended June 30, 2004. Also, in the first quarter of 2004 we obtained two
short term loans in the amounts of $20.0 million and $5.0 million, each of which
are guaranteed by Gerdau S.A., from a Brazilian bank.

       On April 16, 2004, we issued 26.8 million common shares to our majority
shareholder, Gerdau S.A., for total proceeds of $97.9 million (Cdn$131.3
million). The proceeds were used for general corporate purposes, which included
capital expenditures, working capital and repayment of debt.

  CREDIT FACILITIES AND INDEBTEDNESS

       On June 27, 2003, we refinanced most of our outstanding debt by issuing
$405.0 million of 10 3/8% senior notes and entered into a $350.0 million senior
secured credit facility with a syndicate of lenders. The proceeds were used to
repay existing indebtedness under several lending arrangements and to pay costs
associated with the refinancing. Following the refinancing, our principal
sources of liquidity are cash flow generated from operations and borrowings
under the new senior secured credit facility and we believe these sources will
be sufficient to meet our cash flow requirements for at least the next twelve
months. The principal liquidity requirements are working capital, capital
expenditures and debt service. Other than non-cancelable operating lease
commitments, we do not have any off-balance sheet financing arrangements or
relationships with unconsolidated special purpose entities.

       The following is a summary of our existing credit facilities and other
long-term debt:

       Senior secured credit facility:  The senior secured credit facility
provides commitments of up to $350.0 million. We will be able to borrow under
the senior secured credit facility the lesser of (i) the committed amount, and
(ii) the borrowing base (which is based upon a portion of the inventory and
accounts receivable held by most of our operating units less certain reserves),
minus outstanding loans, letter of credit obligations and other obligations owed
under the senior secured credit facility. Since the borrowing base under the
senior secured credit facility will be based on actual inventory and accounts
receivable levels, available borrowings under the facility will fluctuate. The
borrowings under the senior secured credit facility are secured by our inventory
and accounts receivable. At June 30, 2004, there was $36,000 outstanding and
$298.6 million available under the senior secured credit facility compared to
$135.0 million outstanding and $130.3 million available at December 31, 2003.

       Loans under the senior secured credit facility bear interest at a per
annum rate equal to one of several rate options (LIBOR, federal funds rate,
bankers' acceptance or prime rate) based on the facility chosen at the time of
borrowing plus an applicable margin determined by excess availability from time
to time. Borrowings under the senior secured credit facility may be made in U.S.
or Canadian dollars, at our option. Our senior secured credit facility contains
restrictive covenants that limit our ability to engage in specified types of
transactions without the consent of the lenders. These covenants limit our
ability to, among other things: incur additional debt, issue redeemable stock
and preferred stock, pay dividends on our common shares, sell or otherwise
dispose of certain assets and enter into mergers or consolidations.

       An affiliate of CIBC World Markets, one of the underwriters of this
offering, is a lender under the senior secured credit facility.

       Senior notes:  On June 27, 2003, we issued $405.0 million of 10 3/8%
senior notes, of which $35.0 million were sold to an indirect wholly-owned
subsidiary of Gerdau S.A. The notes mature on July 15, 2011. The notes were
issued at 98% of face value. The notes are unsecured, are effectively junior to
secured debt to the extent of the value of the assets securing such debt, rank
equally with all existing and future unsecured unsubordinated debt, and are
senior to any future senior subordinated or
                                        38
<PAGE>

subordinated debt. Interest on the notes accrues at 10 3/8% per annum (10.75%
effective rate) and is payable semi-annually on July 15 and January 15. At any
time prior to July 15, 2006, we may redeem up to 35% of the original principal
amount of the notes with the proceeds of one or more equity offerings of our
common shares at a redemption price of 110.75% of the principal amount of the
notes, together with accrued and unpaid interest, if any, to the date of
redemption. The indenture governing the notes permits us and our restricted
subsidiaries to incur additional indebtedness, including secured indebtedness,
subject to certain limitations. On January 23, 2004, we completed an exchange of
the senior notes. The exchanged notes have substantially the same form and terms
as the original notes issued on June 27, 2003. The exchanged notes were issued
under a prospectus in Ontario and the exchanged notes and subsidiary guarantees
have been registered under the U.S. Securities Act of 1933, as amended, and are
not subject to restrictions on transfer.

       AmeriSteel Bright Bar, Inc. Term Loan:  At June 30, 2004, AmeriSteel
Bright Bar, Inc. had a $2.9 million term loan outstanding compared to $3.2
million as of December 31, 2003. The loan bears interest at a fixed rate of 6%
and matures in September 2011.

       Industrial revenue bonds:  We had $27.4 million of industrial revenue
bonds outstanding as of June 30, 2004 which was unchanged from the amount
outstanding as of December 31, 2003. Of these bonds, $23.8 million of the bonds
were issued in prior years to construct facilities in Jackson, Tennessee. We
assumed an industrial revenue bond in the amount of $3.6 million with the
acquisition of the Cartersville cold drawn facility in September 2002. The
interest rates on these bonds range from 50% to 75% of the prime rate. The
industrial revenue bonds mature in 2014, 2017 and 2018. These bonds are secured
by letters of credit issued under the senior secured credit facility.

       Related party loans:  In the first quarter of 2003, a subsidiary of
Gerdau S.A. made loans totaling $30.0 million to increase our liquidity. These
loans were used for working capital purposes, bore interest at the rate of 6.5%
and were repaid in the second quarter of 2003 using proceeds from the
refinancing we completed in 2003. In conjunction with the issuance of the $405.0
million senior notes in June 2003, $35.0 million of the notes were sold to an
indirect wholly-owned subsidiary of Gerdau S.A. In the first quarter of 2004, we
obtained from a Brazilian bank a $20.0 million, one year, 2.65% interest bearing
loan and a $5.0 million, one year, 2.56% interest bearing loan. Each loan was
guaranteed by Gerdau S.A.

       Convertible debentures:  We have unsecured, subordinated convertible
debentures in the principal amount of Cdn$125.0 million, which bear interest at
6.5% per annum, mature on April 30, 2007, and, at the holders' option, are
convertible into our common shares at a conversion price of Cdn$26.25 per share.
Under the terms of the trust indenture for the convertible debentures, no
adjustment to the conversion price is required if we issue common shares in a
customary offering. The debentures are redeemable, at our option, at par plus
accrued interest and we have the right to settle the principal amount by the
issuance of common shares based on their market value at the time of redemption.

       Capital leases:  We had $1.0 million of capital leases as of June 30,
2004 compared to $1.1 million as of December 31, 2003.

MATERIAL DIFFERENCES BETWEEN CANADIAN GAAP AND U.S. GAAP

       Our financial information is prepared in accordance with U.S. GAAP. U.S.
GAAP differs from Canadian GAAP in several respects. The material differences
between U.S. GAAP and Canadian GAAP as they relate to our financial statements
are described in note 20 to our audited consolidated financial statements and
note 12 to our unaudited interim consolidated financial statements included
elsewhere in this prospectus. The following is a summary of these differences:

       -     Under U.S. GAAP, joint ventures are accounted for using the equity
             method. Under Canadian GAAP, joint ventures are proportionately
             consolidated. This means that 50% of each line item is recorded.
             This means, among other differences, that depreciation expense
             associated with our joint ventures is not reported under U.S. GAAP.

                                        39
<PAGE>

       -     As a result of proportionate accounting, under Canadian GAAP there
             is no equity investment account in long-term assets to which
             allocations of negative goodwill can be made under the purchase
             method of accounting. Therefore, in the business combination with
             Co-Steel Inc., negative goodwill was only allocated against
             property, plant and equipment which lowers depreciation expense.
             Under U.S. GAAP, joint ventures are accounted for under the equity
             method and therefore negative goodwill is allocated to the equity
             investment and property, plant and equipment. As a result,
             depreciation expense under U.S. GAAP is higher.

       -     Comprehensive income is not reported under Canadian GAAP. Under
             U.S. GAAP, comprehensive income represents the change in equity
             during a reporting period from transactions and other events and
             circumstances from non-shareholder sources. Components of
             comprehensive income include items such as net earnings (loss),
             changes in the fair value of investments not held for trading,
             minimum pension liability adjustments, derivative instruments and
             foreign currency translation gains and losses.

       -     Under U.S. GAAP, an additional minimum pension liability is charged
             to other comprehensive income in shareholders' equity to the extent
             that the unfunded accumulated benefit obligation (ABO) exceeds the
             fair value of the plan assets and this amount is not covered by the
             pension liability recorded in the balance sheet. The calculation of
             the ABO is based on the actuarial present value of the vested
             benefits to which the employee is currently entitled, based on the
             employee's expected date of separation or retirement. The
             recognition of an additional minimum liability is not required
             under Canadian GAAP.

       -     Under U.S. GAAP, we accrue for scheduled annual maintenance
             shutdowns. Canadian GAAP does not allow this accounting practice.

CAPITAL EXPENDITURES

       We spent $26.4 million on capital projects in the six months ended June
30, 2004 compared to $21.8 million in the same period in 2003 and $55.2 million
in the year ended December 31, 2003. We expect to spend an aggregate of
approximately $90.0 million on capital projects in 2004, which includes
approximately $28.0 million in carryover projects from the year ended December
31, 2003. Major capital projects in 2004 include caster upgrades of $10.0
million, mill control upgrades of $5.5 million, warehouse and material handling
improvements of $16.0 million, sub-station upgrades of $3.5 million, reheat
furnace improvements of $10.0 million and information system upgrades of $4.0
million.

CONTRACTUAL OBLIGATIONS

       The following table shows our contractual obligations as of June 30,
2004.

<Table>
<Caption>
CONTRACTUAL OBLIGATIONS (IN THOUSANDS)   TOTAL     LESS THAN ONE YEAR   1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
--------------------------------------  --------   ------------------   ---------   ---------   -------------
<S>                                     <C>        <C>                  <C>         <C>         <C>
Long-term debt(1)....................   $457,484        $ 29,182         $ 1,034     $1,183       $426,085
Operating leases(2)..................     70,688          12,119          22,238      8,000         28,331
Capital expenditures(3)..............     66,049          46,234          19,815         --             --
Unconditional purchase
  obligations(4).....................     40,865          40,865              --         --             --
Pension funding obligations(5).......      6,452           6,452              --         --             --
                                        --------        --------         -------     ------       --------
  Total contractual obligations......   $641,538        $134,852         $43,087     $9,183       $454,416
                                        ========        ========         =======     ======       ========
</Table>

------------

(1) Total amounts are included in our consolidated balance sheet as at June 30,
    2004. See note 8, Long-term Debt, to our unaudited consolidated financial
    statements.

(2) Includes minimum lease payment obligations for equipment and real property
    leases in effect as of June 30, 2004.

(3) Purchase obligations for capital expenditure projects in progress.

                                        40
<PAGE>

(4) A majority of these purchase obligations are for inventory and operating
    supplies and expenses used in the ordinary course of business.

(5) Pension funding obligations are included only for 2004 as the amount of
    funding obligations beyond the next year are not yet determinable.

       Environmental liabilities:  We generate certain wastes, including EAF
dust, that are classified as hazardous wastes and must be properly managed under
applicable environmental laws and regulations. In the United States and Canada,
certain environmental laws and regulations impose joint and several liability on
certain classes of persons for the costs of investigation and clean-up of
contaminated properties. Liability may attach regardless of fault or the
legality of the original disposal. Some of our present and former facilities
have been in operation for many years and, over such time, have used substances
and disposed of wastes that may require clean-up. We could be liable for the
costs of such clean-ups. Clean-up costs for any contamination, whether known or
not yet discovered, could be substantial and could have a material adverse
effect on our results of operations.

       Some of our North American operations in the U.S. are responsible for the
remediation of certain sites where EAF dust was generated and/or disposed. In
general, our estimate of remediation costs is based on our review of each site
and the nature of the anticipated remediation activities to be undertaken. Our
process for estimating such remediation costs includes determining for each site
the available remediation methods, applicable laws and regulations, and the
estimated cost for each step of the remediation. In such determinations, we may
employ outside consultants and providers of such remedial services to assist in
making such determinations. Although the ultimate costs associated with the
remediation are not known precisely, we estimated the present value of the total
remaining costs as of December 31, 2003 to be approximately $13.6 million, with
these costs recorded as a liability in our financial statements. Included in the
amounts outstanding is $8.6 million recorded in 2002 with respect to certain
environmental obligations which were triggered by the change in control of
Co-Steel Inc. in certain jurisdictions in which Co-Steel Inc. operated.

       Carbon monoxide and other emissions at our Perth Amboy minimill
frequently exceeded permitted levels during 2001 and 2002. We have conducted
investigations to determine the cause of these episodes, and steps have been
taken to reduce emissions and to modify the Perth Amboy minimill's environmental
permit requirements. Discussions with the New Jersey Department of Environmental
Protection (NJDEP) have largely resolved these permit and compliance issues.
Penalty assessments of approximately $250,000 have been agreed upon.

       In April 2001, we were notified by the Environmental Protection Agency,
the EPA, of an investigation that identifies us as a potential responsible party
(PRP) in a Superfund Site in Pelham, Georgia where the total claim is $15.5
million. The Pelham site was a fertilizer manufacturer in operation from 1910
through 1992, lastly operated by Stoller Chemical Company, a now bankrupt
corporation. The EPA has filed suit with us named as a defendant. We are
included in this action because we allegedly shipped EAF dust to this property
during 1978. Previously, the EPA offered a settlement to the named PRPs totaling
$15.5 million under which our allocation was approximately $1.8 million. The EPA
has recently indicated that it is reconsidering the appropriate allocation; that
reconsideration could cause the EPA's view of our allocation to increase. One of
the named PRPs is in bankruptcy proceedings. We object to our inclusion as a PRP
on several bases, have asserted defenses and are pursuing legal alternatives,
including adding a larger third party which we believe was incorrectly excluded
from the original lawsuit. In 2004, the court denied a motion asserting some,
but not all, of our defenses. As the ultimate exposure to us, if any, is
uncertain, no liability for remediation costs has been accrued for this site.
While we do not anticipate a materially adverse result, we cannot assure you
that the final resolution of this matter will not have a material adverse effect
on us.

       Pension liabilities:  Our pension and retirement plans are in compliance
with applicable Canadian and United States regulatory and funding requirements
and filings. However, a number of our pension plans were underfunded when their
assets and liabilities were last computed. As of December 31, 2003, the
aggregate value of plan assets of our pension plans (including supplemental
retirement plans of the former

                                        41
<PAGE>

Co-Steel) was $278.2 million, while the aggregate projected benefit obligation
was $359.6 million, resulting in an aggregate deficit of $81.4 million for which
we are responsible. We anticipate the identified deficiencies to be larger than
as at December 31, 2003 based on the recent performance of equity markets. We
have made cash payments of $13.7 million to our defined benefit pension plans
for the six months ended June 30, 2004. We expect to contribute an additional
$6.5 million during the remainder of 2004. Funding requirements in future years
may be higher, depending on market conditions, and may restrict the cash
available for our business. Our funding requirements may also be significantly
higher commencing in 2005 if temporary relief provisions enacted by the United
States Congress are not extended.

       We have post-retirement medical plans with unfunded liabilities of
approximately $38.6 million as of December 31, 2003. These plans are not
pre-funded, as is typical. During the year ended December 31, 2003, our benefit
cost relating to our post-retirement medical plans was $3.1 million.

       For year-end purposes, and for the above valuation purposes, we estimated
our liability for future benefits using a 6.5% discount rate for our Canadian
plans and a 6.75% discount rate for our U.S. plans. Each half percentage change
in the discount factor corresponds to an approximate 7%-9% inverse change in the
pension obligations, which were approximately $360 million at December 31, 2003.
A 0.5% change in our assumed rate of return on plan assets corresponds to an
inverse change in pension expense of approximately $1.0 million.

       Gallatin contingent obligations:  As a general partner of Gallatin Steel,
we are required to make capital contributions to Gallatin Steel equal to 50% of
the lease payments it pays to Gallatin County, Kentucky, if the availability
under Gallatin's financing arrangements fall below $10 million or Gallatin's
fixed charge coverage is less than stipulated thresholds as defined by its
financing arrangements. Although Gallatin has historically elected to fund its
lease payments out of its working capital, it is not obligated to do so, and
therefore we could be obligated to fund them in the future.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Our use of derivative instruments is limited. Derivative instruments are
not used for speculative purposes but they are used to manage well-defined
interest rate risks arising out of the normal course of business. In order to
reduce our exposure to changes in the fair value of our senior notes, we entered
into interest rate swaps subsequent to our June 2003 refinancing. The agreements
have a notional value of $200 million and expiration dates of July 15, 2011. We
receive a fixed interest rate and pay a variable interest rate based on LIBOR.
The aggregate mark-to-market (fair value) of the interest rate swap agreements,
which represents the amount that would be received if the agreements were
terminated at December 31, 2003, was approximately $89,000. Taking into account
the interest rate swaps, approximately 38% of our $532.2 million of debt
outstanding as at June 30, 2004 was floating rate and 62% was fixed rate.

       We sometimes use natural gas forward purchase contracts to partially
manage our exposure to price risk of natural gas which we use during the
manufacturing process. Our use of these contracts is immaterial for all periods
presented.

       Every dollar of change in metal spread, the difference between mill
selling prices and scrap raw material cost, results in a corresponding $6.0
million change to our pre-tax income from operations. Every dollar increase or
decrease in the average scrap price results in a corresponding $1.5 million
change to our working capital requirements.

                                        42
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

       There are no recently issued accounting standards applicable under
Canadian GAAP that have not been adopted and reflected in our financial
statements. The following are recently issued accounting standards under U.S.
GAAP:

       In January 2003, FASB issued Interpretation No. 46, ("FIN 46R")
"Consolidation of Variable Interest Entities." Many variable interest entities
have commonly been referred to as special-purpose entities or off-balance sheet
structures, but this Interpretation applies to a larger population of entities.
In general, a variable interest entity is any legal structure used for business
purposes that either (i) does not have equity investors with voting rights or
(ii) has equity investors that do not provide sufficient financial resources for
the entity to support its activities. A variable interest entity often holds
financial assets, including loans or receivables, real estate or other property.
Until now, one company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.
This Interpretation changes that by requiring a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of this Interpretation apply to variable interest entities created
after January 31, 2003 and apply to existing variable interest entities in the
first fiscal year or interim period beginning after December 15, 2003.

       We adopted this standard as of January 1, 2004. We have a 50% interest in
a number of joint ventures. Certain of these joint ventures are considered
variable interest entities under the provisions of FIN 46R. We have evaluated
the terms of the agreements governing the joint ventures and have determined
that we are not subject to a majority of the entities' risk of loss or residual
returns. Therefore, the entities should not be consolidated. The adoption of FIN
46R had no impact on our financial results.

       The Canadian GAAP standard on consolidation of variable interest entities
is effective for us in 2005. The Canadian standard is very similar to FIN 46R.
It is expected that certain of our joint ventures will be considered variable
interest entities but that we will not be the prime beneficiary. The result is
that these joint ventures that are currently proportionately consolidated will
be accounted for under the equity method of accounting for investments.

                                        43
<PAGE>

                                    INDUSTRY

       The United States steel industry is composed of two major sectors:
integrated steel and minimills. Integrated steel facilities use blast furnaces
to make molten steel from iron ore and coke. Minimills, like the ones we own,
melt scrap steel and other iron bearing feedstocks using electric arc furnaces.
Minimills tend to be smaller and less capital-intensive than integrated mills,
and can therefore be built and operated in multiple locations that are closer to
end customers. Minimills have accounted for an increasing amount of North
American steel production.

       The steel industry can also be segmented between flat rolled and long
products. Flat products are processed on rolls with flat faces as opposed to
grooved or cut faces and include shapes such as sheet, strip and plate. Long
products include rods, bars and structural products. Minimill producers like us
tend to concentrate primarily on long products while integrated mills focus on
flat rolled products. However, minimills using thin slab casting technology are
increasingly able to compete with integrated producers of flat rolled products.

       Steel is sold to customers in a variety of industries, including
construction, transportation, appliance, machinery and equipment industries.
Many customers are served indirectly through steel service centers, which act as
intermediaries for a large portion of North American steel supply.

       The North American steel industry is highly cyclical and competitive due
to the large number of steel producers, the dependence upon cyclical end
markets, the high volatility of raw material and energy prices and the presence
of competing materials such as aluminum, cement, composites, glass, plastic and
wood. The industry is also characterized by excess global capacity and intense
import competition which has restrained price expansion during periods of
economic growth and encouraged price decreases during economic contractions.
Beginning in mid-2000 and continuing through 2002, these factors combined with a
general economic slowdown to cause a severe downward cycle for the North
American steel industry. Prices for many steel products reached 10-year lows in
late 2001, resulting in significant domestic capacity closures. Over 20 U.S.
steel companies sought protection under Chapter 11 of the United States
Bankruptcy Code since the beginning of 2000. The operations of some of these
companies have ceased, which may reduce the supply of steel in the United
States. However, because the shutdown of some of these facilities may only be
temporary, it is not possible to predict whether the bankruptcies will have a
long-term reducing effect on the United States steel manufacturing capacity.

       Consolidation is also occurring in the North American steel industry as
many bankrupt steel companies, once overburdened with underfunded pension,
healthcare and other legacy costs, are being relieved of these obligations and
purchased by other steel producers. This consolidation, including the purchases
by steel producers of the assets of LTV Corporation, Bethlehem Steel
Corporation, Trico Steel Co. LLC, National Steel Corporation, Weirton Steel
Corporation and Georgetown Steel Corporation, has created a lower operating cost
structure for the resulting entities and a less fragmented industry. In
addition, Nucor Corporation's acquisition of Birmingham Steel Corporation and
the combination of Gerdau North America and Co-Steel Inc. have significantly
consolidated the long steel products market. According to our estimates, Nucor
Corporation, Commercial Metals Company and ourselves now have an approximately
53% market share of the commodity long products market versus approximately 34%
in 2000. We believe this consolidation trend will continue over the next several
years.

       Increased consolidation in the North American and global steel industry,
coupled with a strong recovery in steel demand fueled largely by expanding
Chinese and North American economies, have significantly improved the market
environment for steel. In 2004, steel producers have been more successful in
passing through the steep scrap raw material and other cost escalation witnessed
since mid-2003, thereby restoring profit margins to reasonable levels.

                                        44
<PAGE>

                                    BUSINESS

OUR BUSINESS

       We are the second largest minimill steel producer in North America with
annual manufacturing capacity of over 6.4 million tons of mill finished steel
products. Through a vertically integrated network of 11 minimills (including one
50%-owned minimill), 13 scrap recycling facilities and 32 downstream operations,
we primarily serve customers in the eastern half of North America. Our products
are generally sold to steel service centers, steel fabricators or directly to
OEMs, for use in a variety of industries, including construction, automotive,
mining, cellular and electrical transmission, metal building manufacturing and
equipment manufacturing.

       Our operations are segmented into two operating divisions, minimills and
downstream operations.

       Minimills.  We own and operate seven minimills in the United States and
three in Canada and also have a 50% interest in an eleventh minimill located in
Kentucky, a joint venture with Dofasco Inc. We manufacture and market a wide
range of steel products, including reinforcing steel bar (rebar), merchant bars,
structural shapes, beams, special sections, coiled wire rod (rod), and, through
our joint venture, flat rolled sheet. For the year ended December 31, 2003, our
mill external shipments were approximately 4.9 million tons. For the six months
ended June 30, 2004, our mill external shipments were approximately 2.6 million
tons. Over 90% of the raw material feed for our minimill operations is recycled
steel scrap, making us the second largest steel recycler in North America. Four
of our minimills are provided scrap from an internal network of 13 scrap
recycling facilities. We believe our recycling operations provide a stable
supply of these minimills' primary raw material.

       Downstream operations.  We have secondary value-added steel businesses
referred to as downstream operations. These steel fabricating and product
manufacturing operations process steel principally produced in our minimills.
For the year ended December 31, 2003, our downstream shipments were
approximately 631,000 tons of fabricated steel products and represent
approximately 11.3% of our 5.6 million tons of total finished steel shipments.
For the six months ended June 30, 2004, our downstream shipments were
approximately 366,000 tons of fabricated steel products and represent
approximately 12.3% of our 3.0 million tons of total finished steel shipments.
Our downstream operations consist of the following:

       -     Rebar fabrication and epoxy coating -- we have one of the largest
             rebar fabricating and epoxy coating operations in North America,
             consisting of 21 rebar fabricating facilities and three epoxy
             coating plants, servicing the concrete construction industry in the
             eastern half of the United States and Canada. Our rebar facilities
             have the capacity to produce approximately 750,000 tons per year of
             fabricated and epoxy coated rebar. The fabricating facilities
             purchase the majority of their rebar requirements from our
             minimills at market prices and cut and bend it to meet our
             customers' engineering, architectural and other end-product
             specifications. The epoxy coating plants apply epoxy coating to
             rebar for use in construction projects requiring rust resistant
             steel, including bridge and tunnel construction.

       -     Railroad spike operations -- we have two railroad spike operations
             that forge steel square bars produced at the Charlotte minimill
             into track spikes. The rail spike operations manufacture and
             distribute the spikes on an annual contract basis to the railroad
             industry throughout North America. The rail spike operations
             purchase all of their raw material from our minimills at market
             prices.

       -     Cold drawn plants -- we have two cold drawn plants that process hot
             rolled merchant and light structural steel bars into cold drawn
             bars with improved physical characteristics. The cold drawn
             operations purchase approximately 40% of their raw material
             requirements from our minimills.

                                        45
<PAGE>

       -     Super light beam processing and elevator guide rails -- we process
             super light steel beams into cross members for the truck trailer
             industry and process steel guide rail sections for elevator
             manufacturers. These operations purchase super light steel beams
             exclusively from our Manitoba minimill at market prices.

       -     Wire mesh and collated nails -- we produce small-diameter drawn
             wire from coiled steel rod. The wire is woven into sheets and rolls
             of wire mesh for concrete pavement reinforcement or converted into
             collated nails for use in high-speed nail machines.

COMPETITIVE STRENGTHS

       We believe the following strengths will enable us to compete more
effectively in our strategic markets.

       Leading market position.  We are the second largest minimill steel
producer in North America. Through a network of minimills and downstream
operations strategically located throughout the eastern half of the United
States and Canada, we are able to efficiently service customers on a local basis
over a broad geographical segment of the North American steel market. Our
manufacturing capacity and wide range of shapes and sizes of bar steel products
enable us to meet a wide variety of customers' steel and fabricated product
needs. Our broad geographic reach and product diversity, combined with our
centralized order management system, is particularly well suited to serve larger
steel service centers and other customers that are increasingly seeking to
fulfill their steel supply requirements from a small number of suppliers. We
believe our proposed acquisition of North Star will enable us to more
effectively and efficiently service our customers throughout the midwestern U.S.
market, enhance our geographic reach west of the Mississippi River and broaden
the range of products we offer our customers.

       Vertically integrated operations.  Our minimills are integrated with 32
downstream steel fabricating facilities and 13 upstream scrap raw material
recycling facilities. Downstream integration provides a captive market for a
significant portion of our mill production and valuable market information on
the end-use demand for steel products. The downstream operations have
historically produced a high return on investment, been less capital intensive
and been subject to less import competition compared to minimill operations. Our
downstream operations also balance some of the cyclicality and volatility of the
base minimill business and enable us to capture additional value-added margins
on the steel produced at our minimills. In the year ended December 31, 2003, our
downstream businesses accounted for approximately 11.3% of our shipments of
total finished steel products and generated approximately 15% of our net sales.
In the six months ended June 30, 2004, our downstream businesses accounted for
approximately 12.3% of our shipments of total finished steel products and
generated approximately 14.2% of our net sales. We also have 13 upstream scrap
recycling facilities that provide approximately 30% of our minimill scrap needs,
thereby decreasing dependency on third-party scrap suppliers.

       Scope for future operational improvement.  We have achieved significant
cost savings from the integration of the operations of Co-Steel and Gerdau North
America through the sharing of best operating practices, freight optimization,
minimill production scheduling efficiencies, consolidated procurement activities
and efficiencies in administrative and management functions. We believe we may
achieve additional cost savings over the mid- to long-term from these sources,
as well as from operational improvements through the coordination of
manufacturing technologies, knowledge-sharing and the fostering of an operating
culture focused on continuous improvement. We expect to achieve additional cost
savings from the proposed integration of our operations with the operations of
North Star.

       Disciplined business system platform.  We believe that our employees are
our most valuable resource and are key to maintaining competitive advantage. Our
corporate culture is geared toward engaging all employees in a common,
disciplined business system focused on continuous improvement. We have
implemented a business system which identifies global industry benchmarks for
key operational and safety measures. This system includes training and safety
programs and performance-based incentives that are designed to improve
performance and motivate employees.

                                        46
<PAGE>

       Strong sponsorship.  We have access to the knowledge base of, and
sponsorship from, our parent company, Gerdau S.A., one of the largest long steel
producers in the world with a history of over 100 years in the steel industry.
We expect to continue to benefit from Gerdau S.A.'s management experience and
its expertise in manufacturing. Gerdau S.A. and its subsidiaries, including us,
have global annual manufacturing capacity of 12.3 million tons of mill finished
steel products with 22 steel plants, two strategic shareholdings and
approximately 74 commercial units in Brazil. With the talent depth, technical
support and financial strength of Gerdau S.A., we believe we are strategically
positioned to grow and succeed within the North American steel industry.

       Experienced management team.  We have a growth-oriented senior management
team that has an average of over 25 years of experience in the steel industry.
Management's extensive experience has been instrumental in our historical growth
and provides a solid base on which to expand our operations. For instance, our
management has a proven track record in successfully managing and integrating
acquisitions. We intend to apply this experience to the pending North Star
acquisition and any subsequent acquisitions.

OUR STRATEGY

       Our strategy involves the following components:

       Continue to offer extensive product capabilities to our customers.  We
believe that we distinguish ourselves from our competitors through our product
diversity and quality, delivery performance, centralized order management
system, and ability to fill orders quickly from multiple inventory sources. We
have one of the widest long steel product ranges in North America and we
regularly add to our product mix in response to our customers' requirements. We
believe many of our customers consider us one of their key suppliers for a wide
range of their product needs. Through our network of minimills and downstream
facilities, we believe that we can distinguish our company by offering one of
the broadest ranges of long steel products in the eastern half of North America,
our extensive geographic coverage and our commitment to providing market-leading
customer service.

       Promote sharing of best practices and pursue opportunities for
synergies.  We promote the sharing of best practices throughout the worldwide
operations of the Gerdau group in order to enhance and improve operational
efficiencies. Drawing on the operational experience of Gerdau S.A., we will
continue to regularly pursue opportunities for operational synergies between
each of our minimills and vertical integration synergies between our scrap
recycling facilities, our minimills and our downstream operations. As part of
our integration of Co-Steel, we have been rationalizing our rolling mill
production schedules, improving our inventory management, exploring common
procurement opportunities and pursuing logistical efficiencies.

       Selectively pursue strategic acquisitions.  We believe that there is
significant opportunity for future growth through selective acquisitions, given
the pace of consolidation in the steel industry and the increasing trend of our
customers to focus on fewer key suppliers. We intend to continue to pursue a
selective and disciplined acquisition strategy, such as the proposed acquisition
of North Star, which is focused on improving our financial performance in the
long-term and expanding our product lines and geographic reach. In our
downstream business we are focused on enhancing our product offering and
strengthening our market position. As a result of our scale and prior successes
in managing and integrating acquisitions, we believe we are strategically
positioned to take an active role in the continuing consolidation of the North
American steel industry.

       Focus on employee communication and participation.  We believe that a
high level of employee involvement is a key factor in the success of our
operations and our pursuit of a continuous improvement platform. We intend to
continue to foster a corporate culture that encourages our employees to
communicate with management in order to achieve operational improvement. Through
open and effective communication, we promote the sharing of best operating
practices throughout our organization and the creation of a learning environment
geared toward attaining escalating performance benchmarks. In

                                        47
<PAGE>

addition, we regularly review our incentive-based compensation arrangements for
employees and senior management to ensure that our employees' financial interest
is aligned with that of our shareholders and competitive within the marketplace.

OUR HISTORY

       We are an indirect subsidiary of, and are controlled by, Brazilian
steelmaker Gerdau S.A., a leading producer of long steel products in Brazil,
Chile, Uruguay, Argentina, and, through us, Canada and the United States. The
Gerdau group, of which we are a part, has global annual mill manufacturing
capacity of 12.8 million tons of finished steel products, over 20,000 employees
and total assets exceeding $5.0 billion. For the six months ended June 30, 2004,
Gerdau S.A. had approximately $3.0 billion in consolidated net sales and had a
market capitalization of over $3.5 billion on June 30, 2004.

       Over the last 15 years, Gerdau S.A. has increased its investment abroad,
including its investment in North America. Most recently, on October 23, 2002,
the parent company of Gerdau S.A.'s North American operations, referred to as
Gerdau North America, acquired Co-Steel Inc. At that time, Gerdau North America
owned and operated seven minimills, two in Canada and five in the United States,
and had 26 downstream operations and six scrap processing operations. Co-Steel
was a Canadian public company that owned and operated three minimills,
participated in a 50/50 joint venture that ran a fourth minimill in Kentucky and
was a major participant in the sourcing, trading and processing of scrap metal
in the northeastern North American steel market. Through the combination,
Co-Steel acquired all of the issued and outstanding shares of the companies
included in Gerdau North America in exchange for Co-Steel common shares
representing approximately 74% of Co-Steel's total common shares and changed its
name to Gerdau Ameristeel Corporation.

       We conduct our operations directly and indirectly through subsidiaries
and joint ventures in Canada and the United States. On December 31, 2002, part
of our U.S. operations were carried on through an 87%-owned U.S. subsidiary. In
March 2003, we effected an exchange, referred to as the minority exchange, in
which we acquired the shares of the subsidiary not previously owned by us in
exchange for newly-issued common shares. Following the transaction with Co-Steel
and the minority exchange, Gerdau S.A. indirectly held approximately 69% of our
common shares.

       On June 27, 2003, we refinanced most of our outstanding debt by issuing
$405.0 million aggregate principal amount of 10 3/8% senior notes due 2011 and
entering into a $350.0 million senior secured credit facility with a syndicate
of lenders. The proceeds were used to repay existing indebtedness under several
lending arrangements and to pay costs associated with the refinancing. Following
the completion of the refinancing, we reorganized our corporate structure to
more efficiently integrate our operations and bring our U.S. operations within
the same U.S. group.

       On March 19, 2004, we acquired the operating assets of Potter Form & Tie
Co., a rebar fabricator in the midwest United States, for $11.1 million in cash.

       On April 16, 2004, we issued 26.8 million common shares to Gerdau S.A.
through a private placement for total proceeds of $97.9 million. This
transaction increased Gerdau S.A.'s ownership to approximately 72% of our common
shares.

                                        48
<PAGE>

OUR PRODUCTS

       The following table shows the breakdown of tons shipped to third parties
and average net selling prices by product for the years ended December 31, 2002
(pro forma to give effect to the acquisition of Co-Steel on October 23, 2002 as
if it had occurred at the beginning of 2002) and 2003 and the six months ended
June 30, 2003 and 2004:

<Table>
<Caption>
                                                           AVERAGE NET                              AVERAGE NET
                                        TONS SHIPPED     SELLING PRICE(1)      TONS SHIPPED      SELLING PRICE(1)
                                         YEAR ENDED         YEAR ENDED       SIX MONTHS ENDED    SIX MONTHS ENDED
                                        DECEMBER 31,       DECEMBER 31,          JUNE 30,            JUNE 30,
                                       --------------    ----------------    ----------------    -----------------
                                       2002     2003      2002      2003      2003      2004      2003       2004
                                       -----    -----    ------    ------    ------    ------    ------     ------
                                        (THOUSANDS)         (PER TON)          (THOUSANDS)           (PER TON)
<S>                                    <C>      <C>      <C>       <C>       <C>       <C>       <C>        <C>
Total mill external shipments(2).....  4,497    4,939     $283      $309     2,434     2,619      $299       $450
Fabricated steel shipments...........    656      631      433       436       318       366       430        534
                                       -----    -----     ----      ----     -----     -----      ----       ----
  Total finished steel shipments.....  5,153    5,570     $302      $323     2,752     2,985      $314       $460
                                       =====    =====     ====      ====     =====     =====      ====       ====
</Table>

------------

(1) Selling prices are net of freight.

(2) Includes 50% of tons shipped by Gallatin Steel Company, our joint venture
    with Dofasco Inc.

  MERCHANT BARS/SPECIAL SECTIONS

       Merchant bars/special sections refer to merchant bars, structural
products, special sections and special bar quality products.

       -     Merchant bars consist of rounds, squares, flats, angles, and
             channels that are less than three inches in dimension. Merchant
             bars are generally sold to steel service centers and to
             manufacturers who fabricate the steel to meet engineering or
             end-product specifications. Merchant bars are used to manufacture a
             wide variety of products, including gratings, transmission towers,
             floor and roof joists, safety walkways, ornamental furniture, stair
             railings and farm equipment. Merchant bars typically require more
             specialized processing and handling than rebar, including
             straightening, stacking, and specialized bundling. Due to their
             variety of shapes and sizes, merchant bars typically are produced
             in short production runs, necessitating frequent changeovers in
             rolling mill equipment.

       -     Structural products consist of angles, channels and beams that are
             three inches and larger in size. Structural products are used in
             construction and in a wide variety of manufacturing applications,
             including housing, trailers and structural support for buildings.
             Like smaller merchant bars, structural products typically require
             specialized processing and handling, and are produced in short
             production runs. Structural products are generally sold to service
             centers, fabricators and OEMs.

       -     Special sections are bar products with singular applications,
             compared to merchant bar products that can be used in a variety of
             applications. Special sections include custom shapes for use in the
             earth moving, material handling and transportation industries. Our
             special sections products include grader blades for tractors,
             elevator guide rails, light rails for crane and mine applications,
             and super light-weight beams for truck trailer cross members.

       -     Special bar quality products (SBQ) are merchant bar shapes that
             have stringent chemical and dimensional tolerance requirements, and
             are often more costly to produce and command a higher margin than
             smaller dimension bar products. SBQ are widely used in industries
             such as mining and automobile production and are generally sold to
             OEMs.

  STOCK REBAR

       Stock rebar refers to straight reinforcing steel bars, ranging from 20 to
60 feet in length and from 3/8 inch to 2 1/4 inches in diameter. Stock rebar is
sold to companies that either fabricate it themselves or

                                        49
<PAGE>

warehouse it for sale to others who fabricate it for reinforced concrete
construction. Rebar products are used primarily in two sectors of the
construction industry: private commercial building projects, such as
institutional buildings, retail sites, commercial offices, apartments,
condominiums, hotels, manufacturing facilities and sports stadiums; and
infrastructure projects, such as highways, bridges, utilities and water and
waste treatment facilities.

  ROD

       Rod refers to coiled wire rod. We produce industrial quality rod products
that are sold to customers in the automotive, agricultural, industrial fastener,
welding, appliance and construction industries. We sell rod to downstream
manufacturers who further process it by cold drawing into various shapes,
including twisted or welded configurations such as coat hangers, supermarket
baskets and chain link fences. Other end uses of wire rod products include the
manufacture of fences, fine wire, chain, welding wire, plating wire, fasteners
and springs. Depending on market conditions and availability, some rod from our
minimills may be sold to our downstream operations that manufacture wire mesh
and collated nails.

  FLAT ROLLED STEEL

       Flat rolled steel is steel that is rolled flat and then packaged into
coils. Gallatin Steel, our joint venture with Dofasco Inc., is our only minimill
that produces flat rolled sheet. Flat rolled sheet is used in the construction,
automotive, appliance, machinery, equipment and packaging industries.

  FABRICATED STEEL

       Fabricated steel is any steel that is further processed after being
rolled by a mill. As a result of the further processing, fabricated steel
generally receives a higher price in the market than mill finished products.
Stock rebar is fabricated by cutting it to size and bending it into various
shapes, and used in reinforced concrete constructions, such as bridges, roads
and buildings. Fabricated steel also includes rounds, flats and squares
processed at the cold drawn plants, and rail spikes, guide rails, super light
beams, wire mesh and nails at other downstream facilities.

  BILLETS

       Billets are rectangular sections of steel that are semi-finished in a
casting process and cut to various lengths. Billets can be sold to other steel
producers and finished into steel products. Our melt shops produce billets for
conversion in the rolling mills into the finished products listed above, such as
rebar, merchant bar, structural shapes and special sections. A small portion of
billet production is sold in the open market to other steel producers for
rolling into finished products.

OUR OPERATIONS

  MINIMILLS

       We operate minimills, which are steel mills that use electric arc
furnaces to melt scrap metal by charging it with electricity. During melting of
scrap metal, alloys and other ingredients (such as fluxes) are added in measured
quantities to achieve desired metallurgical properties. The resulting molten
steel is cast into billets in a continuous casting process. The billets are
typically cooled and stored, and then transferred to a rolling mill where they
are reheated, passed through roughing mills for size reduction, and then rolled
into products such as rebar, merchant bars, structural shapes, rods or special
sections. These products emerge from the rolling mill and are uniformly cooled
on a cooling bed. Most merchant and structural products then pass through
automated straightening and stacking equipment. Finished products are neatly
bundled prior to shipment to customers, typically by rail or truck. In some
cases, finished products are

                                        50
<PAGE>

shipped by rail to a depot before delivery to customers. The following diagram
shows the typical steel production process in our minimills:

                                (STEEL PROCESS)

       All of our minimills are located on property which we own and are
typically located with convenient access to raw materials, means of
transportation (road, and in some cases, rail and water) and customers. In
general, scrap is supplied by our third party scrap recycling operations located
within 500 miles of the minimills. Four of our minimills are vertically
integrated with 13 scrap recycling facilities that supply a portion of their
scrap needs. Rebar finished product deliveries are generally concentrated within
350 miles of a minimill, and merchant bar deliveries are generally concentrated
within 500 miles. Some products, such as special sections produced by our
Manitoba minimill, are shipped greater distances, including overseas.

       The table below presents information regarding our minimills, including
the estimated annual production capacity and actual production for the twelve
months ended June 30, 2004. Annual melting and rolling capacities are based on
the best historical months of production and best rolling mill cycles,
respectively, both annualized and assuming the current mix of product and
eighteen days per year for maintenance shutdown. Actual capacity may vary
significantly from annual capacity due to changes in customer requirements;
sizes, grades and types of products rolled; and production efficiencies.
Capacity calculations may also change from year to year because of these
factors. Manufacturer's design capacity

                                        51
<PAGE>

information is not presented because we do not consider it a relevant measure
due to differences in the product mix and production efficiency assumptions.

<Table>
<Caption>
                                                TWELVE                                   TWELVE
                                  APPROX.    MONTHS ENDED                  APPROX.    MONTHS ENDED
                                   ANNUAL    JUNE 30, 2004    CAPACITY      ANNUAL    JUNE 30, 2004    CAPACITY
                                  MELTING       MELTING      UTILIZATION   ROLLING       ROLLING      UTILIZATION
                                  CAPACITY    PRODUCTION     PERCENTAGE    CAPACITY    PRODUCTION     PERCENTAGE
                                  --------   -------------   -----------   --------   -------------   -----------
                                    (THOUSANDS OF TONS)                      (THOUSANDS OF TONS)
<S>                               <C>        <C>             <C>           <C>        <C>             <C>
Cambridge, Ontario..............     360           336           93.3%        320           312          97.5%
Cartersville, Georgia...........     860           542           63.0         640           451          70.5
Charlotte, North Carolina.......     460           362           78.7         350           293          83.7
Jackson, Tennessee..............     670           527           78.7         600           547          91.2
Jacksonville, Florida...........     640           610           95.3         640           637          99.5
Knoxville, Tennessee............     550           498           91.0         520           482          92.7
Perth Amboy, New Jersey.........     900           682           75.8         800           701          87.6
Sayreville, New Jersey..........     800           585           73.1         600           536          89.3
Selkirk, Manitoba...............     385           357           92.7         360           331          91.9
Whitby, Ontario.................     960           665           69.3         800           618          77.3
                                   -----         -----          -----       -----         -----          ----
  Totals before Gallatin Joint
     Venture....................   6,585         5,164           84.0%      5,630         4,908          87.1%
Gallatin, Kentucky(1)...........     750           763            100(2)      780           763          97.8(2)
                                   -----         -----          -----       -----         -----          ----
  Totals including Gallatin
     Joint Venture..............   7,335(1)      5,927(1)        80.6%(2)   6,410(1)      5,671(1)       88.8%(2)
                                   =====         =====          =====       =====         =====          ====
</Table>

------------

(1) Includes 50% of the capacity and 50% of the production of the Gallatin
    minimill, which is a 50%-owned joint venture.

(2) Capacity utilization percentage includes the Gallatin minimill, calculated
    by using our 50% share of production.

       Although it is generally advantageous to run minimills at full production
levels to achieve the lowest unit costs, producing to targeted inventory levels
balances production with marketing and gives us sufficient flexibility to limit
maintenance delays and other downtime. This approach also results in better
working capital management.

  Cambridge Minimill

       The Cambridge minimill began operations in 1980. It is located on a 32
acre site in Cambridge, Ontario, 60 miles west of Toronto. It produces merchant
bar, SBQ products and rebar. Rebar produced at the Cambridge minimill is sold
primarily to fabricators and service centers in Canada. Approximately 75% of the
Cambridge minimill's production is merchant bar and SBQ products. It generally
produces smaller sizes in smaller production runs targeted to niche markets that
earn higher margins than commodity merchant bars. The minimill's melt shop was
rebuilt in 1986 and includes a 45-ton electric arc furnace and a three-strand
continuous caster. The rolling mill was commissioned in 1987 and includes a
75-tons per hour reheat furnace, an 18 in-line stand rolling mill, a 256 foot
cooling bed, an in-line cut-to-length shear, and a straightening, stacking, and
bundling finishing end. In 2003, a new pollution control system was installed.

  Cartersville Minimill

       The Cartersville minimill began its melting operations in 1989 and
constructed a new rolling mill in 1999. It is located on a 264 acre site in
Cartersville, Georgia. In addition to a wide range of merchant bars, the
minimill produces structural shapes and beams. The minimill's melt shop has a
140-ton electric arc furnace, a ladle refining station and a six-strand billet
caster. Construction of a 63,000 square foot

                                        52
<PAGE>

finished product warehouse was completed in October 2003. We expect to spend
approximately $13 million in 2004 for construction of 52,000 square feet of
additional warehouse space, installation of a rail spur and purchase of a mobile
gantry crane to improve beam handling and storage. In addition, we are
installing a 1000 metric ton cold shear, an 80 foot stacker, an off-line bundle
saw, and material handling equipment that will improve bundle quality and
increase rolling mill production.

  Charlotte Minimill

       The Charlotte minimill began operations in 1961. It is located on a 112
acre site in Charlotte, North Carolina. It produces rebar and merchant bars that
are sold primarily within the eastern seaboard states from Florida to
Pennsylvania. The minimill's melting equipment includes a 75-ton electric arc
furnace, a continuous scrap feeding and preheating system, a ladle refining
station and a three-strand continuous caster. Charlotte's rolling mill includes
an 80-tons per hour reheat furnace, 15 in-line mill stands, a 200-foot cooling
bed, an in-line straightener and flying cut-to-length shear, and an automatic
stacker for merchant bars and rebar. An upgrade to Charlotte's rolling mill
electrical control system was completed in December 2003.

  Gallatin Minimill

       The Gallatin minimill began operations in 1995. It is a joint venture
with Dofasco Inc. We own 50% of the Gallatin Steel Company which owns and
operates the Gallatin minimill. The minimill is located in Gallatin County,
Kentucky, 40 miles southwest of Cincinnati, Ohio on a 1,000 acre site owned by
the Gallatin Steel Company. It produces principally hot band flat rolled steel
products that are used in the construction, automotive, appliance, machinery,
equipment and packaging industries. The minimill operates a direct current
twin-shell 350-ton electric arc furnace with a ladle refining station and a thin
slab caster. The rolling mill is a high-speed tandem rolling mill and a
cut-to-length operation.

  Jackson Minimill

       The Jackson minimill began operations in 1981. It is located on a 283
acre site in Jackson, Tennessee. The Jackson minimill is our largest single
producer of merchant bars and also produces some larger size rebar. The merchant
bars are marketed primarily in the southeast and midwest United States. The
Jackson minimill's melting equipment includes a 140-ton electric arc furnace and
a four-strand continuous billet caster. The rolling mill consists of a 120-tons
per hour reheat furnace, 16 vertical and horizontal in-line quick-change mill
stands, a cooling bed, an in-line straightener, a cut-to-length product shear
and an automatic stacker. The Jackson minimill has a scrap shredder facility
which is used to process raw scrap purchased from third parties. A caster
upgrade project at the Jackson minimill was completed in December 2003.

  Jacksonville Minimill

       The Jacksonville minimill began operations in 1976. It is located on a
550 acre site in Jacksonville, Florida and produces rebar and rods. Straight
rebar is marketed primarily in Florida, the nearby Gulf Coast states and Puerto
Rico, and coiled rebar is shipped throughout the eastern United States. The rod
products are sold throughout the southeastern United States. Jacksonville's
melting equipment consists of a 100-ton electric arc furnace and a four-strand
continuous caster. The rolling mill includes a 100 tons per hour reheat furnace,
a 16-stand, in-line horizontal rolling mill, a 10-stand rod block, a cooling bed
for straight bars and a controlled cooling line for coiled products, a
cut-to-length product shear, and automatic bundling and tying equipment for
straight bars and coils. 40% of the scrap needs of the Jacksonville minimill is
supplied by an on-site recycling facility operated solely for the benefit of the
minimill.

                                        53
<PAGE>

  Knoxville Minimill

       The Knoxville minimill began operations in its present location in 1903.
It is located on a 52 acre site in Knoxville, Tennessee and produces almost
exclusively rebar. The rebar is marketed throughout the southern and midwestern
United States. Knoxville's melt shop completed a $34.5 million modernization in
July 2000. The new facility includes a 95-ton electric arc furnace and a
continuous scrap feeding and preheating system. The rolling mill consists of a
90-tons per hour reheat furnace, 17 in-line mill stands utilizing an in-line
heat treating process, a cooling bed and a cut-to-length shear line. The rolling
mill electrical control system was upgraded in April 2003. Construction of a
54,500 square foot finished product warehouse will be completed by the end of
2004.

  Manitoba Minimill

       The Manitoba minimill began operations in 1917. It is located on a 529
acre site in Selkirk, Manitoba. It produces special sections, merchant bars and
rebar. Approximately 75% of the Manitoba minimill's shipments are special
sections sold to the earth moving, material handling and transportation
industries. Up to 15% of its production is merchant bars and structurals.
Approximately 15% of the Manitoba minimill's production is rebar which is sold
primarily to fabricators and service centers in Canada. The Manitoba minimill
has a 65-ton electric arc furnace, a ladle refining station, a three-strand
continuous caster and operates two rolling mills. Rolling mill #1 has a 15-stand
rolling mill. Rolling mill #2 includes two in-line stands, one horizontal and
the other vertical, along with a cooling bed. The minimill is vertically
integrated with four scrap recycling facilities located in North Dakota that
collect and/or process scrap for use by the minimill and sale to third parties.
The minimill also has its own shredder and shears for processing scrap collected
in close proximity to the minimill.

  Perth Amboy Minimill

       The Perth Amboy minimill began operations in 1980. It is located on a 93
acre site in Perth Amboy, New Jersey. It produces industrial quality rod
products that are sold to customers in the automotive, agricultural, industrial
fastener, welding, appliance and construction industries in the northeastern
United States. The Perth Amboy minimill has a 150-ton electric arc furnace, a
ladle arc refining unit, a five-strand continuous caster and a rod mill.

  Sayreville Minimill

       The Sayreville minimill began operations in 1972 and constructed a new
melt shop and caster in 1997. It is located on a 117 acre site in Sayreville,
New Jersey, 30 miles south of New York City. It primarily produces rebar, which
is generally sold to fabricators in the northeastern United States. The
Sayreville minimill operates a 135-ton electric arc furnace, a continuous scrap
feeding and preheating system, a ladle arc refining unit, a 6-strand continuous
caster and a bar mill. We plan to install a new 135-ton per hour reheat furnace
that will lower maintenance costs and increase rolling mill production by the
end of 2004.

  Whitby Minimill

       The Whitby minimill began operations in 1964. It is located on a 357 acre
site in Whitby, Ontario, 35 miles east of Toronto. It produces principally
merchant bar, structural shapes and rebar. The Whitby minimill has a 150-ton
electric arc furnace, a ladle refining unit, a five-strand continuous caster, a
bar mill and a structural mill. The minimill is vertically integrated with five
scrap recycling facilities in southern Ontario that collect and process scrap
for use by the minimill and sale to third parties. All of the minimill's scrap
needs are supplied by its scrap facilities. The electrical control system at the
Whitby bar minimill was upgraded in August 2003. Construction of a 102,000
square foot finished product warehouse will be completed by March 2005.

                                        54
<PAGE>

  Depots

       We lease depots in Chicago, Illinois; North Jackson, Ohio; and Montreal,
Quebec; and own a warehouse in Milton, Ontario. Finished product is shipped by
rail from several of our minimills to the depots, stored, then shipped to
customers. The following table provides information on these facilities:

<Table>
<Caption>
LOCATION                                               ACREAGE   LEASE EXPIRATION
--------                                               -------   ----------------
<S>                                                    <C>       <C>
Milton, Ontario......................................   32.27     Owned Property
Montreal, Quebec.....................................    1.89      June 30, 2007
Chicago, Illinois....................................    8.88      June 30, 2017
North Jackson, Ohio..................................   21.75       May 31, 2016
</Table>

       Upon completion of the Whitby minimill warehouse, the Milton depot will
no longer be needed.

  DOWNSTREAM OPERATIONS

       We have secondary value-added steel businesses, referred to as downstream
operations. These steel fabricating and product manufacturing operations process
steel principally produced in our minimills.

  Rebar Fabrication

       We operate one of North America's largest rebar fabricating and epoxy
coating groups, which has a 50-year history of quality workmanship and service.
Our network, consisting of 21 rebar fabricating plants and three epoxy coating
plants, services the concrete construction industry in the eastern half of the
United States. The fabricating facilities cut and bend rebar to meet customers'
engineering, architectural and other end-product specifications. The fabricating
plants purchase the majority of their rebar from our Jacksonville, Knoxville,
Charlotte and Sayreville minimills. Our rebar fabricating capacity is over
600,000 tons per year. Estimated capacity is based on best historical months of
production, annualized. The following table shows the rebar fabricating plant
locations and their approximate annual capacities:

<Table>
<Caption>
                                                               CAPACITY
REBAR FABRICATING PLANT                                         (TONS)
-----------------------                                        --------
<S>                                                            <C>
Tampa, Florida..............................................    45,000
Jacksonville, Florida.......................................    40,000
Ft. Lauderdale, Florida.....................................    40,000
Orlando, Florida............................................    15,000
Charlotte, North Carolina...................................    40,000
Raleigh, North Carolina.....................................    35,000
Atlanta, Georgia............................................    40,000
Aiken, South Carolina.......................................    15,000
Knoxville, Tennessee........................................    50,000
Nashville, Tennessee........................................    35,000
Memphis, Tennessee..........................................    20,000
Louisville, Kentucky........................................    35,000
York, Pennsylvania..........................................    60,000
Milton, Pennsylvania........................................    15,000
Baltimore, Maryland.........................................    30,000
Belvidere, Illinois.........................................    30,000
Decatur, Illinois...........................................    15,000
Madison, Wisconsin..........................................    15,000
Appleton, Wisconsin.........................................    20,000
Eldridge, Iowa..............................................    20,000
                                                               -------
Total.......................................................   615,000
                                                               =======
</Table>

                                        55
<PAGE>

       In addition to the fabricating plants listed above, we operate three
epoxy coating plants that are located in Knoxville, Tennessee; Milton,
Pennsylvania; and Sayreville, New Jersey. These facilities apply epoxy coating
to fabricated rebar for rust applications, and have a combined annual coating
capacity of approximately 150,000 tons.

  Railroad Spike Operations

       We own two railroad spike facilities: a 52,000 square foot facility on 41
acres in Lancaster, South Carolina and a 23,000 square foot facility on 7.7
acres in Paragould, Arkansas. The railroad spike operations purchase steel
square bars from the Charlotte minimill and forge the bars into rail track
spikes. These track spikes are generally sold on an annual contract basis to the
major railroad companies in North America. We are one of the leading rail spike
producers in North America and sell approximately 50,000 tons of track spikes
per year.

  Cold Drawn Plants

       We have two cold drawn plants. The Orrville, Ohio plant is a 45,000
square foot greenfield facility built on 6.5 acres of land in 2000. The Orrville
plant is owned by AmeriSteel Bright Bar, Inc., of which our subsidiary owns 80%
and the remaining 20% is owned by members of the plant's management. The
Orrville plant has capacity to produce 30,000 tons of cold drawn flats and
squares per year. The Cartersville, Georgia cold drawn plant is a 90,000 square
foot facility constructed in 1989. The Cartersville cold drawn plant expanded
our cold drawn product offering to include rounds and hexagons. The Cartersville
plant has the capacity to produce 50,000 tons of cold drawn bars per year. Cold
drawn bars are sold primarily to steel service centers. The Jackson, Cambridge
and Cartersville minimills, along with third party mills, supply the Orrville
and Cartersville cold drawn facilities.

  Super Light Beam Processing and Elevator Guide Rails

       We operate a super light beam processing facility in Memphis, Tennessee
that fabricates and coats super light beams purchased from a third party into
cross members for the truck trailer industry. This facility is located on leased
property, with the lease expiring on August 31, 2007. Bradley Steel Processors
Inc., our 50%-owned joint venture with Buhler Industries Inc., also operates a
super light beam processing facility. Bradley's facility is located on leased
property in Winnipeg, Manitoba, near the Manitoba minimill, and processes beams
produced by that minimill. Bradley's lease expires on September 30, 2008.

       SSS/MRM Guide Rail Inc., our 50%-owned joint venture with Monteferro
S.p.A., processes the Manitoba minimill's guide rail sections for elevator
manufacturers. SSS/MRM does business under the name Monteferro North America and
has facilities in Steinbach, Manitoba and in Birds Hill, Manitoba. Both the
Birds Hill and Steinbach facilities are located on leased property, with the
leases expiring on May 31, 2007 and June 30, 2008, respectively. SSS/MRM Guide
Rail also has a 50% interest in a guide rail processing facility in Brazil.

  Wire Mesh and Collated Nails

       Our Atlas Steel & Wire facility in New Orleans, Louisiana produces
small-diameter drawn wire from coiled steel rod. The wire is then either
manufactured into wire mesh for concrete pavement reinforcement or converted
into collated nails for use in high-speed nail machines. We lease a 120,000
square foot facility on five acres of land in New Orleans, Louisiana. The lease
renews annually on August 31, unless terminated by us.

                                        56
<PAGE>

JOINT VENTURES

       We have three 50%-owned joint ventures. The Gallatin minimill is a joint
venture with Dofasco Inc. and produces hot rolled steel products. Bradley Steel
Processors Inc. is a joint venture with Buhler Industries Inc. and processes
super light beams. SSS/MRM Guide Rail is a joint venture with Monteferro S.p.A.
and processes the Manitoba minimill's guide rail sections for elevator
manufacturers.

       In 1994, Co-Steel and Dofasco Inc. established the Gallatin joint venture
by investing $75.0 million each into Co-Steel Dofasco LLC. The initial
investment was used to purchase $150.0 million of industrial revenue bonds from
Gallatin County, Kentucky. The bonds bear interest at a rate of 10%, mature in
2024 and can be prepaid without penalty. Gallatin County used the proceeds from
the industrial revenue bonds to construct the Gallatin minimill, which is being
leased from Gallatin County by Gallatin Steel. Gallatin Steel makes lease
payments to Gallatin County, which in turn redeems bonds and makes interest
payments on the bonds to Co-Steel Dofasco LLC. As of June 30, 2004, there were
approximately $45.0 million of bonds outstanding compared to $73.0 million as of
December 31, 2003. All proceeds received by Co-Steel Dofasco LLC from Gallatin
County are distributed equally to Dofasco and us, provided that specified
financial covenants are satisfied. Under the terms of the partnership agreement
governing the Gallatin joint venture, either partner has the right to compel the
other partner to buy or sell its interest in the Gallatin joint venture, subject
to certain procedures set out in the partnership agreement.

MARKETING

       Our products are generally sold to steel service centers, fabricators or
directly to OEMs east of the Rockies. The products we sell are used in a variety
of industries, including construction, mining, automotive, commercial, cellular
and electrical transmission, metal building manufacturing and equipment
manufacturing. We also sell fabricated rebar to contractors performing work in
both private (commercial) and public (road, bridge and other construction or
infrastructure) projects.

       In our rebar fabrication business, the market areas covered are those
east of the Mississippi River, with plants located in or near most major cities
in the eastern United States. Our strategy is to have production facilities
located in close proximity (normally 200 miles) to customers' job-sites so quick
delivery times are provided to satisfy their reinforcing steel needs.

       The following table shows information on customers during 2002 (pro forma
for the merger with Co-Steel) and 2003:

<Table>
<Caption>
                                                               PERCENT OF NET
                                                              SALES BY CUSTOMER
                                                              -----------------
                                                                2002      2003
                                                              --------   ------
<S>                                                           <C>        <C>
Fabricators.................................................      41%       40%
Steel service centers.......................................      35        37
Wire drawing................................................      15        14
Transportation..............................................       7         7
Other.......................................................       2         2
                                                               -----     -----
  Total.....................................................     100%      100%
                                                               =====     =====
</Table>

       In the year ended December 31, 2003, we sold products to over 1,000
customers and, given the diversity of our products and markets, no one customer
comprised 3% or greater of our consolidated net sales. The five largest
customers comprised approximately 9% of consolidated net sales in the year ended

                                        57
<PAGE>

December 31, 2003. The following table provides a percentage breakdown of
consolidated net sales by customer location for 2002 (pro forma for the merger
with Co-Steel) and 2003:

<Table>
<Caption>
                                                               PERCENT OF NET
                                                              SALES BY COUNTRY
                                                              -----------------
                                                                2002      2003
                                                              --------   ------
<S>                                                           <C>        <C>
United States...............................................    80.3%     79.7%
Canada......................................................    19.2      19.6
Other.......................................................     0.5%      0.6%
                                                               -----     -----
                                                               100.0%    100.0%
                                                               =====     =====
</Table>

       In general, sales of mill finished products to U.S. customers are
centrally managed by our Tampa sales office and sales to Canadian customers are
managed by our Whitby sales office. We have a sales office in Perth Amboy, New
Jersey, for managing rod sales, and Selkirk, Manitoba, for managing sales of
special sections. Metallurgical service representatives at the mills provide
technical support to the sales group. Sales of the cold drawn, rod and super
light beam products are managed by sales representatives located at their
respective facilities. Fabricated rebar and elevator guide rails are generally
sold through a bidding process in which employees at our facilities work closely
with customers to tailor product requirements, shipping schedules and prices.

STEEL-MAKING TECHNOLOGY AND CAPITAL EXPENDITURES

       Our manufacturing processes are dependent upon critical steelmaking
equipment, such as furnaces, continuous casters and rolling equipment, as well
as electrical equipment. Like many minimill steel producers, we do not have a
formal research and development program, since steel-making technology is
readily available for purchase. However we are continuously implementing process
and operational improvements and applying new technology in our operations. Over
the last several years, we have introduced modern technologies in our minimills,
such as high-power transformers, water-cooled side-walls and roofs, oxygen lance
manipulators, and slag foaming and ladle furnaces. In our rolling mills, we have
introduced automatic furnace control, continuous rolling mills, high-speed
finishing blocks, thermex heat treatment, stelmor wire rod processing, automatic
tying machines and slit rolling, among others. Most of the sophisticated
production equipment that we use is supplied by international machinery builders
and steel technology companies. These suppliers generally enter into technology
transfer agreements with purchasers, and provide extensive technical support and
staff training in connection with the installation and commissioning of the
equipment. We have entered into technology transfer agreements with Corus Group,
Kyoei Steel and Badische Stahlwerke Kehl.

       We made $37.6 million of capital expenditures, including the acquisition
of Potter Form & Tie, Co., in the six months ended June 30, 2004 compared to
$55.2 million for the year ended December 31, 2003. We anticipate spending
approximately $90.0 million on capital expenditures in the year ended December
31, 2004. The capital projects include rolling mill electrical control system
upgrades at the Charlotte, Knoxville and Whitby bar minimills; a new warehouse
at the Cartersville minimill; a new melt shop emissions control system at the
Cambridge minimill; and a caster upgrade at the Jackson minimill.

SCRAP, ENERGY AND OTHER RAW MATERIALS

       Steel scrap is the primary raw material consumed in steel-making, and
historically comprises approximately 30% to 45% of our cost of sales, depending
on the minimill and product mix, and represented approximately 44% of mill
production costs in the year ended December 31, 2003 and approximately 54% in
the six months ended June 30, 2004. Scrap availability is a major factor in our
ability to operate. Direct reduced iron, hot briquetted iron and pig iron can
substitute for a limited portion of the steel scrap used in electric furnace
steel production. We do not use significant quantities of scrap substitutes in
our minimills except for pig iron used for its chemical properties in the Perth
Amboy rod facility and to manufacture certain special sections. Scrap metal is
readily available in the regions where

                                        58
<PAGE>

we operate, but prices may become volatile from time to time due to various
factors. Four of our minimills are integrated with recycling operations that
supply a portion of their scrap needs. The balance of scrap metal requirements
is purchased in the open market either directly by us or through brokers who
procure and aggregate scrap as a business on our behalf.

       Electricity and natural gas represented approximately 13.0% and 6.0%,
respectively, of our production cost for the year ended December 31, 2003, and
approximately 13.0% and 6.0%, respectively, of our production cost for the six
months ended June 30, 2004. Most of our minimill operations have long-term
electricity supply contracts with major utilities. The interruptible portion of
the contract supplies the majority of requirements, including the electric arc
furnace load. The interruptible portion represents up to 70% to 90% of the total
load and, for the most part, is based on a spot market price of electricity at
the time it is being used. Therefore, we have significant exposure to the
variances of the electricity spot market. We do not have long-term contracts for
natural gas and therefore are subject to market variables and pricing swings for
natural gas that could materially affect our operating margins and results of
operations. Any interruption in the supply of energy, whether scheduled or
unscheduled, could materially adversely affect our sales and earnings.

       Although deregulation of both natural gas and wholesale electricity have
afforded opportunities for lower costs resulting from competitive market forces,
prices for both of these energy sources have become more volatile in the recent
past and may continue to be. Volatility in the electric power and natural gas
markets generally reflects extremes in weather conditions or physical
disruptions to the supply system. As such, these sources of volatility are
beyond our control.

       Various domestic and foreign firms supply other important raw materials
or operating supplies required by us, including refractories, ferroalloys and
carbon electrodes. We have historically obtained adequate quantities of such raw
materials and supplies at competitive market prices to permit efficient mill
operations. We are not dependent on any one supplier as a source for any
particular material and believe there are adequate alternative suppliers
available in the marketplace should the need arise to replace an existing one.

COMPETITION

  LOCAL COMPETITION

       Our geographic market encompasses the eastern half of Canada and the
United States, predominantly throughout the eastern seaboard, the southeast and
the midwest. We experience substantial competition in the sale of each of our
products from numerous competitors in our markets. Rebar, merchant bars and
structural shapes are commodity steel products for which pricing is the primary
competitive factor. Due to the high cost of freight relative to the value of
steel products, competition from non-regional producers is somewhat limited.
Proximity of product inventories to customers, together with competitive freight
costs and low-cost manufacturing processes, are key to maintaining margins on
rebar and merchant bar products. Rebar deliveries are generally concentrated
within a 350 mile radius of the mills and merchant bar deliveries are generally
concentrated within a 500 mile radius. Some products, such as special sections
produced by the Manitoba minimill, are shipped greater distances, including
overseas. Except in unusual circumstances, the customer's delivery expense is
limited to freight charges from the nearest competitive mill, and the supplier
absorbs any incremental freight charges.

       Our principal competitors include Commercial Metals Company, Marion Steel
Company, Nucor Corporation, Roanoke Electric Steel Corporation, Sheffield Steel
Corporation, Steel Dynamics Inc., Bayou Steel Corporation and Chaparral Steel
Company in the United States. Gallatin Steel competes with numerous other
integrated and minimill steel producers.

       Despite the commodity characteristics of the rebar, merchant bar and
structural markets, we believe we distinguish ourselves from competitors due to
our large product range, product quality, consistent delivery performance,
capacity to service large orders and ability to fill most orders quickly from
inventory. We believe we produce one of the largest ranges of bar products and
shapes east of the

                                        59
<PAGE>

Mississippi River. Our product diversity is an important competitive advantage
in a market where many customers are looking to fulfill their requirements from
a few key suppliers.

  FOREIGN COMPETITION

       The level of foreign competition for North American steel producers is
influenced by several factors, including the balance between global supply and
demand for steel, local demand levels in exporting countries, relative price
levels, foreign exchange rates, freight rates and trade regulation. Due to
unfavorable foreign economic conditions and global excess capacity, imports of
steel bar products into the American and Canadian steel markets reached
historically high levels in recent years, with a corresponding negative impact
on domestic steel prices.

       In November 2003, the World Trade Organization (WTO) Appellate Body
announced that U.S. tariffs imposed to protect the U.S. steel industry from
imports are illegal under trading rules. On December 4, 2003, President Bush
signed a proclamation terminating the steel safeguard tariffs, and announced
that the tariffs were being terminated as they had achieved their purpose and
changed economic circumstances indicated it was time to terminate the tariffs.
However, it is not known whether the termination of the safeguard tariffs is
permanent as President Bush also announced that the steel import licensing and
monitoring program will continue its work until March 2005 in order to be able
to respond to future import surges that could unfairly damage the United States
steel industry. Some domestic U.S. steel producers are currently lobbying for
the establishment of a permanent steel import licensing and monitoring program
through legislation.

       During the first half of 2004, the global steel supply-demand balance has
shifted from an apparent surplus to an apparent shortage. With China's economic
growth fueling worldwide steel and raw material demand, steel industry
conditions changed dramatically beginning in the first quarter of 2004. As
China's steel output has increased at double-digit rates, the global steel
industry has witnessed significant escalation of scrap raw material costs and
steel prices have risen well past historic highs. The situation is being further
fueled by fluctuations in currency exchange rates and the upturn in the North
American and other world economies.

EMPLOYEES

       We currently employ approximately 5,000 employees (including 50% of the
employees at our joint ventures other than Gallatin, which we do not control),
of which approximately 3,300 employees work in minimills, 1,400 work in
downstream and recycling operations and 200 work in corporate and sales offices.
Approximately 1,400 employees are represented by unions under a number of
different collective bargaining agreements. The labor agreements with employees
have different expiration dates. We and the United Steelworkers members at our
Whitby, Ontario minimill recently reached an agreement extending the labor
contract for the Whitby minimill employees through February 28, 2007. The
collective agreements for recycling operations have different expiration dates
beginning in 2006. Bradley Steel Processors Inc. employs 60 people, 57 of whom
are represented by the United Steel Workers of America (the USWA), and SSS/MRM
Guide Rail employs 88 people, 39 of whom are represented by the USWA. In the
first quarter of 2001, a three-month labor disruption occurred at the Whitby
minimill.

       We believe that our relations with our employees are generally good.

OTHER PROPERTIES

       In addition to our owned and leased facilities that are used in our
operations, we own two closed minimills in Florida and industrial property in
New Jersey, as set out below. An agreement has been reached for the sale of our
Keasby, New Jersey property to a recycling corporation, which we expect to

                                        60
<PAGE>

close by the end of 2004. We also lease our 37,000 square foot executive office
located in Tampa, Florida under a lease that expires in May 2005.

<Table>
<Caption>
LOCATION                                                     USE           ACREAGE
--------                                                     ---           -------
<S>                                                  <C>                   <C>
Tampa, Florida.....................................      Closed minimill     40.0
Indiantown, Florida................................      Closed minimill    151.5
Keasby, New Jersey.................................  Industrial property     26.8
</Table>

ENVIRONMENTAL AND REGULATORY MATTERS

       We are required to comply with a complex and evolving body of
environmental and occupational health and safety laws and regulations
concerning, among other things, air emissions, discharges to soil, surface water
and groundwater, noise control, the generation, handling, storage,
transportation and disposal of toxic and hazardous substances and waste, the
clean-up of contamination, indoor air quality and worker health and safety.
These laws and regulations vary by location and can fall within federal,
provincial, state or municipal jurisdictions.

       We generate certain wastes, including electric arc furnace (EAF) dust and
other contaminants, that are classified as hazardous and must be properly
controlled and disposed of under applicable environmental laws and regulations.
In the United States and Canada, certain environmental laws and regulations
impose joint and several liability on certain classes of persons for the costs
of investigation and clean-up of contaminated properties, regardless of fault,
the legality of the original operation or disposal, or the ownership of the
site. Some of our present and former facilities have been in operation for many
years and, over such time, the facilities have used substances and disposed of
wastes (both on-site and off-site) that may require clean-up for which we could
be liable. Reserves based on estimated costs have been made for the clean-up of
sites of which we have knowledge. However, there is no assurance that the costs
of such clean-ups or the clean-up of any potential contamination not yet
discovered will not materially adversely affect us.

       In April 2001, we were notified by the EPA of an investigation that
identifies us as a potentially responsible party (PRP) in a Superfund Site in
Pelham, Georgia where the total claim is $15.5 million. The Pelham site was a
fertilizer manufacturer in operation from 1910 through 1992, last operated by
Stoller Chemical Company, a now bankrupt corporation. The EPA has filed suit
with us named as a defendant. We are included in this action because we
allegedly shipped EAF dust to this property during 1978. Previously, the EPA
offered a settlement to the named PRPs totaling $15.5 million under which our
allocation was approximately $1.8 million. The EPA has recently indicated that
it is reconsidering the appropriate allocation; that reconsideration could cause
the EPA's view of our allocation to increase. One of the named PRPs is in
bankruptcy proceedings. We object to our inclusion as a PRP on several bases,
have asserted defenses and are pursuing legal alternatives, including adding a
larger third party which we believe was incorrectly excluded from the original
lawsuit. In 2004, the court denied a motion asserting some, but not all, of our
defenses. As the ultimate exposure to us, if any, is uncertain, no liability has
been accrued for remediation costs for this site. While we do not anticipate a
materially adverse result, we cannot assure you that the final resolution of
this matter will not have a material adverse effect on us.

       The potential presence of radioactive materials in our scrap supply
presents a significant economic exposure and may present a safety risk to
workers. In addition to the risk to workers and the public, the cost to clean up
the contaminated material and the loss of revenue resulting from the loss in
production time can be material. Radioactive materials are usually in the form
of: sealed radioactive sources, typically installed in measurement gauges used
in manufacturing operations or in hospital equipment; scrap from decommissioned
nuclear power and U.S. Department of Energy facilities; and imported scrap. Past
regulations for generally licensed devices did not provide for tracking of
individual owners. This lack of accountability makes it easy for third parties
to negligently or purposely discard sealed sources in scrap without
consequences. In response to this regulatory gap, we have installed
sophisticated radiation

                                        61
<PAGE>

detection systems at our minimills to monitor all incoming shipments of scrap.
If radioactive material is in the scrap received and is not detected, and is
accidentally melted in an electric furnace, significant costs would be incurred
to clean up the contamination of facilities and to dispose of the contaminated
material. While we have redundant detection systems at our minimills, there is
no assurance that radioactive materials will be detected.

       No assurance can be given that regulatory changes, such as new laws or
enforcement policies, including currently proposed restrictions on the emission
of mercury and other pollutants, a currently proposed interpretation of existing
rules applicable to the disposal of scrap metal shredder residue, or an incident
at one of our properties or operations, will not have a material adverse effect
on the business, financial condition or results of our operations. In December
2002, the Canadian federal government officially ratified the Kyoto Protocol to
the United Nations Framework Convention on Climate Change. We anticipate that
our Canadian minimills may, in the future, be in some way affected by proposed
federal initiatives intended to contribute to Canada meeting its Kyoto target.
The steel industry has been involved in ongoing dialogue with the Canadian
government and several options are being discussed, ranging from covenants to
emissions cap and trade. We expect that a system will be in place in time to
meet the first Kyoto target period of 2008 to 2012. It is too early to determine
the outcome of these discussions or the impact on our results of operations and
financial condition.

       Our business units are required to have governmental permits and
approvals. Any of these permits or approvals may be subject to denial,
revocation or modification under various circumstances. Failure to obtain or
comply with the conditions of permits and approvals may adversely affect
operations and may subject us to penalties. In addition, we may be required to
obtain additional operating permits or governmental approvals and incur
additional costs. There can be no assurance that we will be able to meet all
applicable regulatory requirements. There is no assurance that environmental
capital expenditures will not materially increase in the future. Moreover, we
may be subject to fines, penalties or other liabilities arising from actions
imposed under environmental legislation or regulations.

       In meeting our environmental goals and government-imposed standards in
2003, we incurred operating costs of approximately $14.3 million and spent $7.9
million on environmental-related capital improvements. We expect to spend
approximately $4.0 million on pollution control capital expenditures in 2004.

LEGAL PROCEEDINGS

       Other than routine litigation incidental to our business to which we are
a party or in which any of our property is the subject, there are no material
pending legal proceedings and no such proceedings are known to be contemplated,
except as described below.

       Carbon monoxide and other emissions at our Perth Amboy minimill
frequently exceeded permitted levels during 2001 and 2002. We have conducted
investigations to determine the cause of these episodes, and steps have been
taken to reduce emissions and to modify the Perth Amboy minimill's environmental
permit requirements. Discussions with the NJDEP have largely resolved these
permit and compliance issues. Penalty assessments of approximately $250,000 have
been agreed upon.

       We received notice in 2003 of a lawsuit brought by neighbors with respect
to a waste disposal site in Louisiana that was operated by Safety Kleen, to
which wastes from clean-up activities at our former dust processing division at
our Jackson, Tennessee minimill were sent during approximately one month in
1999. A settlement has been reached that would involve a modest monetary
payment. The settlement is awaiting court approval.

                                        62
<PAGE>

                             NORTH STAR ACQUISITION

NORTH STAR

       On September 9, 2004, we entered into definitive agreements with North
Star Steel Company, Cargill, Incorporated and several related entities to
purchase the land, fixed assets and working capital of four long steel product
minimills and four downstream facilities. We refer to these operations in this
prospectus collectively as North Star. The purchase price for the acquired
assets is $266 million in cash plus the assumption of certain liabilities of the
businesses being acquired, including specific contractual obligations and
selected employee liabilities. $181 million of the purchase price is for working
capital and is subject to adjustment for fluctuations in working capital as of
the closing date. The remaining $97 million of the purchase price (including
approximately $12 million in assumed liabilities) will be allocated to the land,
fixed assets at the four minimills and downstream facilities based on our
estimate of market values. On September 27, 2004, we received regulatory
approval for the proposed acquisition under U.S. antitrust laws. Subject to
satisfaction of certain other conditions, we expect the transaction to close
before the end of 2004. The closing of this offering of common shares is not
conditional upon the closing of the North Star acquisition. If the closing of
the North Star acquisition does not occur, we will use the proceeds of this
offering for other purposes as described in the "Use of Proceeds" section in
this prospectus.

       The definitive purchase agreements contain representations and warranties
consistent with transactions of this type including, but not limited to,
representations as to the financial statements of the business, the title to the
assets being transferred, compliance with applicable laws and environmental
matters. The closing is contingent upon the representations and warranties being
true and correct as of the closing date.

       North Star Steel Company is a subsidiary of Cargill and one of the larger
steel producers in North America with annual mill manufacturing capacity of
approximately 2.0 million tons of finished long steel products. The facilities
we are acquiring consist of four long steel product minimills located in St.
Paul, Minnesota; Wilton, Iowa; Calvert City, Kentucky; and Beaumont, Texas, and
four downstream facilities -- one that processes grinding balls located in
Duluth, Minnesota and three wire rod processing facilities located in Beaumont,
Texas; Memphis, Tennessee; and Carrollton, Texas. The St. Paul and Wilton
minimills have scrap shredder facilities which process raw scrap into shredded
scrap to supply a large part of the minimills' raw material needs. North Star's
products are generally sold to steel service centers, steel fabricators or
directly to OEMs, for use in a variety of industries, including construction,
automotive, mining, cellular and electrical transmission, metal building
manufacturing and general manufacturing.

       North Star's operations are segmented into two operating divisions,
minimills and downstream operations.

       Minimills.  North Star owns and operates four minimills in the United
States which manufacture and market a wide range of steel products, including
reinforcing steel bar (rebar), merchant bars, structural shapes, beams and
coiled wire rod (rod). For the fiscal year ended May 31, 2004, shipments were
approximately 1.7 million tons of mill finished steel products.

       Downstream operations.  North Star's steel fabricating and product
manufacturing operations process steel principally produced in the Beaumont and
St. Paul minimills. For the fiscal year ended May 31, 2004, downstream shipments
were approximately 300,000 tons of processed steel products and represented 12%
of North Star's total finished steel shipments. The downstream operations
consist of three facilities that process wire rod into reinforcing mesh, chain
link fence and industrial wire and one grinding ball processing facility.

                                        63
<PAGE>

BENEFITS OF THE ACQUISITION

       We expect to realize a number of benefits in connection with the proposed
acquisition of North Star, including the following:

       Economies of scale.  Following the acquisition of North Star, we will
have a combined vertically integrated network of 15 minimills (including one
50%-owned minimill), 15 scrap recycling facilities and 36 downstream facilities
with an annual manufacturing capacity of approximately 8.4 million tons of mill
finished steel products. As a result of our greater size, operational
efficiencies, financial strength and increase in market presence, we believe we
will be able to compete more effectively for additional business in strategic
markets.

       Product and geographic diversification.  Through North Star's network of
four minimills and four downstream facilities in the midwestern United States,
we will be able to more effectively and efficiently service our customers
throughout the midwestern U.S. market and enhance our geographic reach west of
the Mississippi River, with a competitive range of long steel products.

       Increased steel production capacity.  We expect our steel production
capacity to increase by approximately 31% as a result of our acquisition of
North Star. We expect this increased production to help us capture a larger
market share of the steel industry, expanding and strengthening our position in
the North American steel market.

       Cost savings.  We expect to realize cost savings as a result of the
proposed acquisition of North Star through sharing of best operating practices,
freight optimization, minimill product manufacturing and scheduling
efficiencies, consolidated procurement activities and efficiencies in selling,
administrative and general functions. We believe we may achieve additional cost
savings over the mid- to long-term from these sources, as well as from
operational improvements through the coordination of manufacturing technologies,
knowledge-sharing and the fostering of an operating culture focused on
continuous improvement.

NORTH STAR'S PRODUCTS

       North Star produces a broad range of steel products for a variety of
industries. The following is a summary of the types of products manufactured by
North Star's minimills, the facility responsible for the production and the
typical product application:

<Table>
<Caption>
MILL PRODUCTS                               FACILITY                       APPLICATIONS
-------------                               --------                       ------------
<S>                              <C>                              <C>
Merchant and Structurals:
  SBQ bars.....................  St. Paul, Wilton                 Automotive, cold finish,
                                                                  energy, forging, gears, shafts,
                                                                  hydraulic cylinders, sucker
                                                                  rods
  Rounds.......................  St. Paul                         Maintenance, agricultural
                                                                  equipment, construction,
                                                                  fabrication
  Shapes.......................  Calvert City, Wilton             Construction, fabrication,
                                                                  transport equipment
  Flats........................  Calvert City, Wilton             General construction,
                                                                  fabrication
  Beams........................  Calvert City                     Construction, fabrication,
                                                                  transport equipment
Rebar..........................  Beaumont, St. Paul, Wilton       Construction, buildings,
                                                                  highways
Wire rod.......................  Beaumont                         Tire bead, tire cord, wool
                                                                  wire, PC strand wire, fencing,
                                                                  wire mesh, hangers, fasteners
</Table>

                                        64
<PAGE>

       The following is a summary of the downstream fabricated steel products
produced by North Star's downstream operations, the facility responsible for the
production and the typical product applications:

<Table>
<Caption>
DOWNSTREAM FABRICATED PRODUCTS            FACILITY                 APPLICATIONS
------------------------------            --------                 ------------
<S>                                      <C>          <C>
Grinding balls.........................  Duluth       Mining, mineral processing
Reinforcing mesh.......................  Beaumont     Construction
Chain link fence.......................  Memphis      Residential and industrial enclosures,
                                                      security
Industrial wire........................  Carrollton   Construction, agricultural and
                                                      miscellaneous wire fabrication (racks,
                                                      carts, application shelves, fasteners)
</Table>

NORTH STAR'S OPERATIONS

  MINIMILLS

       North Star operates four minimills. All of the mills are located on
property owned by North Star, typically located with convenient access to raw
materials, means of transportation (road, and in some cases, rail and water) and
customers.

       The table below presents information regarding North Star's minimills,
including the estimated annual production capacity for the fiscal year ended May
31, 2004. Annual melting and rolling capacities are based on the best historical
months of production and best rolling mill cycles, respectively, both annualized
and assuming current product mix and eighteen days per year for maintenance
shutdown. Actual capacity may vary significantly from annual capacity due to
changes in customer requirements; sizes, grades and types of products rolled;
and production efficiencies. Capacity calculations may also change from year to
year because of the above mentioned factors. Manufacturer's design capacity
information is not presented because we do not consider it a relevant measure
due to differences in the product mix and production efficiency assumptions.

<Table>
<Caption>
                                                               APPROX. ANNUAL     APPROX. ANNUAL
                                                              MELTING CAPACITY   ROLLING CAPACITY
                                                              ----------------   ----------------
                                                                      (THOUSANDS OF TONS)
<S>                                                           <C>                <C>
St. Paul, Minnesota.........................................         600                550
Wilton, Iowa................................................         350                325
Calvert City, Kentucky......................................         N/A                325
Beaumont, Texas.............................................         850                800
                                                                   -----              -----
Total.......................................................       1,800              1,950
</Table>

  St. Paul, Minnesota Minimill

       The St. Paul minimill began operations in 1967. It is located on a 139
acre site in northern Minnesota. The St. Paul minimill produces MBQ and SBQ
round bars and rebar. St. Paul's melting equipment includes a 90-ton electric
arc furnace and a multiple size continuous billet caster. The rolling mill
consists of 120-ton per hour reheat furnace, 14 in-line mill stands, four
finishing mill stands, a cooling bed, an in-line straightener, a cut-to-length
product shear and a semi-automatic stacker. The St. Paul facility has a shredder
which is used to process raw scrap purchased from third parties and supplies the
mill with a portion of its scrap raw material needs. There are approximately 428
employees at the St. Paul minimill.

  Wilton, Iowa Minimill

       The Wilton, Iowa minimill began operations in 1976. It is located on a
167 acre site in Wilton, Iowa. The Wilton minimill produces merchant bar, mostly
flats and angles, and some larger size rebar.

                                        65
<PAGE>

The Wilton minimill's melting equipment includes an 80-ton electric arc furnace
and a three-strand continuous billet caster. The rolling mill consists of a
120-ton per hour reheat furnace, 14 in-line mill stands, a cooling bed, an
in-line straightener, a cut-to-length product shear and an automatic stacker.
The Wilton minimill has a scrap shredder facility which is used to process raw
scrap purchased from third parties and supplies the mill with a portion of its
scrap raw material needs. There are approximately 322 employees at the Wilton
minimill.

  Calvert City, Kentucky Minimill

       The Calvert City minimill is a rolling mill facility and was acquired by
North Star Steel in 1985. It is located on a 357 acre site in Calvert City,
Kentucky. Approximately 75% of the semi-finished billets rolled by the mill are
sourced from third parties and the remainder from North Star's other minimills.
The Calvert City minimill produces merchant bar, light structurals, beams and
some larger size rebar. The Calvert City rolling mill consists of a 120-ton per
hour reheat furnace, two high reversing roughers, six vertical and horizontal
mill stands, a cooling bed, an in-line straightener, a cut-to-length product
shear and an automatic stacker. There are approximately 162 employees at the
Calvert City minimill.

  Beaumont, Texas Minimill

       The Beaumont minimill began operations in 1976. It is located on a 525
acre site on the Neches River in Beaumont, Texas, with barge load/unload
facilities as well as rail service. It produces industrial quality rod products
that are sold to customers in the construction, automotive, tire, fasteners,
furniture and general manufacturing industries. The Beaumont, Texas minimill has
a 120-ton electric arc furnace, a ladle arc refining unit, a four-strand
continuous caster, and a rod mill. The caster was rebuilt in February 2004.
There are approximately 367 employees at the Beaumont minimill.

  DOWNSTREAM OPERATIONS

       North Star has facilities in Beaumont, Texas; Memphis, Tennessee; and
Carrollton, Texas that process wire rod, either produced at the Beaumont
minimill or imported, into reinforcing mesh, chain link fence and industrial
wire. North Star also has a facility in Duluth, Minnesota that processes round
bars produced at the St. Paul minimill into grinding balls used in the mining
industry.

  Beaumont, Texas Facility

       The Beaumont wire mesh plant began operations in 1991 and produces welded
wire reinforcing mesh for slab on grade, tilt-up panels, pre-cast designs and
state highway construction materials. The facility consists of four buildings
totaling approximately 244,000 square feet on 13 acres of land. There are
approximately 39 employees at the Beaumont wire plant.

  Memphis, Tennessee Facility

       The Memphis wire plant was acquired by North Star Steel in 1986 and
produces galvanized after weave (GAW) chain link fabric. The Memphis plant is a
62,000 square foot manufacturing facility located on seven acres and is
geographically well positioned to provide truck delivery to markets east of the
Rocky Mountains. There are approximately 79 employees at the Memphis wire plant.

  Carrollton, Texas Facility

       The Carrollton plant is located in the Dallas-Fort Worth area. The
Carrollton plant is a 132,000 square foot manufacturing facility located on
seven acres of land and includes state of the art chemical descaling, wire
drawing and heat treating facilities. The Carrollton plant is a leased facility
and the current lease expires in 2006. The plant has a rail siding used for
receipt of wire rod and has four shipping bays for outbound truck shipments.
There are approximately 68 employees at the Carrollton plant.

                                        66
<PAGE>

  Duluth, Minnesota Facility

       The Duluth grinding ball facility began operations in 1977 and is located
on 36.5 acre site in Northern Minnesota. The Duluth facility has four production
lines which produce approximately 100,000 tons per year of 1" through 3.5"
diameter grinding balls using forging machines. The plant has automatic
unscrambling, four induction heaters, four ball forgers, rounders and a quench
tank. All raw material for this facility is supplied by the St. Paul minimill.
There are approximately 46 employees at the Duluth facility.

NORTH STAR'S MARKET SEGMENTS

       North Star's products are generally sold to steel service centers,
fabricators or directly to OEMs. Products sold by North Star are used in a
variety of industries, including construction, mining, automotive, commercial,
cellular and electrical transmission, metal building manufacturing and equipment
manufacturing.

SCRAP, ENERGY AND OTHER RAW MATERIALS

       Steel scrap is the primary raw material consumed in minimill
steel-making. In the fiscal year ended May 31, 2004, steel scrap represented
approximately 42% of mill production costs. Scrap availability is a major factor
in North Star's ability to operate. Direct reduced iron, hot briquetted iron and
pig iron can substitute for a limited portion of the steel scrap used in
electric furnace steel production. North Star does not use significant
quantities of scrap substitutes in its minimills except for pig iron used for
its chemical properties in the Beaumont minimill. Scrap metal is readily
available in the regions where North Star operates, but prices may become
volatile from time to time due to reductions in available supply or increased
demand caused by increased exports of steel scrap. Two of North Star's
minimills, St. Paul and Wilton, are integrated with scrap recycling operations
that supply a portion of their scrap needs. The balance of North Star's scrap
raw material requirements is purchased in the open market either directly by
North Star or through brokers.

       Electricity and natural gas represented approximately 7% and 3%,
respectively, of North Star's cost of sales for the fiscal year ended May 31,
2004. Most of North Star's minimill operations have long-term electricity supply
contracts with major utilities. The interruptible portion of the contract
supplies the majority of requirements, including the electric arc furnace load.
The interruptible portion is based on a spot market price of electricity at the
time it is being used. Therefore, North Star has significant exposure to the
variances of the electricity spot market. North Star does not have long-term
contracts for natural gas and therefore is subject to market variables and
pricing swings for natural gas that could materially affect operating margins
and results of operations. Any interruption in the supply of energy, whether
scheduled or unscheduled, could materially adversely affect North Star's sales
and earnings.

       Although deregulation of both natural gas and wholesale electricity have
afforded opportunities for lower costs resulting from competitive market forces,
prices for both of these energy sources have become more volatile in recent
years and may continue to be. Volatility in the electric power and natural gas
markets generally reflects extremes in weather conditions or physical
disruptions to the supply system. As such, these sources of volatility are
beyond North Star's control.

       Various domestic and foreign firms supply other important raw materials
or operating supplies required by North Star, including refractories,
ferroalloys and carbon electrodes. North Star has historically obtained adequate
quantities of such raw materials and supplies at competitive market prices to
permit efficient mill operations. North Star is not dependent on any one
supplier as a source for any particular material and believes there are adequate
alternative suppliers available in the marketplace should the need arise to
replace an existing one.

                                        67
<PAGE>

NORTH STAR'S EMPLOYEES

       North Star currently employs approximately 1,630 employees of which
approximately 1,300 employees work in minimills, approximately 230 work in
downstream operations and 100 work in corporate and sales offices. Approximately
1,000 employees are represented by unions under four different collective
bargaining agreements at the Beaumont, Calvert City, St. Paul and Wilton
minimills and under an agreement at the Memphis downstream facility, as set
forth below.

<Table>
<Caption>
                                        EMPLOYEES
PLANT                  EMPLOYEES   REPRESENTED BY UNION     UNION      EXPIRATION DATE
-----                  ---------   --------------------   ---------    ---------------
<S>                    <C>         <C>                    <C>          <C>
Minimills
  Beaumont...........      367             283                 USWA    March 2005
  Calvert City.......      162             118                 USWA    March 2007
  St. Paul...........      428             347                 USWA    September 2005
  Wilton.............      322             246                 USWA    July 2005
                         -----             ---
  Total..............    1,279             994
                         =====             ===
Downstream Operations
  Beaumont...........       39               0                   --        --
  Memphis............       79              30            Teamsters    August 2005
  Carrollton.........       68               0                   --        --
  Duluth.............       46               0                   --        --
                         -----             ---
  Total..............      232              30
                         =====             ===
</Table>

ENVIRONMENTAL AND REGULATORY MATTERS

       The North Star facilities are required to comply with the same body of
environmental laws and regulations with which our other facilities are required
to comply, including but not limited to, air emissions, discharges to soil,
surface water and ground water, noise control, the generation, handling,
storage, transportation, disposal of toxic and hazardous substances, and the
clean-up of contamination. These laws and regulations vary by location and can
fall within federal, state or municipal jurisdictions.

       The North Star minimills generate certain waste, primarily EAF dust and
other contaminants, that are classified as hazardous and must be properly
controlled and disposed of under applicable environmental laws and regulations.
In the United States, certain environmental laws and regulations impose joint
and several liability on certain classes of persons for the cost of
investigation and clean-up of contaminated properties, regardless of fault,
legality of the original operation or disposal, or the ownership of the site.
The North Star minimills have been in operation for many years and the
facilities have used substances and disposed of waste (both on-site and
off-site) that may require clean up for which we could become liable by virtue
of our purchase of these facilities. The definitive agreements relating to the
acquisition of North Star contain indemnifications from certain of Cargill's
subsidiaries as to environmental matters and a guarantee of the indemnification
concerning environmental matters by Cargill, Incorporated. The indemnity
requires certain of Cargill's subsidiaries to indemnify us for certain
liabilities, including environmental liabilities, that exceed $5.0 million up to
a maximum amount of $25.0 million. The indemnity for environmental matters lasts
for a period of 10 years from the closing date except for the indemnity as it
relates to the St. Paul, Minnesota minimill which lasts for 15 years from the
closing date.

       The North Star St. Paul, Minnesota facility has acknowledged the
existence of environmental contamination in soil and ground water related to
past practices at the facility. The facility has several solid waste management
units, including a solid waste management unit relating to the storage of former
EAF dust and a closed Resource Conservation and Recovery Act (RCRA) landfill
containing EAF dust. At the first location, environmental waste is known to be
located below the water table and ground water is known to contain
concentrations of hazardous constituents, primarily mercury, above the ground
water

                                        68
<PAGE>

protection standard and mercury in the ground water is known to be discharged
into the surface water within the North Star Lake. North Star has completed a
RCRA facility investigation of its St. Paul facility and has submitted a
corrective measures implementation work plan to the Minnesota Pollution Control
Agency. The remedial measures for this solid waste management unit consist of a
soil cover and ground water pump and treat system that intercepts the
contaminant plume prior to discharge in North Star Lake. The plan also specifies
ground water pump and treat for the separate RCRA landfill containing EAF dust.
These treatment systems have been installed and consist of chemical oxidation,
sedimentation, filtration and activated carbon absorption prior to discharge to
the publicly-owned treatment works. We will be continuing operations at the
North Star St. Paul facility and, therefore, we will assume the RCRA permit and
the remediation obligation of North Star in association therewith. At the
present time, North Star estimates that the cost of operating the groundwater
treatment system for these two solid waste management units is approximately
$150,000 to $175,000 per year, which amount will be assumed by us upon the
acquisition of the facility. Depending on the operation of the pump and
treatment system, we may be required to remediate either or both of these sites
at a future time. If the remediation occurs during the indemnity period, North
Star and Cargill, Incorporated. will share in the cost of the remediation based
upon the indemnity as set forth above. In addition, on September 21, 2004, the
Minnesota Pollution Control Agency requested that North Star prepare a sediment
Sampling and Analytical Plan for North Star Lake and submit it to the Agency
within forty-five days from September 21, 2004. The Agency requested that the
Sampling and Analytical Plan contain, at a minimum, sampling of sediment for
mercury, cadmium, chromium and lead and that samples of sediment be taken at
more than one depth interval. If the Agency requires further investigation or
remediation during the indemnity period, North Star and Cargill will share in
the cost of the investigation and remediation based upon the indemnity as set
forth above. The costs of such investigation and remediation may be substantial
and there can be no assurance that any claims for indemnity will occur during
the indemnity period or that the indemnification amount will be sufficient to
cover the cost of any remediation should that be required.

       On October 23, 1996, North Star entered into an Agreed Order with the
Texas Natural Resource Conservation Commission to address potential for
contamination of ground water as a result of the management of industrial and
solid waste at the Beaumont, Texas minimill. This Order required North Star to
investigate six areas at its Beaumont, Texas minimill for contamination. During
the course of the subsequent investigation, five of the six areas have been
released from the Order and a No Further Action Letter has been received from
the Texas Natural Resource Conservation Commission. Investigations performed at
the baghouse location have indicated that releases have occurred and that an
additional assessment was necessary. Since March, 2000 and continuing to the
present, North Star has installed additional monitoring wells in the area around
the EAF baghouse. These wells have been sampled for various metal constituents
of concern, and contamination above Texas Risk Reduction Standard 2 has been
confirmed adjacent to the baghouse. The ground water testing results indicate
that only the upper level water bearing zone (stratum II) has been impacted and
the Texas Commission on Environmental Quality (TCEQ) has concluded that no
further vertical assessment is necessary. Results from sampling the most recent
well installations indicate that the lateral extent of contamination ends
approximately 300 feet from the baghouse. Currently, North Star is negotiating
the details of long term sampling for the existing wells and the appropriate
analysis methods to be used for hexavalent chromium. Based upon the results of
the additional monitoring wells, North Star may be required to remediate the
ground water contamination in the area of the baghouse at the Beaumont, Texas
facility. Pursuant to our indemnity agreement with Cargill, Cargill would
indemnify us for liabilities, including environmental liabilities, that exceed
$5.0 million up to a maximum amount of $25.0 million but we may be responsible
for the first $5.0 million of total remediation costs relating to the North Star
properties we acquire.

       In August 2004, Cargill, the owner of the wire facilities and the direct
parent of North Star, submitted an application to participate in the TCEQ
Voluntary Cleanup Program, or VCUP, to address soil and groundwater
contamination identified in May of 2004 at the Beaumont wire facility. Cargill's
contractor identified "constituents of concern" in groundwater on the site and,
based upon this identification, Cargill filed its application to participate in
the VCUP on August 10, 2004. We will negotiate a Consent Order with the TCEQ
detailing what additional investigation, if any, is required to
                                        69
<PAGE>

fully delineate the contamination at the site and will develop a plan for
containing or remediating that contamination. Based upon current information,
the scope of work required by the Consent Order will most likely focus on
confirming the source of the contamination. If the source of the ground water
contamination is from an off-site source, we will not be responsible for
remediating this contamination. However, if the additional investigation
determines that the source of contamination is on-site, we will be required to
design a remediation scheme to remove the source and stop migration of the
contamination of ground water. The current estimate to complete the VCUP process
is approximately $300,000, which obligation will be assumed by us at closing,
based upon information in possession of the parties today, but this amount may
change based upon further investigation. If we are responsible for remediating
the site, pursuant to our indemnity agreement with Cargill described above, we
may be required to pay for the first $5.0 million of total remediation costs
relating to the North Star properties we acquire.

       In meeting environmental goals and government imposed standards
prescribed for North Star minimills for non-routine, special projects, we expect
to expend approximately $1.0 million from the time of acquisition through
December 31, 2005. See "Business-Environmental and Regulatory Matters" for a
discussion of environmental and regulatory matters affecting our operations.

LEGAL PROCEEDINGS

       Other than routine litigation incidental to North Star's business to
which North Star is a party or in which any of its property is subject, there
are no material pending legal proceedings and no such proceedings are known or
are contemplated.

                                        70
<PAGE>

                                   MANAGEMENT

       The following table sets forth certain information regarding our
directors and executive officers:

<Table>
<Caption>
NAME AND MUNICIPALITY OF RESIDENCE                   AGE   POSITION
----------------------------------                   ---   --------
<S>                                                  <C>   <C>
Andre Beaudry......................................  46    Vice President,
  Tampa, Florida, U.S.                                     Steel Product Sales
Paulo F. Bins De Vasconcellos......................  59    Vice President, Northern Mill
  Tampa, Florida, U.S.                                     Operations
Phillip E. Casey(1)................................  61    Director, Chief Executive
  Tampa, Florida, U.S.                                     Officer and President
Kenneth W. Harrigan(2)(3)(4).......................  77    Director
  Oakville, Ontario, Canada
Joseph J. Heffernan(2)(4)(5).......................  58    Director
  Toronto, Ontario, Canada
Jorge Gerdau Johannpeter...........................  68    Director and Chairman of the
  Porto Alegre, Rio Grande do Sul, Brazil                  Board of Directors
Frederico C. Gerdau Johannpeter....................  62    Director
  Porto Alegre, Rio Grande do Sul, Brazil
Andre Bier Johannpeter(1)..........................  41    Vice President and
  Tampa, Florida, U.S.                                     Chief Operating Officer, Director
Tom J. Landa.......................................  52    Vice President, Finance,
  Tampa, Florida, U.S.                                     Chief Financial Officer and Secretary
J. Spencer Lanthier(2)(3)..........................  63    Director
  Toronto, Ontario, Canada
Michael Mueller....................................  57    Vice President, Southern Mill
  Tampa, Florida, U.S.                                     Operations
Arthur Scace(2)(3)(5)..............................  66    Director
  Toronto, Ontario, Canada
Dr. Michael D. Sopko(1)(2)(4)......................  65    Director
  Oakville, Ontario, Canada
</Table>

------------

(1) Member of Safety, Health and Environmental Committee.

(2) Independent director.

(3) Member of the Audit Committee.

(4) Member of Human Resources Committee.

(5) Member of Corporate Governance Committee.

       ANDRE BEAUDRY has been our Vice President, Steel Product Sales since
October 2002. Prior to that, Mr. Beaudry was Vice President, Mill Product Sales,
of Ameristeel from September 2001. Mr. Beaudry was employed by Gerdau Ameristeel
Cambridge Inc. starting as Vice President Sales and Marketing in 1991 and
serving as President from April 1998 through September 2001. Mr. Beaudry has
over 25 years experience in the steel industry.

       PAULO F. BINS DE VASCONCELLOS has been working with the Gerdau group
since 1972. He has been our Vice President, Steel Mill Northeast Operations
since August 2003. Prior to that Mr. Vasconcellos was an Executive Vice
President of Gerdau S.A.

                                        71
<PAGE>

       PHILLIP E. CASEY has been our President and Chief Executive Officer and a
director since October 2002. Prior to that he was Chief Executive Officer and a
director of AmeriSteel Corporation starting in June 1994 and President of
AmeriSteel Corporation starting in September 1999. Mr. Casey was Chairman of the
Board of Ameristeel from June 1994 until September 1999.

       KENNETH W. HARRIGAN has been a director of Gerdau Ameristeel since 1994.
Mr. Harrigan is also Chairman of K.W. Harrigan Consultants and a director of a
number of other Canadian public companies. Prior to that, he was Chairman and
Chief Executive Officer of and consultant to Ford Motor Company of Canada,
Limited.

       JOSEPH J. HEFFERNAN has been a director of Gerdau Ameristeel since 1996.
He was Vice-Chairman of Gerdau Ameristeel (when it was Co-Steel) from 1999 until
October 2002. Mr. Heffernan is also Chairman of Rothmans Inc., Chairman of
Clairvest Group Inc. and a director of a number of other Canadian companies.

       JORGE GERDAU JOHANNPETER has been working for the Gerdau group since
1954. Mr. Jorge Johannpeter became an executive officer of Gerdau S.A. in 1971
and was appointed Chairman of the Board of Directors and President in 1983.
Since 2002, after the implementation of Gerdau S.A.'s new corporate governance
structure, he also became the President of Gerdau S.A.'s Executive Committee. He
holds a degree in Law from the Federal University of Rio Grande do Sul, Brazil.

       FREDERICO C. GERDAU JOHANNPETER has worked for the Gerdau group since
1961. Mr. Johannpeter became an executive officer of Gerdau S.A. in 1971 and has
been a director since 1973. Under Gerdau S.A.'s new corporate governance
structure, he also became Senior Vice President of Gerdau S.A.'s Executive
Committee. He holds a degree in Business Administration from the Federal
University of Rio Grande do Sul, Brazil and a Masters degree in Business,
Finance, Costs and Investments from the University of Cologne, Germany.

       ANDRE BIER JOHANNPETER was named Chief Operating Officer on July 27,
2004. He has been working for the Gerdau companies since 1980. Mr. Johannpeter
became an Executive Officer of Gerdau S.A. in 1989. In 1998, Mr. Johannpeter was
appointed Director of Information Systems of Gerdau S.A. and in 1999 became
Director of New Business Development of Gerdau S.A. and in 2002 he was appointed
Vice President, North American Operations of Gerdau S.A. Mr. Johannpeter became
a director and was appointed Vice-President, Chief Operating Officer of Gerdau
Ameristeel, Canadian Operations in October 2002 and was appointed Vice
President, Business Development of Gerdau Ameristeel in November 2003. He
received a degree in Business Management from the Catholic Pontiff University of
Rio Grande do Sul, Brazil.

       TOM J. LANDA has been our Vice President, Finance, Chief Financial
Officer and Secretary since October 2002. Prior to that, Mr. Landa was Chief
Financial Officer, Vice President and Secretary of Ameristeel starting in April
1995. Mr. Landa was elected a director of Ameristeel in March 1997. Before
joining Ameristeel, Mr. Landa spent over 19 years in various financial
management positions with Exxon Corporation and its affiliates worldwide.

       J. SPENCER LANTHIER has been a director of Gerdau Ameristeel since 2000.
Mr. Lanthier is also Vice-Chairman and a director of TSX Group Inc. and a
director of a number of other Canadian public companies.

       MICHAEL MUELLER became our Vice President, Steel Mill Southeast
Operations in October 2002. Prior to that, he was Group Vice President, Steel
Mill Operations of Ameristeel, since April 2001. Prior to that, Mr. Mueller
served as President and Chief Executive Officer of Auburn Steel from September
1998. Mr. Mueller previously worked for Ameristeel as Vice President, General
Manager from October 1997 through September 1998. Prior to 1997, Mr. Mueller
served as a Vice President for Birmingham Steel Corporation for three years. Mr.
Mueller has over 32 years of steel industry experience.

       ARTHUR SCACE has been a director of Gerdau Ameristeel since 2003. Mr.
Scace is counsel to McCarthy Tetrault LLP, a Canadian law firm, and is the
former national chairman and managing partner

                                        72
<PAGE>

of the firm. He is a director of several corporations, including a Canadian
chartered bank. Mr. Scace is a Rhodes Scholar with degrees from the University
of Toronto, Harvard University and Oxford University.

       DR. MICHAEL D. SOPKO has been a director of Gerdau Ameristeel since 1997.
Dr. Sopko is also a director of a number of Canadian public companies, including
a Canadian chartered bank and Voisey's Bay Nickel Company Limited.

       Messrs. Jorge and Frederico Johannpeter are brothers. Andre Johannpeter
is the son of Jorge Johannpeter. None of the other directors are related to one
another.

SENIOR OFFICERS

       The following table sets forth information regarding our senior officers
as of the date of this prospectus:

<Table>
<Caption>
                                                                                         YEARS OF STEEL
NAME                                   TITLE                                           INDUSTRY EXPERIENCE
----                                   -----                                           -------------------
<S>                                    <C>                                             <C>
Andre Beaudry........................  Vice President, Steel Product Sales                     25
Glen A. Beeby........................  Vice President, Cambridge Minimill                      21
Paulo F. Bins De Vasconcellos........  Vice President, Northern Mill Operations                35
Robert L. Bullard....................  Vice President, Perth Amboy Minimill                    32
Phillip E. Casey.....................  Chief Executive Officer and President                   18
Michael Christy......................  Vice President, Procurement                             20
Andre B. Johannpeter.................  Vice President and Chief Operating Officer              23
Tom J. Landa.........................  Vice President, Finance, and Chief Financial             9
                                       Officer
Wilburn G. Manuel....................  Vice President, Jackson Minimill                        38
J. Neal McCullohs....................  Vice President, Steel Business Ventures                 25
Michael Mueller......................  Vice President, Southern Mill Operations                32
Roger Paiva..........................  Vice President, Whitby Minimill                         21
Arlan Piepho.........................  Vice President, Knoxville Minimill                      36
Anthony S. Read......................  Vice President, Charlotte Minimill                      18
William E. Rider.....................  Vice President, Sayreville Minimill                     28
James S. Rogers......................  Vice President, Human Resources                         28
Donald R. Shumake....................  Vice President, Jacksonville Minimill                   41
Yuan C. Wang.........................  Vice President, Manitoba Minimill                       17
Edward C. Woodrow....................  Vice President, Cartersville Minimill                   11
Matthew C. Yeatman...................  Vice President, Raw Materials                           19
</Table>

                                        73
<PAGE>

                             PRINCIPAL SHAREHOLDERS

       The following table shows information regarding the beneficial ownership
of our common shares as of the date of this prospectus and as adjusted to give
effect to the sale of our common shares in this offering:

       -     by each person who is known to us to own beneficially more than 5%
             of our common shares;

       -     by each of our directors;

       -     by each of our Chief Executive Officer, our Chief Financial
             Officer, plus our three other most highly compensated executive
             officers whose salary and bonus earned during the year ended
             December 31, 2003 exceeded Cdn$100,000 and those persons who were
             not executive officers on December 31, 2003 because they left their
             position during the year but would have been among the most highly
             paid if they had been executive officers on December 31, 2003; and

       -     by all of our directors and executive officers as a group.

       Beneficial ownership includes any shares over which a person exercises
sole or shared voting or investment power. Common shares underlying options are
deemed to be outstanding and beneficially owned by the person holding the stock
options for the purpose of computing the percentage ownership of that person but
are not considered outstanding for the purposing of computing the percentage
ownership of any other person.

       Except as indicated in the footnotes to the table, to our knowledge, each
shareholder in the table has sole voting and investment power for the common
shares shown as beneficially owned by such shareholder. Aside from adjustments
related to beneficial ownership as described above, percentages are based on
225,089,337 common shares outstanding as of June 30, 2004 and the assumption
that Gerdau S.A. acquires 35,000,000 common shares under this prospectus, there
is no exercise of the overallotment option and Gerdau S.A. does not purchase any
additional common shares under the Gerdau S.A. additional commitment.

<Table>
<Caption>
                                                OWNERSHIP OF SECURITIES    OWNERSHIP OF SECURITIES AFTER
                                                 PRIOR TO THE OFFERING              THE OFFERING
                                                ------------------------   ------------------------------
NAME OF BENEFICIAL OWNER                          NUMBER      PERCENTAGE       NUMBER        PERCENTAGE
------------------------                        -----------   ----------   --------------   -------------
<S>                                             <C>           <C>          <C>              <C>
Gerdau S.A.(1)................................  162,754,900      72.3%      197,754,900          67.0%
Paulo F. Bins De Vasconcellos.................           --        --                --             --
Phillip E. Casey(2)...........................    8,469,090       3.8%        8,469,090           2.9%
Kenneth W. Harrigan...........................        1,000         *             1,000              *
Joseph J. Heffernan(3)........................        5,200         *             5,200              *
Jorge Gerdau Johannpeter(1)...................  162,764,900(4)    72.3%     197,764,900          67.0%
Frederico C. Gerdau Johannpeter(1)............  162,817,900(5)    72.3%     197,817,900          67.0%
Andre Bier Johannpeter(1).....................  162,754,900      72.3%      197,754,900          67.0%
Tom J. Landa..................................      263,822         *           263,822              *
J. Spencer Lanthier...........................       10,043         *            10,043              *
Michael Mueller...............................       22,214         *            22,214              *
Arthur Scace..................................       10,000         *            10,000              *
Dr. Michael D. Sopko..........................        1,000         *             1,000              *
All directors and officers as a group.........  171,610,269      76.2%      206,610,269          70.0%
</Table>

------------

(1) The Gerdau Johannpeter family indirectly controls Metalurgica Gerdau S.A.,
    collectively holding 74.04% of the voting capital and 25.18% of the total
    capital, and Metalurgica Gerdau S.A. and its controlled companies hold
    83.35% of the voting capital of Gerdau S.A.
                                           footnotes continued on following page
                                        74
<PAGE>

(2) Mr. Phillip E. Casey owns 2,987,928 common shares directly and exercises
    control or direction over (i) 4,093,117 common shares held by Carioca
    Limited Partnership, (ii) 1,094,675 common shares held by his wife, (iii)
    279,489 common shares held by 21 of his family members, and (iv) the
    remaining 13,881 common shares held by a family trust, Carioca LLC.

(3) Mr. Joseph J. Heffernan owns 5,000 common shares directly and the remaining
    200 common shares indirectly.

(4) Mr. Jorge Gerdau Johannpeter beneficially owns 162,754,900 common shares
    held by Gerdau S.A. and indirectly holds 10,000 common shares through
    Counterpoint Ltd.

(5) Mr. Frederico C. Gerdau Johannpeter beneficially owns 162,754,900 common
    shares held by Gerdau S.A. and indirectly holds 63,000 common shares through
    Cazab Holdings Ltd.

                                        75
<PAGE>

                           RELATED PARTY TRANSACTIONS

TRANSACTIONS WITH GERDAU S.A.

       The following related party transactions occurred during the period from
January 1, 2003 to the date of this prospectus:

       -     In January and February 2003, wholly-owned subsidiaries of Gerdau
             S.A. made loans totaling $30.0 million to our subsidiaries to
             increase liquidity within the group. These loans were intended to
             be used for working capital purposes and bore interest at the rate
             of 6.5%. Interest expense associated with these loans in the year
             ended December 31, 2003 was $756,000. The loans did not have a
             stated maturity but we repaid these loans with the proceeds of our
             senior notes and the related borrowing under our senior secured
             credit facility.

       -     An indirect wholly-owned subsidiary of Gerdau S.A. bought $35.0
             million aggregate principal amount of our senior notes in June
             2003.

       -     During the first quarter of 2004, we obtained from a Brazilian bank
             a $20.0 million, one year, 2.65% interest bearing loan and a $5.0
             million, one year, 2.56% interest bearing loan. Each loan was
             guaranteed by Gerdau S.A.

       -     On April 16, 2004, we issued 26.8 million common shares to Gerdau
             S.A. through a private placement for total proceeds of $97.9
             million. This transaction increased Gerdau S.A.'s ownership to
             approximately 72% of our common shares.

INDEBTEDNESS OF DIRECTORS AND OFFICERS

       As of June 30, 2004, aside from loans in connection with the purchase of
our common shares, no senior officer, director or employee was indebted to us.
The aggregate indebtedness of all of our senior officers, directors and
employees and all former officers, directors and employees made in connection
with the purchase of our securities was approximately Cdn$2.0 million. This
indebtedness represents loans to executives pursuant to the Co-Steel Long-Term
Incentive Plan, which has been terminated, and are secured by the common shares
purchased with the loan proceeds and, in some cases, life insurance.

       The indebtedness of any person who is, or at any time during the year
ended December 31, 2003 was, our director, executive officer or senior officer
entered into in connection with purchases of securities is shown in the table
below:

<Table>
<Caption>
                                                          LARGEST AMOUNT           AMOUNT           SECURITY FOR
                                              OUR          OUTSTANDING        OUTSTANDING AS AT     INDEBTEDNESS
                                          INVOLVEMENT      DURING 2003          JUNE 30, 2004      (COMMON SHARES)
                                          -----------   ------------------   -------------------   ---------------
<S>                                       <C>           <C>                  <C>                   <C>
TERRY G. NEWMAN.........................     Loan          Cdn$732,200           Cdn$732,200           55,899
Former President and Chief Executive
  Officer
MATTHEW C. YEATMAN......................     Loan          Cdn$ 49,560           Cdn$ 49,560            8,400
Vice President, Raw Materials
</Table>

                                        76
<PAGE>

                          DESCRIPTION OF SHARE CAPITAL

       Our authorized share capital includes an unlimited number of common
shares, of which 225,089,337 common shares were issued and outstanding as of
June 30, 2004, and an unlimited number of preferred shares, issuable in series,
of which no preferred shares of any series are issued and outstanding as of the
date hereof.

COMMON SHARES

       The holders of our common shares are entitled to one vote in respect of
each share held at all meetings of shareholders except meetings at which holders
of a specified class or series of shares are entitled to vote. The holders of
our common shares are entitled to receive dividends if, as and when declared by
our board of directors. In the event of our liquidation, dissolution or
winding-up, after payment of all outstanding debts and liabilities and subject
to the preference of our preferred shares and all other shares ranking senior to
the common shares, if any, the holders of our common shares are entitled to
receive, pro rata, our remaining assets. The holders of our common shares have
no pre-emptive, subscription or redemption rights.

PREFERRED SHARES

       The preferred shares may at any time or from time to time be issued in
one or more series. Our board of directors may by resolution fix the number of
shares in, and determine the designation, rights, privileges, restrictions and
conditions attaching to the shares of, each series of preferred shares.

       The preferred shares are entitled to a preference over our common shares
and any other of our shares ranking junior to the preferred shares in the
distribution of assets in the event of our liquidation, dissolution or
winding-up or other distribution of our assets among our shareholders for the
purpose of winding-up our affairs.

       The preferred shares of each series shall rank in a parity with the
preferred shares of every other series with respect to priority in the payment
of dividends and in the distribution of assets in the event of our liquidation,
dissolution or winding up or other distribution of our assets among our
shareholders for the purpose of winding up our affairs.

       The holders of preferred shares will not be entitled (except as otherwise
provided by law) to receive notice of, attend, or vote at, any meeting of our
shareholders, unless we have failed to pay dividends at the prescribed rate on
the preferred shares, or any one series, whether or not consecutive. In that
event, and for only as long as any such dividends of any one series remain in
arrears, the holders of preferred shares of such series will be entitled to
receive notice of and to attend all shareholders' meetings, and shall be
entitled, voting separately and as a series, to one vote for each share held for
the purposes of electing one member of our board of directors.

                                        77
<PAGE>

                CERTAIN TAX CONSIDERATIONS FOR U.S. SHAREHOLDERS

       The following discussion summarizes certain material Canadian and United
States federal income tax consequences of the acquisition, ownership and
disposition of our common shares purchased pursuant to the offering. This
discussion is not intended to be, nor should it be construed to be, legal or tax
advice to any particular prospective purchaser. This discussion does not take
into account Canadian provincial or territorial tax laws, United States state or
local tax laws, or tax laws of jurisdictions outside of Canada and the United
States. The following is based upon the tax laws of Canada and the United States
as in effect on the date of this prospectus, which are subject to change with
possible retroactive effect. Prospective purchasers should consult their own tax
advisors with respect to their particular circumstances.

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

       The following is a summary of the principal Canadian federal income tax
considerations generally applicable to a U.S. Holder who acquires our common
shares pursuant to this prospectus. As used in this summary of Canadian federal
income tax considerations, the term "U.S. Holder" means a holder of common
shares who: (1) for the purposes of the Income Tax Act (Canada) (the "Tax Act")
(a) will not be or be deemed to be resident in Canada at any time while he or
she holds common shares, (b) deals at arm's length with us, (c) holds the common
shares as capital property, (d) does not use or hold and will not be deemed to
use or hold the common shares in the course of carrying on a business in Canada,
and (e) in respect of whom the common shares are not "designated insurance
property"; and (2) for the purposes of the Canada-United States Income Tax
Convention, 1980 (the "Convention"), will at all relevant times be a resident of
the United States, will not be a resident of Canada at any time while he or she
holds common shares, will not have at any time a permanent establishment or
fixed base in Canada and owns less than 10% of our outstanding voting shares.
Special rules, which are not addressed in this discussion, may apply to a U.S.
Holder that is an insurer that carries on an insurance business in Canada and
elsewhere, or a "financial institution" for purposes of the "mark-to-market"
rules in the Tax Act.

       This summary is based upon the current provisions of the Tax Act and the
regulations thereunder, the Convention, all specific proposals to amend the Tax
Act and regulations announced by the Minister of Finance (Canada) prior to the
date of this prospectus and counsel's understanding of the current published
administrative policies and assessing practices of the Canada Revenue Agency.
This discussion is not exhaustive of all potential Canadian federal income tax
consequences to a U.S. Holder and does not take into account or anticipate any
other changes in law, whether by judicial, governmental or legislative decision
or action nor does it take into account tax legislation or considerations of any
province, territory or foreign jurisdiction.

       Amounts paid or credited or deemed to be paid or credited as, on account
or in lieu of payment of, or in satisfaction of, dividends on common shares
beneficially owned by a U.S. Holder generally will be subject to Canadian
non-resident withholding tax. Under the Convention, the rate of withholding tax
generally applicable to dividends paid to U.S. Holders is 15%. Under the
Convention, dividends paid or credited to certain religious, scientific,
literary, educational or charitable organizations and certain pension
organizations that are resident, and exempt from tax, in the United States and
that have complied with certain administrative procedures are exempt from
Canadian dividend withholding tax.

       Under the Tax Act, a U.S. Holder generally will not be subject to tax in
respect of any capital gain, or entitled to deduct any capital loss, realized on
the disposition or deemed disposition of common shares, unless at the time of
such disposition such common shares constitute "taxable Canadian property" of
the U.S. Holder for the purposes of the Tax Act and the U.S. Holder is not
entitled to relief under the Convention. If the common shares are listed on a
prescribed stock exchange (which includes The Toronto Stock Exchange and the New
York Stock Exchange) at the time they are disposed of, they will generally not
constitute "taxable Canadian property" of a U.S. Holder at the time of
disposition unless, at any time within the 60 month period immediately preceding
the disposition, the U.S. Holder, persons with whom U.S. Holder did not deal at
arm's length for the purposes of the Tax Act, or the U.S. Holder together with
such persons, have owned 25% or more of the issued shares of any class or series
of our stock. In

                                        78
<PAGE>

certain circumstances, common shares may be deemed to be taxable Canadian
property. A deemed disposition of common shares will arise on the death of a
U.S. Holder. If the common shares are "taxable Canadian property" of a U.S.
Holder, under the Convention any capital gain realized on a disposition or
deemed disposition of such shares generally will not be subject to Canadian
federal income tax and any capital loss thereon will be denied unless the value
of the common shares at the time of the disposition or deemed disposition is
derived principally from "real property situated in Canada" within the meaning
set out in the Convention.

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

       The following discussion summarizes the material United States federal
income tax considerations to "United States Shareholders" (as defined below) of
an investment in our common shares. This discussion assumes that you hold your
common shares as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"). We believe, and
accordingly, this discussion assumes that we are not a "controlled foreign
corporation" or a "foreign personal holding company" for United States federal
income tax purposes. This discussion does not purport to be a comprehensive
description of all the potential United States federal income tax considerations
that may be relevant to a particular investor's decision to acquire our common
shares nor does it deal with all United States federal income tax consequences
applicable to holders subject to special tax rules, including banks, brokers,
dealers in securities or currencies, traders in securities that elect to use a
mark-to-market method of accounting for their securities holdings, tax-exempt
entities, insurance companies, persons liable for alternative minimum tax,
persons that actually or constructively own 10% or more of our common shares,
persons that hold common shares as part of a straddle or a hedging, constructive
sale, synthetic security, conversion or other integrated transaction,
pass-through entities (e.g., partnerships), persons whose functional currency is
not the United States dollar, financial institutions, expatriates or former
long-term residents of the United States, individual retirement accounts or
other tax-deferred accounts, real estate investment trusts or regulated
investment companies.

       If an entity that is classified as a partnership for United States
federal income tax purposes holds common shares, the tax treatment of its
partners will generally depend upon the status of the partner and the activities
of the partnership. Partnerships and other entities that are classified as
partnerships for federal income tax purposes and persons holding common shares
through a partnership or other entity classified as a partnership for federal
income tax purposes are urged to consult their tax advisors.

       This discussion is based on the Code, existing and proposed Treasury
regulations thereunder, published rulings, court decisions and administrative
interpretations, all as currently in effect. These laws are subject to change,
repeal or revocation possibly on a retroactive basis so as to result in federal
income tax consequences different from those discussed below.

       For purposes of this discussion you are a "United States Shareholder" if
you are a beneficial owner of common shares and you are for United States
federal income tax purposes (a) a citizen or individual resident of the United
States, (b) a corporation or other entity classified as a corporation created or
organized under the laws of the United States or any political subdivision
thereof, (c) an estate, the income of which is subject to United States federal
income taxation regardless of its source, or (d) any trust if (x) a United
States court is able to exercise primary supervision over the administration of
the trust and (y) one or more United States persons have the authority to
control all substantial decisions of the trust.

       This summary does not discuss United States federal income tax
consequences to any beneficial owner of common shares that is not a United
States Shareholder.

       BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, PERSONS CONSIDERING THE
PURCHASE OF OUR COMMON SHARES ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THEIR PARTICULAR TAX SITUATIONS AND THE PARTICULAR TAX EFFECTS
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE
CHANGES IN THE TAX LAWS OR INTERPRETATIONS THEREUNDER.
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<PAGE>

       Taxation of Dividends.  We currently do not pay dividends on our common
shares. In the event that we do pay a dividend, subject to the passive foreign
investment company rules discussed below, the gross amount of any actual or
deemed distribution by us (including any Canadian taxes withheld therefrom) with
respect to your common shares generally should be included in your gross income
as a dividend to the extent such distribution is paid out of our current or
accumulated earnings and profits, as determined under United States federal
income tax principles. We do not maintain calculations of our earnings and
profits under United States federal income tax principles. However, in the event
we pay dividends in the future, we expect we would calculate our earnings and
profits under United States federal income tax principles at that time. To the
extent that the amount of any distribution exceeds our current and accumulated
earnings and profits for a taxable year, the distribution first will be treated
as a tax-free return of capital to the extent of your adjusted tax basis in the
common shares and to the extent that such distribution exceeds your adjusted tax
basis in the common shares, it will be taxed as a capital gain. If you are a
United States resident entitled to benefits under the Canada-United States
Income Tax Convention, dividends on our common shares generally will be subject
to Canadian withholding tax at the rate of 15 percent. Refer to the section of
this prospectus entitled "Certain Tax Considerations for U.S.
Shareholders -- Canadian Federal Income Tax Considerations". Dividends will not
be eligible for the dividends received deduction generally allowed to United
States corporations in respect of dividends received from other United States
corporations. If you receive a dividend in Canadian dollars, the amount of the
dividend for United States federal income tax purposes will be the U.S. dollar
value of the dividend (determined at the spot rate on the date of such payment)
regardless of whether the payment is later converted into U.S. dollars. In such
cases, you may recognize additional United States source ordinary income or loss
as a result of currency fluctuations between the date on which the dividend is
paid and the date the dividend amount is converted into U.S. dollars.

       If you are a non-corporate United States Shareholder, dividends paid to
you through 2008 may be subject to United States federal income tax at lower
rates than other types of ordinary income, generally 15 percent, provided
certain holding period and other requirements are satisfied. These requirements
include (a) that we not be classified as a "passive foreign investment company",
a "foreign personal holding company" or a "foreign investment company", and (b)
that you not treat the dividend as "investment income" for purposes of the
investment interest deduction rules. United States Shareholders should consult
their own tax advisors regarding the application of these rules.

       Dividends received by a United States Shareholder with respect to common
shares will be treated as foreign source income. The foreign source income
generally will be "passive income" or "financial services income," which will be
treated separately from other types of income for purposes of computing the
foreign tax credit allowable to you. Any Canadian tax withheld with respect to
distributions made on the common shares may, subject to certain limitations, be
claimed as a foreign tax credit against your United States federal income tax
liability or may be claimed as a deduction for United States federal income tax
purposes. The rules relating to foreign tax credits are extremely complex and
the availability of a foreign tax credit depends on numerous factors. You should
consult your own tax advisors concerning the application of the United States
foreign tax credit rules to your particular situation.

       Taxation of Capital Gains.  Subject to the passive foreign investment
company rules discussed below, if you are a United States Shareholder and you
sell or otherwise dispose of your common shares, you will generally recognize
capital gain or loss for United States federal income tax purposes equal to the
difference between the United States dollar value of the amount that you realize
and your adjusted tax basis, determined in United States dollars, in your common
shares. Your adjusted tax basis in our common shares will generally be the cost
to you of such shares. Capital gain of a non-corporate United States Shareholder
is generally taxed at a maximum rate of 15% if the property has been held more
than one year. The deductibility of capital losses is subject to limitations.
The gain or loss will generally be gain or loss from sources within the United
States for foreign tax credit limitation purposes.

       Passive Foreign Investment Company Discussion.  If during any of our
taxable years, 75% or more of our gross income consists of certain types of
"passive" income, or if the average value during a taxable year of our "passive
assets" (generally, assets that generate passive income) is 50% or more of the
average
                                        80
<PAGE>

value of all assets held by us, we will be classified as a "passive foreign
investment company" ("PFIC") for such year. Passive income generally includes
interest, dividends and some types of rent and royalties.

       Based on our current and projected income, assets and activities, we do
not believe we will be classified as a PFIC for our current or any succeeding
taxable year. However, because the determination of whether we will be a PFIC in
the future depends on our assets and income at that time, no assurance can be
provided that we will not be classified as a PFIC in the future.

       If we are classified as a PFIC at any time that you hold our common
shares, you may be subject to increased tax liability and an interest charge in
respect of gain recognized on the sale or other disposition of your common
shares and upon the receipt of certain "excess distributions". The PFIC rules
with respect to additional United States federal income taxes on certain
distributions received from us and any gain realized from the sale or other
disposition of your common shares may be avoided if you are eligible for and
timely make a "qualified electing fund" or "QEF" election, in which case you
would be required to include in income on a current basis your pro rata share of
our ordinary income and net capital gains. However, in order for you to be able
to make the QEF election, we would have to provide you with certain information.
We do not expect to provide the required information in the event we are
classified as a PFIC.

       As another alternative to the foregoing rules, if our shares constitute
"marketable stock" under applicable Treasury Regulations, you may make a
mark-to-market election to include in income each year as ordinary income an
amount equal to the increase in value of its common shares for that year or to
claim a deduction for any decrease in value (but only to the extent of previous
mark-to-market gains). We believe that our common shares should qualify as
marketable stock (although there can be no assurance that this will continue to
be the case).

       United States Shareholders should consult their own tax advisors with
respect to the PFIC issue and its potential application to their particular
situation.

       Information Reporting and Backup Withholding.  If you are a non-corporate
United States Shareholder, information reporting requirements on Internal
Revenue Service Form 1099 generally will apply to:

       -     dividend payments or other taxable distributions made to you within
             the United States, and

       -     the payment of proceeds to you from the sale of common shares
             effected at a United States office of a broker

       unless you come within certain categories of exempt recipients.

       Additionally, backup withholding (currently at a rate of 28%) may apply
to such payments if you are a non-corporate United States Shareholder that does
not come within certain categories of exempt recipients and you:

       -     fail to provide an accurate taxpayer identification number,

       -     are notified by the Internal Revenue Service ("IRS") that you have
             failed to report all interest and dividends required to be shown on
             your federal income tax returns, or

       -     in certain circumstances, fail to comply with other applicable
             requirements of the backup withholding rules.

       A United States Shareholder who does not provide a correct taxpayer
identification number may be subject to penalties imposed by the IRS.

       Any amounts withheld from payments to you under the backup withholding
rules will be allowed as a credit against your federal income tax liability and
entitle you to a refund, provided the required information is furnished to the
IRS. You should consult your own tax advisor regarding the application of backup
withholding in your particular situation, the availability of an exemption from
backup withholding and the procedure for obtaining such an exemption, if
available.
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<PAGE>

                                  UNDERWRITING

       Subject to the terms and conditions of a purchase agreement between us
and each of the underwriters named below, we have agreed to sell to the
underwriters and each of the underwriters has severally agreed to purchase from
us, the number of common shares listed opposite its name below:

<Table>
<Caption>
                                                                 NUMBER OF
UNDERWRITER                                                    COMMON SHARES
-----------                                                    -------------
<S>                                                            <C>
Merrill Lynch, Pierce, Fenner & Smith
             Incorporated...................................
BMO Nesbitt Burns Inc. .....................................
CIBC World Markets Inc. ....................................
J.P. Morgan Securities Inc. ................................
Morgan Stanley & Co. Incorporated...........................
                                                                ----------
             Total..........................................    35,000,000
                                                                ==========
</Table>

       The underwriters have agreed to purchase all of the 35,000,000 common
shares sold under the purchase agreement if any of these common shares are
purchased. The obligations of the underwriters under the purchase agreement may
be terminated at their discretion upon the occurrence of certain stated events,
including the occurrence of a material adverse change in the state of the
financial markets. If an underwriter defaults, the purchase agreement provides
that the purchase commitments of the non-defaulting underwriters may be
increased or the purchase agreement may be terminated.

       This offering is being made concurrently in all of the provinces and
territories of Canada and in the United States pursuant to the
multi-jurisdictional disclosure system implemented by the securities regulatory
authorities in the United States and Canada. The common shares sold under the
purchase agreement will be offered in the United States and Canada through the
underwriters either directly or through their respective U.S. or Canadian
broker-dealer affiliates or agents. Subject to applicable law, the underwriters
may offer the common shares outside of Canada and the United States.

       We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the U.S. Securities Act of 1933, as amended and
applicable Canadian securities legislation, or to contribute to payments that
the underwriters may be required to make in respect of those liabilities.

       The underwriters are offering the common shares sold under the purchase
agreement, subject to prior sale, when, as and if issued to and accepted by
them, subject to approval of legal matters, including the validity of the common
shares, and other conditions contained in the purchase agreement, such as the
receipt by the underwriters of officer's certificates and legal opinions. The
underwriters' commitment to purchase common shares is also conditional upon the
completion of the sale of 35,000,000 common shares to Gerdau S.A. See "Sale to
Gerdau S.A." The underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or in part.

COMMISSIONS AND DISCOUNTS

       The underwriters have advised us that the underwriters propose initially
to offer the common shares to the public at the public offering price on the
cover page of this prospectus and to dealers at that price less a concession not
in excess of $     per common share. The underwriters may allow, and the dealers
may reallow, a discount not in excess of $     per common share to other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

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<PAGE>

       The following table shows the public offering price, underwriting
commission and proceeds before expenses to us (not including proceeds from the
sale of common shares to Gerdau S.A.). This information assumes either no
exercise or full exercise by the underwriters of their overallotment option.

<Table>
<Caption>
                                            PER SHARE   WITHOUT OPTION   WITH OPTION
                                            ---------   --------------   -----------
<S>                                         <C>         <C>              <C>
Public offering price.....................     $             $               $
Underwriting commission...................     $             $               $
Proceeds, before expenses, to us..........     $             $               $
</Table>

       Underwriting commission will not be payable on the 35,000,000 common
shares to be purchased by Gerdau S.A. or on any additional common shares
purchased by Gerdau S.A. pursuant to the Gerdau S.A. additional commitment. The
expenses of the offering, not including the underwriting commission, are
estimated at $     and are payable by us.

OVERALLOTMENT OPTION

       We have granted an option to the underwriters to purchase up to an
additional 5,250,000 common shares from us at the public offering price, less
the underwriting commission. The underwriters may exercise their option for 30
days from the date of the closing of the offering solely to cover any
overallotments, if any. If the underwriters exercise their option, each will be
obligated, subject to conditions contained in the purchase agreement, to
purchase a number of additional common shares proportionate to that
underwriter's initial amount reflected in the above table.

NO SALES OF SIMILAR SECURITIES

       We, our directors and executive officers and Gerdau S.A. have agreed,
with exceptions, not to sell or transfer any common shares for 90 days after the
date of this prospectus without first obtaining the written consent of Merrill
Lynch and BMO Nesbitt Burns Inc. on behalf of the underwriters. Specifically, we
and these other persons have agreed not to directly or indirectly:

       -     offer, pledge, sell or contract to sell any common shares,

       -     sell or grant any option or contract to purchase any common shares,

       -     purchase any option or contract to sell any common shares,

       -     grant any option, right or warrant for the sale of any common
             shares,

       -     lend or otherwise dispose of or transfer any common shares,

       -     request or demand that we file a registration statement related to
             the common shares, or

       -     enter into any swap or other agreement that transfers, in whole or
             in part, the economic consequence of ownership of any common shares
             whether any such swap or transaction is to be settled by delivery
             of common shares or other securities, in cash or otherwise.

       This lockup provision applies to common shares and to securities
convertible into or exchangeable or exercisable for or repayable with common
shares. It also applies to common shares owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires the power of disposition.

NEW YORK STOCK EXCHANGE AND TORONTO STOCK EXCHANGE LISTING

       Our outstanding common shares are listed on the Toronto Stock Exchange
under the symbol "GNA" and we have applied to list the additional common shares
offered hereby, including those to be purchased by Gerdau S.A., on the Toronto
Stock Exchange. We have also applied to list all of our common shares, including
the common shares offered hereby, on the New York Stock Exchange under the
symbol "GNA." Listing will be subject to us fulfilling all of the listing
requirements of the Toronto Stock Exchange and the New York Stock Exchange.

                                        83
<PAGE>

PRICE STABILIZATION AND SHORT POSITIONS

       Pursuant to policy statements of the Ontario Securities Commission and
the Agence nationale d'encadrement du secteur financier, the underwriters may
not, throughout the period of distribution, bid for or purchase shares. The
foregoing restriction is subject to certain exceptions, on the condition that
the bid or purchase not be engaged in for the purpose of creating actual or
apparent active trading in, or raising the price of, the common shares. Such
exceptions include a bid or purchase permitted under the by-laws and rules of
the Toronto Stock Exchange relating to market stabilization and passive market
making activities and a bid or purchase made for and on behalf of a customer
where the order was not solicited during the period of distribution.

       Until the distribution of the common shares is completed, the SEC rules
may limit the underwriters and selling group members from bidding for and
purchasing our common shares. However, the representatives of the underwriters
may engage in transactions that stabilize the price of the common shares, such
as bids or purchases to peg, fix or maintain that price. Such transactions, if
commenced, may be discontinued at any time.

       If the underwriters create a short position in our common shares in
connection with the offering, i.e., if they sell more common shares than they
are obligated to purchase under the purchase agreement, the representatives may
reduce that short position by purchasing common shares in the open market. The
representatives may also elect to reduce any short position by exercising all or
part of the overallotment option described above. Purchases of common shares to
stabilize the price or to reduce a short position may cause the price of the
common shares to be higher than it might be in the absence of such purchases.

       Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common shares. In addition, neither
we nor any of the underwriters makes any representation that the representatives
or the co-lead managers will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.

OTHER RELATIONSHIPS

       Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions. An affiliate of CIBC World Markets, one of
the underwriters of this offering, is a lender under our senior secured credit
facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Credit Facilities
and Indebtedness."

INTERNET OFFERING

       Certain of the underwriters will be facilitating Internet distribution
for this offering to certain of its Internet subscription customers. Such
underwriters intend to allocate a limited number of common shares for sale to
their online brokerage customers. An electronic prospectus is available on the
websites maintained by such underwriters. Other than the prospectus in
electronic format, the information on such websites relating to this offering is
not a part of this prospectus.

                                        84
<PAGE>

                              SALE TO GERDAU S.A.

       Of the 70,000,000 common shares to be sold by us, 35,000,000 common
shares will be sold to Gerdau S.A. at the public offering price. The purchase by
Gerdau S.A. is separate from the offering of 35,000,000 common shares to the
public under this prospectus and the underwriters will not receive any
commission on common shares purchased from us by Gerdau S.A. The terms of the
Gerdau S.A. purchase are set out in an agreement between us and Gerdau S.A.
whereby we have agreed to issue and sell 35,000,000 common shares to Gerdau
S.A., conditional upon the completion of the sale of 35,000,000 common shares to
the underwriters, and certain other matters. In addition, Gerdau S.A. has agreed
to purchase, within two days of the date of exercise of the underwriters
overallotment option, a number of additional common shares equal to the number
of common shares purchased by the underwriters pursuant to the overallotment
option, if any.

                                 LEGAL MATTERS

       The matters referred to under "Eligibility for Investment" and certain
other legal matters relating to the common shares offered under this prospectus
will be passed upon, with respect to U.S. and Canadian matters by Torys LLP, on
behalf of us, and by Blake, Cassels & Graydon LLP, Toronto, Ontario, as to
matters of Canadian law and Skadden, Arps, Slate, Meagher & Flom LLP, Toronto,
Ontario, as to matters of U.S. law, on behalf of the underwriters.

       As of September 30, 2004, the partners and associates of Torys LLP and
Blake, Cassels & Graydon LLP beneficially owned, directly or indirectly, less
than 1% of our outstanding securities.

  INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM, TRANSFER AGENT AND
                                   REGISTRAR

       Our independent registered certified public accounting firm is
PricewaterhouseCoopers LLP whose Tampa office is located at Bank of America
Building, 101 East Kennedy Boulevard, Suite 1500, Tampa, Florida, 33602, U.S.A.

       The transfer agent and registrar for the common shares in Canada is CIBC
Mellon Trust Company at its principal offices in Toronto, Montreal and Calgary
and, in the United States, is its U.S. affiliate, Mellon Investor Services LLC
at its principal office in New York.

                                    EXPERTS

       The financial statements of Gerdau Ameristeel Corporation as of December
31, 2003 and 2002 and for the years then ended included and incorporated by
reference in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, Tampa, Florida, independent registered certified
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.

       The financial statements of North Star as of and for the fiscal year
ended May 31, 2004 included in this prospectus have been so included in reliance
on the report of KPMG LLP, Minneapolis, Minnesota, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.

                      DOCUMENTS INCORPORATED BY REFERENCE

       The following documents, filed with the securities commissions or similar
authorities in Canada (including the permanent information record in the
Province of Quebec), are specifically incorporated by reference in this
prospectus:

       1. our audited comparative consolidated financial statements for the
years ended December 31, 2003 and 2002, together with the report of the auditors
thereon, as set out in pages 18 to 45 of our 2003

                                        85
<PAGE>

annual report and management's discussion and analysis of financial condition
and results of operations for such years as set out in pages 8 to 17 of our 2003
annual report;

       2. our management information circular dated March 25, 2004, prepared in
connection with our annual meeting of shareholders held on May 6, 2004, other
than the sections entitled "Human Resources Committee Report on Executive
Compensation", "Statement of Corporate Governance Practices" and "Shareholder
Return Five-Year Performance Graph";

       3. our annual information form dated April 29, 2004;

       4. our unaudited comparative consolidated financial statements for the
three and six month periods ended June 30, 2004 and 2003 as set out in pages 16
to 40 of our second quarter quarterly report and management's discussion and
analysis of financial condition and results of operations for such periods as
set out in pages 1 to 15 of our second quarter quarterly report;

       5. our material change report dated January 26, 2004 relating to the
completion of our offer to exchange up to $405.0 million aggregate principal
amount of our 10 3/8% senior notes due 2011;

       6. our material change report dated April 8, 2004 relating to our sale of
26.8 million common shares to Gerdau S.A., and

       7. our material change report dated September 14, 2004 relating to the
proposed acquisition of North Star.

       ANY DOCUMENTS OF THE TYPE REFERRED TO IN THE PRECEDING PARAGRAPHS AND ANY
MATERIAL CHANGE REPORTS (EXCEPT CONFIDENTIAL MATERIAL CHANGE REPORTS)
SUBSEQUENTLY FILED BY US WITH A SECURITIES COMMISSION OR ANY SIMILAR AUTHORITY
IN CANADA, AFTER THE DATE OF THIS PROSPECTUS AND PRIOR TO THE TERMINATION OF
THIS OFFERING, SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS.

       ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED
FOR PURPOSES OF THIS PROSPECTUS TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN
OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN MODIFIES OR SUPERSEDES SUCH STATEMENT. ANY
STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT AS SO MODIFIED
OR SUPERSEDED, TO CONSTITUTE A PART OF THIS PROSPECTUS.

       In addition, to the extent that any document or information incorporated
by reference in this prospectus is included in a report that is filed with or
furnished to the SEC on Form 40-F, 20-F, 10-K, 10-Q, 8-K or 6-K (or any
respective successor form), such document or information shall also be deemed to
be incorporated by reference as an exhibit to the registration statement on Form
F-10 of which this prospectus forms a part. In addition, any document filed with
or furnished to the SEC by us which specifically states that it is intended to
be incorporated by reference into the registration statement of which this
prospectus forms a part shall be deemed to be incorporated by reference into the
registration statement.

       The information permitted to be omitted from this prospectus will be
contained in a supplemented prospectus and will be incorporated by reference in
this prospectus as of the date of such supplemented prospectus.

                       WHERE YOU CAN GET MORE INFORMATION

       Information has been incorporated by reference in this prospectus from
documents filed with securities commissions or similar authorities in Canada
(including the permanent information record in the Province of Quebec) and with
the SEC. Copies of this prospectus and the documents incorporated by reference
in this prospectus may be obtained on request without charge from us at 5100
West Lemon Street, Suite 312, Tampa, Florida, U.S.A., 33609, telephone no. (813)
286-8383; attention: Secretary. Copies of these documents are available on the
System for Electronic Document Analysis and Retrieval of the Canadian Securities
Administrators at www.sedar.com.
                                        86
<PAGE>

       We have filed with the SEC a registration statement on Form F-10 under
the U.S. Securities Act of 1933, as amended, with respect to our common shares
of which this prospectus is a part. This prospectus does not contain all of the
information set forth in the registration statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Reference is
made to the registration statement and its exhibits for further information
about us and the common shares offered in this prospectus.

       We are subject to the informational requirements of the U.S. Securities
Exchange Act of 1934, as amended, and in accordance therewith file reports and
other information with the SEC. Under a multi-jurisdictional disclosure system
adopted by the United States and Canada, we generally may prepare these reports
and other information in accordance with the disclosure requirements of Canada,
which are different from those of the United States. As a foreign private
issuer, we are exempt from the rules under the Exchange Act prescribing the
furnishing and content of proxy statements, and our officers and directors and
Gerdau S.A. are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act. Any information filed
with the SEC can be inspected and copied at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, Room 1024. Copies of such material can also be obtained for a fee
from the public reference section of the SEC. The SEC also maintains a website
(www.sec.gov) that makes available reports and other information that we file
electronically with it, including the registration statement that we have filed
with respect to this offering.

             DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

       The following documents have been filed with the SEC as part of the
registration statement on Form F-10 of which this prospectus forms a part:

       -     the documents referred to under the heading "Documents Incorporated
             by Reference";

       -     the purchase agreement referred to under the heading
             "Underwriting";

       -     consent of PricewaterhouseCoopers LLP;

       -     consent of KPMG LLP;

       -     consent of Torys LLP;

       -     consent of Blake, Cassels & Graydon LLP; and

       -     powers of attorney (included on the signature pages of the
             registration statement).

                                        87
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>

<S>                                                           <C>
CANADIAN GAAP/U.S. DOLLAR CONSOLIDATED FINANCIAL STATEMENTS
  OF GERDAU AMERISTEEL CORPORATION FOR THE YEARS ENDED
  DECEMBER 31, 2003 AND 2002................................   F-2
  Report of independent registered certified public
     accounting firm........................................   F-3
  Balance sheet.............................................   F-4
  Statements of earnings (loss).............................   F-5
  Statements of shareholders' equity........................   F-6
  Statements of cash flows..................................   F-7
  Notes.....................................................   F-8
U.S. GAAP/U.S. DOLLAR CONSOLIDATED FINANCIAL STATEMENTS OF
  GERDAU AMERISTEEL CORPORATION FOR THE THREE AND SIX MONTHS
  ENDED JUNE 30, 2004 AND 2003..............................  F-40
  Balance sheet.............................................  F-41
  Statement of earnings (loss)..............................  F-42
  Statement of shareholders' equity.........................  F-43
  Statement of cash flows...................................  F-44
  Notes.....................................................  F-45
U.S. GAAP/U.S. DOLLAR COMBINED FINANCIAL STATEMENTS OF NORTH
  STAR FOR THE YEAR ENDED MAY 31, 2004......................  F-70
  Report of independent auditor.............................  F-71
  Balance sheet.............................................  F-72
  Statement of earnings.....................................  F-73
  Statement of equity.......................................  F-74
  Statement of cash flows...................................  F-75
  Notes.....................................................  F-76
U.S. GAAP/U.S. DOLLAR UNAUDITED PRO FORMA CONDENSED
  CONSOLIDATED FINANCIAL STATEMENTS OF GERDAU AMERISTEEL
  CORPORATION...............................................  F-81
  Pro forma balance sheet...................................  F-82
  Pro forma statement of earnings...........................  F-83
  Notes.....................................................  F-84
</Table>

                                       F-1
<PAGE>

                           CANADIAN GAAP/U.S. DOLLAR
                       CONSOLIDATED FINANCIAL STATEMENTS

                         GERDAU AMERISTEEL CORPORATION
                           DECEMBER 31, 2003 AND 2002

                                       F-2
<PAGE>

       REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
of Gerdau Ameristeel Corporation:

       We have audited the accompanying consolidated balance sheets of Gerdau
Ameristeel Corporation and its subsidiaries as of December 31, 2003 and 2002,
and the related consolidated statements of earnings (loss), of shareholders'
equity, and of cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

       In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gerdau
Ameristeel Corporation and its subsidiaries at December 31, 2003 and 2002, and
the results of their operations and their cash flows for the years then ended in
conformity with Canadian generally accepted accounting principles.

PRICEWATERHOUSECOOPERS LLP

Tampa, Florida
March 12, 2004

                                       F-3
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                               DECEMBER 31,
                                                              DECEMBER 31,         2002
                                                                  2003       (RESTATED NOTE 2)
                                                              ------------   -----------------
                                                                     (US$ IN THOUSANDS)
<S>                                                           <C>            <C>
                                            ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................   $   10,459       $   16,361
  Accounts receivable, net of allowance for doubtful
     accounts of $6,380 (2002 -- $6,913)....................      233,331          172,745
  Inventories (note 4)......................................      376,458          351,400
  Deferred tax assets (note 10).............................       13,269           11,417
  Other current assets......................................       21,608            2,997
                                                               ----------       ----------
TOTAL CURRENT ASSETS........................................      655,125          554,920
PROPERTY, PLANT AND EQUIPMENT (NOTE 5)......................      919,207          898,948
GOODWILL....................................................      116,564          114,374
DEFERRED FINANCING COSTS....................................       16,063            2,514
DEFERRED TAX ASSETS.........................................       15,045            6,033
OTHER ASSETS................................................          204              645
                                                               ----------       ----------
TOTAL ASSETS................................................   $1,722,208       $1,577,434
                                                               ==========       ==========

                             LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable..........................................   $  231,352       $  170,334
  Accrued salaries, wages and employee benefits.............       29,732           27,342
  Accrued interest..........................................       23,730            3,395
  Other current liabilities.................................       34,357           43,267
  Bank indebtedness (note 7)................................        2,055           23,379
  Current portion of long-term borrowings (note 7)..........        1,250           83,942
                                                               ----------       ----------
TOTAL CURRENT LIABILITIES...................................      322,476          351,659
LONG-TERM BORROWINGS, LESS CURRENT PORTION (NOTE 7).........      566,963          411,833
CONVERTIBLE DEBENTURES (NOTE 9).............................       96,719           79,134
ACCRUED BENEFIT OBLIGATION (NOTE 11)........................       74,354           70,166
OTHER LIABILITIES...........................................       45,831           29,175
DEFERRED TAX LIABILITIES (NOTE 10)..........................       64,355           88,191
MINORITY INTEREST...........................................           --           33,312
                                                               ----------       ----------
TOTAL LIABILITIES...........................................    1,170,698        1,063,470
                                                               ----------       ----------
COMMITMENTS AND CONTINGENCIES (NOTE 15)
SHAREHOLDERS' EQUITY
  Capital stock (note 13)...................................      547,601          513,400
  Retained earnings (accumulated deficit)...................      (19,412)           1,329
  Cumulative translation adjustment.........................       23,321             (765)
                                                               ----------       ----------
TOTAL SHAREHOLDERS' EQUITY..................................      551,510          513,964
                                                               ----------       ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................   $1,722,208       $1,577,434
                                                               ==========       ==========
</Table>

                See notes to consolidated financial statements.
                                       F-4
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

<Table>
<Caption>
                                                               YEAR ENDED     YEAR ENDED
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2003           2002
                                                              ------------   ------------
                                                               (US$ IN THOUSANDS, EXCEPT
                                                               EARNINGS PER SHARE DATA)
<S>                                                           <C>            <C>
NET SALES...................................................   $1,927,839     $1,036,055
                                                               ----------     ----------
OPERATING EXPENSES
  Cost of sales.............................................    1,759,878        867,091
  Selling and administrative................................       87,247         62,173
  Depreciation..............................................       83,252         58,683
  Other operating income (note 16)..........................       (1,244)        (5,072)
                                                               ----------     ----------
                                                                1,929,133        982,875
                                                               ----------     ----------
     INCOME (LOSS) FROM OPERATIONS..........................       (1,294)        53,180
                                                               ----------     ----------
OTHER EXPENSES
  Interest, net.............................................       49,549         38,598
  Foreign exchange loss.....................................          726            230
  Amortization of deferred financing costs..................        4,664          1,172
                                                               ----------     ----------
                                                                   54,939         40,000
                                                               ----------     ----------
     INCOME (LOSS) BEFORE INCOME TAXES......................      (56,233)        13,180
INCOME TAX EXPENSE (RECOVERY)...............................      (35,275)           341
                                                               ----------     ----------
INCOME (LOSS) BEFORE MINORITY INTEREST......................      (20,958)        12,839
MINORITY INTEREST...........................................          217         (1,707)
                                                               ----------     ----------
NET INCOME (LOSS)...........................................   $  (20,741)    $   11,132
                                                               ==========     ==========
EARNINGS (LOSS) PER COMMON SHARE -- BASIC (NOTE 13).........   $    (0.11)    $     0.07
EARNINGS (LOSS) PER COMMON SHARE -- DILUTED.................   $    (0.11)    $     0.07
</Table>

                See notes to consolidated financial statements.
                                       F-5
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
                                                                            CUMULATIVE
                                                   INVESTED    RETAINED     TRANSLATION
                                       SHARES      CAPITAL     EARNINGS     ADJUSTMENT     TOTAL
                                     -----------   --------   -----------   -----------   --------
                                                 (US$ IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                  <C>           <C>        <C>           <C>           <C>
BALANCE -- DECEMBER 31, 2001.......  133,388,400   $ 58,364   $    (7,622)   $   (944)    $ 49,798
                                     -----------   --------   -----------    --------     --------
  Net income.......................                      --        11,132          --       11,132
  Subsidiary stock activity........                    (187)           --          --         (187)
  Foreign exchange.................                      --            --         179          179
  Debt converted to equity (note
     8)............................                 325,948            --          --      325,948
  Acquisition (note 3).............   51,503,960    129,275            --          --      129,275
  Dividends paid...................                      --        (2,181)         --       (2,181)
                                     -----------   --------   -----------    --------     --------
BALANCE -- Restated (note 2)
  DECEMBER 31, 2002................  184,892,360    513,400         1,329        (765)     513,964
                                     -----------   --------   -----------    --------     --------
  Net Loss.........................                               (20,741)                 (20,741)
  Acquisition of Minority
     Interest......................   13,198,501     34,201                                 34,201
  Foreign exchange.................                                            24,086       24,086
                                     -----------   --------   -----------    --------     --------
BALANCE -- DECEMBER 31, 2003.......  198,090,861   $547,601   $   (19,412)   $ 23,321     $551,510
                                     ===========   ========   ===========    ========     ========
</Table>

                See notes to consolidated financial statements.
                                       F-6
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                               YEAR ENDED     YEAR ENDED
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2003           2002
                                                              ------------   ------------
                                                                  (US$ IN THOUSANDS)
<S>                                                           <C>            <C>
OPERATING ACTIVITIES
Net income (loss)...........................................   $ (20,741)      $ 11,132
Adjustment to reconcile net income (loss) to net cash
  provided by operating activities:
  Depreciation..............................................      83,252         58,683
  Amortization..............................................       4,664          1,172
  Deferred income taxes.....................................     (22,719)       (10,428)
  Loss on disposition of property, plant and equipment......         192          1,044
  Foreign exchange on related party loans...................       7,241            436
Changes in operating assets and liabilities, net of
  acquisitions:
  Accounts receivable.......................................     (51,072)        21,433
  Inventories...............................................        (263)       (17,991)
  Other assets..............................................      (6,054)        (9,061)
  Liabilities...............................................      49,392        (22,352)
                                                               ---------       --------
NET CASH PROVIDED BY OPERATING ACTIVITIES...................      43,892         34,068
                                                               ---------       --------
INVESTING ACTIVITIES
  Additions to property, plant and equipment................     (59,203)       (33,482)
  Purchase price for acquisitions...........................          --         (6,856)
  Cash acquired in acquisition..............................          --         18,465
  Proceeds from dispositions of property, plant &
     equipment..............................................       2,643            489
                                                               ---------       --------
NET CASH USED IN INVESTING ACTIVITIES.......................     (56,560)       (21,384)
                                                               ---------       --------
FINANCING ACTIVITIES
  Term debt payments........................................      (9,395)       (29,503)
  Proceeds from issuance of new debt........................     542,357             --
  Revolving credit borrowings (payments)....................    (510,053)        27,273
  Reductions (additions) to deferred financing costs........     (15,639)           705
  Changes in minority interest..............................        (217)         2,678
  Subsidiary stock activity.................................          --           (187)
  Dividends paid............................................          --         (2,181)
                                                               ---------       --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.........       7,053         (1,215)
Effect of exchange rate changes on cash and cash
  equivalents...............................................        (287)          (195)
                                                               ---------       --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............      (5,902)        11,274
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..............      16,361          5,087
                                                               ---------       --------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................   $  10,459       $ 16,361
                                                               =========       ========
SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest....................................   $  22,938       $ 57,610
                                                               =========       ========
  Cash paid for income taxes................................   $   1,496       $  2,289
                                                               =========       ========
  Acquisition of minority interest for common stock.........   $  34,201             --
                                                               =========       ========
</Table>

                See notes to consolidated financial statements.
                                       F-7
<PAGE>

                         GERDAU AMERISTEEL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               (US$ IN THOUSANDS)

NOTE 1 -- BASIS OF PRESENTATION

       Gerdau Ameristeel Corporation (the "Company" or "Gerdau Ameristeel") is a
Canadian corporation, whose indirect majority shareholder is Gerdau S.A., a
Brazilian company. On October 23, 2002, Gerdau S.A., parent company of the
Gerdau North America Group, entered into a transaction agreement with Co-Steel
Inc. ("Co-Steel"), a Canadian public company. The "Gerdau North America Group"
consisted of the Gerdau Canada Group (Gerdau Ameristeel Cambridge Inc. and
Gerdau MRM Holdings Inc. and their consolidated subsidiaries) and Gerdau USA,
Inc. and its consolidated subsidiaries FLS Holdings Inc., AmeriSteel Corporation
and AmeriSteel Bright Bar, Inc. (collectively, "GUSA"). This transaction
agreement resulted in Co-Steel acquiring all of the issued and outstanding
shares of the companies included in the Gerdau North America Group, in exchange
for Co-Steel common shares representing approximately 74% of Co-Steel's total
common shares. The transaction was accounted for using the reverse-takeover
method of purchase accounting. The Gerdau North America Group is deemed to be
the acquirer and is assumed to be purchasing the assets and liabilities of
Co-Steel, since the original shareholder of the Gerdau North America Group
became owner of more than 50 percent of the voting shares of Co-Steel on a
fully-diluted basis following the transaction. As a result, the Gerdau North
America Group's historical accounts became the historical accounts for all
periods prior to the date of merger. In connection with the merger, Co-Steel's
name was changed to Gerdau Ameristeel Corporation. As part of this transaction,
certain related party loans of the Gerdau North America Group were converted
into equity in October 2002.

       On March 31, 2003, under the terms of the Transaction Agreement relating
to the acquisition of Co-Steel, the Company completed an exchange of minority
shares of AmeriSteel Corporation for shares of Gerdau Ameristeel. Minority
shareholders of AmeriSteel, primarily executives and employees, exchanged
1,395,041 shares of AmeriSteel for 13,198,501 shares of Gerdau Ameristeel, an
exchange ratio of 9.4617 to 1. As a result, AmeriSteel became an indirect wholly
owned subsidiary of Gerdau Ameristeel. On April 4, 2003, AmeriSteel changed its
name to Gerdau Ameristeel US Inc. ("Ameristeel"). Subsequent to the minority
exchange, Gerdau S.A. owned approximately 67.5% of common shares outstanding. As
of December 31, 2003, Gerdau S.A. increased its interest to 68.6% through share
purchases in the open market.

       The Company operates steel mini-mills, producing primarily steel bars and
special sections for commercial and industrial building construction, steel
service centers and original equipment manufacturers. Its principal market area
is the eastern United States and Canada. Principal suppliers to the Company
include scrap metal producers, electric utilities, natural gas suppliers, rail
and truck carriers. All significant intercompany transactions and accounts have
been eliminated in consolidation.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       These consolidated financial statements are presented in accordance with
accounting principles generally accepted in Canada. All dollar amounts are
reported in United States dollars unless otherwise indicated.

       CONSOLIDATION:  The consolidated financial statements include the
accounts of the Company, its subsidiaries and joint ventures. For 2002, they
include full year results for the Gerdau North America operations, and results
for the Co-Steel operations for the period from October 23, 2002 through
December 31, 2002, which represents the period subsequent to the date of
acquisition.

       JOINT VENTURES AND OTHER INVESTMENTS:  The Company's investments in
Gallatin Steel Company, Bradley Steel Processors and MRM Guide Rail are 50%
joint ventures, and are proportionately consolidated. Other investments where
the Company does not exercise significant influence are accounted

                                       F-8
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for by the cost method. The Company evaluates the carrying value of the
investments to determine if there has been an impairment in value considered
other than temporary, which is assessed by review of cash flows and operating
income and takes into consideration trading values on recognized stock
exchanges. If impairment is considered other than temporary, a provision is
recorded.

       REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:  The Company
recognizes revenues from sales and the allowance for estimated costs associated
with returns from these sales when the product is shipped and title transferred
to the buyer. Provisions are made for estimated product returns and customer
claims based on estimates and actual historical experience. If the historical
data used in the estimates does not reflect future returns and claims trends,
additional provisions may be necessary. An allowance for doubtful accounts is
maintained for estimated losses resulting from the inability of customers to
make required payments.

       CASH AND CASH EQUIVALENTS:  The Company considers all cash on deposit and
term deposits with original maturities of three months or less, to be cash
equivalents. Cash held in the joint venture operations are for the sole use of
the joint ventures.

       INVENTORIES:  Billets and finished goods are valued at the lower of cost
(calculated on an average cost basis) or net realizable value. Scrap,
consumables and operations supplies inventories are valued at the lower of cost
(calculated on an average cost basis) or replacement value. Consumables include
mill rolls, which are recorded at cost and amortized based on usage.

       PROPERTY, PLANT AND EQUIPMENT:  Property, plant and equipment are
recorded at cost. Major renewals and betterments are capitalized and depreciated
over their estimated useful lives. Interest incurred in connection with
significant capital projects is capitalized. Maintenance and repairs are charged
against operations as incurred. Upon retirement or other disposition of
property, plant and equipment, the cost and related allowances for depreciation
are removed from the accounts and any resulting gain or loss is recorded in the
statement of operations. Property, Plant & Equipment Held for Sale is carried at
the lower of cost or net realizable value.

       For financial reporting purposes, the Company provides for depreciation
of property, plant and equipment using the straight-line method over the
estimated useful lives of 10 to 30 years for buildings and improvements and 4 to
15 years for other equipment. During 2002, the Company changed the depreciable
lives of certain buildings and equipment to reflect their updated estimated
economic lives. The effect of this change in accounting estimate reduced
depreciation expense in 2002 by approximately $3.2 million.

       GOODWILL:  Goodwill represents the cost of investments in operating
companies in excess of the fair value of the net identifiable assets acquired.
On January 1, 2002, the Company adopted CICA Handbook Section 3062, Goodwill and
Other Intangible Assets. This section requires that goodwill and intangible
assets with indefinite lives are not amortized, but rather their fair value be
assessed at least annually and written down for any impairment in value. For
acquisitions made subsequent to July 1, 2001, and as of January 1, 2002 for all
existing goodwill and intangible assets with indefinite lives, such assets will
no longer be amortized, but will be evaluated annually for impairment.
Additional goodwill of $2.2 million was created by the exchange of minority
shares of AmeriSteel on March 31, 2003.

       DEFERRED FINANCING COSTS:  Deferred financing costs were incurred in
relation to long term debt and are reflected net of accumulated amortization and
are amortized over the term of the respective debt instruments, which range from
5 to 22 years from the debt inception date. Deferred financing costs are
amortized using the effective interest method.

       DEFERRED INCOME TAXES:  The liability method of accounting for income
taxes is used whereby deferred income taxes arise from temporary differences
between the book value of assets and liabilities and

                                       F-9
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

their respective tax value. Deferred income tax assets and liabilities are
measured using substantially enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred income tax assets and liabilities
of a change in tax rates is recognized in operations in the period that includes
the substantive enactment date. A valuation allowance is recorded to the extent
the recoverability of deferred income tax assets is considered more likely than
not.

       PENSIONS AND POST-RETIREMENT BENEFITS:  The Company accrues its
obligations under employee benefit plans and the related costs, net of plan
assets. The Company has adopted the following policies:

       -     The cost of pensions and other retirement benefits earned by
             employees is actuarially determined using the projected benefit
             method prorated on service and management's best estimate of
             expected plan investment performance for funded plans, salary
             escalation, retirement ages of employees and expected health care
             costs. The discount rate used for determining the liability for
             future benefits is the current interest rate at the balance sheet
             date on high quality fixed income investments with maturities that
             match the expected maturity of the obligations.

       -     Pension assets are valued at fair market value.

       -     Past service costs from plan amendments are amortized on a
             straight-line basis over the average remaining service period of
             employees active at the date of amendment.

       -     The excess of the net actuarial gain or loss over 10% of the
             greater of the benefit obligation and the fair value of plan assets
             is amortized over the average remaining service period of the
             active employees.

       -     A plan curtailment will result if there has been a significant
             reduction in the expected future service of present employees. A
             net curtailment loss is recognized when the event is probable and
             can be estimated, a net curtailment gain is deferred until
             realized.

       ENVIRONMENTAL LIABILITIES:  The Company reserves for potential
environmental liabilities based on the best estimates of potential clean-up and
remediation estimates for known environmental sites. The Company employs a staff
of environmental experts to administer all phases of its environmental programs,
and uses outside experts where needed. These professionals develop estimates of
potential liabilities at these sites based on projected and known remediation
costs. This analysis requires the Company to make significant estimates, and
changes in facts and circumstances could result in material changes in the
environmental accrual.

       REPORTING CURRENCY AND FOREIGN CURRENCY TRANSLATION:  Operating revenue
and expenses arising from foreign currency transactions are translated into U.S.
dollars at exchange rates in effect on the date of the transactions. Monetary
assets and liabilities are translated into U.S. dollars at the exchange rate in
effect at the balance sheet date. Gains or losses arising from these
translations are included in earnings, with the exception of unrealized foreign
exchange gains or losses on long-term monetary items that hedge net investments
in foreign operations which are accumulated in the foreign currency translation
adjustment account in shareholders' equity, until there is a reduction in the
net investment in the foreign operation.

       Assets and liabilities of self-sustaining foreign operations are
translated into U.S. dollars at the exchange rate in effect at the balance sheet
date. Operating revenue and expense items are translated at average exchange
rates prevailing during the year. Any corresponding foreign exchange gains and
losses are deferred and disclosed separately as part of shareholders' equity and
are recognized in earnings when the ownership interest in the foreign operations
is reduced.

                                       F-10
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The consolidated financial statements have been prepared in U.S. dollars
as the majority of the Company's transactions occur in U.S. dollars.

       EARNINGS (LOSS) PER SHARE:  The Company's diluted earnings per share is
determined using the treasury stock method for the effect of outstanding share
purchase options.

       STOCK OPTION PLAN:  The Company accounts for stock options granted to
employees using the intrinsic value based method of accounting. Under this
method, the Company does not recognize compensation expense for the stock
options because the exercise price is equal to the market price of the
underlying stock on the date of grant. Had the Company applied the fair value
based method of accounting, net loss and loss per share and net income and
income per share would be as shown on the following table. The Black-Scholes
option pricing model was used to estimate the fair value of each option grant on
the date of grant and calculate the pro forma stock-based compensation costs.
For purposes of the pro forma disclosures, the assumed compensation expense is
amortized over the option's vesting periods and includes options granted
subsequent to January 1, 2002 and excludes options issued prior to January 1,
2002. The following assumptions were used:

<Table>
<S>                                                           <C>
Expected dividend yield.....................................        0%
Expected share price volatility.............................       55%
Risk-free rate of return....................................        4%
Expected period until exercise..............................  5 years
</Table>

<Table>
<Caption>
                                                                  FOR THE YEAR ENDED
                                                              ---------------------------
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2003           2002
                                                              ------------   ------------
                                                                (AMOUNTS IN $000 EXCEPT
                                                                    PER SHARE DATA)
<S>                                                           <C>            <C>
Net (loss) income, as reported..............................    $(20,741)      $11,132
Pro forma stock-based compensation cost.....................          70            --
                                                                --------       -------
Pro forma, net income.......................................    $(20,811)      $11,132
                                                                ========       =======
Earnings (loss) per share
  Basic, as reported........................................    $  (0.11)      $  0.07
  Basic, pro forma..........................................       (0.11)         0.07
  Diluted, as reported......................................       (0.11)         0.07
  Diluted, pro forma........................................       (0.11)         0.07
</Table>

       DEFERRED SHARE UNIT PLAN:  The Corporation offers a Deferred Share Unit
Plan (DSUP) for independent members of the Board of Directors. Under the DSUP,
each director receives a percentage of his annual compensation in the form of
deferred share units (DSUs) which are notional common shares of the Company. The
issue price of each DSU is based on the closing trading value of the common
shares on the meeting dates and an expense is recognized at that time. The
shares are subsequently marked to market and expensed accordingly. The DSU
account of each director includes the value of dividends, if any, as if
reinvested in additional DSUs. The director is not permitted to convert DSUs
into cash until retirement from the Board. The value of the DSUs, when converted
to cash, will be equivalent to the market value of the common shares at the time
the conversion takes place. The value of the outstanding DSUs as at December 31,
2003 was $147 thousand (2002 -- $141 thousand).

       USE OF ESTIMATES:  The preparation of financial statements in conformity
with Canadian generally accepted accounting principles requires management to
make estimates and assumptions that affect the

                                       F-11
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

       RECLASSIFICATIONS:  Certain amounts for prior years have been
reclassified to conform to the 2003 presentation. Such reclassifications had no
effect on amounts previously reported for net income or shareholders' equity.

       CHANGE IN ACCOUNTING POLICY -- CONVERTIBLE DEBENTURES:  The Company early
adopted CICA Handbook Section 3860.20A, Financial Instruments -- Disclosure and
Presentation. This section requires that the Company's convertible debentures be
treated as liabilities instead of equity and for the related interest to be
included in the statement of earnings (loss) instead of a charge to retained
earnings. This change in accounting policy did not impact net income in 2002,
but resulted in additional interest expense of $6.3 million in 2003. Prior
periods have been restated to reflect the change in accounting.

NOTE 3 -- ACQUISITIONS

       On October 23, 2002, Brazilian steelmaker Gerdau S.A. and Canadian
steelmaker Co-Steel combined their North American operations. In the
transaction, Co-Steel acquired all of the issued and outstanding shares of the
Gerdau North America Group in exchange for shares of Co-Steel representing
approximately 74% of the shares of the combined entity. A portion of these
shares were issued to minority shareholders of AmeriSteel Corporation on March
31, 2003, as described below. The name of Co-Steel was changed to Gerdau
AmeriSteel Corporation as part of the transaction.

       For accounting purposes, the business combination of the Gerdau North
America Group and Co-Steel has been accounted for using the reverse take-over
method of purchase accounting. Gerdau North America is deemed to be the acquirer
and is assumed to be purchasing the assets and liabilities of Co-Steel, since
the original shareholders of the Gerdau North America Group have become owners
of more than 50% of the voting shares of Co-Steel on a fully diluted basis. The
results of the operations of Co-Steel are included from the date of the
transaction.

       The following table summarizes the fair value of assets and liabilities
acquired at the date of the acquisition ($000s):

<Table>
<S>                                                            <C>
Net assets (liabilities) acquired
  Current assets............................................   $242,252
  Current liabilities.......................................   (130,345)
  Property, plant and equipment.............................    389,915
  Other assets..............................................       (177)
  Long-term debt............................................   (219,969)
  Other long-term liabilities...............................    (81,386)
  Net future income taxes...................................     15,768
  Convertible debenture (recorded as equity)................    (80,113)
                                                               --------
                                                               $135,945
                                                               ========
Purchase consideration, representing 51,503,960 Co-Steel
  shares at $2.51 per share.................................   $129,275
Plus transaction costs......................................      6,670
                                                               --------
                                                               $135,945
                                                               ========
</Table>

                                       F-12
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       Effective March 31, 2003, non-controlling shareholders holding, in the
aggregate, approximately 13% of the issued and outstanding shares of AmeriSteel
had their holdings exchanged for Gerdau Ameristeel common shares in a ratio of
9.4617 Gerdau Ameristeel shares for each common share of AmeriSteel exchanged.
The acquisition of the minority interest of AmeriSteel was accounted for as a
step acquisition under the purchase method of accounting, whereby the purchase
price of the shares has been allocated to the net assets acquired based upon
their relative fair values. The exchange resulted in the issuance of an
additional 13,198,501 shares of Gerdau Ameristeel and recording $2.2 million
additional goodwill.

       On June 24, 2002, the Company acquired certain assets and assumed certain
liabilities of Republic Technologies' cold drawn plant in Cartersville, Georgia.
The purchase price was $8.4 million and the transaction was accounted for as a
business combination. The plant commenced operations under Gerdau Ameristeel
ownership on July 2, 2002.

NOTE 4 -- INVENTORIES

       Inventories consist of the following ($000s):

<Table>
<Caption>
                                                              AT DECEMBER 31,   AT DECEMBER 31,
                                                                   2003              2002
                                                              ---------------   ---------------
<S>                                                           <C>               <C>
Ferrous and non-ferrous scrap...............................     $ 76,384          $ 40,983
Work in-process.............................................       31,764            33,701
Finished goods..............................................      157,815           195,893
Raw materials (excluding scrap) and operating supplies......      110,495            80,823
                                                                 --------          --------
                                                                 $376,458          $351,400
                                                                 ========          ========
</Table>

NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment consist of the following ($000s):

<Table>
<Caption>
                                                                     AT DECEMBER 31, 2003
                                                            --------------------------------------
                                                                         ACCUMULATED     NET BOOK
                                                               COST      DEPRECIATION     VALUE
                                                            ----------   ------------   ----------
<S>                                                         <C>          <C>            <C>
Land and improvements.....................................  $   77,651     $  5,321      $ 72,330
Buildings and improvements................................     139,559       24,131       115,428
Machinery and equipment...................................     984,253      306,056       678,197
Construction in progress..................................      39,676           --        39,676
Property, plant and equipment held for sale...............      13,576           --        13,576
                                                            ----------     --------      --------
                                                            $1,254,715     $335,508      $919,207
                                                            ==========     ========      ========
</Table>

<Table>
<Caption>
                                                                     AT DECEMBER 31, 2002
                                                            --------------------------------------
                                                                         ACCUMULATED     NET BOOK
                                                               COST      DEPRECIATION     VALUE
                                                            ----------   ------------   ----------
<S>                                                         <C>          <C>            <C>
Land and improvements.....................................  $   60,341     $  1,769      $ 58,572
Buildings and improvements................................     141,994       14,472       127,522
Machinery and equipment...................................     888,886      203,119       685,767
Construction in progress..................................      14,315           --        14,315
Property, plant and equipment held for sale...............      12,772           --        12,772
                                                            ----------     --------      --------
                                                            $1,118,308     $219,360      $898,948
                                                            ==========     ========      ========
</Table>

                                       F-13
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       Interest costs for property, plant and equipment construction
expenditures of approximately $124 thousand was capitalized for the year ended
December 31, 2003 (2002 -- $100 thousand).

NOTE 6 -- JOINT VENTURES

       The Company's investments in Gallatin Steel Company, Bradley Steel
Processors and MRM Guide Rail are 50% joint ventures. The Company's interests in
the joint ventures have been accounted for using the proportional consolidation
method under which the Company's proportionate share of assets, liabilities,
revenues and expenses of the joint ventures have been included in these
consolidated financial statements.

       The Company's interest in the joint ventures is as follows ($000s):

<Table>
<Caption>
                                                                AT DECEMBER 31,
                                                              -------------------
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
BALANCE SHEET
Current assets(1)(2)........................................  $ 53,137   $ 45,234
Property, plant and equipment(3)
  Land......................................................    11,835     12,068
  Buildings.................................................     7,512      7,957
  Machinery and equipment...................................    80,429     85,618
  Construction in progress..................................     1,665      1,778
Current liabilities.........................................    23,224     26,505
Long-term debt..............................................     4,259      3,415
STATEMENT OF EARNINGS
Sales.......................................................  $224,179   $ 53,591
Operating income............................................     9,685      6,836
Income before income taxes..................................     9,440      6,275
CHANGES IN CASH FLOWS
Cash provided from (used in)
  Operating activities......................................  $ 10,527   $  6,098
  Investing activities......................................    (8,294)    (1,809)
  Financing activities......................................    (4,046)   (17,026)
                                                              --------   --------
Proportionate share of increase (decrease) in cash..........  $ (1,813)  $(12,737)
                                                              ========   ========
</Table>

------------

(1) Includes $0.5 million (2002 -- $4.8 million) of cash and cash equivalents.

(2) Current assets are net of allowance for doubtful accounts of $2.3 million
    (2002 -- $2.2 million).

(3) Net of accumulated depreciation of $19.7 million (2002 -- $5.9 million).

NOTE 7 -- LONG-TERM DEBT

       On June 27, 2003, the Company refinanced its debt by issuing $405 million
aggregate principal 10 3/8% Senior Notes, of which $35.0 million were sold to an
indirect wholly-owned subsidiary of the Company's parent, Gerdau S.A. The notes
mature July 15, 2011 and were issued at 98% of face value. The Company also
entered into a new Senior Secured Credit Facility with a term of up to five
years, which provides commitments of up to $350 million. The borrowings under
the Senior Secured Credit Facility are secured by the Company's inventory and
accounts receivable. The proceeds were used to repay existing indebtedness. At
December 31, 2003, there was $135.0 million outstanding, at interest rates
between 3.93% and 5.50%, and approximately $130 million was available under the
Senior Secured Credit

                                       F-14
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Facility. Included in deferred finance costs in 2003 was a charge of
approximately $2.1 million relating to the write-off of un-amortized costs
relating to extinguished debt.

       At December 31, 2003, Gerdau Ameristeel debt includes the following
($000s):

<Table>
<S>                                                            <C>
Senior Notes, 10 3/8% due 2011, net of original issue
  discount..................................................   $397,271
Senior Secured Credit Facility..............................    135,027
Industrial Revenue Bonds....................................     27,400
AmeriSteel Bright Bar Term Loan.............................      3,172
Gallatin Joint Venture Debt.................................      5,471
Other.......................................................      1,927
                                                               --------
                                                                570,268
Less current portion........................................      3,305
                                                               --------
                                                               $566,963
                                                               ========
</Table>

       At December 31, 2002, the Company had debt agreements that were specific
to the Gerdau Canada Group, GUSA and former Co-Steel entities and included the
following ($000s):

<Table>
<Caption>
                                                               AT DECEMBER 31,
                                                                    2002
                                                               ---------------
<S>                                                            <C>
Gerdau Canada Group:
  Bank indebtedness.........................................      $  17,243
  U.S. Dollar Floating Rate Term Loan.......................         61,743
  Canadian dollar revolving loan (Cdn $35.0 million)........         22,157
  Other.....................................................          1,444
GUSA:
  AmeriSteel Revolving Credit Agreement.....................        100,800
  AmeriSteel Term Loan......................................         68,750
  Industrial Revenue Bonds..................................         36,795
  AmeriSteel Bright Bar.....................................          3,522
  Other.....................................................            809
Co-Steel Group:
  Bank Indebtedness.........................................          6,136
  Canadian dollar revolving loan (Cdn$48.3 million).........         30,577
  U.S. Dollar Fixed Rate Reducing Term Loan.................         96,784
  Fair value of early payment penalty of fixed rate reducing
     term loans.............................................          9,065
  U.S. dollar revolving loan................................         59,768
  Other.....................................................          3,561
                                                                  ---------
                                                                    519,154
Less current portion........................................       (107,321)
                                                                  ---------
                                                                  $ 411,833
                                                                  =========
</Table>

                                       F-15
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GERDAU CANADA GROUP

       As of December 31, 2002, Gerdau Canada Group had a total authorized
revolver facility of Cdn $73 million ($46 million) that bore interest at
floating market rates approximating the bank's prime rate (as defined in the
agreement) plus 1.75% or Bankers' Acceptance plus 2.75%. Companies in the Gerdau
Canada Group pledged accounts receivable and inventory as collateral. The
revolver facility was repaid under the refinancing as of June 27, 2003.

       The total authorized Canadian term facility was Canadian $97.5 million
($61.7 million U.S. dollars) with a due date of January 15, 2004, bearing
interest at floating market rates approximating the bank's prime rate (as
defined in the agreement) plus 1.75%. Interest rate swap agreements related to
this facility were entered into with the Gerdau Canada Group's bank as the
counterparty in November 1999 that effectively fixed the rate of interest on
approximately 50% of the balance. At December 31, 2003, the agreement is for $11
million and bears interest at 6.445% for a term of five years expiring in 2004.
The aggregate fair value of the interest rate swap agreements, which represent
the amount that would be paid by the Gerdau Canada Group if the agreements were
terminated at December 31, 2003, was $457 thousand. The agreements were not
terminated subsequent to the refinancing.

       The Canadian banking agreement, which included Gerdau Steel Inc. (the
controlling shareholder of Gerdau Ameristeel), contained various restrictive
covenants relating to maintenance of certain financial ratios. At December 31,
2002, the Company was not in compliance with certain covenants and requested and
received a waiver of compliance. This agreement no longer applies due to the
refinancing that took place in 2003.

       Collateral for the Canadian credit facility included: (i) Cdn$350 million
demand debentures given by each of Gerdau Steel Inc., Gerdau MRM Holdings Inc.,
Gerdau Ameristeel MRM Special Sections Inc. and Gerdau Ameristeel Cambridge
Inc., each granting a first priority fixed charge on real estate, machinery and
equipment, a first priority floating charge on all other assets and a first
priority fixed charge on inventory and accounts receivable to a maximum of $20
million, (ii) pledges and guaranties of various Gerdau Canada Group members, and
(iii) a guaranty by Gerdau S.A. In addition, an "all risks" insurance policy for
full insurable value on a replacement cost basis was pledged to the lenders.

GUSA

       GUSA's primary financial obligation outstanding as of December 31, 2002
was a $285 million credit facility (the "Revolving Credit Agreement"). It was
collateralized by first priority security interests in substantially all
accounts receivable and inventories of GUSA as well as a lien on the Company's
Charlotte Mill property, plant and equipment. The Revolving Credit Agreement was
amended in September 2000 and increased the total facility from $150 million to
$285 million, of which $100 million was a term loan that amortized at the rate
of 25% per year beginning in December 2001. The Revolving Credit Agreement was
to mature in September 2005. Loans under the Revolving Credit Agreement bore
interest at a per annum rate equal to one of several rate options (LIBOR, Fed
Funds or Prime Rate, as defined in the agreement) based on the facility chosen
at the time of borrowing plus an applicable margin determined by tests of
performance from time to time. The effective interest rate at December 31, 2002
was approximately 3.8%. The Revolving Credit Agreement contained certain
covenants including the requirement to maintain financial ratios and limitations
on indebtedness, liens, investments and disposition of assets and dividends.
Letters of credit were subject to an aggregate sub limit of $50 million. The
credit facility was repaid under the refinancing as of June 27, 2003.

       Industrial revenue bonds ("IRBs") were issued to obtain funding to
construct facilities in Jackson, Tennessee; Charlotte, North Carolina;
Jacksonville, Florida; and Plant City, Florida. GUSA incurred an additional $3.6
million IRB with the acquisition of the Cartersville cold drawn facility in June
2002. The

                                       F-16
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest rates on these bonds range from 50% to 75% of the prime rate (1.0% to
3.75% at December 31, 2003); $3.8 million matures in 2014, $20.0 million matures
in 2017, and $3.6 million matures in 2018. Irrevocable letters of credit issued
pursuant to the Revolving Credit Agreement back the IRBs. As of December 31,
2003, the Company had approximately $51.9 million of outstanding letters of
credit, primarily for IRBs and insurance.

       The AmeriSteel Bright Bar Loan represents a bank loan of AmeriSteel
Bright Bar, a subsidiary of Gerdau Ameristeel US Inc., secured by its machinery
and equipment. The loan matures in 2011 with amortization payments that began in
July 2001. The loan currently bears interest at a rate of approximately 6.0% per
year with the rate having been reset in June 2002 and every three years
thereafter based on prime plus 1%. Ameristeel is a guarantor of the loan.

       In order to reduce its exposure to interest-rate fluctuations, GUSA
entered into interest-rate swap agreements in August and September 2001. The
interest-rate swaps have a notional value of $55 million, with the Company
paying a fixed interest rate and receiving a variable interest rate based on
three-month LIBOR. The underlying hedged instruments were specific tranches of
LIBOR-based revolving credit and term loan borrowings under GUSA's Revolving
Credit Agreement. The agreements were not terminated subsequent to the
refinancing. The aggregate fair value of the interest rate agreements, which
represents the amount that would be paid by GUSA if the agreements were
terminated at December 31, 2003, is approximately $3.8 million. The agreements
have varying expiration dates from 2004 to 2006.

CO-STEEL GROUP

       The Co-Steel entities at December 31, 2002 had revolving facilities of
Cdn$133.9 million and Cdn$22.2 million which could be drawn in either Canadian
or U.S. dollars. These facilities were due on January 15, 2004 and bore interest
at the bankers' acceptance rate or LIBOR plus 2% to 5% depending on debt to
EBITDA (earnings before interest, taxes, depreciation and amortization) ratios.

       The fixed rate reducing term loan at December 31, 2002 was $96.8 million
with interest at a fixed rate of 8.9% to 10.9% depending on debt to EBITDA
ratios. The terms of this facility included a make-whole provision (in the event
of prepayment) that required the Company to pay a penalty if interest rates had
decreased since the original inception of the loan. At December 31, 2002, the
amount of the make-whole provision (which was included in the fair value
adjustments related to the acquisition of Co-Steel) was $9.1 million. This
amount was recognized in 2003 due to the refinancing. These facilities were
repaid in June 2003 as part of the refinancing.

       The maturities of borrowings for the years subsequent to December 31,
2003 are as follows ($000s):

<Table>
<Caption>
                                                                AMOUNT
                                                               --------
<S>                                                            <C>
2004........................................................   $  3,305
2005........................................................        768
2006........................................................        695
2007........................................................        617
2008........................................................    135,691
Thereafter..................................................    429,192
                                                               --------
                                                               $570,268
                                                               ========
</Table>

                                       F-17
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- RELATED PARTY TRANSACTIONS

       The Company is affiliated with a group of companies controlled by Gerdau
S.A. During 2002, the Company had various loans outstanding with affiliated
companies. Related party loans bore interest ranging from 0.0% -- 9.775% that
was expensed but was not payable on a current basis. All advances were repayable
on demand with no collateral. Intercompany charges for interest income were $4.3
million and charges for interest expense were $18.3 million in 2002.
Intercompany charges for management fees and royalties from related parties were
$2.1 million for the year ended December 31, 2002. Accrued liabilities due to
related parties were $5.8 million and $6.4 million as of December 31, 2003 and
2002, respectively. As part of the Co-Steel transaction (Note 1), all of the
related party notes payable, net of the notes receivable from Gerdau Steel Inc.,
were converted to equity in October 2002. In February 2003, Gerdau S.A. made
loans totaling $30 million to GUSA to increase liquidity within Gerdau
Ameristeel. These loans bore interest at 6.5% and were repaid under the June
2003 refinancing. Through the June 2003 refinancing, an indirect wholly-owned
subsidiary of Gerdau S.A. purchased $35 million of bonds. These bonds were
exchanged subsequent to the exchange offer (Note 18).

NOTE 9 -- CONVERTIBLE DEBENTURES

       The Company's unsecured, subordinated convertible debentures bear
interest at 6.5% per annum, mature on April 30, 2007, and, at the holders'
option, are convertible into common shares of the Company at a conversion price
of Cdn$26.25 per share. Under the terms of the Trust Indenture for the
Convertible Debentures, no adjustment to the conversion price is required if the
Company issues common shares in a customary offering. The debentures are
redeemable, at the option of the Company, at par plus accrued interest. The
Company has the right to settle the principal amount by the issuance of common
shares based on their market value at the time of redemption.

NOTE 10 -- INCOME TAXES

       The income tax expense is comprised of ($000's):

<Table>
<Caption>
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Current.....................................................  $  1,311   $ 10,769
Deferred....................................................   (36,586)   (10,428)
                                                              --------   --------
                                                              $(35,275)  $    341
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Current income taxes:
  Canada....................................................  $    713   $  2,890
  U.S. .....................................................       700      8,255
  Other.....................................................      (102)      (376)
                                                              --------   --------
                                                                 1,311     10,769
                                                              --------   --------
Deferred income taxes:
  Canada....................................................   (13,302)      (830)
  U.S. .....................................................   (23,284)    (9,598)
                                                              --------   --------
                                                               (36,586)   (10,428)
                                                              --------   --------
Total Provision for income taxes............................  $(35,275)  $    341
                                                              ========   ========
</Table>

                                       F-18
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The income tax expense differs from the amount calculated by applying
Canadian income tax rate (federal and provincial) to income before income taxes,
as follows:

<Table>
<Caption>
                                                                2003      2002
                                                              --------   -------
<S>                                                           <C>        <C>
Income (loss) before provision for income taxes.............  $(54,162)  $13,180
Income tax (benefit) expense computed using statutory tax
  rates.....................................................   (18,044)    5,091
Increased (decreased) by the tax effect of:
  Tax exempt income.........................................    (7,224)       --
  Effect of different rates in foreign jurisdictions........    (6,752)   (4,437)
  Canadian manufacturing and processing credit..............       291      (215)
  Net future income tax (benefit) expense resulting from
     changes in tax rates...................................    (1,475)      (98)
                                                              --------   -------
Income Tax (Recovery) Expense...............................  $(33,204)  $   341
                                                              ========   =======
</Table>

       The components of the deferred tax assets and liabilities consisted of
the following:

<Table>
<Caption>
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
CANADA
NON-CURRENT ASSETS:
  Net operating loss carry forward..........................  $ 25,532   $ 13,063
  Accounting provisions not currently deductible for tax
     purposes...............................................    28,812     23,882
  Tax depreciation in excess of book depreciation...........   (34,769)   (30,162)
  Other.....................................................    (4,530)      (750)
                                                              --------   --------
Net non-current deferred tax assets.........................  $ 15,045   $  6,033
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                                2003       2002
                                                              --------   --------
<S>                                                           <C>        <C>
US
CURRENT ASSETS:
  Accounting provisions not currently deductible for tax
     purposes...............................................  $ 13,269   $ 11,417
                                                              ========   ========
NON-CURRENT LIABILITIES:
  Net operating loss carry forward..........................  $(42,856)  $(24,181)
  Accounting provisions not currently deductible for tax
     purposes...............................................   (26,811)   (25,011)
  Tax depreciation in excess of book depreciation...........   132,722    136,406
  Other.....................................................     1,300        977
                                                              --------   --------
Net non-current deferred tax liabilities....................  $ 64,355   $ 88,191
                                                              ========   ========
</Table>

       The net deferred tax asset includes a non-capital loss carry forward of
approximately $73.9 million for Canadian income tax purposes that expire on
various dates between 2007 through 2010.

       As of December 31, 2003, the Company has a combined net operating loss
carryforward of approximately $119.0 million for U.S. federal income tax
purposes that expire on various dates between 2005 through 2023. The portion of
this NOL that was generated by the former Co-Steel US group prior to its
acquisition by Gerdau Ameristeel is subject to an annual limitation as outlined
in Internal Revenue Code (IRC) sec.382. The NOL carryforward from the
predecessor company has been reduced to reflect the sec.382 limitation. In
addition, the portion of this NOL that was generated by the former Co-Steel

                                       F-19
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

U.S. group prior to its merger with Gerdau USA, Inc. and subsidiaries is subject
to the Separate Return Limitation Year provisions contained in IRC sec.1502.

       The Company believes its net deferred tax asset at December 31, 2003 of
$15.0 million is more likely than not to be realized based on the combination of
future taxable income from operations plus various tax-planning strategies that
can be implemented, should it become necessary, by the Company's majority
shareholder and have the effect of reducing interest expense or generating
additional taxable earnings.

NOTE 11 -- POST RETIREMENT BENEFITS

       The Company maintains defined benefit pension plans covering the majority
of employees. The benefits are based on years of service and compensation during
the period of employment. Annual contributions are made in conformity with
minimum funding requirements and maximum deductible limitations. Many employees
are also covered by defined contribution retirement plans for which Company
contributions and expense amounted to approximately $2.6 million (2002 -- $10.1
million).

       The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The Company uses a December 31
measurement date for its plans.

       Settlement losses were recognized in the current year due to payments to
former employees under the former Co-Steel plans. The following tables summarize
the accumulated pension benefits and postretirement medical benefit obligations
included in the Company's consolidated statements of financial position ($000s):

<Table>
<Caption>
                                                  PENSION BENEFITS             OTHER BENEFIT PLANS
                                             ---------------------------   ---------------------------
                                              YEAR ENDED     YEAR ENDED     YEAR ENDED     YEAR ENDED
                                             DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 2003           2002           2003           2002
                                             ------------   ------------   ------------   ------------
<S>                                          <C>            <C>            <C>            <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost...............................    $  8,027       $  5,606       $    880       $    341
Interest cost..............................      20,831         12,830          2,247            876
Expected return on plan assets.............      (9,716)       (13,536)            --             --
Amortization of prior service cost.........         (35)           388             --             --
Recognized actuarial gain..................         892              4             --             --
Settlement loss............................         131             --             --             --
                                               --------       --------       --------       --------
Net periodic benefit cost..................    $ 20,130       $  5,292       $  3,127       $  1,217
                                               ========       ========       ========       ========
</Table>

                                       F-20
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                  PENSION BENEFITS             OTHER BENEFIT PLANS
                                             ---------------------------   ---------------------------
                                              YEAR ENDED     YEAR ENDED     YEAR ENDED     YEAR ENDED
                                             DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                 2003           2002           2003           2002
                                             ------------   ------------   ------------   ------------
<S>                                          <C>            <C>            <C>            <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligation at beginning of
  period...................................    $301,352       $164,260       $ 31,978       $  9,068
Acquisition of Co-Steel....................          --        111,531             --         22,048
Service cost...............................       8,027          5,606            880            341
Interest cost..............................      20,831         12,829          2,247            876
Plan participants' contributions...........          --             --            647            532
Amendments.................................          --          2,232             --             --
Actuarial loss.............................      11,248         13,659          1,188            444
Benefits and administrative expenses
  paid.....................................     (14,918)        (8,765)        (2,260)        (1,331)
Settlement loss............................         275             --             --             --
Foreign exchange gain......................      32,753             --          3,874             --
                                               --------       --------       --------       --------
Benefit obligation at end of period........    $359,568       $301,352       $ 38,554       $ 31,978
                                               ========       ========       ========       ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of
  period...................................    $206,070       $133,827       $     --       $     --
Acquisition of Co-Steel....................          --         79,628             --             --
Actual return on plan assets...............      42,447         (8,762)            --             --
Employer contribution......................      18,470         10,142          1,613            799
Plan participants' contributions...........          --             --            647            532
Benefits and administrative expenses
  paid.....................................     (14,917)        (8,765)        (2,260)        (1,331)
Foreign exchange gain......................      26,173             --             --             --
                                               --------       --------       --------       --------
Fair value of plan assets at end of
  period...................................    $278,243       $206,070       $     --       $     --
                                               ========       ========       ========       ========
RECONCILIATION OF FUNDED STATUS -- END OF
  PERIOD
Funded status..............................    $(81,325)      $(95,282)      $(38,554)      $(31,978)
Unrecognized Transition Liability..........       1,905          1,702             --             --
Unrecognized prior service cost............       2,673          2,564             --             --
Unrecognized actuarial loss................      39,069         52,139          1,878            689
                                               --------       --------       --------       --------
Net amount recognized......................    $(37,678)      $(38,877)      $(36,676)      $(31,289)
                                               ========       ========       ========       ========
</Table>

ASSUMPTIONS

<Table>
<Caption>
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS AT DECEMBER 31,      2003            2002
----------------------------------------------------------------------------------  -------------   -------------
<S>                                                                                 <C>             <C>
Discount rate..........................................................             6.25% -- 6.50%  6.50% -- 6.75%
Rate of compensation increases.........................................             2.50% -- 4.50%  4.25% -- 4.50%
</Table>

<Table>
<Caption>
WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST
FOR YEARS ENDED DECEMBER 31,                                                  2003            2002
------------------------------------------------------------------------  -------------   -------------
<S>                                                                       <C>             <C>
Discount rate.....................................................        6.50% -- 6.75%  6.50% -- 6.75%
Expected long-term return on plan assets..........................        7.25% -- 8.40%  7.50% -- 9.25%
Rate of compensation increase.....................................        2.50% -- 4.50%  4.25% -- 4.50%
</Table>

                                       F-21
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
ASSUMED HEALTH CARE COST TREND RATES AT DECEMBER 31,             2003             2002
----------------------------------------------------        --------------   ---------------
<S>                                                         <C>              <C>
Health care cost trend rate assumed for next year.........  9.00% -- 10.00%  10.00% -- 12.00%
Rate to which the cost trend rate is assumed to decline
  (ultimate trend rate)...................................           5.50%             5.50%
Year that the rate reaches the ultimate trend rate........            2008              2008
</Table>

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

<Table>
<Caption>
                                                               1 PERCENTAGE     1 PERCENTAGE
                                                              POINT INCREASE   POINT DECREASE
                                                              --------------   --------------
<S>                                                           <C>              <C>
Effect on total of service and interest cost................      $  367          $  (136)
Effect on postretirement benefit obligation.................      $3,694          $(1,194)
</Table>

PLAN ASSETS

       The Company's pension plan weighted-average asset allocations at December
31, 2003 and 2002, by asset category are as follows:

ASSET CATEGORY

<Table>
<Caption>
                                                              PLAN ASSETS AT
                                                               DECEMBER 31,
                                                              ---------------
                                                               2003     2002
                                                              ------   ------
<S>                                                           <C>      <C>
Equity securities...........................................   70.4%    66.3%
Debt securities.............................................   23.9%    28.5%
Real estate.................................................    0.5%     0.5%
Other.......................................................    5.2%     4.7%
                                                               ----     ----
Total.......................................................    100%     100%
                                                               ====     ====
</Table>

       The Company has an Investment Committee that defines the investment
policy related to the defined benefit plans. The primary investment objective is
to ensure the security of benefits that have accrued under the plans by
providing an adequately funded asset pool which is separate from and independent
of Gerdau Ameristeel Corporation. To accomplish this objective, the fund shall
be invested in a manner that adheres to the safeguards and diversity to which a
prudent investor of pension funds would normally adhere. Gerdau Ameristeel
retains specialized consultant providers that advise and support the Investment
Committee decisions and recommendations.

       The asset mix policy will consider the principles of diversification and
long-term investment goal, as well as liquidity requirements. In order to
accomplish that, the target allocations range between 55%-85% in equity
securities, 20%-35% in debt securities and 0%-10% in real estate and other.

CONTRIBUTIONS

       The Company expects to contribute $4.6 million to its pension plans and
$980 thousand to its other postretirement benefit plans in 2004.

NOTE 12 -- FINANCIAL INSTRUMENTS

       The Company's use of derivative instruments is limited. Derivative
instruments are not used for speculative purposes but they are used to manage
well-defined interest rate risks arising out of the normal

                                       F-22
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

course of business. In order to reduce its exposure to changes in the fair value
of its Senior Notes, the company entered into interest rate swaps subsequent to
the June 2003 refinancing. The agreements have a notional value of $200 million
and expiration dates of July 15, 2011. The Company receives a fixed interest
rate and pays a variable interest rate based on LIBOR. The aggregate
mark-to-market (fair value) of the interest rate agreements, which represents
the amount that would be received if the agreements were terminated at December
31, 2003, was approximately $89 thousand.

NOTE 13 -- CAPITAL STOCK

       Capital stock consists of the following shares:

<Table>
<Caption>
                                                        AUTHORIZED     ISSUED
                                                          NUMBER       NUMBER      INVESTED CAPITAL
                                                        ----------   -----------   ----------------
                                                                                    (IN THOUSANDS)
<S>                                                     <C>          <C>           <C>
December 31, 2003
Common................................................  Unlimited    198,090,861       $547,601
December 31, 2002
Common................................................  Unlimited    184,892,360       $513,400
</Table>

       The predecessor of the Company is the Gerdau North America Group, which
was not a legal entity but a combination of Gerdau companies in North America
and therefore had no capital structure of its own. On October 23, 2002, the
Gerdau companies in North America, consisting of GUSA, Gerdau Courtice Steel
Inc. and Gerdau MRM Steel Inc., among other holding companies, were combined
with Co-Steel Inc., a Canadian minimill steel producer. The combined entity was
renamed Gerdau Ameristeel Corporation and is publicly traded on the Toronto
Stock Exchange under the ticker symbol GNA.TO. The Company's common stock has no
par value. As part of this transaction, minority shareholders of AmeriSteel,
consisting primarily of management and other employees, were required to
exchange their shares of AmeriSteel stock for shares of Gerdau Ameristeel.
Gerdau Ameristeel filed a registration statement on Form F-4 with the Securities
and Exchange Commission and the exchange of shares was completed on March 31,
2003. As a result, an additional 13,198,501 shares of Gerdau Ameristeel were
issued.

EARNINGS (LOSS) PER SHARE

       The following table identifies the components of basic and diluted
earnings per share ($000s except per share data):

<Table>
<Caption>
                                                                  2003           2002
                                                              ------------   ------------
<S>                                                           <C>            <C>
Net income (loss)...........................................  $    (20,741)  $     11,132
Weighted average shares outstanding -- Basic................   194,791,236    143,045,393
Earnings (loss) per share -- Basic..........................  $      (0.11)  $       0.07
                                                              ============   ============
Weighted average shares outstanding -- Diluted..............   194,791,236    143,045,393
Earnings (loss) per share -- Diluted........................  $      (0.11)  $       0.07
                                                              ============   ============
</Table>

       At December 31, 2003, options to purchase 1,013,700 (1,367,400 -- 2002)
common shares were not included in the computation of diluted earnings (loss)
per share because the options' exercise prices were greater than the market
price of the common shares in 2002 and the inclusion of option shares in 2003
would be anti-dilutive. The conversion into common shares of the convertible
debentures has not been included in the diluted earnings (loss) per share
calculations as the conversion rate of Cdn$26.25 per share is antidilutive.

                                       F-23
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14 -- STOCK COMPENSATION PLANS

       The Company has several stock based compensation plans, which are
described below.

       Under the former Co-Steel plan, the Stock-Based Option Plan, the Company
was permitted to grant options to employees and directors to acquire up to a
maximum of 3,041,335 common shares. The exercise price was based on the closing
price of common shares on the trading date previous to the date the options are
issued. The options have a maximum term of 10 years, have a vesting term of
various periods as determined by the Plan administrator at the time of grant,
and are exercisable in installments. The options expire on various dates up to
April 13, 2008.

       A subsidiary of the Company, AmeriSteel, had several stock compensation
plans for its employees. Under the terms of the Transaction Agreement relating
to the acquisition of Co-Steel, minority shareholders of AmeriSteel exchanged
shares of AmeriSteel stock and options for stock and options of Gerdau
AmeriSteel at an exchange rate of 9.4617 Gerdau AmeriSteel shares and options
for each AmeriSteel share or option. This exchange took place on March 31, 2003.
All amounts presented in the discussion below have been restated to reflect the
historical shares at the exchanged value.

       The Company has long-term incentive plans available to executive
management (the "Stakeholder Plans") to ensure the Company's senior management's
interest is congruent with its shareholders. Awards are determined by a formula
based on return on capital employed in a given plan year. Earned awards vest and
are paid out over a period of four years. Participants may elect cash payout or
investments in phantom stock of the Company or Gerdau S.A., for which a 25%
premium is earned if elected. The awards are recorded as a liability and
benefits charged to expense under this plan for the years ended December 31,
2003 and 2002 were $150 thousand and $90 thousand, respectively. It is not
anticipated that further awards will be granted under the plans.

       In July 1999, AmeriSteel's Board of Directors approved a Stock
Purchase/SAR Plan (the "SAR Plan") available to essentially all employees. The
SAR Plan authorizes 946,170 shares of common stock to be sold to employees
during three offering periods, July through September in each of 1999, 2002 and
2005. Employees who purchase stock are awarded stock appreciation rights
("SARs") equal to four times the number of shares purchased. SARs were granted
at fair value at the date of the grant, determined based on an independent
appraisal as of the previous year-end. The SARs become exercisable at the rate
of 25% annually from the grant date and may be exercised for 10 years from the
grant date. It is not anticipated that additional shares, options, or SARs will
be issued under the current plan. The SARs are recorded as a liability and
benefits charged to expense under this plan for the years ended December 31,
2003 and 2002, were $3.5 million and $0, respectively.

       In September 1996, AmeriSteel's Board of Directors approved the
AmeriSteel Corporation Equity Ownership Plan (the "Equity Ownership Plan"),
which provides for grants of common stock, options to purchase common stock and
SARs. The maximum number of common shares that can be issued under the plan is
4,152,286. The Company has granted 492,955 shares of common stock and 4,667,930
incentive stock options under the Equity Ownership Plan through December 31,
2003. All issued options and shares of issued common stock become one-third
vested two years from the grant date, and one third in each of the subsequent
two years from the grant date. All grants were at the fair market value of the
common stock on the grant date, determined based on an independent appraisal as
of the end of the previous year-end. Options may be exercised for 10 years from
the grant date. The Company accounts for stock options granted to employees
using the intrinsic value based method of accounting (see note 2). It is not
anticipated that additional shares, options, or SARs will be issued under the
current plan.

       In July 2002, AmeriSteel's Board of Directors approved the issuance of
SARs that were granted to officers with exercise prices granted at fair value at
the date of grant. 6,244,722 SARs were authorized and issued. The SARs become
one-third vested two years from the grant date, and one third in each of
                                       F-24
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the subsequent two years from the grant date. SARs may be exercised for 10 years
from the grant date. The SARs are recorded as a liability and benefits charged
to expense under this plan for the years ended December 31, 2003 and 2002, were
$5.9 million and $0, respectively.

       In May 1995, AmeriSteel's Board of Directors approved a Stock
Purchase/Option Plan (the "Purchase Plan") available to essentially all
employees. Employees who purchased stock were awarded stock options equal to six
times the number of shares purchased. A total of 356,602 shares were sold under
the Purchase Plan at a purchase price of $1.12 per share. The options were
granted at fair value at the date of the grant, determined based on an
independent appraisal as of the end of the previous year-end. A total of
2,139,612 options were granted under the Purchase Plan. No options remain
available for future grant. All options outstanding are currently vested.
Options may be exercised for 10 years from the grant date.

       A summary of the Company's stock option plans is as follows:

<Table>
<Caption>
                                          YEAR ENDED DECEMBER 31, 2003   YEAR ENDED DECEMBER 31, 2002
                                          ----------------------------   ----------------------------
                                          NUMBER OF   WEIGHTED-AVERAGE   NUMBER OF   WEIGHTED-AVERAGE
                                           SHARES      EXERCISE PRICE     SHARES      EXERCISE PRICE
                                          ---------   ----------------   ---------   ----------------
<S>                                       <C>         <C>                <C>         <C>
AMERISTEEL PLANS
Outstanding, beginning of period........    281,197        $20.37          307,664        $19.18
Exchange for options of Gerdau
  Ameristeel............................   (281,197)        20.37               --            --
Granted.................................         --            --           58,650         17.00
Exercised...............................         --            --          (17,233)        12.75
Forfeited...............................         --            --          (67,884)        14.02
                                          ---------        ------        ---------        ------
Outstanding, end of period..............         --                        281,197        $20.37
                                          =========        ======        =========        ======
GERDAU AMERISTEEL PLANS
Outstanding, beginning of period........  1,367,400        $ 9.30               --
Merger with Co-Steel....................         --            --        1,367,400        $ 9.30
Ameristeel Plans Options exchanged for
  Gerdau Ameristeel Options.............  2,660,601          2.15               --            --
Granted.................................         --            --               --            --
Exercised...............................         --            --               --            --
Expired.................................   (421,431)        19.72               --            --
                                          ---------        ------        ---------        ------
Outstanding, end of period..............  3,606,570        $ 6.41        1,367,400        $ 9.30
                                          =========        ======        =========        ======
</Table>

                                       F-25
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The following table summarizes information about options outstanding at
December 31, 2003:

<Table>
<Caption>
                                                        WEIGHTED-AVERAGE
                                                           REMAINING       WEIGHTED-AVERAGE     NUMBER
EXERCISE PRICE RANGE US$           NUMBER OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE
------------------------           ------------------   ----------------   ----------------   -----------
<S>                                <C>                  <C>                <C>                <C>
$ 1.32 to $ 1.43.................        914,262           5.3 years            $ 1.38           552,431
$ 1.80 to $ 1.90.................        966,740           6.8 years              1.85           446,829
$ 2.11 to $ 2.96.................        711,868           5.2 years              2.61           572,807
$14.39 to $17.41(1)..............        349,000           3.0 years             15.64           349,000
$18.69 to $23.70(1)..............        664,700           1.7 years             19.24           664,700
                                       ---------                                               ---------
                                       3,606,570                                               2,585,767
                                       =========                                               =========
</Table>

------------

Note:

(1) these options are denominated in Canadian dollars and have been translated
    to US$ using the exchange rate at December 31, 2003.

NOTE 15 -- CONTINGENCIES AND COMMITMENTS

ENVIRONMENTAL

       As the Company is involved in the manufacturing of steel, it produces and
uses certain substances that may pose environmental hazards. The principal
hazardous waste generated by current and past operations is electric arc furnace
("EAF") dust, a residual from the production of steel in electric arc furnaces.
Environmental legislation and regulation at both the federal and state level
over EAF dust is subject to change, which may change the cost of compliance.
While EAF dust is generated in current production processes, such EAF dust is
being collected, handled and disposed of in a manner that the Company believes
meets all current federal, state and provincial environmental regulations. The
costs of collection and disposal of EAF dust are being expensed as operating
costs when incurred. In addition, the Company has handled and disposed of EAF
dust in other manners in previous years, and is responsible for the remediation
of certain sites where such dust was generated and/or disposed.

       In general, the Company's estimate of remediation costs is based on its
review of each site and the nature of the anticipated remediation activities to
be undertaken. The Company's process for estimating such remediation costs
includes determining for each site the expected remediation methods, and the
estimated cost for each step of the remediation. In such determinations, the
Company may employ outside consultants and providers of such remedial services
to assist in making such determinations. Although the ultimate costs associated
with the remediation are not known precisely, the Company estimated the total
remaining costs as at December 31, 2003 to be approximately $13.6 million
(2002 -- $14.9 million), with these costs recorded as a liability at December
31, 2003, of which the Company expects to pay approximately $1.5 million within
the year ended December 31, 2004. Included in the amounts outstanding, $8.6
million was recorded in 2002 with respect to certain environmental obligations
which were triggered by the change in control of Co-Steel in certain
jurisdictions where Co-Steel operated. This liability was recorded at the
present value of the estimated future costs of these obligations.

       Based on past use of certain technologies and remediation methods by
third parties, evaluation of those technologies and methods by the Company's
consultants and third-party estimates of costs of remediation-related services
provided to the Company of which the Company and its consultants are aware, the
Company and its consultants believe that the Company's cost estimates are
reasonable. Considering the uncertainties inherent in determining the costs
associated with the clean-up of such

                                       F-26
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contamination, including the time periods over which such costs must be paid,
the extent of contribution by parties which are jointly and severally liable,
and the nature and timing of payments to be made under cost sharing
arrangements, there can be no assurance the ultimate costs of remediation may
not differ from the estimated remediation costs.

       In April 2001, the Company was notified by the United States
Environmental Protection Agency (the "EPA") of an investigation that identifies
the Company as a potential responsible party ("PRP") in a Superfund Site in
Pelham, Georgia. The Pelham site was a fertilizer manufacturer in operation from
1910 through 1992, lastly operated by Stoller Chemical Company, a now bankrupt
corporation. The EPA offered a settlement to the named PRPs under which the
Company's allocation was approximately $1.8 million. The Company objects to its
inclusion as a PRP in this site and is pursuing legal alternatives, including
the addition to the allocation of larger third parties which the Company
believes were incorrectly excluded from the original settlement offer. The EPA
has filed suit with the Company named as a defendant. As the ultimate exposure
to the Company, if any, is uncertain, no liability has been established for this
site.

OTHER CLAIMS

       In the normal course of its business, various lawsuits and claims are
brought against the Company. The Company vigorously contests any claim which it
believes is without merit. Management believes that any settlements will not
have a material effect on the financial position or the consolidated earnings of
the Company.

OPERATING LEASE COMMITMENTS

       The Company leases certain equipment and real property under
non-cancelable operating leases. Aggregate future minimum payments under these
leases are as follows ($000s):

<Table>
<Caption>
YEAR ENDING DECEMBER 31,                                       AMOUNT
------------------------                                       -------
<S>                                                            <C>
2004........................................................   $11,403
2005........................................................    10,411
2006........................................................     7,281
2007........................................................     6,035
2008........................................................     6,008
Thereafter..................................................    34,402
                                                               -------
                                                               $75,540
                                                               =======
</Table>

       Certain of the operating lease commitments of the former Co-Steel
entities were at lease rates in excess of fair value as of the acquisition date.
Accordingly, a purchase accounting liability was recorded by the Company for the
present value of the unfavorable lease commitments.

SERVICE COMMITMENTS

       The Company has long-term contracts with several raw material suppliers.
The Company typically realizes lower costs and improved service from these
contracts. The Company believes these raw materials would be readily available
in the market without such contracts.

NOTE 16 -- OTHER INCOME

       Other income, net of other expenses for the year ended December 31, 2003,
consists of income of $3.5 million in electric power rebates from the Province
of Ontario and a $1.8 million charge from a
                                       F-27
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

settlement of environmental warranties from the May 2000 sale of Co-Steel's
Mayer Parry Recycling unit in England.

       Other income, net of other expenses for the year ended December 31, 2002,
consists of $6.1 million proceeds from an insurance settlement relating to
environmental costs incurred by the Company in prior years, partially offset by
$1.0 million relating to the closing of the Wilmington, Delaware and St. Albans,
West Virginia fabricating plants.

NOTE 17 -- SEGMENT INFORMATION

       The Company is organized into two primary business segments: (a) Mills
and (b) Downstream. Steel products sold to the downstream divisions are sold at
market prices with intracompany transactions eliminated upon consolidation.
Performance is evaluated and resources allocated based on specific segment
requirements and measurable factors. Segment assets are those assets that are
specifically identified with the operations in each operational segment.
Corporate assets include primarily: cash; assets held for sale; some property,
plant and equipment; deferred income taxes; and deferred financing costs.
Corporate expense includes: corporate headquarters staff, including executive
management; human resources; finance and accounting; procurement and
environmental; and management information systems. Included in these respective
areas are payroll costs, travel and entertainment, professional fees and other
costs that may not be directly attributable to either specific segment.

       Operational results and other financial data for the geographic and two
business segments for years ended December 31 are presented below ($000s):

<Table>
<Caption>
                                                                 YEAR ENDED          YEAR ENDED
                                                              DECEMBER 31, 2003   DECEMBER 31, 2002
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
Revenue from external customers:
  Steel mills...............................................     $1,631,712          $  771,906
  Downstream products.......................................        296,127             264,149
                                                                 ----------          ----------
     Total..................................................     $1,927,839          $1,036,055
                                                                 ==========          ==========
Inter-company sales:
  Steel mills...............................................     $  314,693          $  159,027
  Downstream products.......................................             --                  --
  Corp/eliminations/other...................................       (314,693)           (159,027)
                                                                 ----------          ----------
     Total..................................................     $       --          $       --
                                                                 ==========          ==========
Total sales:
  Steel mills...............................................     $1,946,405          $  930,933
  Downstream products.......................................        296,127             264,149
  Corp/eliminations/other...................................       (314,693)           (159,027)
                                                                 ----------          ----------
     Total..................................................     $1,927,839          $1,036,055
                                                                 ==========          ==========
Net income (loss):
  Steel mills...............................................     $   17,758          $   49,973
  Downstream products.......................................          6,620               8,842
  Corp/eliminations/other...................................        (45,119)            (47,683)
                                                                 ----------          ----------
     Total..................................................     $  (20,741)         $   11,132
                                                                 ==========          ==========
</Table>

                                       F-28
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                 YEAR ENDED          YEAR ENDED
                                                              DECEMBER 31, 2003   DECEMBER 31, 2002
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
Depreciation and amortization expense:
  Steel mills...............................................     $   76,674          $   46,460
  Downstream products.......................................          4,383               3,775
  Corp/eliminations/other...................................          6,859               9,620
                                                                 ----------          ----------
     Total..................................................     $   87,916          $   59,855
                                                                 ==========          ==========
Segment assets:
  Steel mills...............................................     $1,545,619          $1,424,363
  Downstream products.......................................        169,599             122,425
  Corp/eliminations/other...................................          6,990              30,646
                                                                 ----------          ----------
     Total..................................................     $1,722,208          $1,577,434
                                                                 ==========          ==========
Segment goodwill:
  Steel mills...............................................     $   90,889          $   89,181
  Downstream products.......................................         25,675              25,193
                                                                 ----------          ----------
     Total..................................................     $  116,564          $  114,374
                                                                 ==========          ==========
Capital expenditures:
  Steel mills...............................................     $   55,152          $   24,581
  Downstream products.......................................          2,198               7,131
  Corp/eliminations/other...................................          1,853               1,770
                                                                 ----------          ----------
     Total..................................................     $   59,203          $   33,482
                                                                 ==========          ==========
</Table>

       Geographic data is as follows:

<Table>
<Caption>
                                                            UNITED STATES    CANADA      TOTAL
                                                            -------------   --------   ----------
<S>                                                         <C>             <C>        <C>
DECEMBER 31, 2003
Revenue from external customers...........................   $1,480,901     $446,938   $1,927,839
Long-lived assets.........................................      652,557      266,650      919,207
DECEMBER 31, 2002
Revenue from external customers...........................   $  862,300     $173,755   $1,036,055
Long-lived assets.........................................      665,697      233,251      898,948
</Table>

                                       F-29
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                 YEAR ENDED          YEAR ENDED
                                                              DECEMBER 31, 2003   DECEMBER 31, 2002
                                                              -----------------   -----------------
<S>                                                           <C>                 <C>
REVENUES BY PRODUCT LINES
Mill finished goods:
  Stock rebar...............................................     $  433,396          $  198,460
  Merchant bar/special sections.............................        791,917             440,909
  Rods......................................................        194,043              47,060
  Flat rolled...............................................        215,380              38,572
                                                                 ----------          ----------
Total mill finished goods:..................................      1,634,736             725,001
Billets.....................................................         17,850              15,313
                                                                 ----------          ----------
Total mill products.........................................      1,652,586             740,314
Other mill segments.........................................             --              31,101
Fabricating and downstream..................................        275,253             264,640
                                                                 ----------          ----------
Total segment revenues......................................     $1,927,839          $1,036,055
                                                                 ==========          ==========
</Table>

NOTE 18 -- FINANCIAL INFORMATION RELATED TO SUBSIDIARY GUARANTORS

       Consolidating financial information related to the Company and its
Subsidiary Guarantors and non-Guarantors as of December 31, 2003 and 2002 and
for the years ended December 31, 2003 and 2002 is disclosed to comply with the
reporting requirements of the Company's Subsidiary Guarantors. The Subsidiary
Guarantors are wholly-owned Subsidiaries of the Company which have fully and
unconditionally guaranteed the Company's 10 3/8% Senior Notes due 2011. The
non-Guarantors are subsidiaries of the Company, and non wholly-owned
subsidiaries like Ameristeel Bright Bar, which have not fully and
unconditionally guaranteed the Company's 10 3/8% Senior Notes due 2011.
Consolidating financial information follows:

                                       F-30
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATING BALANCE SHEETS
                               DECEMBER 31, 2003

<Table>
<Caption>
                                                     GERDAU
                                                   AMERISTEEL                    NON-
                                         GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                        --------   -----------   ----------   ----------   ------------   ------------
                                                                      (US$ IN THOUSANDS)
<S>                                     <C>        <C>           <C>          <C>          <C>            <C>
                                                        ASSETS
CURRENT ASSETS
  Cash and cash equivalents...........  $     --   $    3,033    $    5,813    $  1,613    $        --     $   10,459
  Accounts receivable, net............        --       45,425       158,475      29,431             --        233,331
  Inventories.........................        --       71,477       279,976      25,005             --        376,458
  Deferred tax assets.................        --           --        13,269          --             --         13,269
  Other current assets................        --        6,101        14,495       1,012             --         21,608
                                        --------   ----------    ----------    --------    -----------     ----------
TOTAL CURRENT ASSETS..................        --      126,036       472,028      57,061             --        655,125
PROPERTY, PLANT AND EQUIPMENT.........        --      175,654       603,209     140,344             --        919,207
INVESTMENT IN SUBSIDIARIES............   445,946      687,222       334,465          --     (1,467,633)            --
OTHER ASSETS..........................        --          124           (52)        132             --            204
GOODWILL..............................        --           --       111,877       4,687             --        116,564
DEFERRED FINANCING COSTS..............    10,977          145         4,902          39             --         16,063
DEFERRED TAX ASSETS...................        --       34,253       (53,667)     34,459             --         15,045
                                        --------   ----------    ----------    --------    -----------     ----------
TOTAL ASSETS..........................  $456,923   $1,023,434    $1,472,762    $236,722    $(1,467,633)    $1,722,208
                                        ========   ==========    ==========    ========    ===========     ==========

                                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable....................  $     --   $   44,798    $  163,114    $ 23,440    $        --     $  231,352
  Intercompany........................     4,696      111,628            --          --       (116,324)            --
  Accrued salaries, wages and employee
    benefits..........................        --        3,297        26,435          --             --         29,732
  Accrued Interest....................    21,360        1,433           937          --             --         23,730
  Other current liabilities...........      (895)      10,873        23,558         821             --         34,357
  Bank indebtedness...................        --           --         1,524         531             --          2,055
  Current portion of long-term
    borrowings........................        --           --           798         452             --          1,250
                                        --------   ----------    ----------    --------    -----------     ----------
TOTAL CURRENT LIABILITIES.............    25,161      172,029       216,366      25,244       (116,324)       322,476
ACCRUED BENEFIT OBLIGATION............        --       51,076        23,278          --             --         74,354
LONG-TERM BORROWINGS..................   397,271       75,078        87,669       6,945             --        566,963
CONVERTIBLE DEBENTURE.................        --       96,719            --          --             --         96,719
RELATED PARTY BORROWINGS..............        --      (72,681)       73,127    (115,437)       114,991             --
DEFERRED TAX LIABILITIES..............        --           --        64,355          --             --         64,355
OTHER LIABILITIES.....................        --           53        45,778          --             --         45,831
                                        --------   ----------    ----------    --------    -----------     ----------
TOTAL LIABILITIES.....................   422,432      322,274       510,573     (83,248)        (1,333)     1,170,698
SHAREHOLDERS' EQUITY
  Capital Stock.......................    61,109      727,862       951,354     317,220     (1,509,944)       547,601
  Retained earnings (accumulated
    deficit)..........................   (16,987)      11,242       (33,584)     20,183           (266)       (19,412)
  Cumulative translation adjustment...    (9,631)     (37,944)       44,419     (17,433)        43,910         23,321
                                        --------   ----------    ----------    --------    -----------     ----------
TOTAL SHAREHOLDERS' EQUITY............    34,491      701,160       962,189     319,970     (1,466,300)       551,510
                                        --------   ----------    ----------    --------    -----------     ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
  EQUITY..............................  $456,923   $1,023,434    $1,472,762    $236,722    $(1,467,633)    $1,722,208
                                        ========   ==========    ==========    ========    ===========     ==========
</Table>

                                       F-31
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATING BALANCE SHEETS
                               DECEMBER 31, 2002

<Table>
<Caption>
                                                      GERDAU
                                                    AMERISTEEL                    NON-
                                           GUSAP    CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                          -------   -----------   ----------   ----------   ------------   ------------
                                                                       (US$ IN THOUSANDS)
<S>                                       <C>       <C>           <C>          <C>          <C>            <C>
                                                        ASSETS
CURRENT ASSETS
  Cash and cash equivalents.............  $    --    $  9,118     $    2,161    $  5,082     $      --      $   16,361
  Accounts receivable, net..............       --      25,950        129,113      21,480        (3,798)        172,745
  Inventories...........................       --      47,883        281,879      21,797          (159)        351,400
  Deferred tax assets...................       --      32,019        (57,001)     36,399            --          11,417
  Other current assets..................       --          --          2,923          74            --           2,997
                                          -------    --------     ----------    --------     ---------      ----------
TOTAL CURRENT ASSETS....................       --     114,970        359,075      84,832        (3,957)        554,920
PROPERTY, PLANT AND EQUIPMENT...........       --     100,040        656,939     141,616           353         898,948
INVESTMENT IN SUBSIDIARIES..............   94,208          --          8,356        (562)     (102,002)             --
GOODWILL................................       --          --        109,687       4,687            --         114,374
DEFERRED FINANCING COSTS................       --          --          2,514          --            --           2,514
DEFERRED TAX ASSETS.....................       --       6,033             --          --            --           6,033
OTHER ASSETS............................    1,201        (440)          (159)         43            --             645
                                          -------    --------     ----------    --------     ---------      ----------
TOTAL ASSETS............................  $95,409    $220,603     $1,136,412    $230,616     $(105,606)     $1,577,434
                                          =======    ========     ==========    ========     =========      ==========

                                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable......................  $    --    $ 30,298     $  121,968    $ 22,445     $  (4,377)     $  170,334
  Accrued salaries, wages and employee
    benefits............................       --       4,436         19,360       3,546            --          27,342
  Other current liabilities.............     (837)      1,939         42,110          55            --          43,267
  Interest Payable......................      145       1,497          1,723          30            --           3,395
  Bank indebtedness.....................       --      24,880         (7,185)      5,684            --          23,379
  Current portion of long-term
    borrowings..........................   14,501          --         68,906         535            --          83,942
                                          -------    --------     ----------    --------     ---------      ----------
TOTAL CURRENT LIABILITIES...............   13,809      63,050        246,882      32,295        (4,377)        351,659
LONG TERM BORROWINGS, LESS CURRENT
  PORTION...............................   35,500     146,967        222,804       6,562            --         411,833
CONVERTIBLE DEBENTURES..................       --      79,134             --          --            --          79,134
RELATED PARTY BORROWINGS................   23,398          --        (23,398)         --            --              --
ACCRUED BENEFIT OBLIGATION..............       --          --         70,166          --            --          70,166
OTHER LIABILITIES.......................       --      13,099         16,076          --            --          29,175
DEFERRED TAX LIABILITIES................       --          --         87,616         222           353          88,191
MINORITY INTEREST.......................       --          --         33,312          --            --          33,312
                                          -------    --------     ----------    --------     ---------      ----------
TOTAL LIABILITIES.......................   72,707     302,250        653,458      39,079        (4,024)      1,063,470
SHAREHOLDERS' EQUITY
  Capital stock.........................   22,385     (81,647)       483,473     190,610      (101,421)        513,400
  Retained earnings (accumulated
    deficit)............................      317          --            246         927          (161)          1,329
  Cumulative translation adjustment.....       --          --           (765)         --            --            (765)
                                          -------    --------     ----------    --------     ---------      ----------
TOTAL SHAREHOLDERS' EQUITY..............   22,702     (81,647)       482,954     191,537      (101,582)        513,964
                                          -------    --------     ----------    --------     ---------      ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
  EQUITY................................  $95,409    $220,603     $1,136,412    $230,616     $(105,606)     $1,577,434
                                          =======    ========     ==========    ========     =========      ==========
</Table>

                                       F-32
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2003

<Table>
<Caption>
                                                      GERDAU
                                                    AMERISTEEL                    NON-
                                          GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                         --------   -----------   ----------   ----------   ------------   ------------
                                                               (US$ IN THOUSANDS)
<S>                                      <C>        <C>           <C>          <C>          <C>            <C>
OPERATING ACTIVITIES
Net (loss) income......................  $(17,305)   $  (8,551)    $(14,036)   $  19,256    $      (105)     $(20,741)
Adjustment to reconcile net income
  (loss) to net cash provided by (used
  for) operating activities:
  Depreciation.........................        --       14,534       58,814        9,904             --        83,252
  Amortization.........................     2,094        5,321       (1,134)      (1,617)            --         4,664
  Deferred income taxes................        --       (6,582)     (15,939)        (198)            --       (22,719)
  Loss on disposition of property,
    plant and equipment................        --           --          192           --             --           192
  Foreign exchange on related party
    loans..............................     4,707        2,534           --           --             --         7,241
Changes in operating assets and
  liabilities, net of acquisitions:
  Accounts receivable..................        --       (1,311)     (39,365)     (10,396)            --       (51,072)
  Inventories..........................        --          593        1,711       (2,567)            --          (263)
  Other assets.........................     1,201       (3,246)      (4,481)         472             --        (6,054)
  Liabilities..........................    20,400       33,728       (8,892)       4,156             --        49,392
  Intercompany.........................        --      129,449      (88,555)       2,667        (43,561)           --
                                         --------    ---------     --------    ---------    -----------      --------
NET CASH PROVIDED BY (USED FOR)
  OPERATING ACTIVITIES.................    11,097      166,469     (111,685)      21,677        (43,666)       43,892
                                         --------    ---------     --------    ---------    -----------      --------
INVESTING ACTIVITIES
  Investments..........................  (362,715)    (840,572)    (682,795)    (108,024)     1,994,106            --
                                         --------    ---------     --------    ---------    -----------      --------
  Additions to property, plant and
    equipment..........................        --       (7,979)     (47,172)      (4,052)            --       (59,203)
  Proceeds from dispositions...........        --           --        2,643           --             --         2,643
                                         --------    ---------     --------    ---------    -----------      --------
NET CASH USED IN INVESTING
  ACTIVITIES...........................  (362,715)    (848,551)    (727,324)    (112,076)     1,994,106       (56,560)
FINANCING ACTIVITIES
  Term debt payments...................        --           --       (9,395)          --             --        (9,395)
  Proceeds from issuance of new debt...   357,941      (61,281)    (191,321)          --        437,018       542,357
  (Payment) borrowing of short-term and
    long-term borrowings, net..........        --     (110,567)     (49,122)      (6,658)      (343,706)     (510,053)
  Increase in related party loans......   (34,069)     (21,096)     222,827     (119,022)       (48,640)           --
  Additions to deferred financing
    costs..............................   (10,977)          --       (4,662)          --             --       (15,639)
  Issuance of common stock.............    38,723      869,228      874,551      212,610     (1,995,112)           --
  Changes in minority interest.........        --           --         (217)          --             --          (217)
  Subsidiary stock activity............        --           --           --           --             --            --
                                         --------    ---------     --------    ---------    -----------      --------
NET CASH (USED FOR) PROVIDED BY
  FINANCING ACTIVITIES.................   351,618      676,284      842,661       86,930     (1,950,440)        7,053
  Effect of exchange rate changes......        --         (287)          --           --             --          (287)
                                         --------    ---------     --------    ---------    -----------      --------
(DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS..........................        --       (6,085)       3,652       (3,469)            --        (5,902)
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD............................        --        9,118        2,161        5,082             --        16,361
                                         --------    ---------     --------    ---------    -----------      --------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD...............................  $     --    $   3,033     $  5,813    $   1,613    $        --      $ 10,459
                                         ========    =========     ========    =========    ===========      ========
</Table>

                                       F-33
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATING STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                                       GERDAU
                                                     AMERISTEEL                    NON-
                                           GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                          --------   -----------   ----------   ----------   ------------   ------------
                                                                        (US$ IN THOUSANDS)
<S>                                       <C>        <C>           <C>          <C>          <C>            <C>
OPERATING ACTIVITIES
Net (loss) income.......................  $  7,098    $    (743)    $  2,633    $   4,158      $(2,014)       $ 11,132
Adjustment to reconcile net income
  (loss) to net cash provided by (used
  for) operating activities:
  Depreciation..........................        --        1,576       52,782        4,242           83          58,683
  Amortization..........................        --           --        1,167            5           --           1,172
  Deferred income taxes.................        --       (1,518)     (10,017)       1,268         (161)        (10,428)
  Loss on disposition of property, plant
    and equipment.......................        --           --        1,044           --           --           1,044
  Unrealized foreign exchange on related
    party loans.........................        --           --          436           --           --             436
Changes in operating assets and
  liabilities, net of acquisitions:
  Accounts receivable...................        --       16,125          878          874        3,556          21,433
  Inventories...........................        --       (3,535)     (15,261)         794           11         (17,991)
  Other assets..........................       705       (4,410)      (5,544)         188           --          (9,061)
  Liabilities...........................     2,739       (3,710)     (13,140)      (5,156)      (3,085)        (22,352)
                                          --------    ---------     --------    ---------      -------        --------
NET CASH PROVIDED BY (USED FOR)
  OPERATING ACTIVITIES..................    10,542        3,785       14,978        6,373       (1,610)         34,068
                                          --------    ---------     --------    ---------      -------        --------
INVESTING ACTIVITIES
  Additions to property, plant and
    equipment...........................        --         (265)     (34,620)       1,325           78         (33,482)
  Purchase price for acquisitions.......        --           --       (6,856)          --           --          (6,856)
  Cash acquired in acquisition..........        --        1,688          131       16,646           --          18,465
  Proceeds from dispositions............        --           --          489           --           --             489
                                          --------    ---------     --------    ---------      -------        --------
NET CASH USED IN INVESTING ACTIVITIES...        --        1,423      (40,856)      17,971           78         (21,384)
                                          --------    ---------     --------    ---------      -------        --------
FINANCING ACTIVITIES
  Term debt payments....................      (466)          --      (29,037)          --           --         (29,503)
  Revolving credit borrowings
    (payments)..........................        --        3,910       39,344      (15,981)          --          27,273
  Increase in related party loans.......  (137,363)          --      139,113       (1,750)          --
  Additions to deferred financing
    costs...............................        --           --          705           --           --             705
  Changes in minority interest..........        --           --        2,678           --           --           2,678
  Issuance of common stock..............   127,287           --     (127,287)      (1,532)       1,532
  Subsidiary stock activity.............        --           --         (187)          --           --            (187)
  Dividends paid........................        --           --       (2,181)          --           --          (2,181)
                                          --------    ---------     --------    ---------      -------        --------
NET CASH (USED FOR) PROVIDED BY
  FINANCING ACTIVITIES..................   (10,542)       3,910       23,148      (19,263)       1,532          (1,215)
                                          --------    ---------     --------    ---------      -------        --------
EFFECT OF EXCHANGE RATE CHANGES.........        --           --         (195)          --           --            (195)
(DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS...........................        --        9,118       (2,925)       5,081           --          11,274
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD.............................        --           --        5,086            1           --           5,087
                                          --------    ---------     --------    ---------      -------        --------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD................................  $     --    $   9,118     $  2,161    $   5,082      $    --        $ 16,361
                                          ========    =========     ========    =========      =======        ========
</Table>

                                       F-34
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
                          YEAR ENDED DECEMBER 31, 2003

<Table>
<Caption>
                                              GERDAU
                                            AMERISTEEL                    NON-
                                  GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                 --------   -----------   ----------   ----------   ------------   ------------
                                                               (US$ IN THOUSANDS)
<S>                              <C>        <C>           <C>          <C>          <C>            <C>
NET SALES......................  $     --    $349,728     $1,342,731    $240,887      $(5,507)      $1,927,839
OPERATING EXPENSES
  Cost of sales................        --     319,105      1,232,543     213,744       (5,514)       1,759,878
  Selling and administrative...         3      13,088         67,453       6,591          112           87,247
  Depreciation.................        --      14,534         58,814       9,904           --           83,252
  Other operating expense......        --      (3,671)         2,242         185           --           (1,244)
                                 --------    --------     ----------    --------      -------       ----------
                                        3     343,056      1,361,052     230,424       (5,402)       1,929,133
                                 --------    --------     ----------    --------      -------       ----------
INCOME(LOSS) FROM OPERATIONS...        (3)      6,672        (18,321)     10,463         (105)          (1,294)
                                 --------    --------     ----------    --------      -------       ----------
Amortization of deferred
  financing costs..............     2,094       5,321         (1,134)     (1,617)          --            4,664
Foreign Exchange...............    (8,402)      1,613          7,424          91           --              726
Interest.......................    23,539      20,976         14,677      (9,643)          --           49,549
                                 --------    --------     ----------    --------      -------       ----------
                                   17,231      27,910         20,967     (11,169)          --           54,939
                                 --------    --------     ----------    --------      -------       ----------
(LOSS) INCOME BEFORE TAXES.....   (17,234)    (21,238)       (39,288)     21,632         (105)         (56,233)
INCOME TAX (BENEFIT) EXPENSE...        71      (9,067)       (28,655)      2,376           --          (35,275)
                                 --------    --------     ----------    --------      -------       ----------
(LOSS) INCOME BEFORE MINORITY
  INTEREST.....................   (17,305)    (12,171)       (10,633)     19,256         (105)         (20,958)
STOCK DIVIDENDS................        --      (3,620)         3,620          --           --               --
MINORITY INTEREST..............        --          --            217          --           --              217
                                 --------    --------     ----------    --------      -------       ----------
NET (LOSS) INCOME..............  $(17,305)   $ (8,551)    $  (14,036)   $ 19,256      $  (105)      $  (20,741)
                                 ========    ========     ==========    ========      =======       ==========
</Table>

                                       F-35
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
                          YEAR ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                               GERDAU
                                             AMERISTEEL                    NON
                                   GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                  --------   -----------   ----------   ----------   ------------   ------------
                                                                (US$ IN THOUSANDS)
<S>                               <C>        <C>           <C>          <C>          <C>            <C>
NET SALES.......................  $     --     $40,547      $937,612     $64,353       $(6,457)      $1,036,055
OPERATING EXPENSES
  Cost of sales.................        --      38,777       784,516      50,245        (6,447)         867,091
  Selling and administrative....       725       1,591        57,570       2,288            (1)          62,173
  Depreciation..................        --       1,576        52,782       4,242            83           58,683
  Other operating expense.......   (17,385)         --        12,300          13            --           (5,072)
                                  --------     -------      --------     -------       -------       ----------
                                   (16,660)     41,944       907,168      56,788        (6,365)         982,875
                                  --------     -------      --------     -------       -------       ----------
INCOME (LOSS) FROM OPERATIONS...    16,660      (1,397)       30,444       7,565           (92)          53,180
                                  --------     -------      --------     -------       -------       ----------
OTHER EXPENSES
  Interest......................     8,304       1,918        25,082       1,289         2,005           38,598
  Foreign exchange (gains)
     losses.....................        --          --           230          --            --              230
  Amortization of deferred
     financing costs............        --          --         1,167           5            --            1,172
                                  --------     -------      --------     -------       -------       ----------
                                     8,304       1,918        26,479       1,294         2,005           40,000
                                  --------     -------      --------     -------       -------       ----------
(LOSS) INCOME BEFORE TAXES......     8,356      (3,315)        3,965       6,271        (2,097)          13,180
INCOME TAX (BENEFIT) EXPENSE....     1,258      (2,572)         (375)      2,113           (83)             341
                                  --------     -------      --------     -------       -------       ----------
(LOSS) INCOME BEFORE MINORITY
  INTEREST......................     7,098        (743)        4,340       4,158        (2,014)          12,839
MINORITY INTEREST...............        --          --        (1,707)         --            --           (1,707)
                                  --------     -------      --------     -------       -------       ----------
NET (LOSS) INCOME...............  $  7,098     $  (743)     $  2,633     $ 4,158       $(2,014)      $   11,132
                                  ========     =======      ========     =======       =======       ==========
</Table>

NOTE 19 -- SUBSEQUENT EVENTS

       The Company completed the exchange of its $405 million Senior Notes on
January 23, 2004. The exchanged notes have substantially the same form and terms
as the original outstanding notes that were offered in a private placement in
the June 2003 refinancing. The exchanged notes were issued under a prospectus in
Ontario and the exchanged notes and subsidiary guarantees have been registered
under the U.S. Securities Act of 1933, as amended, and are not subject to
restrictions on transfer.

       During the first quarter of 2004, the Company obtained a $25 million, one
year, 2.65% interest bearing loan from a Brazilian bank. The loan was guaranteed
by Gerdau S.A.

       In March 2004, the Company acquired certain assets and assumed certain
liabilities of Potter Form & Tie Co., a rebar fabricator with six locations
throughout the Midwest, for approximately $11.0 million. The transaction was
accounted for as a business combination.

                                       F-36
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 20 -- DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES

       The Company's consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting principles ("GAAP"). The
most significant differences between Canadian and United States GAAP, in terms
of impact on the Company's consolidated financial statements, relate to the
accounting for pensions, derivative instruments and the reporting of
comprehensive income.

       The following table reconciles the consolidated statements of earnings
(loss) as reported under Canadian GAAP with those that would have been reported
under United States GAAP:

<Table>
<Caption>
                                                                  YEAR ENDED
                                                                 DECEMBER 31
                                                              ------------------
                                                                2003      2002
                                                              --------   -------
<S>                                                           <C>        <C>
NET (LOSS) INCOME -- CANADIAN GAAP..........................  $(20,741)  $11,132
Adjustment to purchase price allocation relating to
  differences under US GAAP(a)..............................    (2,600)     (451)
Changes in fair value of interest rate derivatives(c).......    (3,354)      368
                                                              --------   -------
NET (LOSS) INCOME -- UNITED STATES GAAP.....................  $(26,695)  $11,049
                                                              ========   =======
OTHER COMPREHENSIVE INCOME (LOSS):
  Derivative gain (loss)(c).................................     3,466    (2,310)
  Minimum unfunded pension liability(d).....................     5,357   (16,309)
  Foreign currency translation adjustment(b)................    24,085       179
                                                              --------   -------
OTHER COMPREHENSIVE INCOME (LOSS) -- UNITED STATES GAAP.....    32,908   (18,440)
                                                              --------   -------
COMPREHENSIVE INCOME (LOSS) -- UNITED STATES GAAP...........  $  6,213   $(7,391)
                                                              ========   =======
Net (loss) earnings per share -- United States GAAP
  Basic.....................................................  $  (0.04)  $  0.08
  Diluted...................................................  $  (0.04)  $  0.08
                                                              ========   =======
</Table>

------------

(a)  Adjustment to Purchase Price Allocation Relating to differences under US
     GAAP

     Under Canadian GAAP, joint ventures are accounted for using the
     proportionate consolidation method, while under US GAAP, joint ventures are
     accounted for under the equity method. Under an accommodation of the US
     Securities and Exchange Commission, accounting for joint ventures need not
     be reconciled from Canadian to US GAAP. The different accounting treatment
     affects only the display and classification of financial statement items
     and not net income or shareholders' equity. See note 6 for summarized
     financial information in respect of the Company's joint ventures.

     Because of the different treatment of joint ventures between Canadian GAAP
     and US GAAP as well as a difference in the treatment for accounting for
     convertible debentures, a permanent difference results in the allocation of
     the purchase price. Under purchase accounting, the excess of the value of
     the assets over the purchase price (negative goodwill) is allocated to the
     long term assets acquired. Under Canadian GAAP, because the joint venture
     assets are proportionately accounted for and therefore there is no
     investment in subsidiary long term asset, the negative goodwill is
     allocated only against property, plant and equipment. Under US GAAP, the
     negative goodwill is allocated to both property, plant and equipment and to
     investment in subsidiary. As a result, there is a difference in
     depreciation expense. Additionally, due to the difference in accounting
     treatment for convertible debentures at the time of purchase, there is a
     difference in interest expense.

(b)  Comprehensive Income

     United States accounting standards for reporting comprehensive income are
     set forth in SFAS No. 130. Comprehensive income represents the change in
     equity during a reporting period from transactions and other events and
     circumstances from non-owner sources. Components of comprehensive income
     include items such as net earnings (loss), changes in the fair value of
     investments not held for trading, minimum pension liability adjustments,
     derivative instruments and certain foreign currency translation gains and
     losses.

                                       F-37
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(c)  Derivative Instruments

     The Company has interest rate swap agreements. Under US GAAP, unrealized
     gains and losses on the mark-to-market valuation of the swaps may be
     subject to hedge treatment under SFAS No. 133 whereby all or a portion of
     the mark-to-market gain or loss is recorded to other comprehensive income
     and the swap recorded at fair value. Any ineffective portion is recorded
     against income.

(d)  Accumulated unfunded pension liability

     Under U.S. GAAP, the Company should recognize an additional minimum pension
     liability charged to other comprehensive income in shareholders' equity to
     the extent that the unfunded accumulated benefit obligation ("ABO") exceeds
     the fair value of the plan assets and this amount is not covered by the
     pension liability already recognized in the balance sheet. The calculation
     of the ABO is based on the actuarial present value of the vested benefits
     to which the employee is currently entitled, based on the employee's
     expected date of separation or retirement. Canadian GAAP does not require
     the recognition of an additional minimum liability.

       The following table indicates the cumulative effect of the above
adjustments on balance sheet accounts, displaying results under Canadian GAAP
and US GAAP:

<Table>
<Caption>
                                                        CANADIAN GAAP      UNITED STATES GAAP
                                                        DECEMBER 31,          DECEMBER 31,
                                                     -------------------   -------------------
                                                       2003       2002       2003       2002
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
ASSETS
Current assets.....................................  $655,125   $554,920   $601,988   $518,144
Property, plant & equipment........................   919,207    898,948    795,062    765,644
Goodwill...........................................   116,564    114,674    116,564    114,374
Other assets.......................................    31,312      9,192    163,494    121,595
LIABILITIES
Current liabilities (excl indebtedness)............   319,171    244,338    296,482    222,471
Current portion of long-term debt..................     3,305    107,321      2,774    101,090
Long-term debt & related party debt................   663,682    490,967    641,005    463,423
Other long-term liabilities........................   120,185     99,341    138,168    132,894
Deferred income taxes..............................    64,355     88,191     65,072     73,375
Minority interest..................................        --     33,312         --     33,312
SHAREHOLDERS' EQUITY
Invested capital...................................   547,601    513,400    547,601    513,400
Retained earnings (deficit)........................   (19,412)     1,329    (25,816)       879
Cumulative translation adjustment..................    23,321       (765)        --         --
Other comprehensive income.........................        --         --     11,821    (21,087)
</Table>

                                       F-38
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       Changes in shareholders' equity under US GAAP were as follows:

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                                 2003         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
Shareholders' equity at beginning of year...................   $493,192     $ 47,728
Net (loss) earnings.........................................    (26,695)      11,049
Subsidiary stock activity...................................         --         (187)
Minority interest exchange..................................     34,201           --
Debt converted to equity....................................         --      325,948
Acquisition.................................................         --      129,275
Foreign currency translation adjustment.....................     24,085          179
Other comprehensive income (loss)...........................      8,823      (18,619)
Dividends...................................................         --       (2,181)
                                                               --------     --------
Shareholders' equity at end of year.........................   $533,606     $493,192
                                                               ========     ========
</Table>

       The difference in consolidated shareholders' equity may be reconciled as
follows:

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                                 2003         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
Shareholders' equity based on Canadian GAAP.................   $551,510     $513,964
                                                               --------     --------
US GAAP purchase price adjustments..........................     (3,051)        (451)
Accumulated unfunded pension................................    (11,499)     (16,856)
Unrealized losses on interest rate derivatives..............     (3,354)      (3,465)
                                                               --------     --------
Cumulative reduction in net earnings under US GAAP..........    (17,904)     (20,772)
                                                               --------     --------
Shareholders' equity based on US GAAP.......................   $533,606     $493,192
                                                               ========     ========
</Table>

       There are no significant differences with respect to the consolidated
statement of cash flows between US GAAP and Canadian GAAP.

                                       F-39
<PAGE>

                             U.S. GAAP/U.S. DOLLAR
                       CONSOLIDATED FINANCIAL STATEMENTS

                         GERDAU AMERISTEEL CORPORATION
                             JUNE 30, 2004 AND 2003

                                       F-40
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                               JUNE 30,    DECEMBER 31,
                                                                 2004          2003
                                                              ----------   ------------
                                                                 (US$ IN THOUSANDS)
                                                                     (UNAUDITED)
<S>                                                           <C>          <C>
                                        ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................  $   16,886    $    9,950
  Accounts receivable, net..................................     304,731       205,226
  Inventories (note 5)......................................     427,259       352,842
  Deferred tax assets.......................................      13,269        13,269
  Other current assets......................................      17,469        20,701
                                                              ----------    ----------
     TOTAL CURRENT ASSETS...................................     779,614       601,988
INVESTMENTS (note 7)........................................     161,834       132,314
PROPERTY, PLANT AND EQUIPMENT (note 6)......................     780,475       795,063
GOODWILL....................................................     117,915       116,564
DEFERRED FINANCING COSTS....................................      14,906        16,063
DEFERRED TAX ASSETS.........................................       7,592        15,045
OTHER ASSETS................................................         100            72
                                                              ----------    ----------
TOTAL ASSETS................................................  $1,862,436    $1,677,109
                                                              ==========    ==========

                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable..........................................  $  242,208    $  208,664
  Accrued salaries, wages and employee benefits.............      32,494        29,732
  Accrued interest..........................................      21,190        23,730
  Other current liabilities.................................      54,809        34,357
  Bank indebtedness (note 8)................................       3,021         1,524
  Current portion of long-term borrowings (note 8)..........      26,161         1,250
                                                              ----------    ----------
     TOTAL CURRENT LIABILITIES..............................     379,883       299,257
LONG-TERM BORROWINGS, LESS CURRENT PORTION (note 8).........     428,302       562,703
CONVERTIBLE DEBENTURES......................................      74,751        78,302
ACCRUED BENEFIT OBLIGATIONS (note 9)........................      82,988        92,996
OTHER LIABILITIES...........................................      43,540        45,172
DEFERRED TAX LIABILITIES....................................      97,528        65,072
                                                              ----------    ----------
TOTAL LIABILITIES...........................................   1,106,992     1,143,502
                                                              ----------    ----------
SHAREHOLDERS' EQUITY
  Capital stock (note 10)...................................     645,737       547,601
  Retained earnings (accumulated deficit)...................     101,155       (25,816)
  Accumulated other comprehensive income....................       8,552        11,822
                                                              ----------    ----------
TOTAL SHAREHOLDERS' EQUITY..................................     755,444       533,607
                                                              ----------    ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................  $1,862,436    $1,677,109
                                                              ==========    ==========
</Table>

                See notes to consolidated financial statements.
                                       F-41
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

<Table>
<Caption>
                                                     THREE MONTHS ENDED          SIX MONTHS ENDED
                                                   -----------------------   -------------------------
                                                    JUNE 30,     JUNE 30,      JUNE 30,      JUNE 30,
                                                      2004         2003          2004          2003
                                                   ----------   ----------   ------------   ----------
                                                   (US$ IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
                                                                       (UNAUDITED)
<S>                                                <C>          <C>          <C>            <C>
NET SALES........................................   $733,774     $440,797     $1,352,727     $857,360
OPERATING EXPENSES
  Cost of sales..................................    556,288      399,580      1,097,545      791,279
  Selling and administrative.....................     22,779       18,241         43,819       35,272
  Depreciation...................................     18,973       17,027         37,887       35,152
  Other operating (income) expense...............       (510)       1,602         (1,471)        (179)
                                                    --------     --------     ----------     --------
                                                     597,530      436,450      1,177,780      861,524
                                                    --------     --------     ----------     --------
INCOME (LOSS) FROM OPERATIONS....................    136,244        4,347        174,947       (4,164)
EARNINGS FROM JOINT VENTURES.....................     36,184        1,176         45,695        4,862
                                                    --------     --------     ----------     --------
INCOME BEFORE OTHER EXPENSES AND INCOME TAXES....    172,428        5,523        220,642          698
OTHER EXPENSES
  Interest, net..................................     10,039       15,840         28,059       25,923
  Foreign exchange (gain) loss...................        418          262            675         (571)
  Amortization of deferred financing costs.......        626        3,204          1,248        3,578
                                                    --------     --------     ----------     --------
                                                      11,083       19,306         29,982       28,930
                                                    --------     --------     ----------     --------
INCOME (LOSS) BEFORE INCOME TAXES................    161,345      (13,783)       190,660      (28,232)
INCOME TAX EXPENSE (BENEFIT).....................     55,879       (6,897)        63,689      (14,818)
                                                    --------     --------     ----------     --------
INCOME (LOSS) BEFORE MINORITY INTEREST...........    105,466       (6,886)       126,971      (13,414)
MINORITY INTEREST................................         --           --             --          217
                                                    --------     --------     ----------     --------
NET INCOME (LOSS)................................   $105,466     $ (6,886)    $  126,971     $(13,197)
                                                    ========     ========     ==========     ========
EARNINGS (LOSS) PER COMMON SHARE -- BASIC........   $   0.48     $  (0.03)    $     0.61     $  (0.07)
EARNINGS (LOSS) PER COMMON SHARE -- DILUTED......   $   0.48     $  (0.03)    $     0.60     $  (0.07)
</Table>

                See notes to consolidated financial statements.
                                       F-42
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

<Table>
<Caption>
                                                           RETAINED EARNINGS   ACCUMULATED OTHER
                                   NUMBER OF    INVESTED     (ACCUMULATED        COMPREHENSIVE
                                    SHARES      CAPITAL        DEFICIT)          INCOME (LOSS)      TOTAL
                                  -----------   --------   -----------------   -----------------   --------
                                                             (US$ IN THOUSANDS)
                                                                 (UNAUDITED)
<S>                               <C>           <C>        <C>                 <C>                 <C>
BALANCE -- DECEMBER 31, 2002....  184,892,360   $513,400       $   (107)           $(20,094)       $493,199
                                                                                                   --------
Comprehensive income:
  Net loss......................           --         --        (13,197)                 --         (13,197)
  Other comprehensive income:
     Unrealized loss on cash
       flow hedge...............           --         --             --               3,550           3,550
     Foreign exchange...........           --         --             --              28,630          28,630
                                                                                                   --------
Comprehensive income............                                                                     18,983
                                  -----------   --------       --------            --------        --------
  Acquisition of minority
     interest...................   13,198,501     34,201             --                  --          34,201
                                  -----------   --------       --------            --------        --------
BALANCE -- JUNE 30, 2003........  198,090,861   $547,601       $(13,304)           $ 12,086        $546,383
                                  -----------   --------       --------            --------        --------
BALANCE -- DECEMBER 31, 2003....  198,090,861   $547,601       $(25,816)           $ 11,822        $533,607
                                                                                                   --------
Comprehensive income:
  Net income....................           --         --        126,971                  --         126,971
  Other comprehensive income:
     Foreign exchange...........           --         --             --              (3,270)         (3,270)
                                                                                                   --------
Comprehensive income............                                                                    123,701
  Stock issuance................   26,800,000     97,771             --                  --          97,771
  Employee stock options........      198,476        365             --                  --             365
                                  -----------   --------       --------            --------        --------
BALANCE -- JUNE 30, 2004........  225,089,337   $645,737       $101,155            $  8,552        $755,444
                                  ===========   ========       ========            ========        ========
</Table>

                See notes to consolidated financial statements.
                                       F-43
<PAGE>

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                                        --------------------   -------------------
                                                        JUNE 30,   JUNE 30,    JUNE 30,   JUNE 30,
                                                          2004       2003        2004       2003
                                                        --------   ---------   --------   --------
                                                                    (US$ IN THOUSANDS)
                                                                       (UNAUDITED)
<S>                                                     <C>        <C>         <C>        <C>
OPERATING ACTIVITIES
Net income (loss).....................................  $105,466   $  (6,886)  $126,971   $(13,197)
Adjustment to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation........................................    18,973      17,027     37,887     35,152
  Amortization........................................       626       3,204      1,248      3,578
  Deferred income taxes...............................    33,891      (5,368)    38,032    (12,234)
  (Gain) on disposition of property, plant and
     equipment........................................        --        (426)        --       (330)
  Foreign exchange on related party loans.............        --       3,867         --      7,241
  (Income) from joint ventures........................   (36,184)     (1,176)   (45,695)    (4,862)
  Distributions from Joint Ventures...................    14,000          --     15,799      1,799
Changes in operating assets and liabilities, net of
  acquisitions:
  Accounts receivable.................................   (13,051)      8,062   (102,336)   (57,117)
  Inventories.........................................   (38,960)    (15,959)   (75,326)    (2,610)
  Other assets........................................     2,094      (4,371)     1,042     (9,162)
  Liabilities.........................................   (19,669)     (9,059)    53,989     32,533
                                                        --------   ---------   --------   --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES...    67,186     (11,085)    51,611    (19,209)
INVESTING ACTIVITIES
  Additions to property, plant and equipment..........   (15,217)    (11,856)   (26,429)   (21,780)
  Acquisitions........................................        --          --    (11,127)        --
  Proceeds from dispositions of property, plant, and
     equipment........................................        --           5         --         77
                                                        --------   ---------   --------   --------
NET CASH USED IN INVESTING ACTIVITIES.................   (15,217)    (11,851)   (37,556)   (21,703)
FINANCING ACTIVITIES
  Proceeds from issuance of new debt..................        --     542,357     25,000    542,357
  Revolving credit (payments).........................  (149,275)   (468,949)  (130,072)  (474,199)
  Increase in related party loans payable.............        --     (30,000)        --         --
  Additions to deferred financing costs...............        --     (13,378)        --    (13,419)
  Changes in minority interest........................        --          --         --       (218)
  Proceeds from issuance of employee stock
     purchases........................................       170          --        365         --
  Proceeds from the issuance of common stock..........    97,889          --     97,889         --
                                                        --------   ---------   --------   --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES...   (51,216)     30,030     (6,818)    54,521
                                                        --------   ---------   --------   --------
Effect of exchange rate changes on cash and cash
  equivalents.........................................      (155)        319       (301)       (40)
                                                        --------   ---------   --------   --------
INCREASE IN CASH AND CASH EQUIVALENTS.................       598       7,413      6,936     13,569
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......    16,288      18,698      9,950     12,542
                                                        --------   ---------   --------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............  $ 16,886   $  26,111   $ 16,886   $ 26,111
                                                        ========   =========   ========   ========
</Table>

                See notes to consolidated financial statements.
                                       F-44
<PAGE>

                         GERDAU AMERISTEEL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               (US$ IN THOUSANDS)

NOTE 1 -- BASIS OF PRESENTATION

       Gerdau Ameristeel Corporation (the "Company" or "Gerdau Ameristeel") is a
Canadian corporation, whose indirect majority shareholder is Gerdau S.A., a
Brazilian company. On October 23, 2002, Gerdau S.A., parent company of the
Gerdau North America Group, entered into a transaction agreement with Co-Steel
Inc. ("Co-Steel"), a Canadian public company. The "Gerdau North America Group"
consisted of the Gerdau Canada Group (Gerdau Ameristeel Cambridge Inc. and
Gerdau MRM Holdings Inc. and their consolidated subsidiaries) and Gerdau USA,
Inc. and its consolidated subsidiaries FLS Holdings Inc., AmeriSteel Corporation
and AmeriSteel Bright Bar, Inc. (collectively, "GUSA"). This transaction
agreement resulted in Co-Steel acquiring all of the issued and outstanding
shares of the companies included in the Gerdau North America Group, in exchange
for Co-Steel common shares representing approximately 74% of Co-Steel's total
common shares. The transaction was accounted for using the reverse-takeover
method of purchase accounting. The Gerdau North America Group is deemed to be
the acquirer and is assumed to be purchasing the assets and liabilities of
Co-Steel, since the original shareholder of the Gerdau North America Group
became owner of more than 50 percent of the voting shares of Co-Steel on a
fully-diluted basis following the transaction. As a result, the Gerdau North
America Group's historical accounts became the historical accounts for all
periods prior to the date of merger. In connection with the merger, Co-Steel's
name was changed to Gerdau Ameristeel Corporation. As part of this transaction,
certain related party loans of the Gerdau North America Group were converted
into equity in October 2002.

       On March 31, 2003, under the terms of the Transaction Agreement relating
to the acquisition of Co-Steel, the Company completed an exchange of minority
shares of AmeriSteel Corporation for shares of Gerdau Ameristeel. Minority
shareholders of AmeriSteel, primarily executives and employees, exchanged
1,395,041 shares of AmeriSteel for 13,198,501 shares of Gerdau Ameristeel, an
exchange ratio of 9.4617 to 1. As a result, AmeriSteel became an indirect wholly
owned subsidiary of Gerdau Ameristeel. On April 4, 2003, AmeriSteel changed its
name to Gerdau Ameristeel US Inc. ("Ameristeel"). Subsequent to the minority
exchange, Gerdau S.A. owned approximately 67.5% of common shares outstanding. As
of December 31, 2003, Gerdau S.A. increased its interest to 68.6% through share
purchases in the open market. In April 2004, the Company issued 26,800,000
common shares to its majority shareholder, Gerdau S.A. Subsequent to this
transaction, Gerdau S.A. held 72.3% of the Company's shares.

       The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for interim period reports and,
therefore, do not include all the information or footnotes necessary for a
complete presentation of financial condition, results of operations and cash
flows in conformity with United States generally accepted accounting principles
(GAAP). However, all adjustments which, in the opinion of management, are
necessary for a fair presentation have been included. Such adjustments consisted
of only normal recurring items. These condensed financial statements should be
read in conjunction with the financial statements and the notes thereto included
in the Company's latest annual report and have been prepared using the
accounting policies as described in the latest annual report and Note 12 which
describes the significant differences between Canadian and U.S. GAAP. Certain
amounts have been reclassified to conform to the current-period financial
statement presentation. The results of the three and six month periods ended
June 30, 2004 and 2003 are not necessarily indicative of the results to be
expected for future periods.

       The Company operates steel mini-mills, producing primarily steel bars and
special sections for commercial and industrial building construction, steel
service centers and original equipment manufacturers. Its principal market area
is the eastern United States and Canada. Principal suppliers to the Company
include scrap metal producers, electric utilities, natural gas suppliers, rail
and truck carriers. All significant intercompany transactions and accounts have
been eliminated in consolidation.

                                       F-45
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- STOCK BASED COMPENSATION

       The Company accounts for stock options granted to employees using the
intrinsic value method of accounting. Under this method, the Company does not
recognize compensation expense for the stock options because the exercise price
is equal to the market price of the underlying stock on the date of grant. Had
the Company applied the fair value based method of accounting, net income (loss)
and earnings (loss) per share would be as shown on the following table. The
Black-Scholes option pricing model was used to estimate the fair value of each
option grant on the date of grant and calculate the pro forma stock-based
compensation costs. For purposes of the pro forma disclosures, the assumed
compensation expense is amortized over the option's vesting periods. The
following assumptions were used:

<Table>
<S>                                                           <C>
Expected dividend yield.....................................        0%
Expected share price volatility.............................       55%
Risk-free rate of return....................................        4%
Expected period until exercise..............................  5 years
</Table>

<Table>
<Caption>
                                                      FOR THE THREE MONTHS    FOR THE SIX MONTHS
                                                              ENDED                  ENDED
                                                      ---------------------   -------------------
                                                      JUNE 30,    JUNE 30,    JUNE 30,   JUNE 30,
                                                        2004        2003        2004       2003
                                                      ---------   ---------   --------   --------
                                                        (AMOUNTS IN $000 EXCEPT PER SHARE DATA)
<S>                                                   <C>         <C>         <C>        <C>
Net income (loss), as reported......................  $105,466     $(6,886)   $126,971   $(13,197)
Pro forma stock-based compensation cost.............        67         124         136        248
                                                      --------     -------    --------   --------
Pro forma, net income (loss)........................  $105,399     $(7,010)   $126,835   $(13,445)
Earnings per share
  Basic, as reported................................  $   0.48     $ (0.03)   $   0.61   $  (0.07)
  Basic, pro forma..................................  $   0.48     $ (0.04)   $   0.61   $  (0.07)
  Diluted, as reported..............................  $   0.48     $ (0.03)   $   0.60   $  (0.07)
  Diluted, pro forma................................  $   0.48     $ (0.04)   $   0.60   $  (0.07)
</Table>

NOTE 3 -- RECENT ACCOUNTING PRONOUNCEMENTS

       In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities", an interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements". In December 2003,
the FASB issued a revised version of FIN 46. FIN 46R addresses consolidation by
business enterprises of variable interest entities in which an enterprise
absorbs a majority of the entity's expected losses, receives a majority of the
entity's expected residual returns, or both, as a result of ownership,
contractual or other financial interest in the entity. The interpretation
requires that if a business has a controlling financial interest in a variable
interest entity, the entity must be consolidated.

       The Company adopted FIN 46 as of January 1, 2004. The Company has a 50%
interest in a number of joint ventures (see note 7). Certain of these joint
ventures are considered variable interest entities under the provisions of FIN
46. The Company has evaluated the terms of the agreements between the joint
ventures and has determined that the Company is not the primary beneficiary of
the joint venture agreements and should not be consolidated. The joint ventures
were previously accounted for under the equity method; therefore the adoption of
FIN 46 had no impact on the Company for the three and six month periods ended
June 30, 2004.

                                       F-46
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- ACQUISITIONS

       In March 2004, the Company acquired certain assets and assumed certain
liabilities of Potter Form & Tie Co., a rebar fabricator with six locations
throughout the Midwest, for approximately $11.1 million. As a result of this
transaction, $1.4 million of goodwill was recorded. The transaction was
accounted for as a purchase.

NOTE 5 -- INVENTORIES

       Inventories consist of the following ($000s):

<Table>
<Caption>
                                                              AT JUNE 30,   AT DECEMBER 31,
                                                                 2004            2003
                                                              -----------   ---------------
<S>                                                           <C>           <C>
Ferrous and non-ferrous scrap...............................   $ 51,754        $ 64,173
Work in-process.............................................     51,451          31,764
Finished goods..............................................    179,370         151,014
Raw materials (excluding scrap) and operating supplies......    144,684         105,891
                                                               --------        --------
                                                               $427,259        $352,842
                                                               ========        ========
</Table>

NOTE 6 -- PROPERTY, PLANT & EQUIPMENT

       Property, plant and equipment consist of the following ($000s):

<Table>
<Caption>
                                                                       AT JUNE 30, 2004
                                                            --------------------------------------
                                                                         ACCUMULATED     NET BOOK
                                                               COST      DEPRECIATION     VALUE
                                                            ----------   ------------   ----------
<S>                                                         <C>          <C>            <C>
Land and improvements.....................................  $   63,020    $  (3,158)     $ 59,862
Buildings and improvements................................     130,315      (22,775)      107,540
Machinery and equipment...................................     781,671     (225,484)      556,187
Construction in progress..................................      43,406           --        43,406
Property, plant and equipment held for sale...............      13,480           --        13,480
                                                            ----------    ---------      --------
                                                            $1,031,892    $(251,417)     $780,475
                                                            ==========    =========      ========
</Table>

<Table>
<Caption>
                                                                     AT DECEMBER 31, 2003
                                                            --------------------------------------
                                                                         ACCUMULATED     NET BOOK
                                                               COST      DEPRECIATION     VALUE
                                                            ----------   ------------   ----------
<S>                                                         <C>          <C>            <C>
Land and improvements.....................................  $   63,175    $  (2,680)     $ 60,495
Buildings and improvements................................     128,243      (20,327)      107,916
Machinery and equipment...................................     768,298     (191,597)      576,701
Construction in progress..................................      36,375           --        36,375
Property, plant and equipment held for sale...............      13,576           --        13,576
                                                            ----------    ---------      --------
                                                            $1,009,667    $(214,604)     $795,063
                                                            ==========    =========      ========
</Table>

NOTE 7 -- JOINT VENTURES

       The Company's investments in Gallatin Steel Company, Bradley Steel
Processors and MRM Guide Rail are 50% joint ventures. The Company's interests in
the joint ventures have been accounted for using the equity method.

                                       F-47
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The following table sets forth selected data for the Company's joint
ventures ($000s):

<Table>
<Caption>
                                                              JUNE 30,   DECEMBER 31,
                                                                2004         2003
                                                              --------   ------------
<S>                                                           <C>        <C>
BALANCE SHEET
  Current assets............................................  $86,096      $ 53,137
  Property, plant and equipment, net........................   98,316       101,441
  Current liabilities.......................................   24,561        23,224
  Long-term debt............................................    3,266         4,259
</Table>

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                   JUNE 30,
                                                              ------------------
                                                                2004      2003
                                                              --------   -------
<S>                                                           <C>        <C>
STATEMENT OF EARNINGS
  Sales.....................................................  $111,619   $55,094
  Operating income..........................................    36,867     1,815
  Income before income taxes................................    36,808     1,760
  Net Income................................................    36,184     1,176
</Table>

<Table>
<Caption>
                                                               SIX MONTHS ENDED
                                                                   JUNE 30,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
STATEMENT OF EARNINGS
  Sales.....................................................  $190,291   $107,587
  Operating income..........................................    47,134      5,832
  Income before income taxes................................    47,023      5,685
  Net Income................................................    45,695      4,862
</Table>

       The tax expense for the Company's partnership, Gallatin Steel Company, is
provided for in the Company's tax provision and the remainder of the joint
venture earnings are net of tax.

NOTE 8 -- LONG-TERM DEBT

       On June 27, 2003, the Company refinanced its debt by issuing $405.0
million aggregate principal 10 3/8% Senior Notes, of which $35.0 million were
sold to an indirect wholly-owned subsidiary of the Company's parent, Gerdau S.A.
The notes mature July 15, 2011 and were issued at 98% of face value. The Company
also entered into a new Senior Secured Credit Facility with a term of up to five
years, which provides commitments of up to $350.0 million. The borrowings under
the Senior Secured Credit Facility are secured by the Company's inventory and
accounts receivable. The proceeds were used to repay existing indebtedness. At
June 30, 2004, there was $36 thousand outstanding, at an interest rate of 4.75%
and, based upon available collateral under the terms of the agreement,
approximately $298.6 million was available under the Senior Secured Credit
Facility.

       During the first quarter of 2004, the Company obtained a $25.0 million,
one year, 2.65% interest bearing loan from a Brazilian bank. This loan was
guaranteed by Gerdau S.A.

                                       F-48
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       Debt includes the following ($000s):

<Table>
<Caption>
                                                              JUNE 30,   DECEMBER 31,
                                                                2004         2003
                                                              --------   ------------
<S>                                                           <C>        <C>
Senior Notes, 10 3/8% due 2011, net of original issue
  discount..................................................  $397,619     $397,271
Senior Secured Credit Facility..............................        36      135,027
Short term debt.............................................    25,000           --
Industrial Revenue Bonds....................................    27,400       27,400
AmeriSteel Bright Bar Term Loan.............................     2,887        3,172
Other.......................................................     4,542        2,607
                                                              --------     --------
                                                               457,484      565,477
Less current portion........................................   (29,182)      (2,774)
                                                              --------     --------
                                                              $428,302     $562,703
                                                              ========     ========
</Table>

NOTE 9 -- POST RETIREMENT BENEFITS

       The Company maintains defined benefit pension plans covering the majority
of employees. The benefits are based on years of service and compensation during
the period of employment. Annual contributions are made in conformity with
minimum funding requirements and maximum deductible limitations.

       The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The Company uses a December 31
measurement date for its plans.

       The following tables summarize the accumulated pension benefits and
postretirement medical benefit obligations included in the Company's
consolidated statements of financial position ($000s):

<Table>
<Caption>
                                                           PENSION BENEFITS     OTHER BENEFIT PLANS
                                                             THREE MONTHS          THREE MONTHS
                                                                 ENDED                 ENDED
                                                          -------------------   -------------------
                                                          JUNE 30,   JUNE 30,   JUNE 30,   JUNE 30,
                                                            2004       2003       2004       2003
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost............................................  $ 2,454    $ 2,007      $232       $220
Interest cost...........................................    5,593      5,208       546        562
Expected return on plan assets..........................   (5,239)    (4,626)       --         --
Amortization of transition obligation...................       43         41        --         --
Amortization of prior service cost......................       72        115       (53)        --
Recognized actuarial gain...............................      582        239         7         --
Settlement loss.........................................       --         35        --         --
                                                          -------    -------      ----       ----
Net periodic benefit cost...............................  $ 3,505    $ 3,019      $732       $782
                                                          =======    =======      ====       ====
</Table>

                                       F-49
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                          PENSION BENEFITS     OTHER BENEFIT PLANS
                                                          SIX MONTHS ENDED      SIX MONTHS ENDED
                                                         -------------------   -------------------
                                                         JUNE 30,   JUNE 30,   JUNE 30,   JUNE 30,
                                                           2004       2003       2004       2003
                                                         --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost...........................................  $  4,908   $ 4,014     $  464     $  440
Interest cost..........................................    11,186    10,416      1,092      1,124
Expected return on plan assets.........................   (10,478)   (9,252)        --         --
Amortization of transition obligation..................        86        82         --         --
Amortization of prior service cost.....................       144       230       (106)        --
Recognized actuarial gain..............................     1,164       478         14         --
Settlement loss........................................        --        70         --         --
                                                         --------   -------     ------     ------
Net periodic benefit cost..............................  $  7,010   $ 6,038     $1,464     $1,564
                                                         ========   =======     ======     ======
</Table>

       The Company contributed $13.7 million to its defined benefit pension
plans for the six months ended June 30, 2004. The Company expects to contribute
an additional $6.5 million during the fiscal year 2004.

NOTE 10 -- CAPITAL STOCK

       Capital stock consists of the following shares:

<Table>
<Caption>
                                                        AUTHORIZED     ISSUED      INVESTED CAPITAL
                                                          NUMBER       NUMBER       (IN THOUSANDS)
                                                        ----------   -----------   ----------------
<S>                                                     <C>          <C>           <C>
June 30, 2004
  Common..............................................  Unlimited    225,089,337       $645,737
December 31, 2003
  Common..............................................  Unlimited    198,090,861       $547,601
</Table>

       The predecessor of the Company is the Gerdau North America Group, which
was not a legal entity but a combination of Gerdau companies in North America
and therefore had no capital structure of its own. On October 23, 2002, the
Gerdau companies in North America, consisting of GUSA, Gerdau Courtice Steel
Inc. and Gerdau MRM Steel Inc., among other holding companies, were combined
with Co-Steel Inc., a Canadian minimill steel producer. The combined entity was
renamed Gerdau Ameristeel Corporation and is publicly traded on the Toronto
Stock Exchange under the ticker symbol GNA.TO. The Company's common stock has no
par value. As part of this transaction, minority shareholders of AmeriSteel,
consisting primarily of management and other employees, were required to
exchange their shares of AmeriSteel stock for shares of Gerdau Ameristeel.
Gerdau Ameristeel filed a registration statement on Form F-4 with the Securities
and Exchange Commission and the exchange of shares was completed on March 31,
2003. As a result, an additional 13,198,501 shares of Gerdau Ameristeel were
issued.

                                       F-50
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS (LOSS) PER SHARE

       The following table identifies the components of basic and diluted
earnings per share ($000s except per share data):

<Table>
<Caption>
                                           THREE MONTHS ENDED             SIX MONTHS ENDED
                                       ---------------------------   ---------------------------
                                         JUNE 30,       JUNE 30,       JUNE 30,       JUNE 30,
                                           2004           2003           2004           2003
                                       ------------   ------------   ------------   ------------
<S>                                    <C>            <C>            <C>            <C>
Basic earnings (loss) per share:
  Basic net earnings (loss)..........  $    105,466   $     (6,886)  $    126,971   $    (13,197)
  Average shares outstanding.........   220,340,150    198,090,861    209,246,286    191,491,610
  Basic net earnings (loss) per
     share...........................  $       0.48   $      (0.03)  $       0.61   $      (0.07)
Diluted earnings (loss) per share:
  Diluted net earnings (loss)........  $    105,466   $     (6,886)  $    126,971   $    (13,197)
Diluted average shares outstanding:
  Average shares outstanding.........   220,340,150    198,090,861    209,246,286    191,491,610
  Dilutive effect of stock options...     1,130,657             --      1,129,880             --
Diluted net earnings (loss) per
  share..............................  $       0.48   $      (0.03)  $       0.60   $      (0.07)
</Table>

       At June 30, 2004, options to purchase 826,000 (1,367,000 at June 30,
2003) common shares were not included in the computation of diluted earnings
(loss) per share as their inclusion would be anti-dilutive.

NOTE 11 -- SEGMENT INFORMATION

       The Company is organized into two primary business segments: (a) Mills
and (b) Downstream. Steel products sold to the downstream divisions are sold at
market prices with intracompany transactions eliminated upon consolidation.
Performance is evaluated and resources allocated based on specific segment
requirements and measurable factors. Segment assets are those assets that are
specifically identified with the operations in each operational segment.
Corporate assets include primarily: cash; assets held for sale; some property,
plant and equipment; deferred income taxes; and deferred financing costs.
Corporate expense includes: corporate headquarters staff, including executive
management; human resources; finance and accounting; procurement and
environmental; and management information systems. Included in these respective
areas are payroll costs, travel and entertainment, professional fees and other
costs that may not be directly attributable to either specific segment.

                                       F-51
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       Operational results and other financial data for the geographic and two
business segments for the three and six month periods ended June 30 are
presented below ($000s):

<Table>
<Caption>
                                                  THREE MONTHS ENDED       SIX MONTHS ENDED
                                                 --------------------   ----------------------
                                                 JUNE 30,    JUNE 30,    JUNE 30,    JUNE 30,
                                                   2004        2003        2004        2003
                                                 ---------   --------   ----------   ---------
<S>                                              <C>         <C>        <C>          <C>
Revenue from external customers:
  Steel mills..................................  $ 597,788   $357,726   $1,131,267   $ 711,913
  Downstream products..........................    135,986     83,071      221,460     145,447
                                                 ---------   --------   ----------   ---------
     Total.....................................  $ 733,774   $440,797   $1,352,727   $ 857,360
                                                 =========   ========   ==========   =========
Inter-company sales:
  Steel mills..................................  $ 143,240   $ 81,479   $  272,294   $ 151,551
  Downstream products..........................         --         --           --          --
  Corp/eliminations/other......................   (143,240)   (81,479)    (272,294)   (151,551)
                                                 ---------   --------   ----------   ---------
     Total.....................................  $      --   $     --   $       --   $      --
                                                 =========   ========   ==========   =========
Total sales:
  Steel mills..................................  $ 741,028   $439,205   $1,403,561   $ 863,464
  Downstream products..........................    135,986     83,071      221,460     145,447
  Corp/eliminations/other......................   (143,240)   (81,479)    (272,294)   (151,551)
                                                 ---------   --------   ----------   ---------
     Total.....................................  $ 733,774   $440,797   $1,352,727   $ 857,360
                                                 =========   ========   ==========   =========
Net income (loss):
  Steel mills..................................  $ 138,665   $ (5,376)  $  181,949   $  (3,570)
  Downstream products..........................     10,672      3,065       14,007       7,408
  Corp/eliminations/other......................    (43,871)    (4,575)     (68,985)    (17,035)
                                                 ---------   --------   ----------   ---------
     Total.....................................  $ 105,466   $ (6,886)  $  126,971   $ (13,197)
                                                 =========   ========   ==========   =========
</Table>

<Table>
<Caption>
                                                                AS OF         AS OF
                                                               JUNE 30,    DECEMBER 31,
                                                                 2004          2003
                                                              ----------   ------------
<S>                                                           <C>          <C>
Segment assets:
  Steel mills...............................................  $1,326,767    $1,212,135
  Downstream products.......................................     199,549       133,654
  Corp/eliminations/other...................................     336,120       331,320
                                                              ----------    ----------
     Total..................................................  $1,862,436    $1,677,109
                                                              ==========    ==========
</Table>

NOTE 12 -- DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED
           ACCOUNTING PRINCIPLES

       The Company's consolidated financial statements are prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"). The
Company makes available to all shareholders consolidated financial statements
prepared in accordance with Canadian GAAP and files these financial statements
with Canadian regulatory authorities. Results reported under Canadian GAAP may
differ from results reported under U.S. GAAP. The most significant differences
between United States and Canadian GAAP, in terms of impact on the Company's
consolidated financial statements, relate to the accounting for joint ventures,
pensions and the reporting of comprehensive income.

                                       F-52
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The following tables reconcile the consolidated statements of earnings
(loss) as reported under U.S. GAAP with those that would have been reported
under Canadian GAAP:

<Table>
<Caption>
                                                              THREE MONTHS ENDED
                                                                   JUNE 30,
                                                              ------------------
                                                                2004      2003
                                                              --------   -------
<S>                                                           <C>        <C>
NET (LOSS) INCOME -- US GAAP................................  $105,466   $(6,886)
Adjustment to purchase price allocation relating to
  differences under Canadian GAAP(a)........................       678       778
Maintenance shutdown accrual(f).............................     3,377        --
                                                              --------   -------
NET (LOSS) INCOME -- CANADIAN GAAP..........................  $109,521   $(6,108)
                                                              ========   =======
Net (loss) earnings per share -- Canadian GAAP
  Basic.....................................................  $   0.50   $ (0.03)
  Diluted...................................................  $   0.49   $ (0.03)
                                                              ========   =======
</Table>

<Table>
<Caption>
                                                               SIX MONTHS ENDED
                                                                   JUNE 30,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
NET (LOSS) INCOME -- US GAAP................................  $126,971   $(13,197)
Adjustment to purchase price allocation relating to
  differences under Canadian GAAP(a)........................     1,356      1,158
Maintenance shutdown accrual(f).............................     3,377         --
                                                              --------   --------
NET (LOSS) INCOME -- CANADIAN GAAP..........................  $131,704   $(12,039)
                                                              ========   ========
Net (loss) earnings per share -- Canadian GAAP
  Basic.....................................................  $   0.63   $  (0.06)
  Diluted...................................................  $   0.63   $  (0.06)
                                                              ========   ========
</Table>

------------

(a)  Adjustment to Purchase Price Allocation relating to differences under
     Canadian GAAP

     Under Canadian GAAP, joint ventures are accounted for using the
     proportionate consolidation method, while under US GAAP, joint ventures are
     accounted for under the equity method. The different accounting treatment
     affects only the display and classification of financial statement items
     and not net income or shareholders' equity. See note 7 for summarized
     financial information in respect of the Company's joint ventures.

     Because of the different treatment of joint ventures between Canadian GAAP
     and US GAAP as well as a difference in the treatment for accounting for
     convertible debentures at the time of purchase, a permanent difference
     resulted from the allocation of the purchase price. Under purchase
     accounting, the excess of the value of the assets over the purchase price
     (negative goodwill) is allocated to the long term assets acquired. Under
     Canadian GAAP, because the joint venture assets are proportionately
     accounted for and therefore there is no investment in subsidiary long term
     asset, the negative goodwill is allocated only against property, plant and
     equipment. Under US GAAP, the negative goodwill is allocated to property,
     plant and equipment and investment in subsidiary. As a result, there is a
     difference in depreciation expense. Also, due to the difference in
     accounting for convertible debentures at the time of purchase, there is a
     difference in interest expense.

(b)  Comprehensive Income

     United States accounting standards for reporting comprehensive income are
     set forth in SFAS No. 130. Comprehensive income represents the change in
     equity during a reporting period from transactions and other events and
     circumstances from non-owner sources. Components of comprehensive income
     include items such as net earnings (loss), changes in the fair value of
     investments not held for trading, minimum pension liability adjustments,
     derivative instruments and certain foreign currency translation gains and
     losses. Under Canadian GAAP, there is no comprehensive income.

                                       F-53
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(c)  Derivative Instruments

     The Company early adopted CICA Handbook Accounting Guideline AcG-13 as of
     January 1, 2004. This section changed the accounting for derivatives under
     Canadian GAAP. As a result of the adoption of this section, there is no
     difference in accounting for the Company's interest rate swaps under U.S.
     and Canadian GAAP. In accordance with section 1506, prior periods have been
     restated to reflect the change in accounting.

(d)  Accumulated unfunded pension liability

     Under U.S. GAAP, the Company recognizes an additional minimum pension
     liability charged to other comprehensive income in shareholders' equity to
     the extent that the unfunded accumulated benefit obligation ("ABO") exceeds
     the fair value of the plan assets and this amount is not covered by the
     pension liability already recognized in the balance sheet. The calculation
     of the ABO is based on the actuarial present value of the vested benefits
     to which the employee is currently entitled, based on the employee's
     expected date of separation or retirement. Canadian GAAP does not require
     the recognition of an additional minimum liability.

(e)  Change in Accounting Policies -- Convertible Debentures

     Under Canadian GAAP, the Company early adopted CICA Handbook Section
     3860.20A, Financial Instruments -- Disclosure and Presentation in fiscal
     2003. This section requires that the Company's convertible debentures be
     treated as liabilities instead of equity and for the related interest to be
     included in the statement of earnings (loss) instead of as a change to
     retained earnings. This change was adopted as of and for the year ended
     December 31, 2003. Prior periods have been restated to reflect the change
     in accounting. As a result of the adoption of this accounting policy, there
     is no difference in the treatment of convertible debentures between U.S.
     and Canadian GAAP; however, a basis difference exists related to the
     purchase price allocation.

(f)  Maintenance shutdown accrual

     Under U.S. GAAP, the Company accrues for scheduled annual maintenance
     shutdowns. Canadian GAAP does not allow this accounting practice.

                                       F-54
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The following table indicates the cumulative effect of the above
adjustments on balance sheet accounts, displaying results under Canadian GAAP
and U.S. GAAP:

<Table>
<Caption>
                                                      CANADIAN GAAP          UNITED STATES GAAP
                                                 -----------------------   -----------------------
                                                 JUNE 30,   DECEMBER 31,   JUNE 30,   DECEMBER 31,
                                                   2004         2003         2004         2003
                                                 --------   ------------   --------   ------------
<S>                                              <C>        <C>            <C>        <C>
ASSETS
Current assets.................................  $865,710     $655,125     $779,614     $601,988
Property, plant & equipment....................   900,559      919,207      780,475      795,063
Goodwill.......................................   117,915      116,564      117,915      116,564
Other assets...................................    22,598       31,312      184,432      163,494

LIABILITIES
Current liabilities (excluding indebtedness)...   377,627      319,171      350,701      296,483
Current portion of long-term debt..............    26,358        3,305       29,182        2,774
Long-term debt.................................   431,568      566,963      428,302      562,703
Other long-term liabilities....................   195,158      220,258      201,280      216,470
Deferred income taxes..........................   101,345       64,355       97,528       65,072
SHAREHOLDERS' EQUITY
Invested capital...............................   645,737      547,601      645,737      547,601
Retained earnings (deficit)....................   108,938      (22,766)     101,155      (25,816)
Cumulative translation adjustment..............    20,051       23,321           --           --
Other comprehensive income(b)..................        --           --        8,552       11,822
                                                 --------     --------     --------     --------
Total Shareholders' Equity.....................  $774,726     $548,156     $755,444     $533,607
                                                 ========     ========     ========     ========
</Table>

       Changes in shareholders' equity under Canadian GAAP were as follows:

<Table>
<Caption>
                                                               SIX MONTHS ENDED
                                                                   JUNE 30,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Shareholders' equity at beginning of year...................  $548,156   $510,498
Net (loss) earnings.........................................   131,704    (12,039)
Employee stock options......................................       365         --
Stock issuance..............................................    97,771         --
Unrealized loss on cash flow hedge..........................        --      3,550
Foreign currency translation adjustment.....................    (3,270)    28,630
Minority interest exchange..................................        --     34,201
                                                              --------   --------
Shareholders' equity at end of period.......................  $774,726   $564,840
                                                              ========   ========
</Table>

                                       F-55
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       The difference in consolidated shareholders' equity may be reconciled as
follows:

<Table>
<Caption>
                                                               SIX MONTHS ENDED
                                                                   JUNE 30,
                                                              -------------------
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Shareholders' equity based on U.S. GAAP.....................  $755,444   $546,383
Adjust purchase price.......................................     4,406      1,601
Maintenance shutdown accrual................................     3,377         --
Accumulated unfunded pension(d).............................    11,499     16,856
                                                              --------   --------
CUMULATIVE INCREASE IN NET EARNINGS UNDER CANADIAN GAAP.....    19,282     18,457
                                                              --------   --------
SHAREHOLDERS' EQUITY BASED ON CANADIAN GAAP.................  $774,726   $564,840
                                                              ========   ========
</Table>

       There are no significant differences with respect to the consolidated
statement of cash flows between U.S. GAAP and Canadian GAAP.

       In 2003, results were originally presented in accordance with Canadian
GAAP. Beginning in 2004, the Company is reporting financial results under U.S.
GAAP. Prior year results have been presented under U.S. GAAP for comparative
purposes. The following statements present Canadian GAAP results restated for
newly adopted accounting principles (see (c) and (e) above) as compared to prior
periods as restated in U.S. GAAP. Differences between Canadian GAAP and U.S.
GAAP are described above.

                                       F-56
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                  DECEMBER 31, 2003
                                                              --------------------------
                                                              CANADIAN GAAP
                                                               (RESTATED)      US GAAP
                                                              -------------   ----------
                                                                  (US$ IN THOUSANDS)
                                                                     (UNAUDITED)
<S>                                                           <C>             <C>
                                         ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................   $   10,459     $    9,950
  Accounts receivable, net..................................      233,331        205,226
  Inventories...............................................      376,458        352,842
  Deferred tax assets.......................................       13,269         13,269
  Other current assets......................................       21,608         20,701
                                                               ----------     ----------
TOTAL CURRENT ASSETS........................................      655,125        601,988
INVESTMENTS.................................................           --        132,314
PROPERTY, PLANT AND EQUIPMENT...............................      919,207        795,063
GOODWILL....................................................      116,564        116,564
DEFERRED FINANCING COSTS....................................       16,063         16,063
DEFERRED TAX ASSETS.........................................       15,045         15,045
OTHER ASSETS................................................          204             72
                                                               ----------     ----------
TOTAL ASSETS................................................   $1,722,208     $1,677,109
                                                               ==========     ==========

                          LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable..........................................   $  231,352     $  208,664
  Accrued salaries, wages and employee benefits.............       29,732         29,732
  Accrued interest..........................................       23,730         23,730
  Other current liabilities.................................       34,357         34,357
  Bank indebtedness.........................................        2,055          1,524
  Current portion of long-term borrowings...................        1,250          1,250
                                                               ----------     ----------
TOTAL CURRENT LIABILITIES...................................      322,476        299,257
LONG-TERM BORROWINGS, LESS CURRENT PORTION..................      566,963        562,703
CONVERTIBLE DEBENTURES......................................       96,719         78,302
ACCRUED BENEFIT OBLIGATIONS.................................       74,354         92,996
OTHER LIABILITIES...........................................       49,185         45,172
DEFERRED TAX LIABILITIES....................................       64,355         65,072
                                                               ----------     ----------
TOTAL LIABILITIES...........................................    1,174,052      1,143,502
                                                               ----------     ----------
SHAREHOLDERS' EQUITY
  Capital stock.............................................      547,601        547,601
  Accumulated deficit.......................................      (22,766)       (25,816)
  Accumulated other comprehensive income....................           --         11,822
  Cumulative translation adjustment.........................       23,321             --
                                                               ----------     ----------
TOTAL SHAREHOLDERS' EQUITY..................................      548,156        533,607
                                                               ----------     ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................   $1,722,208     $1,677,109
                                                               ==========     ==========
</Table>

                                       F-57
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

<Table>
<Caption>
                                                                  THREE MONTHS ENDED
                                                                    JUNE 30, 2003
                                                              --------------------------
                                                              CANADIAN GAAP
                                                                (RESTATED)      US GAAP
                                                              --------------   ---------
                                                              (US$ IN THOUSANDS, EXCEPT
                                                               EARNINGS PER SHARE DATA)
                                                                     (UNAUDITED)
<S>                                                           <C>              <C>
NET SALES...................................................     $495,891      $440,797
OPERATING EXPENSES
  Cost of sales.............................................      449,334       399,580
  Selling and administrative................................       19,719        18,241
  Depreciation..............................................       20,176        17,027
  Other operating expense (income)..........................        1,839         1,602
                                                                 --------      --------
                                                                  491,068       436,450
                                                                 --------      --------
INCOME (LOSS) FROM OPERATIONS...............................        4,823         4,347
EARNINGS FROM JOINT VENTURES................................           --         1,176
INCOME BEFORE OTHER EXPENSES AND INCOME TAXES...............        4,823         5,523
OTHER EXPENSES
  Interest, net.............................................       14,728        15,840
  Foreign exchange (gain) loss..............................          262           262
  Amortization of deferred financing costs..................        3,204         3,204
                                                                 --------      --------
                                                                   18,194        19,306
                                                                 --------      --------
INCOME (LOSS) BEFORE INCOME TAXES...........................      (13,371)      (13,783)
INCOME TAX EXPENSE (BENEFIT)................................       (7,263)       (6,897)
                                                                 --------      --------
NET INCOME (LOSS)...........................................     $ (6,108)     $ (6,886)
                                                                 ========      ========
EARNINGS (LOSS) PER COMMON SHARE -- BASIC...................     $  (0.03)     $  (0.03)
EARNINGS (LOSS) PER COMMON SHARE -- DILUTED.................     $  (0.03)     $  (0.03)
</Table>

                                       F-58
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

<Table>
<Caption>
                                                                   SIX MONTHS ENDED
                                                                    JUNE 30, 2003
                                                              --------------------------
                                                              CANADIAN GAAP
                                                                (RESTATED)      US GAAP
                                                              --------------   ---------
                                                              (US$ IN THOUSANDS, EXCEPT
                                                               EARNINGS PER SHARE DATA)
                                                                     (UNAUDITED)
<S>                                                           <C>              <C>
NET SALES...................................................     $964,947      $857,360
OPERATING EXPENSES
  Cost of sales.............................................      885,863       791,279
  Selling and administrative................................       38,139        35,272
  Depreciation..............................................       39,918        35,152
  Other operating expense (income)..........................           58          (179)
                                                                 --------      --------
                                                                  963,978       861,524
                                                                 --------      --------
INCOME (LOSS) FROM OPERATIONS...............................          969        (4,164)
EARNINGS FROM JOINT VENTURES................................           --         4,862
INCOME BEFORE OTHER EXPENSES AND INCOME TAXES...............          969           698
OTHER EXPENSES
  Interest, net.............................................       23,740        25,923
  Foreign exchange (gain) loss..............................        3,578          (571)
  Amortization of deferred financing costs..................         (571)        3,578
                                                                 --------      --------
                                                                   26,747        28,930
                                                                 --------      --------
INCOME (LOSS) BEFORE INCOME TAXES...........................      (25,778)      (28,232)
INCOME TAX EXPENSE (BENEFIT)................................      (13,522)      (14,818)
                                                                 --------      --------
INCOME (LOSS) BEFORE MINORITY INTEREST......................     $(12,256)     $(13,414)
MINORITY INTEREST...........................................          217           217
                                                                 --------      --------
NET INCOME (LOSS)...........................................     $(12,039)     $(13,197)
                                                                 ========      ========
EARNINGS (LOSS) PER COMMON SHARE -- BASIC...................     $  (0.06)     $  (0.07)
EARNINGS (LOSS) PER COMMON SHARE -- DILUTED.................     $  (0.06)     $  (0.07)
</Table>

                                       F-59
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                  SIX MONTHS ENDED
                                                                    JUNE 30, 2003
                                                              -------------------------
                                                              CANADIAN GAAP
                                                               (RESTATED)      US GAAP
                                                              -------------   ---------
                                                                 (US$ IN THOUSANDS)
                                                                     (UNAUDITED)
<S>                                                           <C>             <C>
OPERATING ACTIVITIES
Net (loss)..................................................    $ (12,039)    $ (13,197)
Adjustment to reconcile net (loss) to net cash used in
  operating activities:
  Depreciation..............................................       39,918        35,152
  Amortization..............................................        3,578         3,578
  Deferred income taxes.....................................      (11,729)      (12,234)
  (Gain) Loss on disposition of property, plant and
     equipment..............................................          (93)         (330)
  Unrealized foreign exchange on related party loans........        7,241         7,241
  (Income) from joint ventures..............................           --        (4,862)
  Distributions from joint ventures.........................           --         1,799
Changes in operating assets and liabilities, net of
  acquisitions:
  Accounts receivable.......................................      (63,646)      (57,117)
  Inventories...............................................        1,479        (2,610)
  Other assets..............................................       (7,884)       (9,162)
  Liabilities...............................................       29,185        32,533
                                                                ---------     ---------
NET CASH USED IN OPERATING ACTIVITIES.......................      (13,990)      (19,209)
INVESTING ACTIVITIES
  Additions to property, plant and equipment................      (24,222)      (21,780)
  Proceeds from dispositions................................           77            77
                                                                ---------     ---------
NET CASH USED IN INVESTING ACTIVITIES.......................      (24,145)      (21,703)
FINANCING ACTIVITIES
  Proceeds from issuance of new debt........................      542,357       542,357
  Revolving credit borrowings/payments, net.................     (479,378)     (474,199)
  Additions to deferred financing costs.....................      (13,419)      (13,419)
  Changes in minority interest..............................         (218)         (218)
                                                                ---------     ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES...................       49,342        54,521
Effect of exchange rate changes on cash and cash
  equivalents...............................................          (40)          (40)
                                                                ---------     ---------
INCREASE IN CASH AND CASH EQUIVALENTS.......................       11,167        13,569
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............       16,361        12,542
                                                                ---------     ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................    $  27,528     $  26,111
                                                                =========     =========
</Table>

                                       F-60
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- FINANCIAL INFORMATION RELATED TO SUBSIDIARY GUARANTORS

       Consolidating financial information related to the Company and its
Subsidiary Guarantors and non-Guarantors as of June 30, 2004 and December 31,
2003 and for the three and six months ended June 30, 2004 and June 30, 2003 is
disclosed to comply with the reporting requirements of the Company's Subsidiary
Guarantors. The Subsidiary Guarantors are wholly-owned subsidiaries of the
Company which have fully and unconditionally guaranteed the Company's 10 3/8%
Senior Notes due 2011. The non-Guarantors are subsidiaries of the Company, and
non wholly-owned subsidiaries like AmeriSteel Bright Bar, which have not fully
and unconditionally guaranteed the Company's 10 3/8% Senior Notes due 2011.
Consolidating financial information follows:

                                       F-61
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATING BALANCE SHEET
                                 JUNE 30, 2004

<Table>
<Caption>
                                                     GERDAU
                                                   AMERISTEEL                    NON-
                                         GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                        --------   -----------   ----------   ----------   ------------   ------------
                                                                      (US$ IN THOUSANDS)
<S>                                     <C>        <C>           <C>          <C>          <C>            <C>
                                                        ASSETS
CURRENT ASSETS
  Cash and cash equivalents...........  $     --   $    4,349    $   11,531   $   1,006    $        --     $   16,886
  Accounts receivable, net............        --       78,505       224,055       2,171             --        304,731
  Inventories.........................        --       85,268       339,646       2,345             --        427,259
  Deferred tax assets.................        --           --        13,269          --             --         13,269
  Other current assets................        --        3,191        14,082         196             --         17,469
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL CURRENT ASSETS..................        --      171,313       602,583       5,718             --        779,614
INVESTMENT IN SUBSIDIARIES............   445,946      644,872       204,437          --     (1,133,421)       161,834
PROPERTY, PLANT AND EQUIPMENT.........        --      166,680       610,526       3,269             --        780,475
GOODWILL..............................        --           --       113,228       4,687             --        117,915
DEFERRED FINANCING COSTS..............    10,291          140         4,439          36             --         14,906
DEFERRED TAX ASSETS...................        --       25,494       (17,902)         --             --          7,592
OTHER ASSETS..........................        --           --           100          --             --            100
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL ASSETS..........................  $456,237   $1,008,499    $1,517,411   $  13,710    $(1,133,421)    $1,862,436
                                        ========   ==========    ==========   =========    ===========     ==========

                                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable....................  $     --   $   61,153    $  179,642   $   1,413    $        --     $  242,208
  Intercompany........................     4,727      (17,565)       41,447      18,795        (47,404)            --
  Accrued salaries, wages and employee
    benefits..........................        --        4,895        27,598           1             --         32,494
  Accrued Interest....................    19,259        1,082           849          --             --         21,190
  Other current liabilities...........      (501)      10,247        44,424         639             --         54,809
  Bank indebtedness...................        --           --         3,021          --             --          3,021
  Current portion of long-term
    borrowings........................        --           --        25,712         449             --         26,161
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL CURRENT LIABILITIES.............    23,485       59,812       322,693      21,297        (47,404)       379,883
LONG-TERM BORROWINGS..................   397,619           36        28,169       2,478             --        428,302
CONVERTIBLE DEBENTURE.................        --       74,751            --          --             --         74,751
RELATED PARTY BORROWINGS..............        --       10,508        71,980    (129,816)        47,328             --
ACCRUED BENEFIT OBLIGATION............        --       51,876        31,112          --             --         82,988
OTHER LIABILITIES.....................        --           49        43,491          --             --         43,540
DEFERRED TAX LIABILITIES..............        --           --        96,305       1,223             --         97,528
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL LIABILITIES.....................   421,104      197,032       593,750    (104,818)           (76)     1,106,992
SHAREHOLDERS' EQUITY
  Capital Stock.......................    61,109      803,380       940,019      32,876     (1,191,647)       645,737
  Retained earnings (accumulated
    deficit)..........................   (16,345)      47,608       (43,886)    114,797         (1,019)       101,155
  Accumulated other comprehensive
    income............................    (9,631)     (39,521)       27,528     (29,145)        59,321          8,552
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL SHAREHOLDERS' EQUITY............    35,133      811,467       923,661     118,528     (1,133,345)       755,444
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
  EQUITY..............................  $456,237   $1,008,499    $1,517,411   $  13,710    $(1,133,421)    $1,862,436
                                        ========   ==========    ==========   =========    ===========     ==========
</Table>

                                       F-62
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                          CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 2003

<Table>
<Caption>
                                                     GERDAU
                                                   AMERISTEEL                    NON-
                                         GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                        --------   -----------   ----------   ----------   ------------   ------------
                                                                      (US$ IN THOUSANDS)
<S>                                     <C>        <C>           <C>          <C>          <C>            <C>
                                                        ASSETS
CURRENT ASSETS
  Cash and cash equivalents...........  $     --   $    3,033    $    5,813   $   1,104    $        --     $    9,950
  Accounts receivable, net............        --       45,425       158,476       1,325             --        205,226
  Inventories.........................        --       71,477       279,976       1,389             --        352,842
  Deferred tax assets.................        --           --        13,269          --             --         13,269
  Other current assets................        --        6,101        14,494         106             --         20,701
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL CURRENT ASSETS..................        --      126,036       472,028       3,924             --        601,988
INVESTMENT IN SUBSIDIARIES............   445,946      687,222       190,432          --     (1,191,286)       132,314
PROPERTY, PLANT AND EQUIPMENT.........        --      175,654       616,038       3,371             --        795,063
GOODWILL..............................        --           --       111,877       4,687             --        116,564
DEFERRED FINANCING COSTS..............    10,977          145         4,902          39             --         16,063
DEFERRED TAX ASSETS...................        --       34,253       (17,988)     (1,220)            --         15,045
OTHER ASSETS..........................        --          124           (52)         --             --             72
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL ASSETS..........................  $456,923   $1,023,434    $1,377,237   $  10,801    $(1,191,286)    $1,677,109
                                        ========   ==========    ==========   =========    ===========     ==========

                                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable....................  $     --   $   44,798    $  163,124   $     742    $        --     $  208,664
  Intercompany........................     4,697      111,625            --          --       (116,322)            --
  Accrued salaries, wages and employee
    benefits..........................        --        3,297        26,434           1             --         29,732
  Accrued Interest....................    21,360        1,433           937          --             --         23,730
  Other current liabilities...........      (895)      10,873        23,559         820             --         34,357
  Bank indebtedness...................        --           --         1,524          --             --          1,524
  Current portion of long-term
    borrowings........................        --           --           798         452             --          1,250
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL CURRENT LIABILITIES.............    25,162      172,026       216,376       2,015       (116,322)       299,257
LONG-TERM BORROWINGS..................   397,270       75,078        87,669       2,686             --        562,703
CONVERTIBLE DEBENTURE.................        --       78,302            --          --             --         78,302
RELATED PARTY BORROWINGS..............        --      (72,679)       73,118    (115,371)       114,932             --
ACCRUED BENEFIT OBLIGATION............        --       51,076        41,920          --             --         92,996
OTHER LIABILITIES.....................        --           53        45,119          --             --         45,172
DEFERRED TAX LIABILITIES..............        --           --        65,072          --             --         65,072
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL LIABILITIES.....................   422,432      303,856       529,274    (110,670)        (1,390)     1,143,502
SHAREHOLDERS' EQUITY
  Capital Stock.......................    61,109      727,862       955,126      32,876     (1,229,372)       547,601
  Retained earnings (accumulated
    deficit)..........................   (16,987)      29,660      (150,853)    113,383         (1,019)       (25,816)
  Accumulated other comprehensive
    income............................    (9,631)     (37,944)       43,690     (24,788)        40,495         11,822
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL SHAREHOLDERS' EQUITY............    34,491      719,578       847,963     121,471     (1,189,896)       533,607
                                        --------   ----------    ----------   ---------    -----------     ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
  EQUITY..............................  $456,923   $1,023,434    $1,377,237   $  10,801    $(1,191,286)    $1,677,109
                                        ========   ==========    ==========   =========    ===========     ==========
</Table>

                                       F-63
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATING STATEMENT OF CASH FLOWS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2004

<Table>
<Caption>
                                                                   GERDAU
                                                                 AMERISTEEL                    NON-
                                                        GUSAP    CORPORATION   GUARANTORS   GUARANTORS   CONSOLIDATED
                                                       -------   -----------   ----------   ----------   ------------
                                                                             (US$ IN THOUSANDS)
<S>                                                    <C>       <C>           <C>          <C>          <C>
OPERATING ACTIVITIES
Net income...........................................  $   642    $ 17,948      $106,967      $1,414      $ 126,971
Adjustment to reconcile net income to net cash
  provided by (used in) operating activities:
  Depreciation.......................................       --       8,477        29,308         102         37,887
  Amortization.......................................      729          --           516           3          1,248
  Deferred income taxes..............................       --       8,974        29,013          45         38,032
  Income from Joint Ventures.........................       --          --       (45,965)         --        (45,965)
  Distributions from Joint Ventures..................       --          --        15,799          --         15,799
Changes in operating assets and liabilities, net of
  acquisitions:
  Accounts receivable................................       --     (35,072)      (66,331)       (933)      (102,336)
  Inventories........................................       --     (16,373)      (57,997)       (956)       (75,326)
  Other assets.......................................       --        (350)        1,394          (2)         1,042
  Liabilities........................................   (1,719)    (24,552)       79,719         541         53,989
                                                       -------    --------      --------      ------      ---------
NET CASH (USED IN) PROVIDED BY OPERATING
  ACTIVITIES.........................................     (348)    (40,948)       92,693         214         51,611
INVESTING ACTIVITIES
  Investments........................................       --      18,739       (18,739)         --             --
  Additions to property, plant and equipment.........       --      (4,960)      (21,469)         --        (26,429)
  Acquisitions.......................................       --          --       (11,127)         --        (11,127)
                                                       -------    --------      --------      ------      ---------
NET CASH PROVIDED BY (USED IN) INVESTING
  ACTIVITIES.........................................       --      13,779       (51,335)         --        (37,556)
FINANCING ACTIVITIES
  Proceeds from issuance of new debt.................       --          --        25,000          --         25,000
  Revolving credit borrowings (payments).............      348     (69,517)      (60,693)       (210)      (130,072)
  Proceeds from issuance of employee stock
    purchases........................................       --          --           365          --            365
  Proceeds from issuance of common stock.............       --      98,102          (213)         --         97,889
                                                       -------    --------      --------      ------      ---------
NET CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES.........................................      348      28,585       (35,541)       (210)        (6,818)
  Effect of exchange rate changes....................       --        (100)          (99)       (102)          (301)
                                                       -------    --------      --------      ------      ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.....       --       1,316         5,718         (98)         6,936
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.....       --       3,033         5,813       1,104          9,950
                                                       -------    --------      --------      ------      ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...........  $    --    $  4,349      $ 11,531      $1,006      $  16,886
                                                       =======    ========      ========      ======      =========
</Table>

                                       F-64
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                     CONSOLIDATING STATEMENT OF CASH FLOWS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2003

<Table>
<Caption>
                                                       GERDAU
                                                     AMERISTEEL                    NON-
                                           GUSAP     CORPORATION   GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                         ---------   -----------   ----------   ----------   ------------   ------------
                                                                       (US$ IN THOUSANDS)
<S>                                      <C>         <C>           <C>          <C>          <C>            <C>
OPERATING ACTIVITIES
Net (loss) income......................  $   7,192    $(11,712)    $ (18,960)    $ 10,283     $      --      $ (13,197)
Adjustment to reconcile net income
  (loss) to net cash provided by (used
  for) operating activities:
  Depreciation.........................         --       7,528        27,498          126            --         35,152
  Amortization.........................      1,354       1,908           313            3            --          3,578
  Deferred income taxes................         --      (3,366)       (7,391)      (1,477)           --        (12,234)
  Gain on disposition of property,
    plant and equipment................         --          --          (330)          --            --           (330)
  Foreign exchange on related party
    loans..............................      7,241          --            --           --            --          7,241
  Income from Joint Ventures...........         --          --        (4,862)          --            --         (4,862)
  Distributions from Joint Ventures....         --          --         1,799           --            --          1,799
Changes in operating assets and
  liabilities, net of acquisitions:
  Accounts receivable..................         --     (16,681)      (39,930)        (506)           --        (57,117)
  Inventories..........................         --      (6,106)        3,445           51            --         (2,610)
  Other assets.........................         --      (4,886)       (4,277)           1            --         (9,162)
  Liabilities..........................     31,214      17,100       (73,550)       9,041        48,728         32,533
                                         ---------    --------     ---------     --------     ---------      ---------
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES.................     47,001     (16,215)     (116,245)      17,522        48,728        (19,209)
                                         ---------    --------     ---------     --------     ---------      ---------
INVESTING ACTIVITIES
  Investments..........................   (477,866)     90,075      (508,485)          --       896,276             --
  Additions to property, plant and
    equipment..........................         --      (3,102)      (18,678)          --            --        (21,780)
  Proceeds from dispositions...........         --          --            77           --            --             77
                                         ---------    --------     ---------     --------     ---------      ---------
NET CASH USED IN INVESTING
  ACTIVITIES...........................   (477,866)     86,973      (527,086)          --       896,276        (21,703)
                                         ---------    --------     ---------     --------     ---------      ---------
FINANCING ACTIVITIES
  Proceeds from issuance of new debt...    395,030          --       147,327           --            --        542,357
  (Payment) borrowing of short-term and
    long-term borrowings, net..........         --     (73,850)     (400,165)        (184)           --       (474,199)
  Additions to deferred financing......     (8,719)         --        (4,700)          --            --        (13,419)
  Changes in minority interest.........         --          --          (218)          --            --           (218)
  Proceeds from issuance of common
    stock..............................     44,554       1,741       915,982      (17,273)     (945,004)            --
                                         ---------    --------     ---------     --------     ---------      ---------
NET CASH (USED IN) PROVIDED BY
  FINANCING ACTIVITIES.................    430,865     (72,109)      658,226      (17,457)     (945,004)        54,521
                                         ---------    --------     ---------     --------     ---------      ---------
  Effect of exchange rate changes......         --         (40)           --           --            --            (40)
                                         ---------    --------     ---------     --------     ---------      ---------
(DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS..........................         --      (1,391)       14,895           65            --         13,569
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD............................         --       9,118         2,161        1,263            --         12,542
                                         ---------    --------     ---------     --------     ---------      ---------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD...............................  $      --    $  7,727     $  17,056     $  1,328     $      --      $  26,111
                                         =========    ========     =========     ========     =========      =========
</Table>

                                       F-65
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
                        THREE MONTHS ENDED JUNE 30, 2004

<Table>
<Caption>
                                                      GERDAU
                                                    AMERISTEEL                    NON-
                                          GUSAP     CORPORATION   GUARANTORS   GUARANTORS   CONSOLIDATED
                                         --------   -----------   ----------   ----------   ------------
                                                               (US$ IN THOUSANDS)
<S>                                      <C>        <C>           <C>          <C>          <C>
NET SALES..............................  $     --    $150,516      $577,722      $5,536      $  733,774
OPERATING EXPENSES
  Cost of sales........................        --     116,688       435,126       4,474         556,288
  Selling and administrative...........        --       2,719        19,817         243          22,779
  Depreciation.........................        --       4,180        14,742          51          18,973
  Other operating (income).............        --          (2)         (508)         --            (510)
                                         --------    --------      --------      ------      ----------
                                               --     123,585       469,177       4,768         597,530
INCOME FROM OPERATIONS.................        --      26,931       108,545         768         136,244
EARNINGS FROM JOINT VENTURES...........        --          --        36,184          --          36,184
                                         --------    --------      --------      ------      ----------
INCOME BEFORE OTHER EXPENSES & INCOME
  TAXES................................        --      26,931       144,729         768         172,428
OTHER EXPENSES
  Interest, net........................    10,679       2,643        (3,325)         42          10,039
  Foreign exchange (gain) loss.........        (8)        419            --           7             418
  Amortization of deferred financing
     costs.............................       365          --           259           2             626
                                         --------    --------      --------      ------      ----------
                                           11,036       3,062        (3,066)         51          11,083
(LOSS) INCOME BEFORE TAXES & MINORITY
  INTEREST.............................   (11,036)     23,869       147,795         717         161,345
INCOME TAX EXPENSE (BENEFIT)...........       201       7,772        48,321        (415)         55,879
                                         --------    --------      --------      ------      ----------
(LOSS) INCOME BEFORE STOCK DIVIDENDS...   (11,237)     16,097        99,474       1,132         105,466
STOCK DIVIDENDS........................        --        (449)          449          --              --
                                         --------    --------      --------      ------      ----------
NET (LOSS) INCOME......................  $(11,237)   $ 15,648      $ 99,923      $1,132      $  105,466
                                         ========    ========      ========      ======      ==========
</Table>

                                       F-66
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
                        THREE MONTHS ENDED JUNE 30, 2003

<Table>
<Caption>
                                                          GERDAU
                                                        AMERISTEEL                    NON-
                                               GUSAP    CORPORATION   GUARANTORS   GUARANTORS   CONSOLIDATED
                                              -------   -----------   ----------   ----------   ------------
                                                                    (US$ IN THOUSANDS)
<S>                                           <C>       <C>           <C>          <C>          <C>
NET SALES...................................  $    --    $160,328      $275,557     $  4,912      $440,797
OPERATING EXPENSES
  Cost of sales.............................       --     152,306       243,013        4,261       399,580
  Selling and administrative................       --       3,252        14,596          393        18,241
  Depreciation..............................       --       4,007        12,914          106        17,027
  Other operating (income) expense..........       --      (1,060)        2,662           --         1,602
                                              -------    --------      --------     --------      --------
                                                   --     158,505       273,185        4,760       436,450
INCOME FROM OPERATIONS......................       --       1,823         2,372          152         4,347
EARNINGS FROM JOINT VENTURES................       --          --         1,176           --         1,176
                                              -------    --------      --------     --------      --------
INCOME BEFORE OTHER EXPENSES & INCOME
  TAXES.....................................       --       1,823         3,548          152         5,523
OTHER EXPENSES
  Interest..................................      890       9,953        14,300       (9,303)       15,840
  Foreign exchange (gain) loss..............   (5,293)      3,670         3,366       (1,481)          262
  Amortization of deferred financing
     costs..................................    1,091       1,908           202            3         3,204
                                              -------    --------      --------     --------      --------
                                               (3,312)     15,531        17,868      (10,781)       19,306
INCOME (LOSS) BEFORE INCOME TAXES...........    3,312     (13,708)      (14,320)      10,933       (13,783)
INCOME TAX (BENEFIT) EXPENSE................     (374)     (2,912)       (4,961)       1,350        (6,897)
                                              -------    --------      --------     --------      --------
NET INCOME (LOSS)...........................  $ 3,686    $(10,796)     $ (9,359)    $  9,583      $ (6,886)
                                              =======    ========      ========     ========      ========
</Table>

                                       F-67
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
                         SIX MONTHS ENDED JUNE 30, 2004

<Table>
<Caption>
                                                        GERDAU
                                                      AMERISTEEL                    NON-
                                            GUSAP     CORPORATION   GUARANTORS   GUARANTORS   CONSOLIDATED
                                           --------   -----------   ----------   ----------   ------------
                                                                 (US$ IN THOUSANDS)
<S>                                        <C>        <C>           <C>          <C>          <C>
NET SALES................................  $     --    $284,012     $1,058,386    $10,329      $1,352,727
OPERATING EXPENSES
  Cost of sales..........................        --     234,120        854,895      8,530       1,097,545
  Selling and administrative.............        --       5,152         38,192        475          43,819
  Depreciation...........................        --       8,477         29,308        102          37,887
  Other operating (income)...............        --          (5)        (1,466)        --          (1,471)
                                           --------    --------     ----------    -------      ----------
                                                 --     247,744        920,929      9,107       1,177,780
INCOME FROM OPERATIONS...................        --      36,268        137,457      1,222         174,947
EARNINGS FROM JOINT VENTURES.............        --          --         45,695         --          45,695
                                           --------    --------     ----------    -------      ----------
INCOME BEFORE OTHER EXPENSES & INCOME
  TAXES..................................        --      36,268        183,152      1,222         220,642
OTHER EXPENSES
  Interest, net..........................    21,358       6,159            471         71          28,059
  Foreign exchange (gain) loss...........       (13)        716             --        (28)            675
  Amortization of deferred financing
     costs...............................       729          --            516          3           1,248
                                           --------    --------     ----------    -------      ----------
                                             22,074       6,875            987         46          29,982
(LOSS) INCOME BEFORE TAXES & MINORITY
  INTEREST...............................   (22,074)     29,393        182,165      1,176         190,660
INCOME TAX EXPENSE (BENEFIT).............       394       9,197         54,336       (238)         63,689
                                           --------    --------     ----------    -------      ----------
(LOSS) INCOME BEFORE STOCK DIVIDENDS.....   (22,468)     20,196        127,829      1,414         126,971
STOCK DIVIDENDS..........................    23,110      (2,248)       (20,862)        --              --
                                           --------    --------     ----------    -------      ----------
NET (LOSS) INCOME........................  $    642    $ 17,948     $  106,967    $ 1,414      $  126,971
                                           ========    ========     ==========    =======      ==========
</Table>

                                       F-68
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                 GERDAU AMERISTEEL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATING STATEMENT OF EARNINGS (LOSS)
                         SIX MONTHS ENDED JUNE 30, 2003

<Table>
<Caption>
                                                          GERDAU
                                                        AMERISTEEL                    NON-
                                              GUSAP     CORPORATION   GUARANTORS   GUARANTORS   CONSOLIDATED
                                             --------   -----------   ----------   ----------   ------------
                                                                   (US$ IN THOUSANDS)
<S>                                          <C>        <C>           <C>          <C>          <C>
NET SALES..................................  $     --    $249,620      $601,897     $ 5,843       $857,360
OPERATING EXPENSES
  Cost of sales............................        --     232,823       553,493       4,963        791,279
  Selling and administrative...............        --       5,961        28,799         512         35,272
  Depreciation.............................        --       7,528        27,498         126         35,152
  Other operating (income) expense.........        --      (3,470)        3,291          --           (179)
                                             --------    --------      --------     -------       --------
                                                   --     242,842       613,081       5,601        861,524
INCOME (LOSS) FROM OPERATIONS..............        --       6,778       (11,184)        242         (4,164)
EARNINGS FROM JOINT VENTURES...............        --          --         4,862          --          4,862
                                             --------    --------      --------     -------       --------
INCOME BEFORE OTHER EXPENSES & INCOME
  TAXES....................................        --       6,778        (6,322)        242            698
OTHER EXPENSES
  Interest, net............................     1,792      12,962        21,134      (9,965)        25,923
  Foreign exchange (gain) loss.............   (10,056)      3,361         6,124          --           (571)
  Amortization of deferred financing
     costs.................................     1,354       1,908           313           3          3,578
                                             --------    --------      --------     -------       --------
                                               (6,910)     18,231        27,571      (9,962)        28,930
(LOSS) INCOME BEFORE TAXES & MINORITY
  INTEREST.................................     6,910     (11,453)      (33,893)     10,204        (28,232)
INCOME TAX (BENEFIT) EXPENSE...............      (282)     (1,539)      (12,918)        (79)       (14,818)
                                             --------    --------      --------     -------       --------
INCOME (LOSS) BEFORE DIVIDENDS & MINORITY
  INTEREST.................................     7,192      (9,914)      (20,975)     10,283        (13,414)
STOCK DIVIDENDS............................        --       1,798        (1,798)         --             --
MINORITY INTEREST..........................        --          --           217          --            217
                                             --------    --------      --------     -------       --------
NET INCOME (LOSS)..........................  $  7,192    $(11,712)     $(18,960)    $10,283       $(13,197)
                                             ========    ========      ========     =======       ========
</Table>

                                       F-69
<PAGE>

                             U.S. GAAP/U.S. DOLLAR
                         COMBINED FINANCIAL STATEMENTS

                                   NORTH STAR
                                  MAY 31, 2004

                                       F-70
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Cargill, Incorporated:

       We have audited the accompanying combined balance sheets of North Star
Steel Minnesota, and North Star Steel Iowa, North Star Steel Kentucky, North
Star Steel Texas, and Cargill Wire (collectively the Company), which are owned
by Cargill, Incorporated as of May 31, 2004, and the related statements of
earnings, equity, and cash flows for the year then ended. These combined
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 auditing standards generally
accepted in the United States of America. 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 financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
May 31, 2004, and the results of its operations and its cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.

KPMG LLP

September 29, 2004

                                       F-71
<PAGE>

                                   NORTH STAR

                             COMBINED BALANCE SHEET
                                  MAY 31, 2004

<Table>
<Caption>
                                                                   AS AT
                                                                MAY 31, 2004
                                                               --------------
                                                               (IN THOUSANDS)
<S>                                                            <C>
ASSETS
Current assets:
  Cash......................................................            --
  Trade accounts receivable, net of allowance for bad debts
     of $900................................................     $ 104,123
  Nontrade receivables......................................         1,797
  Inventories...............................................       102,072
  Other current assets......................................           372
  Deferred tax asset........................................         4,304
  Income tax receivable.....................................            --
  Due from Cargill, Inc. ...................................         1,669
                                                                 ---------
     Total current assets...................................       214,337
                                                                 ---------
Property, plant, and equipment:
  Land and buildings........................................        62,562
  Machinery and equipment...................................       339,726
  Construction in progress..................................         5,740
                                                                 ---------
     Total property, plant, and equipment...................       408,028
  Less accumulated depreciation.............................      (304,553)
                                                                 ---------
     Net property, plant, and equipment.....................       103,475
  Prepaid Pension Asset.....................................         7,386
  Deferred income tax.......................................         7,652
  Debt issue costs..........................................            66
                                                                 ---------
     Total assets...........................................     $ 332,916
                                                                 =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................     $  50,523
  Accrued payroll and related taxes.........................        12,342
  Other accrued liabilities.................................        24,349
  Income taxes payable......................................        11,234
  Current portion of long-term debt.........................         1,000
  Due to Cargill, Inc. .....................................            --
                                                                 ---------
     Total current liabilities..............................        99,448
                                                                 ---------
Long-term liabilities:
  Due to Cargill, Inc. .....................................        25,625
  Long-term debt............................................         4,200
  Other deferred liabilities................................        35,810
                                                                 ---------
     Total long-term liabilities............................        65,635
                                                                 ---------
     Total liabilities......................................       165,083
                                                                 ---------
Total stockholders' equity..................................       167,833
                                                                 ---------
Total liabilities and stockholders' equity..................     $ 332,916
                                                                 ---------
</Table>

                                       F-72
<PAGE>

                                   NORTH STAR

                         COMBINED STATEMENT OF EARNINGS
                            YEAR ENDED MAY 31, 2004

<Table>
<Caption>
                                                                 YEAR ENDED
                                                                MAY 31, 2004
                                                               --------------
                                                               (IN THOUSANDS)
<S>                                                            <C>
Revenue.....................................................      $696,532
Cost of sales...............................................       608,992
                                                                  --------
  Gross profit..............................................        87,540
Selling, general, and administrative expense................        36,697
Asset impairment............................................        15,000
                                                                  --------
  Income from operations....................................        35,843
Interest expense, net.......................................           997
Miscellaneous income........................................        (1,210)
                                                                  --------
  Income before income tax expense..........................        36,056
Income tax expense..........................................        13,408
                                                                  --------
  Net Income................................................      $ 22,648
                                                                  ========
</Table>

                                       F-73
<PAGE>

                                   NORTH STAR

                          COMBINED STATEMENT OF EQUITY
                            YEAR ENDED MAY 31, 2004

<Table>
<Caption>
                                                                TOTAL
                                                                EQUITY
                                                               --------
<S>                                                            <C>
Balance at May 31, 2003.....................................   $112,745
Net income..................................................     22,648
Loss on securities, net of tax..............................       (417)
Capital contributions.......................................     32,857
                                                               --------
BALANCE AT MAY 31, 2004.....................................   $167,833
                                                               ========
</Table>

                                       F-74
<PAGE>

                                   NORTH STAR

                        COMBINED STATEMENT OF CASH FLOWS
                            YEAR ENDED MAY 31, 2004

<Table>
<Caption>
                                                                    2004
                                                               --------------
                                                               (IN THOUSANDS)
<S>                                                            <C>
Cash flows from operating activities:
  Net income................................................       22,648
  Adjustments to reconcile net income to net cash provided
     by operating activities:
       Deferred income taxes................................       (6,129)
       Provision for bad debt...............................          350
       Asset impairment.....................................       15,000
       Depreciation and amortization........................       12,355
       Loss on disposal of assets...........................          120
       (Gain) on securities.................................         (417)
  Changes in current assets and liabilities:
     Income tax receivable..................................        3,952
     Trade accounts receivable..............................      (33,780)
     Nontrade receivables...................................        2,724
     Inventories............................................       (9,856)
     Other current assets...................................          987
     Prepaid Pension Asset..................................       (2,742)
     Debt issue costs.......................................            6
     Accounts payable.......................................       12,722
     Accrued payroll and related taxes......................        5,050
     Other accrued expenses.................................        4,795
     Accrued income taxes...................................       11,234
  Change in other deferred liabilities......................          558
                                                                  -------
          Net cash provided by operating activities.........       39,577
                                                                  -------
Cash flows from investing activities:
  Additions to property, plant, and equipment...............      (17,488)
  Proceeds from Dispositions................................          238
                                                                  -------
          Net cash used in investing activities.............      (17,250)
                                                                  -------
Cash flows from financing activities:
  Net change in due to/due from Cargill, Inc. ..............      (55,184)
  Capital Contribution......................................       32,857
                                                                  -------
          Net cash used in financing activities.............      (22,327)
                                                                  -------
          Net change in cash and cash equivalents...........           --
Cash and cash equivalents at beginning of year..............           --
                                                                  -------
Cash and cash equivalents at end of year....................           --
                                                                  =======
</Table>

                See accompanying notes to financial statements.
                                       F-75
<PAGE>

                                   NORTH STAR

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                  MAY 31, 2004

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) ORGANIZATION

       North Star Steel Minnesota and North Star Steel Iowa are divisions of
North Star Steel Company, which is a wholly owned subsidiary of Cargill
Incorporated. North Star Steel Kentucky, Inc is a wholly owned Subsidiary of
North Star Steel Company which is, in turn, a wholly owned subsidiary of
Cargill, Incorporated. North Star Steel Texas, Inc is a wholly owned subsidiary
of Cargill, Incorporated. Cargill Wire is a division of Cargill, Incorporated
with locations in Memphis, Tennessee, Beaumont, Texas, Carrollton, Texas, and an
administrative office in Dallas, Texas. These locations are collectively
referred to as the Company. The Company produces steel billets, hot rolled bars,
wire rod, coiled rebar, and various steel components made to customer
specification. In addition, grinding balls are produced for various mining
industries. The Company also produces chain link fence, welded wire mesh and
industrial wire. Customers include transportation manufacturers, original
equipment manufacturers, oil and gas equipment manufacturers, steel service
centers, barge and ship builders, agriculture, forgers, fabricators, metal
builders, construction, and distributors.

  (b) STATEMENT PRESENTATION

       The accompanying combined financial statements have been prepared on the
accrual basis of accounting. Significant intercompany transactions are
eliminated in consolidation. These combined financial statements do not
necessarily reflect the financial position and results of operations of the
Company in the future or what the financial position and results of operations
would have been had the Company been an independent entity during the periods
presented. Certain costs are charged to the Company by Cargill, Incorporated and
North Star Steel Company and are generally based on proportional allocations and
in certain circumstances, based on specific identification of applicable costs
which management believes is reasonable. It is not practicable to estimate what
the expense would have been on a stand-alone basis. The Company utilizes a
divisional distribution ledger which is a mechanism whereby intercompany
accounts are settled with Cargill, Incorporated without the need to generate
checks for cash receipts and disbursements.

  (c) REVENUE RECOGNITION

       Revenue is derived from sales of steel billets, rolled steel bars, wire
rod, coiled rebar, chain link fence, welded wire mesh, industrial wire, grinding
balls, and various steel components made to customer specification. The Company
recognizes revenue when it is realizable and earned. Revenue is realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists; (ii) delivery has occurred or services have
been rendered; (iii) the seller's price to the buyer is fixed and determinable;
and (iv) collectibility is reasonably assured. This occurs upon transfer of
title to the customer, which is generally at the time the product is shipped.

  (d) CONCENTRATION OF CREDIT RISK

       Sales to the Company's top five customers totaled $91,518,000 in 2004.
Accounts receivable due from these top five customers totaled $11,599,000 at May
31, 2004.

  (e) INCOME TAXES

       Cargill, Incorporated and substantially all of its domestic subsidiaries
are members of a group which files a consolidated federal income tax return.
Federal income taxes or tax benefits are allocated to each company on the basis
of its individual taxable income or loss and tax credits included in the return.

                                       F-76
<PAGE>
                                   NORTH STAR

             NOTES TO COMBINED FINANCIAL STATEMENTS --  (CONTINUED)
                                  MAY 31, 2004

Deferred income taxes are recognized for temporary differences between income
for financial reporting purposes and income for tax purposes. State income taxes
are allocated to each company on the basis of its individual taxable income and
the weighted apportionment factors pursuant to the companies' tax sharing
agreement.

  (f) INVENTORIES

       Inventories are stated at the lower of cost or market. Cost includes
materials and production labor and overhead, and is determined on a last-in,
first-out (LIFO) basis for North Star Steel Minnesota, Iowa, and Texas. North
Star Steel Kentucky, Inc. value is determined on a first-in, first-out basis
(FIFO). Cargill Wire value is determined on a moving weighted average basis.
Approximately 66% of the Company's inventories are valued using the LIFO method
as of May 31, 2004.

       During 2004, inventory quantities were reduced. These reductions resulted
in a liquidation of LIFO inventory quantities carried at lower costs prevailing
in prior years as compared with costs of 2004. As a result, cost of sales was
decreased by $4.5 million in 2004.

  (g) PROPERTY, PLANT, AND EQUIPMENT

       Property, plant, and equipment are stated at cost. Depreciation is
calculated using either straight-line, double-declining, or
sum-of-the-years-digits methods. Depreciation is computed using the following
useful lives:

<Table>
<S>                                                            <C>
Buildings...................................................       8-40 years
Machinery and equipment.....................................       4-20 years
Land Improvements...........................................      12-40 years
</Table>

  (h) RECOVERABILITY OF FIXED ASSETS

       The Company periodically evaluates the carrying value of these long-lived
assets when events and circumstances indicate the carrying value may not be
recoverable. If the carrying value is considered impaired, a loss is recognized
based on the amount by which the carrying value exceeds fair market value.

  (i) ACCOUNTING ESTIMATES

       The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and 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.

                                       F-77
<PAGE>
                                   NORTH STAR

             NOTES TO COMBINED FINANCIAL STATEMENTS --  (CONTINUED)
                                  MAY 31, 2004

(2) INVENTORIES

       The components of inventories are as follows:

<Table>
<Caption>
                                                                   2004
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
Raw materials...............................................     $ 31,676
Work-in-progress............................................       16,610
Finished goods..............................................       68,292
Supplies....................................................       25,152
LIFO reserve................................................      (39,658)
                                                                 --------
                                                                 $102,072
                                                                 ========
</Table>

       The LIFO inventories of North Star Steel Minnesota and Iowa are part of a
consolidated LIFO pool for the entire North Star Steel Co. As a result, the LIFO
reserve is allocated to North Star Steel Minnesota and Iowa and is not
necessarily representative of a LIFO reserve calculated on a stand-alone basis.

(3) DEBT

       The Company's debt includes a $4,200,000 Industrial Revenue Bond (IRB)
issued by Orange County Navigation and Port District Industrial Development
Corporation. The IRB matures February 1, 2017. During the life of the IRB,
interest is payable at 6.375%. The Company's debt also includes a $1,000,000
five-year promissory note form the Kentucky Economic Finance Authority. The
lump-sum principal payment is due January 31, 2005. Interest is 2% per year and
is payable on a quarterly basis.

(4) LEASE COMMITMENTS

       The Company has operating leases for plant equipment. Rental expenses
incurred in connection with these leases were $3,888,000 for the year ended May
31, 2004. The future minimum lease commitments under noncancelable operating
leases are as follows:

<Table>
<Caption>
                                                              (IN THOUSANDS)
<S>                                                           <C>
Year ending May 31:
          2005..............................................     $ 1,759
          2006..............................................         964
          2007..............................................         319
                                                                 -------
                                                                 $ 3,042
                                                                 =======
</Table>

(5) INCOME TAXES

       Income tax expense is made up of the following components:

<Table>
<Caption>
                                                                   2004
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
Current.....................................................     $19,307
Deferred....................................................      (5,899)
                                                                 -------
                                                                 $13,408
                                                                 =======
</Table>

                                       F-78
<PAGE>
                                   NORTH STAR

             NOTES TO COMBINED FINANCIAL STATEMENTS --  (CONTINUED)
                                  MAY 31, 2004

       The effective tax rate is different from the statutory federal income tax
rate for the following reasons:

<Table>
<Caption>
                                                                   2004
                                                              --------------
<S>                                                           <C>
Federal statutory rate......................................       35.0%
State and local income taxes................................        1.5
Other.......................................................        0.7
                                                                   ----
                                                                   37.2%
                                                                   ====
</Table>

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

<Table>
<Caption>
                                                                   2004
                                                              --------------
                                                              (IN THOUSANDS)
<S>                                                           <C>
Deferred tax liabilities:
  Depreciation and amortization.............................     $(10,851)
                                                                 --------
     Total deferred tax liabilities.........................      (10,851)
                                                                 --------
Deferred tax assets:
  Accruals..................................................        4,304
  Other.....................................................       18,503
                                                                 --------
     Total deferred tax assets..............................       22,807
                                                                 --------
     Net deferred tax assets................................     $ 11,956
                                                                 ========
</Table>

       Management believes it is more likely than not that the Company will
generate sufficient taxable income in the future to realize the deferred tax
assets. Accordingly, no valuation allowance for the deferred tax assets was
considered necessary at May 31, 2004.

(6) RELATED-PARTY TRANSACTIONS

       Costs are allocated to the Company by Cargill, Incorporated and North
Star Steel Company for corporate services such as legal, insurance
administration, tax administration, human resources, leasing, public relations,
credit and collections, revenue accounting, and IT support. Such costs
aggregated $16,921,000 in 2004.

       Cargill, Incorporated also allocates certain reserves to the Company
based on estimates of the portion of its total reserves that relate to the
Company's operations. Other accrued liabilities (within current liabilities)
includes allocations from Cargill, Incorporated for worker's compensation
claims, health and dental claims, and certain other self-insured risks totaling
$11,966,000 as of May 31, 2004. Other deferred liabilities (within long-term
liabilities) includes allocations from Cargill, Incorporated for post-
retirement healthcare reserves and pension liabilities of $34,578,000 as of May
31, 2004. Prepaid pension assets are also allocations from Cargill, Incorporated
in the amount of $7,386,000 as of May 31, 2004.

       North Star Steel Texas had sales to Cargill affiliates of $793,000 during
fiscal year 2004. These sales were primarily to Cargill Ferrous International.
North Star Steel Texas purchased from Cargill affiliates $6,397,000 during
fiscal year 2004. These purchases were primarily from Cargill Ferrous
International.

                                       F-79
<PAGE>
                                   NORTH STAR

             NOTES TO COMBINED FINANCIAL STATEMENTS --  (CONTINUED)
                                  MAY 31, 2004

       North Star Steel Minnesota sells grinding balls to Cargill Fertilizer,
sales were $1,779,000, as of May 31, 2004.

       The due to/due from Cargill, Incorporated bears interest at variable
rates. The long-term weighted average interest rates at year-end charged on the
balances were 5.99% at May 31, 2004. The short-term weighted average interest
rates at year-end charged to balances were 1.24% at May 31, 2004.

(7) CONTINGENCIES

  (a) ENVIRONMENTAL

       The Company is required to comply with various environmental laws and
regulations incidental to its normal business operations. The Company has
reserved for future costs associated with monitoring the Corrective Measures
that have been implemented, including the operation and maintenance of the pump
and treat system at St. Paul, Minnesota. Additional costs for losses which may
be identified in the future cannot be presently determined; however, management
does not believe any such issues would materially affect the financial position
of the Company.

  (b) GENERAL

       Certain claims and lawsuits have been filed in the ordinary course of
business. It is management's opinion that settlement of all litigation would not
require payment of an amount which would be material to the financial statements
of the Company.

(8) ASSET IMPAIRMENT

       During early 2004, the market for wire rod products continued to
experience weak demand coupled with low-priced imports and higher raw material
prices. This change required an impairment analysis to be performed. The
estimated undiscounted future cash flows generated by the property and equipment
that manufactures this product line were less than the carrying values at the
Texas location. The carrying values of the fixed assets were reduced to an
estimated fair market value using recent steel related transactions. This
resulted in a pre-tax charge of $15,000,000 recorded as an asset impairment on
the income statement.

(9) SUBSEQUENT EVENT

       In September 2004, Cargill, Incorporated and several related entities
entered into definitive agreements to sell the fixed assets and working capital
of the Company to Gerdau Ameristeel.

(10) CANADIAN GAAP RECONCILIATION

       The significant accounting policies used to prepare these financial
statements as outlined in Note 1 conform, in all material respects, with
Canadian generally accepted accounting principles (Canadian GAAP), except as
described below.

       The Company uses derivative products (principally options and futures) to
hedge fuel price volatility. The Company recognizes all derivative instruments
in the balance sheet at fair value. During 2002 and 2003, the derivatives were
deemed effective cash flow hedges and the changes in fair value were recorded in
accumulated other comprehensive income under U.S. GAAP. Under Canadian GAAP, the
fair value adjustments in 2002 and 2003 would have been deferred as a liability
in the respective years. The amount of accumulated other comprehensive income
under U.S. GAAP that would have been recorded as a liability under Canadian GAAP
was $417,000 at the beginning of 2004. During 2004, the

                                       F-80
<PAGE>
                                   NORTH STAR

             NOTES TO COMBINED FINANCIAL STATEMENTS --  (CONTINUED)
                                  MAY 31, 2004

Company determined that its derivative instruments were no longer effective cash
flow hedges and the changes in fair value were recorded in earnings in
accordance with both U.S. GAAP and Canadian GAAP.

       The separate return method of calculating the income tax provision is not
substantially different than the method described in Note 1.

     New Accounting Standards Adopted in 2004

       Effective November 2003, the Company began recognizing employee stock
compensation based on the fair value method of Statement of Financial Accounting
Standards (SFAS) No. 123 Accounting for Stock Based Compensation, with the
retroactive restatement method provided by SFAS No. 148 Accounting for Stock
Based Compensation -- Transition and Disclosure. The fair value methods of SFAS
123 and Section 3870 are substantially the same. The compensation expense for
employee stock-based compensation was not material for the year-ended May 31,
2004.

       In December 2002, the CICA issued Section 3063 Impairment of Long Lived
Assets. This new section establishes standards for the recognition, measurement
and disclosure of the impairment of long-lived assets. As a result of the new
Canadian standard, the method of accounting for the impairment of long-lived
assets under Canadian GAAP is substantially the same as under US GAAP (in
accordance with SFAS 144 Impairment of Long Lived Assets). The Company adopted
the provisions of Section 3063 in June 2003.

                                       F-81
<PAGE>

                             U.S. GAAP/U.S. DOLLAR

                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS

                         GERDAU AMERISTEEL CORPORATION

                                       F-82
<PAGE>

                         GERDAU AMERISTEEL CORPORATION

                      PRO FORMA CONSOLIDATED BALANCE SHEET
                              AS AT JUNE 30, 2004
<Table>
<Caption>

                                                 PRO FORMA
                                                ISSUANCE OF                               PRO FORMA         PRO FORMA
                                     GERDAU       COMMON                                 ACQUISITION       CONSOLIDATED
                                   AMERISTEEL    SHARES(2)     SUBTOTAL    NORTH STAR   ADJUSTMENTS(3)      U.S. GAAP
                                   ----------   -----------   ----------   ----------   --------------     ------------
                                                                  (DOLLARS IN THOUSANDS)
                                                                       (UNAUDITED)
<S>                                <C>          <C>           <C>          <C>          <C>                <C>
                                                        ASSETS
CURRENT ASSETS
 Cash and cash equivalents.......  $  16,886     $331,396     $  348,282    $     --      $(301,651)(c)     $   46,631
 Accounts receivable, net........    304,731           --        304,731     104,123             --            408,854
 Inventories.....................    427,259           --        427,259     102,072         59,609(a)         588,940
 Deferred tax assets and
   recoverable taxes.............     13,269           --         13,269       4,304         (4,304)(d)         13,269
 Other current assets............     17,469           --         17,469       2,169             --             19,638
 Related party receivable........         --           --             --       1,669         (1,669)(d)             --
                                   ----------    --------     ----------    --------      ---------         ----------
TOTAL CURRENT ASSETS.............    779,614      331,396      1,111,010     214,337       (248,015)         1,077,332
INVESTMENTS......................    161,834           --        161,834          --             --            161,834
PROPERTY, PLANT, AND EQUIPMENT
 (NET)...........................    780,475           --        780,475     103,475         (2,454)(b)        881,496
GOODWILL.........................    117,915           --        117,915          --             --            117,915
DEFERRED FINANCING COSTS.........     14,906           --         14,906          66            (66)(d)         14,906
DEFERRED TAX ASSETS..............      7,592           --          7,592       7,652         (7,652)(d)          7,592
OTHER ASSETS.....................        100           --            100       7,386         (7,386)(d)            100
                                   ----------    --------     ----------    --------      ---------         ----------
TOTAL ASSETS.....................  $1,862,436    $331,396     $2,193,832    $332,916      $(265,573)        $2,261,175
                                   ==========    ========     ==========    ========      =========         ==========

                                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
 Trade accounts payable..........  $ 242,208           --     $  242,208    $ 50,523      $      --         $  292,731
 Accrued salaries, wages and
   employee benefits.............     32,494           --         32,494      12,342        (12,342)(d)         32,494
 Other current liabilities.......     75,999           --         75,999      35,583        (23,963)(e)         87,619
 Bank indebtedness...............      3,021           --          3,021          --             --              3,021
 Current portion of long-term
   borrowings....................     26,161           --         26,161       1,000             --             27,161
                                   ----------    --------     ----------    --------      ---------         ----------
TOTAL CURRENT LIABILITIES........    379,883           --        379,883      99,448        (36,305)           443,026
Long-term borrowings, less
 Current Portion.................    503,054           --        503,054       4,200             --            507,254
Related party borrowings.........         --           --             --      25,625        (25,625)(d)             --
Other liabilities................    126,527           --        126,527      35,810        (35,810)(d)        126,527
Deferred Tax Liabilities.........     97,528           --         97,528          --             --             97,528
                                   ----------    --------     ----------    --------      ---------         ----------
TOTAL LIABILITIES................  1,106,992           --      1,106,992     165,083        (97,740)         1,174,335
                                   ----------    --------     ----------    --------      ---------         ----------
SHAREHOLDERS' EQUITY
 Capital Stock...................    645,737      331,396        977,133          --             --            977,133
 Retained earnings...............    101,155           --        101,156     167,833       (167,833)(f)        101,156
 Cumulative translation
   adjustment....................     20,051           --         20,050          --             --             20,050
 Accumulated other comprehensive
   income........................    (11,499)          --        (11,499)         --             --            (11,499)
                                   ----------    --------     ----------    --------      ---------         ----------
TOTAL SHAREHOLDERS' EQUITY.......    755,444      331,396      1,086,840     167,833       (167,833)         1,086,840
                                   ----------    --------     ----------    --------      ---------         ----------
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY............  $1,862,436    $331,396     $2,193,832    $332,916      $(265,573)        $2,261,175
                                   ==========    ========     ==========    ========      =========         ==========

<Caption>
                                       CANADIAN GAAP
                                       ADJUSTMENTS(5)         PRO FORMA
                                   ----------------------    CONSOLIDATED
                                      JOINT                    CANADIAN
                                   VENTURES(A)    OTHER          GAAP
                                   -----------   --------    ------------
                                           (DOLLARS IN THOUSANDS)
                                                (UNAUDITED)
<S>                                <C>           <C>         <C>
                                                   ASSETS
CURRENT ASSETS
 Cash and cash equivalents.......   $  19,517    $     --     $   66,148
 Accounts receivable, net........      38,989          --        447,843
 Inventories.....................      27,563          --        616,503
 Deferred tax assets and
   recoverable taxes.............          --          --         13,269
 Other current assets............          27          --         19,665
 Related party receivable........          --          --             --
                                    ---------    --------     ----------
TOTAL CURRENT ASSETS.............      86,096          --      1,163,428
INVESTMENTS......................    (192,047)     30,213(b)          --
PROPERTY, PLANT, AND EQUIPMENT
 (NET)...........................     133,848     (14,808)(b)   1,000,536
GOODWILL.........................          --          --        117,915
DEFERRED FINANCING COSTS.........          --          --         14,906
DEFERRED TAX ASSETS..............          --          --          7,592
OTHER ASSETS.....................          --          --            100
                                    ---------    --------     ----------
TOTAL ASSETS.....................   $  27,897    $ 15,405     $2,304,477
                                    =========    ========     ==========

                                    LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
 Trade accounts payable..........   $  22,862    $     (6)    $  315,587
 Accrued salaries, wages and
   employee benefits.............       1,908          --         34,402
 Other current liabilities.......       2,162      (4,421)(e)      85,360
 Bank indebtedness...............      (3,012)         --              9
 Current portion of long-term
   borrowings....................         188          --         27,349
                                    ---------    --------     ----------
TOTAL CURRENT LIABILITIES........      24,108      (4,427)       462,707
Long-term borrowings, less
 Current Portion.................       3,266      15,898(f)     526,418
Related party borrowings.........          --          --             --
Other liabilities................          --     (18,641)(c)     107,886
Deferred Tax Liabilities.........         523       3,294(d)     101,345
                                    ---------    --------     ----------
TOTAL LIABILITIES................      27,897      (3,876)     1,198,356
                                    ---------    --------     ----------
SHAREHOLDERS' EQUITY
 Capital Stock...................          --          --        977,133
 Retained earnings...............          --       7,782(g)     108,938
 Cumulative translation
   adjustment....................          --          --         20,050
 Accumulated other comprehensive
   income........................          --      11,499(c)          --
                                    ---------    --------     ----------
TOTAL SHAREHOLDERS' EQUITY.......          --      19,281      1,106,121
                                    ---------    --------     ----------
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY............   $  27,897    $ 15,405     $2,304,477
                                    =========    ========     ==========
</Table>

                                       F-83
<PAGE>

                         GERDAU AMERISTEEL CORPORATION

                  PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
                   FOR THE TWELVE MONTHS ENDED JUNE 30, 2004

<Table>
<Caption>
                                                                                            CANADIAN GAAP
                                                                           PROFORMA        ADJUSTMENTS(5)             PROFORMA
                                                           PROFORMA        COMBINED     ---------------------         COMBINED
                               GERDAU                    ACQUISITION       CONDENSED       JOINT                      CONDENSED
                             AMERISTEEL    NORTH STAR   ADJUSTMENTS(4)     U.S. GAAP    VENTURES(A)    OTHER        CANADIAN GAAP
                             -----------   ----------   --------------    -----------   -----------   -------       -------------
                                                       (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                         (UNAUDITED)
<S>                          <C>           <C>          <C>               <C>           <C>           <C>           <C>
NET SALES..................  $ 2,306,538    $696,532       $     --       $ 3,003,070    $306,883     $    --        $ 3,309,953
OPERATING EXPENSES
  Cost of sales............    1,974,744     596,637        (21,249)(a)     2,550,132     240,007      (4,421)(h)      2,785,718
  Selling and
    administrative.........       90,112      36,697             --           126,809       5,622          --            132,431
  Depreciation.............       74,686      12,355         (3,171)(b)        83,870      10,321       1,874(i)          96,065
  Other operating (income)
    expense................       (2,772)     15,000         (1,210)(c)        11,018         (55)         --             10,963
                             -----------    --------       --------       -----------    --------     -------        -----------
                               2,136,770     660,689        (25,630)        2,771,829     255,895      (2,547)         3,025,177
                             -----------    --------       --------       -----------    --------     -------        -----------
INCOME FROM OPERATIONS.....      169,768      35,843         25,630           231,241      50,988       2,547            284,776
EARNINGS FROM JOINT
  VENTURES.................       48,500          --             --            48,500     (48,040)       (460)(j)             --
                             -----------    --------       --------       -----------    --------     -------        -----------
INCOME BEFORE OTHER
  EXPENSES AND INCOME
  TAXES....................      218,268      35,843         25,630           279,741       2,948       2,087            284,776
OTHER EXPENSES
  Interest, net............       62,016         997           (709)(d)        62,304         (57)     (4,850)(k)         57,397
  Foreign exchange (gain)
    loss...................        1,972          --             --             1,972          --          --              1,972
  Amortization of deferred
    financing costs........        2,069          --             --             2,069         265          --              2,334
  Other income.............           --      (1,210)         1,210(c)             --          --          --                 --
                             -----------    --------       --------       -----------    --------     -------        -----------
                                  66,057        (213)           501            66,345         208      (4,850)            61,703
                             -----------    --------       --------       -----------    --------     -------        -----------
INCOME BEFORE INCOME
  TAXES....................      152,211      36,056         25,129           213,396       2,740       6,937            223,073
INCOME TAX EXPENSE
  (BENEFIT)................       38,737      13,408          8,795(e)         60,940       2,740        (282)(l)         63,398
                             -----------    --------       --------       -----------    --------     -------        -----------
NET INCOME.................  $   113,474    $ 22,648       $ 16,334       $   152,456    $     --     $ 7,219        $   159,675
PRO FORMA EARNINGS PER
  COMMON SHARE -- BASIC....  $      0.56                                  $      0.56                                $      0.58
PRO FORMA EARNINGS PER
  COMMON SHARE -- DILUTED..  $      0.56                                  $      0.56                                $      0.58
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES
  OUTSTANDING..............  203,668,582                                  273,668,582                                273,668,582
</Table>

                                       F-84
<PAGE>

                         GERDAU AMERISTEEL CORPORATION

                 NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA
                                  (Unaudited)

1.  BASIS OF PRESENTATION

       The pro forma consolidated balance sheet and statement of earnings give
effect to the acquisition of North Star and the issuance of common shares of
Gerdau Ameristeel Corporation ("Gerdau Ameristeel" or the "Company").

       On September 9, 2004, Gerdau Ameristeel entered into definitive
agreements with Cargill, Incorporated and certain of its subsidiaries to
purchase the land, fixed assets and working capital of North Star. Gerdau
Ameristeel has offered 70,000,000 common shares for sale and intends to use a
portion of the proceeds to finance the proposed North Star acquisition. Under
the terms of the purchase agreements, the Company will pay $266 million in cash,
plus or minus changes in working capital from April 30, 2004 to the date of
closing. In addition, the Company will assume certain liabilities under the
terms of the agreements.

       The unaudited pro forma condensed consolidated balance sheet as at June
30, 2004 has been prepared by combining our consolidated balance sheet as at
June 30, 2004 and the combined balance sheet of North Star as at May 31, 2004,
and gives effect to our acquisition of North Star as if it had occurred on June
30, 2004. In addition, the balance sheet gives effect to the offering of
70,000,000 common shares for sale. The unaudited pro forma condensed
consolidated income statement for the twelve months ended June 30, 2004 has been
prepared by combining (i) our consolidated income statement for the twelve
months ended June 30, 2004, which was prepared by combining our consolidated
income statement for the year ended December 31, 2003 and our consolidated
income statement for the six months ended June 30, 2004, less our consolidated
income statement for the six months ended June 30, 2003, and (ii) the combined
income statement of North Star for the fiscal year ended May 31, 2004, and gives
effect to our acquisition of North Star as if it had occurred on July 1, 2003.

       The pro forma statements are not necessarily indicative of what the
results of operations and financial position would have been, nor do they
purport to project the company's results of operations for any future periods.
The pro forma statements should be read in conjunction with the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the selected financial data, the summary financial data and the
other financial statements that appear elsewhere in this prospectus. In the
opinion of management of Gerdau Ameristeel, these unaudited pro forma statements
include all adjustments necessary for a fair presentation.

2.  PRO FORMA ISSUANCE OF COMMON SHARES

       The U.S. GAAP columns in the pro forma consolidated balance sheet reflect
the issuance of 70,000,000 of our common shares valued at Cdn$6.18 ($4.86),
which is the closing price of the common shares on the Toronto Stock Exchange on
October 4, 2004 for net proceeds of $331.4 million after deducting underwriters'
fees and estimated expenses, which aggregate approximately $8.8 million.

3.  PRO FORMA ACQUISITION ADJUSTMENTS

       The U.S. GAAP columns in the pro forma consolidated balance sheet reflect
the following pro forma adjustments:

       (a) An adjustment to record the difference between the cost of North Star
inventory and its preliminary estimated fair value as required under purchase
price accounting.

       (b) The allocation of the purchase price to North Star's assets and
liabilities according to the purchase accounting method. As a result, historical
book values were restated to preliminary estimated fair values. The estimated
fair values of the net assets acquired exceeded the purchase price resulting in
negative goodwill which was then allocated to reduce the book values of
long-term assets.

                                       F-85
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA --  (CONTINUED)
                                  (Unaudited)

       (c) The acquisition of North Star's land, fixed assets, and working
capital for $301.7 million cash, including a $35 million increase in working
capital from April 30, 2004 to May 31, 2004, the date of the North Star balance
sheet.

       (d) Adjustments to remove assets and liabilities not acquired.

       (e) Adjustment to conform North Star's accounting policy to the Company's
by accruing for scheduled annual maintenance shutdowns ($1.0 million) and
assumption of other liabilities of ($10.6 million).

       (f) Adjustment to reflect the elimination of the North Star equity.

4.  ACQUISITION ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS

       The U.S. GAAP column of the pro forma consolidated statement of earnings
reflects the following pro forma adjustments:

       (a) Adjustments to conform North Star's accounting policy to the
Company's by adjusting inventories from LIFO to FIFO.

       (b) Reduction of depreciation expense to reflect new basis of long-term
assets.

       (c) Reclassification of other income to conform with the Company's
presentation.

       (d) Reduction in interest expense for debt not assumed.

       (e) Adjusted income tax expense to tax effect certain pro forma
adjustments noted above, assuming a 35% rate.

5.  DIFFERENCES BETWEEN U.S. GAAP AND CANADIAN GAAP

       The preceding notes have been prepared in accordance with U.S. GAAP. The
material differences between U.S. GAAP and Canadian GAAP are described in note
20 to our audited financial statements, note 12 to our unaudited financial
statements for the three and six months ended June 30, 2003 and 2004 and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Material Differences Between Canadian GAAP and U.S. GAAP."

       The following adjustments are reflected in the Canadian GAAP columns:

JOINT VENTURES

       (a) The consolidation of our joint ventures, which are accounted for
under the proportionate consolidation method under Canadian GAAP and under the
equity method in U.S. GAAP.

OTHER ADJUSTMENTS -- BALANCE SHEET

       (b) Decrease in property, plant and equipment by $14.8 million and an
increase in investments (equity in joint ventures) by $30.2 million, as a result
of the differences in the treatment of the 2002 Co-Steel purchase price
allocation of negative goodwill. Under Canadian GAAP, negative goodwill was
allocated to reduce property, plant and equipment. Under U.S. GAAP, negative
goodwill was allocated against other assets (equity in joint ventures),
resulting in higher book value of property, plant and equipment and associated
deferred income taxes and lower other assets.

       (c) Reversal of the additional minimum pension liability of $18.6 million
recorded under U.S. GAAP, net of tax of $7.1 million included in other
comprehensive income.

                                       F-86
<PAGE>
                         GERDAU AMERISTEEL CORPORATION

         NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA --  (CONTINUED)
                                  (Unaudited)

       (d) Income tax benefit related to minimum pension liability of $7.1
million (see (c) above) and purchase price allocations of $3.8 million (see (b)
above).

       (e) Reversal of the accrual for scheduled annual maintenance shutdowns.

       (f) At the time of the merger with Co-Steel, convertible debentures were
accounted for differently under U.S. and Canadian GAAP. Under U.S. GAAP, the
convertible debentures were reduced to fair value as they were treated as a
liability. Under Canadian GAAP they were considered equity. Currently, there is
no difference in accounting treatment; however a basis difference exists.

       (g) Accumulated effect of the above adjustments.

OTHER ADJUSTMENTS -- STATEMENT OF EARNINGS

TWELVE MONTHS ENDED JUNE 30, 2004

       (h) Reversal of annual maintenance accrual of $4.4 million.

       (i) The increase in depreciation expense by $1.9 million due to the
higher property, plant and equipment resulting from the differences in
allocation of negative goodwill as described in (b) above.

       (j) Increase in earnings in joint ventures of $0.5 million due to
differences in accounting treatment of the purchase price allocation.

       (k) Reversal of $4.9 million in amortization of the fair value adjustment
relating to convertible debentures as described in (f) above.

       (l) Income tax effect of $0.3 million on the Canadian GAAP adjustments.

                                       F-87
<PAGE>



Our Vision: to be recognized as the most successful company in the steel
industry

Our Mission: To create value for our customers, employees, shareholders, and
communities through the engagement of people and excellence of operations.

Our Values: Safety o Integrity o Customer driven culture o Investment in people,
processes, and technology o Engaged employees o Open communication o Community
and environmental awareness o Profitability




                                      [PHOTOS]



                                        [MAP]

                               [GERDAU AMERISTEEL LOGO]
<PAGE>

                               70,000,000 SHARES

                                 (GERDAU LOGO)

                         GERDAU AMERISTEEL CORPORATION

                                 COMMON SHARES

                             ----------------------

                                   PROSPECTUS

                             ----------------------

                              MERRILL LYNCH & CO.
                               BMO NESBITT BURNS
                               CIBC WORLD MARKETS
                                    JPMORGAN
                                 MORGAN STANLEY

                                          , 2004
<PAGE>


                                     PART II

                   INFORMATION NOT REQUIRED TO BE DELIVERED TO
                             OFFEREES OR PURCHASERS

INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Gerdau Ameristeel Corporation (the "Corporation") is incorporated under the
Business Corporations Act (Ontario). Section 136 of the Business Corporations
Act (Ontario) provides that: "(1) A corporation may indemnify a director or
officer of the corporation, a former director or officer of the corporation or a
person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is made a party by reason
of being or having been a director or officer of such corporation or body
corporate, if, (a) he or she acted honestly and in good faith with a view to the
best interests of the corporation; and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he
or she had reasonable grounds for believing that his or her conduct was lawful;
(2) A corporation may, with the approval of the court, indemnify a person
referred to in subsection (1) in respect of an action by or on behalf of the
corporation or body corporate to procure a judgment in its favour, to which the
person is made a party by reason of being or having been a director or an
officer of the corporation or body corporate, against all costs, charges and
expenses reasonably incurred by the person in connection with such action if he
or she fulfils the conditions set out in clauses (1) (a) and (b); and (3)
Despite anything in this section, a person referred to in subsection (1) is
entitled to indemnity from the corporation in respect of all costs, charges and
expenses reasonably incurred by him in connection with the defence of any civil,
criminal or administrative action or proceeding to which he or she is made a
party by reason of being or having been a director or officer of the corporation
or body corporate, if the person seeking indemnity, (a) was substantially
successful on the merits in his or her defence of the action or proceeding; and
(b) fulfils the conditions set out in clauses (1) (a) and (b)."

     In accordance with the Business Corporations Act (Ontario), section 6.2 of
the By-Laws of the Corporation provides that: "the Corporation shall indemnify a
director or officer, former director or officer who acts or acted at the
Corporation's request as a director or officer of a body corporate of which the
Corporation is or was a shareholder or creditor, and the heirs and legal
representatives of such a person to the extent permitted by the Business
Corporations Act (Ontario)."

     The By-Laws of the Corporation further provide that the Corporation may, to
the extent permitted by the Business Corporations Act (Ontario), purchase and
maintain insurance for the benefit of a director or officer, a former director
or officer or a person who acts or acted at the Corporation's request as a
director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor and the heirs and legal representatives of such a
person.

     A policy of directors' and officers' liability insurance is maintained by
the Corporation which insures, subject to certain standard exclusions, directors
and officers for losses as a result of claims against the directors and officers
of the Corporation in their capacity as directors and officers and also
reimburses the Corporation for payments made pursuant to the indemnity provided
by the Corporation pursuant to the Business Corporations Act (Ontario) and the
By-Laws of the Corporation. The directors and officers are not required to pay
any premium in respect of the insurance. No claims have been made thereunder to
date.



                                      II-1

<PAGE>
         The purchase agreement will contain provisions by which the
underwriters agree to indemnify the Corporation, each of the directors and
officers of the Corporation and each person who controls the Corporation within
the meaning of the Securities Act of 1933, as amended, with respect to
information furnished by the underwriters for use in this Registration
Statement.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling the Corporation pursuant to the foregoing provisions, the
Corporation has been informed that in the opinion of the U.S. Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable.




                                      II-2
<PAGE>


                                    EXHIBITS

The following have been filed as part of the Registration Statement:

<TABLE>
<CAPTION>
      EXHIBIT     DESCRIPTION
      -------     -----------
      <S>         <C>

         3.1*     Purchase Agreement

         4.1      Audited comparative consolidated financial statements for the
                  years ended December 31, 2003 and 2002, together with the
                  report of the auditors thereon, as set out in pages 18 to 45
                  of the Corporation's 2003 annual report (incorporated by
                  reference to the Corporation's annual report on Form 40-F
                  filed with the Commission on April 30, 2004)

         4.2      Management's discussion and analysis of financial condition
                  and results of operations for the years ended December 31,
                  2003 and 2002, as set out in pages 8 to 17 of the
                  Corporation's 2003 annual report (incorporated by reference to
                  the Corporation's annual report on Form 40-F filed with the
                  Commission on April 30, 2004)

         4.3      Management information circular dated March 25, 2004, prepared
                  in connection with the Corporation's annual meeting of
                  shareholders held on May 6, 2004, other than the sections
                  entitled "Human Resources Committee Report on Executive
                  Compensation," "Statement of Corporate Governance Practices"
                  and "Shareholder Return Five-Year Performance Graph"
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on April 13, 2004)

         4.4      Annual information form dated April 29, 2004 (incorporated by
                  reference to the Corporation's annual report on Form 40-F
                  filed with the Commission on April 30, 2004)

         4.5      Unaudited comparative consolidated financial statements for
                  the three and six month periods ended June 30, 2004 and 2003,
                  as set out in pages 16 to 40 of the Corporation's second
                  quarter quarterly report (incorporated by reference to the
                  Corporation's report on Form 6-K filed with the Commission on
                  August 5, 2004)

         4.6      Management's discussion and analysis of financial condition
                  and results of operations for the three and six month periods
                  ended June 30, 2004 and 2003, as set out in pages 1 to 15 of
                  the Corporation's second quarter quarterly report
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on August 5, 2004)

         4.7      Material change report dated January 26, 2004 relating to the
                  completion of the Corporation's offer to exchange up to
                  $405,000,000 aggregate principal amount of the Corporation's
                  10 3/8% senior notes due 2011(incorporated by reference to the
                  Corporation's report on Form 6-K filed with the Commission on
                  January 26, 2004)

         4.8      Material change report dated April 8, 2004 relating to the
                  Corporation's sale of 26,800,000 common shares to Gerdau S.A.
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on April 13, 2004)

         4.9      Material change report dated September 14, 2004 relating to
                  the Corporation's proposed acquisition of North Star
</TABLE>


                                      II-3
<PAGE>

<TABLE>
        <S>       <C>

                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on September 17, 2004)

         4.10     Asset Purchase and Sale Agreement dated September 9, 2004
                  between North Star Steel Company, North Star Recycling
                  Company, North Star Steel Texas, Inc. and North Star Steel
                  Kentucky, Inc. and Gerdau Ameristeel US Inc. (incorporated by
                  reference to the Corporation's report on Form 6-K filed with
                  the Commission on September 20, 2004)

         4.11     Asset Purchase and Sale Agreement dated September 9, 2004
                  between Cargill, Incorporated and Gerdau Ameristeel US Inc.
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on September 20, 2004)

         5.1      Consent of PricewaterhouseCoopers LLP

         5.2      Consent of KPMG LLP

         5.3*     Consent of Torys LLP

         5.4*     Consent of Blake, Cassels & Graydon LLP

         6.1      Powers of Attorney (included on page III-2 of this
                  Registration Statement)
</TABLE>
--------

* To be filed by Amendment.


                                      II-4
<PAGE>


                                    PART III

                  UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

ITEM 1.  UNDERTAKING.

         The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to this Registration Statement on
Form F-10 or to transactions in said securities.

ITEM 2.  CONSENT TO SERVICE OF PROCESS.

         Concurrently with the filing of this Form F-10, the Registrant filed
with the Commission a written irrevocable consent and power of attorney on Form
F-X.




                                     III-1
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form F-10 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Tampa, State of Florida, on this 5th day of
October, 2004.



                                     GERDAU AMERISTEEL CORPORATION



                                     By:   /s/ Tom J. Landa
                                        ----------------------------------------
                                        Name:  Tom J. Landa
                                        Title: Vice-President, Finance, Chief
                                               Financial Officer and Secretary



                               POWERS OF ATTORNEY

         Each person whose signature appears below constitutes and appoints
Phillip E. Casey and Tom J. Landa and each of them singly, as his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments
and supplements) to this Registration Statement on Form F-10, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the U.S. Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
                    SIGNATURE                                        TITLE                            DATE
                    ---------                                        -----                            ----
<S>                                                   <C>                                       <C>
  /s/ Phillip E. Casey                                Director, President and Chief             October 5, 2004
  --------------------------------------------        Executive Officer (Principal
  Phillip E. Casey                                    Executive Officer)


  /s/ Tom J. Landa                                    Vice-President, Finance, Chief            October 5, 2004
  --------------------------------------------        Financial Officer and Secretary
  Tom J. Landa                                        (Principal Financial and Accounting
                                                      Officer)



                                                      Director                                  October 5, 2004
  --------------------------------------------
  Jorge Gerdau Johannpeter
</TABLE>



                                     III-2

<PAGE>

<TABLE>
<CAPTION>
                    SIGNATURE                                        TITLE                        DATE
                    ---------                                        -----                        ----
<S>                                                   <C>                                   <C>

  /s/ Kenneth W. Harrigan                             Director                              October 5, 2004
  --------------------------------------------
  Kenneth W. Harrigan



  /s/ Joseph J. Heffernan                             Director                              October 5, 2004
  --------------------------------------------
  Joseph J. Heffernan



  /s/ J. Spencer Lanthier                             Director                              October 5, 2004
  --------------------------------------------
  J. Spencer Lanthier



  /s/ Michael D. Sopko                                Director                              October 5, 2004
  --------------------------------------------
  Michael D. Sopko



                                                      Director                              October 5, 2004
  --------------------------------------------
  Frederico C. Gerdau Johannpeter



                                                      Director                              October 5, 2004
  --------------------------------------------
  Andre Bier Johannpeter



  /s/ Arthur Scace                                    Director                              October 5, 2004
  --------------------------------------------
  Arthur Scace
</TABLE>




                                     III-3
<PAGE>


                            AUTHORIZED REPRESENTATIVE

         Pursuant to the requirements of Section 6(a) of the Securities Act of
1933, as amended, the Authorized Representative certifies that it is the duly
authorized United States representative of Gerdau Ameristeel Corporation and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, solely in its capacity as the duly authorized representative of
Gerdau Ameristeel Corporation in the United States, in the City of Tampa, State
of Florida, on October 5, 2004.



                                       GERDAU AMERISTEEL US INC.
                                       (Authorized U.S. Representative)



                                       By: /s/ Tom J. Landa
                                          --------------------------------------
                                          Name:  Tom J. Landa
                                          Title: Vice-President, Finance, Chief
                                                 Financial Officer and Secretary




                                     III-4
<PAGE>

                                  EXHIBIT INDEX

The following have been filed as part of the Registration Statement:

<TABLE>
<CAPTION>
      EXHIBIT     DESCRIPTION
      -------     -----------
      <S>         <C>

         3.1*     Purchase Agreement

         4.1      Audited comparative consolidated financial statements for the
                  years ended December 31, 2003 and 2002, together with the
                  report of the auditors thereon, as set out in pages 18 to 45
                  of the Corporation's 2003 annual report (incorporated by
                  reference to the Corporation's annual report on Form 40-F
                  filed with the Commission on April 30, 2004)

         4.2      Management's discussion and analysis of financial condition
                  and results of operations for the years ended December 31,
                  2003 and 2002, as set out in pages 8 to 17 of the
                  Corporation's 2003 annual report (incorporated by reference to
                  the Corporation's annual report on Form 40-F filed with the
                  Commission on April 30, 2004)

         4.3      Management information circular dated March 25, 2004, prepared
                  in connection with the Corporation's annual meeting of
                  shareholders held on May 6, 2004, other than the sections
                  entitled "Human Resources Committee Report on Executive
                  Compensation," "Statement of Corporate Governance Practices"
                  and "Shareholder Return Five-Year Performance Graph"
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on April 13, 2004)

         4.4      Annual information form dated April 29, 2004 (incorporated by
                  reference to the Corporation's annual report on Form 40-F
                  filed with the Commission on April 30, 2004)

         4.5      Unaudited comparative consolidated financial statements for
                  the three and six month periods ended June 30, 2004 and 2003,
                  as set out in pages 16 to 40 of the Corporation's second
                  quarter quarterly report (incorporated by reference to the
                  Corporation's report on Form 6-K filed with the Commission on
                  August 5, 2004)

         4.6      Management's discussion and analysis of financial condition
                  and results of operations for the three and six month periods
                  ended June 30, 2004 and 2003, as set out in pages 1 to 15 of
                  the Corporation's second quarter quarterly report
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on August 5, 2004)

         4.7      Material change report dated January 26, 2004 relating to the
                  completion of the Corporation's offer to exchange up to
                  $405,000,000 aggregate principal amount of the Corporation's
                  10 3/8% senior notes due 2011(incorporated by reference to the
                  Corporation's report on Form 6-K filed with the Commission on
                  January 26, 2004)

         4.8      Material change report dated April 8, 2004 relating to the
                  Corporation's sale of 26,800,000 common shares to Gerdau S.A.
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on April 13, 2004)

         4.9      Material change report dated September 14, 2004 relating to
                  the Corporation's proposed acquisition of North Star
</TABLE>


<PAGE>


<TABLE>
        <S>       <C>
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on September 17, 2004)

         4.10     Asset Purchase and Sale Agreement dated September 9, 2004
                  between North Star Steel Company, North Star Recycling
                  Company, North Star Steel Texas, Inc. and North Star Steel
                  Kentucky, Inc. and Gerdau Ameristeel US Inc. (incorporated by
                  reference to the Corporation's report on Form 6-K filed with
                  the Commission on September 20, 2004)

         4.11     Asset Purchase and Sale Agreement dated September 9, 2004
                  between Cargill, Incorporated and Gerdau Ameristeel US Inc.
                  (incorporated by reference to the Corporation's report on Form
                  6-K filed with the Commission on September 20, 2004)

         5.1      Consent of PricewaterhouseCoopers LLP

         5.2      Consent of KPMG LLP

         5.3*     Consent of Torys LLP

         5.4*     Consent of Blake, Cassels & Graydon LLP

         6.1      Powers of Attorney (included on page III-2 of this
                  Registration Statement)
</TABLE>

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* To be filed by Amendment.