<PAGE>
                                       
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549
                                       
                                   FORM 10-K

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 
     For the fiscal year ended OCTOBER 31, 1996

                                       or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from _______ to _______

                                       
                  COMMISSION FILE NUMBERS 33-68230, 333-4513

                                       
                               RENCO METALS, INC.
             (Exact name of registrant as specified in its charter)

                DELAWARE                                         13-3724916
    (State or other jurisdiction of                            (IRS Employer
     incorporation or organization)                          Identification No.)

          238 NORTH 2200 WEST
         SALT LAKE CITY, UTAH                                      84116
(Address of principal executive offices)                         (Zip Code)

                                (801) 532-2043
              Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:      NONE

Securities registered pursuant to Section 12(g) of the Act:      NONE

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the proceeding 12 months (or for such shorter period that the 
registrant was required to file such reports) and (2) has been subject to 
such filing requirements for the past 90 days.   
[X] YES   [ ]  NO

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

Number of shares outstanding of each of the registrant's classes of common 
stock, as of January 27, 1996:  COMMON STOCK, NO PAR VALUE: 1,000 SHARES. 
Aggregate market value of the voting stock held by non-affiliates of the 
registrant:  $0; all shares of the voting stock of the registrant are owned 
by its parent, The Renco Group, Inc.

Documents incorporated by reference:     NONE

     ----------------------------------------------------------------------
<PAGE>
                                       
                                   FORM 10-K
                               RENCO METALS, INC.
                       FISCAL YEAR ENDED OCTOBER 31, 1996

                               TABLE OF CONTENTS
                               -----------------

                                                                        PAGE NO.
                                                                        --------
TABLE OF CONTENTS                                                           2

PART I 

  ITEM 1  -  Business                                                       3

  ITEM 2  -  Properties                                                     9

  ITEM 3  -  Legal Proceedings                                             10

  ITEM 4  -  Submission of Matters to a Vote of Security Holders           11

PART II

  ITEM 5  -  Market for Registrant's Common Equity and Related
             Stockholder Matters                                           12

  ITEM 6  -  Selected Financial Data                                       12

  ITEM 7  -  Management's Discussion and Analysis of Financial
             Condition and Results of Operations                           13

  ITEM 8  -  Financial Statements and Supplementary Data                   15

  ITEM 9  -  Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure                        37

PART III

  ITEM 10 -  Directors and Executive Officers of the Registrant            37

  ITEM 11 -  Executive Compensation                                        38

  ITEM 12 -  Security Ownership of Certain Beneficial
             Owners and Management                                         40

  ITEM 13 -  Certain Relationships and Related Transactions                40

PART IV

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

SIGNATURES                                                                 45



                                      -2-
<PAGE>
                                       
                                     PART I

ITEM 1.  BUSINESS.

    Renco Metals, Inc. ("Renco Metals" or the "Company") is a holding company 
with two wholly-owned operating companies, Magnesium Corporation of America 
("Magcorp") and Sabel Industries, Inc. ("Sabel").  Through Magcorp, the 
Company is engaged in the production and sale of magnesium and magnesium 
alloys for customers throughout the world.  Sabel is a diversified company in 
the southeast United States primarily involved in the steel service center, 
scrap metal and rebar businesses.  Magcorp and Sabel collectively are 
sometimes herein referred to as the "Subsidiaries" or "Guarantors."

    All of the Company's issued and outstanding capital stock is owned by The 
Renco Group, Inc. ("Group") which is 95.9 percent owned by Mr. Ira Leon 
Rennert, the Chairman and Chief Executive Officer of the Company and Group, 
and by trusts established by him for himself and members of his family (but 
of which he is not a trustee).  As a result of such ownership, Mr. Rennert 
controls the Company and its Subsidiaries.  Group acquired Magcorp in 1989 
and Sabel in 1987.

    The Company was incorporated in Delaware in 1993 and its executive 
offices are located at c/o Magcorp, 238 North 2200 West, Salt Lake City, Utah 
84116, (801) 532-2043.

    The Company classifies its operations into two business segments:  
Magcorp's operations comprise the magnesium production segment, and Sabel's 
operations comprise the steel fabrication and wholesaling segment.  Reference 
is hereby made to Note 13 to the Financial Statements, "Segment Information," 
included in ITEM 8, Part II of this Form 10-K.

    The Company's fiscal year ends October 31.  Neither Subsidiary's business 
is a) seasonal; b) requires unusual working capital; c) involves significant 
sales order backlog; d) requires extensive research and development 
expenditures or; e) involves federal government contracting. Neither 
Subsidiary has foreign operations.  Substantially all export sales are 
attributable to Magcorp. Reference is hereby made to Note 14 to the Financial 
Statements, "Significant Customers and Export Sales," included in ITEM 8, 
Part II of this Form 10-K.


MAGCORP

  OVERVIEW

    In 1996, Magcorp was the third largest producer of pure magnesium and 
magnesium alloys outside the former Commonwealth of Independent States 
("CIS") and People's Republic of China ("PRC").  The term "western world" 
hereinafter refers to areas of the world excluding the CIS and PRC.  The 
production facilities are located in Rowley, Utah and have a nominal annual 
production capacity of almost 41,000 metric tons, which is approximately 16 
percent of the western world production capacity, according to International 
Magnesium Association ("IMA") information and Magcorp management estimates.  
Magcorp participates in the world magnesium markets which represented demand 
of 296,000 metric tons in 1996 according to IMA information (based on nine 
month figures annualized).  The quality of magnesium produced and the variety 
of products produced enables Magcorp to participate in the full range of key 
magnesium end-use markets.

  COMPETITIVE CONDITIONS

    Magcorp management estimates, from IMA and public information, that four 
major producers, Magcorp, Dow Chemical, Norsk Hydro, and Northwest Alloys, 
together account for 87 percent of available western world production 
capacity. Like Magcorp, Dow Chemical and Norsk Hydro market magnesium 
products to all the key end-user markets.  Magcorp management estimates that 
Northwest Alloys, a wholly owned subsidiary of Alcoa, supplies an estimated 
70 percent of its production capacity to its parent, Alcoa, and markets the 
balance of its capacity directly to end users and through an agency.  
Northwest Alloys participates primarily in the aluminum alloying and 
desulfurization markets and does not participate in the die casting, 
electro-chemical and metal reduction markets.  In mid-1996, as a result of 
weakness in can production by their parent company, Northwest Alloys reduced 
their workforce by about one-third and also reduced their production.  A 
Norsk Hydro plant in Canada (one of their two production facilities) has 
limited its participation in the U.S. market mainly to the die casting 
segment in part due to high antidumping and countervailing duties on their 
pure magnesium imports to the U.S. See "ITEM 3.  Legal Proceedings--Pending 
Trade Issues."  Magnesium imports also affect competition, and are more fully 
discussed under "--Recent Industry Developments" below.



                                      -3-
<PAGE>
                                       
    The seven primary magnesium producers outside the CIS and PRC shipped 
about 228,000 metric tons of magnesium in calendar year 1996 according to the 
IMA, based on annualized nine month statistics. In addition, 68,000 metric 
tons of magnesium produced in the CIS and PRC were consumed in markets 
outside of the CIS and PRC. The Company estimates that these combined 
shipments generated revenues of approximately $1.1-1.2 billion.

    According to the IMA (based on nine month figures annualized), North 
American markets account for the majority of western world consumption of 
magnesium, 56 percent in calendar 1996, whereas Western Europe and Asia 
account for 23 percent and 14 percent, respectively.  All other western world 
areas combined account for the remaining seven percent.  North American 
consumption by end-use market is generally indicative of western world 
consumption as a whole.  The following table compiled from IMA data presents 
magnesium consumption in North America, by customer category, with the end 
uses of each category for calendar years 1992 through 1996:
                                       
                NORTH AMERICAN CONSUMPTION OF PRIMARY MAGNESIUM

<TABLE>

CUSTOMER CATEGORY      1992     1993     1994     1995     1996(*)                END USES
-----------------      ----     ----     ----     ----     ------                 --------
                              (in thousands of metric tons)
<S>                   <C>      <C>      <C>      <C>      <C>        <C>
Aluminum Alloying...   66.2     64.7     73.0     77.6     66.1      Beverage cans, truck panels, home
                                                                     siding,aircraft and marine alloys.
Desulfurization.....   24.6     29.3     26.2     22.2     26.6      Steel production from iron.
Die Casting.........   21.2     22.7     30.6     42.7     47.9      Automotive, electronics and hand tools.
Ductile Iron........    6.2      7.4      6.9      6.5      6.4      Pipe production, automotive components 
                                                                     and heavy-earth moving equipment.
Metal Reduction.....    5.5      3.9      2.4      2.6      3.6      Production of titanium, zirconium,
                                                                     beryllium and uranium. Uses include
                                                                     aerospace, chemical processing and
                                                                     nuclear products.
Electro-Chemical....    6.2      6.3      6.4      6.8      6.7      Cast anodes for cathodic protection
                                                                     of underground steel pipelines.
Others..............    9.6      8.8      7.2      7.0      8.8      Sheet and plate and extrusion
                      -----    -----    -----    -----    -----      stock, gravity castings for
                                                                     aerospace applications, powder for
                                                                     flares, chemicals and exotic
                                                                     pharmaceuticals and perfumes.
    Total...........  139.5    143.1    152.7    165.4    166.1      (*) Based on 9 month IMA figures, 
                      -----    -----    -----    -----    -----      annualized
                      -----    -----    -----    -----    ----- 
</TABLE>

    Key competitive issues in all end-use markets are pricing, long-term 
supply agreements with customers, assurance of a reliable supply, flexibility 
of deliveries, and shape, size, and quality of product.

    As is evident in the North American consumption table above, consumption 
of magnesium has grown 19 percent from 1992 to 1996, or at a cumulative 
annual growth rate of 4.5 percent.  This growth is due to magnesium's 
inherent metallurgical properties including its light weight, high 
strength-to-weight ratio, excellent corrosion resistance and reactivity with 
certain elements. These metallurgical properties have helped die casting to 
be the fastest growing segment of the domestic magnesium industry, where 
automobile manufacturers are turning to more magnesium parts to help lighten 
their vehicles.  In 1996, combined consumption in all end use markets 
excluding aluminum alloying increased 13.9 percent over 1995 levels.  This 
increase was offset by a decline in the aluminum alloying market, where 
greater competition from plastics affected consumption of aluminum cans. 

    MAGNESIUM SUPPLY.  In early 1994, one of the largest domestic producers 
significantly reduced its capacity, and that capacity has not been replaced. 
The magnesium manufacturing process is highly technical and proprietary to 
each producer. Management estimates a cost of approximately $500 million to 
establish a facility with the same production capacity as Magcorp's facility. 
One new facility, located in Israel with an estimated annual capacity of 
27,500 metric tons, is expected to begin production sometime in 1997. Cost 
overruns of at least $80 million have been publicized.  The capacity of the 
Israeli facility may also be increased, subject to start-up success, 
viability and market conditions, from 27,500 to 55,000 metric tons, with a 
possible start-up date for the second phase in 1999. At least one-third of 
the output from the Israeli plant is committed to Volkswagen, reportedly for 
new automotive applications, which will reduce the total amount of material 
the Israeli producer will have to offer for sale in worldwide markets.  
Management estimates that the current capacity of plants outside the CIS and 
PRC is about 255,000 metric tons, excluding the Israeli facility.  In the 
third quarter of calendar 1996, management estimates that North American 
producers, including Magcorp, ran at about 93 percent of capacity.

    In January 1997, a consortium of companies announced a timetable for a 
pilot magnesium production plant, feasibility study, and construction of a 
full-scale 90,000 metric ton annual capacity facility intended to be in 
service in 2004 in Australia.  In addition to the Israeli and Australian 
facilities, two other potential manufacturers have announced their intent to 
build a facility in Canada and Iceland, respectively.  Pilot and feasibility 
studies have not been completed for any of these facilities. 



                                      -4-

<PAGE>

     RECENT INDUSTRY DEVELOPMENTS

   Magnesium prices are sensitive to supply and demand conditions in all of the
end user markets served by the magnesium industry.  As a result of these
industry conditions, list prices for pure magnesium sold by North American
producers in North America increased to record highs in 1995, increasing from
$1.43 per pound in 1991 to $1.93 per pound in mid-1995, and remained at that
price through calendar 1996.  In mid-December 1996, Magcorp announced a list
price decrease for primary pure magnesium to $1.80 per pound to be effective
January 1, 1997, reflecting current competition and slightly higher producer
inventories. No changes were made to list prices for die casting alloys.  This
list price decrease was matched by Dow Chemical effective on the same date and
by Norsk Hydro on January 15, 1997.  Norsk Hydro also lowered their European
list price by an additional 13 percent below their North American price, citing
the strong penetration of lower priced CIS and PRC shipments into Europe. 
Magnesium generally sells for prices somewhat lower than the list price for pure
magnesium, with price dependent on market segment, chemistry, contract terms,
including negotiated discounts, and quality.  

   Manufacturers in the PRC also have recently become significant exporters of
magnesium. In response to the rise in the price of magnesium, many small
magnesium factories were established in the PRC, many of which produce lower
quality magnesium. Estimated annual capacity in the PRC is estimated to have
increased to approximately 40,000 to 60,000 metric tons. Magcorp believes that
increased capacity may result in an increase in exports, although there is also
a belief that internal PRC consumption of domestically produced magnesium may
increase.  Furthermore, recent price trends for PRC magnesium may encourage the
shutdown of some of the smaller, higher cost facilities.  In 1996, limited PRC
pure magnesium was shipped into the U.S. due to the antidumping duties in place.
See "ITEM 3.  Legal Proceedings--Pending Trade Issues."

   Production in the CIS has been relatively unchanged in 1996.  However, more
CIS magnesium reached the U.S. in 1996 than in 1995, due to the lack of duties
against certain Russian traders.  Magcorp is continuing its appeals in the
effort to secure dumping duties against all Russian imports, but there is no
guarantee of success. See "ITEM 3.  Legal Proceedings--Pending Trade Issues." 
In Norway, Norsk Hydro announced that they will bring an additional 8,000 metric
tons of capacity on line by the end of 1997, and that they have now started
their scrap recycling plant for die casting alloys.  Industry publications have
also speculated about possible incremental small expansions at Dow Chemical and
in Brazil.

   As of September 30, 1996, the latest available date of IMA statistics,
magnesium producer inventories outside the PRC and CIS were 38,400 metric tons,
which represents approximately six and one-half weeks of supply, compared with
normal levels of approximately eight weeks, and up from a record low of 17,200
metric tons in June 1995. The recent increase in inventories resulted from
slightly lower demand, coupled with increased availability of magnesium produced
in the CIS and PRC.  

   Magnesium pricing and volume are dependent on the overall market supply and
demand, and there is no certainty that current trends will continue.  Management
expects continued strong growth in die casting, and with a recovery in aluminum
can usage and higher use of rolled aluminum sheet in automobiles, it is likely
that overall demand will continue to grow, and that the western magnesium
producers will continue to operate at relatively high capacity utilization
rates.

     BUSINESS STRATEGY

   Magcorp's business strategy consists of three principal elements: (i)
maximize sales in markets in which superior margins can be achieved, (ii)
establish and maintain long-term customer relationships through service, product
flexibility and responsiveness and (iii) manage production and overhead costs
aggressively.

   In furtherance of its business strategy, Magcorp emphasizes quality, service
and flexibility to meet changing customer specifications. In particular,
management believes that Magcorp's range of products and delivery program has
afforded Magcorp a significant degree of flexibility to meet customer needs
which serves to foster long-term relationships with its core customers.
Additionally, with respect to costs, management has maintained a continual
aggressive cost management program and is now pursuing a $46 million program of
production technology changes in the form of new electrolytic cell technology
and a new magnesium caster.  The new electrolytic cells are expected to reduce
operating costs and improve manufacturing efficiencies resulting from reductions
in: (i) electricity consumption, (ii) manufacturing labor requirements, (iii)
magnesium metal losses in the manufacturing process and (iv) chlorine emissions.
Additionally, the new magnesium caster is expected to improve product quality,
reduce labor requirements and permit the Company to produce some of the various
sizes, shapes and weights of magnesium ingots at lower cost.


                                     -5-

<PAGE>

   The electrolytic cell conversion will commence in early 1997 with the
installation of a prototype cell and, assuming its successful operation, the
conversion of the remaining cells is expected to be completed by 1999. As a
result, the associated cost reductions and related manufacturing efficiencies
are expected to be realized in the Company's operating results beginning in
fiscal year 1999. Management estimates that the caster will be installed by the
end of fiscal year 1999.

   With respect to chlorine emissions, the electrolytic cell conversion is
expected to significantly reduce the Company's emissions, thereby addressing
anticipated regulations imposed under amendments to the Clean Air Act of 1990
(the "Clean Air Act"). See "--Environmental Matters."

     CUSTOMERS AND MARKETS

   Magcorp sells pure magnesium and magnesium alloys to domestic and
international customers in the key end-use markets, including its three largest
segments, aluminum alloying, desulfurization and die casting.  Magcorp offers
over 30 different sizes, shapes and weights of primary magnesium and magnesium
alloy products in a range of purity levels to meet customer specifications. All
established and prospective new domestic accounts are handled by Magcorp's staff
of two direct salespersons and four field representatives who receive technical
assistance from plant personnel.  Accounts in Europe, Japan, and Australia are
handled through agency arrangements.

   Approximately 90 percent of Magcorp's annual volume is sold pursuant to
contracts with select customers. During 1995 and 1994, sales to any single
customer did not exceed ten percent of total consolidated revenues.  During
1996, sales to Rossborough Manufacturing Co. LP approximated 12 percent of total
revenues.  Reference is hereby made to Note 14 to the Financial Statements,
"Significant Customers and Export Sales," included in ITEM 8, Part II of this
Form 10-K.

     RAW MATERIALS

   Magcorp's source of raw material for magnesium production is brine from the
Great Salt Lake.  The Great Salt Lake brine is concentrated through solar
evaporation and selective precipitation of undesirable salts until a high grade
magnesium chloride brine is produced for plant feedstock.  The magnesium
chloride brine is further purified, spray dried to powder using gas turbines,
and melted to produce feed for electrolytic cells, which use direct electrical
current to separate the magnesium metal and chlorine.  The magnesium metal from
the electrolytic cells is then refined and cast into the wide variety of pure
magnesium and magnesium alloy products produced by Magcorp.  

   Magcorp's natural gas requirements are purchased from gas producers or
marketers, transported by a gas transportation company and delivered to the
Rowley facility by a local gas distribution company. Management has negotiated
favorable gas pricing due to the volume of Magcorp's requirements.

   Magcorp purchases its electrical requirements from a local utility pursuant
to a contract in effect until January 1, 2002. As is the case with other
industrial facilities, the terms of the contract grant the utility the right to
interrupt electrical power to Magcorp under certain limited circumstances and
with reasonable notice while providing Magcorp with advantageous electricity
rates. If the utility exercises such right, upon any such interruption, Magcorp
can purchase available electricity at market rates. Additionally, Magcorp is
able to produce on average 25 percent of its electrical power needs through the
gas turbines located at the Rowley facility. The utility and Magcorp are
currently in negotiations for a new contract; the utility had requested a
reopening of the existing contract and Magcorp had challenged the utility's
billing practices under the existing contract. 

   A variety of chloride based by-products which are produced during the
production of magnesium metal are sold into commercial markets or are
neutralized and disposed of in compliance with environmental regulations. 
Aggregate sales of all by-products accounted for two percent or less of
consolidated revenues in 1994, 1995 and 1996.

   Other raw materials critical to plant operations include graphite anodes,
special refractory brick, and sulfuric acid.  Magcorp maintains alternative
sources of these raw materials to ensure a secure supply at competitive prices.

     EMPLOYEES

   As of October 31, 1996, Magcorp had 560 employees, 147 of whom were salaried
and 413 of whom were hourly workers. Approximately 74 percent of the hourly
employees are represented by the United Steelworkers of America and employed
under a three year collective bargaining contract that expires November 1, 1997
and automatically renews for additional one-year periods (unless written notice
of termination by either party is given). Magcorp believes that its relations
with employees are satisfactory.


                                     -6-

<PAGE>

     ENVIRONMENTAL MATTERS

   Magcorp's most significant long-term environmental issue is compliance with
the Clean Air Act. Title III of the Clean Air Act will establish, on a published
schedule, new emission standards for previously unregulated air toxins. These
national emission standards for hazardous air pollutants ("NESHAPS") will be
technology based and will be designed to achieve the maximum control as
determined by a comparison of installations at similar facilities in specific
industry categories.

   It is expected that Magcorp will be required to make substantial reductions
in chlorine and hydrogen chloride emissions to meet NESHAPS for primary
magnesium refineries that will be promulgated by the year 2000. In response to
the anticipated regulations imposed under amendments to the Clean Air Act,
Magcorp is acquiring new electrolytic cell technology that will reduce chlorine
emissions at the source. The new cells are also expected to significantly reduce
costs since they have much higher throughput and are more energy efficient. A
prototype cell will be installed and operated in early calendar year 1997 and,
assuming its successful operation, the conversion of the remaining cells is
expected to be completed by 1999. With respect to hydrogen chloride, Magcorp
will install scrubbers to reduce emissions.

   Magcorp plans to spend $40 million of its capital budget, including the
capital required for the prototype cell, by the year 2000 directly or indirectly
to meet environmental regulatory requirements, primarily for NESHAPS, and for
anticipated other future requirements. Magcorp believes that these expenditures
required to comply with environmental standards are substantial.

   Under Title V of the Clean Air Act, Magcorp will be required to conduct
additional air monitoring and record keeping and will pay operating fees based
on emission levels. The enhanced emission monitoring will require initial
expenditures of about $120,000 and annual operating costs of $100,000. Annual
operating fees are approximately $120,000 and future increases are likely.

   Magcorp will close its existing landfill and will open a new landfill in time
to comply with new regulations anticipated to be in effect in three to five
years. The estimated cost of closing the existing landfill and opening the new
landfill is $450,000 given Magcorp's present interpretation of what the new
regulations would require.

   In August 1992, a Notice of Violation and Compliance Order ("NOVCO") was
issued to Magcorp concerning certain alleged violations of the Utah Solid and
Hazardous Waste Act and the Utah Administrative Code.  Magcorp contested the
NOVCO and requested a hearing on the alleged violations.  In August 1994, the
Utah Solid and Hazardous Waste Control Board ("Control Board") presented a
proposed stipulation and consent order to Magcorp for resolution of the NOVCO. 
Magcorp objected to much of the 1994 stipulation and consent order.  In December
1996, the Control Board submitted a proposed stipulation and consent order that
was acceptable to Magcorp and full settlement of the original alleged violations
is essentially complete.  The Control Board has also, at this time, vacated
their position that the wastes being sent to the Rowley facility's industrial
wastewater pond are subject to regulation by the State of Utah.  In addition, an
issue exists as to whether piles of material generated in the electrolytic
process, which cover an extensive land area at the Rowley facility, can be
classified as a hazardous or solid waste, and if so, what measures might be
required to investigate and address these piles. If these wastes are ultimately
deemed subject to State regulation and corrective action is required, the costs
of compliance could be material.

SABEL

     OVERVIEW

   Sabel, founded in 1869, is a diversified company primarily involved in the
steel service center, scrap metal and rebar fabrication businesses. Sabel's
steel service center facilities distribute and process new carbon steel for
large and small industrial accounts as well as for the general public. Sabel's
scrap metal operations process to customer specifications and sell and transport
ferrous and non-ferrous scrap metal to mini- and integrated steel mills,
foundries and other related metal companies. Sabel's rebar fabrication operation
customizes rebar to shapes and sizes required for use in building and highway
construction. Additionally, Sabel operates a full-service wholesale center which
sells a variety of tools and plumbing, sprinkler, building and general supplies.
Sabel also operates a plastics recycling service on a customer's premises which
buys from and sells all types of commodity and engineering thermoplastics to
bottlers, crate manufacturers and molders.

     BUSINESS STRATEGY

   Sabel's business strategy is to focus on niche products and services and
emphasize long-term customer and supplier relationships within its served
markets.


                                     -7-

<PAGE>


   DIVERSE BUSINESSES.  Sabel management believes that Sabel operates at a
competitive advantage by maintaining a presence in the scrap metal, rebar and
service center markets. Specifically, Sabel's diverse operations provide it
access to timely information across its served markets prior to its competitors
which generally operate in only one market. This information enables Sabel to
manage its inventory and price changes in a manner which benefits Sabel's
financial performance.

   NICHE MARKETS.  Sabel also focuses on small volume, high-margin sales to
customers whose order sizes are not efficiently handled by larger steel service
centers and scrap metal companies. Management believes that Sabel's flexibility
to service these customers, enhanced by its ability to provide one-day
turnaround service on most commonly used steel products at competitive prices,
is a unique facet of Sabel's strategy. Sabel's relationship with larger
customers enables Sabel to maintain a specific inventory of steel products. As a
result, Sabel's smaller customers benefit from such inventory and are able to
implement "just-in-time" delivery for material requirements planning objectives.

   CUSTOMER AND SUPPLIER RELATIONSHIPS.  With a primary focus on the Southeast
region, management believes Sabel's geographic proximity to its customers and
suppliers facilitates a high level of customer service while minimizing freight
costs and delivery time. Management believes Sabel's strong market presence in
the region has enabled it to obtain contracts for on-site collection of scrap
materials from a number of industrial concerns.

     DESCRIPTION OF PRODUCTS AND MARKETS SERVED

   STEEL SERVICE CENTER.  Sabel's steel service center division ("SSC") is
comprised of four facilities located in Montgomery, Dothan, Mobile and
Tuscaloosa, Alabama. This geographic coverage allows Sabel to cost-effectively
service most of Alabama, the Gulf Coast, the panhandle of Florida, Southern
Mississippi, West Georgia and the Atlanta metropolitan area. In fiscal year
1996, SSC accounted for 68 percent of Sabel's revenues.

   SSC specializes in stocking, reprocessing and delivering hot rolled and cold
rolled carbon steel in a variety of sizes and shapes. Purchases of new steel for
reprocessing are spread across approximately 15 steel mills including both
integrated mills and mini-mills, thereby ensuring favorable prices and
availability of product. SSC processes more than 60 percent of the steel it
sells. SSC has an extensive customer list comprised of approximately 3,000
customers ranging from large industrial companies to small welding shops. As a
result, no single customer represents in excess of 5 percent of the division's
total sales.

   The sales and marketing team at SSC consists of 16 direct salespeople and six
sales representatives covering the Southeast region. All orders are entered and
recorded through SSC's computerized system which facilitates order processing
and delivery. Sabel continually works to improve the efficiency of this system
to provide greater accuracy and speed in order entry.
   
   SCRAP METAL.  Management believes Sabel's 127 years of experience in the
scrap metal business has fostered a strong reputation for quality and service.
The scrap metal division of Sabel is a full-service scrap metal dealer with two
large scrap yards located in Montgomery. Scrap metal in those yards is collected
from approximately 250 suppliers, primarily industrial suppliers along with
dealers and individual consumers. The scrap metal division sells to
approximately 45 customers, including mini- and integrated steel mills,
foundries and specialized manufacturing entities. As a freight-sensitive
business, a majority of Sabel's scrap is sold to customers within its geographic
area. In fiscal year 1996, the scrap metal division accounted for 18 percent of
Sabel's revenues.

   All scrap processed in the scrap metal division is inspected prior to
shipment to ensure quality and compliance with customer specifications. As a
result, management believes Sabel enjoys a high quality reputation and has an
acceptance rate in excess of 99 percent for all scrap sold to customers.

   REBAR FABRICATION DIVISION.  Sabel's rebar fabrication division ("RFD"), also
located in Montgomery, purchases stock 60 foot bars from various rebar
manufacturers and customizes the length, shape and bend according to
construction blueprint plans. Structural bars and wire are widely used in the
construction of buildings and highways. In 1996, RFD contributed 11 percent of
Sabel's revenues.

   Since its formation, RFD has focused on construction projects from dams to
driveways in its markets. Sabel's management believes RFD has established a
strong track record for accuracy of shape and size and for prompt delivery due
to the efficient design of the RFD facility. Orders for RFD's products are
affected by the levels of activity in the construction and building sectors, as
well as the conditions in the overall economy.

   OTHER OPERATIONS.  Other businesses operated by Sabel consist of a wholesale
center which sells a variety of tools and plumbing, sprinkler, building and
general supplies and a plastics recycling service which operates a portable
grinder. These other operations represented 3 percent of Sabel's fiscal year
1996 revenues.


                                     -8-


<PAGE>

     COMPETITION

   Each of the principal fields in which Sabel is engaged -- steel service
centers, scrap metal and rebar fabrication -- is highly competitive. Sabel
competes with numerous other concerns, some of which are much larger. Sabel is
unable to estimate its competitive position in its market place.  Nevertheless,
Sabel believes that no other company in its trading area offers the same range
of services.

     EMPLOYEES

   As of October 31, 1996, Sabel had 249 employees, 74 of whom were salaried and
175 of whom were hourly workers. Of the hourly employees, 32 are represented by
the United Steelworkers of America. The current three year bargaining contract
expires on June 20, 1997. Sabel believes that its relations with employees are
satisfactory.

     ENVIRONMENTAL MATTERS

   The most significant long-term environmental issue at Sabel's facilities
concerns compliance with storm water regulations under the Clean Water Act that
became effective in 1991. Sabel is actively pursuing a program of compliance,
and it is expected that costs associated with this program will not have a
material adverse effect on the Company's financial position or on future results
of operations.

ITEM 2.  PROPERTIES.

     MAGCORP

   Magcorp's main facilities include its headquarters located in Salt Lake City,
Utah and its production plant located in Rowley, Utah, approximately 60 miles
outside Salt Lake City. Magcorp's senior management, sales and marketing and
administrative functions are based at the Salt Lake City headquarters. All
production takes place at the Rowley facility. Inventory is stored at the Rowley
facility and at a third party leased warehouse space in Utah, as well as
locations throughout the world.

   Magcorp's production facilities are located on 4,525 acres of land
immediately adjacent to the Great Salt Lake which is the long-term raw material
source. The brine from the Great Salt Lake is concentrated through one or both
of two solar pond concentrating systems, the Stansbury Basin Pond System and the
Knolls Pond System, to provide the final high grade brine feedstock for the
magnesium plant. The Stansbury System is located about 15 miles and the Knolls
System about 45 miles from the plant site. Both pond systems are capable of
providing high grade brine feedstock to the plant to facilitate nameplate plant
production rates under normal operating conditions.

   Magcorp's production facility in Rowley, Utah was constructed in 1972. From
1993 to the present, management has implemented an aggressive cost reduction and
productivity improvement program to increase the facility's output at lower
costs. In 1995, as a result of the cost and productivity initiatives, the
capacity rating of the facility was increased to 40,823 metric tons per year.
This figure corresponds to the ceiling established by the Company's operating
permit with the State of Utah Department of Environmental Quality.  In late
1996, the State of Utah approved Magcorp's request to increase the operating
permit to allow annual production of up to 43,545 metric tons.

   Magcorp owns its Salt Lake City administrative offices and Rowley production
facilities. The Knolls Pond Systems is located on land leased from the State of
Utah for a term expiring on December 31, 2016 and on Federal land under a right-
of-way from the Bureau of Land Management of the Department of Interior which
expires in 2023. The Stansbury Pond System is located primarily on land leased
from the State of Utah for a term expiring on March 8, 2010. Magcorp also holds
other easements, rights-of-way and water rights primarily from the Bureau of
Land Management and the State of Utah. Magcorp pays a royalty to the State of
Utah based on its production of magnesium from Great Salt Lake brine. The Rowley
facility is readily accessible by truck and rail.

     SABEL

   Sabel's operations are carried out in eight facilities covering approximately
315,000 square feet across the Southeast region which include four steel service
centers, two scrap metal yards, a rebar fabricating plant and a wholesale
equipment supply center. Most of Sabel's facilities are leased from entities
controlled by the Sabel family. The steel service centers are equipped to
process steel from stock for their customers' needs and the rebar fabricating
plant is equipped to fabricate bars to customer specifications.

                                     -9-
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

     PENDING TRADE ISSUES

        MAGNESIUM IMPORTS FROM THE RUSSIAN FEDERATION, UKRAINE AND PRC

   In 1994, Magcorp filed an antidumping petition with the Department of
Commerce ("DOC") and the U.S. International Trade Commission ("ITC") for
imposition of antidumping duties against imports of magnesium from the Russian
Federation, Ukraine and the PRC. In its petition, Magcorp alleged that imports
of pure and alloy magnesium from producers in these countries were being sold in
the United States at less than fair value and had injured the U.S. magnesium
industry with resultant negative financial results, loss of markets, and layoffs
of workers at U.S. magnesium producers. The antidumping duties sought in the
petition generally exceeded 100 percent, reflecting the level of dumping and
impact on domestic producers. Two unions representing workers at Magcorp and Dow
Chemical were co-petitioners in the filing. Dow Chemical subsequently joined the
petition as a co-petitioner.

   In March 1995, the DOC determined that pure magnesium imports from all three
countries were dumped in the United States, but also determined that certain
Russian producers and traders were not dumping Russian magnesium products. In
May 1995, the ITC announced its affirmative determinations that imports of pure
magnesium from those three countries were a cause of injury to the domestic
magnesium industry. The DOC and ITC decisions, taken together, resulted in the
imposition of antidumping duties against imports of pure magnesium from each of
the three countries at the following rates:

                                                        PURE
                         Russian Federation..........  0-100%
                         Ukraine..................... 80-104%
                         PRC.........................    108%

   No antidumping duties were assessed against magnesium alloys.  These rates
are subject to revision in future administrative reviews, which can be requested
annually.  The first such review could have been requested in May 1996, but none
was.  The next review request can be made in May 1997.

   In June 1995, one of the traders of Ukrainian magnesium appealed to the U.S.
Court of International Trade ("CIT") the ITC's determination that imports of
pure magnesium from the Ukraine had injured domestic magnesium producers; if the
trader's appeal is successful, the 80-104 percent antidumping duty determination
could be lifted against Ukrainian imports of pure magnesium. In August 1996, the
CIT rejected the appeal by the Ukrainian trader and affirmed the ITC's
determination.  The Ukrainian trader has appealed the CIT's decision to the U.S.
Court of Appeals for the Federal Circuit. 

   In June 1995, Magcorp appealed to the CIT for review of the DOC's
determination that certain producers and traders of Russian Federation magnesium
had not sold at less than fair value. On December 23, 1996, the CIT affirmed the
DOC's determination, with a required recalculation of the selling, general, and
administrative expenses.  Magcorp intends to appeal the CIT's decision to the
U.S. Court of Appeals for the Federal Circuit.  None of the possible outcomes of
the appeal process or the impact of the determinations or the impact of the
appeal process upon the Company's business can be determined at the present
time.

   MAGNESIUM IMPORTS FROM CANADA

   In 1991, Magcorp filed a petition with the DOC and the ITC for imposition of
countervailing and antidumping duties against Canadian and Norwegian magnesium
producers. No duties were imposed on Norwegian imports. In 1993, final duties on
magnesium imported into the United States from Canada (except magnesium from
Timminco) were imposed by the DOC after appeals to panels established by the
U.S.-Canada Free Trade Agreement as follows:

      Countervailing duties on pure and alloy magnesium imports.......   7.6%
      Antidumping duties on pure magnesium imports....................  21.0%

   Administrative reviews were initiated by the DOC regarding both the
antidumping order and the countervailing duty ("CVD") orders.  With respect to
both the first and second antidumping review periods, which covered the period
from February 20, 1992 through July 31, 1994, the DOC made final determinations
that there had been no sales of pure magnesium by Norsk Hydro Canada Inc.
("NHCI" or "the Canadian producer") to the United States and, thus, no
antidumping duty was collectable. With respect to the third review period from
August 1, 1994 through July 31, 1995, the DOC made a final determination that
NHCI sales to the United States were made at prices that were not below fair
value and, therefore, no antidumping duty was assessed on these imports and the
antidumping duty deposit rate for imports from NHCI in the subsequent period was
set at zero percent.  The fourth antidumping administrative review, covering the
August 1, 1995 through July 31, 1996 period, has been initiated by the DOC,
which is scheduled to release its final determination in this review by
September 2, 1997.

                                     -10-
<PAGE>

   The DOC's determination of no sales at less than fair value in the third
antidumping administrative review could constitute the first year of the three-
year period of findings of no dumping which is a prerequisite for the Canadian
producer to demonstrate that it qualifies for revocation. In connection with a
third consecutive review resulting in a determination that NHCI has not sold
below fair value, NHCI could seek revocation of the antidumping order.  An
elimination of, or a substantial decrease in, these duties could have a material
and adverse impact on magnesium prices, depending upon market conditions.

   The DOC is conducting administrative reviews of the CVD orders on imports of
pure and alloy magnesium from Canada.  The CVD deposit rate after the final
determination and appeal proceedings was 7.6 percent.  With respect to the first
CVD administrative review, which covers the period from December 6, 1991 through
December 31, 1992, the DOC has preliminarily determined that the applicable CVD
duty is 9.9 percent.  The final determination in the first reviews is scheduled
for release in January 1997.  In the second CVD administrative review, which
covers calendar year 1993, the DOC's preliminary determination is scheduled for
release in early 1997.  In the third CVD administrative review, which covers
calendar 1994, the DOC has preliminarily determined that the applicable CVD duty
is 4.0 percent.  The final determination in the third review is scheduled for
March 1997.  The DOC has initiated the fourth CVD administrative review, which
covers calendar 1995, and has scheduled the release of the final determination
for that review for September 2, 1997.  Until a final determination is made in
one of the CVD administrative reviews, the CVD deposit rate applied to subject
imports continues to be 7.6 percent.

     OTHER LEGAL PROCEEDINGS

   With the exception of the trade cases discussed above, neither the Company
nor its Subsidiaries is a party to any material legal proceeding other than
ordinary routine litigation incidental to its business.

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

   No matters were submitted during the fourth quarter of fiscal 1996 to a vote
of security holders.



















                                     -11-
<PAGE>

                                    PART II

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

   All of the Company's issued and outstanding common equity, 1,000 shares of
common stock, no par value, are owned by a single stockholder, Group.  There is
no established public trading market for these shares.  

   There were no dividends declared on the Company's common stock in fiscal
1995.  In fiscal 1996, the Company paid to Group dividends totaling $88.95
million, including $75.03 million paid in conjunction with the issuance of 11.5%
Senior Notes described more fully in Note 5 to the Company's consolidated
financial statements, appearing elsewhere herein.  The payment of and amounts of
dividends are restricted by the Company's long-term debt agreements, which
generally allow dividends of up to 50 percent of consolidated net income.  Based
on profitability and after taking into account the Company's prospects and
liquidity needs, the Company plans to pay quarterly dividends to the extent
allowed by the Company's long-term debt agreements.  See also Note 5 to the
Financial Statements, "Long-term debt," included in ITEM 8, Part II of this Form
10-K.

ITEM 6.  SELECTED FINANCIAL DATA.

   The following table sets forth selected financial and operating data relating
to the consolidated results of the Company as of and for each of the five fiscal
years in the period ended October 31, 1996.  Such selected information is
qualified by and should be read in conjunction with the detailed information and
consolidated financial statements and the notes thereto appearing elsewhere
herein.

<TABLE>
                                                                                 Year ended October 31,
                                                         --------------------------------------------------------------------
                                                           1996           1995           1994           1993           1992
                                                         --------       --------       --------       --------       --------
                                                                                    (in thousands)
<S>                                                        <C>            <C>             <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
     Net sales                                           $196,974       $185,806       $132,950       $131,139       $117,262 
     Cost of sales                                        116,808        121,189        106,364         95,313         95,501 
     Depreciation, depletion, and amortization              6,509          5,770          5,604          7,135         10,698 
     Selling, general, and administrative expenses         22,704         18,470         16,352         14,714         14,499 
     Operating income (loss)                               50,953         40,377          4,630         13,977         (3,436)
     Interest income                                        1,353            881            186             56             11
     Interest expense                                      13,045         10,138         10,208          7,414          7,614 
     Income tax expense (benefit)                          13,534         11,143         (1,932)         2,503           (331)
     Income (loss) from continuing operations              25,727         19,977         (3,460)         4,116        (10,708)
     Extraordinary item                                    (7,284)             -              -          2,930             - 
     Cumulative effect of accounting change                     -              -             30              -             - 
     Net income (loss)                                     18,443         19,977         (3,430)         7,046        (10,708)
</TABLE>

<TABLE>
                                                                                     October 31,
                                                         --------------------------------------------------------------------
                                                           1996           1995           1994           1993           1992
                                                         --------       --------       --------       --------       --------
<S>                                                        <C>            <C>             <C>            <C>            <C>
BALANCE SHEET DATA:                                                                 (in thousands)

     Working capital                                     $ 47,677       $ 58,880       $ 36,911       $ 35,186      $ 16,818 
     Property, plant, and equipment, net                   36,613         32,014         30,862         32,845        35,341 
     Total assets                                         118,658        116,551         89,038         90,515        78,700 
     Total debt                                           154,150         78,012         78,839         75,862        62,274 
     Stockholder's equity (deficit)                       (74,034)         4,760        (15,004)       (12,000)      (19,519)
</TABLE>

                                      -12-
<PAGE>


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

   The Company is a holding company incorporated on July 19, 1993 which has two
wholly-owned operating companies, Magcorp and Sabel. Through Magcorp, the
Company is engaged in the production and sale of magnesium and magnesium alloys
for customers throughout the world. Group acquired Magcorp in August 1989. Sabel
is a diversified company in the southeast United States primarily involved in
the steel service center, scrap metal and rebar businesses. Sabel was acquired
by Group in July 1987.

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

RESULTS OF OPERATIONS

<TABLE>
                                                                               Year ended October 31,
                                                                        -------------------------------------
                                                                          1996           1995          1994
                                                                        --------       --------      --------
                                                                                    (in thousands)
<S>                                                                       <C>            <C>            <C>
Sales by business segment:
     Magcorp                                                            $152,941       $136,348      $ 90,745 
     Sabel                                                                44,033         49,458        42,205 
                                                                        --------       --------      --------
       Total sales                                                       196,974        185,806       132,950 
Cost of sales                                                            116,808        121,189       106,364 
Depreciation, depletion, and amortization                                  6,509          5,770         5,604 
Selling, general, and administrative expenses                             22,704         18,470        16,352 
                                                                        --------       --------      --------
       Total operating income                                             50,953         40,377         4,630 
Interest income                                                            1,353            881           186 
Interest expense                                                         (13,045)       (10,138)      (10,208)
                                                                        --------       --------      --------
Earnings (loss) before income taxes                                       39,261         31,120        (5,392)
Income tax expense (benefit)                                              13,534         11,143        (1,932)
                                                                        --------       --------      --------
Net income (loss) before extraordinary items and accounting change        25,727         19,977        (3,460)
Extraordinary item - extinguishment of debt, net of taxes                 (7,284)             -            - 
Cumulative effect of accounting change-income taxes                            -              -            30 
                                                                        --------       --------      --------
Net income (loss)                                                       $ 18,443       $ 19,977      $ (3,430)
                                                                        --------       --------      --------
                                                                        --------       --------      --------
</TABLE>

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995

   SALES for fiscal year 1996 increased 6.0 percent over fiscal year 1995.  The
increase was attributable to a 12.2 percent increase in Magcorp's revenues,
which was offset by a 11.0 percent decrease in Sabel's revenues.  Magcorp's
average selling price for magnesium increased 15.3 percent while magnesium
shipments decreased 3.6 percent.  Selling prices were favorably impacted by an
increased percentage of contract sales versus spot sales and by higher 1996 U.S.
list prices, upon which most contract pricing is based.  Volumes were down due
to reduced spot sales due to competition from primarily Russian and Chinese
producers. According to IMA statistics, estimated worldwide market shipments
through the 1996 third calendar quarter were down 2.6 percent over the
comparable period in 1995.  Effective January 1, 1997, Magcorp's list price was
reduced by 6.7 percent which will reduce future sales revenues. Magnesium
pricing and volume are dependent on the overall market supply and demand, and
there is no assurance that current trends will continue.  Sabel's sales decrease
was due to a general weakening of prices and volume throughout all the steel
markets in which Sabel operates. 

   COST OF SALES for fiscal year 1996 decreased 3.6 percent from fiscal year
1995. Magcorp's cost of sales did not change significantly. Cost of sales at
Sabel decreased 14.5 percent, which percentage is higher than the sales decrease
discussed above due to lower cost of goods purchased for resale in the current
period.


                                     -13-

<PAGE>

   DEPRECIATION, DEPLETION, AND AMORTIZATION for fiscal year 1996 increased 12.8
percent from fiscal year 1995 primarily due to increased depreciation of
property, plant and equipment as a result of recent capital equipment additions.

   SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for fiscal year 1996 increased
22.9 percent, primarily due to one time charges totaling $3.85 million related
to contractual compensation payments made to certain executives of Magcorp in
connection with the dividend paid to Group in conjunction with the issuance of
11.5% Senior Notes described more fully in Note 5 to the Company's consolidated
financial statements, appearing elsewhere herein.  ($1.4 million of the $5.25
million paid was previously accrued as a result of profitable operations.) 
Excluding the $3.85 million charge, selling, general, and administrative
expenses for the year did not change significantly from the corresponding prior
year.

   INTEREST INCOME for fiscal year 1996 increased $0.5 million from fiscal year
1995 due to cash and cash equivalent balances on hand that increased to a month-
end average of approximately $26 million in the current year from a month-end
average of approximately $17 million in the corresponding prior year.

   INTEREST EXPENSE for 1996 increased $2.9 million primarily as a result of the
issuance of the 11.5% Senior Notes in July, 1996, which increased long-term debt
by $76.5 million.

   INCOME TAXES are estimated at statutory rates, including estimates of
available credits, for both years presented.

FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994

   SALES for fiscal year 1995 increased 39.8 percent. Magcorp's sales increased
by 50.3 percent. Both magnesium sales volume and selling price were favorably
affected by the tight supply conditions in the magnesium market. The increased
revenues at Magcorp were the result of a 27.7 percent increase in sales volume
and a 17.4 percent increase in selling price. According to IMA statistics, total
worldwide market shipments in 1995 calendar year increased 5.8 percent over the
comparable period in 1994. Sales at Sabel increased 17.2 percent, primarily as a
result of a 16 percent volume increase in its steel service centers, and to a
lesser extent higher prices in the steel and scrap metal markets.

   COST OF SALES for fiscal year 1995 increased by 13.9 percent from fiscal year
1994. Magcorp's cost of sales increased by 11.9 percent. Magcorp's cost of sales
did not increase in the same proportion as sales volume, however, because of
certain economies of scale achieved with higher production levels, together with
decreases in certain energy costs when compared to the corresponding period in
1994. Magcorp's cost of sales is highly sensitive to acquired energy costs and
levels of production; generally unit costs will increase as production levels
decrease. Cost of sales at Sabel increased 19.1 percent, due to increases in
sales volume and higher cost of products sold. The increasing costs of steel
products is indicative of pricing pressures facing Sabel in the markets in which
it operates.

   DEPRECIATION, DEPLETION, AND AMORTIZATION for fiscal year 1995 increased by
3.0 percent from fiscal year 1994 primarily due to increased depreciation of
property, plant and equipment as a result of recent capital equipment additions.

   SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES for fiscal year 1995 increased
13.0 percent. The increased expense is attributable to increased costs
associated with increased sales activity and profitable operations at Magcorp,
including profit sharing accruals, as well as increased ongoing legal costs
associated primarily with the import trade cases. Sabel also experienced
increased labor, labor related costs, and maintenance costs associated with its
increased sales activity.

   INTEREST INCOME for fiscal year 1995 increased $0.7 million from fiscal year
1994 due to cash and cash equivalent balances on hand that increased from $7.9
million at the beginning of 1995 to $30.1 million by the end of the fiscal year.

   INTEREST EXPENSE had no significant change for fiscal year 1995 from fiscal
year 1994.

   INCOME TAX EXPENSE (BENEFIT) was estimated at statutory rates.  The effective
rate in 1995 included a $1.5 million depletion credit allowable for Magcorp's
operations in profitable years, partially offset by a $0.4 million valuation
allowance charge for deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

   The Company's liquidity needs arise from working capital requirements,
capital expenditures, dividend payments, and interest payment obligations. The
Company's primary available source of liquidity is from cash provided by
operating activities. The Company also has available $40.0 million in Revolving
Credit Facilities that provide for advances by the lender to a maximum of $33.0
million for Magcorp and $7.0 million for Sabel, based on specified percentages
of eligible accounts receivable, supplies inventories, and finished goods
inventories, net of outstanding letters of credit. As of October 31, 1996, the
unused amounts available to Magcorp and Sabel were approximately $22.1 million
and $4.8 million, respectively. 


                                     -14-

<PAGE>


   Cash provided by operating activities was $39.2 million for 1996, of which
$11.2 million was used in capital expenditures.

   In July 1996, Renco Metals issued $150 million aggregate principal amount of
11 1/2% Senior Notes (the Notes) due July 1, 2003. Proceeds from the issuance of
the Notes together with available cash were used to: (i) retire $73.5 million of
the existing $75 million 12% Senior Notes due 2000 (Old Notes) at a rate of
112.75 percent of the principal amount outstanding plus accrued interest
pursuant to a tender offer and consent solicitation, (ii) redeem all of the
existing 10% preferred stock, held by Group, with a par value of $8.5 million,
(iii) pay a dividend to Group in the amount of $75.03 million, (iv) pay certain
contractual compensation payments related to the dividend totaling $5.25 million
to certain Magcorp executives, and (v) pay related fees and expenses.  An
extraordinary charge of $7.28 million (net of income tax benefit of $4.56
million) was incurred as a result of the early extinguishment of Old Notes.  As
a result of the items discussed above, together with additional dividends to
Group of $13.92 million and net repayments of debt, net cash used in financing
activities was $37.4 million for 1996, resulting in a net decrease in cash for
the year of $9.3 million.

    As of October 31, 1996, the Company has budgeted approximately $12 million,
$26 million and $24 million for capital expenditures for fiscal 1997, 1998, and
1999, respectively, of which an estimated $40 million is related to magnesium
process enhancements that will also improve environmental compliance.

   The declaration and payment of dividends by the Company are restricted by the
Company's debt agreements, which generally allow dividends up to 50 percent of
consolidated net income. Based on profitability and after taking into account
the Company's prospects and liquidity needs, the Company plans to pay quarterly
dividends to the extent allowed by the Company's debt agreements. Management
anticipates that existing cash balances and cash generated from operations, and
availability under its Revolving Credit Facilities will be sufficient to finance
the Company's liquidity needs for the foreseeable future.

ENVIRONMENTAL MATTERS

   The Company and its operations are subject to an increasing number of
federal, state, and local environmental laws and regulations governing, among
other things, air emissions, waste water discharge, and solid and hazardous
waste disposal. Environmental laws and regulations continue to change rapidly
and it is likely that the Company will be subject to increasingly stringent
environmental standards. Compliance with such laws and regulations is a
significant factor in the Company's operations as it is with all domestic
industrial facilities. The Company believes that it has to date materially
complied with all federal, state, and local environmental regulations and is
committed to maintaining its compliance with these laws. See "ITEM 1.  
Business -- Environmental Matters."

ITEM 8.  FINANCIAL STATEMENTS

   Financial statements follow immediately and are listed in ITEM 14 of Part IV
of this report.


                                     -15-

<PAGE>






                             INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholder
Renco Metals, Inc. and Subsidiaries:


We have audited the accompanying consolidated balance sheets of Renco Metals,
Inc. and subsidiaries as of October 31, 1996 and 1995, and the related
consolidated statements of operations, stockholder's equity (deficit), and cash
flows for each of the years in the three-year period ended October 31, 1996. In
conjunction with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index.  These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Renco Metals, Inc.
and subsidiaries as of October 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended October 31, 1996, in conformity with generally accepted accounting
principles.  Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

As discussed in note 2(f) to the consolidated financial statements, the Company
changed its method of accounting for income taxes as of November 1, 1993 to
adopt the provisions of Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES.

                                      
                                       KPMG Peat Marwick LLP


Salt Lake City, Utah
December 3, 1996



                                     -16-


<PAGE>
                                      
                     RENCO METALS, INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS

                          OCTOBER 31, 1996 AND 1995
              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                        ASSETS                            1996       1995   
                                                        --------   -------- 
Current assets: 
  Cash and cash equivalents                             $ 20,779   $ 30,091 
  Accounts receivable, less allowance for
   doubtful accounts of $514 in 1996 and 1995             24,864     27,854 
  Income tax refund receivable                             1,467        575 
  Inventories, net                                        26,447     21,631 
  Prepaid expenses                                         1,663        801 
                                                        --------   -------- 
    Total current assets                                  75,220     80,952 

Property, plant, and equipment, net                       36,613     32,014 
Other assets, net                                          6,825      3,585 
                                                        --------   -------- 
                                                        $118,658    116,551 
                                                        --------   -------- 
                                                        --------   -------- 

    LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
  Current installments of long-term debt                $     18   $     15 
  Accounts payable                                         7,794      7,511 
  Accrued expenses                                        19,486     14,327 
  Deferred income taxes                                      245        219 
                                                        --------   -------- 
    Total current liabilities                             27,543     22,072 

Long-term debt, excluding current installments           154,132     77,997 
Postretirement medical benefits                            6,605      6,477 
Deferred income taxes                                      2,180      1,646 
Other liabilities                                          2,232      3,599 
                                                        --------   -------- 
    Total liabilities                                    192,692    111,791 
                                                        --------   -------- 

Stockholder's equity (deficit):
  10% preferred stock, $1,000 par value.  Authorized,
   issued, and outstanding 8,500 shares in 1995                -      8,500 
  Common stock, no par value.  Authorized, issued,
   and outstanding 1,000 shares                                1          1 
  Additional paid-in capital                                 500        500 
  Accumulated deficit                                    (74,535)    (4,028)
  Minimum pension liability adjustment                         -       (213)
                                                        --------   -------- 
    Net stockholder's equity (deficit)                   (74,034)     4,760 

Commitments and contingencies                                  -          - 
                                                        --------   -------- 
                                                        $118,658   $116,551 
                                                        --------   -------- 
                                                        --------   -------- 


See accompanying notes to consolidated financial statements.


                                     -17-
<PAGE>

                     RENCO METALS, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994
                            (DOLLARS IN THOUSANDS)

<TABLE>
                                                              1996        1995        1994   
                                                            --------    --------    -------- 
<S>                                                         <C>         <C>         <C>      
Sales                                                       $196,974    $185,806    $132,950 

Costs and expenses:
  Cost of sales                                              116,808     121,189     106,364 
  Depreciation, depletion, and amortization                    6,509       5,770       5,604 
  Selling, general, and administrative expenses               22,704      18,470      16,352 
                                                            --------    --------    -------- 
    Income from operations                                    50,953      40,377       4,630 

Interest income                                                1,353         881         186 
Interest expense                                             (13,045)    (10,138)    (10,208)
                                                            --------    --------    -------- 

    Income (loss) before income taxes, 
     extraordinary item, and cumulative effect 
     of change in accounting principle                        39,261      31,120      (5,392)

Income tax expense (benefit)                                  13,534      11,143      (1,932)
                                                            --------    --------    -------- 

    Income (loss) before extraordinary item and 
     cumulative effect of change in accounting 
     principle                                                25,727      19,977      (3,460)

Extraordinary item - extinguishment of debt (less 
 applicable income tax benefit of $4,559) (note 5)            (7,284)          -           - 

Cumulative effect of change in accounting for
 income taxes                                                      -           -          30 
                                                            --------    --------    -------- 
    Net income (loss)                                       $ 18,443    $ 19,977    $ (3,430)
                                                            --------    --------    -------- 
                                                            --------    --------    -------- 
</TABLE>


See accompanying notes to consolidated financial statements.













                                      -18- 
<PAGE>

                     RENCO METALS, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)

                YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994

                            (DOLLARS IN THOUSANDS)
<TABLE>
                                                                                                          Net     
                                                                                           Minimum       stock-   
                                                                 Additional      Accum-    pension      holder's  
                                          Preferred     Common     paid-in      ulated    liability      equity   
                                            stock       stock      capital      deficit   adjustment    (deficit) 
                                          ---------     ------     -------     --------   ----------    --------- 
<S>                                         <C>           <C>        <C>         <C>         <C>           <C>    
Balances at October 31, 1993               $ 8,500          1        500       (20,575)      (426)       (12,000)

  Minimum pension liability adjustment           -          -          -             -        426            426 

  Net loss                                       -          -          -        (3,430)         -         (3,430)
                                           -------        ---        ---       -------       ----        ------- 
Balances at October 31, 1994                 8,500          1        500       (24,005)         -        (15,004)

  Minimum pension liability adjustment           -          -          -             -       (213)          (213)

  Net income                                     -          -          -        19,977          -         19,977 
                                           -------        ---        ---       -------       ----        ------- 

Balances at October 31, 1995                 8,500          1        500        (4,028)      (213)         4,760 

  Retirement of preferred stock             (8,500)         -          -             -          -         (8,500)

  Dividends                                      -          -          -       (88,950)         -        (88,950)

  Minimum pension liability adjustment           -          -          -             -        213            213 
  Net income                                     -          -          -        18,443          -         18,443 
                                           -------        ---        ---       -------       ----        ------- 
Balances at October 31, 1996               $     -          1        500       (74,535)         -        (74,034)
                                           -------        ---        ---       -------       ----        ------- 
                                           -------        ---        ---       -------       ----        ------- 
</TABLE>


See accompanying notes to consolidated financial statements.


                                        -19-
<PAGE>


                        RENCO METALS, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                    YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994

                               (DOLLARS IN THOUSANDS)

<TABLE>

                                                                   1996         1995        1994
                                                                 --------      ------      ------
<S>                                                               <C>           <C>          <C>
Cash flows from operating activities:
  Net income (loss)                                              $ 18,443      19,977      (3,430)
  Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
    Depreciation, depletion, and amortization                       6,509       5,770       5,604
    Extraordinary item- extinguishment of debt                     11,843           -           -
    Amortization of financing fees                                    853         772         772
    Cumulative effect of accounting change                              -           -         (30)
    Loss (gain) on sale of equipment                                   76          78          (1)
    Deferred income taxes                                             561       1,865        (430)
    Provision for bad debts                                           152         188          93
    Postretirement and deferred compensation plans                  5,314       1,292         486
    Decrease (increase) in operating assets:
      Accounts receivable                                           2,838      (5,285)     (4,083)
      Income tax refund receivable                                   (891)        392        (518)
      Inventories                                                  (4,583)        220       1,284
      Prepaid expenses                                             (1,095)       (271)      1,184
      Other assets                                                     28         (20)         31
    Increase (decrease) in operating liabilities:
      Accounts payable                                                282        (546)        662
      Accrued expenses                                              5,159       5,630      (1,326)
      Other liabilities                                            (6,254)        (25)        135
                                                                 --------      ------      ------
        Net cash provided by operating activities                  39,235      30,037         433
                                                                 --------      ------      ------
Cash flows from investing activities:
  Capital expenditures                                            (11,223)     (7,185)     (3,227)
  Proceeds from sale of equipment                                      40         185           9
                                                                 --------      ------      ------
        Net cash used in investing activities                     (11,183)     (7,000)     (3,218)
                                                                 --------      ------      ------
Cash flows from financing activities:
  Net borrowings (repayments) under revolving credit agreements      (347)     (1,317)      3,085
  Repayment of long-term debt                                     (73,516)        (10)       (108)
  Financing fees and tender offer premiums paid                   (16,051)          -           -
  Borrowings of long-term debt                                    150,000         500           -
  Dividends to Group                                              (88,950)          -           -
  Retirement of preferred stock                                    (8,500)          -           -
                                                                 --------      ------      ------
        Net cash provided by (used in) financing activities       (37,364)       (827)      2,977
                                                                 --------      ------      ------
Increase (decrease) in cash and cash equivalents                   (9,312)     22,210         192
Cash and cash equivalents, beginning of year                       30,091       7,881       7,689
                                                                 --------      ------      ------
Cash and cash equivalents, end of year                           $ 20,779      30,091       7,881
                                                                 --------      ------      ------
                                                                 --------      ------      ------
</TABLE>


                                       -20-

<PAGE>

                     RENCO METALS, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                YEARS ENDED OCTOBER 31, 1996, 1995, AND 1994

                            (DOLLARS IN THOUSANDS)
<TABLE>
                                                                           1996       1995       1994
                                                                          ------     -----      -----
<S>                                                                        <C>        <C>        <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest                                    $9,014     9,366      8,986
Cash paid (refunds received) during the year for income taxes              9,363     8,888       (984)

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Minimum pension liability adjustment to other assets                      $  (87)      469       (401)
Minimum pension liability adjustment to other liabilities                    300      (682)       827
</TABLE>



See accompanying notes to consolidated financial statements.











                                       -21-

<PAGE>

                       RENCO METALS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        OCTOBER 31, 1996, 1995, AND 1994

                             (DOLLARS IN THOUSANDS)

(1)  PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
     
     Renco Metals, Inc. (Renco Metals) is a holding company incorporated in
     Delaware in July, 1993, and is a 100 percent owned subsidiary of The Renco
     Group, Inc. (Group).
     
     The accompanying consolidated financial statements include the accounts of
     Renco Metals and its subsidiaries, Magnesium Corporation of America
     (Magcorp) and Sabel Industries, Inc. (Sabel) (collectively the Company). 
     Renco Metals is a holding company that has no independent operations, and
     its only assets are cash and its investments in Magcorp and Sabel.  Magcorp
     owns and operates a magnesium production plant on the Great Salt Lake at
     Rowley, Utah, and sells pure magnesium and magnesium alloys to domestic and
     international customers.  Sabel is a diversified company in the southeast
     United States primarily involved in the steel service center, scrap metal
     and rebar businesses.
     
     Renco Metal's senior notes are unconditionally and fully guaranteed,
     jointly and severally, by both of its subsidiaries, Magcorp and Sabel (the
     Guarantors).  Separate financial statements of the Guarantors are not
     presented because, in management's opinion, such financial statements would
     not be material to investors.  Summarized financial information on the
     combined Guarantors is presented below: 
     
               SUMMARIZED COMBINED GUARANTOR FINANCIAL INFORMATION

<TABLE>
                                                            Years ended October 31,
                                                          ----------------------------
                                                            1996       1995     1994
                                                          --------   -------   -------
<S>                                                       <C>        <C>       <C>
     Combined Guarantor statement of operations data:
         Net sales                                        $196,974   185,806   132,950
         Cost of sales                                     116,808   121,189   106,364
         Income (loss) before extraordinary items and 
             accounting change                              25,603    19,787    (3,597)
         Net income (loss)                                  18,319    19,787    (3,567)

                                                              October 31,
                                                          ------------------
                                                            1996      1995
                                                          --------   -------
     Combined Guarantor balance sheet data:
         Current assets                                   $ 71,982    75,163
         Noncurrent assets                                  43,438    35,599
         Current liabilities                                20,907    19,434
         Noncurrent liabilities                             13,649    14,719
</TABLE>

                                     -22-

<PAGE>

                       RENCO METALS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  CASH AND CASH EQUIVALENTS
          
          For purposes of reporting cash flows, the Company considers all highly
          liquid financial instruments purchased with a maturity of three months
          or less to be cash equivalents.  Cash equivalents consist of the
          following:

                                                       1996          1995
                                                      ------        -----
               Money market funds                     $8,045        5,132
               Certificates of deposit                   150          140
                                                      ------        -----
                                                      $8,195        5,272
                                                      ------        -----
                                                      ------        -----

     (b)  INVENTORIES
          
          Inventories are stated at the lower of cost or market, using either
          weighted averaging last-in, first-out (LIFO) or first-in, first-out
          (FIFO).  
          
     (c)  PROPERTY, PLANT, AND EQUIPMENT
          
          Property, plant, and equipment are carried at cost. Depreciation is
          computed primarily on the straight-line method over the estimated
          useful lives of the related assets.  Expenditures for normal repairs
          and maintenance are charged to expense as incurred.
          
     (d)  OTHER ASSETS
          
          Other assets include financing costs associated with long-term debt. 
          The costs are being amortized using the straight-line method over the
          period of the related long-term debt.  Other assets consist of the
          following:

                                                          1996      1995
                                                         ------    -----
              Loan origination and financing fees        $6,680    4,738
              Unrecognized pension prior service cost       449      536
              Deposits and other                             20       48
                                                         ------    -----
                                                          7,149    5,322
              Less accumulated amortization                 324    1,737
                                                         ------    -----
                                                         $6,825    3,585
                                                         ------    -----
                                                         ------    -----

     (e)  DEFERRED COMPENSATION
          
          The Company has deferred compensation agreements with certain key
          employees in the form of net worth appreciation participation
          agreements.  The deferred compensation is based on the performance of
          the Company over the period of the employee's employment.  The
          aforementioned agreements have been accounted for as deferred
          compensation in the accompanying consolidated financial statements.

                                     -23-

<PAGE>

                       RENCO METALS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)

     (f)  OTHER LIABILITIES
          
          POSTRETIREMENT HEALTH CARE BENEFITS
          
          Magcorp provides postretirement health care benefits to substantially
          all of its salaried employees.  The liability is accrued over the
          employee's estimated period of employment based on actuarially
          determined amounts.  Benefits are funded as costs are actually
          incurred.
          
          ENVIRONMENTAL COMPLIANCE COSTS
          
          Industrial companies such as Magcorp and Sabel have in recent years
          become subject to increasingly demanding environmental standards
          imposed by federal, state, and local environmental laws and
          regulations.  It is the policy of the Company to endeavor to comply
          with applicable environmental laws and regulations.  The Company
          considers current information, environmental laws and regulations, and
          adjusts its related accruals as considered necessary.
          
     (g)  INCOME TAXES
          
          The Company and Group file a consolidated federal income tax return
          and have a tax sharing agreement which requires that the operating
          companies provide for federal and state income taxes as if they were
          filing separate income tax returns except that generally, no
          carryforward of net operating losses is permitted, unless such losses
          are generated by net tax temporary differences.  Under the terms of
          the agreement, each subsidiary is required to remit to Group the
          amount of federal income taxes provided.
          
          Effective November 1, 1993, the Company adopted Statement of Financial
          Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES (Statement
          109).  The cumulative effect of this change in accounting for income
          taxes of $30 is reported separately in the consolidated statement of
          operations for 1994.  Statement 109 requires the recognition of
          deferred tax liabilities and assets for the temporary differences
          between the financial reporting bases and tax bases of the Company's
          assets and liabilities at enacted rates expected to be in effect when
          such amounts are realized or settled.  Prior years' consolidated
          financial statements have not been restated to apply the provisions of
          Statement 109.
     
     (h)  RECLASSIFICATIONS
     
          Certain reclassifications have been made to the 1995 and 1994
          consolidated financial statements to conform to the 1996 presentation.
     
     (i)  USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
     
          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the consolidated financial statements and the reported amounts
          of revenues and expenses during the reporting period.  Actual results
          could differ from those estimates.
          
                                     -24-

<PAGE>

                       RENCO METALS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)

     (j)  FINANCIAL INSTRUMENTS
          
          The carrying value of accounts receivable, accounts payable, and
          accrued expenses approximates their estimated value due to the
          relative short maturity of these instruments.  The carrying value of
          long-term debt approximates its estimated fair value due to recent
          issuance of the debt.
          
     
(3)  INVENTORIES
     
     Inventories consist of the following: 
     
                                                           1996       1995
                                                         -------     ------
               Finished goods                            $17,293     12,600
               Brine in ponds                              1,942      2,677
               Spare parts and supplies                    6,937      5,897
               Raw materials and work-in-process             855        798
                                                         -------     ------
                                                          27,027     21,972
               Less LIFO reserve                             580        341
                                                         -------     ------
                                                         $26,447     21,631
                                                         -------     ------
                                                         -------     ------

     LIFO inventory was reduced in 1995.  This reduction resulted in charging 
     lower inventory costs prevailing in previous years to cost of sales, thus 
     reducing cost of sales by approximately $570 below the amount that would 
     have resulted from replacing the liquidated inventory at October 31, 1995
     prices.

     
(4)  PROPERTY, PLANT, AND EQUIPMENT
     
     Property, plant, and equipment are summarized as follows:

                                                               1996      1995
                                                              -------   ------
             Land                                             $   390      390
             Buildings                                          5,036    4,986
             Equipment                                         62,962   54,187
             Leasehold improvements                               862      755
             Construction-in-process                            4,215    2,400
                                                              -------   ------
                                                               73,465   62,718
             Less accumulated depreciation and amortization    36,852   30,704
                                                              -------   ------
                                                              $36,613   32,014
                                                              -------   ------
                                                              -------   ------

                                     -25- 
<PAGE>
                                      
                    RENCO METALS, INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

                            (DOLLARS IN THOUSANDS) 

(5)  LONG-TERM DEBT

     Long-term debt is summarized as follows:

                                                            1996        1995  
                                                          --------    ------- 
          For Renco Metals:
            11.5% senior notes (a)                        $150,000          - 
            12% senior notes (b)                             1,500     75,000 

          For Magcorp:
            Revolving credit facility (c)                        -          - 

          For Sabel:
            Revolving credit facility (c)                    2,175      2,522 
            9.7% mortgage note                                 475        490 
                                                          --------    ------- 

               Total long-term debt                        154,150     78,012 

          Less current installments                             18         15 
                                                          --------    ------- 

               Long-term debt, excluding current 
                installments                              $154,132     77,997 
                                                          --------    ------- 
                                                          --------    ------- 

     The aggregate maturities of long-term debt for each of the twelve-
     month periods subsequent to October 31, 1996 are as follows: 1997,
     $18; 1998, $20; 1999, $2,197; 2000, $1,915; 2001, $-0-, and
     thereafter, $150,000.
     
     (a)  11.5% SENIOR NOTES

          In July 1996, Renco Metals issued $150,000 aggregate principal amount
          of 11.5 percent senior notes (the Notes) due July 1, 2003.  The Notes
          were registered under the Securities Act of 1933, as amended,
          effective June 27, 1996.  Proceeds from the issuance of the Notes
          together with available cash were used to: (i) retire $73,500 of the
          existing $75,000 12 percent senior notes due 2000 (Old Notes) at a
          rate of 112.75 percent of the principal amount outstanding plus
          accrued interest pursuant to a tender offer and consent solicitation,
          (ii) redeem all of the existing 10 percent preferred stock, held by
          Group, with a par value of $8,500, (iii) pay a dividend to Group in
          the amount of $75,028, (iv) pay certain contractual compensation
          payments related to the dividend totaling $5,252 to certain executives
          of Magcorp, and (v) pay related fees and expenses.  An extraordinary
          charge of $7,284 (net of income tax benefits of $4,559) was incurred
          as a result of the early extinguishment of Old Notes.
     
          The Notes are general unsecured obligations of Renco Metals, and are
          unconditionally and fully guaranteed, jointly and severally, by the
          Guarantors.  Secured indebtedness of the Guarantors, including
          borrowings under the Revolving Credit Facilities described below, is
          senior in right of payments to the Notes with respect to the assets
          securing such indebtedness.  Interest on the Notes is payable
          semiannually on January 1 and July 1 of each year, commencing January
          1, 1997.


                                     -26- 
<PAGE>
                    RENCO METALS, INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

                            (DOLLARS IN THOUSANDS) 

     (a)  11.5% SENIOR NOTES (continued)
     
          Except under certain circumstances defined in the indenture governing
          the Notes, the Notes are not redeemable prior to July 1, 2000. 
          Thereafter, the Notes are redeemable in whole or part, at the option
          of Renco Metals, at redemption prices ranging from 105.75 percent to
          100 percent of the principal amount, depending on the date of
          redemption.  The indenture governing the Notes contains certain
          covenants, that, among others, limit the type and amount of additional
          indebtedness that may be incurred by Renco Metals and impose
          limitations on investments, loans advances, the payment of dividends
          and making of certain other payments, the creation of liens, certain
          transactions with affiliates, and certain mergers.  At October 31,
          1996, Renco Metals was in compliance with all applicable covenants.

     (b)  12% SENIOR NOTES (OLD NOTES)
     
          Concurrent with the issuance of the 11.5 percent Notes described 
          above, Renco Metals purchased $73,500 of the $75,000 aggregate
          principal amount of Old Notes through a tender offer and consent
          solicitation, and amendments to the indenture governing the Old Notes
          were executed, leaving $1,500 of Old Notes remaining outstanding.  The
          amendments to the indenture involved deletion of a number of covenants
          to facilitate issuance of the new 11.5 percent Notes.  Renco Metals
          was in compliance with all remaining applicable covenants on the Old
          Notes at October 31, 1996.  The Old Notes are due July 15, 2000, are
          general unsecured obligations of Renco Metals, are unconditionally and
          fully guaranteed, jointly and severally, by the Guarantors, and have
          the same rank in right of payment with other senior indebtedness of
          Renco Metals.  Interest is payable semiannually on January 15 of each
          year.  On or after July 15, 1998, Renco Metals may, subject to certain
          conditions, redeem any or all of the remaining $1,500 of Old Notes at
          104 percent of the principal amount thereof, declining to 100 percent
          for redemptions on or after July 15, 1999 (in each case, together with
          accrued and unpaid interest to the redemption date).
     
     (c)  REVOLVING CREDIT FACILITIES
     
          Magcorp and Sabel each have revolving credit facility agreements that
          provide for advances by the lender based on specified percentages of
          eligible accounts receivable, supplies inventories, and finished goods
          inventories to a maximum of $33,000 for Magcorp and $7,000 for Sabel. 
          Advances bear interest at the prime rate plus one percent, payable
          monthly, and are secured primarily by all receivables and inventories
          of the borrower.  In addition, the lender may extend up to $5,000 and
          $1,500 of letter of credit accommodations to Magcorp and Sabel,
          respectively, within the limits set forth above.  Outstanding letters
          of credit under the agreements at October 31, 1996 total $2,955 for
          Magcorp and $-0- for Sabel.  Based on these criteria as of October 31,
          1996, the unused amounts available to Magcorp and Sabel were
          approximately $22,100 and $4,800, respectively.  The revolving credit
          facilities will continue until August 1999 and from year to year
          thereafter, provided that either Magcorp or Sabel, as the case may be,
          or the lender may terminate either of the facilities as of August 31,
          1999, or any subsequent anniversary date on 60 days advance written
          notice. 
     
          The revolving credit facilities contain various covenants and
          restrictions including financial covenants that specify Magcorp and
          Sabel maintain specified ratios or minimum financial amounts with
          regard to net worth and working capital, as well as restrictions
          regarding additional indebtedness, liens, loans, dividends, and
          transactions with affiliates.  At October 31, 1996, Magcorp and Sabel
          were in compliance with all applicable covenants.


                                    -27- 
<PAGE>
                                      
                    RENCO METALS, INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

                            (DOLLARS IN THOUSANDS) 


(6)  PREFERRED STOCK

     The Company has authorized 8,500 shares of preferred stock, which were
     redeemed in July 1996 in conjunction with the issuance of the 11.5
     percent Notes discussed above.

(7)  INCOME TAXES

     Components of income tax expense (benefit) follow, allocated to income
     from continuing operations:


                                Current       Deferred     Total  
                                --------      --------     ------ 
          1996:
               Federal          $ 11,036         204       11,240 
               State               1,937         357        2,294 
                                --------      ------       ------ 
                                $ 12,973         561       13,534 
                                --------      ------       ------ 
                                --------      ------       ------ 
          1995:
               Federal          $  8,988         530        9,518 
               State                 290       1,335        1,625 
                                --------      ------       ------ 
                                $  9,278       1,865       11,143 
                                --------      ------       ------ 
                                --------      ------       ------ 
          1994:
               Federal          $ (1,578)       (392)      (1,970)
               State                  76         (38)          38 
                                --------      ------       ------ 
                                $ (1,502)       (430)      (1,932)
                                --------      ------       ------ 
                                --------      ------       ------ 

     In addition to the above income taxes, the Company recognized a
     current income tax benefit of $4,559 in 1996 related to extraordinary
     losses on the early retirement of debt (see note 5).

     The statutory federal income tax rate is reconciled to the effective
     income tax rate as follows:

                                                  1996       1995       1994  
                                                 -------    ------     ------ 

     Computed "expected" tax expense (benefit)   $13,742    10,892     (1,893)
     State and local tax, net of 
      federal benefit                              1,381     1,400         64 
     Depletion                                    (1,553)   (1,505)      (792)
     Change in deferred tax asset 
      valuation allowance                              -       350        543 
     Other                                           (36)        6        146 
                                                 -------    ------     ------ 
       Income tax provision (benefit)            $13,534    11,143     (1,932)
                                                 -------    ------     ------ 
                                                 -------    ------     ------ 


                                    -28- 
<PAGE>
                                      
                    RENCO METALS, INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

                            (DOLLARS IN THOUSANDS) 


(7)  INCOME TAXES (continued)

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and deferred tax liabilities at
     October 31, 1996 and 1995, are as follows:


                                                           1996        1995  
                                                          -------     ------ 
          Deferred tax assets:
               Bad debt reserves                          $   194        194 
               Inventories-uniform capitalization             272        239 
               Vacation accruals                               59         80 
               Payable to Group                               122        122 
               Deferred compensation                          101        511 
               Miscellaneous accruals                          71         95 
               Net operating loss carryforwards             2,366      2,685 
               Postretirement medical benefit               1,042        993 
               Environmental reserve                          459        459 
                                                          -------     ------ 

                    Total gross deferred tax assets         4,686      5,378 
                    Less valuation allowance                  893        893 
                                                          -------     ------ 

                    Net deferred tax assets                 3,793      4,485 
                                                          -------     ------ 

          Deferred tax liabilities:
               Inventory basis difference                    (827)      (827)
               Accumulated depreciation                    (5,391)    (5,523)
                                                          -------     ------ 

                    Total gross deferred tax liabilities   (6,218)    (6,350)
                                                          -------     ------ 

                    Net deferred tax liability            $(2,425)    (1,865)
                                                          -------     ------ 
                                                          -------     ------ 

          Deferred income taxes - current                 $  (245)      (219)
          Deferred income taxes - noncurrent               (2,180)    (1,646)
                                                          -------     ------ 

                    Net deferred tax liability            $(2,425)    (1,865)
                                                          -------     ------ 
                                                          -------     ------ 


     The net change in the total valuation allowance for 1996 and 1995 was
     an increase of $-0- and $350, respectively.

     Management believes that existing taxable temporary differences, net
     of the established valuation allowance, will more likely than not
     reverse within the applicable carryforward periods to allow future
     realization of existing net deferred tax assets.

                                    -29- 

<PAGE>

                      RENCO METALS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)


(8)  RELATED PARTY TRANSACTIONS

     Magcorp has $318 payable to Group at October 31, 1996 and 1995, that
     is noninterest bearing.  The payable is included in other liabilities
     in the accompanying consolidated balance sheet and is subordinated to
     the liabilities described in note 5.

     Group provides management services to the Company under a management
     agreement.  Such services include operational consulting, budget
     review, income tax consulting and contracting for insurance under
     master policies.  Pursuant to the agreement, which expires on October
     31, 2000, Group provides such services to the Company for an annual
     management fee of $1,200.  The Company paid management fees to the
     Group of $1,200 for each of the years ended in the three-year period
     ended October 31, 1996.

     During 1996, the Company paid to Group dividends totaling $88,950,
     including $75,028 paid in conjunction with the issuance of the 11.5
     percent Notes discussed in note 5.


(9)  EMPLOYEE BENEFIT PLANS
     
     (a)  PENSION AND PROFIT SHARING PLANS
     
          MAGCORP
     
          Magcorp has a defined benefit plan for hourly employees, a
          defined contribution plan for salaried employees, and thrift
          plans for all employees.  All of Magcorp's plans have fiscal
          year-ends of December 31.
     
          Pension benefits for Magcorp's defined benefit plan are generally
          based on a flat dollar amount times years of credited service,
          including years of employment with the previous owner.  Magcorp's
          funding policy is to contribute amounts sufficient to satisfy
          regulatory funding standards, based upon independent actuarial
          valuations.  Net pension cost for the defined benefit plan for
          1996, 1995, and 1994, includes the following components:


<TABLE>
                                                                1996      1995      1994
                                                               -----      ----      ----
                <S>                                             <C>        <C>       <C>
            Service cost - benefits earned during the year     $ 192       143       184
            Interest cost on projected benefit obligations       291       232       235
            Return on assets                                    (423)     (381)      (64)
            Net amortization and deferral                        197       182       (99)
                                                               -----      ----       ---
              Net pension cost                                 $ 257       176       256
                                                               -----      ----       ---
                                                               -----      ----       ---
</TABLE>


                                      -30-

<PAGE>

                      RENCO METALS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                            (DOLLARS IN THOUSANDS)


(9)  EMPLOYEE BENEFIT PLANS (continued)
     
          The plan's funded status at each October 31, was as follows:

<TABLE>
                                                                            1996           1995        1994
                                                                          -------         ------      ------
                 <S>                                                       <C>             <C>          <C>
          Actuarial present value of benefit obligations:
            Vested benefits                                               $ 3,854          3,562       2,449
            Nonvested benefits                                                512            471         387
                                                                          -------         ------      ------
              Accumulated benefit obligations                             $ 4,366          4,033       2,836
                                                                          -------         ------      ------
                                                                          -------         ------      ------
          Plan's assets at fair value, principally listed securities      $ 3,683          3,169       2,720
          Actuarial present value of projected benefit obligations         (4,366)        (4,033)     (2,836)
                                                                          -------         ------      ------
              Projected benefit obligations in excess of plan assets         (683)          (864)       (116)
          Unrecognized prior service cost                                     498            536         397
          Unrecognized net loss (gain) from past experience and
           effects of changes in assumptions                                  (48)           213        (329)
                                                                          -------         ------      ------

              Net prepaid (accrued) pension cost prior to
               adjustment for minimum liability                              (233)          (115)        (48)
          Adjustment for additional minimum liability                        (449)          (749)        (68)
                                                                          -------         ------      ------
              Net accrued minimum liability                               $  (682)          (864)       (116)
                                                                          -------         ------      ------
                                                                          -------         ------      ------
</TABLE>

          Assumptions used above for Magcorp's defined benefit plan as of
          October 31, 1996, 1995, and 1994 include:

<TABLE>
                                                                   1996      1995      1994
                                                                   -----     -----     -----
               <S>                                                  <C>       <C>       <C>
          Discount rates for determining estimated obligations
           and interest cost                                       7.25%     7.25%     8.25%
          Expected aggregate average long-term change in
           compensation                                             n/a       n/a       n/a
          Expected long-term return on assets                      8.25%     8.25%     8.25%
</TABLE>

          Contributions for Magcorp's defined contribution plan are based
          upon age, years of service, and gross compensation for each
          salaried employee, and totaled approximately $709, $612, and
          $585, for 1996, 1995, and 1994, respectively.

          Magcorp has a salaried thrift plan and an hourly thrift plan that
          qualify under the Internal Revenue Code Section 401(k).  The
          plans are available to substantially all employees.  Magcorp may
          make discretionary matching contributions of 50 percent of each
          hourly employee's contribution, and 75 percent of each salaried
          employee's contribution up to the first six percent of each
          employee's compensation.  Matching contributions were $432 and
          $310, for 1996 and 1995, respectively.  There were no matching
          contributions during fiscal year 1994.


                                     -31-

<PAGE>



                      RENCO METALS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)


(9)  EMPLOYEE BENEFIT PLANS (continued)
     
          SABEL
     
          Under an agreement with the United Steelworkers' Union, which
          covers certain production employees, Sabel contributes to a
          pension plan based on a set amount per hour worked for covered
          employees.  The contributions to the plan were $40, $78, and $59
          for 1996, 1995, and 1994, respectively.
     
          Sabel has a noncontributory profit sharing plan for management
          and administrative employees.  The amount of the annual
          contribution, if any, is at the discretion of Sabel and is not to
          exceed 15 percent of the compensation of the eligible employees. 
          The contributions were $99, $191 and $98, for 1996, 1995, and
          1994 respectively.
     
     (b)  POSTRETIREMENT MEDICAL BENEFIT PLAN
     
          Magcorp sponsors a self-insured, fee-for-service health care plan
          that provides postretirement medical benefits to salaried
          retirees who retire from active employment status on or after age
          55 with ten or more years of service.  Qualified retirees will
          receive lifetime benefits for themselves and their spouses. 
          Employees who retire on or after age 55 with less than ten years
          but at least five years or more of service, will receive benefits
          paid by Magcorp only after age 65.
     
          The following table presents the plan's funded status reconciled
          with amounts recognized in the Company's consolidated balance
          sheets at October 31, 1996 and 1995:

<TABLE>
                                                                    1996       1995
                                                                   ------     -----
              <S>                                                    <C>       <C>
          Accumulated postretirement benefit obligation:
            Retirees                                               $  475       425
            Fully eligible active plan participants                 1,006       900
            Other active plan participants                          1,827     1,636
                                                                   ------     -----
                                                                    3,308     2,961
          Plan assets at fair value                                     -         -
                                                                   ------     -----
              Accumulated postretirement benefit obligation in 
               excess of plan assets                                3,308     2,961
          Unrecognized net gain                                     3,297     3,516
                                                                   ------     -----
              Accrued postretirement benefit obligation            $6,605     6,477
                                                                   ------     -----
                                                                   ------     -----
</TABLE>

     The unrecognized net gain is being amortized over a period of
     approximately fifteen years, which represents the average future
     working lifetime of the plan participants.  The amortization of the
     gain is offset against actual service cost and interest cost over the
     period of amortization.



                                     -32-

<PAGE>

                      RENCO METALS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)


(9)  EMPLOYEE BENEFIT PLANS (continued)
     
     Net period postretirement benefit cost includes the following
     components:
     
                                                   1996      1995     1994
                                                  ------     ----     ----
     Service cost                                 $  155      137      232
     Interest cost                                   213      196      264
     Amortization of gain                           (219)    (243)    (124)
                                                  ------     ----     ----
       Net periodic postretirement benefit cost   $  149       90      372
                                                  ------     ----     ----
                                                  ------     ----     ----

     For measurement purposes, an 7.8 percent annual rate of increase in
     the per capita cost of covered benefits (i.e., health care cost trend
     rate) was assumed for 1996; the rate was assumed to decrease gradually
     to 5.5 percent by the year 2018 and remain at that level thereafter. 
     The health care cost trend rate assumption has a significant effect on
     the amounts reported.  For example, increasing the assumed health care
     cost trend rates by one percentage point in each year would increase
     the accumulated postretirement benefit obligation as of October 31,
     1996 by $303 and the aggregate of the service and interest cost
     components of net periodic postretirement benefit cost for the year
     ended October 31, 1996 by $36.
     
     The weighted-average discount rate used in determining the accumulated
     postretirement benefit obligation was 7.25 percent at October 31, 1996
     and 1995.


(10) LEASES

     The Company has several noncancelable operating leases, primarily for
     office and warehouse space, and machinery and equipment.  These leases
     generally contain renewal options.  Future minimum lease payments
     under noncancelable operating leases (with initial or remaining lease
     terms in excess of one  year) as of October 31, 1996 are listed below:

               Year ending October 31:
                    1997                              $1,914
                    1998                               1,410
                    1999                               1,192
                    2000                               1,021
                    2001                                 313
                    Thereafter                           408
                                                      ------
                      Total minimum lease payments    $6,258
                                                      ------
                                                      ------

     Rent expense aggregated $2,393, $2,867, and $3,126 for 1996, 1995, and
     1994, respectively.  Included in rental expense was contingent rental
     expense of approximately $80, $122, and $106 for 1996, 1995, and 1994,
     respectively.  Additionally, included in rental expense are leases of
     certain office and warehouse space from entities in which the
     president of Sabel holds an indirect material interest.  Rent expense
     for such leases aggregated approximately $331, $339, and $342 for
     1996, 1995, and 1994, respectively.


                                       -33-

<PAGE>

                 RENCO METALS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        (DOLLARS IN THOUSANDS)

(11) COMMITMENTS AND CONTINGENCIES
     
     (a)  LITIGATION
     
          The Company and its subsidiaries are involved in litigation arising in
          the normal course of business.  It is not possible to state the
          ultimate liability, if any, in these matters.  In the opinion of
          management, based upon the advice of outside counsel, such litigation
          will not have any material effect on the Company.
     
     (b)  OTHER AGREEMENTS
     
          Magcorp assumed from its previous owner certain agreements with
          unrelated corporations (Nominal Lessor) under which tax benefits were
          transferred to the unrelated corporations as allowed under a provision
          of the Economic Recovery Tax Act of 1981.  Included in the terms of
          the agreements are various covenants, including a promise not to
          dispose of the property covered by the agreements, and also
          indemnification of the Nominal Lessor against any losses which might
          result from a breach of Magcorp's warranties and covenants.  The
          seller also holds a $1,000 irrevocable letter of credit as collateral
          for performance by Magcorp on the Nominal Lessor agreements.
          
          Magcorp and Sabel both have net worth appreciation participation
          agreements with certain executives wherein these individuals are
          entitled to receive a specified percentage of cumulative net income,
          less any common stock dividends, of their respective companies
          commencing at specified dates in the agreements, through the date of
          the individual's termination based on a specified vesting schedule. 
          Payment will be made in 40 equal quarterly installments, without
          interest, commencing three months after termination of employment.  If
          Magcorp or Sabel pays any cash dividend on its common stock during the
          term of the employment of the applicable executives, the respective
          company will make a cash payment to such executives equal to the total
          amount of the cash dividend multiplied by their applicable fully-
          vested participation percentage.  Amounts are accrued as earned.
     

(12) ACCRUED EXPENSES

     Accrued expenses consist of:

                                                        1996       1995
                                                      -------     ------
          Salaries, bonuses, vacation, and other
           related accruals                           $ 6,473      5,569
          Utilities                                     3,147      3,069
          Interest                                      5,803      2,638
          Taxes, other than income                        535        481
          Other                                         3,528      2,570
                                                      -------     ------
                                                      $19,486     14,327
                                                      -------     ------
                                                      -------     ------

                                     -34-
<PAGE>

                 RENCO METALS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        (DOLLARS IN THOUSANDS)

(13) SEGMENT INFORMATION

     The Company classifies its operations into two business segments:
     magnesium production and steel fabrication and wholesaling.  There are
     no intersegment sales.  Summarized financial information by business
     segment is as follows:

                                               1996      1995       1994
                                             --------   -------   -------
          Net sales:
             Magnesium                       $152,941   136,348    90,745
             Steel                             44,033    49,458    42,205
                                             --------   -------   -------
                                             $196,974   185,806   132,950
                                             --------   -------   -------
                                             --------   -------   -------

          Income from operations:
             Magnesium                       $ 49,119    37,993     2,723
             Steel                              1,938     2,467     1,979
             Corporate                           (104)      (83)      (72)
                                             --------   -------   -------
                                             $ 50,953    40,377     4,630
                                             --------   -------   -------
                                             --------   -------   -------

          Identifiable assets:
             Magnesium                       $ 99,796    94,849    67,904
             Steel                             15,624    15,913    15,535
             Corporate                          3,238     5,789     5,599
                                             --------   -------   -------
                                             $118,658   116,551    89,038
                                             --------   -------   -------
                                             --------   -------   -------

          Capital expenditures:
             Magnesium                       $ 10,564     6,051     2,574
             Steel                                659     1,134       653
                                             --------   -------   -------
                                             $ 11,223     7,185     3,227
                                             --------   -------   -------
                                             --------   -------   -------

          Depreciation, depletion,
           and amortization:
             Magnesium                       $  6,106     5,397     5,263
             Steel                                403       373       341
                                             --------   -------   -------
                                             $  6,509     5,770     5,604
                                             --------   -------   -------
                                             --------   -------   -------

                                     -35-
<PAGE>

                 RENCO METALS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        (DOLLARS IN THOUSANDS)

(14) SIGNIFICANT CUSTOMERS AND EXPORT SALES

     During 1995 and 1994, sales to any single customer did not exceed
     ten percent of total consolidated revenues.  During 1996, sales to
     Rossborough Manufacturing Co. LP approximated 12 percent of total
     revenues. The following table summarizes export sales to various
     geographic areas:

                                      1996       1995       1994
                                    -------     ------     -----
          Net export sales:
               Europe               $ 8,524      8,357     5,804
               Japan                  3,718      5,988     2,826
               Canada                 1,262      1,050       545
               Other                  1,670        798       104
                                    -------     ------     -----
                                    $15,174     16,193     9,279
                                    -------     ------     -----
                                    -------     ------     -----

                                     -36-

<PAGE>

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

     None.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

   The following table sets forth certain information regarding the directors
and executive officers of the Company, Magcorp and Sabel:
   
                 NAME         AGE               POSITION
                 ----         ---               --------
          Ira Leon Rennert    62    Chairman, Director, and Chief Executive
                                    Officer of the Company
          Roger L. Fay......  51    Vice President, Finance of the Company
          Michael H. Legge..  50    President and Chief Executive Officer of
                                    Magcorp
          Keith Sabel.......  46    Director, President and Chief Executive
                                    Officer of Sabel
          Justin W. D'Atri..  69    Director of Sabel
          Howard I. Kaplan..  52    Vice President of Sales and Marketing of
                                    Magcorp
          Ron L. Thayer.....  37    Vice President of Operations of Magcorp
          Lee R. Brown......  50    Vice President of Human Resources and
                                    Public and Governmental Affairs of
                                    Magcorp
          Todd R. Ogaard....  41    Vice President of Finance and
                                    Administration of Magcorp
  
     IRA LEON RENNERT has been the Chairman, Chief Executive Officer and sole
member of the Board of Directors of the Company since its inception and has been
the Chairman, CEO and principal shareholder of Group since its first acquisition
in 1975. In addition, Mr. Rennert is the Chairman of the Board of all of Group's
subsidiaries including WCI Steel, Inc. and AM General Corporation. Group was the
majority stockholder of Covert Marine, Inc., a wholesale distributor of
recreational boating equipment in Kansas City, Missouri, in respect of which an
order for relief was entered on October 23, 1992 under Chapter 11 of the
Bankruptcy Code by the U.S. Bankruptcy Court for the Western District of
Missouri. The Company has never had any business relationship with Covert
Marine, Inc.

     ROGER L. FAY has been Vice President, Finance for the Company since its
inception and has been Vice President, Finance for Group since 1983. Mr. Fay is
a certified public accountant. Before joining Group, Mr. Fay served for twelve
years as a controller of one of Group's subsidiaries.

     MICHAEL H. LEGGE was appointed President and Chief Executive Officer of
Magcorp on January 1, 1993. He was most recently Vice President of Operations at
the Rowley facility and has served in several managerial and technical positions
since joining NL Industries, Inc., a predecessor of Magcorp, in 1979.

     KEITH SABEL has served in his present position as President and Chief
Executive Officer of Sabel since 1990 and is also a director of Sabel. Mr. Sabel
has been with Sabel in various positions for the past 22 years.

     JUSTIN W. D'ATRI, a practicing attorney in New York, New York from 1952
until his retirement in June 1996, has been Secretary and a director of, and
legal counsel for, Group since its inception and is now a consultant to Group,
and Secretary of the Company since its incorporation. Mr. D'Atri has been the
Secretary and a director of Sabel since 1987, and Secretary of Magcorp since
August 1989. Mr. D'Atri was a director of Covert Marine, Inc. which is discussed
under Mr. Rennert's biography above.

     HOWARD I. KAPLAN has served in his present position as Vice President of
Sales and Marketing of Magcorp since 1986. Dr. Kaplan joined AMAX Magnesium, a
predecessor of Magcorp, in 1981 and served as Manager of Technical Market
Development, Process Control Superintendent and Electrolytics and Cast House
Superintendent. Dr. Kaplan has a Ph.D. from the University of Pennsylvania in
Metallurgy and Materials Science.

                                     -37-
<PAGE>

  RON L. THAYER has served in his present position since January 1, 1993. He was
most recently Operations Superintendent at the Rowley facility and has served in
several managerial and technical positions since joining AMAX Magnesium, a
predecessor of Magcorp, in 1988. Prior to joining AMAX Magnesium, Mr. Thayer was
with Williams Resources, a chemical company in Denver, Colorado.

  LEE R. BROWN has been Vice President of Human Resources at Magcorp since 1984.
Mr. Brown joined NL Industries, Inc., a predecessor of Magcorp, in 1978. Prior
to joining NL Industries, he spent 2 years with Kennecott Copper.

  TODD R. OGAARD joined Magcorp in February 1994, and assumed Vice President of
Finance responsibilities effective February, 1995. Mr. Ogaard is a certified
public accountant. Prior to joining Magcorp, he was a Senior Manager with the
accounting and consulting firm of KPMG Peat Marwick LLP, and had been with that
firm in various capacities from September 1981 through January 1994.

ITEM 11.  EXECUTIVE COMPENSATION.

     The following table sets forth certain information concerning compensation
of the named executive officers by the Company for services rendered to it in
all capacities during fiscal 1996, 1995 and 1994:

                           SUMMARY COMPENSATION TABLE

<TABLE>
                                                                                        Long-term
                                                                                          Compen-
                                                                                          sation
                   Name and                                    Annual Compensation(1)  ------------          All Other
                   Principal                                   ----------------------      LTIP               Compen-
                   Position                             Year     Salary       Bonus     Payouts (3)           sation
------------------------------------------------        ----   ---------    ---------  ------------       --------------
<S>                                                     <C>       <C>         <C>          C>                   <C>
Ira Leon Rennert (2)                                    1996    $      -    $      -    $        -        $90,149,675(2)
Chairman and Chief Executive Officer                    1995           -           -             -          1,200,000(2)
                                                        1994           -           -             -          1,200,000(2)

Michael H. Legge                                        1996     120,756     275,000     2,668,490             17,850(4)
President and Chief Executive Officer of Magcorp        1995     120,756     200,000             -             16,491(4)
                                                        1994     120,756      35,000             -             11,291(4)

Keith Sabel                                             1996     128,797     141,000             -              5,625(5)
President and Chief Executive Officer of Sabel          1995     124,061      21,000             -              8,050(5)
                                                        1994     120,890      14,000             -              4,466(5)

Howard I. Kaplan                                        1996      94,723     180,000       889,497             21,989(4)
Vice President of Sales and Marketing of Magcorp        1995      94,723     100,000             -             18,678(4)
                                                        1994      94,723      25,000             -              8,288(4)

Ron L. Thayer                                           1996      85,550     130,000       889,497              5,700(4)
Vice President of Operations of Magcorp                 1995      85,550     125,000                            6,064(4)
                                                        1994      81,688      25,000                            2,647(4)
</TABLE>

------------------------
(1)  Value of perquisites per individual did not exceed the lesser of $50,000 or
     10 percent of total salary and bonus per named executive officer.

(2)  Mr. Rennert receives no cash compensation directly from the Company. He is
     Chairman of the Board. All of the Company's issued and outstanding capital
     stock is owned by Group, which is 95.9 percent owned by Mr. Rennert and by
     trusts established by him for himself and members of his family (but of
     which he is not a trustee). Group receives a management fee from the
     Company pursuant to a management agreement. The amount shown includes the
     $1.2 million annual management fee paid by the Company to Group for each
     fiscal year. See "ITEM 13.  Certain Relationships and Related
     Transactions." In 1996, the Company paid Group dividends totaling $88.95
     million, including $75.03 million paid in conjunction with the issuance of
     11.5% Senior Notes described more fully in Note 5 to the Company's
     consolidated financial statements, appearing elsewhere herein.

(3)  The amounts shown as "LTIP Payouts" in the table for each named executive
     officer represent contractual payments under such officer's Net Worth
     Appreciation Agreement.  See "--Net Worth Appreciation Agreements" below. 

(4)  The other compensation shown consists of employer contributions to a
     defined contribution pension plan, and matching contributions under
     Magcorp's 401(k) savings plan.

                                       -38-
<PAGE>

(5)  Consists of employer contributions to a noncontributory profit sharing
     plan.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Company had no compensation committee during fiscal 1996. The sole
member of the Board of Directors was Ira Leon Rennert. The compensation for the
executive officers is fixed by negotiations between such executive officers and
Mr. Rennert acting on behalf of Group.
  
     During fiscal 1996, no executive officer of the Company served (a) as a
member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served on the
Company's board of directors, (b) as a director of another entity, one of whose
executive officers served on the Company's board of directors or (c) as a member
of the compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers served as a
Director of the Company.

EMPLOYMENT AGREEMENTS

     Mr. Legge is employed by Magcorp pursuant to an employment agreement
effective as of January 1, 1993 which continues until December 31, 1997 and for
additional one-year periods thereafter unless terminated by either party by
written notice given 30 days prior to then current expiration date. Pursuant to
such employment agreement, Mr. Legge will receive a base minimum annual salary
of $120,000 and a bonus of at least $35,000 for each fiscal year in which
Magcorp is profitable.

     Dr. Kaplan is employed by Magcorp pursuant to an employment agreement
effective as of June 1, 1994 which continues until October 31, 1999 and for
additional one-year periods thereafter unless terminated by either party by
written notice given 6 months prior to the then current expiration date.
Pursuant to such employment agreement, Mr. Kaplan will receive a base minimum
annual salary of $94,723 and a bonus of at least $25,000 for each fiscal year in
which Magcorp is profitable.

     Mr. Thayer is employed by Magcorp pursuant to an employment agreement
effective as of January 1, 1993 which continues until December 31, 1997 and for
additional one-year periods unless terminated by either party by written notice
given 30 days prior to the then current expiration date. Pursuant to such
employment agreement, Mr. Thayer will receive a base minimum annual salary of
$85,500 and a bonus of at least $20,000 for each fiscal year in which Magcorp is
profitable. 

NET WORTH APPRECIATION AGREEMENTS

     Mr. Legge, Dr. Kaplan, Mr. Thayer and two other officers of Magcorp are
each parties to Net Worth Appreciation Agreements ("NWAP Agreements") with
Magcorp, under which he will be entitled to receive a fixed percentage of the
increase in the net worth of Magcorp from August 1, 1996 until the end of the
fiscal quarter preceding the date of the termination of his employment or, if
the employee leaves voluntarily following the expiration of 30 days after his
giving notice of resignation. Such amount is payable without interest in 40
equal quarterly installments commencing on the employee's termination, or, if
later, the earlier of June 11, 2011 or his attaining the age 62 (or his prior
death or disability), and so long as he has not engaged in any business
competitive with that of Magcorp subsequent to leaving his employment. The
maximum aggregate percentage payable to the five executives is 7 percent of such
increase in the net worth of Magcorp.

     Mr. Sabel and one other officer of Sabel are each parties to NWAP
Agreements with Sabel entitling them upon leaving the employment of Sable to
receive a fixed percentage of the increase in the net worth of Sabel from August
1, 1993 until the end of the fiscal quarter preceding the date of termination,
payable without interest in 40 quarterly installments.
  
     Assuming all of the Company's executive officers had retired at October 31,
1996, and their respective maximum percentages had vested, an aggregate of
$290,000 would have been payable to such executive officers pursuant to the NWAP
Agreements.

     The NWAP Agreements also provide that, if while employed by Magcorp or
Sabel, the respective company pays any cash dividend on its common stock, the
respective company will make a cash payment to the applicable executive officer

                                      -39-
<PAGE>

equal to the total amount of the cash dividend multiplied by their applicable
fully vested participation percentage. During 1996, in conjunction with the
Company's dividends to Group, Magcorp's Board of Directors declared and paid to
the Company dividends totaling $88.95 million. Accordingly, an aggregate of
$6.23 million was paid to the five Magcorp executive officers who are covered by
Magcorp's NWAP Agreements.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
  
     The following table sets forth the beneficial ownership of the outstanding
equity securities of the Company as of January 27, 1997:

<TABLE>
                                                 NAME AND ADDRESS OF   AMOUNT AND NATURE OF    PERCENT
                   TITLE OF CLASS                  BENEFICIAL OWNER    BENEFICIAL OWNERSHIP    OF CLASS
                   --------------                -------------------   --------------------    --------
             <S>                                    <C>                     <C>                 <C>
     10% preferred stock, $1,000 par value.....     (1)                (1)                       (1)
     Common stock, no par value................     Group(2)           1,000 shares, Direct     100%
</TABLE>

------------------------
(1)  The preferred stock of the Company was redeemed in July 1996 in conjunction
     with the issuance of 11.5% Senior Notes described more fully in Note 5 to
     the Company's consolidated financial statements, appearing elsewhere
     herein.
(2)  All of the Company's issued and outstanding capital stock is owned by
     Group, which is 95.9 percent owned by Mr. Rennert and by trusts established
     by him for himself and members of his family (but of which he is not a
     trustee). Mr. Rennert may be deemed to be the beneficial owner of the
     Company's capital stock. Roger L. Fay, Vice President, Finance of the
     Company, is Vice President, Finance and a minority stockholder of Group.
     Justin W. D'Atri, Secretary of the Company and the Subsidiaries, is
     Secretary and a director of Group and one of the trustees of the trusts
     mentioned in the preceding paragraph. No other executive officer of the
     Company or the Subsidiaries has any interest in Group.  By virtue of
     Group's ownership of all the outstanding shares of capital stock of the
     Company, and Mr. Rennert's ownership of a majority of the capital stock of
     Group, Mr. Rennert is in a position to control actions that require the
     consent of a majority of the holders of the Company's outstanding shares of
     capital stock, including the election of the board of directors.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     MANAGEMENT AGREEMENT

     Group provides management services to the Company under a management
agreement (the "Management Agreement"). Such services include operational
consulting, budget review, income tax consulting and contracting for insurance
under master policies. Pursuant to the Management Agreement, Group provides such
services to the Company for an annual management fee equal to $1.2 million. The
Management Agreement expires on October 31, 2000. The Company paid management
fees to Group of $1.2 million for each of the fiscal years ended October 31,
1996, 1995 and 1994, respectively.
  
     INSURANCE SHARING PROGRAM
  
     To obtain the advantages of volume, Group purchases certain insurance
coverage for its subsidiaries, including the Company, and the actual cost of
such insurance, without markup, is reimbursed by the covered subsidiaries.  The
major areas of the Company's insurance coverage obtained under the Group
programs are property, business interruption, general, product and auto
liability and workers' compensation.  The premiums for director and officer,
fidelity, fiduciary, property, business interruption, auto liability and
casualty umbrella are allocated by Group substantially as indicated in the
underlying policies.  General and product liability and workers' compensation
coverages are loss sensitive programs with both fixed and variable premium
components.  The fixed premium component for this coverage is allocated to each
insured Group subsidiary based on factors that include historical guaranteed
cost premium, the overall growth of each subsidiary and an assessment of risk
based on loss experience.  The fixed component is subject to revision resulting
from the insurance carrier's audit of actual premium factors.  As claims (the
variable component) are paid, each insured within the loss sensitive program is
charged for its claims up to a maximum amount and subject to an overall maximum
for all insured subsidiaries.  Each insured Group subsidiary has been assigned
an individual maximum cost based on historical guaranteed cost premiums.  The
overall and individual subsidiary maximums are subject to revision based on
audit of actual premium factors.  If an insured Group subsidiary reaches its
individual maximum cost, the other insured subsidiaries are required to share
proportionately in the excess cost of the subsidiary which has reached its
individual maximum. In fiscal 1996, the Company incurred costs of approximately
$1.3 million under the Group insurance program. 

                                     -40-
<PAGE>

The Company believes that its insurance costs under this program were less 
than it would have incurred if it had obtained its insurance directly.

     TAX SHARING AGREEMENT

     Pursuant to a tax sharing agreement between the Company and Group, the
Company pays to Group an amount equal to the amount the Company would have been
required to pay for taxes on a stand-alone basis to the Internal Revenue Service
and the applicable state taxing authority, as the case may be, except that the
Company will not have the benefit of any of its tax loss carryforwards unless
such tax losses were a result of timing differences between the Company's
accounting for tax and financial reporting purposes, which agreement also
provides that transactions between the Company and Group and its other
subsidiaries are accounted for on a cash basis and not on an accrual basis.


     TRANSACTIONS WITH SABEL FAMILY

   Sabel leases certain of its facilities from an affiliate of the Sabel family
under a lease running to July 31, 1997, which may be extended for two additional
terms of five years each. Total rent payments during fiscal year 1996 were $0.3
million. 


                                   PART IV

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

   A.  Documents filed as part of this Form 10-K:

<TABLE>
                <S>                                                                   <C>
       1.  FINANCIAL STATEMENTS (included in Part II, ITEM 8):

            Independent Auditors' Report                                               16

            Consolidated Balance Sheets - October 31, 1996 and 1995                    17

            Consolidated Statements of Operations - Years ended October 31, 1996,
                 1995, and 1994                                                        18

            Consolidated Statements of Stockholder's Equity (Deficit) -
                 Years ended October 31, 1996, 1995, and 1994                          19

            Consolidated Statements of Cash Flows - Years ended October 31,
                 1996, 1995, and 1994                                                  20

            Notes to Consolidated Financial Statements                                 22

       2.  FINANCIAL STATEMENT SCHEDULES  (included in Part IV):   

            Schedule II              Valuation and Qualifying Accounts                 44
</TABLE>

     Schedules not listed above have been omitted because the information
          required to be set forth therein is not applicable or is included in
          the consolidated financial statements or notes thereto.

                                      -41-
<PAGE>

3.   EXHIBITS
                         
     EXHIBIT 
       NO.                      IDENTIFICATION OF EXHIBITS 
     -------                    -------------------------- 

      3.1   ----  Certificate of Incorporation of Renco Metals, Inc.        (1)

      3.2   ----  Certificate of Incorporation of Magnesium 
                  Corporation of America                                    (1)

      3.3   ----  Certificate of Incorporation of Sabel Industries, Inc.    (1)

      3.4   ----  By-laws of Renco Metals, Inc.                             (1)

      3.5   ----  By-laws of Magnesium Corporation of America               (1)

      3.6   ----  By-laws of Sabel Industries, Inc.                         (1)

      4.1   ----  Indenture dated as of July 1, 1996 among Renco            (6)
                  Metals, Inc., Issuer, Magnesium Corporation of 
                  America and Sabel Industries, Inc., Guarantors, and
                  Fleet National Bank, Trustee, relating to 11-1/2% 
                  Senior Notes Due 2003 (with form of Note and form of
                  guarantee annexed)

      4.4   ----  Indenture dated as of August 1, 1993 among Renco          (1)
                  Metals, Inc., Issuer, Magnesium Corporation of 
                  America and Sabel Industries, Inc., Guarantors, and
                  Shawmut Bank Connecticut National Association (a/k/a
                  Fleet National Bank), Trustee, relating to 12% Senior
                  Notes Due 2000 (with form of Note annexed)

      4.5   ----  First Supplemental Indenture dated as of July 1, 1996     (7)
                  supplementing Indenture dated as of August 1, 1993 
                  among Renco Metals, Inc., as Issuer, Magnesium 
                  Corporation of America and Sabel Industries, Inc., as
                  Guarantors, and Fleet National Bank, as Trustee, 
                  relating to 12% Senior Notes Due 2000

     10.1   ----  Employment Agreements between Magnesium Corporation 
                  of America and:
                  a) Michael H. Legge, dated September 24, 1992 
                       effective January 1, 1993                            (1)
                  b) Ron L. Thayer effective June 1, 1994                   (2)
                  c) Howard I. Kaplan dated June 10, 1994                   (2)
                  d) Lee R. Brown, dated September 1, 1989                  (1)
                  e) Todd R. Ogaard, dated December 1, 1994                 (2)
                         
     10.2   ----  Net Worth Appreciation Agreements between Magnesium 
                  Corporation of America and:
                  a) Michael H. Legge, dated September 24, 1992             (1)
                  b) Ron L. Thayer, dated September 24, 1992                (1)
                  c) Lee R. Brown, dated July 30, 1993                      (1)
                  d) Howard I. Kaplan, dated June 10, 1994                  (2)
                  e) Todd R. Ogaard, dated May 19, 1995                     (3)

     10.3   ----  Amendments to Net Worth Appreciation Agreements between 
                  Magnesium Corporation of America and:
                  a) Michael H. Legge                                       (8)
                  b) Ron L. Thayer                                          (8)
                  c) Lee R. Brown                                           (8)
                  d) Todd R. Ogaard                                         (8)
                  e) Howard I. Kaplan                                       (8)

     10.4   ----  Management Consultant Agreement dated August 4, 1993      (1)
                  between The Renco Group, Inc. and Renco Metals, Inc.
                         
     10.5   ----  Amendment No. 1 to Management Consultant Agreement        (5)
                  dated May 17, 1996 between The Renco Group, Inc. 
                  and Renco Metals, Inc.

     10.6   ----  Amended and Restated Loan and Security Agreement          (1)
                  between Congress Financial Corporation and Magnesium 
                  Corporation of America dated August 4, 1993

     10.7   ----  Amendment No. 1 dated January 31, 1996 to Amended and     (4)
                  Restated Loan and Security Agreement dated as of 
                  August 4, 1993, between Congress Financial Corporation
                  and Magnesium Corporation of America, extending the 
                  term thereof to August 4, 1998

     10.8   ----  Amendment No. 2 dated July 3, 1996 to Amended and         (8)
                  Restated Loan and Security Agreement dated as of 
                  August 4, 1993, between Congress Financial Corporation
                  and Magnesium Corporation of America

     10.9   ----  Loan and Security Agreement between Congress Financial    (1)
                  Corporation and Sabel Industries, Inc. dated August 
                  4, 1993

     10.10  ----  Amendment No. 1 dated January 31, 1996 to Loan and        (4)
                  Security Agreement dated as of August 4, 1993, 
                  between Congress Financial Corporation and Sabel
                  Industries, Inc., extending the term thereof to
                  August 4, 1998

     10.11  ----  Amendment No. 2 dated July 3, 1996 to Loan and Security   (8)
                  Agreement dated as of August 4, 1993, between Congress
                  Financial Corporation and Sabel Industries, Inc.

                                      -42- 
<PAGE>

     EXHIBIT 
       NO.                      IDENTIFICATION OF EXHIBITS 
     -------                    -------------------------- 

     10.12   ----  Agreement dated July 31, 1969 between the State of       (1)
                   Utah, acting by and through the State Land Board, 
                   and National Lead Company, as amended by Addendum 
                   dated March 7, 1970, Second Addendum dated March 7,
                   1972 and Assignment to Amax Magnesium Corporation 
                   dated October 31, 1980 (ML 18779)

     10.13   ----  Special Use Lease Agreement 711 dated July 14, 1987      (1)
                   between the State of Utah, Division of State Lands 
                   and Forestry and Amax Magnesium Corporation

     10.14   ----  Amended Rights of Way No. U-54897, dated June 21, 1993   (1)
                   issued by the United States Department of the Interior
                   Bureau of Land Management, Salt Lake District Office 
                   to Magnesium Corporation of America

     10.15   ----  Lease dated May 13, 1991 between Sabel Industries,       (1)
                   Inc. as tenant and Janis Sabel, the Estate of Mark 
                   Sabel, Marcelle Sabel Moers a/k/a Marcel Sabel Moers,
                   Dorothy Anne Bell and Lee Altheimer as successors to 
                   the Estate of Dorothy Altheimer with respect to 
                   premises known as Theodore Highway 90, County of 
                   Mobile, Alabama

     10.16   ----  Lease dated July 1, 1977 between Dewey Emfinger and      (1)
                   his wife, Bea Emfinger, to Sabel Steel Service 
                   Incorporated with respect to premises known at 599 
                   Ross Clark Circle, Dothan, Alabama and the sublease
                   thereof to Sabel Industries, Inc. then known as Ren
                   Alabama Inc. dated July 30, 1987

     10.17   ----  Lease dated July 30, 1987 between Mark Sabel, Janis      (1)
                   Sabel, Marcel Moers and Dorothy Altheimer, owner of
                   an undivided 50% interest and Ted Cohen, owner of an
                   undivided 50% interest, all as tenants in common, to
                   Sabel Industries, Inc. (name subsequently changed to
                   JiMark Investment Company, Inc.) with respect to 
                   premises known as 2811 Day Street, Montgomery, Alabama
                   and the sublease thereof to Sabel Industries, Inc., 
                   then known as Ren Alabama Inc., dated July 30, 1987.
                   Note: Sabel Industries, Inc. subsequently purchased 
                   the undivided 50% interest of Mr. Cohen

     10.18   ----  Master Lease Indenture dated July 30, 1987 between       (1)
                   Sabel Land Company, a tenancy in common, comprised of
                   Mark Sabel, Janis Sabel, Marcel Moers and Dorothy 
                   Altheimer and Sabel Industries, Inc. then known as 
                   Ten Alabama Inc. covering premises known as Railroad 
                   Street, West Lafayette Street, East Lafayette Street,
                   749 North Court Street and 589 North Court Street, all
                   in Montgomery, Alabama (other premises covered by this
                   original lease are no longer used by Sabel Industries,
                   Inc.)

     10.19   ----  Brine Supply Agreement dated August 3, 1993 between      (1)
                   AZKO Salt Inc. and Magnesium Corporation of America

     10.20   ----  Net Worth Appreciation Agreements between Sabel 
                   Industries, Inc. and:
                   a) Keith Sabel, dated January 24, 1994                   (2)
                   b) Phillip Brown, dated January 24, 1994                 (2)

     10.21   ----  Waiver of "Additional Fees" through October 31, 1995     (3)
                   dated January 11, 1996 between The Renco Group, Inc.
                   and Renco Metals, Inc.

     21.1    ----  Subsidiaries of Renco Metals, Inc.                       (1)

     27      ----  Financial Statement Schedules                            (8)

   _______________
   (1)  Previously filed and incorporated herein by reference from the 
        Registrants' Registration Statement on Form S-4 (file no. 33-68230)
        as declared effective by the Securities and Exchange Commission on 
        December 3, 1993.

   (2)  Previously filed and incorporated herein by reference from Renco Metals,
        Inc.'s Form 10-K for the fiscal year ended October 31, 1994 (File No. 
        33-68230).

   (3)  Previously filed and incorporated herein by reference from Renco Metals,
        Inc.'s Form 10-K for the fiscal year ended October 31, 1995 (File No. 
        33-68230).

   (4)  Previously filed and incorporated herein by reference from Renco Metals,
        Inc.'s Form 10-Q for the quarterly period ended January 31, 1996 (File 
        No. 33-68230).

   (5)  Previously filed and incorporated herein by reference from the 
        Registrants' Registration Statement on Form S-1 (File no. 333-4513) as
        declared effective by the Securities and Exchange Commission on June 27,
        1996.

   (6)  Previously filed and incorporated herein by reference from Renco Metals,
        Inc.'s Form 8-K, filed July 17, 1996 (File No. 333-4513).

   (7)  Previously filed and incorporated herein by reference from Renco Metals,
        Inc.'s Form 10-Q for the quarterly period ended July 31, 1996 (Files No.
        33-68230 and 333-4513).

   (8)  Filed herewith electronically

B. No reports on Form 8-K were issued subsequent to the Registrant's Quarterly
   Report on Form 10-Q for the quarter ended July 31, 1996.



                                      -43-
<PAGE>

                                                                    SCHEDULE II 

                       RENCO METALS, INC. AND SUBSIDIARIES

                        Valuation and Qualifying Accounts

                  Years ended October 31, 1996, 1995, and 1994

                             (dollars in thousands)
<TABLE>
                                                           Additions    Deductions -            
                                              Balance at   charged to    write-offs    Balance  
                                               beginning   costs and      against      at end   
                                               of year      expenses     allowance     of year  
                                              ----------   ----------   ------------   -------  
<S>                                           <C>          <C>          <C>            <C>      
Year ended October 31, 1996:
  Applied against asset accounts:
    Allowance for doubtful accounts             $  514         152          (152)        514 
    Allowance for inventory obsolescence           564           -          (122)        442 

Year ended October 31, 1995:
  Applied against asset accounts:
    Allowance for doubtful accounts             $  491         188          (165)        514 
    Allowance for inventory obsolescence           678           -          (114)        564 

Year ended October 31, 1994:
  Applied against asset accounts:
    Allowance for doubtful accounts             $  956          93          (558)        491 
    Allowance for inventory obsolescence           764           -           (86)        678 
</TABLE>











                                        -44-
<PAGE>

                               S I G N A T U R E S


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


                                        RENCO METALS, INC.
                                        (Registrant)



Date:   January 27, 1997                By   /s/  Ira Leon Rennert           
-----------------------------             ---------------------------------- 
                                             Ira Leon Rennert                
                                             Chairman of the Board and       
                                             Chief Executive Officer         



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


Date:   January 27, 1997                     /s/  Ira Leon Rennert           
-----------------------------             ---------------------------------- 
                                             Ira Leon Rennert
                                             Chairman of the Board, sole
                                             Director, and Chief Executive
                                             Officer (Principal Executive
                                             Officer)



Date:   January 27, 1997                     /s/  Roger L. Fay               
-----------------------------             ---------------------------------- 
                                             Roger L. Fay
                                             Vice President, Finance
                                             (Principal Financial and
                                             Accounting Officer)






           SUPPLEMENTAL INFORMATION OF BE FURNISHED WITH REPORTS FILED     
        PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT 
             REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT       

     No annual report to security holders covering the registrant's last 
fiscal year and no proxy statement, form of proxy or other proxy soliciting 
material with respect to any annual or other meeting of security holders has 
been nor will be sent to security holders.   







                                      -45- 
<PAGE>

                             EXHIBIT INDEX


EXHIBIT
NO.                  IDENTIFICATION OF EXHIBITS
---       ------------------------------------------------------------------

10.3------Amendments dated June 11, 1997 to Net Worth Appreciation Agreements 
          between Magnesium Corporation of America and:-
                     (a) Michael H. Legge-
                     (b) Ron L. Thayer-
                     (c) Lee R. Brown-
                     (d) Todd R. Ogaard-
                     (e) Howard I. Kaplan-


10.8------Amendment No. 2 dated July 3, 1996 to Amended and Restated Loan and
          Security Agreement dated as of August 4, 1993, between Congress
          Financial Corporation and Magnesium Corporation of America-


10.11-----Amendment No. 2 dated July 3, 1996 to Loan and Security Agreement
          dated as of August 4, 1993, between Congress Financial Corporation
          and Sabel Industries, Inc.-