Document:

<PAGE>

                                                                    Exhibit 10.7

                             EMPLOYMENT AGREEMENT
                                      OF
                                PAUL E. SHAMPAY

     This EMPLOYMENT AGREEMENT ("Agreement") is made and entered as of January
6, 2000 by and between Paul E. Shampay ("Employee") and Kaiser Ventures Inc.
("Kaiser").

                                   Recitals

     A.   Employee is currently employed by Kaiser as Corporate Controller.

     B.   Effective as of January 6, 2000, Kaiser expanded Employee's duties and
responsibilities and has appointed him as Vice President, Finance.

     C.   The intent of this Agreement is to set forth the current agreement and
understanding of Employee and Kaiser with regard to Employee's continued
employment by Kaiser and to supercede any prior employment agreement.

          NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     1.   Employment, Positions and Duties.  Kaiser hereby continues the
employment of Employee upon the terms and conditions set forth in this
Agreement. Employee's position with Kaiser shall be Vice President, Finance.
Employee shall have the responsibilities and duties normally incident to such
position, including, but not limited to, those duties and responsibilities set
forth in Exhibit "A" attached hereto and incorporated herein by this reference
and such other duties and responsibilities as may be reasonably assigned to him
from time-to-time by Kaiser's Executive Vice President or Chief Executive
Officer. Employee agrees to devote his full business time and attention to the
discharge of his duties and responsibilities under this Agreement.

     2.   Term.  Employee's employment under the terms of this Agreement shall
commence as of January 15, 2000, and shall continue until terminated as provided
herein; provided, however, upon Employee's termination, Employee shall receive
the severance compensation provided herein.

     3.   Base Salary.  Employee's initial annual base salary shall be Ninety
One Thousand Dollars ($91,000).

     Prior to the first meeting of the Board of Directors in any calendar year,
the Human Relations Committee of the Board will review Employee's salary and
report its recommendations for any revision to the full Board at such meeting.

     4.   Annual Bonus.  In addition to his base salary, Employee shall be
entitled to participate in the bonus program of Kaiser applicable to senior
executives as it may be amended from time to time. The timing, size and/or
amount of any bonus awarded to Employee during the term of this Agreement will
be determined annually in accordance with the process set forth in Paragraph 3
above for the annual base salary review and based upon the bonus program
developed from time to time by the Compensation and Benefits Committee and
approved by the Board of Directors.

                                       1
<PAGE>

     5.   Stock Options and Other Stock Related Incentives.  Employee shall be
eligible for the grant of incentive stock options, non-qualified stock options
and other forms of stock related incentives from time-to-time in the discretion
of the Stock Option Committee of the Board of Directors. The timing, size and
amount of any future stock options or other stock related incentives will be
determined generally in accordance with the process used to determine the award
of any bonus to Employee. The grant and exercise of the stock options and other
stock related incentives shall generally be subject to and governed by the terms
of Kaiser's 1995 Stock Plan as it may be amended or any similar or successor
option plan. However, the Stock Option Committee may award stock options,
restricted stock or other stock related incentives outside the 1995 Stock Plan
in its discretion.

     6.   Other Benefits.  Employee will be entitled to participate in all
benefits provided by Kaiser to its employees and to senior executives in
accordance with and subject to Kaiser's polices and procedures as they may exist
from time-to-time, including, but not limited to, medical and dental insurance,
life insurance, disability insurance, 401(k) savings plan, any pension plan,
deferred compensation plan, education and seminar reimbursement, car allowance,
and reimbursement of reasonable expenses for company business. These benefits
shall include life insurance for the benefit of Employee with a face amount of
not less than Employee's annual base salary, except that Kaiser may self-insure
if insurance is not available on a commercially reasonable basis. Employee shall
be entitled to three (3) weeks of paid vacation per year until Employee has been
employed at Kaiser for five (5) years at which time Employee shall be entitled
to four (4) weeks of paid vacation per year.

     7.   Restricted Stock.  Any restricted stock issued by Kaiser in lieu of
cash payments in connection with Employee's base salary or any bonus, shall be
subject to the terms and conditions of a stock restriction agreement which may
provide, among other things, for the forfeiture of such stock in phases if
Employee should voluntarily terminate his employment with Kaiser within a
certain period of time or upon Employee's termination for "cause", as defined
herein.

     8.   Death Benefits.  In the event of Employee's death, Kaiser shall pay to
Employee's personal representative or his estate, Employee's salary and benefits
through the end of the month in which the death occurred plus a ratable portion
of Employee's anticipated bonus for the year through the date of Employee's
death. Employee's anticipated bonus shall be measured by the bonus awarded for
the most recent fiscal year. If a bonus has been earned by Employee for the
preceding fiscal year but has not yet been paid prior to the death of Employee,
Employee's estate or personal representative shall be paid the full amount of
the earned but unpaid bonus. The proceeds from any such life insurance shall be
for the sole benefit of Employee's designated beneficiaries or if there are no
designated beneficiaries, Employee's estate. Upon an Employee's death, all
restricted stock issued to Employee for past services (e.g. bonus stock), shall
immediately vest and all restricted stock initially issued for anticipated
future services (e.g. salary stock) will vest ratably through the date of death.
Employee's estate or personal representative shall have at least one (1) year
after the date of Employee's death while in the employment of the Company in
which to exercise all vested Stock Options.

     9.   Disability Benefits.  In the event of the disability of Employee for
any reason, Kaiser shall continue to pay to Employee his salary and benefits
less short-term disability payments until long-term disability payments are made
to Employee but in no event shall such salary and benefit payments continue for
longer than six (6) months from the date of disability. In addition, upon
permanent disability, the vesting of all retirement and deferral compensation
plans and all outstanding options, restricted stock or other stock related
incentives shall continue to occur for a period of two (2) years after the date
of disability in the same manner as if Employee were still employed by Kaiser
during that period.

                                       2
<PAGE>

     10.  Deductions.  Applicable federal and state income taxes, social
security contributions (FICA), Medicare contributions, medical insurance
premiums and any other appropriate or customary deductions shall be withheld
from any compensation paid to Employee by Kaiser.

     11.  Material Change.  Upon the occurrence of a Material Change as
hereafter defined which occurs on or after October 1, 1999, and subject to
Paragraph 14 below, all options to acquire shares of Kaiser stock, restricted
stock or any other stock related incentive previously granted to Employee shall
immediately and be deemed to have fully vested one (1) day prior to the
effective date of the Material Change, notwithstanding any other applicable
vesting schedule. Upon the occurrence of a Material Change, Employee shall be
entitled, for a period of two years, to exercise his stock options as to any of
such shares. This provision shall take precedence over any contrary provision
in any standard stock option agreement. For purposes of this Agreement, the term
Material Change shall refer to and mean the occurrence of any one of the
following events after the date of this Agreement:

          a.   any sale, merger or other acquisition of all or substantially all
of Kaiser with or by another entity where the shareholders of Kaiser at the time
of the sale, merger or other acquisition do not own or control at least 51% of
the voting power of such entity immediately after the time of the sale, merger
or other acquisition.

          b.   any acquisition of common stock by a person or "group" (as
defined in section 13(d) of the Securities Exchange Act of 1934), resulting in
the "beneficial ownership" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) by that person or group of more than (i) 25% of the
capital stock of Kaiser accompanied by a change of more than 50% of the
directors of Kaiser within one year after such event or (ii) 35% of the capital
stock of Kaiser with or without such change.

          c.   following October 1, 1999 until January 6, 2000, there has been
an aggregate of net assets with a cumulative value that exceeds the greater of
(i) $20,000,000 or (ii) 20% of the net equity of Kaiser at the time of the
distribution (whether by dividend or repurchase of stock) distributed to any one
or more Kaiser shareholders, and on or after January 6, 2000, there has been an
aggregate of net assets with a cumulative value that exceeds the greater of (i)
$30,000,000 or (ii) 30% of the net equity of Kaiser at the time of the
distribution (whether by dividend or repurchase of stock) distributed to any one
or more Kaiser shareholders.

          d.   During any period of two consecutive years, the individuals who
at the beginning of such period constitute the Board of Directors of the
Company, cease for any reason, to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company's shareholders, of
each new director has been approved at the time of such election or nomination
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.

          e.   The Board of Directors or any designated committee determines, in
its sole discretion, that any person (such as that term is used in Sections
13(d) and 14(d) of the Exchange Act) directly or indirectly exercises a
controlling influence over the management or policies or the Company.

     12.  Constructive Termination After A Material Change.  Upon the occurrence
of a Material Change, Employee shall be deemed to have been constructively
discharged upon the occurrence of any of the following events within six months
(6) before or eighteen (18) months after the Material Change:

                                       3
<PAGE>

          a.   The assignment to Employee of duties materially and adversely
inconsistent with Employee's positions immediately prior to a Material Change.
This includes a change in reporting responsibilities, authority including title,
or responsibilities; provided, however, a lateral transfer within Kaiser or to
an Affiliate shall not be deemed a constructive termination;

          b.   Any requirement that Employee permanently relocate to an office
more than  50 miles from the then location to which he is assigned; and

          c.   Any failure to provide Employee with compensation and benefits in
the aggregate on terms that are materially less favorable than those enjoyed by
Employee under this Agreement immediately prior to a Material Change, or the
subsequent taking of any action that would materially reduce Employee's
compensation and benefits in effect at the time of the Material Change.

          then, at Employee's option, exercisable within ninety (90) days of the
date Employee knew, or should have known exercising reasonable care, of the
occurrence of any of the foregoing events and the expiration of any applicable
cure period, Employee shall have the right to terminate his employment by
written notice to Kaiser, and on the date of such termination Kaiser will pay
Employee the compensation and benefits described in Paragraph 13 below.

     13.  Compensation Payable Upon Actual or Constructive Termination Related
to a Material Change. In the event Employee is terminated for any reason except
for death, permanent disability or for cause, as defined below, within six (6)
months before or eighteen (18) months after a Material Change or upon the
Constructive Termination of Employee before or after a Material Change as
defined and provided in Paragraph 12 above, Kaiser shall pay to Employee the
following compensation as severance benefits in addition to the severance
compensation that Employee shall receive pursuant to Paragraph 15 regardless of
any Material Change:

          a.   if the termination is effective after March 31 of any year, an
amount equal to the pro rata portion of the bonus that Employee would have been
eligible to earn for the year of termination as measured by the Employee's
average percentage bonus over the past five years (or such lesser period of time
during which Employee was eligible to receive a bonus);

          b.   an amount equal to one year's average annual bonus (cash and
stock, but not including stock options or stock grants outside of the annual
bonus) as measured by Employee's average percentage bonus over the past five
years (or such lesser period of time during which Employee was eligible to
receive bonus); and

          c.   Employee shall have the right to participate proportionately in
stock buyback or dividend distribution in proportion to shares owned together
with all other shareholders.

     All amounts due Employee shall be payable in one lump sum or, at Employee's
option, over such period of time not to exceed twelve (12) months.  Employee
shall have no duty to seek other employment during this period of time and there
shall be no offset for any compensation paid to Employee from any other source;
provided, however, if Employee is paid a consulting fee or receives compensation
from Kaiser or an Affiliate of Kaiser for services actually rendered during a
one (1) year period from the date of termination, unless otherwise agreed in
writing, such amount shall be offset against the payments made or due Employee.

     For purposes of this Agreement, "average percentage bonus over the past
five years" shall mean the average percentage bonus received by Employee for the
five years preceding the year of

                                       4
<PAGE>

termination (or for such lesser period in which bonus payments were received) as
applied to the Employee's current annual base salary.

     14.  Possible Reduction in Certain Benefits.

          (a)  Except as provided in Paragraph 14(b) below, Employee shall in no
circumstances receive "payments in the nature of compensation" from Kaiser which
would result in "excess parachute payments" (as that term is defined in Sections
280G and 4999 of the Internal Revenue Code of 1954, as amended, or any
equivalent or analogous term as shall in the future be defined in any law or
regulation governing the amount of severance compensation that may be paid
without penalty to an officer of a company upon  a change in control of Kaiser).
In the event either Employee or Kaiser shall be advised in writing by his or its
counsel that Employee would receive excess parachute payments if all payments
under all contacts between Employee and Kaiser were made, such opinion shall be
confidentially disclosed to the other party.  If it is mutually determined that
such payments would trigger the excess parachute payments provisions, Employee
shall receive only such compensation and benefits under his contracts with
Kaiser (not to exceed those permitted without constituting excess parachute
payments) which he, in his sole discretion, has designated in written notice to
Kaiser. Employee shall have a minimum of thirty (30) days in which to make such
written designation. In the event of a disagreement between the counsel of the
respective parties as to whether a payment would result in excess parachute
payments, such counsel shall jointly designate an independent tax counsel (whose
fees shall be paid by Kaiser) within 10 days who shall promptly make a
conclusive determination of the matter.

          (b)  Notwithstanding anything else to the contrary, in the event
Employee is terminated pursuant to Paragraph 13 above, Employee shall have the
right, in his sole discretion, to elect to receive all or any part of the
compensation payable to him upon termination (or which would have been due under
Section 11 but for a previous election under Section 14(a)) without regard to
whether any such amounts may constitute "excess parachute payments." If Employee
fails to provide the Company a written designation within thirty (30) days, he
shall be presumed to have elected to receive all compensation and benefits due
him without regard to whether any such compensation or benefits shall constitute
"excess parachute payments."

          (c)  Nothing in this Paragraph 14 shall be construed or deemed to be a
forfeiture of any compensation or benefits that Employee may elect not to
accelerate due to any concern about the receipt of "excess parachute payments."

     15.  Termination Without Cause.  In the event Kaiser elects to terminate
Employee's employment without cause (as defined below) during the term of this
Agreement, then Kaiser agrees to pay Employee an amount equal to one year's
annual base salary (based on Employees then current annual base salary) and
continue to provide and pay its portion of all of Employee's health, welfare,
insurance and other benefits for a period of twelve (12) months following the
date of termination, including Kaiser's portion of any retirement and deferred
compensation plan such as Kaiser's 401(k) plan. After such termination, Employee
shall be entitled, for a period of two years to exercise his stock options as to
any then vested, including any options vesting within one year of termination as
provided in the next sentence, notwithstanding any other applicable provision
contained in any option agreement. In addition to the foregoing related to stock
options, with respect to any restricted stock or other stock related incentives,
Employee shall continue to vest in such securities for a period of one-year
following termination. If Employee is terminated before or after a Material
Change as provided in Paragraph 12, Employee shall receive the additional
severance compensation provided in Paragraph 13.

                                       5
<PAGE>

     16.  Termination for Cause.  If Kaiser elects to terminate Employee's
employment for cause (as defined below), Employee's employment will terminate on
the date fixed for termination by Kaiser and thereafter Kaiser will not be
obligated to pay Employee any additional compensation, other than the
compensation due and owing up to the date of termination and as may be required
by law. After such termination, Employee shall be entitled, for a period of one
hundred twenty (120) days, to exercise any stock options or other stock related
incentives that are vested as of the date of termination.

     17.  Definition of "Cause." "Cause" for the purposes of this Agreement
shall mean any of the following:

          a.   Willful breach by Employee of any provision of this Agreement,
provided, however, if the breach is not a material breach, Kaiser shall give
Employee written notice of such breach and Employee shall have thirty (30) days
in which to cure such breach. No written notice or cure period shall be required
in the event of a willful and material breach of this Agreement by Employee;

          b.   Gross negligence or dishonesty in the performance of Employee's
duties or responsibilities hereunder;

          c.   Engaging in conduct or activities or holding any position that
materially conflicts with the interest of, or materially interferes with
Employee's duties and responsibilities to Kaiser or its Affiliates; or

          d.   Engaging in conduct which is materially detrimental to the
business of Kaiser or its Affiliates.

     18.  Voluntary Termination.  Employee's employment by Kaiser may be
terminated at any time upon the parties' mutual written agreement or voluntarily
by either party upon prior written notice to the other. In the event of a mutual
written agreement, Employee's severance benefits shall be as set forth in such
agreement. In the event of Employee's voluntary termination of employment,
Kaiser shall not be obligated to pay Employee any additional compensation, other
than the compensation due and owing as through the date of termination and as
may be required by law. After such termination, Employee shall be entitled for a
period of one hundred twenty (120) days to exercise any stock options or other
stock related incentives that are vested as of the date of termination.

     19.  Confidentiality.

          a.   Employee's Obligations.  Employee agrees that (a) except as
               ----------------------
provided in this Agreement Employee shall maintain the confidential nature of
any Proprietary Information received or acquired by him, and (b) Employee shall
use such Proprietary Information solely for the purpose of meeting his
obligations under this Agreement and not in connection with any other business
or activity. "Proprietary Information" means all oral, written or recorded
information about or related to Kaiser or any of its Affiliates or its or their
technology, assets, liabilities, or business, whether acquired before or after
the date hereof, and regardless of the manner in which it is acquired, together
with any documents or other materials prepared by Employee which contain or
reflect such information. After termination of employment upon demand of Kaiser,
Employee agrees to return or destroy any and all materials containing any
Proprietary Information.

                                       6
<PAGE>

          b.   Kaiser's Obligations.  Kaiser agrees that it shall maintain and
               --------------------
provide information regarding Employee in accordance with generally accepted
industry and business practices.

          c.   Limitations on Confidential Obligations and Use Restrictions.
               ------------------------------------------------------------
The restrictions in Paragraph 19(a) above do not apply to information which the
Employee can demonstrate (i) is then in the public domain by acts not
attributable to such disclosing party or (ii) is hereafter received on an
unrestricted basis by such Employee from a third party source who, to Employee's
knowledge after due inquiry, is not and was not bound by confidentiality
obligations to Kaiser or any Affiliate thereof. In addition, Employee and Kaiser
are permitted to disclose any Proprietary Information as necessary in the
defense or prosecution of any legal action.

          d.   Actions if Disclosure Required.  If Employee is required by law
               -------------------------------
to make any disclosure otherwise prohibited hereunder, such party shall use its
best efforts to provide the other with prompt prior notice where possible so
that (a) the other party (with the reasonable cooperation of the party required
to make such disclosure) may seek an appropriate protection order or other
remedy and/or (b) the parties can seek in good faith to agree on the appropriate
scope and approach to disclosure. If a protective order or other remedy is not
obtained, the party required to make such disclosure may furnish only that
portion of information protected hereby which it is legally compelled to
disclose and shall use its reasonable efforts to obtain confidential treatment
for all information so disclosed.

          e.   Injunction.  Each party agrees that remedies at law may be
               -----------
inadequate to protect against breach of this Paragraph 19, and hereby agrees to
the granting of injunctive relief without proof of actual damage.

     20.  Indemnification. Kaiser agrees to indemnify employee in accordance
with the Indemnification Agreement between Employee and Kaiser dated January 15,
2000, a copy of which is attached hereto as Exhibit "B" and incorporated herein
by this reference.

     21.  Arbitration of Disputes.  If Employee and Kaiser cannot resolve a
dispute (whether arising in contract or tort or any other legal theory, whether
based on federal, state or local statute or common law and regardless of the
identities of any other defendants) that in any way relates to or arises out of
this Agreement, the termination of Employee's employment relationship with
Kaiser or any Affiliate thereof, (without limiting the generality of any other
Paragraph herein), then such dispute shall be settled as follows:

          a.   Kaiser and Employee agree to jointly select a judicial officer
who is affiliated with the Judicial Arbitration and Mediation Service, or such
other equivalent organization as Kaiser and Employee may mutually select, to act
as the trier of fact and judicial officer in such dispute resolution;

          b.   If Kaiser and Employee are unable to agree upon a particular
judicial officer, then the decision shall be made by the chief executive officer
of the Judicial Arbitration and Mediation Service, after consulting with Kaiser
and Employee;

          c.   Kaiser and Employee shall have the same rights of discovery as if
the dispute were being resolved in the Superior Court of the State of
California.  However, the judicial officer shall, on his own motion, or the
request of either Kaiser or Employee, have the authority to extend or reduce the
time periods therefor; and,

                                       7
<PAGE>

          d.   The judicial officer serving hereunder shall be designated as a
referee under the provisions of Title VIII, Chapter 6 of the California Code of
Civil Procedure (Sections 638 through 645. 1, inclusive). Payment for the
services of the judicial officer and the rights and procedure of appeal, and/or
other review of the decision, shall be made as provided in such sections.

     The judicial officer shall have the right to grant injunctive relief,
specific performance and other equitable remedies.

     22.  Miscellaneous.

          a.   Entire Agreement; Amendments.  This Agreement and the exhibits
               -----------------------------
attached hereto state the entire understanding and agreement between the parties
with respect to its subject matter supercedes the Employment Agreement between
Employee and Kaiser dated October 10, 1996 and may only be amended by a written
instrument duly executed by Employee and Kaiser.

          b.   Assignment.  This Agreement and the rights and obligations of
               -----------
Employee may not be sold, transferred, assigned, pledged or hypothecated by
Employee.

          c.   Non-Waiver.  Failure to insist upon strict compliance with any
               -----------
provision of this Agreement or the waiver of any specific event of non-
compliance shall not be deemed to be or operate as a waiver of such provision or
any other provision hereof or any other event of non-compliance.

          d.   Binding Effect.  This Agreement shall be binding upon and inure
               ---------------
to the benefit of Kaiser, its successors and assigns and, Employee's heirs,
successors, and legal or personal representatives.

          e.   Headings.  The headings throughout this Agreement are for
               ---------
convenience only and shall in no way be deemed to define, limit, or add to the
meaning of any provision of this Agreement.

          f.   Context.  Whenever required by the context, the singular shall
               --------
include the plural, the plural the singular, and one gender such other gender as
is appropriate.

          g.   Notices.  All notices, request, demands, consents and other
               --------
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when hand delivered or sent by certified United States
mail, postage prepaid, with return by certified requested, addressed to the
parties as follows:

                    Kaiser Ventures Inc.
                    3633 E. Inland Empire Blvd., Suite 850
                    Ontario, CA 91764
                    Attn: General Counsel

                    Paul Shampay
                    41764 Corte Lara
                    Temecula, CA 92592

          h.   Costs.  In any action taken to enforce the provisions of this
               ------
Agreement, the prevailing party shall be reimbursed all reasonable costs
incurred in such legal action including reasonable attorney's fees in such
action.

                                       8
<PAGE>

          i.   Severability.  If any provision or clause of this Agreement, as
               -------------
applied to any party or circumstances shall be adjudged by a court to be invalid
or unenforceable, said adjudication shall in no manner effect any other
provision of this Agreement, the application of such provision to any other
circumstances or the validity or enforceability of this Agreement.

          j.   Definition of Affiliate.  The term "Affiliate" for purposes of
               ------------------------
this Agreement shall mean any person or entity now or hereafter in control,
controlled by or in common control with Kaiser. It shall also include any direct
or indirect subsidiary of such Corporation and any company in which Kaiser has
more than a ten percent (10%) ownership interest.

          k.   Acknowledgment Regarding ISO's.  Employee acknowledges that he is
               ------------------------------
responsible for the tax consequences of all severance compensation he may
receive and that certain actions may need to be taken by Employee within limited
periods of time to preserve the tax status of any incentive stock options.
Kaiser makes no representation or warranty that any past or future grant of a
stock option to Employee qualifies as an incentive stock option.

          l.   Governing Law.  This Agreement shall be governed by and construed
               --------------
in accordance with the laws of the State of California.

     IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement to be effective as of the day and year first written above not
withstanding the actual date of signature.

"Employee"                              "Kaiser"
Paul E. Shampay                         Kaiser Ventures Inc.

/s/ Paul E. Shampay                     By:  /s/ James F. Verhey
---------------------------------            -----------------------------------
      Paul E. Shampay                           James F. Verhey,
                                                Executive Vice President

                                        By:  /s/ Todd G. Cole
                                             -----------------------------------
                                             Todd G. Cole, Chairman,
                                             Human Relations Committee

                                       9
<PAGE>

                                 SCHEDULE "A"
                                 ============

                                Paul E. Shampay
                            Vice President, Finance

     This position will report to the Executive Vice President & CFO.

Responsibilities:

     This position has the responsibility to manage all accounting, tax,
insurance and treasury functions for the Company, its subsidiaries and it joint
ventures; to assist the CFO in representing the Company with all outside
entities coming under the purview of corporate finance; to assist CFO and
General Counsel in ensuring that all SEC reporting requirements are mat in a
satisfactory and timely manner; to assist the CFO in managing the investor
relations function; to manage the Company's annual budget and capital plan
processes; to manage the Company's internal financial reporting; to manage the
Company's annual audits by the Outside Independent Accountants, to manage the
Company's insurance program; to manage all the human resource and employee
benefits functions; and to manage the Company's computer, communication and
office equipment systems and software. These duties include the following:

     .    Manage all aspects of the accounting and treasury functions of the
          Company, its subsidiaries and joint ventures, employing Generally
          Accepted Accounting Procedures.
     .    Manage the Company's annual budget and capital plan processes.
     .    Manage the annual audit and all audit procedures with outside
          auditors.
     .    Assist CFO and General Counsel regarding all SEC reporting and
          disclosure issues.
     .    Assist CFO in managing and oversee all financial aspects of SEC
          compliance.
     .    Assist CFO in managing the Company's financial analysis and modeling
          function.
     .    Assist CFO in managing the investor relations program, and
          shareholder/investor communications.
     .    Assist CFO in managing all tax planning and reporting.
     .    Manage all Company debt/lender compliance and reporting requirements.
     .    Manage all insurance programs.
     .    Manage and oversee all human resource functions to include employee
          benefits.
     .    Manage and oversee the Company's computer, communication and office
          equipment systems and software.

                                       10<PAGE>

                                                                EXHIBIT 10.8.1

                                First Amendment
                                     to the
                              Employment Agreement
                                       of
                                 Anthony Silva

     This FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT OF ANTHONY SILVA ("First
Amendment") is made and entered into as of January 6, 2000, by and between
ANTHONY SILVA ("Employee") and KAISER VENTURES INC. ("Kaiser").

                                    Recitals

     A.  Employee is currently employed by Kaiser as Vice President, Resource
Development and Environmental Services and has an existing Employment Agreement
with Kaiser dated effective January 15, 1998, (collectively the "Employment
Agreement"); and

     B.  Employee and Kaiser have mutually agreed to the modification of certain
provisions of the Employment Agreement and therefore Employee and Kaiser desire
to amend the Employment Agreement solely as provided herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

     1.  Amendment of Paragraph 11 of Employment Agreement.  Paragraph 11 of the
Employment Agreement is hereby amended as follows:

          (a) Subparagraph 11.b.  Subparagraph 11.b. of the Employment Agreement
              -----------------
     is hereby deleted in its entirety and the following new subparagraph 11.b.
     is substituted therefore:

               "b.  any acquisition of common stock by a person or
          "group" (as defined in section 13(d) of the Securities
          Exchange Act of 1934), resulting in the "beneficial
          ownership" (as defined in Rule 13d-3 under the Securities
          Exchange Act of 1934) by that person or group of more than
          35% of the capital stock of Kaiser."

          (b) Subparagraph 11.c.  Subparagraph 11.c of the Employment Agreement
              -----------------
     is hereby deleted in its entirety an the following new subparagraph 11.c.
     is substituted therefore:

               "c.  following the date of this Amendment there has
          been an aggregate of net assets with a cumulative value that
          exceeds the greater of (i) $30,000,000 or (ii) 30% of the
          net equity of Kaiser at the time of the distribution
          (whether by dividend or repurchase of stock) distributed to
          any one or more Kaiser shareholders."

          (c) Addition of Subparagraphs 11.d. and 11.e.  Paragraph 11 of the
              ----------------------------------------
     Employment Agreement is amended by the addition of the following new
     subparagraphs:

            "d.  During any period of two consecutive years, the
          individuals who at the beginning of such period constitute
          the Board of Directors of the Company, cease for any reason,
          to constitute at least a majority thereof,

                                       1
<PAGE>

          unless the election, or the nomination for election by the
          Company's shareholders, of each new director has been
          approved at the time of such election or nomination by a
          vote of at least two-thirds of the directors then still in
          office who were directors at the beginning of the period; or

            e.  The Board of Directors or any designated committee
          determines, in its sole discretion, that any person (such as
          that term is used in Sections 13(d) and 14(d) of the Exchange
          Act) directly or indirectly exercises a controlling influence
          over the management or policies or the Company."

     2.   Amendment of Paragraph 12 of the Employment Agreement.  Subparagraph
12.c. of the Employment Agreement is hereby deleted in its entirety, except for
that portion of the paragraph commencing with "then, at Employee's option---"
and ending with the words "Paragraph 13 below," and the following new portion of
Subparagraph 12.c. is substituted therefor:

            "c.  Any failure to provide Employee with compensation and
          benefits in the aggregate on terms that are materially less
          favorable than those enjoyed by Employee under this
          Agreement immediately prior to a Material Change, or the
          subsequent taking of any action that would materially reduce
          Employee's compensation and benefits in effect at the time
          of the Material Change."

     3.   Amendment of Paragraph 13 of the Employment Agreement. Paragraph 13 of
the Employment Agreement is hereby amended as follows:

          (a) Subparagraph 13.a.  The phrase "as measured by the preceding
              -----------------
     year's bonus" in subparagraph 13.a. is hereby deleted in its entirety and
     the following new phrase is substituted therefore in Subparagraph 13.a.:
     "as measured by Employee's average percentage bonus over the past five
     years (or such lesser period of time during which Employee was eligible to
     receive a bonus)."

          (b) Subparagraph 13.b.  The phrase in Subparagraph 13.b, "averaged
              -----------------
     over the two (2) immediately preceding years" is herein deleted and
     replaced with the phrase "as measured by Employee's average percentage
     bonus over the past five years" (or such lesser period of time during which
     Employee was eligible to receive a bonus)."

          (c) Subparagraph 13.c.  The word "will" in Subparagraph 13.c is hereby
     deleted and replaced with the word "with," such that the end of
     Subparagraph 13.c reads "in proportion to shares owned together with all
     other shareholders."

          (d) Additional Paragraph.  Paragraph 13 of the Employment Agreement is
              --------------------
     hereby amended by the addition of the following paragraph at the end of the
     current Paragraph 13.

               "For purposes of this Agreement, "average percentage
          bonus over the past five years" shall mean the average
          percentage bonus received by Employee for the five years
          preceding the year of termination (or for such lesser period
          in which bonus payments were received) as applied to the
          Employee's current annual base salary." is substituted
          therefore:

                                       2
<PAGE>

          4.   Amendment of Paragraph 16.  Paragraph 16 of the Employment
Agreement is hereby amended by deleting the reference to "ninety (90) days" and
substituting therefore "one hundred twenty (120) days."

          5.   Amendment of Paragraph 18.  Paragraph 18 of the Employment
Agreement is hereby amended by the addition of the following phrase to the end
of the first sentence of Paragraph 18, "provided, however, Employee shall give a
minimum of ninety (90) days advance written notice."

          6    Ratification of Employment Agreement as Amended.  The Employment
Agreement is not amended in any respect except as expressly provided herein, and
the Employment Agreement as amended by this First Amendment is hereby ratified
and approved in all respects

     7  Governing Law.  This First Amendment shall be governed by and construed
in accordance with the laws of the State of California.

     IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to the Employment Agreement to be effective as of the day and year first written
above not withstanding the actual date of signature.

"Employee"                         "Kaiser"
Anthony Silva                      Kaiser Ventures Inc.

/s/ Anthony Silva                  By:  /s/ Richard E. Stoddard
-------------------------------         ----------------------------------------
Anthony Silva                           Richard E. Stoddard
                                        President & Chief Executive Officer

                                   By:  /s/ Todd G. Cole
                                        ----------------------------------------
                                        Todd G. Cole, Chairman of the
                                        Human Relations Committee

                                       3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}]]