UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 DECEMBER 31, 2000
OR

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

FOR THE TRANSITION PERIOD FROM ____________ TO ____________

COMMISSION FILE NUMBER 0-19657

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

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

3313 WEST SECOND STREET
THE DALLES, OREGON 97058
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (541) 296-6161

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of each class)

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

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

As of March 27, 2001 the aggregate market value of the registrant's
Common Stock held by non-affiliates of the registrant was $0. Solely for
purposes of this calculation, the registrant has treated its Board of Directors
and executive officers as affiliates.

As of March 27, 2001, the number of shares of the registrant's Common
Stock outstanding was 1,000 shares.

DOCUMENTS INCORPORATED BY REFERENCE:

Not applicable.

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

- -------------------------------------------------------------------------------------------------------------------------
State of I.R.S. Employer
Commission file incorporation or Identification
Company number organization Number
- -------------------------------------------------------------------------------------------------------------------------

Goldendale Holding Company 333-72245-04 Delaware 91-1785763
- -------------------------------------------------------------------------------------------------------------------------
Goldendale Aluminum Company 333-72245-05 Delaware 91-1380241
- -------------------------------------------------------------------------------------------------------------------------
Northwest Aluminum Company 333-72245-02 Oregon 93-0905834
- -------------------------------------------------------------------------------------------------------------------------
Northwest Aluminum Specialties, Inc. 333-72245-01 Oregon 93-1019176
- -------------------------------------------------------------------------------------------------------------------------
Northwest Aluminum Technologies, LLC 333-72245-03 Washington 93-1196863
- -------------------------------------------------------------------------------------------------------------------------

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

SUPPLEMENTAL INFORMATION TO 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 or proxy material has been sent to security holders.

GOLDEN NORTHWEST ALUMINUM, INC.
TABLE OF CONTENTS

ITEM PAGE
NO. NO.
- --- ---

PART I............................................................................................................1
1. Business..................................................................................................1
2. Properties...............................................................................................13
3. Legal Proceedings........................................................................................13
4. Submission of Matters to a Vote of Security Holders......................................................13

PART II..........................................................................................................14
5. Market for Registrant's Common Equity and Related Stockholder Matters....................................14
6. Selected Financial Data..................................................................................14
7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................15
7(a). Quantitative and Qualitative Disclosures about Market Risk..............................................24
8. Financial Statements and Supplemental Data...............................................................24
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....................24

PART III.........................................................................................................25
10. Directors and Executive Officers of the Registrant.......................................................25
11. Executive Compensation...................................................................................27
12. Security Ownership of Certain Beneficial Owners and Management...........................................28
13. Certain Relationships and Related Transactions...........................................................28

PART IV..........................................................................................................30
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.........................................30

PART I

ITEM 1. BUSINESS

Our company was incorporated in 1998, and, through its three primary
operating subsidiaries, Goldendale Aluminum Company, Northwest Aluminum Company
and Northwest Aluminum Specialties, Inc., is a leading producer of primary
aluminum and selected specialty engineered high quality value-added aluminum
products. Our revenues come from two main sources: fees received from tolling
alumina into aluminum and sales of value-added aluminum products. At our two
facilities on the Columbia River east of Portland, Oregon, we operate two
primary aluminum smelters with combined production capacity of 250,000 metric
tons, making us one of the five largest primary aluminum producers in the United
States. We produce approximately two-thirds of our primary aluminum under a
tolling agreement with Hydro Aluminum Louisville, Inc., a large international
industrial and trading company. In conjunction with our smelter operations, we
operate three casthouses that produce a range of value-added aluminum products,
including our proprietary line of direct-cast, small diameter, alloyed billet
products.

We sell value-added billet and related products directly to the extrusion
and direct forge industries for further processing into final products such as
fire extinguishers, automobile air bag canisters, golf club heads, bicycle
frames and a variety of automotive and aircraft parts. We believe our cost
competitive position, strategic relationships, investment in new smelting and
casting technologies and mix of higher-margin, value-added products are key
competitive advantages and have been primary determinants of our historical
profitability.

We believe that historically we have ranked among the lower cost aluminum
producers in the United States. We attribute our historical profitability to a
number of factors including access to and innovative procurement of low-cost
hydroelectric power, technical innovation at the plant level, good labor
relations and low levels of corporate overhead.

The aluminum industry in the Pacific Northwest is facing a critical time in
its history. Among the primary factors affecting any aluminum smelting operation
is the cost of its electrical power. Due to an extreme under-supply of power and
other factors, the market price of electrical power in the Pacific Northwest has
risen to a level that currently prohibits smelting operations in a cost
effective manner. We were able to remarket most of our existing supply of power
at prices in excess of its cost, with the proceeds to be applied to certain
"Qualified Expenditures," as described below. We believe that through partnering
with our primary supplier of electricity, our labor force, and our major
suppliers, in the future we will be able to continue operating our smelters at
reduced levels while still meeting our obligations to employees, creditors and
others. Additionally, by pursuing the development of new power generation
facilities, we believe we will not only survive the current crisis, but will
emerge as a more efficient provider of aluminum with access to lower cost power
and with the ability to re-market that power during periods of high market power
prices.

ACCESS TO ELECTRIC POWER

One of our primary costs is electrical power and prior to mid-2000, those
costs had been relatively stable. The source of the majority of our power has
been through the Bonneville Power Administration (BPA). We have supplemented the
BPA power with purchases of market power during time periods when market prices
historically have been lower than the price we pay BPA under our contract.

Because electricity is both necessary for the manufacturing of aluminum and
the single largest cost of making primary aluminum, the availability and pricing
of electricity and access to transmission is crucial to our operations.
Approximately 80% of all power produced or consumed in the Pacific Northwest is
delivered over the transmission system of BPA. Both of our smelters are
connected directly to the main high voltage transmission grid of BPA. Each plant
has a 20-year transmission agreement with BPA, expiring in April 2015, for
transmission capacity that we believe is sufficient to meet both plants'
existing and projected energy needs. These transmission agreements obligate BPA
to offer Goldendale Aluminum Company and Northwest Aluminum Company a new
transmission agreement upon the expiration of the current agreements. Moreover,
the transmission agreements also obligate BPA to act as agent for Goldendale and
Northwest to obtain transmission services over other transmission systems if
requested. With the exception of limited rights to restrict transmission service
in the event of certain threats to system stability, the transmission agreements
obligate BPA to provide Goldendale and Northwest with the same

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open access transmission available to utilities and power companies under the
rules of the Federal Energy Regulatory Commission.

Goldendale and Northwest are buying energy from BPA under a five-year power
sale agreement through which approximately 60% of each plant's energy needs are
contractually secured at predetermined prices through September 30, 2001. The
published annual average rate for power from BPA is 2.2 cents per kilowatt-hour.
The power sale agreement allows us to schedule our purchases in different months
when power is priced at different rates in such a way that power purchased from
BPA has an actual rate that is lower than the published average rate. The
remaining 40% of Northwest's and Goldendale's energy requirements is obtained by
purchasing blocks of energy under periodic contracts from various suppliers,
including BPA, PacifiCorp, Enron, Illinova Energy, Duke Energy, Avista Energy,
the Avista Utilities and others.

Beginning in the latter part of 2000, the power market began suffering from
extreme under-supply pressures and other factors, resulting in a sharp increase
in power prices. These prices required us to adjust the power procurement
strategies we had pursued in the past. We had planned to cover our power needs
for half of February, all of March and April, and half of May of 2001 by
purchasing power on the spot market. The forward prices of power, however, made
it clear that market power for those months would not be affordable. We were
unwilling to shut down all of our smelting operations during those months due to
the costs involved. We chose to reduce our production capacity to approximately
60% of normal beginning in October 2000. Our intent was to have BPA remarket and
sell power we did not need because of reduced production and to use the
resulting proceeds to buy power for any open periods. We refer to the process of
using proceeds from BPA's remarketing of power to purchase power during other
periods as "reshaping." Our current power sale contract with BPA allows us to
reshape our power purchases in this manner. We proceeded with the curtailment,
the related reduction in our work force and adjustments to our long-term alumina
supply contracts. BPA remarketed and sold the excess power made available for
the months of October, November and December of 2000, and part of the excess
power of January 2001.

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

We entered into an agreement with BPA which allows BPA to remarket the
power available to us and use these proceeds to reimburse us for defined
qualified expenditures. Additionally, agreements were made with the United Steel
Workers of America in regard to employee lay-offs, with Norsk Hydro Americas,
Inc. in regard to readjusting our tolling contract with Hydro and with Glencore
in regard to readjusting the alumina supply contract.

We entered into a Remarketing Addendum (the "Addendum") with BPA in
December 2000. Under the Addendum, our operating subsidiaries, Goldendale
Aluminum Company and Northwest Aluminum Company, agreed to curtail smelter
production and assist BPA in remarketing the electric power that they had the
right to purchase. BPA agreed to use the proceeds from the remarketing to
reimburse Goldendale Aluminum Company and Northwest Aluminum Company or their
designees for specified qualified expenditures, including, among others,
expenses associated with debt service and workforce reductions resulting from
the curtailment, and expenditures for the planning, licensing, siting,
acquisition and/or construction of conventional or renewable resources to
provide power for future operations of our smelters. For a given sale of
remarketed power, the net proceeds are equal to the revenue received by BPA in
the sale, minus the price we would have been obligated to pay had we purchased
the power, minus a specified amount retained by BPA, plus any interest costs BPA
avoids as a result of the net proceeds. We estimate that from December 29, 2000
through September 30, 2001, $285.0 million of net proceeds will be available for
reimbursement of qualified expenditures. The Addendum is effective through the
earlier of the date on which all of the net proceeds have been paid by BPA or
September 30, 2010.

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adjustment clause, but rate adjustments had never occurred in the past. However,
during the fall and winter of 2000, BPA indicated that it probably would need to
impose a significant surcharge on rates effective after October 1, 2001. In
March 2001, BPA proposed a revised and expanded "Cost Recovery Adjustment
Clause" that would grant BPA very broad discretion to adjust rates every six
months to ensure that it could recover all its costs and repay its obligations
to the U.S. Treasury under almost any circumstances. This revised "Cost Recovery
Adjustment Clause" and the initial rate adjustment is subject to a new BPA rate
proceeding that is scheduled to be completed by June 2001 and to review by the
Federal Energy Regulatory Commission ("FERC"). While the outcome of these
proceedings is uncertain, we expect the resulting power costs to be
significantly higher than under our current power sale agreements with BPA.
Because the rate for BPA power will not be determinable until the conclusion of
the rate case, we have a unilateral right to terminate the contract within a
specified period after FERC approves the new rates. We anticipate FERC approval
by September 2001. Under the new contract, we will not be able to reshape or
have BPA remarket our procurements of power. In addition, the BPA Administrator
may have broad discretion to temporarily or permanently limit or terminate our
purchases of power in circumstances in which the Administrator determines that
we are not in compliance with all applicable federal, state and local laws and
regulations. We do not expect to receive any cost-based firm power service
directly from BPA after our new contract expires on September 30, 2006.

Given the change and uncertainties in future BPA service and power markets,
our long-term power strategy is now one of self-reliance, severing our
dependence on BPA and other power providers, and becoming a power supplier as
well as a power consumer. We believe this strategy will allow us to realize the
economic value either of producing aluminum or selling power. Entities
controlled by our sole shareholder are actively pursuing development of the
following power projects:

1. A 248 MW natural gas-fired combined cycle combustion turbine project
near Goldendale, Washington.
2. Wind projects to be developed in Klickitat County, Washington and
north central Oregon.
3. A 520 MW natural gas-fired combined cycle combustion turbine project
near St. Helens, Oregon.
4. Four GE LM6000 turbines and associated equipment to be located at the
Goldendale smelter facility.

If all of the projects are developed as presently anticipated, the system
would include 770 megawatts of base-load, gas-fired, combined cycle combustion
turbine capacity, 180 megawatts of "peaking" capacity and 300 to 600 megawatts
of intermittent wind generation capacity. We are negotiating a plan and
agreement with Northwest Energy Development, LLC, of which our sole shareholder
is the sole member ("Northwest Energy"), pursuant to which we will be able to
purchase at cost up to 100% of the power generated by the facilities to be built
by Northwest Energy for the first 20 years after each facility begins commercial
operation. We will then be able to use the power in our operations or remarket
it to third parties at market prices. If we remarket the power, we will be able
to keep the proceeds if allowed by the project financing arrangement of the
particular facility from which we purchase the power or pay the proceeds to the
facility to reduce project financing and other costs. We will designate
Northwest Energy as the recipient of up to $25 million in BPA remarketing
proceeds to reimburse expenditures incurred in connection with the development
of the power generation facilities. We also anticipate entering into an
agreement with BPA or another party under which BPA or the other party would
agree to guarantee or provide up to $200 million of third party revolving debt
secured by a portion of the remarketing proceeds to finance qualified
expenditures in connection with the development of these power supply
facilities. BPA would be able to treat as unavailable for reimbursement of
qualified expenditures remarketing proceeds of up to 110% of the amount of its
guarantee. We will be eligible to receive liquidated damages from Northwest
Energy if a specified minimum amount of generating capacity is not available by
October 1, 2006.

OPERATIONS

We conduct our business and derive revenues through two principal business
activities: the production of value-added specialty aluminum products under
tolling contracts and for direct sales, and the production of primary aluminum
under a tolling contract. All of our business is conducted under one segment as
defined by Statement of Financial Accounting Standards No. 131.

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PRODUCTION OF VALUE-ADDED ALUMINUM PRODUCTS

We operate a value-added production operation which blends primary
aluminum, produced at the Goldendale smelter or purchased from Hydro, Glencore
Ltd. and other aluminum producers, with various alloys into a variety of
value-added products, including proprietary small diameter billet ("SDB") and
related products. Our SDB products are cast directly from molten aluminum in a
process that eliminates the expense associated with the extrusion process
typically required to manufacture SDB products. Our SDB products are frequently
manufactured to customer specifications, and, as such, can be priced to provide
us with enhanced margins relative to commodity aluminum products. Since
Northwest Aluminum Specialties began its value-added operations in the early
1990s, the business has grown to represent a significant percentage of our total
revenues. Our SDB products are typically forged or extruded by our customers
into end use forms which include fire extinguishers, automobile air bag
canisters, golf club heads, bicycle frames and a variety of automotive and
aircraft parts.

In late 1996, Specialties added a new billet machining operation that
allows us to manufacture SDB in any diameter between 2 inches and 5 inches,
within extremely tight engineering tolerances. Bar sawing capabilities were also
added that allow us to deliver cut billet "pucks" that meet customer
specifications. These new capabilities have led to additional business and
opportunities that we believe will allow us to continue to increase the size of
our value-added aluminum business and enhance the average premium received.

Our value-added standard extrusion billet and hot molten metal products
that are not produced under tolling arrangements are sold at the Midwest market
price, which includes a premium of $.03 to $.05 per pound over the London Metal
Exchange price, plus a premium of between $.06 and $.13 per pound. Our specialty
extrusion billet, hot closed die forging, cold impact forging and semi-solid
forging are sold at the Midwest market price plus a premium of between $.13 and
$.81 per pound.

Because of our remelt capability, our non-tolled value-added production has
not been impacted by the curtailments to the same extent as our smelter
production. Production through the casthouse operations at Northwest is
approximately 50% of normal. Sales of non-tolled products were $202.6 million
and $219.6 million for the years ended December 31, 1999 and December 31, 2000,
respectively.

PRODUCTION OF PRIMARY ALUMINUM

Our subsidiaries operate two aluminum smelters in The Dalles, Oregon and
Goldendale, Washington. The smelters have the capacity to produce approximately
250,000 metric tons of primary aluminum per year. A metric ton is equal to
2,204.6 pounds. These smelters consist of 826 vertical pin Soderberg technology
reduction cells organized into five pot lines. The smelters use advanced
conservation technology, computer control procedures and environmental control
equipment to enhance their efficiency. Capital investment in the facilities by
us and the smelters' previous owners over the life of the facilities,
competitive wage rates, access to low cost hydroelectric power, low overhead and
tolling agreements that have historically insured full smelter utilization have
also contributed to the smelters' efficiency. The efficiency of the smelters has
allowed us to maintain a competitive cost position relative to other industry
participants, many of which are significantly larger than we are.

SMELTING METHODS. Smelting, which involves the reduction of alumina to
aluminum ingot, is an electrolytic process. Raw alumina is dissolved in an
electrolytic bath in large cells, or pots, which are insulated with brick and
lined with carbon. The cell lining acts as the negative cathode, and a carbon
block, which is partially immersed in the electrolytic bath serves as a positive
anode. The carbon anode is composed of petroleum coke and coal tar pitch and is
consumed in the smelting process, as oxygen released from alumina in the
reduction process binds with the carbon to form carbon dioxide. Because of the
high cost of removing metallic impurities from aluminum, careful attention must
be given to avoiding impurity introduction by way of the raw materials used in
the anode manufacturing process. Petroleum coke and coal tar pitch are used as
the carbon and binder sources because of their relatively high purity. Gases and
particulate matter are collected in the hood around the lower rim of the anode
casing and are passed through the smelter's air and water purification systems.
Molten aluminum is drawn from the bottom of the cell, and, typically, poured
into molds as unalloyed metal, or sow, or routed into holding furnaces where
various alloying ingredients may be added before casting into plate, slab, logs
or ingot.

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The world's aluminum smelters are evenly split between two basic anode
technologies, Soderberg and pre-bake. The two processes differ only in the
fabrication and connection of the carbon anode. Most recently constructed
smelters use pre-bake technology, which has certain inherent advantages relative
to Soderberg technology and may permit primary aluminum production at a lower
cost, albeit at a higher initial investment.

Soderberg anodes are baked by utilizing waste heat from the smelting cell
and, as such, are referred to as self-baking. A steel casing or mold six to
eight meters by two meters containing the coke aggregate and coal tar pitch
mixture is mounted over the smelting cell and its contents bake as they progress
toward the electrolytic bath. The carbon mass is allowed to slip through the
casing at the rate of its oxidation in the electrolytic bath. In the vertical
spike version of the Soderberg cell, electrical contact is made by steel tipped
aluminum spikes entering from the top. They are pulled by a special tool and
reset as their tips approach the electrolytic bath surface due to consumption of
the anode. In the horizontal spike version of the Soderberg cell the
steel-aluminum spikes enter through the side of the casing instead of through
the top. They must be removed and reset as the anode is consumed.

Pre-bake anodes are formed by blending sized petroleum coke aggregate and
coal tar pitch, molding it into blocks complete with preformed electrical
connection sockets by hydraulic pressing or vibration forming, and firing in
oil- or gas-fired ceramic-lined ring furnace pits. A typical block is 70
centimeters wide, 125 centimeters long and 50 centimeters high. Electrical
contact and physical support is obtained through aluminum or copper rods welded
or bolted to steel stubs. The stubs are set in the anode sockets and molten cast
iron is poured around them to produce a strong joint with low electrical
resistance.

GOLDENDALE SMELTER. The smelter in Goldendale, Washington was built in
1971, making it the most recently constructed aluminum smelter in the Pacific
Northwest, and was expanded in 1981. The total annual production capacity of the
Goldendale smelter is 168,000 metric tons of primary aluminum output. The
Goldendale smelter employs vertical pin Soderberg technology and consists of 526
reduction cells organized into three pot lines. The Goldendale smelter has
undergone a number of technology upgrades during its lifetime. These upgrades
have resulted in a significant improvement in production efficiencies over the
years as measured by energy consumption, carbon consumption and cell life.

The Goldendale smelter was constructed from engineering plans based on
Norsk Hydro ASA's Karmoy, Norway facility, and as such is similar in terms of
layout, smelter design and operating processes. The Goldendale smelter was also
designed to operate in tandem with our smelter located in The Dalles, Oregon.

NORTHWEST SMELTER. Located across the Columbia River and approximately 35
miles west of the Goldendale smelter, our smelter in The Dalles produces primary
aluminum. Built in 1958, The Dalles smelter consists of 300 vertical pin
Soderberg reduction cells organized into two pot lines. The smelter's production
capacity is about 82,000 metric tons of primary aluminum per year.

We also operate a carbon plant at The Dalles facility. The plant produces
approximately 40,000 metric tons of carbon briquettes, which are consumed during
the alumina reduction process. We have surplus capacity in the plant and
recently have begun selling briquettes to a non-affiliated aluminum producer.

CELL RELINING. Each smelter's cells are grouped into series electrical
circuits varying from 150 to 186 cells. Each cell must be relined on average
every 2,300 to 2,600 days. When a cell is relined, it is removed from the
production process by electrically isolating the cell, allowing the electricity
to flow past the cell to the next cell in the circuit. The cell is allowed to
cool and the lower half of the cell, known as the cathode, is removed and taken
from the cell lines to our cell relining area. The residual cooled and hardened
electrolyte and aluminum and the spent pot liner, which consists of carbon
blocks and insulating brick, are removed from the steel cell casing. The steel
casing is then straightened and patched if necessary. The cell is then relined
with new insulating brick, carbon blocks and other material and supplies,
including ramming paste and collector bars. The total cell relining costs are
approximately $75,000 per cell. The number of cells relined each year varies
based on the quality of materials used, operating conditions and the number of
cells that have been relined over the years.

THE HYDRO TOLLING AGREEMENT. Goldendale and Hydro Aluminum Louisville, Inc.
entered into a ten-year contract effective January 1, 1997. The Hydro tolling
agreement has been extended another seven years, until December 2013.

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Under the terms of the Hydro tolling agreement, Goldendale must use its
smelter exclusively to produce at least 157,000 metric tons of aluminum annually
from the alumina supplied to it by Hydro, and Hydro is required to supply
sufficient alumina to enable Goldendale to produce that amount of aluminum.
Hydro supplies the alumina at no cost to Goldendale, and at all times the
alumina and aluminum inventory is owned by Hydro. Goldendale bears the entire
cost of unloading and storing the alumina and transporting it to the smelter
from Goldendale's unloading facility. Hydro pays a tolling fee to Goldendale for
converting the alumina to aluminum based on a percentage of the price of
aluminum on the London Metal Exchange. Pursuant to its tolling agreement with
Hydro, Goldendale receives an additional tolling fee for casting the aluminum
into value-added "casthouse products" such as extrusion billet, foundry "T" or
sheet ingot. In addition, Goldendale shares premiums that Hydro is able to
realize on sales of value-added products in the market. Hydro is required to
place orders for at least 70,000 metric tons of value-added products each year.
The tolling agreement also specifies quality and efficiency requirements. If the
products or production schedules do not meet the required specifications, the
parties have agreed to work together to identify and correct the problem;
however, Hydro may terminate the agreement if Goldendale's production were to
continue to fall below the product or schedule specifications.

The Hydro agreement also requires Goldendale to use any additional smelter
capacity resulting from the installation of new point feeder technology under
the facilities investment program, discussed below, exclusively to produce
aluminum products for Hydro, subject to some maximum volumes. Hydro is required
to supply sufficient alumina to enable Goldendale to produce the additional
volume. However, Hydro's commitment to place orders for value-added products
remains at 70,000 metric tons and has not been increased to reflect the
additional casthouse capacity expected to result from the facilities investment
program. Hydro has informed us that it will utilize the additional casthouse
capacity. Hydro would like to receive more of the primary aluminum produced at
the Goldendale smelter in the form of billet rather than ingot. In contrast to
ingot, billet is a casthouse product. If Hydro's demand for billet does not use
the full capacity of the Goldendale casthouse, we anticipate using the excess
capacity to cast primary aluminum from the smelter at The Dalles into commodity
billet for other value-added customers.

In December of 2000, we entered into a "Side Agreement to Agreement to Toll
Convert Alumina into Aluminum" with Hydro. As a consequence of the current power
market conditions in the Pacific Northwest, we had curtailed production at the
Goldendale smelter and allowed the Bonneville Power Administration to remarket
the excess power made available because of the curtailment. We agreed with Hydro
that for the period from October 1, 2000 through December 31, 2002, we would
curtail the production level at the Goldendale smelter by 53,000 metric tons
annually, to a production level of 105,000 metric tons annually. For the period
from December 24, 2000 through September 30, 2001, we agreed to further curtail
the production level at the Goldendale smelter by an additional 83,000 metric
tons annually. During that period a total of approximately 16,500 metric tons of
aluminum would be delivered to Hydro. We agreed to pay a cancellation fee of
$38.8 million in connection with these adjustments in the tolling agreement. We
paid $9.2 million of this amount on March 1, 2001 and will pay the remainder in
monthly installments through September 30, 2001. These qualify as expenditures
that are reimbursable under the Addendum.

THE GLENCORE TOLLING AGREEMENT. Northwest was a party to a tolling contract
with Glencore, Ltd. until the contract expired in December 1999. Under the
Glencore tolling agreement, Glencore provided alumina to Northwest for
conversion into primary aluminum. Glencore supplied enough alumina to support
the full production capacity of the Northwest smelter, and Northwest used its
best efforts to produce 82,000 metric tons of aluminum ingot and other finished
products for Glencore in exchange for a tolling fee based on a certain
percentage of the London Metal Exchange price for aluminum.

Due to the growth of its value-added operations, Northwest had increased
its purchases of primary aluminum from Glencore and others to such an extent
that it was purchasing more primary aluminum from Glencore and others than the
production capacity of the Northwest smelter. Glencore's tolling contract
allowed us to operate The Dalles smelter at full capacity while we had no
developed market for our smelter production. The success of our non-tolled
products, however, reduced the importance of this contract, and we did not renew
it when it expired in December 1999. We have, however, entered into an agreement
with Glencore to have Glencore supply the smelter at The Dalles with all of its
alumina requirements from October 1, 1999 to December 31, 2004. Amendments have
been made to that agreement to accommodate the recent curtailments in production
levels. We have agreed to pay

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Glencore cancellation fees totaling $3.2 million. These fees qualify as
expenditures that are reimbursable under the Addendum.

UNLOADING FACILITIES. We receive raw alumina at our Portland, Oregon
unloading facility. A ship channel maintained by the U.S. Army Corps of
Engineers serves the facility. Three steel silos are located on the property
with the capacity to store 42,000 metric tons of alumina. Alumina is delivered
to the facility by ship and is then transferred into silos for short-term
storage and delivered to our smelters by rail. The unloading facility has
sufficient capacity to handle our unloading and storage requirements.

FACILITIES INVESTMENT PROGRAM

Both we and previous owners of our facilities have periodically made major
investments in new plant and equipment. From 1978 to 1981, Martin Marietta
Corporation made a major investment in both smelters by implementing new anode
and cathode technology, modernizing electrical and environmental control systems
and adding the third cell line at the Goldendale smelter. In 1991 and 1997,
Northwest Aluminum Specialties added new casting capability.

We have undertaken the facilities investment program to expand capacity and
enhance operating efficiency. With the financial and technical support of Hydro,
we plan to expand the casthouse at Goldendale and upgrade the cell lines at
Goldendale and at The Dalles. We have borrowed $20.0 million from Hydro under a
note purchase agreement to partially finance the facilities investment program.
We intend to implement the facilities investment program over the next five
years, in two stages.

In the first stage we modernized the Goldendale casthouse. The Goldendale
casthouse expansion is designed to increase the facility's capacity to produce
value-added billet from 13 million pounds per month to an initial capacity of 22
million pounds per month, with the option to expand capacity to over 30 million
pounds per month. The additional value-added production will be sold by Hydro
under the tolling agreement, with the same sharing of market premiums in excess
of costs. As discussed below, our share of any incremental earnings from the
facilities investment program will be used to repay the debt owed to Hydro.
Hydro has informed us that its own U.S. extrusion plants should be able to use a
significant portion of this additional capacity. The expansion was completed in
2000 at a total cost of $12.6 million, which was somewhat less than our estimate
of the project's total cost of $13.5 million.

The first stage also includes a 12 to 18-month demonstration of the planned
cell line improvements in a 34-cell section at Goldendale. Conversion of this
section and the demonstration are budgeted to cost $6.4 million. Cell
improvements include point feeders to control alumina additions, magnetic
compensation to stabilize cell operations, cathode redesign to optimize heat
balance, new computer controls and other related technologies. The technology
for the cell line improvements has been licensed from Hydro, which already has
implemented these changes at a similar smelter in Norway. Based upon Hydro's
experience, we expect the improvements to increase smelter production, reduce
average unit costs of production, increase production efficiencies and
significantly reduce air emissions. The improvements are underway, and were
expected to be substantially complete by the end of 2000. The curtailment of
operations has necessitated a delay in the completion until the end of 2001.
Through December 2000, expenditures related to this conversion totaled $3.5
million, which is consistent with our estimate of the project's total cost.
Results of this test phase obtained thus far are positive.

We have temporarily suspended Phase II of the Facilities Investment Program
because of our recent curtailments and uncertainties in our long-term supply of
competitively priced electric power. We plan to begin the second stage of
converting the remaining cells at both smelters when our long-term power supply
is secure and we complete the demonstration of our cell line upgrades and obtain
all necessary permits. The conversion can be performed cell by cell, with
minimal disruption of operations, and can be accelerated or slowed for market or
other reasons. We estimate that conversion of the remaining cells at both
smelters will cost approximately $55.0 million, and estimate that the cost of
conversion of a cell will be recovered in about 3.5 years. Hydro has agreed,
subject to certain conditions, to provide an additional $10.0 million of
subordinated financing if we decide to convert the remaining cells at
Goldendale. We expect the remaining $45.0 million, and any additional costs of
the facilities investment program, will be funded through cash from operations
and borrowings under our revolving credit facility.

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RESEARCH AND DEVELOPMENT AND INTELLECTUAL PROPERTY

We have traditionally placed emphasis on innovation and research and
development. We have laboratory facilities dedicated to environmental
compliance, quality testing and research and development. We engage in several
research and development activities designed to improve earnings by increasing
value-added margins or reducing costs. Expenditures for activities designated as
research and development were $0.8 million in 2000, $2.1 million in 1999, and
$1.2 million in 1998. We also have received grants from state and federal
governments for certain research and development activities.

Our research and development encompasses five broad initiatives:

- First, we undertake research and development to develop new alloys and
casting and homogenizing practices that improve the characteristics of
metal sold to customers. We endeavor to protect our proprietary
interest in our products and processes by filing patent applications
where appropriate and otherwise by seeking to protect them as trade
secrets. This research has resulted in several proprietary products and
an issued patent for a new alloy.

- Second, we have focused research in the area of semi-solid metalworking
("SSM"). SSM is intended to give automotive and other parts the
physical properties of forgings with the production cost of
die-castings. We have obtained a patent for the casting and
transformation of aluminum to produce SSM parts.

- Third, we have undertaken an initiative to further develop a process to
recycle Spent Pot Lining ("SPL"). We believe this process may allow SPL
to be recycled into several marketable products rather than being
treated and land filled at a significant cost. We have a patent on our
method of treating SPL from aluminum reduction cells and have
applications for other patents on SPL recycling.

- Fourth, our subsidiary, Northwest Aluminum Technologies, has acquired
and expects to develop a new technology to smelt aluminum in a low
temperature bath using inert metallic anodes and titanium diboride
cathodes. In our pursuit of this technology, we have acquired four
patents and intend to file additional patent applications. We also have
received three grants from the U.S. government to fund additional
research to develop new smelting technologies.

- Fifth, we engage in several other research and development projects to
continuously improve our smelting and casting operations.

We have eight patents and two trademarks. We have set out a description and
the termination date of each in the following table. We also have a number of
patents pending.

DESCRIPTION OF PATENT OR TRADEMARK TERMINATION DATE
- ---------------------------------- ----------------

A patent for a method and apparatus for the electrolytic
reduction of alumina................................................... October 25, 2014

A patent for the electrolytic reduction of alumina..................... August 31, 2008

A patent for the electrolytic reduction of alumina..................... February 13, 2010

A patent for a point feeder and a method for Soderberg aluminum
reduction cells........................................................ October 4, 2010

A patent for non-consumable anode and lining for aluminum
electrolytic reduction cell............................................ April 17, 2012

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A patent for casting, thermal transformation and semi-solid
forming of aluminum alloys............................................. April 14, 2015

A patent for a high strength aluminum alloy............................ September 12, 2014

A patent for a method of treating SPL from aluminum
reduction cells........................................................ December 8, 2015

A trademark for "Direct Forge", the name under which Northwest
Aluminum Specialties markets its small diameter billet................. December 15, 2002; automatically renewed for
subsequent 10 year terms if still in use

A trademark for "Direct Form".......................................... April 18, 2007; automatically renewed for
subsequent 10 year terms if still in use

SALES AND MARKETING

Hydro and Glencore have been our largest customers, accounting for 43% and
5% of our revenues in 2000 and 37% and 17% of our revenues in 1999,
respectively. The Glencore tolling arrangement expired on December 31, 1999. We
directly sell value-added aluminum products to approximately 100 extruders,
forgers, casters, traders and other customers throughout the United States and
abroad. Our Vice President of Sales and Marketing oversees a small sales and
customer service group that makes and supports these direct sales.

SUPPLIERS

The major raw materials we use are alumina, petroleum coke and coal tar
pitch, aluminum ingot, scrap aluminum and alloying elements and electricity. We
obtain our raw materials either through annual contracts or on the spot market.
Our recent curtailments have altered the delivery schedules of our longer term
supply arrangements.

Alumina consumed in the production of aluminum is supplied by Hydro for all
the alumina requirements of the smelter operations at Goldendale under the
tolling agreement. Glencore supplies all of the alumina requirements of the
smelter at The Dalles under a long-term supply agreement.

The other raw materials involved in the reduction of alumina are petroleum
coke, coal tar pitch and carbon lining. Petroleum coke is used to make anodes
and carbon lining and is sourced locally from a large producer of quality coke,
which is one of several suppliers. Coal tar pitch is available from several
suppliers. Carbon lining, which acts as the cathode in the smelting cells, is
purchased from various suppliers.

We annually purchase aluminum to supplement our smelter production. Prior
to December 31, 1999, we were buying back from Glencore almost the entire 82,000
metric tons of our smelter production at The Dalles. Additionally, we were
purchasing approximately 45,000 metric tons from other producers, including
Hydro, at market prices in the form of primary ingot, primary molten metal and
scrap metal. Primary suppliers include Hydro, Vanalco and Alcoa. The other major
inputs in the making of aluminum products are alloying elements, such as
magnesium and silicon, which are provided by various suppliers.

HEDGING ACTIVITIES

Our revenues and earnings are sensitive to changes in the price of primary
aluminum and in the premiums for, and mix of, our value-added products. For
example, the tolling fees we receive are tied to the London Metal Exchange price
of aluminum. The premiums that we must pay for base metal that we do not produce
in our own smelters fluctuates within an historical range of minus $0.01/lb to
plus $0.075/lb. This premium is dependent on the geographic location of the
source materials and the destination, as well as the general availability of
metal inventory and demand.

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Primary aluminum prices historically have been subject to significant
cyclical price fluctuations. The timing of changes in the market price of
aluminum are largely unpredictable. Aluminum prices historically have shown long
periods of average, or below average, prices followed by sudden, relatively
short periods of above average prices. The sudden rise of prices is generally
the result of some unforeseen event that changes the fundamental dynamic of the
existing marketplace. The fall of communism and the resultant excess of Russian
metal on world markets was one such event and the massive shortage of
electricity in the western United States is another such event. Over the
thirteen-year period between January 1, 1988 and December 31, 2000, the three
month price of aluminum on the London Metal Exchange has ranged between a low of
approximately $0.47 per pound to a high of approximately $1.26 per pound. During
this period prices averaged $0.72 per pound.

In general when we engage in fixed price forward sales contracts, we also
purchase the base material at a fixed price and premium for delivery or
settlement during the time period when the sale occurs. In general we do not
hedge our smelter production, preferring to utilize that production for formula
based sales, since we have some degree of control in reducing our manufacturing
costs. Because our curtailments left us exposed to obligations to sell
value-added primary aluminum products without a corresponding production
capability, we acquired a limited number of call options over the expected
period of the curtailment to hedge our sales obligations. In order to manage the
risk of market aluminum prices and continue to service our customer commitments,
the strategic use of options on aluminum were employed. When we initially
curtailed our smelter operations in October 2000, we purchased the same tonnage
of options (3500 mt per month) for the expected period of curtailment that we
would normally have purchased. When we further curtailed our smelter operations
in December 2000, we then purchased an additional tonnage of options.
Historically, we have agreed to sell our value-added products from two to six
months before the start of the calendar year. The current year was no different
because there was little information regarding the ultimate severity of
electricity shortages.

BACKLOG

The only sales for which we have a backlog are those for which an absolute
price has been agreed. The amount of backlog expands and contracts throughout
the year depending on (1) fixed price orders our customers receive from their
customers and (2) our customers' beliefs regarding the future direction of
aluminum pricing. Another major factor that is affecting backlog this year is
the decline in the truck trailer market and the reduction of fixed forward
orders placed by two of our customers that supply that market. For these reasons
as well as the timing of shipments, backlog may not be a reliable indicator of
future sales activity. Our fixed price backlog at December 31, 2000 was $27.7
million as compared to $31.7 million at December 31, 1999. At March 22, 2001 our
fixed price backlog was $24.6 million as compared to $62.4 million at March 22,
2000.

COMPETITION

Competition within the aluminum industry is intense. We compete with both
domestic and foreign producers of primary aluminum and with primarily domestic
producers of extrusion billet and other value-added products and with primarily
domestic producers of other products such as copper, steel, glass and plastic.
Many of our competitors have greater financial resources than we do, which may
adversely affect our ability to compete effectively.

Primary aluminum is a commodity with standard qualities. Competition
generally is based upon the ability to produce primary aluminum at a cost below
the market price, which generally is established through trading on the London
Metal Exchange. We also compete with various aluminum producers, casting
companies, extruders and other fabricators in the production of extrusion
billet, sheet ingot, small diameter ingot and other value-added products. In the
extrusion billet market, we compete primarily with Alcan and Alumax, a
subsidiary of Alcoa. Northwest Aluminum Specialties' major competition in the
small diameter billet segment comes from Alcoa, Kaiser, Pimalco, a large,
efficient extruder and subsidiary of Alcoa, Newman and Allgoods, which are both
punched plate producers. Competition in the sale of these value-added products
generally is based upon price, quality, availability, service and other factors.
We concentrate on the sale of value-added products in which we believe we have
production expertise, cost, quality, geographic and other competitive
advantages.

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ENVIRONMENTAL AND HEALTH MATTERS

We are subject to federal, state and local environmental laws. From time to
time, these environmental laws are amended and new ones are adopted. These laws
regulate, among other things, air emissions and water discharges; the use,
generation, storage, treatment, transportation and disposal of solid and
hazardous materials and wastes; and the release of hazardous or toxic substances
or other contaminants into the environment. In addition, we are subject to
various federal, state and local workplace health and safety laws and
regulations. The environmental and health laws are administered by the U.S.
Environmental Protection Agency, and various other federal, state and local
agencies.

To operate our business in compliance with environmental and health laws,
we must obtain and maintain in effect permits for each of our facilities for a
variety of operations. These permits include without limitation permits for
discharges of wastewater, emission of air pollutants and management of hazardous
wastes. As a result, we sometimes are required to make expenditures for
pollution control equipment or for other purposes related to our permits and
compliance with the environmental and health laws. We have been fined or
penalized for breaches or alleged breaches of the environmental and health laws
and subjected to claims and litigation brought by federal, state or local
agencies and by private parties seeking remedial or other enforcement action
under the environmental and health laws or damages related to injuries or
alleged injuries to health or to the environment. The Dalles smelter, the
Goldendale smelter and the Portland unloading facility were subject to an
environmental compliance assessment by an independent environmental consultant
in 1996 that was updated in the summer of 1998. In both cases, we hired and paid
the consultant. These assessments were intended to evaluate our compliance with
the environmental laws regulating discharges of wastewater, emission of air
pollutants and the management of hazardous wastes. These assessments identified
no condition of non-compliance that we believe would have a material adverse
effect on our financial condition or results of operations, nor are we aware of
any such material condition.

Our manufacturing facilities have been in operation for several decades,
and these facilities have used substances and generated and disposed of wastes
that are or may be considered hazardous. For example, these facilities have in
the past stored or disposed of wastewater treatment sludge in on-site surface
impoundments such as ponds and lagoons and have handled spent pot liner and
disposed of spent pot liner and other wastes in on-site regulatorily-approved
waste piles.

Martin Marietta Corporation, a prior owner of The Dalles smelter, conducted
an investigation of soil and groundwater at the smelter and implemented clean-up
measures at the smelter site, including the removal of hazardous substances from
groundwater and certain areas of the site and the encapsulation of other areas
where hazardous substances were disposed or released. Martin Marietta performed
this work under the supervision of the U.S. Environmental Protection Agency. In
1996, Martin Marietta completed the investigations and clean-up measures
required by the EPA at The Dalles smelter site. Although the purpose of the
Martin Marietta investigation was to identify all areas at the smelter where
hazardous substances had been disposed or released, some affected areas may not
have been identified or the clean-up measures may not perform as expected in the
future.

Hazardous substances have also been released at the Goldendale facility,
and the site was listed in the EPA's Comprehensive Environmental Response,
Compensation, and Liability Information System database in 1980. We expect
expenditures will be necessary at the Goldendale smelter to investigate and
clean up releases of hazardous substances disposed or released at the Goldendale
smelter. We have requested the State of Washington Department of Ecology to
approve a plan to close an on-site surface impoundment at the Goldendale
facility by 2005-2006. We expect to receive a response from the State of
Washington. As of December 31, 2000, the estimated cost of the surface
impoundment closure and post-closure actions was $1.9 million. We have
established a trust fund of approximately $1.3 million as of December 31, 2000,
to help pay these costs, and we have procured insurance coverage to provide
funds to the State of Washington for closure if we default. The actual closure
costs may exceed our estimate. Under a contract with the former owners of the
Goldendale smelter, the former owners have agreed to reimburse Goldendale
Aluminum Company for certain anticipated expenditures. We do not assure you the
former owners of the Goldendale smelter will contribute their contractually
allocated share of the costs necessary to investigate and cleanup hazardous
substances disposed or released at the Goldendale smelter site or to obtain
regulatory closure of surface impoundments at the site.

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Due to continuing environmental regulations regarding spent pot liner
disposal, over the past few years we have experienced substantial increases in
costs associated with the disposal of SPL from our smelters. We presently
dispose of SPL under a contract with a chemical waste treatment company, which
expires on February 14, 2003. EPA has proposed but not published a new treatment
standard for SPL. The Company cannot predict if or when EPA will publish the
proposed rule nor can the Company predict what, if any, impact the proposed rule
would have on the Company's SPL disposal practices.

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

An environmental condition that we do not know about could exist as to one
or more of our properties and could have an adverse effect on our results of
operations or financial condition. Future environmental or health laws could
have an adverse effect on our results of operation or financial condition.

EMPLOYEES

As of December 31, 2000, we employed 1,084 workers, 494 of which are
members of Local 8147 and 366 of which are members of Local 9170 of the United
Steelworkers of America (USW). Goldendale Aluminum Company is signatory to a
collective bargaining agreement with the USW for the period May 24, 1996 through
May 31, 2001. Northwest Aluminum Company is a signatory to a collective
bargaining agreement with the USW for the period July 1, 1996 through June 30,
2001. Because of uncertainties surrounding our future power supply and rates and
operating levels after October 2001, the Company and the USW are in discussions
to extend the expiration date of current labor agreements until September 2001.

Both labor agreements provide for a 4% wage increase each year of the
contract. During the contract period there is a no strike/no lockout agreement.
We provide a profit sharing program in addition to the base compensation for all
employees, and a fully paid medical, dental and vision health care plan. We have
a 401(k) plan but no defined benefit plan.

In conjunction with our agreement with BPA to remarket excess power
resulting from the December 2000 curtailment, we reached an agreement with the
United Steelworkers of America concerning the use of the proceeds from the
remarketing of power. We are required to obtain the USW's consent in order to
use the remarketing proceeds for nonemployee-related qualified expenditures. The
USW has agreed that its consent will not be unreasonably withheld.

We believe we have a good relationship with the union and an employee
involvement process that encourages creativity, productivity and positive
employer-employee relations.

FORWARD-LOOKING STATEMENTS

This Form 10-K includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to our goals, plans and expectations regarding:
the future availability of low-cost power, the facilities investment program,
the regulation of the disposal of spent pot liner, the development of new
smelting technology by Northwest Aluminum Technologies, and capital
expenditures. Risk factors related to these forward looking statements are
discussed in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Forward-Looking Statements."

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ITEM 2. PROPERTIES

We own all of our facilities. The following table shows (1) each
facility, (2) its square footage, (3) its annual production capacity and (4) its
use.

FACILITIES

SQUARE ANNUAL
FACILITY FOOTAGE CAPACITY USE
-------- ------- -------- ---

GOLDENDALE
Smelter 1,209,730 168,000 mt Alumina reduction
Casthouse Included in above 168,000 mt Produce sow, billet, sheet

Unloading Facility 7.9 acres 42,000 mt
(Portland) Shipments
Paste Plant 37,711 85,000 mt Carbon briquette
production
Laboratory 18,995 Quality control, R & D

Real Property 6,473 acres
NORTHWEST
Smelter 636,000 82,000 mt Alumina reduction
Casthouse 122,000 99,800 mt Produce sow, billet, ingot
Paste Plant 108,000 85,000 mt Carbon briquette
production
Real Property 390 acres
SPECIALTIES
Casthouse 160,000 Up to 54,500 mt Value-added billet
depending on
product mix
Sawing/Turning 100,000 Saw: Semi-fabrication
130,000 mt
Turning:
1,000,000 logs

We believe these facilities are adequate to meet our current needs. We are
expanding or upgrading some of our facilities as a result of the facilities
investment program. Most of our facilities are subject to mortgages and other
claims held by our creditors to secure our 12% first mortgage notes and our
indebtedness to Hydro. See Item 1, "Business -- Facilities Investment Program."

ITEM 3. LEGAL PROCEEDINGS

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

In December 1999, Goldendale settled a dispute with the Internal Revenue
Service relating to proposed adjustments in its taxable income for prior years.
In August 1999, Northwest settled a similar dispute with the IRS. Goldendale and
Northwest have agreed to capitalize certain expenditures for prior years. As a
result, we paid a dividend of $1.9 million to our shareholder for payment of
these taxes.

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

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 2000.

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PART II

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

There is no established public trading market for our common stock. There
is one holder of our common stock.

We are a subchapter S corporation and pay dividends to our sole
shareholder. In 1999 and 2000, we paid cash dividends of $1.9 million and $0,
respectively, to our sole shareholder.

With certain exceptions, we will not, and will not permit our subsidiaries
to, create or otherwise allow to exist any consensual restrictions on the
ability of any subsidiaries to pay dividends or make any other distributions on
their capital stock or pay any indebtedness owed to us or any of our other
subsidiaries or to make loans or advances or transfer any of their assets to us
or any of our other subsidiaries.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data presented below includes the
accounts of Northwest Aluminum Company, Northwest Aluminum Technologies and
Northwest Aluminum Specialties for all periods presented. It also includes the
accounts of Goldendale Holding Company and Goldendale Aluminum Company from May
22, 1996, the date Goldendale was acquired by Brett Wilcox, our sole
shareholder. This data should be read in conjunction with the consolidated
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" contained elsewhere in this
document.

FISCAL YEAR ENDED
-------------------------------------------------------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)

INCOME STATEMENT DATA:
Revenues ...................................... $ 376,946 $ 504,024 $ 479,276 $ 452,491 $ 423,800
Cost of revenues .............................. 333,647 442,663 447,883 438,101 394,776
General and administrative expenses ........... (9,746) (17,115) (18,119) (16,672) (19,431)
Net gains on power sales ...................... -- -- -- -- 13,980
Reimbursement of expenditures ................. -- -- -- -- 40,795
Curtailment expenses .......................... -- -- -- -- (42,944)
Interest expense .............................. (9,454) (16,723) (14,180) (21,977) (23,701)
Other income (expense), net ................... 1,442 4,246 614 603 (157)
Income (loss) before income taxes ............. 25,541 31,769 (292) (23,656) (2,434)
Income tax expense (benefit) .................. 6,636 13,274 3,009 (3,745) (4,408)
Net income (loss) ............................. 18,905 18,495 (4,853) (19,911) (6,842)
Net income (loss) per share of common
stock ....................................... 16,686 14,847 (8,501) (23,559) (10,490)
Ratio of earnings to fixed charges ............ 2.8x 2.1x --(1) --(1) --(1)
BALANCE SHEET DATA:
Cash and cash equivalents ..................... $ 6,345 $ 1,251 $ 37,633 $ 1,929 $ 1,982
Working capital ............................... 61,908 36,398 79,292 53,606 40,250
Total assets .................................. 350,815 347,011 364,634 370,631 408,493
Total long-term debt .......................... 185,441 134,941 192,955 200,662 195,702
Goldendale Holding Company preferred .......... 29,663 29,663 29,663 29,663 29,663
Total shareholder's equity .................... 103,615 115,680 77,516 52,081 41,591
OTHER DATA:
EBITDA ........................................ $ 47,137 $ 63,315 $ 33,616 $ 20,241 $ 46,564
Dividend per common share ..................... 67,587 2,932 -- 1,876 --

- ---------
(1) For the years ended December 31, 1998, 1999 and 2000, earnings were
insufficient to cover fixed charges. The earnings deficiency was $2,390, $27,880
and $8,409 in 1998, 1999 and 2000, respectively.

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EBITDA represents operating income before deductions for depreciation and
amortization. EBITDA has been presented because we believe it is commonly used
by investors to analyze operating performance and to determine a company's
ability to take on additional indebtedness or service indebtedness. EBITDA
should not be considered in isolation or as a substitute for net income, cash
flow from operations or any other measure of income or cash flow that is
prepared as generally accepted accounting principles require, or as a measure of
a company's profitability or liquidity. In addition, our definition of EBITDA
may not be identical to similarly entitled measures used by other companies. See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements included elsewhere in
this document.

For purposes of the computation of the ratio of earnings to fixed charges,
fixed charges consist of interest expense, amortization of deferred financing
costs and dividends accrued on the Goldendale preferred stock. Earnings consist
of income before income taxes plus fixed charges.

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

In addition to reading this section, you should read the consolidated
financial statements and related notes that begin on page F-1. That section
contains all of our detailed financial information including our results of
operations.

BASIS OF PRESENTATION

We were incorporated in the state of Oregon in June 1998 for the purposes
of becoming the holding company of Northwest Aluminum Company, Northwest
Aluminum Specialties, Inc., Northwest Aluminum Technologies, LLC and Goldendale
Holding Company and its wholly owned subsidiary, Goldendale Aluminum Company.
For purposes of this section only, the term "Northwest" refers to Northwest
Aluminum Company and Northwest Aluminum Specialties, Inc., the term "Goldendale"
refers to Goldendale Holding Company and Goldendale Aluminum Company and the
term "Technologies" refers to Northwest Aluminum Technologies, LLC. We, along
with Goldendale and Technologies, report on a December 31 fiscal year basis.
Northwest reports on a September 30 fiscal year basis. Included in intercompany
payable at December 31, 2000 is $4.2 million representing the portion of
intercompany transactions that do not eliminate due to the differing year-ends.
All other significant intercompany accounts and transactions have been
eliminated. We do not believe seasonal or other factors materially affect the
consolidation of these differing fiscal periods. During 2000 we curtailed
operations at our facilities. Refer to discussion of this matter included in
Item 1, "Business".

OVERVIEW

Our revenues have historically come from two primary sources:

(1) fees received from smelting alumina into aluminum and casting that
aluminum into primary and value-added aluminum products under tolling
contracts with Hydro and until December 31, 1999 with Glencore, and

(2) the sale of non-tolled value-added aluminum products to other
customers.

Revenue from fees for the conversion of alumina and processing of aluminum under
tolling arrangements is recognized upon completion of the tolling process. Under
the tolling arrangements, alumina suppliers deliver their alumina to us. The
alumina is converted to aluminum in reduction cells by putting it in liquid form
by dissolving it in an "electrolyte" solution and then passing electric current
through the electrolyte to separate the alumina into its two parts, aluminum and
oxygen. This process is continuous and is nearly instantaneous as the alumina is
dissolved in the electrolyte. The molten aluminum is withdrawn from the cells
and cast or formed into finished products. Revenue from the sale of non-tolled
value-added aluminum products is recognized upon shipment to the customer.

Because our tolling fees are a percentage of prices of aluminum on the
London Metal Exchange, the amount of revenue from tolling activities varies
depending on market aluminum prices, especially LME prices and gross smelter
production volumes. The tolling fees are based on prior three-month average LME
prices and not current market aluminum prices. Additional revenue for tolled
value-added products is dependent on the volume of value-

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added production and the cost of production versus the dollar amount of pricing
premiums. The amount of revenue from non-tolled value-added sales varies
depending on market aluminum prices, demand for our value-added products and the
pricing premiums we are able to realize for these products. Our revenues from
non-tolled value-added products may not be as strongly affected by lower LME
prices as is the case with tolling fees because of increased demand for
value-added products at lower prices.

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

PRICE PER
YEAR ENDED DECEMBER 31, POUND
----------------------- -----

1995.............................................................. $0.83
1996.............................................................. $0.70
1997.............................................................. $0.74
1998.............................................................. $0.63
1999.............................................................. $0.63
2000.............................................................. $0.71

The timing and magnitude of an increase or decrease in aluminum prices is
uncertain. As of December 31, 2000, the three-month LME price per pound of
aluminum was $0.71, and more recently LME prices have fluctuated around $0.68
per pound.

One of our primary costs is electrical power and prior to 2000, those costs
had been relatively stable. The source of the majority of our power has been
through the Bonneville Power Administration (BPA). We have supplemented the BPA
power with purchases of market power during time periods that have historically
had lower cost than our cost through BPA.

Beginning in the latter part of 2000, the market price of electric power
began to increase dramatically because of an extreme shortage of supply and
other factors. As an example, our average cost of power per pound of aluminum
produced was $.16 and $.18 in 1999 and 2000. The average market price of power
for the last six months has been approximately $245 per megawatt, equating to
$1.95 per pound of aluminum produced. These changes in power prices made it
apparent that we needed to change our strategies to obtain affordable power long
term.

While most of our power supply during the 4th quarter of 2000 and the first
three quarters of 2001 were under fixed price contracts with BPA, a portion was
not covered during the late Spring 2001 when market power prices historically
have been very low. Because of the dramatic increase in forward power prices
that occurred in 2000 it became uneconomic to purchase power to meet our open
requirements during the Spring 2001. We therefore chose to reduce our production
level to approximately 60% of normal beginning October 2000 and "reshape" or
sell power where we had excess over operational need because of reduced
production level and "reshape" or buy power for any open periods.

We entered into an agreement with BPA, which allows BPA to remarket the
power available to us and use these proceeds to reimburse us for defined
qualified expenditures. Additionally, agreements were made with the United
Steelworkers of America in regard to employee lay-offs, with Norsk Hydro in
regard to readjusting our tolling agreement with Hydro and with Glencore in
regard to readjusting the alumina supply contract.

We entered into a Remarketing Addendum (the "Addendum") with BPA in
December 2000. Under the Addendum, our operating subsidiaries, Goldendale
Aluminum Company and Northwest Aluminum Company,

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20

agreed to curtail smelter production and assist BPA in remarketing the electric
power that they had the right to purchase. BPA agreed to use the proceeds from
the remarketing to reimburse Goldendale Aluminum Company and Northwest Aluminum
Company or their designees for specified qualified expenditures, including,
among others, expenses associated with debt service and workforce reductions
resulting from the curtailment, and expenditures for the planning, licensing,
siting, acquisition and/or construction of conventional or renewable resources
to provide power for future operations of our smelters. For a given sale of
remarketed power, the net proceeds are equal to the revenue received by BPA in
the sale, minus the price we would have been obligated to pay had we purchased
the power, minus a specified amount retained by BPA, plus any interest costs BPA
avoids as a result of the net proceeds. We estimate that from December 29, 2000
through September 30, 2001, $285.0 million of net proceeds will be available for
reimbursement of qualified expenditures. The Addendum is effective through the
earlier of the date on which all of the net proceeds have been paid by BPA or
September 30, 2010.

In October 2000, we entered into a new power sale agreement with BPA that
will be effective from October 1, 2001 through September 30, 2006. The contract
will allow us to direct available power to either or both of our operating
facilities. Approximately 50% of our power requirements will be met through the
contract. Last summer, BPA completed a rate proceeding to determine the base
rate under this new power contract. The base rate adopted by BPA was $23.5 per
megawatt-hour. The rate adopted by BPA also included a "Cost Recovery Adjustment
Clause," which allows BPA to adjust rates under certain defined circumstances.
While past BPA rates also contained a similar adjustment clause, rate
adjustments had never been implemented in the past. But because of dramatically
higher power market prices for the power BPA needed to purchase to meet its
supply obligations, BPA indicated during the fall of 2000 and winter of 2001
that it probably would need to impose a significant surcharge on rates effective
after October 1, 2001. In March 2001, BPA proposed a revised and expanded "Cost
Recovery Adjustment Clause" that would grant BPA very broad discretion to adjust
rates every six months to ensure that it could recover all its costs and repay
its obligations to the U.S. Treasury under almost any circumstances. This
revised "Cost Recovery Adjustment Clause" and the initial rate adjustment is
subject to a new BPA rate proceeding that is scheduled to be completed by June
2001 and to review by the Federal Energy Regulatory Commission ("FERC"). While
the outcome of these proceedings is uncertain, we expect the resulting power
costs to be significantly higher than under our current power sale agreements
with BPA. Because the rate for BPA power will not be determinable until the
conclusion of the rate case, we have a unilateral right to terminate the
contract within a specified period after FERC approves the new rates. We
anticipate FERC approval by September 2001. Under the new contract, we will not
be able to reshape or have BPA remarket our procurements of power. In addition,
the BPA Administrator may have broad discretion to temporarily or permanently
limit or terminate our purchases of power in circumstances in which the
Administrator determines that we are not in compliance with all applicable
federal, state and local laws and regulations. We do not expect to receive any
cost-based firm power service directly from BPA after our new contract expires
on September 30, 2006.

Our long-term power strategy is now one of self-reliance, severing our
dependence on BPA and becoming a power supplier as well as a power consumer.
This posture will allow us opportunities to choose between producing aluminum
when aluminum prices are high and power prices low or selling power when
aluminum prices are low and power prices high.

Our cash flow and earnings are highly sensitive to aluminum prices and now
to market power prices because the balance of our production costs are largely
fixed. At low market aluminum prices and/or high market power prices, we are
able to reduce some variable costs, but most of the production costs of primary
aluminum are constant in the short term (alumina, labor, carbon), and therefore
such changes in market prices will cause declines in earnings. Conversely,
increased market aluminum prices and/or decreased market power prices will cause
increases in earnings.

To reduce our reliance on market-priced primary aluminum and to improve
overall profitability, we have pursued a strategy of increasing both our
"tolled" and "non-tolled" value-added production through specialty casting and
processing operations. Through these operations, we are able to realize premiums
over market LME prices, the amount of which varies with the degree of
value-added content of the product and uniqueness of the product in the
marketplace. Our volume of value-added production has increased significantly
over the past decade relative to the volume of our primary production. Our
continued investment in value-added production operations is designed to further
increase our value-added production capabilities. As a consequence of this
strategy, the volume of non-tolled value-added production at Northwest has grown
from 153.7 million pounds in 1993 to 266.6 million pounds in 2000. Prior to
January 1, 2000, the smelter operation at The Dalles was under a tolling
contract with Glencore.

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The Glencore tolling contract allowed Northwest to operate the smelter at
The Dalles at full capacity while it developed value-added products. The success
of our non-tolled products, however, reduced the importance of this contract,
and it was not renewed upon its expiration in December 1999. The effect of this
non-renewal was the elimination of revenue and cost of revenue related to
tolling aluminum for Glencore. The underlying cost for primary aluminum is now
our own production cost rather than the market price we were paying Glencore and
others for aluminum for our value added operation.

THE BUSINESS COMBINATION

On December 18, 1998, Brett Wilcox contributed to Golden Northwest
Aluminum, Inc. his membership interest in Technologies and all of the
outstanding shares of common stock of Northwest and Goldendale. This business
combination was treated for accounting purposes as a combination of entities
under common control in a manner similar to a pooling of interests. The business
combination has not had and we do not expect it to have a significant impact on
our financial position, results of operations or cash flows. In accordance with
generally accepted accounting principles, however, the amount recorded as
Goldendale preferred stock has been reclassified and recorded as a minority
interest of our company.

RESULTS OF OPERATIONS

The following table sets forth the consolidated statement of operations
data as a percentage of revenues for 1998, 1999 and 2000.

YEAR ENDED DECEMBER 31,
-----------------------
1998 1999 2000
------ ------ ------

Revenues .................................... 100.0% 100.0% 100.0%
Cost of revenues ............................ 93.4 96.8 93.2
------ ------ ------
Gross margin ................................ 6.6 3.2 6.8
Net gains on power sales .................... 0.0 0.0 3.3
Reimbursement of expenditures ............... 0.0 0.0 9.6
Curtailment expenses ........................ 0.0 0.0 (10.1)
General and administrative expenses ......... (3.8) (3.7) (4.6)
------ ------ ------
Operating income (loss) ..................... 2.8 (0.5) 5.0
Interest expense ............................ (3.0) (4.9) (5.6)
Other income, net ........................... 0.2 0.2 0.0
------ ------ ------
Net other expenses .......................... (2.8) (4.7) (5.6)
------ ------ ------
Loss before income taxes .................... 0.0 (5.2) (0.6)
Income tax expense (benefit) ................ 0.7 (0.8) 1.0
------ ------ ------
Loss before extraordinary item .............. (0.7) (4.4) (1.6)
Extraordinary item .......................... (0.3) (0.0) 0.0
------ ------ ------
Net loss .................................... (1.0)% (4.4)% (1.6)%
====== ====== ======

2000 COMPARED TO 1999

Total revenues decreased from $452.5 million to $423.8 million for the
years ended December 31, 1999 and December 31, 2000, respectively, a decrease of
$28.7 million, or 6.3%. Revenues were primarily influenced by the cessation of
the Glencore tolling agreement, by a partial curtailment of operations to
facilitate the opportunity to sell electrical power into the marketplace and by
changes in the market prices of aluminum and power.

The cessation of the Glencore tolling agreement eliminated approximately
500,000 pounds per day of production billable under tolling arrangements
beginning January 1, 2000. Because of Northwest's September 30 year-end, the
impact on the Company's consolidated financial statements was reported beginning
April 1, 2000. For the year ended December 31 tolling revenues decreased $54.3
million from 1999 to 2000 due to the cessation of this agreement. Tolling
revenues continued to be earned under the Company's Hydro tolling contract,
increasing from $166.6 million to $180.1 million for the years ended December
31, 1999 and December 31, 2000, respectively.

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Total revenues from tolling agreements decreased from $241.6 million to $200.8
million for the years ended December 31, 1999 and December 31, 2000,
respectively, a decrease of $40.8 million, or 16.9%.

Volumes produced under tolling contracts decreased from 527.9 million
pounds to 373.6 million pounds for the years ended December 31, 1999 and
December 31, 2000, respectively, a decrease of 154.3 million pounds, or 29.2%.
The decrease in production volume due to the non-renewal of the Glencore tolling
agreement was 137.8 million pounds, with a related decrease in revenues of $56.7
million. Other than the decrease due to the non-renewal of the Glencore tolling
agreement, the decrease in production level under tolling arrangements was due
to a partial curtailment beginning in October 2000 of production capacity to
facilitate the reshaping of electrical power procurement to open periods. The
production capacity of the Goldendale facility was cut to approximately
two-thirds of normal capacity for the final three months of 2000, resulting in a
decrease in production volume of 16.5 million pounds, with a related decrease in
revenues from tolling agreements of $8.0 million.

Offsetting the impact of volume changes, increases in average effective LME
aluminum prices from $.60 per pound to $.71 per pound for the years ended
December 31, 1999 and December 31, 2000, respectively, increased revenues from
tolling contracts by $23.8 million.

Sales of non-tolled products increased from $202.6 million to $219.6
million for the years ended December 31, 1999 and December 31, 2000,
respectively, an increase of $17.0 million, or 8.4%. The primary factors
affecting revenues from sales of non-tolled products were the rise in market
prices of aluminum and changes in volumes shipped.

An increase in average selling price of $.07 per pound because of the
overall rise in the market price of aluminum provided an increase in non-tolling
revenues of $18.1 million from 1999 to 2000. Somewhat offsetting this positive
impact was a slight decrease in shipments of non-tolled aluminum products from
268.1 million pounds to 266.6 million pounds for the years ended December 31,
1999 and December 31, 2000, respectively, a decrease of 1.5 million pounds, or
approximately one-half of one percent.

Other revenues, primarily from the sale of carbon briquettes, decreased
from $8.3 million for the year ended December 31, 1999 to $3.4 million for the
year ended December 31, 2000.

Cost of revenues decreased from $438.1 million to $394.8 million for the
years ended December 31, 1999 and December 31, 2000, respectively, a decrease of
$43.3 million, or 9.9%. As a percentage of revenues, cost of revenues declined
from 96.8% to 93.2% for the years ended December 31, 1999 and December 31, 2000,
respectively. The primary influences on cost of revenue were the cessation of
the Glencore tolling agreement, a partial curtailment of production to
facilitate the opportunity to have BPA remarket electrical power into the market
place, an increase in market aluminum prices and an increase in our cost of
power.

Beginning January 1, 2000, the cessation of the Glencore tolling agreement
enabled us to utilize our Northwest smelting capacity to provide material for
our sales of non-tolled value-added product. This eliminated $57.9 million of
cost of revenues for the year ended December 31, 2000. In addition, the cost of
materials for approximately 75% of our non-tolled value-added product is now at
our internal smelter production cost instead of market aluminum prices.

The production capacity of the Goldendale facility was cut to approximately
two-thirds of normal capacity during the last three months of 2000. This
resulted in a decrease in production volume of 16.5 million pounds and a
decrease in cost of revenues of $7.8 million.

The increased market price of aluminum from 1999 to 2000 resulted in an
increase of $15.5 million in our purchased metal costs over the prior year.

For the years ended December 31, 1999 and December 31, 2000, respectively,
power costs increased $4.8 million from $86.0 million in 1999 to $90.8 million
in 2000. If we had been at full operation for the entire year our cost of power
would have increased by approximately $9.4 million, but our reduced levels of
production decreased our usage, thus decreasing our cost $4.6 million.

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Gross margin increased from $14.4 million for the year ended December 31,
1999, to $29.0 million for the year ended December 31, 2000, an increase of
$14.6 million, or 101.4%. As a percentage of revenues, gross margin rose from
3.2% to 6.8% for the years ended December 31, 1999 and December 31, 2000,
respectively. The increase in gross margin resulted primarily from the changes
in revenues and cost of revenues (discussed above).

Sales of the power made available from the curtailment in October 2000
generated $18.3 million, less the cost of the power, resulting in net proceeds
of $14.0 million.

The employee and contract costs related to the production curtailments at
Goldendale during 2000 totaled $42.9 million, of which $40.8 million is
reimbursable from the remarketing proceeds. The employee and contract costs
related to the production curtailments at Northwest totaled $6.6 million, of
which $5.4 million is reimbursable from the remarketing proceeds. Due to
differing year-ends, the statement of operations does not include the Northwest
costs or reimbursements.

General and administrative expenses increased from $16.7 million to $19.4
million, for the years ended December 31, 1999 and December 31, 2000,
respectively. As a percentage of revenues, general and administrative expenses
increased from 3.7% to 4.6% for the years ended December 31, 1999 and December
31, 2000, respectively. The increase resulted primarily from the recognition of
a $2.0 million provision for the possible non-collection of an account
receivable.

Interest expense increased from $22.0 million to $23.7 million for the
years ended December 31, 1999 and December 31, 2000, respectively. The increase
from 1999 to 2000 is due to increased borrowings under our revolving credit
facility.

Income tax benefit decreased from $3.7 million to an income tax expense of
$4.4 million for the years ended December 31, 1999 and December 31, 2000,
respectively. This change was due primarily to an increase in taxable income of
Goldendale, a C corporation, for the year ended December 31, 2000 compared to
1999.

As a result of the foregoing factors, we reported a net loss of $6.8
million for the year ended December 31, 2000 versus a net loss of $19.9 million
for the year ended December 31, 1999.

1999 COMPARED TO 1998

Primary and value-added aluminum produced under tolling contracts increased
slightly from 526.3 million pounds in 1998 to 527.9 million pounds in 1999.
Shipments of non-tolled value-added aluminum products were 270.5 million pounds
and 268.1 million pounds for 1998 and 1999, respectively, a decrease of less
than 1%.

Revenues decreased from $479.3 million in 1998 to $452.5 million in 1999, a
decrease of $26.8 million, or 5.6%. Revenues from tolling contracts decreased
9.3% from $266.3 million in 1998 to $241.6 million in 1999, primarily due to the
decrease in average effective LME aluminum prices from $.67 per pound in 1998 to
$.60 per pound in 1999. Sales on non-tolled value-added products decreased
slightly from $204.6 million in 1998 to $202.6 million in 1999, due to the
slight decrease in shipments from 1998 to 1999. Tolling revenues earned in 1998
and 1999 under the Hydro and Glencore tolling contracts were $178.1 million and
$166.6 million, and $88.2 million and $75.0 million, respectively.

Cost of revenues decreased from $447.9 million in 1998 to $438.1 million in
1999, a decrease of $9.8 million, or 2.2%. The cost of revenues decreased due to
the decrease in the effective market aluminum prices in 1999 and reduced power
costs from the liquidation of a power contract for $3.5 million.

Gross margin decreased from $31.4 million in 1998 to $14.4 million in 1999,
a decrease of 54.1%. As a percentage of revenues, gross margin declined from
6.6% to 3.2%. Gross margin declined due primarily to the decrease in revenues of
$26.8 million, offset by a decrease in cost of revenues of $9.8 million.

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General and administrative expenses decreased from $18.1 million in 1998 to
$16.7 million in 1999, primarily due to the $1.5 million write-off of a
long-term trade receivable in 1998. As a percentage of revenues, general and
administrative expenses decreased from 3.8% in 1998 to 3.7% in 1999.

Interest expense increased from $14.2 million in 1998 to $22.0 million in
1999, or 54.9%, primarily as a result of the first mortgage notes that have a
substantially greater interest rate than our prior borrowings and because of
increased indebtedness. Our debt load during 1999 included the 12% first
mortgage notes, the Hydro note, and beginning in the fourth quarter, borrowings
against our revolving credit facility.

Income tax expense decreased from $3.0 million in 1998 to an income tax
benefit of $3.7 million in 1999, primarily as a result of Goldendale's loss
before income taxes of $13.0 million.

As a result of the foregoing factors, we reported a net loss of $19.9
million in 1999 versus a net loss of $4.9 million in 1998.

LIQUIDITY AND CAPITAL RESOURCES

During this period of curtailment, our cash flow and liquidity from
operations will be supplemented by reimbursements for "qualified expenditures"
from the remarketing proceeds received by BPA. "Qualified expenditures" include
reimbursements for curtailment related employee costs, contract breakage fees,
and operational inefficiencies, for capital expenditures and for debt service.
For the period January 1, 2001 through September 30, 2001, these reimbursements
are estimated to be $100 million, however no assurance can be given that such
amounts will be realized.

Historically, our cash and capital requirements have been satisfied through
cash generated from operating activities and borrowings under our primary credit
facilities. Before December 21, 1998, Goldendale and Northwest operated under
independent credit facilities which were scheduled to mature in 2001 and
consisted of total borrowings at December 21, 1998 of $125.2 million under term
loans and revolving credit facilities. See Note 4 to the consolidated financial
statements. We repaid these credit facilities with proceeds from the sale of our
12% first mortgage notes.

Our current credit facility with Fleet Capital (previously BankBoston) is a
$75.0 million senior secured revolving credit facility collateralized by all of
the inventory, accounts receivable and other rights to payment of our
subsidiaries. Availability under the revolving line of credit is controlled by a
borrowing base formula based on eligible receivables and inventory, and there
must always be at least $15 million available for borrowing at any given time.
Based on this formula, we had net availability of approximately $62.5 million
under the revolving line of credit at December 31, 2000, against which we had
borrowed $47.2 million.

Our liquidity and capital needs relate primarily to payment of principal
and interest on borrowings, capital expenditures, including our facilities
investment program, and distributions to our sole shareholder to pay income
taxes. The first stage of the facilities investment program consisting of an
expansion of the Goldendale casthouse and a 34-cell demonstration of new cell
line technology has been completed. We have borrowed $20.0 million from Hydro
under a note purchase agreement to partially finance this facilities investment
program. Our liquidity and capital needs also relate to working capital and
other general corporate requirements. Additionally, the Goldendale preferred
stock became redeemable at our discretion after December 31, 1998. We anticipate
that the funds necessary to redeem the Goldendale preferred stock will be drawn
from our revolving credit facility with Fleet Capital. The redemption price for
the Goldendale preferred stock at December 31, 2000 was $30.0 million plus any
accrued but unpaid dividends, which totaled $16.8 million at December 31, 2000.
We intend to pay a portion of accrued dividends (approximately $8.5 million) in
2001 to fund distributions from the Goldendale Retirement Plan, the holder of
the Preferred Stock. Furthermore, we are subject to a number of contingencies
and uncertainties.

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

Year Ended December 31,
-----------------------
1998 1999 2000
-------- -------- --------
(Dollars in thousands)

Net cash provided by (used in) operating activities ......... $ 28,263 $(24,093) $ 8,557
Net cash used in investing activities ....................... (18,718) (32,609) (30,430)
Net cash provided by financing activities ................... 26,837 20,998 21,926
Increase (decrease) in cash and cash equivalents ............ 36,382 (35,704) 53

Net cash provided by (used in) operating activities was $28.3 million,
$(24.1) million and $8.6 million for 1998, 1999 and 2000, respectively. The net
cash provided by operating activities during 2000 of $8.6 million was primarily
attributable to cash provided by our net loss, as adjusted for non-cash charges,
of $24.1 million. Additionally, changes in working capital used net cash of
$15.5 million. The decrease in working capital was primarily due to the
transition from the Glencore tolling arrangement with related impacts on trade
accounts receivable, inventories and trade accounts payable. The decrease in
intercompany receivable was primarily due to the normalization of working
capital needs of Northwest during the year and the net proceeds from sales of
remarketed power that otherwise would have been used by Northwest in the fourth
quarter of 2000.

The net cash used in operating activities during 1999 of $24.1 million was
primarily attributable to cash provided by our net loss, as adjusted for
non-cash charges, of $8.2 million, offset by cash used in operating activities
of $32.3 million attributable to changes in working capital needs. The changes
in working capital requirements were primarily due to the rise in market
aluminum prices and Northwest's transition from tolling to non-tolling.

Net cash used in investing activities was $30.4 million in 2000, compared
to net cash used in investing activities of $32.6 million in 1999 and $18.7
million in 1998. Cash used in investing activities in 2000 was primarily
attributable to capital expenditures of $27.2 million. Cash used in investing
activities in 1999 was primarily attributable to capital expenditures of $33.1
million.

Net cash provided by financing activities was $21.9 million in 2000,
compared to net cash provided by financing activities of $21.0 million in 1999,
and net cash provided by financing activities of $26.8 million in 1998. Net cash
provided from financing activities in 2000 was primarily attributable to net
borrowings of $22.0 million under our credit facility. Net cash provided from
financing activities in 1999 was primarily attributable to net borrowings of
$25.3 million under our credit facility and $1.9 million paid in dividends.

We believe cash flow from operations, available borrowings under our
revolving credit facility and under our note purchase agreement with Hydro,
reimbursements from BPA for "qualified expenditures" and cash on hand will
provide adequate funds for our foreseeable working capital needs, planned
capital expenditures and debt service and other obligations through 2001.

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

- to make required payments of principal and interest on the notes and
our other debt;
- to finance anticipated capital expenditures;
- to fund working capital requirements; or
- to fund the possible redemption of all outstanding shares of the
Goldendale preferred stock.

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

SEASONALITY AND INFLATION

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

EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 ("SFAS No. 138"), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and No. 138 are effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. We adopted SFAS No. 133 and No. 138 as of
the beginning of the fiscal year 2001. Management does not believe that the
adoption of SFAS No. 133 and No. 138 will have any initial impact on its
consolidated financial statements.

As prescribed in EITF 00-10, "Accounting for Shipping and Handling Fees and
Costs", we began reclassifying shipping and handling costs from a component of
revenues to cost of revenues in the fourth quarter of 2000. This change required
a restatement of revenues and cost of revenues for all periods presented.

FORWARD-LOOKING STATEMENTS

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

- fluctuations in the price of primary aluminum;

- fluctuations in the market price of electricity;

- our ability to obtain an affordable and reliable supply of
electricity;

- servicing our substantial indebtedness;

- the incurrence of future indebtedness;

- restrictions on our ability to operate our business imposed by the
terms of our indebtedness;

- the effects of federal and state environmental laws and regulations;

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- the continued viability of the technology used in our smelters;

- our ability to operate effectively with and without tolling
agreements, including the Hydro and Glencore tolling agreement;

- retaining and recruiting key personnel;

- changes in labor relations with the unions representing our employees;

- the timing of the restart of our smelter operations; and

- our ability to create or locate cost effective supplies of power.

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

ITEM 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We manage interest rate risk through the strategic use of fixed and
variable interest rate debt and, to a limited extent, interest rate derivatives.
At December 31, 2000, our derivative instrument consisted of an interest rate
swap agreement which expires in 2003 and effectively fixes our interest rate at
6.4% on a notional principal amount of $20.0 million on our floating rate
long-term debt. The agreement requires quarterly cash settlements for interest
rate fluctuation outside of the fixed rate.

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The financial statements and supplemental data required by this item are
included in this Report on Form 10-K commencing on page F-1.

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

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information about our directors, executive
officers and certain other key employees as of the date of this document.

NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------

Brett E. Wilcox............................ 47 Chairman, President and Director
Allen Barkley.............................. 45 Deputy Chief Operations Officer
William R. Reid............................ 52 Chief Financial Officer
Daniel J. Gnall............................ 43 Vice President -- Sales and Marketing
Muhsin (Mac) Seyhanli...................... 56 Chief Operations Officer
Gerald Miller.............................. 59 Vice President, General Counsel and Secretary
Jessie Casswell............................ 51 Vice President -- Purchasing
Stephen E. Babson.......................... 50 Director
David Bolender............................. 68 Director
Mark O. Hatfield........................... 78 Director
Michael G. Psaros.......................... 33 Director

Brett E. Wilcox has served as our President since our inception in June
1998. Mr. Wilcox is also the President of Northwest Aluminum Company, which he
founded in 1986, and since 1996 has served as the President of Goldendale
Aluminum Company. Before founding Northwest in 1986, Mr. Wilcox was the
Executive Director of Direct Service Industries, a trade association of ten
large aluminum and other energy-intensive companies that purchase electricity
from the Bonneville Power Administration. Before 1986, Mr. Wilcox was an
attorney with Preston and Gates in Seattle, Washington, concentrating in energy
and general business matters. Mr. Wilcox is chairman of the Oregon Economic
Development Commission, Vice Chair of the Oregon Progress Board and active in
various civic and business organizations.

Allen Barkley joined Northwest in June 1995 as Production Engineering
Manager and became Vice President and General Manager in October 1996. He became
Deputy Chief Operations Officer of Golden Northwest Aluminum in October 2000
when the management groups of Northwest and Goldendale consolidated. Before
joining Northwest, Mr. Barkley spent 18 years at a primary aluminum smelter
facility in Columbia Falls, Montana where he served in a variety of capacities,
including production, engineering, maintenance and public affairs.

William R. Reid joined Northwest in 1986, became its Controller in 1993 and
was appointed Chief Financial Officer of Northwest in 1996 and of Golden
Northwest Aluminum in August 1998. Before joining Northwest, Mr. Reid was a
senior auditor with Touche Ross & Co.

Daniel J. Gnall joined Northwest in August 1991 as a metal trader, and in
1992 became Vice President -- Sales and Marketing responsible for metal
purchasing and sales. He became Vice President - Sales and Marketing of Golden
Northwest Aluminum in October 2000 when the management groups of Northwest and
Goldendale consolidated. Before joining Northwest, Mr. Gnall was an account
executive with Martin Marietta Corporation and worked for Cassmet International,
Inc., a metals trading company where he served as its General Manager in charge
of physical operations and non-ferrous metal purchasing and sales.

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Muhsin (Mac) Seyhanli became Chief Operations Officer of Golden Northwest
Aluminum in August 1998. He was one of the founders of Columbia Aluminum
Company, the predecessor of Goldendale, and since 1994 has been the general
manager for all operations at Goldendale, becoming its Vice President and
General Manager in 1996. Before his current position, Mr. Seyhanli was a cell
line manager for both Columbia and Commonwealth Aluminum. Mr. Seyhanli has over
29 years of experience in the aluminum industry.

Gerald Miller became Vice President, General Counsel and Secretary of
Golden Northwest Aluminum in August 1998. He joined Columbia Aluminum Company in
1989 as General Counsel and Corporate Secretary. In 1996, Mr. Miller was named
to the additional post of Vice President -- Energy and Government Affairs of
Goldendale. Before joining Goldendale, Mr. Miller was a trial lawyer in private
practice in the state of Washington. Mr. Miller is a member of the Board of
Directors of the State of Washington Economic Development Finance Authority.

Jessie Casswell became Vice President - Purchasing of Golden Northwest
Aluminum in October 2000 when the management groups of Northwest and Goldendale
consolidated. Prior to October 2000, she had been the Chief Financial Officer of
Goldendale since 1998 and the Controller since 1984. She has served as Chief
Financial Officer of Technologies since 1999. From 1972 to 1984, Ms. Casswell
served as the Controller of Northwest. Ms. Casswell is also a member of the
Executive Committee of the Goldendale profit sharing plan and is the Chairperson
of the Trustees of the profit sharing plan.

Stephen E. Babson became a director of Golden Northwest Aluminum in 1998.
Since 1996, he has served as a director of Goldendale. Mr. Babson is the
Chairman and a partner in the Portland office of Stoel Rives LLP, which acts as
our counsel, since 1984. Mr. Babson is also a director of Roseburg Forest
Products Co. and TechTracker.com, Inc., and serves on the advisory boards of
several Pacific Northwest based technology companies. He is the general partner
of Babson Capital Partners, LP, a private investment fund, and the secretary and
director of the Oregon Symphony Association.

David Bolender became a director of Golden Northwest Aluminum in 1998.
Since 1996, he has served as a director of Goldendale. Since 1991, Mr. Bolender
has served as Chairman of the Board of Electro Scientific Industries, Inc., a
manufacturer of machine tools for the electronics industry. From May 1998 to
2000, Mr. Bolender served as Chief Executive Officer and Chairman of the Board
of Protocol Systems, a manufacturer of medical vital sign monitoring
instrumentation. From 1982 to 1991, Mr. Bolender was President of Pacific Power
and Light Company and PacifiCorp Electric Operations Group. Before joining
PacifiCorp in 1982, Mr. Bolender spent 12 years with Westinghouse Electric
Corporation, where he managed the construction and operation of power plants
around the world. He is a member of the board of directors of Benson Industries.

Mark O. Hatfield became a director of Golden Northwest Aluminum and
Goldendale in 1999. Since 1997, he has served as an administrative consultant to
the Lasker Foundation, and as Chairman of Funding First, a medical and health
research program of the Mary Woodward Lasker Trust. From 1967 to 1997, Mr.
Hatfield served in the United States Senate as senator from the state of Oregon.
From 1959 to 1967, he served as Governor of the state of Oregon. Mr. Hatfield
serves on the board of directors of Lattice Semiconductor Corporation, a
developer of high-performance programmable logic devices. Mr. Hatfield also
serves on the Boards of Directors of Oregon Health Sciences University, the
Bonneville Environmental Foundation, and GeoTrust Corp. Mr. Hatfield also is the
Chairman of the Board of Directors of the Northwest Health Foundation.

Michael G. Psaros became a director of Golden Northwest Aluminum in 1998.
Since 1996, he has served as a director of Goldendale. Since 1991, Mr. Psaros
has been a Principal of Keilin & Co. LLC, a New York investment bank. In 1998,
Mr. Psaros became a founding Principal of KPS (Keilin, Psaros, Shapiro) Special
Situations Fund, L.P., a private equity fund focused on investing in
underperforming, distressed and troubled companies. Before joining Keilin and
founding KPS, Mr. Psaros worked in the investment banking department of Bear,
Stearns & Co. Inc. Mr. Psaros serves on the board of directors of United Road
Services, Inc. Mr. Psaros was originally nominated to Goldendale's board by the
President of the United Steelworkers of America.

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ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In the last fiscal year, our board of directors utilized the services of
Messrs. Babson, Bolender, Hatfield and Psaros, our four outside directors, as a
compensation committee. With the advice of the compensation committee, Brett
Wilcox made the compensation decisions for executive officers.

EXECUTIVE COMPENSATION

Compensation Summary. The following table sets forth compensation
information for the President and our other six most highly compensated
executives, each of whose total annual compensation exceeded $100,000 in 2000.

Summary Compensation Table

Annual Compensation
Other Annual
Salary Bonus Compensation
------ ----- ------------

Brett E. Wilcox, Chairman, President and
Director
2000 ....................................... $701,506 $500,000 $ 0
1999 ....................................... $603,581 $ 532 $ 0
1998 ....................................... $601,806 $903,001 $ 0

Muhsin (Mac) Seyhanli, Chief Operations Officer
2000 ....................................... $154,846 $ 50,000 $ 0
1999 ....................................... $150,000 $100,573 $ 0
1998 ....................................... $150,000 $253,380 $ 0

Gerald Miller, Vice President, General
Counsel and Secretary
2000 ....................................... $123,877 $ 25,000 $211,034
1999 ....................................... $120,000 $ 50,869 $211,043
1998 ....................................... $120,000 $ 49,101 $211,043

Jessie Casswell, Vice President - Purchasing
2000 ....................................... $ 98,187 $ 15,000 $211,034
1999 ....................................... $ 92,800 $ 50,989 $211,043
1998 ....................................... $ 88,615 $ 68,718 $211,043

Allen Barkley, Deputy Chief Operations Officer
2000 ....................................... $116,096 $ 35,000 $ 0
1999 ....................................... $108,810 $ 1,316 $ 0
1998 ....................................... $106,950 $100,000 $ 0

Daniel J. Gnall, Vice President - Sales and
Marketing
2000 ....................................... $116,096 $ 35,000 $ 0
1999 ....................................... $108,810 $ 1,316 $ 0
1998 ....................................... $106,950 $100,000 $ 0

William R. Reid, Chief Financial Officer
2000 ....................................... $116,096 $ 50,000 $ 0
1999 ....................................... $108,810 $ 1,316 $ 0
1998 ....................................... $106,950 $100,000 $ 0

The salaries of the above-named executive officers will be the same in
fiscal 2001. Any increases in bonuses or other annual compensation will be
dependent upon operating results and performance in fiscal 2001.

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In connection with the acquisition of Goldendale, we entered into deferred
compensation agreements with certain employees in exchange for the employees
waiving their rights under stock-based compensation and other employment
agreements which existed at the time. Payments made under those agreements are
included above under Other Annual Compensation.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Our articles of incorporation eliminate, to the fullest extent permitted by
Oregon law, liability of our directors for monetary damages for conduct as a
director. Although liability for monetary damages has been eliminated, equitable
remedies such as injunctive relief or rescission remain available. In addition,
a director is not relieved of his responsibilities under any other law,
including the federal securities laws.

Our articles of incorporation require us to reimburse the directors for any
liabilities and related expenses arising from our operations to the fullest
extent not prohibited by law. We believe that the limitation of liability
provisions in our articles of incorporation may enhance our ability to attract
and retain qualified individuals to serve as directors.

DIRECTORS' COMPENSATION

Directors who are not our employees receive a fee of $5,000 per board
meeting attended.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 27, 2001, 1,000 shares of common stock were outstanding, held
of record by Brett E. Wilcox.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We sell semi-solid metalworking and other value-added products to Hot Metal
Technologies, Inc. and Hot Metal Moldings, Inc. under annual purchase orders.
Hot Metal Technologies and Hot Metal Moldings, suppliers of automotive parts,
are each wholly owned by Brett Wilcox, our President and sole shareholder. Our
sales to these companies under these purchase orders totaled approximately $5.8
million for the year ended December 31, 1999 and $6.4 for the year ended
December 31, 2000. The terms of these sales were comparable to similar sales to
non-affiliates. We also made advances to Hot Metal Technologies and Hot Metal
Moldings during the years ended December 31, 1999 and 2000 by way of payroll and
benefits expenses paid by Northwest Aluminum Company for Northwest employees on
loan to these companies. On December 31, 1997, $4.0 million of the total amount
then owed by Hot Metal Technologies and Hot Metal Moldings to us for accounts
receivable and advances was converted to a note receivable. The note bears
interest at 9.25% per year and is payable in quarterly installments beginning
April 1, 1998 through September 2005. As of December 31, 2000, a combined total
of approximately $4.1 million was owed by these companies to us, consisting of
approximately $2.4 million on the note receivable and accounts receivable of
approximately $1.7 million. The highest amount of total indebtedness of Hot
Metal Technologies and Hot Metal Moldings to us since January 1, 1997 was $6.5
million.

In 1998, the federal government made a grant of $750,000 to Hot Metal
Technologies as contractor, and Northwest Aluminum Specialties as subcontractor,
for semi-solid metalworking research.

In 1999, we paid $1.9 million to Mr. Wilcox to pay taxes owed by him as a
result of Internal Revenue Service adjustments for taxes owed for earlier
periods for Northwest, which files as a Subchapter S corporation. In 1997,
Northwest Aluminum Company paid $4.9 million to Mr. Wilcox to pay taxes owed by
him as a result of Northwest's status as a Subchapter S corporation. The amount
paid was in excess of actual tax liabilities and, of this amount, $2.9 million
was recorded as a dividend. The remaining $2.0 million is recorded as a
receivable on our consolidated balance sheet and is outstanding. No interest is
payable upon the receivable.

Mr. Wilcox has entered into an agreement with Northwest, Northwest Aluminum
Specialties and us under which we have agreed not to file any amended income tax
return or change any election or accounting method without the consent of Mr.
Wilcox if the filing or change would increase any tax liability of Mr. Wilcox.
In

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addition, the companies have agreed to reimburse Mr. Wilcox for any adjustment
for taxes owed for earlier periods, including interest on any such payments, and
for certain other fees and costs relating to periods before December 18, 1998.

Under a voting agreement effective May 17, 1996, Mr. Wilcox must cause
Goldendale Holding Company to vote the shares of Goldendale Aluminum Company
common stock held by it to ensure that

(1) the Goldendale Aluminum Company board of directors consists of not
more than five directors; (2) not less than one director is a nominee
designated by the President of the United Steel Workers of America;
and

(3) not less than two directors are nominees of Mr. Wilcox who have no
significant continuing business relationship with Mr. Wilcox or any
entity controlled by him.

The voting agreement will remain in force so long as the USW represents the
collective bargaining unit of the Goldendale facility, except that clauses (1)
and (3) of the preceding sentence will continue only until the termination of
the initial term of the Collective Bargaining Agreement dated April 7, 1996
between Goldendale Aluminum Company and the USW.

We are negotiating a plan and agreement with Northwest Energy Development,
LLC, of which Mr. Wilcox is the sole member, pursuant to which we will be able
to purchase at cost up to 100% of the power generated by the facilities to be
built by Northwest Energy for the first 20 years after each facility begins
commercial operation. See "Business - Access to Electric Power."

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PART IV

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

(a) 1. FINANCIAL STATEMENTS Page in this Report.
--------------------

Report of Independent Certified Public Accountants........................... F-2

Consolidated Balance Sheets.................................................. F-3

Consolidated Statements of Operations........................................ F-4

Consolidated Statements of Shareholder's Equity.............................. F-5

Consolidated Statements of Cash Flows........................................ F-6

Summary of Significant Accounting Policies................................... F-7

Notes to Consolidated Financial Statements................................... F-12

2. FINANCIAL STATEMENT SCHEDULES:

NORTHWEST ALUMINUM COMPANY AND NORTHWEST ALUMINUM SPECIALTIES, INC.

Report of Independent Certified Public Accountants........................... S-2

Combined Balance Sheets...................................................... S-3

Combined Statements of Operations............................................ S-4

Combined Statements of Shareholder's Equity.................................. S-5

Combined Statements of Cash Flows............................................ S-6

Summary of Significant Accounting Policies................................... S-7

Notes to Combined Financial Statements ...................................... S-10

GOLDENDALE HOLDING COMPANY AND SUBSIDIARY

Report of Independent Certified Public Accountants........................... S-17

Consolidated Balance Sheets.................................................. S-18

Consolidated Statements of Operations........................................ S-19

Consolidated Statements of Shareholders' Equity ............................. S-20

Consolidated Statements of Cash Flows........................................ S-21

Summary of Significant Accounting Policies................................... S-22

Notes to Consolidated Financial Statements .................................. S-26

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3. EXHIBITS:

(a) The exhibits listed below are filed as part of this report

Exhibit
Number

3.1 Articles of Incorporation of Registrant. Incorporated by
reference to Exhibit 3.1 to our Registration Statement on Form
S-4, as amended (Registration No. 333-72245).

3.2 Bylaws of Registrant. Incorporated by reference to Exhibit 3.2
to our Registration Statement on Form S-4, as amended
(Registration No. 333-72245).

4.1 Indenture, dated as of December 21, 1998, between Registrant,
as Issuer, Northwest Aluminum Specialties, Inc., Northwest
Aluminum Company, Northwest Aluminum Technologies, LLC,
Goldendale Holding Company, and Goldendale Aluminum Company,
as Guarantors, and U.S. Trust Company, N.A., as Trustee.
Incorporated by reference to Exhibit 4.1 to our Registration
Statement on Form S-4, as amended (Registration No.
333-72245).

4.2 Credit Agreement, dated December 21, 1998, among the Financial
Institutions named therein, BancBoston, N.A., as
Administrative Agent, U.S. Bank National Association, as
Documentation Agent, Northwest Aluminum Company, Northwest
Aluminum Specialties, Inc., Goldendale Aluminum Company, and
Northwest Aluminum Technologies, as amended by the Agreement
and Amendment No. 1, dated as of January 21, 1999.
Incorporated by reference to Exhibit 4.2 to our Registration
Statement on Form S-4, as amended (Registration No.
333-72245).

4.3 Registration Rights Agreement, dated as of December 21, 1998,
by and among the Registrant, the Subsidiary Guarantors party
to this Agreement; and BancBoston Robertson Stephens Inc., and
Libra Investments, Inc. Incorporated by reference to Exhibit
4.3 to our Registration Statement on Form S-4, as amended
(Registration No. 333-72245).

4.4 Certificate of Incorporation of Goldendale Holding Company.
Incorporated by reference to Exhibit 4.4 to our Registration
Statement on Form S-4, as amended (Registration No.
333-72245).

10.1 Agreement to Toll Convert Alumina into Aluminum, dated May 22,
1996, between Hydro Aluminum Louisville, Inc., and Goldendale
Aluminum Company. Incorporated by reference to Exhibit 10.1 to
our Registration Statement on Form S-4, as amended
(Registration No. 333-72245). (Confidential treatment of
portions of this document has been granted by order of the
Commission. The information omitted from this exhibit has been
filed with the Commission.)

10.2 First Amendment to Agreement to Toll Convert Alumina into
Aluminum, dated December 21, 1998. Incorporated by reference
to Exhibit 10.2 to our Registration Statement on Form S-4, as
amended (Registration No. 333-72245).

10.3 Tax Indemnification Agreement, dated as of December 21, 1998,
between Registrant, Northwest Aluminum Company, Northwest
Aluminum Specialties, Inc., and Brett E. Wilcox. Incorporated
by reference to Exhibit 10.8 to our Registration Statement on
Form S-4, as amended (Registration No. 333-72245).

10.4 General Transmission Agreement, dated April 7, 1995, executed
by the United States of America Department of Energy acting by
and through the Bonneville Power Administration and Northwest
Aluminum Company. Incorporated by reference to Exhibit 10.9 to
our Registration Statement on Form S-4, as amended
(Registration No. 333-72245).

10.5 Power Sale Agreement, dated September 28, 1995, between the
United States of America Department of Energy acting by and
through the Bonneville Power Administration and Northwest
Aluminum Company. Incorporated by reference to Exhibit 10.10
to our Registration Statement on Form S-4, as amended
(Registration No. 333-72245).

10.6 Voting Agreement dated May 17, 1996, by Brett Wilcox for the
benefit of the United Steelworkers of America, Local 8147.
Incorporated by reference to Exhibit 10.11 to our Registration
Statement on Form S-4, as amended (Registration No.
333-72245).

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10.7 General Transmission Agreement, dated May 4, 1995, executed by
the United States of America Department of Energy acting by
and through the Bonneville Power Administration and Columbia
Aluminum Company. Incorporated by reference to Exhibit 10.12
to our Registration Statement on Form S-4, as amended
(Registration No. 333-72245).

10.8 Power Sales Agreement, dated September 18, 1995, executed by
the United States of America Department of Energy acting by
and through the Bonneville Power Administration and Columbia
Aluminum Company. Incorporated by reference to Exhibit 10.13
to our Registration Statement on Form S-4, as amended
(Registration No. 333-72245).

10.9 Cancelable Swap Agreement dated January 21, 1999, between
Goldendale Aluminum Company and BankBoston, N.A. Incorporated
by reference to Exhibit 10.14 to our Registration Statement on
Form S-4, as amended (Registration No. 333-72245).

10.10 Alumina Supply Agreement dated October 15, 1999 by Glencore
Ltd. and Northwest Aluminum Company. Incorporated by reference
to Exhibit 10.10 to our Annual Report on Form 10-K for the
year ended December 31, 1999. (Confidential treatment of
portions of this document has been requested. The information
omitted from this exhibit has been filed with the Commission.)

10.11 Phantom Stock Termination Agreement dated August 1, 1996
between Goldendale Aluminum Company and Jessie Casswell.
Incorporated by reference to Exhibit 10.11 to our Annual
Report on Form 10-K for the year ended December 31, 1999.*

10.12 Block Power Sales Agreement, effective October 1, 2001,
between the Bonneville Power Administration and the
Registrant.

10.13 Amendment to Alumina Supply Agreement, dated as of October 23,
2000, between Glencore Ltd. and Northwest Aluminum Company.

10.14 Agreement on the Use of Net Proceeds from Remarketing, dated
December 27, 2000, between the Registrant and the United
Steelworkers of America.

10.15 Remarketing Addendum to the 1996 Agreements, dated effective
December 29, 2000, executed by the Bonneville Power
Administration and the Registrant, Goldendale Aluminum Company
and Northwest Aluminum Company.

10.16 Side Agreement to Agreement to Toll Covert Alumina into
Aluminum (Tolling Contract) between Hydro Aluminum Metal
Products North America, Inc. and Goldendale Aluminum Company.

10.17 Second Amendment to Alumina Supply Agreement, dated January 5,
2001, between Glencore Ltd. and Northwest Aluminum Company.

10.18 Memorandum of Understanding, Curtailment of Operations due to
Power Sale, dated January 11, 2001, between the Bargaining
Units of the United Steelworkers of America and the
Registrant, Northwest Aluminum Company and Goldendale Aluminum
Company.

12.1 Statements re Computation of Ratios.

21.1 Subsidiaries of the Registrant.

24.1 Powers of Attorney (included on signature pages of the
Registration Statement).

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

* Management contract or compensatory arrangement.

(b) Reports on Form 8-K

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Golden Northwest Aluminum, Inc., and the
Co-Registrants named below, have duly caused this Report to be signed on their
behalf by the undersigned, thereunto duly authorized, in The Dalles, Oregon, on
March 30, 2001.

GOLDEN NORTHWEST ALUMINUM, INC.

By: /s/ BRETT E. WILCOX
------------------------------------
Brett E. Wilcox
President and Chairman of the Board

CO-REGISTRANTS

GOLDENDALE HOLDING COMPANY
GOLDENDALE ALUMINUM COMPANY
NORTHWEST ALUMINUM COMPANY
NORTHWEST ALUMINUM SPECIALTIES, INC.

By /s/ BRETT E. WILCOX
-------------------------------------
Brett Wilcox
President

NORTHWEST ALUMINUM TECHNOLOGIES, L.L.C.

By /s/ WILLIAM R. REID
-------------------------------------
William R. Reid
Vice President

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Brett E. Wilcox and William R.
Reid his attorney-in-fact, with the power of substitution, for him in any and
all capacities, to sign any amendments to this Report, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on March 30, 2001 on
behalf of the Registrant and in the capacities indicated:

REGISTRANT OFFICERS AND DIRECTORS

Signature Title
- ---------------------------------------- ------------------------------------------------------

/s/ BRETT E. WILCOX President, Chairman of the Board and Director
- ---------------------------------------- (Principal Executive Officer)
Brett E. Wilcox

/s/ WILLIAM R. REID Chief Financial Officer
- ---------------------------------------- (Principal Financial Officer and Principal Accounting
William R. Reid Officer)

/s/ STEPHEN E. BABSON Director
- ----------------------------------------
Stephen E. Babson

Director
- ----------------------------------------
David Bolender

Director
- ----------------------------------------
Mark O. Hatfield

/s/ MICHAEL G. PSAROS Director
- ----------------------------------------
Michael G. Psaros

CO-REGISTRANT OFFICERS AND DIRECTORS

Signature Title
- ---------------------------------------- ------------------------------------------------------

GOLDENDALE HOLDING COMPANY
NORTHWEST ALUMINUM COMPANY
NORTHWEST ALUMINUM SPECIALTIES, INC.

/s/ BRETT E. WILCOX President and Director
- ---------------------------------------- (Principal Executive Officer)
Brett E. Wilcox

/s/ WILLIAM R. REID Chief Financial Officer
- ---------------------------------------- (Principal Financial Officer and Principal Accounting
William R. Reid Officer)

GOLDENDALE ALUMINUM COMPANY

/s/ BRETT E. WILCOX President and Chairman of the Board
- ---------------------------------------- (Principal Executive Officer and Principal Financial
Brett E. Wilcox Officer and Principal Accounting Officer)

/s/ STEPHEN E. BABSON Director
- ----------------------------------------
Stephen E. Babson

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Director
- ------------------------------------
David Bolender

Director
- ------------------------------------
Mark O. Hatfield

Director
- ------------------------------------
Michael G. Psaros

NORTHWEST ALUMINUM TECHNOLOGIES, L.L.C.

/s/ BRETT E. WILCOX Director
- ------------------------------------ (Principal Executive Officer)
Brett E. Wilcox

/s/ WILLIAM R. REID Chief Financial Officer
- ------------------------------------ (Principal Financial Officer and Principal Accounting
William R. Reid Officer)

INDEX TO FINANCIAL STATEMENTS

GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants...................................................F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000.........................................F-3
Consolidated Statements of Operations for the years ended December 31, 1998, 1999
and 2000.........................................................................................F-4
Consolidated Statements of Shareholder's Equity for the years ended December 31,
1998, 1999 and 2000..............................................................................F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999
and 2000.........................................................................................F-6
Summary of Significant Accounting Policies...........................................................F-7
Notes to Consolidated Financial Statements...........................................................F-12

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Golden Northwest Aluminum, Inc. and Subsidiaries
The Dalles, Oregon

We have audited the accompanying consolidated balance sheets of Golden
Northwest Aluminum, Inc. and Subsidiaries as of December 31, 1999 and 2000 and
the related consolidated statements of operations, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated 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.

As disclosed in Note 15 to the consolidated financial statements, during
the year ended December 31, 2000 Golden Northwest Aluminum, Inc. and
Subsidiaries temporarily curtailed the production of aluminum at its two smelter
facilities.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Golden
Northwest Aluminum, Inc. and Subsidiaries as of December 31, 1999 and 2000, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.

/s/ BDO SEIDMAN, LLP

Spokane, Washington
March 9, 2001

F-2
41

GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
-------------------------
ASSETS (Note 4) 1999 2000
--------- ---------
(IN THOUSANDS)

Current assets:
Cash and cash equivalents ..................................................... $ 1,929 $ 1,982
Trade accounts receivable, less allowance for doubtful accounts of $100
(Note 14) .................................................................. 54,752 41,768
Reimbursement receivable (Note 15) ............................................ -- 40,795
Current portion of receivable due from related company (Note 13) .............. 2,639 2,141
Inventories (Note 1) .......................................................... 65,618 89,316
Intercompany receivable ....................................................... 13,106 --
Income taxes refundable (Note 10) ............................................. 3,121 811
Deferred income taxes (Note 10) ............................................... -- 2,825
Other current assets (Note 5) ................................................. 666 2,149
--------- ---------
Total current assets ................................................. 141,831 181,787
--------- ---------
Property, plant and equipment, net (Note 2) ........................................ 132,961 139,147
Goodwill, net of accumulated amortization of $14,241 and $18,829 (Note 10) ........ 81,348 74,186
Advances to shareholder ............................................................ 2,000 2,000
Receivable due from related company, less current portion (Note 13) ................ 1,824 1,985
Other assets, net (Notes 3 and 14) ................................................. 10,667 9,388
--------- ---------
$ 370,631 $ 408,493
========= =========

LIABILITIES, PREFERRED STOCK AND SHAREHOLDER'S EQUITY

Current liabilities:
Current portion of long-term debt (Notes 4 and 5) ............................. $ 25,279 $ 47,233
Trade accounts payable ........................................................ 45,925 21,744
Accrued expenses (Note 8) ..................................................... 16,806 16,986
Accrued curtailment expenses (Note 15) ........................................ -- 42,833
Deferred income taxes (Note 10) ............................................... 215 --
Current portion of dividends payable (Note 11) ................................ -- 8,500
Intercompany payable .......................................................... -- 4,241
--------- ---------
Total current liabilities ............................................ 88,225 141,537
--------- ---------
Long-term debt, less current portion (Notes 4 and 5) .......................... 170,000 170,000
Deferred income taxes (Note 10) ............................................... 15,012 15,498
Deferred compensation notes payable (Note 7) .................................. 662 --
Other long-term liabilities (Note 9) .......................................... 1,825 1,893
Dividends payable (Note 11) ................................................... 13,163 8,311
--------- ---------
Total liabilities .................................................... 288,887 337,239
--------- ---------

Commitments and contingencies (Notes 6, 7, 9 and 11)

Preferred stock of subsidiary (Note 11) ............................................ 29,663 29,663

Shareholder's equity:
Common stock, no par value; 350,000 shares authorized; 1,000 shares
issued and outstanding ..................................................... -- --
Additional paid-in capital .................................................... 63,628 63,628
Accumulated deficit ........................................................... (11,547) (22,037)
--------- ---------
Total shareholder's equity ........................................... 52,081 41,591
--------- ---------
$ 370,631 $ 408,493
========= =========

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-3
42

GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues (Notes 6 and 13) ................................... $ 479,276 $ 452,491 $ 423,800
Cost of revenues (Note 13) .................................. 447,883 438,101 394,776
--------- --------- ---------
Gross margin ................................................ 31,393 14,390 29,024
Net gains on power sales (Note 15) .......................... -- -- 13,980
Reimbursement of expenditures (Note 15) ..................... -- -- 40,795
Curtailment expenses (Note 15) .............................. -- -- (42,944)
General and administrative expenses ......................... (18,119) (16,672) (19,431)
--------- --------- ---------
Operating income (loss) ..................................... 13,274 (2,282) 21,424
--------- --------- ---------
Other income (expense):
Interest expense (Notes 4 and 10) ........................ (14,180) (21,977) (23,701)
Other income (expense), net .............................. 614 603 (157)
--------- --------- ---------
Net other expense ........................................... (13,566) (21,374) (23,858)
--------- --------- ---------
Loss before income taxes .................................... (292) (23,656) (2,434)
Income tax expense (benefit) (Note 10) ...................... 3,009 (3,745) 4,408
--------- --------- ---------
Loss before extraordinary item .............................. (3,301) (19,911) (6,842)
Extraordinary item - loss on extinguishment of debt
(net of income tax benefit of $513) (Note 4) ............. (1,552) -- --
--------- --------- ---------
Net loss .................................................... $ (4,853) $ (19,911) $ (6,842)
========= ========= =========

Loss before extraordinary item .............................. $ (3,301) $ (19,911) $ (6,842)
Dividends accrued on preferred stock of subsidiary .......... (3,648) (3,648) (3,648)
--------- --------- ---------
Loss to common shareholder .................................. (6,949) (23,559) (10,490)
Extraordinary item .......................................... (1,552) -- --
--------- --------- ---------
Net loss to common shareholder .............................. $ (8,501) $ (23,559) $ (10,490)
========= ========= =========

Loss per share - basic and diluted:
Loss before extraordinary item .............................. $ (6,949) $ (23,559) $ (10,490)
Extraordinary item .......................................... (1,552) -- --
--------- --------- ---------
Net loss per share of common stock .......................... $ (8,501) $ (23,559) $ (10,490)
========= ========= =========

Weighted average shares of common stock outstanding ......... 1,000 1,000 1,000
========= ========= =========

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-4
43

GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

RETAINED
EARNINGS TOTAL
COMMON STOCK ADDITIONAL (ACCUMU- SHARE-
---------------------- PAID-IN LATED) HOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT SHARE DATA)

Balance at January 1, 1998 ............................ 1,000 $ -- $ 65,504 $ 20,513 $ 86,017
Dividends accrued on preferred stock .................. -- -- -- (3,648) (3,648)
Net loss .............................................. -- -- -- (4,853) (4,853)
-------- -------- -------- -------- --------

Balance at December 31, 1998 .......................... 1,000 -- 65,504 12,012 77,516
Dividends accrued on preferred stock .................. -- -- -- (3,648) (3,648)
Dividends paid on common stock ........................ -- -- (1,876) -- (1,876)
Net loss .............................................. -- -- -- (19,911) (19,911)
-------- -------- -------- -------- --------

Balance at December 31, 1999 .......................... 1,000 -- 63,628 (11,547) 52,081
Dividends accrued on preferred stock .................. -- -- -- (3,648) (3,648)
Net loss .............................................. -- -- -- (6,842) (6,842)
-------- -------- -------- -------- --------

Balance at December 31, 2000 .......................... 1,000 $ -- $ 63,628 $(22,037) $ 41,591
======== ======== ======== ======== ========

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-5
44

GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
--------- --------- ---------
(IN THOUSANDS)

Cash flows from operating activities:
Net loss ...................................................... $ (4,853) $ (19,911) $ (6,842)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Depreciation and amortization ............................... 20,342 22,523 25,140
Amortization of financing costs ............................. 29 1,049 1,059
Loss (gain) on disposal of assets ........................... (38) 197 480
Provision for bad debts ..................................... 1,500 -- 2,037
Unrealized loss on derivative financial instruments ......... -- -- 1,567
Extraordinary loss .......................................... 2,065 -- --
Deferred income taxes ....................................... 487 4,376 610
Change in assets and liabilities, net of effect of
Trade accounts receivable ............................... 13,198 (6,588) 10,947
Reimbursement receivable ................................ -- -- (40,795)
Inventories ............................................. 5,809 (10,535) (23,698)
Prepaid expenses ........................................ (259) 120 525
Income taxes refundable ................................. (955) (5,318) 2,310
Other assets ............................................ 527 (1,676) 194
Trade accounts payable .................................. (6,878) 4,890 (24,181)
Accrued expenses ........................................ (3,214) 220 (1,044)
Accrued curtailment expenses ............................ -- -- 42,833
Intercompany payable/receivable ......................... 418 (13,524) 17,347
Other liabilities ....................................... 85 84 68
--------- --------- ---------
Net cash provided by (used in) operating activities .............. 28,263 (24,093) 8,557
--------- --------- ---------
Cash flows from investing activities:
Proceeds from disposal of assets .............................. 1,210 -- 43
Acquisition of property, plant and equipment .................. (19,010) (33,098) (27,235)
Premiums paid for derivative financial instruments ............ -- -- (3,575)
Net payments from (advances to) related company ............... (918) 489 337
--------- --------- ---------
Net cash used in investing activities ............................ (18,718) (32,609) (30,430)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving credit facilities .................. 300,772 57,000 404,926
Repayments under revolving credit facilities .................. (299,762) (31,721) (382,972)
Principal repayments of term loan facilities .................. (11,904) -- --
Proceeds from long-term borrowings ............................ 45,953 -- --
Deferred finance costs ........................................ (7,035) -- --
Principal payments on deferred compensation notes ............. (1,662) (1,072) (1,074)
Dividends paid on common stock ................................ -- (1,876) --
Increase (decrease) in bank overdraft ......................... 475 (1,333) 1,046
--------- --------- ---------
Net cash provided by financing activities ........................ 26,837 20,998 21,926
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ............. 36,382 (35,704) 53
Cash and cash equivalents, beginning of year ..................... 1,251 37,633 1,929
--------- --------- ---------
Cash and cash equivalents, end of year ........................... $ 37,633 $ 1,929 $ 1,982
========= ========= =========

Supplemental Disclosures of Cash Flow Information (Note 12)

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

F-6
45

GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

OPERATIONS, PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The operations of Golden Northwest Aluminum, Inc. ("Golden" or the
"Company") consist primarily of the smelting conversion of alumina to aluminum,
processing of aluminum into primary products, and the sale of those products
within one business segment (Note 15). The Company's operating subsidiaries'
smelting operations were under tolling agreements with aluminum suppliers
through December 1999. In December 1999, Northwest Aluminum Company chose not to
continue its tolling arrangement and allowed it to expire. Goldendale Aluminum
Company smelting operations are under a tolling agreement that has been amended
and now expires December 31, 2013. The operations are located in the Pacific
Northwest on the Columbia River. Approximately 80% of the labor force of the
Company's subsidiaries is subject to collective bargaining agreements. The
agreement with Goldendale's labor force is due to expire June 1, 2001 and the
agreement with Northwest's labor force is due to expire July 1, 2001. The
Company and the collective bargaining units are in discussions to extend the
expiration dates of current labor agreements until September 2001.

The Company was incorporated in the state of Oregon on June 3, 1998 for the
purposes of becoming the holding company of Northwest Aluminum Company,
Northwest Aluminum Specialties, Inc., (collectively "Northwest"), Goldendale
Holding Company and its wholly owned subsidiary, Goldendale Aluminum Company
(collectively "Goldendale") and Northwest Aluminum Technologies, LLC
("Technologies"). The sole shareholder of the Company also owned all of the
outstanding shares of common stock of Northwest, Goldendale and Technologies. On
December 18, 1998, the sole shareholder of Golden contributed all of the issued
and outstanding shares of common stock of Northwest, Goldendale and Technologies
to the Company. The transaction was accounted for as a merger of entities under
common control in a manner similar to a pooling of interests. Accordingly, the
financial statements give retroactive effect to this transaction. The
consolidated financial statements include the accounts of Northwest, Goldendale
and Technologies.

The Company, Goldendale and Technologies report on a December 31 year
basis; Northwest reports on a September 30 fiscal year basis. Included in
current assets at December 31, 1999 is $13,106, and included in current
liabilities at December 31, 2000 is $4,241, representing the portion of
intercompany advances which do not eliminate due to the differing year-ends. All
other significant intercompany accounts and transactions have been eliminated.

Consolidated and separate results of Northwest, Goldendale and Technologies
are as follows:

YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
--------- --------- ---------

Revenues:
Northwest ......................... $ 300,724 $ 283,609 $ 238,866
Goldendale ........................ 178,552 168,882 184,934
--------- --------- ---------
$ 479,276 $ 452,491 $ 423,800
========= ========= =========

Net income (loss):
Northwest ......................... $ (3,483) $ (8,278) $ (7,662)
Goldendale ........................ (111) (9,220) 4,009
Technologies ...................... (336) (551) (903)
Golden ............................ -- -- (1,567)
Consolidating adjustments ......... (923) (1,862) (719)
--------- --------- ---------
$ (4,853) $ (19,911) $ (6,842)
========= ========= =========

F-7
46

GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

REVENUE RECOGNITION

Revenues for the conversion of alumina and processing of aluminum under
tolling arrangements are recognized upon completion of the tolling process.
Under the tolling arrangements, alumina suppliers deliver their alumina to the
Company. The alumina is converted to aluminum in reduction cells by putting it
in liquid form by dissolving it in an "electrolyte" solution and then passing
electric current through the "electrolyte" to separate the alumina into its two
parts, aluminum and oxygen. This process is continuous and is nearly
instantaneous as the alumina is dissolved in the "electrolyte". Revenues from
the processing and sale of aluminum products are recognized upon shipment. Net
gains from the sale of power are recognized during the period that the
associated power is provided.

Revenues billed to customers from shipping and handling are included in
revenues for financial reporting purposes. Costs for the related shipping and
handling expenses have been included in cost of revenues.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
by the weighted-average cost method.

FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

The fair values of financial instruments have been determined through
information obtained from quoted market sources and management estimates (Note
5).

The Company does not invest in financial instruments or derivatives for
trading purposes. From time to time, as part of its risk management strategy,
the Company uses derivative financial instruments to hedge exposure to changes
in the price of aluminum. If the financial instrument qualifies for hedge
accounting, changes in market value of the instrument and the premium paid are
deferred until the gain or loss is recognized on the hedged commodity. If the
contract is not a hedge or does not qualify for hedge accounting, changes in
market value are recorded currently in cost of revenues.

Goldendale has entered into an interest rate swap agreement for purposes
of minimizing exposure to interest rate risk. The differential between the
floating interest rate and the fixed interest rate, which is to be paid or
received, is recognized in interest expense as the floating interest rate
changes over the life of the agreement.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment including cell relining costs are stated at
cost, less accumulated depreciation and amortization. For financial reporting
purposes, the costs of plant and equipment are depreciated over the estimated
useful lives of the assets, which range from three to forty years, using the
straight-line method.

F-8
47
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

GOODWILL

Goodwill represents the excess of the purchase price over the fair value
of net assets acquired and is being amortized on a straight-line basis over
twenty years. The Company periodically evaluates the recoverability of goodwill.
The measurement of possible impairment is based primarily on the Company's
ability to recover the unamortized balance of the goodwill from expected future
operating cash flows on an undiscounted basis (Note 10).

ASSET IMPAIRMENT

The Company evaluates its long-lived assets for financial impairment, and
continues to evaluate them as events or changes in circumstances indicate that
the carrying amount of such assets may not be fully recoverable. The Company
evaluates the recoverability of long-lived assets by measuring the carrying
amount of the assets against the estimated undiscounted future cash flows
associated with them. At the time such evaluations indicate that the future
undiscounted cash flows of certain long-lived assets are not sufficient to
recover the carrying value of such assets, the assets are adjusted to their fair
values.

INTEREST COSTS

The Company follows the policy of capitalizing interest as a component of
the cost of property, plant and equipment constructed for its own use. Interest
costs of $44, $576 and $498 were capitalized during the years ended December 31,
1998, 1999 and 2000, respectively.

INCOME TAXES

Both the Company and its Northwest and Technologies subsidiaries have
elected to be taxed under the provisions of Subchapter S of the Internal Revenue
Code. Under those provisions, the Company, including these subsidiaries, does
not pay federal or state corporate income taxes on its taxable income. Instead,
the Company's shareholder is liable for individual federal and state income
taxes on its taxable income. It is the Company's intention to pay dividends to
the shareholder in an amount no less than the sum of these federal and state
income taxes.

The Company's other subsidiary, Goldendale, accounts for income taxes
under the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). SFAS 109 uses the liability method so
that deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities given the provisions of enacted tax laws and tax rates. Deferred
income tax expense or benefit is based on the changes in the financial statement
basis versus the tax basis in Goldendale's assets or liabilities from period to
period.

ESTIMATES

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

F-9
48
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and trade
accounts receivable. The Company places its cash and cash equivalents with
various high quality financial institutions; these deposits may exceed federally
insured limits at various times throughout the year. Northwest sells its
products to various customers involved in the manufacturing of aluminum products
located throughout the United States. Credit risk arising from these receivables
is controlled through credit approval, credit limit and monitoring procedures.
Receivables due from the Company's two primary tolling customers prior to
December 1999 comprise 41% of the Company's total trade accounts receivable at
December 31, 1999. Receivables due from the Company's one tolling customer after
December 1999 comprise 30% of the Company's total trade accounts receivable at
December 31, 2000. All of the reimbursement receivable is due from Bonneville
Power Administration. In management's opinion the credit risk associated with
non-payment of the reimbursement receivable is considered minimal as the
Bonneville Power Administration is an agent of the government of the United
States of America.

RESEARCH AND DEVELOPMENT COSTS

Expenditures associated with research and development for existing product
process improvements are expensed as incurred. These costs amounted to $1,194,
$2,070 and $853 during the years ended December 31, 1998, 1999 and 2000,
respectively. Depreciation on equipment used for research and development
amounted to $0, $47 and $14 during the years ended December 31, 1998, 1999 and
2000.

CASH AND CASH EQUIVALENTS

For purposes of balance sheet classification and the statements of cash
flows, the Company considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.

ENVIRONMENTAL MATTERS

The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. Expenditures which extend the life of the
related property or mitigate or prevent future environmental contamination are
capitalized. The Company records a liability for an environmental matter when it
is probable and can be reasonably estimated. The liability is adjusted as
further information develops or circumstances change. The Company's estimated
liability is reduced to reflect the anticipated participation of other
potentially responsible parties in those instances where it is probable that
such parties are legally responsible and financially capable of paying their
respective shares of the relevant costs. The estimated liability of the Company
is not discounted or reduced for possible recoveries from insurance carriers.

RECLASSIFICATIONS

Certain reclassifications of 1998 and 1999 amounts have been made to
conform to classifications used in 2000. As prescribed in EITF 00-10,
"Accounting for Shipping and Handling Fees and Costs," the Company began
reclassifying shipping and handling costs from a component of revenues to cost
of revenues in the fourth quarter of 2000. This change required a restatement of
revenues and cost of revenues for all periods presented.

F-10
49
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 ("SFAS No. 138"), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and 138 are effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Company adopted SFAS No. 133 and No.
138 as of the beginning of the fiscal year 2001. Management does not believe
that the adoption of SFAS No. 133 and No. 138 will have any initial impact on
its consolidated financial statements.

EARNINGS (LOSS) PER SHARE

Basic earnings per share includes no dilution and is calculated by
dividing income (loss) available to common shareholders after preferred stock
dividends accrued, by the average number of shares actually outstanding during
the period. Diluted earnings per share reflects the potential dilution of
securities (such as stock options, warrants and securities convertible into
common stock) that could share in the earnings of an entity. The Company has no
dilutive securities as of December 31, 2000.

F-11
50
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. INVENTORIES

Inventories consist of the following:

DECEMBER 31,
----------------------
1999 2000
-------- --------

Purchased metals and tolling in process .................................. $ 42,880 $ 60,425
Supplies and alloys ...................................................... 13,619 15,303
Carbon plant materials ................................................... 5,414 4,844
Alumina .................................................................. 3,705 8,744
-------- --------
$ 65,618 $ 89,316
======== ========

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

DECEMBER 31,
----------------------
1999 2000
-------- --------

Land and improvements .................................................... $ 7,814 $ 7,821
Machinery and equipment .................................................. 148,993 165,939
Buildings and improvements ............................................... 40,679 41,263
Capital projects in process .............................................. 12,133 18,817
-------- --------
209,619 233,840
Less accumulated depreciation ............................................ 76,658 94,693
-------- --------
$132,961 $139,147
======== ========

During 1998, the Company changed its method of accounting for cell relining
costs from expensing such costs as incurred to capitalizing and amortizing these
costs over future periods. As a result of relining the cells with improved
materials, the useful life of the individual cells has increased. In addition,
the cell relining activity and related expenditures vary each year. The Company
believes that the new method improves the matching of revenues and costs as
technological improvements have extended the estimated period of economic
benefit realized from cell relining. The change was applied by retroactively
restating the previously issued consolidated financial statements.

F-12
51
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

3. OTHER ASSETS

Other assets consist of the following:

DECEMBER 31,
----------------------
1999 2000
-------- --------

Long-term trade receivable, less allowance for
doubtful accounts of $900 .............................................. $ 1,572 $ 1,316
Debt issue costs, net of accumulated amortization
of $1,078 and $2,137 ................................................... 6,522 5,463
Restricted cash ........................................................... 1,844 1,906
Power project assets held for sale ........................................ 543 543
Other ..................................................................... 186 160
-------- --------
$ 10,667 $ 9,388
======== ========

Restricted cash consists of cash held in trust and committed for
environmental cleanup and workers compensation self-insurance as required by the
State of Washington. These monies will be disbursed at a future date as allowed
by the State.

4. LONG-TERM DEBT

Long-term debt consists of the following:

DECEMBER 31,
----------------------
1999 2000
-------- --------

First mortgage notes ...................................................... $150,000 $150,000
Subordinated credit agreement ............................................. 20,000 20,000
Revolving credit facility ................................................. 25,279 47,233
-------- --------
Long-term debt ............................................................ 195,279 217,233
Less current portion ...................................................... 25,279 47,233
-------- --------
Long-term debt less current portion ....................................... $170,000 $170,000
======== ========

In December 1998, the Company issued $150 million of 12% first mortgage
notes due on December 15, 2006. Interest is payable semi-annually on June 15 and
December 15, commencing June 15, 1999. Payment of the notes is guaranteed by all
of the Company's subsidiaries. The debt is collateralized by substantially all
of the real property, plant and equipment of the Company's subsidiaries and by a
pledge of all of the issued and outstanding capital stock of the Company's
subsidiaries. On or after December 15, 2002, the notes are redeemable at the
option of the Company at specified redemption prices. There are no sinking fund
requirements. The indenture agreement limits principal payments on subordinated
debt, dividends or shareholder distributions, and investments in subsidiaries.
In connection with the issuance of the notes, each of the Company's direct and
indirect wholly owned subsidiaries has jointly and severally guaranteed the
notes on a full and unconditional basis. (See Note 5.)

In December 1998, the Company entered into a $75 million bank revolving
credit facility, which matures on December 20, 2003 and is collateralized by
inventory, accounts receivable and related intangibles, including a security
interest in the Company's tolling agreement. Borrowings under the credit
facility bear interest at a floating base rate plus from 0.50% to 1.00% (10.50%
at December 31, 2000) or the LIBOR rate plus from 2.00% to 2.50% (9.18% at
December 31, 2000). The additional

F-13
52
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

margin is dependent upon the consolidated ratio of earnings before interest,
income taxes, depreciation and amortization to interest expense. The credit
facility provides for the payment of a commitment fee of 0.50% per annum based
on the unused portion of the credit facility. The credit agreement contains
restrictive covenants, including a minimum net worth requirement, a minimum
excess availability requirement and limitations on capital expenditures,
dividends, additional indebtedness, mergers and other business combinations,
assets sales, encumbrances, investments and transactions with affiliates. The
Company was in compliance with these covenants at December 31, 2000.

Also in December 1998, the Company entered into a subordinated credit
agreement with Norsk Hydro USA, Inc. pursuant to which $20 million was advanced.
The debt bears interest at LIBOR plus two percent (8.82% at December 31, 2000)
and is due in December 2005. The debt is secured by a second lien and a pledge
on the collateral securing the first mortgage notes and is guaranteed by the
Company's subsidiaries. Except for the collateral security, the guarantees by
the Company are subordinate to the indebtedness under the bank revolving credit
facility. The credit agreement provides for additional borrowings of $10 million
on or prior to December 31, 2001.

On January 21, 1999, the Company terminated at no cost its existing
interest rate swap agreements and entered into a new swap agreement that expires
in 2003. The fixed interest rate paid on the new swap is 6.4% and covers $20
million of notional principal amount of floating rate (LIBOR) indebtedness of
the Company. Although the Company is exposed to credit loss on the interest rate
swap in the event of nonperformance by the counterparties, the Company estimates
the likelihood of such nonperformance to be remote. At December 31, 1999 and
2000, the fair value of the interest rate swap was approximately $92 and $350,
respectively, which reflects the estimated amount that the Company would pay to
terminate the contracts.

5. FINANCIAL INSTRUMENTS

Derivative Financial Instruments

The Company holds call options for the purpose of mitigating the risk of
market price fluctuations of anticipated aluminum purchases. These options
required the payment of an upfront premium in return for the right to receive
the amount, if any, by which the price at the settlement date exceeds the strike
price. At December 31, 2000, the Company had option contracts that established a
price range for 3,400 to 6,800 metric tons of primary aluminum per month over an
11-month period beginning January 1, 2001. For the year ended December 31, 2000,
there was a loss as a result of these positions of $1,567. At December 31, 2000,
the fair value of these options of $2,008 is included in other current assets.

Fair Value of Financial Instruments

For certain of the Company's financial instruments, including cash and
cash equivalents, accounts receivable, certain long-term debt, accounts payable
and accrued expenses, the carrying amounts approximate fair value due to their
short maturities. Consequently, such financial instruments are not included in
the following table that provides information about the carrying amounts and
estimated fair values of the first mortgage notes based on quoted market prices
(Note 4):

F-14
53
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

DECEMBER 31,
----------------------
1999 2000
-------- --------

Carrying amount ............. $150,000 $150,000
Estimated fair value ........ $150,000 $135,000

6. ALUMINA TOLLING CONVERSION AGREEMENTS

Both Goldendale and Northwest had agreements with alumina suppliers for
the conversion of alumina to aluminum for a tolling charge under which the
entire production capacity of the smelting facilities is dedicated to the
tolling of its supplier's alumina. The supplier is obligated to supply, without
charge, alumina sufficient to meet the requirements for full operation. The
tolling fees set forth in the contracts are a percentage of the price of
aluminum quoted on the London Metal Exchange. Goldendale's agreement, as
amended, continues through December 31, 2011, and Northwest's agreement
terminated on December 31, 1999. These two tolling customers accounted for 19%
and 37% of the Company's consolidated revenues in 1998, 17% and 37% of the
Company's consolidated revenue in 1999, and 5% and 43% of the Company's
consolidated revenue in 2000.

In December 2000, Goldendale entered into an agreement modifying the terms
of its alumina tolling agreement. The modification allows for a reduction in the
amount of aluminum production through September 2001 to a level of approximately
15% of Goldendale's capacity and extends the tolling arrangement to December 31,
2013. In connection with the modification, Goldendale incurred modification
charges of $38,750, which is included in curtailment expenses in the statement
of operations (Note 15).

In October 1999, Northwest entered into an agreement to purchase alumina
from a supplier at a cost based on a percentage of the price of aluminum quoted
on the London Metals Exchange with deliveries scheduled over a 5-year period. In
October 2000 and again in December 2000, the Company entered into agreements
modifying the terms of their alumina supply contract. The modifications allow
for a reduction in the amount of alumina to be purchased through 2001. The
modifications are reflected in the commitment schedule (Note 9). In connection
with the modifications, Northwest incurred charges of $3,200 (Note 15).

7. EMPLOYEE BENEFIT PLANS

Profit Sharing Bonus Plans

Northwest has entered into a contractual agreement, which continues
through June 30, 2001, with the United Steelworkers of America, AFL-CIO, to pay
annually as additional compensation 20% of the combined net income of Northwest,
as adjusted in accordance with the agreement. Northwest's total additional
compensation bonuses under this agreement amounted to approximately $829, $298
and $698 during the fiscal years ended September 30, 1998, 1999 and 2000,
respectively.

Goldendale has a profit sharing plan for its hourly and salaried
employees. All Goldendale employees are eligible participants in this plan upon
completion of a probationary period. The plan provides for payments equal to a
percentage of Goldendale's profits, as defined. These amounts are to be
distributed to eligible participants on or before March 31 following
Goldendale's year-end. For the years ended December 31, 1998, 1999 and 2000,
Goldendale recorded approximately $380, $0 and $1,488, respectively, of expense
related to this plan.

F-15
54
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

Retirement Benefit Plans

Northwest has a defined contribution 401(k) profit sharing plan (the
"401(k) Plan") covering substantially all Northwest employees under which
employees may elect to defer pay subject to statutory limits. Northwest is
committed to contribute the greater of $.25 per eligible hour worked or 5% of
the combined adjusted net income of Northwest. In addition, Northwest is
required to make matching contributions of 25% of elective deferrals. Northwest
may also make discretionary contributions to the 401(k) Plan. Total
contributions by Northwest to the 401(k) Plan amounted to approximately $341,
$694 and $964 during the fiscal years ended September 30, 1998, 1999 and 2000,
respectively.

Goldendale has a 401(k) profit sharing plan under which employees may
elect to defer pay subject to statutory limits. Goldendale also makes matching
contributions for nonbargaining employees on the basis of percentages specified
in the plan and discretionary contributions as determined on an annual basis.
Goldendale also maintained a separate profit sharing retirement plan (the "DC
Plan") which provided retirement benefits for substantially all of its
employees. Goldendale is committed to contribute the greater of 5% of net income
or $.25 per eligible hour worked. During 1999, the separate profit sharing
retirement plan was merged into the 401(k) profit sharing plan. For the periods
ended December 31, 1998, 1999 and 2000, Goldendale recorded approximately $290,
$514 and $384 of expense for plan contributions.

Deferred Compensation Notes Payable

In connection with the acquisition of Goldendale in 1996, the Company
entered into deferred compensation agreements with certain employees in exchange
for the employees waiving their rights under stock-based compensation and other
employment agreements which existed at that date. The notes are payable in
monthly installments of approximately $115, including interest at 8.75%, through
2001.

8. ACCRUED EXPENSES

Accrued expenses consist of the following:

DECEMBER 31,
--------------------
1999 2000
------- -------

Bonuses and employee benefits ......... $ 4,275 $ 5,762
Salaries and related expenses ......... 3,956 5,322
Interest .............................. 3,163 1,548
Bank overdraft ........................ 1,574 2,620
Other ................................. 3,838 1,734
------- -------
$16,806 $16,986
======= =======

9. COMMITMENTS AND CONTINGENCIES

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

During 1999, the Company contracted for the design and construction of a
bath reclaim facility at Goldendale. In connection therewith, a dispute has
arisen over contract change orders to an engineering

F-16
55
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

and construction contract. The Company has accrued an estimate of the costs to
settle the claim in the amount of $520. If the settlement offer is not accepted,
the ultimate cost to the Company may exceed this accrual.

As of December 31, 1999 and 2000, the Company had a liability of
approximately $1,825 and $1,893, respectively, for estimated environmental
remediation activities to be taken on the Company's facility. The Company's
estimate of this liability is based on a remediation study conducted by
independent engineering consultants. The total cost of remediation is estimated
at $3 million; however, under a court decree the Company is only responsible for
approximately one-half of the total. The remaining cost is the responsibility of
prior owners. No accrual has been provided for the Northwest facility as the
Company is unaware of any current condition which would give rise to remedial
action.

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

The Company has entered into various agreements for the purchase of power,
alumina, and aluminum, including agreements with the Bonneville Power
Administration (BPA) for the purchase of electrical power at fixed rates.
Contracts with BPA expiring on September 30, 2001, were modified in December
2000 (Note 15).

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

YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------------------ --------

2001 ............................... $ 66,781
2002 ............................... 32,022
2003 ............................... 32,022
2004 ............................... 32,022
--------
$162,847
========

In October 2000, the Company entered into a new electrical power sale
agreement with BPA that will be effective from October 1, 2001 through September
30, 2006. The Company expects that 50% of its electrical power requirements will
be met through this contract. The new contract allows the Company to direct the
available power to the facilities. The power rates set forth under the new
contract are subject to review by the Federal Energy Regulatory Commission.
Because the rate for BPA power will not be determinable until the conclusion of
the review, the Company has the right to terminate the contract within a
specified time period after the review. Under the new contract, the BPA
Administrator may have broad discretion to temporarily or permanently limit or
terminate purchases of power in circumstances in which the Administrator
determines that the Company is not in compliance with all applicable federal,
state and local laws and regulations.

10. INCOME TAXES

Income tax expense (benefit) consists of the following:

YEAR ENDED DECEMBER 31,
------------------------------------
1998 1999 2000
--------- --------- ---------

Current .................................................. $ 2,009 $ (7,338) $ 3,798
Deferred ................................................. 487 3,593 610
--------- --------- ---------
Income tax expense (benefit) ............................. $ 2,496 $ (3,745) $ 4,408
========= ========= =========

F-17
56
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

The difference between the federal statutory tax rate and the effective
tax rate resulted from the following:

YEAR ENDED DECEMBER 31,
----------------------------------
1998 1999 2000
------ ------ ------

Federal statutory tax rate ........................... 35.0% (35.0)% 35.0%
Loss from entities not subject to
income taxes ....................................... (70.4) 15.8 (156.0)
Amortization of goodwill ............................. (70.5) 7.0 (66.0)
Other items, net ..................................... -- (3.6) 5.9
------ ------ ------
Effective tax rate ................................... (105.9)% (15.8)% (181.1)%
====== ====== ======

Significant components of the Company's deferred tax assets and liabilities are
as follows:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Current:
Accrued expenses ............................... $ (1,805) $ 1,226
Accrued curtailment expenses ................... -- 1,301
Inventory ...................................... 55 53
Other .......................................... 1,535 245
-------- --------
$ (215) $ 2,825
======== ========

Non-current:
Property, plant and equipment .................. $(16,286) $(16,565)
Power project assets ........................... 404 404
Deferred compensation .......................... 231 --
Other .......................................... 639 663
-------- --------
$(15,012) $(15,498)
======== ========

In 1999, as a result of an audit by the Internal Revenue Service, the
Company entered into an agreement to capitalize certain expenditures for income
tax purposes. As a result of the agreement, goodwill and interest expense were
reduced by approximately $2 million and $1 million, respectively, during 1999.
The sole shareholder of the Company incurred additional taxes and interest
associated with this agreement. In December 1999, the Company made a dividend
distribution of approximately $1.9 million to reimburse the shareholder for such
amounts. In 2000, as a result of the resolution of an estimated deferred tax
liability arising from the acquisition of the Company, the Company reduced
goodwill and interest expense by approximately $2.6 million and $.5 million,
respectively.

11. PREFERRED STOCK OF SUBSIDIARY

Goldendale has authorized 150,000 shares of $.01 par value Series A
cumulative, nonconvertible preferred stock. At December 31, 2000 and 1999,
131,836.1 shares were issued and outstanding. The shares were issued in
connection with the acquisition of Goldendale in 1996 and are stated at their
per share fair value when issued of $225. The liquidation preference on the
preferred stock is $225 per share plus accumulated dividends.

F-18
57
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

Terms of the Goldendale preferred stock provide for dividends accruing
quarterly and payable in cash as declared by the Board of Directors according to
the following schedule:

YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------------

2001.......................................................... $27.68/share
2002.......................................................... $29.93/share
2003.......................................................... $32.18/share
Thereafter.................................................... $34.43/share

Commencing on January 1, 2002, the preferred shareholders have the option
of receiving additional shares of preferred stock in satisfaction of any
cumulative dividend in arrears that may exist at that time. At December 31, 1999
and 2000, dividends payable on preferred stock were $13,163 ($99.85 per share)
and $16,811 ($127.53 per share), respectively. The Company plans to pay a
portion of dividends payable in 2001 in order to fund distributions from the
Goldendale Retirement Plan.

The Company may redeem any or all outstanding shares of Series A Preferred
Stock at the following redemption prices:

YEAR ENDING DECEMBER 31, AMOUNT
------------------------ -------

2001........................................................ $227.25
Thereafter.................................................. $225.00

The shares of preferred stock and shares of common stock vote together as
a single class on all matters submitted to a vote of shareholders of Goldendale.
The holders of shares of preferred stock are entitled to one vote per share and
have full voting rights and power equal to those of the holders of common stock.

12. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information is as follows:

DECEMBER 31,
------------------------------------
1998 1999 2000
--------- --------- ---------

Cash paid (received) during the period for:
Interest ............................................... $ 13,273 $ 21,779 $ 22,231
Income taxes ........................................... $ 2,900 $ (2,796) $ 4,492
Non-cash investing and financing activities:
Principal balance of debt refinanced ................... $ 124,047 $ -- $ --
Reduction to acquisition contingency accrual:
Goodwill ............................................. $ -- $ 2,045 $ 2,574
Deferred income tax benefit .......................... $ -- $ 783 $ 3,164
Interest expense ..................................... $ -- $ 1,262 $ 590
Dividends accrued on preferred stock ................... $ 3,648 $ 3,648 $ 3,648

13. RELATED PARTY TRANSACTIONS

Sales to a company related by common ownership amounted to $6,406, $5,766,
and $6,380 for the years ended December 31, 1998, 1999 and 2000, respectively.
The receivable due from the related company includes the balance due from those
sales, together with cash advances, of which $4,000 was

F-19
58
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

converted to a note receivable on December 31, 1997. The note bears interest at
9.25% and is payable in quarterly installments through September 2005. Interest
income from this related company amounted to $263, $304 and $230 for the years
ended December 31, 1998, 1999 and 2000, respectively. Purchases from this
related company amounted to $1,998 and $3,216 for the years ended December 31,
1999 and 2000, respectively, of which $189 is included in trade accounts payable
at December 31, 1999. There were no purchases from this related company in 1998.

A member of the Company's board of directors is a partner in a law firm
which performs legal services for the Company. Fees paid to this firm amounted
to $959, $96 and $153 for the years ended December 1998, 1999 and 2000. Included
in trade accounts payable is $3 and $45 due to this firm at December 31, 1999
and 2000, respectively.

14. VALUATION AND QUALIFYING ACCOUNTS

Allowance for doubtful accounts activity was as follows:

DECEMBER 31,
------------------------------------
1998 1999 2000
--------- --------- ---------

Balance, beginning of year ............................... $ 1,000 $ 1,000 $ 1,000
Charged to expense ....................................... 1,500 -- 2,037
Write-offs, net of recoveries ............................ (1,500) -- (2,037)
--------- --------- ---------
Balance, end of year ..................................... $ 1,000 $ 1,000 $ 1,000
========= ========= =========

Northwest has an arrangement with a third party to distribute aluminum
throughout Texas. In addition to providing distribution services, the third
party was a long-term customer of Northwest purchasing aluminum products for
resale. In 1998, because the third party was experiencing financial problems,
Northwest entered into an arrangement to extend the terms of repayment and
provide a method for the third party to repay its debt to Northwest by direct
retention of a portion of earned services. Northwest also ceased selling
aluminum products to this third party. In September 2000, Northwest determined
that, primarily due to the third party's increasingly limited earnings
potential, the financial condition of the third party was worsening and an
impairment of the long-term trade receivable had occurred. As a result,
Northwest took a write-down on the receivable and recognized a loss of $2,037.

15. POWER SALES AND CURTAILMENT

In September 2000, the Company curtailed smelter production levels to 60%
of capacity as a result of significant increases in the spot market price of
electrical power. At reduced production levels, the Company was able to sell
excess electrical power contractually available under its existing power
contracts with the Bonneville Power Administration (BPA). As a result of these
power sales, the Company recorded a net gain from power sales of approximately
$13,980 in 2000, which was composed of gross proceeds of $18,277 offset by
incremental excess power costs.

In December 2000, the Company curtailed smelter production further, to a
level of approximately 15% of capacity at Goldendale and ceased smelting
production at Northwest. This second curtailment was done in conjunction with a
modification to the Company's existing electrical power contracts with BPA. The
modification to the contracts allows BPA to remarket the electrical power that
the Company would have used. The proceeds from the remarketed power will become
available to the Company as reimbursement for "qualified expenditures" through
December 2010. As defined in the remarketing agreement, "qualified expenditures"
are costs related to curtailing production (including employee layoff

F-20
59
GOLDEN NORTHWEST ALUMINUM COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

expenditures, contract cancellation fees, unabsorbed fixed costs and debt
service payments), costs incurred pursuant to plans to secure a future power
supply and enhance operations of the facilities, and payment of tax liabilities
related to these reimbursements. Revenue from reimbursement of expenditures is
recognized in the period that the qualified expenditures are incurred to the
extent that such expenditures will be reimbursed. Revenue from reimbursable
expenditures by Goldendale amounted to $40,795 during 2000 and is included in
the statement of operations. Due to differing year-ends, revenue from
reimbursable expenditures does not include revenue from reimbursable
expenditures by Northwest during 2000. Such revenue amounted to $5,439.

In connection with these curtailments, the Company reduced its active
workforce by 471 hourly employees. Terminated and inactive employees were
provided severance packages that included either a severance payment or
compensation continuation for a period time. In addition, these employees
received a continuation of medical benefits for a period ranging from nine to
twelve months.

Costs related to the curtailments, including contract cancellation charges
of $38,750 and workforce reduction costs of $4,219, incurred by Goldendale are
included in the statement of operations. Due to differing year-ends, the
statement of operations does not include curtailment costs incurred by Northwest
during 2000. Northwest incurred contract cancellation charges of $3,200 and
workforce reduction costs of $3,371.

During the curtailment, the Company's recycling, remelt and casting
operations will continue to operate and supply existing customers. The Company
expects to return to full production levels once power is available at
acceptable price levels. However, no assurances can be given that the Company's
plans for restarting its smelter operations will occur as currently planned, if
at all.

16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table presents a condensed summary of quarterly results of
operations for the years ended December 31, 1999 and 2000 (dollars in thousands,
except per share data). As prescribed in EITF 00-10, "Accounting for Shipping
and Handling Fees and Costs," the Company began reclassifying shipping and
handling costs from a component of revenues to cost of revenues in the fourth
quarter of 2000. This change required a restatement of revenues and cost of
revenues for all periods presented.

DECEMBER 31, 1999
-------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- --------- ---------

Revenues $ 104,342 $ 109,121 $ 114,825 $ 124,203 $ 452,491
Gross Margin 2,008 4,862 7,093 427 14,390
Net Loss (6,067) (4,874) (2,340) (6,630) (19,911)
Per common share:
Net Loss (6,979) (5,786) (3,251) (7,543) (23,559)

DECEMBER 31, 2000
-------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- --------- ---------

Revenues $ 127,892 $ 105,393 $ 102,369 $ 88,146 $ 423,800
Gross Margin 8,605 9,023 9,740 1,656 29,024
Net Loss (2,299) (1,880) (3,018) 355 (6,842)
Per common share:
Net Loss (3,211) (2,792) (3,932) (555) (10,490)

F-21
60

INDEX TO FINANCIAL STATEMENT SCHEDULES

NORTHWEST ALUMINUM COMPANY AND NORTHWEST ALUMINUM SPECIALTIES, INC.
Report of Independent Certified Public Accountants...................................................S-2
Combined Balance Sheets..............................................................................S-3
Combined Statements of Operations....................................................................S-4
Combined Statements of Shareholder's Equity..........................................................S-5
Combined Statements of Cash Flows....................................................................S-6
Summary of Significant Accounting Policies...........................................................S-7
Notes to Combined Financial Statements............................................................ S-10

GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
Report of Independent Certified Public Accountants...................................................S-17
Consolidated Balance Sheets..........................................................................S-18
Consolidated Statements of Operations................................................................S-19
Consolidated Statements of Shareholders' Equity......................................................S-20
Consolidated Statements of Cash Flows................................................................S-21
Summary of Significant Accounting Policies...........................................................S-22
Notes to Consolidated Financial Statements........................................................ S-26

S-1
61

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Northwest Aluminum Company
and Northwest Aluminum Specialties, Inc.
The Dalles, Oregon

We have audited the accompanying combined balance sheets of Northwest Aluminum
Company and Northwest Aluminum Specialties, Inc. as of September 30, 1999 and
2000, and the related combined statements of operations, shareholder's equity
(deficit), and cash flows for each of the three years in the period ended
September 30, 2000. These combined financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the combined
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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Northwest Aluminum
Company and Northwest Aluminum Specialties, Inc. as of September 30, 1999 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 2000 in conformity with accounting
principles generally accepted in the United States of America.

/s/ BDO SEIDMAN, LLP

Spokane, Washington
November 3, 2000, except for Note 12 as to which the date is December 27, 2000

S-2
62
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

COMBINED BALANCE SHEETS

ASSETS (Note 4)
SEPTEMBER 30,
-------------------------
1999 2000
--------- ---------
(IN THOUSANDS)

Current assets:
Cash and cash equivalents ................................................. $ 194 $ 1,371
Trade accounts receivable, less allowance for doubtful accounts
of $100 ................................................................ 38,313 27,058
Current portion of receivable due from related company (Note 10) .......... 2,639 2,141
Inventories (Notes 1 and 10) .............................................. 41,267 65,591
Other current assets (Note 2) ............................................. 500 1,649
--------- ---------
Total current assets ............................................. 82,913 97,810
--------- ---------
Property, plant and equipment, net (Note 3) .................................... 37,802 40,559
Advances to shareholder ........................................................ 2,000 2,000
Receivable due from related company, less current portion (Note 10)............. 1,824 1,985

Long-term trade receivable, less allowance for doubtful accounts of
$900 (Note 11) ............................................................ 1,572 1,316
--------- ---------
$ 126,111 $ 143,670
========= =========

LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)

Current liabilities:
Trade accounts payable (Note 10) ........................................... $ 33,415 $ 18,385
Accrued expenses (Notes 7 and 10) .......................................... 4,815 7,843
--------- ---------
Total current liabilities ........................................ 38,230 26,228
Long-term debt due to parent (Note 4) .......................................... 79,743 118,842
--------- ---------
Total liabilities ................................................ 117,973 145,070
--------- ---------

Commitments and contingencies (Notes 5, 6 and 8)

Shareholder's equity (deficit):
Common stock, no par value; 2,000 shares authorized,
Issued and outstanding ................................................ 38 38
Additional paid-in capital ................................................. 20,736 18,860
Accumulated deficit ........................................................ (12,636) (20,298)
--------- ---------
Total shareholder's equity (deficit) ............................. 8,138 (1,400)
--------- ---------
$ 126,111 $ 143,670
========= =========

See accompanying summary of significant accounting policies and notes to
combined financial statements.

S-3
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NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.
COMBINED STATEMENTS OF OPERATIONS

YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999 2000
--------- --------- ---------
(IN THOUSANDS)

Revenues (Notes 5 and 10) ............................. $ 301,826 $ 283,939 $ 238,933
Cost of revenues (Note 10) ............................ 289,835 275,806 224,217
--------- --------- ---------
Gross margin .......................................... 11,991 8,133 14,716
General and administrative expenses ................... (8,293) (6,026) (9,274)
--------- --------- ---------
Operating income ...................................... 3,698 2,107 5,442
--------- --------- ---------
Other income (expense):
Interest expense (Notes 4 and 10) .................. (7,463) (10,269) (13,471)
Other income, net .................................. 282 433 367
--------- --------- ---------
Other expense, net .................................... (7,181) (9,836) (13,104)
--------- --------- ---------
Net loss before extraordinary item .................... (3,483) (7,729) (7,662)
Extraordinary item-loss on extinguishment of debt
(Note 4) ........................................ -- 549 --
--------- --------- ---------
Net loss .............................................. $ (3,483) $ (8,278) $ (7,662)
========= ========= =========

See accompanying summary of significant accounting policies and notes to
combined financial statements.

S-4
64

NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)

TOTAL
SHARE-
COMMON STOCK ADDITIONAL (ACCUMU- HOLDER'S
---------------------- PAID-IN LATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT) (DEFICIT)
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE DATA)

Balance at October 1, 1997 ...................... 2,000 $ 38 $ 20,736 $ (875) $ 19,899
Net loss ........................................ -- -- -- (3,483) (3,483)
-------- -------- -------- -------- --------

Balance at September 30, 1998 ................... 2,000 38 20,736 (4,358) 16,416
Net loss ........................................ -- -- -- (8,278) (8,278)
-------- -------- -------- -------- --------

Balance at September 30, 1999 ................... 2,000 38 20,736 (12,636) 8,138
Net loss ........................................ -- -- -- (7,662) (7,662)
Distributions to parent ......................... -- -- (1,876) -- (1,876)
-------- -------- -------- -------- --------

Balance at September 30, 2000 ................... 2,000 $ 38 $ 18,860 $(20,298) $ (1,400)
======== ======== ======== ======== ========

See accompanying summary of significant accounting policies and notes to
consolidated financial statements.

S-5
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NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

COMBINED STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

YEAR ENDED SEPTEMBER 30,
-----------------------------------------
1998 1999 2000
--------- --------- ---------
(IN THOUSANDS)

Cash flows from operating activities:
Net loss ................................................... $ (3,483) $ (8,278) $ (7,662)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ............................ 6,865 7,301 7,413
Loss on disposal of assets ............................... 68 22 458
Provision for bad debts .................................. 1,500 -- 2,037
Extraordinary loss ....................................... -- 549 --
Changes in assets and liabilities:
Trade accounts receivable ............................ 7,419 (2,548) 11,218
Inventories .......................................... 4,925 (6,121) (24,324)
Other current assets ................................. (93) (137) 473
Other assets ......................................... 962 (758) (1,744)
Trade accounts payable ............................... (6,990) 890 (15,030)
Accrued expenses ..................................... 446 (8) 3,028
--------- --------- ---------
Net cash provided by (used in) operating activities ........... 11,619 (9,088) (24,133)
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of assets ............................... 10 -- 43
Acquisition of property, plant and equipment ............... (7,655) (6,560) (10,671)
Receivable due from related company ........................ (918) 489 337
Premiums paid for derivative financial instruments ......... -- -- (1,622)
--------- --------- ---------
Net cash used in investing activities ......................... (8,563) (6,071) (11,913)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving credit facilities ............... 191,166 31,733 --
Repayments under revolving credit facilities ............... (189,702) (28,624) --
Principal repayment of term loan facilities ................ (4,404) (1,250) --
Net borrowings from parent ................................. -- 14,935 39,099
Advances to parent ......................................... -- (2,055) --
Distribution paid .......................................... -- -- (1,876)
Loan fees paid ............................................. (50) -- --
--------- --------- ---------
Net cash provided by (used in) financing activities ........... (2,990) 14,739 37,223
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents .......... 66 (420) 1,177
Cash and cash equivalents, beginning of year .................. 548 614 194
--------- --------- ---------
Cash and cash equivalents, end of year ........................ $ 614 $ 194 $ 1,371
========= ========= =========

Supplemental Disclosures of Cash Flow Information (Note 9)

S-6
66
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

PRINCIPLES OF COMBINATION, BASIS OF PRESENTATION, AND OPERATIONS

The financial statements are presented on a combined basis as Northwest
Aluminum Company and Northwest Aluminum Specialties, Inc. (the "Companies") are
under common ownership and common management. All intercompany transactions have
been eliminated in combination. On December 18, 1998, the sole shareholder of
the Companies transferred all of the issued and outstanding shares of common
stock of the Companies to Golden Northwest Aluminum, Inc. (GNA), a company also
wholly-owned by the shareholder.

The operations of the Companies consist primarily of the smelting
conversion of alumina to aluminum, processing of aluminum into primary products,
and the sale of those products. The Companies' smelting operations were under a
tolling agreement with an alumina supplier through December 1999. In December
1999, the Companies' tolling agreement expired. The operations are located in
the Pacific Northwest on the Columbia River. Approximately 80% of the Companies'
labor force is subject to collective bargaining agreements. The Companies'
agreement with its labor force is set to expire July 1, 2001. The Company and
the collective bargaining unit are in discussions to extend the expiration date
of the current labor agreement until September 2001.

REVENUE RECOGNITION

Revenues from the sale of aluminum products are recognized upon shipment.
Revenues for the conversion of alumina and processing of aluminum under a
tolling arrangement through December 1999 were recognized upon completion of the
tolling process.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method, except for certain supply inventories that
are based upon the weighted average cost method.

FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

The fair values of financial instruments have been determined through
information obtained from quoted market sources and management estimates. It is
management's belief that financial instruments held by the Companies approximate
fair market value.

The Companies do not invest in derivatives for trading purposes. From time
to time, as part of its risk management strategy, the Companies use derivative
financial instruments to hedge exposure to changes in the price of aluminum. If
the financial instrument qualifies for hedge accounting, changes in the market
value of the instrument and the premium paid are deferred until the gain or loss
is recognized on the hedged commodity. If the contract is not a hedge or does
not qualify for hedge accounting, changes in market value are recorded
currently.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, less accumulated
depreciation and amortization. For financial reporting purposes, the costs of
plant and equipment are depreciated over the estimated useful lives of the
assets, which range from five to twenty-five years, using the straight-line
method.

S-7
67
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

ASSET IMPAIRMENT

The Companies evaluate their long-lived assets for financial impairment and
continue to evaluate them as events or changes in circumstances indicate that
the carrying amount of such assets may not be fully recoverable. The Companies
evaluate the recoverability of long-lived assets by measuring the carrying
amount of the assets against the estimated undiscounted future cash flows
associated with them. At the time such evaluations indicate that the future
undiscounted cash flows of certain long-lived assets are not sufficient to
recover the carrying value of such assets, the assets are adjusted to their fair
values.

INTEREST COSTS

The Companies follow the policy of capitalizing interest as a component of
the cost of property, plant and equipment constructed for its own use. Interest
costs of $147, $76 and $35 were capitalized during the years ended September 30,
1998, 1999 and 2000, respectively.

INCOME TAXES

The Companies have elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under those provisions, the Companies do not pay
federal or state corporate income taxes on their taxable income. Instead, the
shareholder is liable for individual federal and state income taxes on the
Companies' taxable income. It is the Companies' intention to pay distributions
to the shareholder in an amount no less than the sum of these federal and state
income taxes.

ESTIMATES

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

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Companies to a
concentration of credit risk consist of cash and cash equivalents and trade
accounts receivable. The Companies place their cash and cash equivalents with
various high quality financial institutions; these deposits may exceed federally
insured limits at various times throughout the year. The Companies sell their
products to various customers involved in the manufacturing of aluminum products
located throughout the United States. Credit risk arising from these receivables
is controlled through credit approval, credit limit and monitoring procedures.
Receivables due from the Companies' primary tolling customer prior to December
1999 comprised 18% and 17% of the Companies' total trade accounts receivable at
September 30, 1998 and 1999, respectively.

S-8
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NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(DOLLARS IN THOUSANDS)

RESEARCH AND DEVELOPMENT COSTS

Expenditures associated with research and development for existing product
process improvements are expensed as incurred. These costs amounted to $71, $111
and $109 during the years ended September 30, 1998, 1999 and 2000, respectively.

CASH AND CASH EQUIVALENTS

For purposes of balance sheet classification and the statements of cash
flows, the Companies consider all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

ENVIRONMENTAL MATTERS

The Companies expense environmental expenditures related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. Expenditures that extend the life of the
related property or mitigate or prevent future environmental contamination are
capitalized. The Companies record a liability for an environmental matter when
it is probable and can be reasonably estimated.

RECLASSIFICATIONS

Certain reclassifications of 1999 amounts have been made to conform to
classifications used in 2000. As prescribed in EITF 00-10, "Accounting for
Shipping and Handling Fees and Costs," the Companies began reclassifying
shipping and handling costs from a component of revenues to cost of revenues in
the fourth quarter of 2000. This change required a restatement of revenues and
cost of revenues for all periods presented.

EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 ("SFAS No. 138"), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and No. 138 are effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Companies are currently analyzing the
financial impact (if any) the adoption of SFAS No. 133 and No. 138 will have on
their combined financial statements.

S-9
69
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. INVENTORIES

Inventories consist of the following:

1999 2000
-------- --------

Manufactured metals and tolling in process ................. $ 33,633 $ 50,508
Supplies and alloys ........................................ 5,795 6,131
Carbon plant materials ..................................... 1,449 2,275
Alumina .................................................... 390 6,677
-------- --------
$ 41,267 $ 65,591
======== ========

2. DERIVATIVE FINANCIAL INSTRUMENTS

The Companies hold call options for the purpose of mitigating the risk of
market price fluctuations of anticipated aluminum purchases. These options
required the payment of an upfront premium in return for the right to receive
the amount, if any, by which the price at the settlement date exceeds the strike
price. At September 30, 2000, the Companies had option contracts that
established a price range for 3,400 metric tons of primary aluminum per month
over a 6-month period beginning January 1, 2001. For the year ended September
30, 2000, there was no gain or loss as a result of these positions. At September
30, 2000, the fair value of these options of $1,622 is included in other current
assets.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

1999 2000
-------- --------

Land and improvements ...................................... $ 2,974 $ 2,974
Machinery and equipment .................................... 57,760 62,833
Buildings and improvements ................................. 21,273 21,555
Capital projects in process ................................ 4,241 6,711
-------- --------
86,248 94,073
Less accumulated depreciation .............................. 48,446 53,514
-------- --------
Property, plant and equipment, net ......................... $ 37,802 $ 40,559
======== ========

4. LONG-TERM DEBT

S-10
70
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

and for working capital and other general corporate purposes. In connection with
the extinguishment of its existing debt, the Companies recognized an
extraordinary loss of $549 in fiscal 1999. The indenture agreement limits
principal payments on subordinated debt, dividends or shareholder distributions,
and investments in subsidiaries.

On December 21, 1998, the Companies, together with GNA's other
subsidiaries, entered into a $75 million bank revolving credit facility,
collateralized by inventory, accounts receivable and related intangibles,
including a security interest in Northwest Aluminum Company's tolling agreement
with Glencore, which matured on December 31, 1999 (see Note 5). Borrowings under
the credit facility bear interest at a floating base rate specified in the
credit agreement plus 0.50% to 1.00% or LIBOR plus 2.00% to 2.50%, depending on
the consolidated ratio of earnings before interest, income taxes, depreciation
and amortization to interest expense. The credit facility provides for the
payment of a commitment fee of 0.50% per annum based on the unused portion of
the credit facility. The credit agreement contains restrictive covenants,
including a minimum net worth requirement, a minimum excess availability
requirement and limitations on capital expenditures, dividends, additional
indebtedness, mergers and other business combinations, asset sales,
encumbrances, investments and transactions with affiliates.

Also on December 21, 1998, GNA entered into a subordinated credit
agreement for $20 million. The debt bears interest at LIBOR plus 2.00% (8.32% at
September 30, 2000) and is due in December 2005. The debt is secured by a second
lien and pledge on the collateral securing the first mortgage notes and is
guaranteed by the Companies and by other subsidiaries of GNA. Except for the
collateral security, the guarantees by the Companies are subordinate to the
indebtedness under the bank revolving credit facility. The credit agreement
provides for additional borrowings of $10 million on or prior to December 31,
2001.

The long-term debt due to parent represents the Companies' allocable share
of the proceeds from the first mortgage notes and is repayable to GNA under the
same terms and conditions as the first mortgage notes described above.

The total outstanding debt of GNA co-guaranteed by the Companies at
September 30, 2000 amounted to:

1999 2000
-------- --------

First Mortgage Notes ........................... $150,000 $150,000
Subordinated Credit Agreement .................. 20,000 20,000
Revolving Credit Facility ...................... 25,279 41,593
-------- --------
$195,279 $211,593
======== ========

S-11
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NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

5. ALUMINA SUPPLY

Northwest Aluminum Company had an agreement with Glencore, Ltd.
(Glencore), which continued through December 31, 1999, for the conversion of
alumina to aluminum for a tolling charge under which the entire production
capacity of the smelting facility was dedicated to the tolling of its supplier's
alumina. The supplier was obligated to supply, without charge, alumina
sufficient to meet the requirements for full operation. The tolling fee set
forth in the contract was a percentage of the price of aluminum quoted on the
London Metals Exchange. This tolling customer accounted for 30%, 27% and 9% of
the Companies' combined revenues in fiscal 1998, 1999 and 2000, respectively.

On October 15, 1999, Northwest Aluminum Company entered into an agreement to
purchase alumina from a supplier at a cost based on a percentage of the price of
aluminum quoted on the London Metals Exchange with deliveries scheduled over the
next 5 years. Subsequent to September 30, 2000, Northwest Aluminum Company
entered into an agreement modifying the terms of their alumina supply contract.
The modification includes a reduction in the amount of alumina to be purchased
and requires a fee to be paid for reduced purchases. This modification has been
included in the commitment schedule (Note 8).

6. EMPLOYEE BENEFIT PLANS

Profit Sharing Bonus Plan

The Companies have entered into a contractual agreement, which continues
through 2001, with the United Steelworkers of America, AFL-CIO, to pay annually
as additional compensation 20% of the combined net income of the Companies, as
adjusted in accordance with the agreement. The Companies' total additional
compensation bonuses under this agreement amounted to approximately $829, $298
and $698 in fiscal 1998, 1999 and 2000, respectively.

Retirement Benefit Plan

The Companies have also established a defined contribution 401(k) profit
sharing plan (the "401(k) Plan") covering substantially all employees under
which employees may elect to defer pay subject to statutory limits. The
Companies are committed to contribute the greater of $.25 per eligible hour
worked or 5% of the combined adjusted net income of the Companies. In addition,
the Companies are required to make matching contributions of 25% of elective
deferrals. The Companies may also make discretionary contributions to the 401(k)
Plan. Total contributions by the Companies to the 401(k) Plan amounted to
approximately $341, $694 and $964 in fiscal 1998, 1999 and 2000, respectively.

S-12
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NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

7. ACCRUED EXPENSES

Accrued expenses consist of the following:

1999 2000
-------- --------

Profit sharing and bonuses ..................... $ 620 $ 1,304
Salaries and related expenses .................. 1,200 2,085
Interest (Note 10) ............................. 2,798 3,151
Bank overdraft ................................. -- 1,106
Other .......................................... 197 197
-------- --------
$ 4,815 $ 7,843
======== ========

8. COMMITMENTS AND CONTINGENCIES

In 1998, as a result of an audit by the Internal Revenue Service, the
Companies entered into an agreement to capitalize certain expenditures. Because
the Companies have Subchapter S tax reporting status, the sole shareholder of
the Companies incurred additional taxes and interest associated with the
agreement. As a result, the Companies declared and paid a distribution of $1,876
to GNA, the parent of the Companies, to reimburse the shareholder for such
amounts.

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

The Companies have entered into various agreements for the purchase of
power, alumina, and aluminum, including an agreement with the Bonneville Power
Administration (BPA) for the purchase of electrical power at fixed rates. The
contract with BPA expires September 30, 2001. Subsequent to year-end, a new
contract with BPA was entered into (Note 12).

Future estimated minimum payments under these non-cancelable agreements at
September 30, 2000 are as follows:

Year ending September 30, Amount
----------------------------------------------------------------- ------------

2001 $ 34,169
2002 29,785
2003 33,888
2004 33,888
2005 8,472
------------
$ 140,202
============

S-13
73
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information are as follows:

Year ended September 30,
------------------------------------
1998 1999 2000
--------- --------- ---------

Cash paid during the year for:
Interest ............................... $ 6,904 $ 8,165 $ 13,118

Non-cash investing and financing activities:
Repayments of revolving credit
facilities with new debt ......... $ -- $ 50,238 $ --
Repayment of term loan facilities
with new debt .................... $ -- $ 16,221 $ --

10. RELATED PARTY TRANSACTIONS

GNA, the parent of the Companies, allocates substantially all of its costs
to its subsidiaries based on the ratio of each subsidiary's borrowings (Note 4)
to the total borrowings by all subsidiaries. For the year ended September 30,
1999, the Company incurred $8,308 and $485 in interest charges and other
expenses, respectively, which were charged to the Companies by GNA. For the year
ended September 30, 2000, the Company incurred $11,310 and $1,972 in interest
charges and other expenses, respectively, which were charged to the Companies by
GNA. Accrued expenses include $2,798 and $3,151 of interest payable to GNA at
September 30, 1999 and 2000, respectively.

Sales to a company related by common ownership amounted to $6,406, $5,766
and $6,380 for the years ended September 30, 1998, 1999 and 2000, respectively.
The receivable due from related company includes the balance due from those
sales, together with cash advances, of which $4,000 was converted to a note
receivable on December 31, 1997. The note bears interest at 9.25% and is payable
in quarterly installments through September 2005. Interest income from this
related company amounted to $263, $304 and $230 for the years ended September
30, 1998, 1999 and 2000, respectively. Purchases from this related company
amounted to $1,998 and $3,216 for the years ended September 30, 1999 and 2000,
respectively, of which $189 is included in trade accounts payable at September
30, 1999.

Sales to another company related by common ownership amounted to $294,
$330 and $67, for the years ended September 30, 1998, 1999 and 2000,
respectively. Purchases from this related company amounted to $1,181, $1,573 and
$1,562 for the years ended September 30, 1998, 1999 and 2000, respectively.
Trade accounts payable includes balances due this company amounting to $900 and
$1,890 at September 30, 1999 and 2000, respectively.

S-14
74
NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

11. LONG-TERM TRADE RECEIVABLE

The Companies have an arrangement with a third party to distribute
aluminum throughout Texas. In addition to providing distribution services, the
third party was a long-term customer of the Companies, purchasing aluminum
products for resale. In 1998, because the third party was experiencing financial
problems, the Companies entered into an arrangement to extend the terms of
repayment and provide a method for the third party to repay its debt to the
Companies by direct retention of a portion of earned services. The Companies
also ceased selling aluminum products to this third party. In September 2000,
the Companies determined that primarily due to the third party's increasingly
limited earnings potential, the financial condition of the third party was
worsening and an impairment of the long-term trade receivable had occurred. As a
result, the Companies took a write-down on the receivable and recognized a loss
of $2,000.

12. SUBSEQUENT EVENTS

In late September 2000, the Companies reduced smelter production levels to
50% of capacity as a result of significant increases in the spot market price of
electrical power. At reduced production levels, the Companies will be able to
reshape or sell electrical power contractually available under its existing
power contracts with the Bonneville Power Administration (BPA) to minimize the
effect of high market power prices. In connection with this partial curtailment,
the Companies reduced its workforce by 66 employees and provided a severance
package to employees that were terminated. Costs related to the curtailment and
related workforce reduction of approximately $1 million were recognized in
October 2000.

In October 2000, GNA, the parent of the Companies, entered into a new
electrical power sale agreement with BPA that will be effective from October 1,
2001 through September 30, 2006. The Companies expect that 50% of their
electrical power requirements will be met through this contract. The new
contract allows GNA to direct the available power to the Companies' facility as
well as to a facility related by common ownership. The power rates set forth
under the new contract are subject to review by the Federal Energy Regulatory
Commission. Because the rate for BPA power will not be determinable until the
conclusion of the review, GNA has the right to terminate the contract within a
specified time period after the review. Under the new contract, the BPA
Administrator may have broad discretion to temporarily or permanently limit or
terminate purchases of power in circumstances in which the Administrator
determines that the Companies are not in compliance with all applicable federal,
state and local laws and regulations.

In late December 2000, the Companies curtailed all remaining smelter
production. This further curtailment was done in conjunction with a modification
to the Companies' existing electrical power contract with BPA. The modification
to the contract allows BPA to remarket the electrical power that the Companies
would have used. The proceeds from the remarketed power will become available to
the Companies as reimbursement for costs defined in the remarketing agreement as
"qualified expenditures". "Qualified expenditures" are costs related to
curtailing production (including employee layoff expenditures, contract
cancellation fees, unabsorbed fixed costs and debt service payments), costs
incurred pursuant to plans to secure a future power supply and enhance
operations of the facilities, and payment of tax liabilities related to these
reimbursements. During the curtailment, the Companies' recycling, remelt and
casting operations will continue to operate and supply their existing customers.
Costs related to this subsequent workforce reduction will be recognized in
December 2000. The Companies expect to resume smelter production once power is
available at acceptable price levels.

S-15
75

NORTHWEST ALUMINUM COMPANY AND
NORTHWEST ALUMINUM SPECIALTIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)
(DOLLARS IN THOUSANDS)

However, no assurances can be given that the Companies' plans for restarting its
smelter operations will occur as currently planned, if at all.

S-16
76

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Goldendale Holding Company and Subsidiary
Goldendale, Washington

We have audited the accompanying consolidated balance sheets of Goldendale
Holding Company and Subsidiary as of December 31, 1999 and 2000 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

As disclosed in Note 13 to the consolidated financial statements, during
the year ended December 31, 2000 Goldendale Holding Company and Subsidiary
temporarily curtailed the production of aluminum.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Goldendale
Holding Company and Subsidiary as of December 31, 1999 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.

/s/ BDO SEIDMAN, LLP

Spokane, Washington
February 22, 2001

S-17
77
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

ASSETS (Note 4)
DECEMBER 31,
----------------------
1999 2000
-------- --------
(IN THOUSANDS)

Current assets:
Cash and cash equivalents ..................................................... $ 244 $ 140
Trade accounts receivable (Note 12) ........................................... 17,707 16,717
Reimbursement receivable (Note 13) ............................................ -- 40,795
Inventories (Note 1) .......................................................... 24,351 23,725
Prepaid expenses .............................................................. 166 114
Income taxes refundable (Note 9) .............................................. 3,121 811
Deferred income taxes (Note 9) ................................................ -- 2,825
-------- --------
Total current assets ................................................. 45,589 85,127
-------- --------
--------
Property, plant and equipment, net (Note 2) ........................................ 95,075 98,516
Goodwill, net of accumulated amortization
of $14,241 and $18,829 (Note 9) ............................................... 81,348 74,186
Other assets, net (Note 3) ......................................................... 2,387 2,449
-------- --------
$224,399 $260,278
======== ========

LIABILITIES, PREFERRED STOCK AND SHAREHOLDER'S EQUITY

Current liabilities:
Current portion of long-term debt due to parent (Note 4) ...................... $ 8,916 $ 8,955
Trade accounts payable ........................................................ 13,184 5,097
Accrued expenses (Note 7) ..................................................... 13,981 11,388
Accrued curtailment expenses (Note 13) ........................................ -- 42,833
Deferred income taxes (Note 9) ................................................ 215 --
Current portion of dividends payable (Note 10) ................................ -- 8,500
-------- --------
Total current liabilities ............................................ 36,296 76,773
-------- --------
Long-term debt due to parent, less current portion (Note 4) ................... 78,327 78,328
Deferred income taxes (Note 9) ................................................ 15,012 15,498
Deferred compensation notes payable (Note 6) .................................. 662 --
Other long-term liabilities (Note 8) .......................................... 1,825 1,893
Dividends payable (Note 10) ................................................... 13,163 8,311
-------- --------
Total liabilities .................................................... 145,285 180,803
-------- --------

Commitments and Contingencies (Notes 5, 6, 8 and 10)

Preferred stock, cumulative, nonconvertible, $.01 par value; 150,000 shares
authorized, 131,836.1 issued and outstanding (aggregate liquidation
preference $42,826 in 1999 and $46,474 in 2000
(Note 10)) .................................................................... 29,663 29,663

Shareholders' Equity (Note 10):
Common stock, $.01 par value, 350,000 shares authorized, 197,688.82 issued
and outstanding ........................................................... 2 2
Additional paid-in capital .................................................... 44,478 44,478
Retained earnings ............................................................. 4,971 5,332
-------- --------
Total shareholder's equity ......................................................... 49,451 49,812
-------- --------
$224,399 $260,278
======== ========

See accompanying summary of significant accounting policies and notes to
combined financial statements.

S-18
78
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
--------- --------- ---------
(IN THOUSANDS)

Revenues (Notes 5 and 12) ........................................ $ 177,456 $ 169,319 $ 185,322
Cost of revenues (Note 12) ....................................... 159,329 163,926 170,653
--------- --------- ---------
Gross margin ..................................................... 18,127 5,393 14,669
Net gains on power sales (Note 13) ............................... -- -- 13,980
Reimbursement of expenditures (Note 13) .......................... -- -- 40,795
Curtailment expenses (Note 13) ................................... -- -- (42,944)
General and administrative expenses .............................. (9,776) (10,504) (9,722)
--------- --------- ---------
Operating income (loss) .......................................... 8,351 (5,111) 16,778
--------- --------- ---------
Other income (expense):
Interest expense (Notes 9 and 12) ............................. (6,386) (8,938) (9,764)
Other income, net ............................................. 1,886 1,084 1,403
--------- --------- ---------
Net other expense ................................................ (4,500) (7,854) (8,361)
--------- --------- ---------
Income (loss) before income taxes ................................ 3,851 (12,965) 8,417
Income tax expense (benefit) (Note 9) ............................ 3,009 (3,745) 4,408
--------- --------- ---------
Income (loss) before extraordinary item .......................... 842 (9,220) 4,009
Extraordinary item - loss on extinguishment of debt (net
of income tax benefit of $513) (Note 4) ........................ (953) -- --
--------- --------- ---------
Net income (loss) ................................................ $ (111) $ (9,220) $ 4,009
========= ========= =========

See accompanying summary of significant accounting policies and notes to
combined financial statements.

S-19
79
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

COMMON
STOCK ADDITIONAL TOTAL
------------------------- PAID-IN RETAINED SHAREHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)

Balance at January 1, 1998 ....................... 197,688.82 $ 2 $ 44,478 $ 21,598 $ 66,078
Dividends accrued on preferred stock ............. -- -- -- (3,648) (3,648)
Net loss ......................................... -- -- -- (111) (111)
---------- ---------- ---------- ---------- ----------

Balance at December 31, 1998 ..................... 197,688.82 2 44,478 17,839 62,319
Dividends accrued on preferred stock ............. -- -- -- (3,648) (3,648)
Net loss ......................................... -- -- -- (9,220) (9,220)
---------- ---------- ---------- ---------- ----------

Balance at December 31, 1999 ..................... 197,688.82 2 44,478 4,971 49,451
Dividends accrued on preferred stock ............. -- -- -- (3,648) (3,648)
Net income ....................................... -- -- -- 4,009 4,009
---------- ---------- ---------- ---------- ----------

Balance at December 31, 2000 ..................... 197,688.82 $ 2 $ 44,478 $ 5,332 $ 49,812
========== ========== ========== ========== ==========

See accompanying summary of significant accounting policies and notes to
combined financial statements.

S-20
80

GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
--------- --------- ---------
(IN THOUSANDS)

Cash flows from operating activities:
Net income (loss) .............................................. $ (111) $ (9,220) $ 4,009
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization ................................ 13,448 15,197 17,689
Loss (gain) on disposal of assets ............................ (106) 175 22
Extraordinary loss ........................................... 1,466 -- --
Deferred income taxes ........................................ 487 4,376 610
Change in assets and liabilities:
Trade accounts receivable ................................ 5,588 (5,217) 990
Reimbursement receivable ................................. -- -- (40,795)
Inventories .............................................. 884 (4,414) 626
Prepaid expenses ......................................... (166) 257 52
Income taxes refundable .................................. (955) (5,318) 2,310
Other assets ............................................. (285) (282) (62)
Trade accounts payable ................................... (579) 5,365 (8,087)
Accrued expenses ......................................... (3,662) 1,199 (2,831)
Accrued curtailment expenses ............................. -- -- 42,833
Other liabilities ........................................ 85 84 68
--------- --------- ---------
Net cash provided by operating activities ......................... 16,094 2,202 17,434
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of assets ................................... 1,200 -- --
Acquisition of property, plant and equipment ................... (11,140) (26,460) (16,564)
--------- --------- ---------
Net cash used in investing activities ............................. (9,940) (26,460) (16,564)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving credit facility ..................... 107,747 -- --
Repayments under revolving credit facility ..................... (110,060) -- --
Principal repayments of term loan .............................. (7,500) -- --
Net borrowings from parent ..................................... 4,131 25,524 40
Principal payments on deferred compensation notes .............. (1,662) (1,072) (1,074)
Increase (decrease) in bank overdraft .......................... 859 (292) 60
--------- --------- ---------
Net cash provided by (used in) financing activities ............... (6,485) 24,160 (974)
--------- --------- ---------
Net decrease in cash and cash equivalents ......................... (331) (98) (104)
Cash and cash equivalents, beginning of year ...................... 673 342 244
--------- --------- ---------
Cash and cash equivalents, end of year ............................ $ 342 $ 244 $ 140
========= ========= =========

Supplemental Disclosures of Cash Flow Information (Note 11)

S-21
81
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(DOLLARS IN THOUSANDS)

OPERATIONS, PRINCIPLES OF COMBINATION AND BASIS OF PRESENTATION

The operations of the Company consist primarily of the smelting conversion
of alumina to aluminum under a tolling arrangement with an alumina supplier. In
addition, the Company operates an alumina unloading facility. The Company
operates within one business segment. The operations are located in the Pacific
Northwest on the Columbia River. During 2000, the Company curtailed a
substantial portion of its operations (Note 13).

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Goldendale Aluminum Company. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Approximately 81% of the Company's labor force is subject to collective
bargaining agreements. The Company's agreement with its labor force is due to
expire June 1, 2001. The Company and the collective bargaining unit are in
discussions to extend the expiration date of the current labor agreement until
September 2001.

REVENUE RECOGNITION

Revenues for the conversion of alumina and processing of aluminum under a
tolling arrangement is recognized upon completion of the tolling process. Net
gains from the sale of power are recognized during the period that the
associated power is provided.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
by the weighted-average cost method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment including cell-relining costs are stated at
cost, less accumulated depreciation and amortization. For financial reporting
purposes, the costs of plant and equipment are depreciated over the estimated
useful lives of the assets, which range from three to thirty years, using the
straight-line method.

GOODWILL

ASSET IMPAIRMENT

S-22
82
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(DOLLARS IN THOUSANDS)

time such evaluations indicate that the future undiscounted cash flows of
certain long-lived assets are not sufficient to recover the carrying value of
such assets, the assets are adjusted to their fair values.

INTEREST COSTS

The Company follows the policy of capitalizing interest as a component of
the cost of property, plant and equipment constructed for its own use. Interest
costs of $0, $500 and $463 were capitalized during the years ended December 31,
1998, 1999 and 2000, respectively.

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 uses the liability method so that deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities given the provisions of
enacted tax laws and tax rates. Deferred income tax expense or benefit is based
on the changes in the financial statement basis versus the tax bases in assets
or liabilities from period to period.

ESTIMATES

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

CONCENTRATIONS OF CREDIT RISK

FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

S-23
83
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(DOLLARS IN THOUSANDS)

The Company has entered into an interest rate swap agreement for purposes
of minimizing exposure to interest rate risk. The differential between the
floating interest rate and the fixed interest rate which is to be paid or
received is recognized in interest expense as the floating interest rate changes
over the life of the agreement.

RESEARCH AND DEVELOPMENT COSTS

Expenditures associated with research and development for existing product
process improvements are expensed as incurred. These costs amounted to $789,
$1,516 and $0 during the years ended December 31, 1998, 1999 and 2000,
respectively. Depreciation on equipment used for research and development
amounted to $0, $47 and $14 during the years ended December 31, 1998, 1999 and
2000, respectively.

CASH AND CASH EQUIVALENTS

For purposes of balance sheet classification and the statements of cash
flows, the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

ENVIRONMENTAL MATTERS

The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. Expenditures which extend the life of the
related property or mitigate or prevent future environmental contamination are
capitalized. The Company records a liability for an environmental matter when it
is probable and can be reasonably estimated. The Company's estimated liability
is reduced to reflect the anticipated participation of other potentially
responsible parties in those instances where it is probable that such parties
are legally responsible and financially capable of paying their respective
shares of the relevant costs. The estimated liability of the Company is not
discounted or reduced for possible recoveries from insurance carriers.

RECLASSIFICATIONS

Certain reclassifications of 1998 and 1999 amounts have been made to
conform to classifications used in 2000.

EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

S-24
84

GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(DOLLARS IN THOUSANDS)

hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized as income in
the period of change. SFAS No. 133 and 138 are effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. The Company adopted SFAS No. 133
and No. 138 as of the beginning of the fiscal year 2001. Management does not
believe that the adoption of SFAS No. 133 and No. 138 will have any initial
impact on its consolidated financial statements.

S-25
85
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

1. INVENTORIES

Inventories consist of the following:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Tolling in process ............................. $ 3,451 $ 4,229
Supplies and alloys ............................ 7,824 9,172
Electrolyte materials .......................... 5,796 5,688
Carbon plant materials ......................... 3,965 2,569
Alumina ........................................ 3,315 2,067
-------- --------
$ 24,351 $ 23,725
======== ========

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Land and improvements .......................... $ 4,840 $ 4,847
Machinery and equipment ........................ 91,135 103,008
Buildings and improvements ..................... 19,406 19,708
Capital projects in process .................... 7,892 12,106
-------- --------
123,273 139,669
Less accumulated depreciation .................. 28,198 41,153
-------- --------
$ 95,075 $ 98,516
======== ========

During 1998, the Company changed its method of accounting for cell
relining costs from expensing such costs as incurred to capitalizing and
amortizing these costs over future periods. The Company believes that the new
method is preferable since it improves the matching of revenues and costs as
technological improvements have extended the estimated period of economic
benefit realized from cell relining. The change was applied by retroactively
restating the previously issued consolidated financial statements. The effect of
this change was to decrease net loss by $2,829 for the year ended December 31,
1998.

3. OTHER ASSETS

Other assets consist of the following:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Restricted cash ................................ $ 1,844 $ 1,906
Power project assets held for sale ............. 543 543
-------- --------
$ 2,387 $ 2,449
======== ========

S-26
86
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

4. LONG-TERM DEBT

Long-term debt consists of the following:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Long-term debt due to parent ................... $ 87,243 $ 87,283
Less current portion ........................... 8,916 8,955
-------- --------
Long-term debt less current portion ............ $ 78,327 $ 78,328
======== ========

On December 18, 1998, the sole common stock shareholder of the Company
transferred all of the issued and outstanding shares of common stock of the
Company to Golden Northwest Aluminum, Inc. (GNA), a company also wholly-owned by
the shareholder.

On December 21, 1998, GNA issued $150 million of 12% first mortgage notes
due on December 15, 2006. Interest is payable semi-annually on June 15 and
December 15, commencing June 15, 1999. Payment of the notes is guaranteed by the
Company and by other subsidiaries of GNA. The debt is collateralized by
substantially all of the real property, plant and equipment of the Company and
by a pledge of all of the issued and outstanding capital stock of GNA. On or
after December 15, 2002, the notes are redeemable at the option of GNA at
specified redemption prices. There are no sinking fund requirements. The net
proceeds from the sale of the notes were used to repay all amounts then
outstanding under the Company's existing credit facility and term loans, to fund
capital expenditures and for working capital and other general corporate
purposes. In connection with the extinguishment of its existing debt, the
Company recognized an extraordinary loss, net of income taxes, of $953 in 1998.
The indenture agreement limits principal payments on subordinated debt,
dividends or shareholder distributions, and investments in subsidiaries.

On December 21, 1998, the Company, together with GNA's other subsidiaries,
entered into a $75 million bank revolving credit facility which matures on
December 20, 2003 and is collateralized by inventory, accounts receivable and
related intangibles, including a security interest in the Company's tolling
agreement. Borrowings under the credit facility bear interest at a floating base
rate plus from 0.50% to 1.00% (10.50% at December 31, 2000) or LIBOR plus from
2.00% to 2.50%, (9.18% at December 31, 2000) depending on the consolidated ratio
of earnings before interest, income taxes, depreciation and amortization to
interest expense. The credit facility provides for the payment of a commitment
fee of 0.50% per annum based on the unused portion of the credit facility. The
credit agreement contains restrictive covenants, including a minimum net worth
requirement, a minimum excess availability requirement and limitations on
capital expenditures, dividends, additional indebtedness, mergers and other
business combinations, assets sales, encumbrances, investments and transactions
with affiliates. The Company was in compliance with these covenants at December
31, 2000.

Also on December 21, 1998, GNA entered into a subordinated credit
agreement for $20 million. The debt bears interest at LIBOR plus 2.00% (8.82% at
December 31, 2000) and is due in December 2005. The debt is secured by a second
lien and pledge on the collateral securing the first mortgage notes and is
guaranteed by the Company and other subsidiaries of GNA. Except for the
collateral security, the

S-27
87
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

guarantees by the Company are subordinate to the indebtedness under the bank
revolving credit facility. The credit agreement provides for additional
borrowings of $10 million on or prior to December 31, 2001.

The long-term debt due to parent represents the Company's allocable share
of the proceeds from the first mortgage notes, a portion of the proceeds from
the subordinated credit agreement and the Company's net borrowings from the $75
million bank revolving credit facility. This debt is repayable to GNA under the
same terms and conditions as the first mortgage notes, the subordinated credit
agreement and the bank revolving credit facility described above.

On January 21, 1999, the Company terminated at no cost its existing
interest rate swap agreement and entered into a new swap agreement that expires
in 2003. The fixed interest rate paid on the new swap is 6.4% and covers $20
million of notional principal amount of floating rate (LIBOR) indebtedness of
the Company. Although the Company is exposed to credit loss on the interest rate
swap in the event of nonperformance by the counterparties, the Company estimates
the likelihood of such nonperformance to be remote. At December 31, 1999 and
2000, the fair value of the interest rate swap was approximately $92 and $350,
respectively, which reflects the estimated amount that the Company would pay to
terminate the contracts.

The total outstanding debt of GNA co-guaranteed by the Company at December
31, 2000 amounted to:

1999 2000
-------- --------

First Mortgage Notes ........................... $150,000 $150,000
Subordinated Credit Agreement .................. 20,000 20,000
Revolving Credit Facility ...................... 25,279 47,233
-------- --------
$195,279 $217,233
======== ========

5. ALUMINA TOLLING CONVERSION AGREEMENT

The Company has an agreement with an alumina supplier for the conversion
of alumina to aluminum for a tolling charge under which the entire production
capacity of the smelting facilities is dedicated to the tolling of the
supplier's alumina. The supplier is obligated to supply, without charge, alumina
sufficient to meet the requirements for full operation. The tolling fees set
forth in the contract are a percentage of the price of aluminum quoted on the
London Metal Exchange. The agreement, as amended, continues through December 31,
2011. This tolling customer accounted for 99% of the Company's consolidated
revenue in 1998, 1999 and 2000.

In December 2000, the Company entered into an agreement modifying the
terms of its alumina tolling agreement. The modification allows for a reduction
in the amount of aluminum production through September 2001 to a level of
approximately 15% of capacity and extends the tolling arrangement to December
31, 2013. In connection with the modification the Company incurred modification
charges of $38,750, which is included in curtailment expenses in the statement
of operations (Note 13).

S-28
88
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

6. EMPLOYEE BENEFIT PLANS

Profit Sharing Bonus Plan

The Company has a profit sharing plan for its hourly and salaried
employees. All employees are eligible participants in this plan upon completion
of a probationary period. The plan provides for payments equal to a percentage
of profits, as defined. Allocation of the payments is based upon hours worked.
These amounts are to be distributed to eligible participants on or before March
31 following the Company's year-end. For the years ended December 31, 1998, 1999
and 2000, the Company recorded approximately $380, $0 and $1,488, respectively,
of expense related to this plan.

Retirement Benefit Plans

The Company has a 401(k) profit sharing plan under which employees may
elect to defer pay, subject to statutory limits; the Company also makes matching
contributions for nonbargaining employees on the basis of percentages specified
in the plan and discretionary contributions as determined on an annual basis.
The Company also maintained a separate profit sharing retirement plan (the "DC
Plan") which provided retirement benefits for substantially all of its
employees. Goldendale is committed to contribute the greater of 5% of net income
or $.25 per eligible hour worked. During 1999, the separate profit sharing
retirement plan was merged into the 401(k) profit sharing plan. For the years
ended December 31, 1998, 1999 and 2000, the Company recorded approximately $290,
$514 and $384 of expense for plan contributions.

Deferred Compensation Notes Payable

In connection with the acquisition of the Company in 1996, the Company
entered into deferred compensation agreements with certain employees in exchange
for the employees waiving their rights under stock-based compensation and other
employment agreements which existed at the acquisition date. The notes are
payable in monthly installments of approximately $115, including interest at
8.75%, through 2001.

7. ACCRUED EXPENSES

Accrued expenses consist of the following:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Bonuses and employee benefits .................. $ 3,655 $ 4,458
Salaries and related expenses .................. 2,756 3,237
Interest payable (Note 13) ..................... 2,355 650
Bank overdraft ................................. 1,574 1,514
Other .......................................... 3,641 1,529
-------- --------
$ 13,981 $ 11,388
======== ========

S-29
89
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

8. COMMITMENTS AND CONTINGENCIES

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

During 1999, the Company contracted for the design and construction of a
bath reclaim facility. In connection therewith, a dispute has arisen over
contract change orders to an engineering and construction contract. The Company
has accrued an estimate of the costs to settle the claim in the amount of $520.
If the settlement offer is not accepted, the ultimate cost to the Company may
exceed this accrual.

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

The Company has an existing agreement for the purchase of power with the
Bonneville Power Administration (BPA) for the purchase of electrical power at
fixed rates. The contracts with BPA expiring on September 30, 2001, was modified
in December 2000 (Note 13). Future estimated minimum payments under this
agreement at December 31, 2000 are $43,676 in 2001.

In October 2000, the parent of the Company entered into a new electrical
power sale agreement with BPA that will be effective from October 1, 2001
through September 30, 2006. The Company expects that 50% of its electrical power
requirements will be met through this contract. The new contract allows GNA to
direct the available power to the Company's facility as well as to a facility
related by common ownership. The power rates set forth under the new contract
are subject to review by the Federal Energy Regulatory Commission. Because the
rate for BPA power will not be determinable until the conclusion of the review,
GNA has the right to terminate the contract within a specified time period after
the review. Under the new contract, the BPA Administrator may have broad
discretion to temporarily or permanently limit or terminate purchases of power
in circumstances in which the Administrator determines that the Company is not
in compliance with all applicable federal, state and local laws and regulations.

S-30
90
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

9. INCOME TAXES

Income tax expense (benefit) consists of the following:

YEAR ENDING DECEMBER 31,
------------------------------------
1998 1999 2000
--------- --------- ---------

The difference between the federal statutory tax rate and the effective
tax rate resulted from the following:

YEAR ENDING DECEMBER 31,
------------------------------------
1998 1999 2000
--------- --------- ---------

Federal statutory tax rate ............................... 35.0% (35.0)% 35.0%
Amortization of goodwill ................................. 69.6 12.8 19.1
IRS audit settlement ..................................... -- (8.7) --
Other items, net ......................................... 0.1 2.0 (1.8)
--------- --------- ---------
Effective tax rate ....................................... 104.7% (28.9)% 52.3%
========= ========= =========

Significant components of the Company's deferred tax assets and
liabilities are as follows:

DECEMBER 31,
-----------------------
1999 2000
-------- --------

Current:
Accrued expenses ............................ $ (1,805) 1,226
Accrued curtailment expenses ................ -- 1,301
Inventory ................................... 55 53
Other ....................................... 1,535 245
-------- --------
$ (215) $ 2,825
======== ========

Noncurrent:
Property, plant and equipment ............... $(16,286) (16,565)
Power project assets ........................ 404 404
Deferred compensation notes ................. 231 --
Other ....................................... 639 663
-------- --------
$(15,012) $(15,498)
======== ========

S-31
91
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

10. SHAREHOLDERS' EQUITY

Terms of the Company's preferred stock provide for dividends accruing
quarterly and payable in cash as declared by the Board of Directors according to
the following schedule:

YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------ ------------

2001......................................... $27.68/share
2002......................................... $29.93/share
2003......................................... $32.18/share
Thereafter............................................... $34.43/share

The Company may redeem any or all outstanding shares of Series A Preferred
Stock at the following redemption prices:

YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------ ------

2001................................................... $227.25
Thereafter............................................. $225.00

The shares of preferred stock and shares of common stock vote together as
a single class on all matters submitted to a vote of the shareholders of the
Company. The holders of shares of preferred stock are entitled to one vote per
share and have full voting rights and power equal to those of the holders of
common stock.

S-32
92
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

11. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information is as follows:

YEAR ENDED DECEMBER 31,
------------------------------------
1998 1999 2000
--------- --------- ---------

Cash paid (received) during the period for:
Interest ............................................... $ 6,369 $ 3,345 $ 11,074
Income taxes ........................................... $ 2,900 $ (2,796) 4,492
Non-cash investing and financing activities:
Debt refinanced with borrowings from parent ............ $ 57,588 $ -- $ --
Dividends accrued on preferred stock ................... $ 3,648 $ 3,648 $ 3,648
Reduction to acquisition contingency accrual:
Goodwill ........................................... $ -- $ 2,045 $ 2,574
Deferred income tax benefit ........................ $ -- $ 783 $ 3,164
Interest expense ................................... $ -- $ 1,262 $ 590

12. RELATED PARTY TRANSACTIONS

GNA, the parent of the Company, allocates substantially all of its costs
to its subsidiaries based on the ratio of each subsidiary's borrowings to the
total borrowings by all subsidiaries. For the years ended December 31, 1999 and
2000, the Company incurred $9,978 and $10,682, respectively, in interest charges
and other expenses which were charged to the Company by GNA. Accrued expenses
include $704 and $650 of interest payable to GNA at December 31, 1999 and 2000,
respectively.

Sales to a company related by common ownership amounted to $1,102, $1,750
and $1,621 for the years ended December 31, 1998, 1999 and 2000, respectively.
Purchases from this company amounted to $202, $561 and $596 for the years ended
December 31, 1998, 1999 and 2000, respectively. Trade accounts receivable
includes balances due from this company amounted to $1,214 and $1,435 at
December 31, 1999 and 2000, respectively. Also included in trade accounts
receivable are balances due from another company related by common ownership
amounted to $86 and $704 at December 31, 1999 and 2000, respectively.

A member of the Company's board of directors is a partner in a law firm
which performs legal services for the Company. Fees paid to this firm amounted
to $180, $3 and $54 for the years ended December 1998, 1999 and 2000.

S-33
93
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(DOLLARS IN THOUSANDS)

13. POWER SALES AND CURTAILMENT

In September 2000, the Company curtailed smelter production levels to
approximately 67% of capacity as a result of significant increases in the spot
market price of electrical power. At reduced production levels, the Company was
able to sell excess electrical power contractually available under its existing
power contracts with the Bonneville Power Administration (BPA). As a result of
these power sales, the Company recorded a net gain from power sales of
approximately $13,980 in 2000 which was composed of gross proceeds of $18,277
offset by incremental excess power costs. In connection with the initial
curtailment, the Company reduced its workforce by 88 hourly employees and
provided a severance package to employees that were either voluntarily or
involuntarily terminated.

In December 2000, the Company curtailed smelter production further, to a
level of approximately 15% of capacity. This second curtailment was done in
conjunction with a modification to the Company's existing electrical power
contract with BPA. The modification to the contract allows BPA to remarket the
electrical power that the Company would have used. The proceeds from the
remarketed power will become available to the Company as reimbursement for
"qualified expenditures" through December 2010. As defined in the remarketing
agreement, "qualified expenditures" are costs related to curtailing production
(including employee layoff expenditures, contract cancellation fees, unabsorbed
fixed costs and debt service payments), costs incurred pursuant to plans to
secure a future power supply and enhance operations of the facilities, and
payment of tax liabilities related to these reimbursements. Income from
reimbursable costs amounted to $40,795 in 2000. Revenue from reimbursement of
expenditures is recognized in the period that the qualified expenditures are
incurred to the extent that such expenditures will be reimbursed. Costs related
to the curtailments, including contract cancellation charges of $38,750 and
workforce reduction costs of $4,219 have been incurred.

In connection with this second curtailment, the Company reduced its active
workforce by 208 hourly employees. These inactive employees were provided a
severance package that includes full wages and benefits to September 30, 2001.

The Company expects to return to full production levels once power is
available at acceptable price levels. However, no assurances can be given that
the Company's plans for restarting its smelter operations will occur as
currently planned, if at all.

S-34

94
EXHIBIT INDEX

Exhibit
Number
- ------------