KAISER ALUMINUM CORP, 10-Q, 1997-11-05

KAISER ALUMINUM CORP
10-Q, 1997-11-05
PRIMARY PRODUCTION OF ALUMINUM

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

Commission file number 1-9447

KAISER ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 94-3030279
(State of incorporation) (I.R.S. Employer Identification
No.)

5847 SAN FELIPE, SUITE 2600, HOUSTON, TEXAS 77057-3010
(Address of principal executive offices) (Zip Code)

(713) 267-3777
(Registrant's telephone number, including area code)

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
----- ------

At October 31, 1997, the registrant had 78,980,881 shares of Common
Stock outstanding.

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
--------------------

CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
<TABLE>

<CAPTION>
September 30, December 31,
1997 1996
------------------------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 26.3 $ 81.3
Receivables 305.0 252.4
Inventories 553.3 562.2
Prepaid expenses and other current assets 125.1 127.8
------------------------------
Total current assets 1,009.7 1,023.7
Investments in and advances to unconsolidated affiliates 158.1 168.4
Property, plant, and equipment - net 1,162.9 1,168.7
Deferred income taxes 298.0 264.5
Other assets 335.6 308.7
------------------------------
Total $ 2,964.3 $ 2,934.0
==============================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 161.1 $ 189.7
Accrued interest 24.8 35.6
Accrued salaries, wages, and related expenses 76.7 95.4
Accrued postretirement medical benefit obligation -
current portion 50.1 50.1
Other accrued liabilities 121.4 132.7
Payable to affiliates 103.1 97.0
Long-term debt - current portion 2.7 8.9
------------------------------
Total current liabilities 539.9 609.4
Long-term liabilities 515.8 458.1
Accrued postretirement medical benefit obligation 714.6 722.5
Long-term debt 969.3 953.0
Minority interests 124.7 121.7
Commitments and contingencies
Stockholders' equity:
Preferred stock .4
Common stock .8 .7
Additional capital 534.0 531.1
Accumulated deficit (432.0) (460.1)
Additional minimum pension liability (2.8) (2.8)
------------------------------
Total stockholders' equity 100.0 69.3
------------------------------
Total $ 2,964.3 $ 2,934.0
==============================

</TABLE>

The accompanying notes to interim consolidated financial statements are an
integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars, except share amounts)

<TABLE>

<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Net sales $ 634.1 $ 553.4 $ 1,778.6 $ 1,652.1
------------------------------ ------------------------------
Costs and expenses:
Cost of products sold 523.7 485.0 1,473.7 1,394.8
Depreciation 22.9 24.3 68.8 72.5
Selling, administrative, research and development, and
general 33.0 33.6 95.3 97.4
Restructuring of operations 19.7
------------------------------ ------------------------------
Total costs and expenses 579.6 542.9 1,657.5 1,564.7
------------------------------ ------------------------------
Operating income 54.5 10.5 121.1 87.4
Other income (expense):
Interest expense (27.5) (22.6) (83.3) (68.3)
Other - net 2.1 2.1 1.7 3.0
------------------------------ ------------------------------
Income (loss) before income taxes and minority interests 29.1 (10.0) 39.5 22.1
(Provision) benefit for income taxes (11.0) 3.8 (2.4) (8.4)
Minority interests (.6) (.4) (3.3) (2.2)
------------------------------ ------------------------------
Net income (loss) 17.5 (6.6) 33.8 11.5
Dividends on preferred stock (1.3) (2.1) (5.5) (6.3)
------------------------------ ------------------------------
Net income (loss) available to common shareholders $ 16.2 $ (8.7) $ 28.3 $ 5.2
============================== ==============================
Earnings (loss) per common and common equivalent share:
Primary $ .22 $ (.12) $ .39 $ .07
============================== ==============================
Fully diluted $ .22 $ .43
============== ==============
Weighted average common and common equivalent shares
outstanding (000):
Primary 74,663 71,646 72,775 71,843
Fully diluted 79,193 79,164

</TABLE>

The accompanying notes to interim consolidated financial statements are an
integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In millions of dollars)

<TABLE>

<CAPTION>
Nine Months Ended
September 30,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 33.8 $ 11.5
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation 68.8 72.5
Restructuring of operations 19.7
Non-cash benefit for income taxes (12.5)
Amortization of excess investment over equity in
unconsolidated affiliates 8.7 8.7
Amortization of deferred financing costs and net
discount on long-term debt 4.5 4.1
Undistributed equity in (income) loss of unconsolidated
affiliates, net of distributions 16.7 (7.5)
Minority interests 3.3 2.2
(Increase) decrease in receivables (59.5) 41.0
(Increase) decrease in inventories 5.7 (19.8)
(Increase) decrease in prepaid expenses and other assets 1.1 (38.1)
Decrease in accounts payable (28.6) (24.1)
Decrease in accrued interest (10.8) (18.4)
Decrease in payable to affiliates and accrued liabilities (29.8) (23.1)
Decrease in accrued and deferred income taxes (2.1) (18.6)
Other 3.6 4.6
------------------------------
Net cash provided (used) by operating activities 22.6 (5.0)
------------------------------
Cash flows from investing activities:
Net proceeds from disposition of property and investments 22.2 1.6
Capital expenditures (94.7) (91.1)
Other (2.6) (1.3)
------------------------------
Net cash used by investing activities (75.1) (90.8)
------------------------------
Cash flows from financing activities:
Borrowings under revolving credit facility, net 118.1
Borrowings of long-term debt 19.0
Repayments of long-term debt (8.6) (9.0)
Increase in restricted cash, net (6.5)
Incurrence of financing costs (0.6)
Dividends paid (4.2) (8.4)
Capital stock issued .4
Redemption of minority interests' preference stock (2.0) (5.2)
------------------------------
Net cash provided (used) by financing activities (2.5) 95.5
------------------------------
Net decrease in cash and cash equivalents during the period (55.0) (.3)
Cash and cash equivalents at beginning of period 81.3 21.9
------------------------------
Cash and cash equivalents at end of period $ 26.3 $ 21.6
==============================
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 89.5 $ 82.7
Income taxes paid 14.8 22.4
Tax allocation payments to MAXXAM Inc. 1.1

</TABLE>

The accompanying notes to interim consolidated financial statements are an
integral part of these statements.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except prices and per share amounts)

1. GENERAL

Kaiser Aluminum Corporation (the "Company") is a subsidiary of MAXXAM
Inc. ("MAXXAM"). MAXXAM and one of its wholly owned subsidiaries together
own approximately 63% of the Company's Common Stock with the remaining
approximately 37% publicly held. The Company operates through its
subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC").

The foregoing unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X as promulgated by the Securities and
Exchange Commission. Accordingly, these financial statements do not
include all of the disclosures required by generally accepted accounting
principles for complete financial statements. These unaudited interim
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31,
1996. In the opinion of management, the unaudited interim consolidated
financial statements furnished herein include all adjustments, all of which
are of a normal recurring nature, necessary for a fair statement of the
results for the interim periods presented.

The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities known to exist as of the
date the financial statements are published, and the reported amounts of
revenues and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation
of the Company's consolidated financial statements; accordingly, it is
possible that the actual results could differ from these estimates and
assumptions, which could have a material effect on the reported amounts of
the Company's consolidated financial position and results of operations.

Operating results for the quarter ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997.

2. INVENTORIES

The classification of inventories is as follows:

<TABLE>

<CAPTION>
September 30, December 31,
1997 1996
------------------------------
<S> <C> <C>
Finished fabricated aluminum products $ 95.4 $ 113.5
Primary aluminum and work in process 220.7 200.3
Bauxite and alumina 110.5 110.2
Operating supplies and repair and maintenance parts 126.7 138.2
------------------------------
Total $ 553.3 $ 562.2
==============================

</TABLE>

Substantially all product inventories are stated at last-in, first-out
(LIFO) cost, not in excess of market. Replacement cost is not in excess of
LIFO cost.

3. SOLID WASTE DISPOSAL REVENUE BONDS

In March 1997, KACC entered into an agreement (the "Loan Agreement")
with the Industrial Development Corporation of Spokane County, Washington
(the "IDC") in connection with which the IDC issued $19.0 of 7.6% Solid
Waste Disposal Revenue Bonds due 2027 (the "Bonds") and loaned the proceeds
to KACC to finance the construction of certain qualifying expenditures at
its Mead smelter, which are part of the previously announced modernization
and expansion of Mead's carbon baking furnace. The net proceeds from the
sale of the Bonds of approximately $18.6 were deposited into a restricted
construction account (the balance of which is included in Other assets) and
may be withdrawn from time to time by KACC, pursuant to the Loan Agreement
and Bond indenture. The Loan Agreement requires KACC to make payments on
the dates and in the amounts required to permit the IDC to satisfy all of
its payment obligations under the Bonds and related indenture.

4. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

PRIMARY
Earnings per common and common equivalent share are computed by
deducting dividends on the 8.255% PRIDES, Convertible Preferred Stock (the
"PRIDES") from net income in order to determine net income available to
common shareholders. This amount is then divided by the weighted average
number of common and common equivalent shares outstanding during the
period. The impact of the number of outstanding stock options on the
weighted average number of common and common equivalent shares for the
quarters and nine month periods ended September 30, 1997, and 1996, was
immaterial.

FULLY DILUTED
For the quarter and nine months ended September 30, 1997, fully
diluted earnings per share are presented even though the results are
antidilutive as a result of the August 1997 conversion of the PRIDES. The
fully diluted computations for these periods assume that the conversion of
the PRIDES had occurred at the beginning of each period. Accordingly, the
dividend amounts for the quarter and nine-month period ended September 30,
1997, of $1.3 and $5.5, respectively, have not been deducted from net
income and the weighted average number of common and common equivalent
shares has been adjusted to reflect the 7,227,848 shares of the Company's
Common Stock issued upon conversion of the PRIDES in August 1997 as if they
had been outstanding from the beginning of each period.

The PRIDES were excluded from the calculation of the weighted average
number of common and common equivalent shares outstanding for the quarter
and nine-months ended September 30, 1996, because they were antidilutive.

NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS No. 128"). Under SFAS No. 128, primary earnings per share ("Primary
EPS") will be replaced by basic earnings per share ("Basic EPS"), and fully
diluted earnings per share ("Fully Diluted EPS") will be replaced with
diluted earnings per share ("Diluted EPS"). Basic EPS differs from Primary
EPS in that it only includes the weighted average impact of outstanding
shares of the Company's Common Stock (i.e., it excludes common stock
equivalents and the dilutive effect of options, etc.) Diluted EPS is
substantially similar to Fully Diluted EPS as previously reported. The
provisions of SFAS No. 128 will result in the retroactive restatement of
previously reported Primary EPS and Fully Diluted EPS figures, but SFAS No.
128 prohibits such restatement prior to December 31, 1997. Based on the
Company's computations, the adoption of SFAS No. 128 is not expected to
impact earnings per share amounts reported during the current quarter or
any recent prior period.

5. CONTINGENCIES

ENVIRONMENTAL CONTINGENCIES
The Company and KACC are subject to a number of environmental laws, to
fines or penalties assessed for alleged breaches of such environmental
laws, and to claims and litigation based upon such laws. KACC currently is
subject to a number of lawsuits under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and, along
with certain other entities, has been named as a potentially responsible
party for remedial costs at certain third-party sites listed on the
National Priorities List under CERCLA.

Based on the Company's evaluation of these and other environmental
matters, the Company has established environmental accruals primarily
related to potential solid waste disposal and soil and groundwater
remediation matters. At September 30, 1997, the balance of such accruals,
which are primarily included in Long-term liabilities, was $30.8. These
environmental accruals represent the Company's estimate of costs reasonably
expected to be incurred based on presently enacted laws and regulations,
currently available facts, existing technology, and the Company's
assessment of the likely remediation actions to be taken. The Company
expects that these remediation actions will be taken over the next several
years and estimates that annual expenditures to be charged to these
environmental accruals will be approximately $3.0 to $8.0 for the years
1997 through 2001 and an aggregate of approximately $7.0 thereafter.

As additional facts are developed and definitive remediation plans and
necessary regulatory approvals for implementation of remediation are
established or alternative technologies are developed, changes in these and
other factors may result in actual costs exceeding the current
environmental accruals. The Company believes that it is reasonably
possible that costs associated with these environmental matters may exceed
current accruals by amounts that could range, in the aggregate, up to an
estimated $19.0. As the resolution of these matters is subject to further
regulatory review and approval, no specific assurance can be given as to
when the factors upon which a substantial portion of this estimate is based
can be expected to be resolved. However, the Company is currently working
to resolve certain of these matters. While uncertainties are inherent
in the final outcome of these environmental matters, and it is presently
impossible to determine the actual costs that ultimately may be incurred,
management currently believes that the resolution of such uncertainties
should not have a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity.

ASBESTOS CONTINGENCIES
KACC is a defendant in a number of lawsuits, some of which involve
claims of multiple persons, in which the plaintiffs allege that certain of
their injuries were caused by, among other things, exposure to asbestos
during, and as a result of, their employment or association with KACC or
exposure to products containing asbestos produced or sold by KACC. The
lawsuits generally relate to products KACC has not manufactured for at
least 20 years. At September 30, 1997, the number of such claims pending
was approximately 71,200, as compared with 71,100 at December 31, 1996. In
1996, approximately 21,100 of such claims were received and 9,700 were
settled or dismissed. During the quarter and nine months ended September
30, 1997, approximately 3,400 and 9,000 of such claims were received and
6,500 and 8,900 of such claims were settled or dismissed, respectively.

Based on past experience and reasonably anticipated future activity,
the Company has established an accrual for estimated asbestos-related costs
for claims filed and estimated to be filed through 2008. There are
inherent uncertainties involved in estimating asbestos-related costs, and
the Company's actual costs could exceed or be less than these estimates.
The Company's accrual was calculated based on the current and anticipated
number of asbestos-related claims, the prior timing and amounts of
asbestos-related payments, and the advice of Wharton Levin Ehrmantraut
Klein & Nash, P.A. with respect to the current state of the law related to
asbestos claims. Accordingly, an estimated asbestos-related cost accrual
of $156.8, before consideration of insurance recoveries, is included
primarily in Long-term liabilities at September 30, 1997. While the
Company does not presently believe there is a reasonable basis for
estimating such costs beyond 2008 and, accordingly, no accrual has been
recorded for such costs which may be incurred beyond 2008, there is a
reasonable possibility that such costs may continue beyond 2008, and such
costs may be substantial. The Company estimates that annual future cash
payments in connection with such litigation will be approximately $13.0 to
$20.0 for each of the years 1997 through 2001, and an aggregate of
approximately $86.0 thereafter.

The Company believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs. Claims for
recovery from some of KACC's insurance carriers are currently subject to
pending litigation and other carriers have raised certain defenses, which
have resulted in delays in recovering costs from the insurance carriers.
The timing and amount of ultimate recoveries from these insurance carriers
are dependent upon the resolution of these disputes. The Company believes,
based on prior insurance-related recoveries in respect of asbestos-related
claims, existing insurance policies, and the advice of Thelen, Marrin,
Johnson & Bridges LLP with respect to applicable insurance coverage law
relating to the terms and conditions of those policies, that substantial
recoveries from the insurance carriers are probable. Accordingly, an
estimated aggregate insurance recovery of $127.9, determined on the same
basis as the asbestos-related cost accrual, is recorded primarily in Other
assets at September 30, 1997.

Management continues to monitor claims activity, the status of
lawsuits (including settlement initiatives), legislative progress, and
costs incurred in order to ascertain whether an adjustment to the existing
accruals should be made to the extent that historical experience may differ
significantly from the Company's underlying assumptions. While
uncertainties are inherent in the final outcome of these asbestos matters
and it is presently impossible to determine the actual costs that
ultimately may be incurred and insurance recoveries that will be received,
management currently believes that, based on the factors discussed in the
preceding paragraphs, the resolution of asbestos-related uncertainties and
the incurrence of asbestos-related costs net of related insurance
recoveries should not have a material adverse effect on the Company's
consolidated financial position, results of operations, or liquidity.

OTHER CONTINGENCIES
The Company and KACC are involved in various other claims, lawsuits,
and other proceedings relating to a wide variety of matters. While
uncertainties are inherent in the final outcome of such matters, and it is
presently impossible to determine the actual costs that ultimately may be
incurred, management currently believes that the resolution of such
uncertainties and the incurrence of such costs should not have a material
adverse effect on the Company's consolidated financial position, results of
operations, or liquidity.

See Note 8 of the Notes to Consolidated Financial Statements for the
year ended December 31, 1996.

6. DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

At September 30, 1997, the net unrealized loss, including unamortized
net option premiums, on KACC's position in aluminum forward sales and
option contracts, (based on an average price of $1,647 per ton* ($.75 per
pound) of primary aluminum), natural gas and fuel oil forward purchase and
option contracts, and forward foreign exchange contracts, was approximately
$11.6.

ALUMINA AND ALUMINUM
The Company's earnings are sensitive to changes in the prices of
alumina, primary aluminum and fabricated aluminum products, and also depend
to a significant degree upon the volume and mix of all products sold.
Primary aluminum prices have historically been subject to significant
cyclical fluctuations. During the period from January 1, 1993, through
- ------------
*All references to tons in this report refer to metric tons of 2,204.6
pounds.

September 30, 1997, the Average Midwest United States transaction price for
primary aluminum has ranged from approximately $.50 to $1.00 per pound.
Alumina prices as well as fabricated aluminum product prices (which vary
considerably among products) are significantly influenced by changes in the
price of primary aluminum but generally lag behind primary aluminum price
changes by up to three months.

From time to time in the ordinary course of business, KACC enters into
hedging transactions to provide price risk management in respect of the net
exposure of earnings resulting from (i) anticipated sales of alumina,
primary aluminum and fabricated aluminum products, less (ii) expected
purchases of certain items, such as aluminum scrap, rolling ingot, and
bauxite, whose prices fluctuate with the price of primary aluminum.
Forward sales contracts are used by KACC to effectively lock-in or fix the
price that KACC will receive for its shipments. KACC also uses option
contracts (i) to establish a minimum price for its product shipments, (ii)
to establish a "collar" or range of prices for KACC's anticipated sales,
and/or (iii) to permit KACC to realize possible upside price movements. As
of September 30, 1997, KACC had sold forward, at fixed prices,
approximately 17,300, 93,600 and 24,000 tons of primary aluminum with
respect to 1997, 1998 and 1999, respectively. As of September 30, 1997,
KACC had also purchased put options to establish a minimum price for
approximately 42,100 and 52,000 tons of primary aluminum with respect to
1997 and 1998, respectively, and had entered into option contracts that
established a price range for an additional 51,000, 231,600 and 124,500
tons for 1997, 1998 and 1999, respectively.

As of September 30, 1997, KACC had sold forward virtually all of the
alumina available to it in excess of its projected internal smelting
requirements for 1997, 1998 and 1999 at prices indexed to future prices of
primary aluminum.

ENERGY
KACC is exposed to energy price risk from fluctuating prices for fuel
oil and natural gas consumed in the production process. Accordingly, KACC
from time to time in the ordinary course of business enters into hedging
transactions with major suppliers of energy and energy related financial
instruments. As of September 30, 1997, KACC had a combination of fixed
price purchase and option contracts for the purchase of approximately
44,000 MMBtu of natural gas per day during the remainder of 1997, and for
41,000 MMBtu of natural gas per day for 1998. As of September 30, 1997,
KACC also held a combination of fixed price purchase and option contracts
for an average of 228,000, 232,000 and 25,000 barrels of fuel oil per month
for 1997, 1998, and 1999, respectively.

FOREIGN CURRENCY
KACC enters into forward exchange contracts to hedge material cash
commitments to foreign subsidiaries or affiliates. At September 30, 1997,
KACC had net forward foreign exchange contracts totaling approximately
$135.0 for the purchase of 175.5 Australian dollars from October 1997
through December 1998, in respect of its commitments for 1997 and 1998
expenditures denominated in Australian dollars. At September 30, 1997,
KACC also held options to purchase approximately 10.0 Australian dollars
over the last three months of 1997.

See Note 9 of the Notes to Consolidated Financial Statements for the
year ended December 31, 1996.

7. RESTRUCTURING OF OPERATIONS

The Company has previously disclosed that it set a goal of achieving
significant cost reductions and other profit improvements, with the full
effect planned to be realized in 1998 and beyond, measured against 1996
results. The initiative is based on the Company's conclusion that the
level of performance of its existing facilities and businesses would not
achieve the level of profits the Company considers satisfactory based upon
historic long-term average prices for primary aluminum and alumina. During
the second quarter of 1997, the Company recorded a $19.7 restructuring
charge to reflect actions taken and plans initiated to achieve the reduced
production costs, decreased corporate selling, general and administrative
expenses, and enhanced product mix intended to achieve this goal. The
significant components of the restructuring charge are enumerated below.

ERIE PLANT DISPOSITION
During the second quarter of 1997, the Company formed a joint venture
with a third party related to the assets and liabilities associated with
the wheel manufacturing operations at its Erie, Pennsylvania, fabrication
plant. Management subsequently decided to close the remainder of the Erie
plant in order to consolidate its aluminum forgings operations at two other
facilities for increased efficiency. As a result of the joint venture
formation and plant closure, the Company recognized a net pre-tax loss of
approximately $1.4.

OTHER ASSET DISPOSITIONS
As a part of the Company's profit enhancement and cost reduction
initiative, management made decisions regarding product rationalization and
geographical optimization, which led management to decide to dispose of
certain assets which had nominal operating contribution. These strategic
decisions resulted in the Company recognizing a pre-tax charge for
approximately $15.6 associated with such asset dispositions.

EMPLOYEE AND OTHER COSTS
As a part of the Company's profit enhancement and cost reduction
initiative, management concluded that certain corporate and other staff
functions could be consolidated or eliminated resulting in a second quarter
pre-tax charge of approximately $2.7 for benefit and other costs.

8. COMPLETED ACQUISITION

During June 1997, Kaiser Bellwood Corporation, a newly formed, wholly
owned subsidiary of KACC, completed the acquisition of Reynolds Metals
Company's Bellwood, Virginia, extrusion plant and its existing inventories
for a total purchase price (after post-closing adjustments) of $41.6,
consisting of cash payments of $38.4 and the assumption of approximately
$3.2 of employee related and other liabilities. Upon completion of the
transaction, Kaiser Bellwood Corporation became a subsidiary guarantor
under the indentures in respect of KACC's 9-7/8% Senior Notes due 2002,
10-7/8% Series B and Series D Senior Notes due 2006, and 12-3/4% Senior
Subordinated Notes due 2003.

9. CONVERSION OF PRIDES TO COMMON STOCK

During August 1997, the 8,673,850 outstanding shares of PRIDES were
converted into 7,227,848 shares of Common Stock pursuant to the terms of
the PRIDES Certificate of Designations. Further, in accordance with the
PRIDES Certificate of Designations, no dividends were paid or payable for
the period June 30, 1997, to, but not including, the date of conversion.
However, in accordance with generally accepted accounting principles, the
$1.3 of accrued dividends attributable to the period June 30, 1997, to, but
not including, the conversion date is treated as an increase in Additional
capital at the date of conversion and must still be reflected as a
reduction of Net income (loss) available to common shareholders.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------

This section should be read in conjunction with the response to Item
1, Part I, of this Report.

This section 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 section
(see, for example, "Profit Enhancement and Cost Reduction Initiative,"
"Results of Operations," and "Liquidity and Capital Resources"). Such
statements can be identified by the use of forward-looking terminology such
as "believes," "expects," "may," "estimates," "will," "should," "plans" or
"anticipates" or the negative thereof or other variations thereon 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
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. This section and the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, each identify other factors that could
cause such differences. 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.

RECENT EVENTS AND DEVELOPMENTS

The Company has previously disclosed that it has a goal of achieving
significant cost reductions and other profit improvements, with the full
effect planned to be realized in 1998 and beyond, measured against 1996
results. The initiative is based on the Company's conclusion that the
level of performance of its existing facilities and businesses would not
achieve the level of profits the Company considers satisfactory based upon
historic long-term average prices for primary aluminum and alumina. During
the second quarter of 1997, the Company recorded a $19.7 million
restructuring charge to reflect actions taken and plans initiated to
achieve the reduced production costs, decreased corporate selling, general
and administrative expenses, and enhanced product mix intended to achieve
this goal. See Note 7 of the Notes to Interim Consolidated Financial
Statements.

During June 1997, Kaiser Bellwood Corporation, a newly formed, wholly
owned subsidiary of the Company, completed the acquisition of Reynolds
Metals Company's Bellwood, Virginia, extrusion plant and its existing
inventories for a total purchase price of $41.6 million. See Note 8 of
Notes to Interim Consolidated Financial Statements.

During August 1997, the 8,673,850 outstanding shares of PRIDES were
converted into 7,227,848 shares of Common Stock pursuant to the terms of
the PRIDES Certificate of Designations.

The Company currently anticipates that the Volta River Authority may
partially reduce its electric power allocation to the Company's 90% owned
Volta Aluminium Company Limited ("Valco") smelter facility in Ghana in
1998. Informal discussions with local officials suggest that regional
rainfall has been insufficient to raise the level of the lake, from which
the facility receives its hydroelectric power, to maintain the current
level of power for the coming year. Formal notice of Valco's 1998 power
allocation is expected on or about November 15, 1997. Meetings are planned
with local officials for early November to discuss the situation.

RESULTS OF OPERATIONS

The table on the following page provides selected operational and
financial information on a consolidated basis with respect to the Company
for the quarters and nine month periods ended September 30, 1997, and 1996.
As an integrated aluminum producer, the Company uses a portion of its
bauxite, alumina, and primary aluminum production for additional processing
at certain of its other facilities. Intracompany shipments and sales are
excluded from the information set forth on the following page.

Interim results are not necessarily indicative of those for a full
year.

SELECTED OPERATIONAL AND FINANCIAL INFORMATION
(Unaudited)
(In millions of dollars, except shipments and prices)

<TABLE>

<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Shipments: (1)
Alumina 579.2 598.6 1,457.0 1,506.7
Aluminum products:
Primary aluminum 86.4 88.1 246.9 262.9
Fabricated aluminum products 105.2 83.1 299.5 245.4
------------------------------ ------------------------------
Total aluminum products 191.6 171.2 546.4 508.3
============================== ==============================
Average realized sales price:
Alumina (per ton) $ 200 $ 187 $ 196 $ 199
Primary aluminum (per pound) .76 .67 .75 .69
Net sales:
Bauxite and alumina:
Alumina $ 115.9 $ 111.7 $ 285.6 $ 300.2
Other (2) (3) 27.1 25.8 80.2 77.2
------------------------------ ------------------------------
Total bauxite and alumina 143.0 137.5 365.8 377.4
------------------------------ ------------------------------
Aluminum processing:
Primary aluminum 145.0 130.6 409.5 402.8
Fabricated aluminum products 341.7 282.4 990.6 861.4
Other (3) 4.4 2.9 12.7 10.5
------------------------------ ------------------------------
Total aluminum processing 491.1 415.9 1,412.8 1,274.7
------------------------------ ------------------------------
Total net sales $ 634.1 $ 553.4 $ 1,778.6 $ 1,652.1
============================== ==============================
Operating income (loss):
Bauxite and alumina $ 8.8 $ (2.1) $ 14.8 $ 8.8
Aluminum processing (4) 64.1 29.1 161.6 127.8
Corporate (5) (18.4) (16.5) (55.3) (49.2)
------------------------------ ------------------------------
Total operating income $ 54.5 $ 10.5 $ 121.1 $ 87.4
============================== ==============================
Net income (loss) $ 17.5 $ (6.6) $ 33.8 $ 11.5
============================== ==============================
Capital expenditures $ 25.9 $ 39.2 $ 94.7 $ 91.1
============================== ==============================

</TABLE>

[FN]
- ---------------------------------
(1) In thousands of metric tons.
(2) Includes net sales of bauxite.
(3) Includes the portion of net sales attributable to minority interests
in consolidated subsidiaries.
(4) Operating income for the nine months ended September 30, 1997 includes
a pre-tax charge of $15.1 related to restructuring of operations
recorded in the quarter ended June 30, 1997.
(5) Operating income for the nine months ended September 30, 1997 includes
a pre-tax charge of $4.6 related to restructuring of operations
recorded in the quarter ended June 30, 1997.
</FN>

OVERVIEW
The Company's operating results are sensitive to changes in prices of
alumina, primary aluminum, and fabricated aluminum products, and also
depend to a significant degree on the volume and mix of all products sold
and on KACC's hedging strategies. Primary aluminum prices have
historically been subject to significant cyclical fluctuations. Alumina
prices as well as fabricated aluminum product prices (which vary
considerably among products) are significantly influenced by changes in the
price of primary aluminum but generally lag behind primary aluminum price
changes by up to three months.

During the first nine months of 1997, the Average Midwest United
States transaction price ("AMT Price") for primary aluminum remained
relatively stable generally in the $.75 - $.80 per pound range. The AMT
Price for primary aluminum for the week ended October 31, 1997, was
approximately $.77 per pound. This compares favorably to 1996 when the AMT
Price remained fairly stable generally in the $.70 - $.75 range through
June and then declined during the second half of the year, reaching a low
of approximately $.65 per pound for October 1996, before recovering late in
the year.

See Note 6 of the Notes to Interim Consolidated Financial Statements
for a discussion of KACC's hedging activities.

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO QUARTER AND
NINE MONTHS ENDED SEPTEMBER 30, 1996

SUMMARY
The Company reported net income of $17.5 million, or $.22 per common
and common equivalent share, for the third quarter of 1997, compared to a
net loss of $6.6 million, or $.12 per common and common equivalent share,
for the same period of 1996. Net sales in the third quarter of 1997 totaled
$634.1 million compared to $553.4 million in the third quarter of 1996.

For the nine-month period ended September 30, 1997, net income was
$33.8 million, or $.39 per common and common equivalent share compared to
net income of $11.5 million, or $.07 per common and common equivalent per
share for the nine-month period ended September 30, 1996. Net sales for
the nine months ended September 30, 1997, were $1,778.6 million compared to
$1,652.1 million for the first nine months of 1996.

Results for the nine-month period ended September 30, 1997, include
the effect of certain non-recurring items including a $19.7 million
restructuring charge (discussed above), an approximate $12.5 million non-
cash tax benefit related to settlement of certain matters and a $5.8
million charge related to additional litigation reserves. Excluding these
items, net income for the nine-month period ended September 30, 1997, would
have been approximately $37.1 million, and primary earnings per common and
common equivalent share for the period would have been $.43.

BAUXITE AND ALUMINA
Net sales of alumina increased by 4% for the quarter ended September
30, 1997, from the comparable period in the prior year, as a result of a 7%
increase in average realized prices from the sale of alumina, offset by a
3% decline in alumina shipments. Shipment volumes were down as compared to
the quarter ended September 30, 1996, primarily as a result of the timing
of shipments. For the nine-month period ended September 30, 1997, net
segment sales declined by 3% from the comparable period in the prior year.
This change was due to a 2% decrease in average realized prices between
periods and a 3% reduction in alumina shipments.

Segment operating income improved substantially on a quarter to
quarter basis and, to a lesser extent, for the comparative nine month
periods as well. On a quarterly basis, the improvement resulted primarily
from improvements in average realized prices and operating efficiencies and
reduced raw material and energy prices. On a year-to-date basis, these
improvements were somewhat offset by the impact of reductions in both the
average realized alumina price and alumina shipments as discussed above.

ALUMINUM PROCESSING
Net sales of primary aluminum for the quarter ended September 30,
1997, increased by 11% from the comparable prior year period as a result of
a 13% increase in average realized prices offset by a 2% decrease in
shipments. Net sales of fabricated aluminum products for the quarter ended
September 30, 1997, were up 21% as compared to the prior year period as a
result of a 27% increase in shipments offset by a 4% decrease in average
realized prices. The increase in fabricated aluminum product shipments
over the third quarter of 1996 was the result of the Company's June 1997
acquisition of an extrusion facility in Bellwood, Virginia, as well as
increased international sales of can sheet and increased shipments of heat-
treated products.

For the nine-month period ended September 30, 1997, net sales for the
aluminum processing segment increased by approximately 11% from the
comparable prior year period primarily as a result of a 15% increase in
fabricated aluminum product net sales. The increase in fabricated product
net sales resulted from the same shipment and price factors discussed in
the preceding paragraph. Net sales of primary aluminum for the nine-month
period ended September 30, 1997, were basically flat as compared to the
prior year as reduced shipments for the period were offset by an increase
in the average realized price.

In addition to being affected by the price and volume factors
discussed above, the aluminum processing segment's operating income for the
nine months ended September 30, 1997, also benefited from reduced power,
raw material and supply costs as well as improved operating efficiencies.
In addition, the segment's operating income for the quarter and nine month
period ended September 30, 1997, includes approximately $2.7 million and
$7.5 million of operating income realized during the periods, related to
the settlement of certain issues related to energy service contracts.
Operating income for the nine-month period ended September 30, 1997, also
includes a $15.1 million second quarter charge resulting from the
restructuring of operations.

CORPORATE
Corporate operating expenses represent corporate general and
administrative expenses, which are not allocated to the Company's business
segments. Operating results for the nine-month period ended September 30,
1997, includes a pre-tax charge of approximately $4.6 million associated
with the Company's restructuring of operations.

LIQUIDITY AND CAPITAL RESOURCES

CAPITAL STRUCTURE
MAXXAM Inc. ("MAXXAM") and MAXXAM Group Holdings Inc. ("MGHI"), a
wholly owned subsidiary of MAXXAM, collectively own approximately 63% of
the Company's Common Stock, par value $.01 per share. The remaining
approximately 37% of the Company's Common Stock is publicly held.

MGHI has pledged 27,938,250 shares of the Company's Common Stock
beneficially owned by it (the "Pledged Shares") as security for $225.7
million of debt securities of one of its wholly owned subsidiaries.
Additionally, MGHI has agreed to pledge up to 16,055,000 of such Pledged
Shares as security for $130.0 million of its debt securities should the
security pledge related to the $225.7 million of debt securities be
released due to an early retirement of the related debt (other than by a
refinancing).

The Company has an effective "shelf" registration statement covering
the offering of up to 10,000,000 shares of the Company's Common Stock that
are owned by MAXXAM. Any such offering would only be made by means of a
prospectus. The Company will not receive any of the net proceeds from any
transaction initiated by MAXXAM pursuant to this registration statement.

The Company also has an effective "shelf" registration statement
covering the offering from time to time of up to $150.0 million of equity
securities. Any such offering will only be made by means of a prospectus.

The Credit Agreement does not permit the Company or KACC to pay any
dividends on their common stock.

OPERATING ACTIVITIES
At September 30, 1997, the Company had working capital of $469.8
million, compared with working capital of $414.3 million at December 31,
1996. The increase in working capital was due primarily to an increase in
Receivables and a decrease in Accounts payable partially offset by a
decrease in Cash and cash equivalents.

INVESTING ACTIVITIES
Capital expenditures during the quarter and nine months ended
September 30, 1997, were $25.9 million and $94.7 million, respectively, and
were used primarily to acquire the Bellwood extrusion facility from
Reynolds, improve production efficiency, reduce operating costs, expand
capacity at existing facilities, and construct new facilities. The
Company's first Micromill(TM) facility, which was constructed in Nevada
during 1996 as a demonstration and production facility, achieved
operational start-up by year-end 1996. The facility remained in a start-up
mode during the first nine months of 1997 as the Company continued its
efforts to implement the Micromill(TM) technology on a full scale basis.
While the Micromill(TM) technology has not yet been fully implemented or
commercialized, and no assurances can be given that the Company will
ultimately be successful in this regards, the Company currently expects to
commence limited product shipments to customers in the fourth quarter of
1997.

Total consolidated capital expenditures (of which approximately 7% is
expected to be funded by the Company's minority partners in certain foreign
joint ventures) are expected to be between $70.0 and $140.0 million per
annum in each of 1997 through 1999. Management continues to evaluate
numerous projects, all of which require substantial capital, including the
Company's Micromill project, and other potential opportunities both in the
United States and overseas.

Subsequent to September 30, 1997, a joint decision was made by a
KACC subsidiary and its joint venture partner to terminate and dissolve
the Sino-foreign aluminum joint venture in which the subsidiary had
invested approximately $9.0 million in 1995. Under the terms of the
joint venture agreement and Chinese law, a distribution of the joint
venture's net assets is to be made to each of the parties in respect of
their individual ownership interests. The amount that will ultimately be
received upon dissolution and the associated terms of any payments are the
subject of ongoing negotiations and is subject to certain governmental
approvals by officials of the People's Republic of China.

FINANCING ACTIVITIES AND LIQUIDITY

At September 30, 1997, the Company had long-term debt of $972.0
million, compared with $961.9 million at December 31, 1996. The change in
long-term debt between periods is primarily the result of $19.0 million of
proceeds from the Spokane County, Washington, Solid Waste Disposal Revenue
Bonds, which were loaned to KACC to finance certain qualifying capital
expenditures at its Mead smelter, offset by scheduled payments of the
current portion of long-term debt.

At September 30, 1997, $273.8 million (of which $73.8 million could
have been used for letters of credit) was available to KACC under the
Credit Agreement. Loans under the Credit Agreement bear interest at a
spread (which varies based on the results of a financial test) over either
a base rate or LIBOR at the Company's option. During the quarter and nine
month period ended September 30, 1997, the average per annum interest rates
on loans outstanding under the Credit Agreement were approximately 9.0% and
9.5%, respectively. Upon completion of the acquisition of the Bellwood
facility, Kaiser Bellwood Corporation became a subsidiary guarantor under
the indentures in respect of KACC's 9-7/8% Senior Notes due 2002, 10-7/8%
Series B and Series D Senior Notes due 2006, and 12-3/4% Senior
Subordinated Notes due 2003.

Management believes that the Company's existing cash resources,
together with cash flows from operations and borrowings under the Credit
Agreement, will be sufficient to meet its working capital and capital
expenditure requirements for the next year. Additionally, with respect to
long-term liquidity, management believes that operating cash flow, together
with the ability to obtain both short and long-term financing, should
provide sufficient funds to meet the Company's working capital and capital
expenditure requirements.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
-----------------

Asbestos-related Litigation

KACC is a defendant in a number of lawsuits, some of which involve
claims of multiple persons, in which the plaintiffs allege that certain of
their injuries were caused by, among other things, exposure to asbestos
during, and as a result of, their employment or association with KACC or
exposure to products containing asbestos produced or sold by KACC. The
portion of Note 5 of the Notes to Interim Consolidated Financial Statements
contained in this report under the heading "Asbestos Contingencies" is
incorporated herein by reference. See Part I, Item 3. "LEGAL PROCEEDINGS -
Asbestos-related Litigation" in the Company's Form 10-K for the year ended
December 31, 1996.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------

(a) Exhibits.

Exhibit No. Exhibit
----------- -------

3.1 Restated Certificate of Incorporation of Kaiser Aluminum
Corporation (the "Company" or "KAC"), dated February 21, 1991
(incorporated by reference to Exhibit 3.1 to Amendment No. 2 to
the Registration Statement on Form S-1, dated June 11, 1991,
filed by KAC, Registration No. 33-37895).

3.2 Certificate of Retirement of KAC, dated October 24, 1995
(incorporated by reference to Exhibit 3.2 to the Report on Form
10-K for the period ended December 31, 1995, filed by KAC, File
No. 1-9447).

*3.3 Amended and Restated Bylaws of KAC, dated October 1, 1997.

*4.7 Eleventh Amendment to Credit Agreement and Limited Waivers, dated
as of October 20, 1997, amending the Credit Agreement, dated as
of February 15, 1994, as amended, among KACC, KAC, the financial
institutions a party thereto, and BankAmerica Business Credit,
Inc., as Agent.

*27 Financial Data Schedule.

(b) Reports on Form 8-K.

A Current Report on Form 8-K was filed by the Company (under Item 5.)
on August 15, 1997, announcing the Company's intention to redeem its
8.255% PRIDES, Convertible Preferred Stock, par value $.05 per share
("PRIDES"), on August 29, 1997, pursuant to the PRIDES Certificate of
Designations.

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

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized, who have signed this report on
behalf of the registrant as the principal financial officer and principal
accounting officer of the registrant, respectively.

KAISER ALUMINUM CORPORATION

/s/ John T. La Duc
By: ----------------------------
John T. La Duc
Vice President and
Chief Financial Officer
(Principal Financial Officer)

/s/ Daniel D. Maddox
By: ----------------------------
Daniel D. Maddox
Controller - Corporate
Consolidation and Reporting
(Principal Accounting Officer)

Dated: November 5, 1997<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of the Company for the nine months ended
September 30, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000811596
<NAME> KAISER ALUMINUM CORPORATION
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 310
<ALLOWANCES> 5
<INVENTORY> 553
<CURRENT-ASSETS> 1,010
<PP&E> 1,163
<DEPRECIATION> 69
<TOTAL-ASSETS> 2,964
<CURRENT-LIABILITIES> 540
<BONDS> 969
0
0
<COMMON> 1
<OTHER-SE> 99
<TOTAL-LIABILITY-AND-EQUITY> 2,964
<SALES> 1,779
<TOTAL-REVENUES> 1,779
<CGS> 1,474
<TOTAL-COSTS> 1,474
<OTHER-EXPENSES> 164
<LOSS-PROVISION> 20
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 40
<INCOME-TAX> 2
<INCOME-CONTINUING> 34
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34
<EPS-PRIMARY> .39
<EPS-DILUTED> .43

</TABLE>

AMENDED AND RESTATED BY-LAWS

KAISER ALUMINUM CORPORATION
October 1, 1997
INDEX

PAGE
Article I - OFFICES
SECTION 1. Registered Office . . . . . . . . . . . . 1
-----------------
SECTION 2. Offices . . . . . . . . . . . . . . . . . . 1
--------

Article II - MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. . . . . . . . . . . . . . .1
-------------------
SECTION 2. Annual Meetings. . . . . . . . . . . . . . . . .1
---------------
SECTION 3. Special Meetings . . . . . . . . . . . . . . . .3
----------------
SECTION 4. Adjourned Meetings, Notice . . . . . . . . . . .3
--------------------------
SECTION 5. Voting . . . . . . . . . . . . . . . . . . . . .4
------
SECTION 6. Quorum . . . . . . . . . . . . . . . . . . . . .4
-------
SECTION 7. Proxies. . . . . . . . . . . . . . . . . . . . .4
-------
SECTION 8. Inspectors . . . . . . . . . . . . . . . . . . .4
----------
SECTION 9. Procedural Rules . . . . . . . . . . . . . . . .5
----------------

Article III - DIRECTORS
SECTION 1. Powers . . . . . . . . . . . . . . . . . . . . .5
------
SECTION 2. Number and Qualification of Directors. . . . . .5
-------------------------------------
SECTION 3. Election and Term of Office. . . . . . . . . . .5
---------------------------
SECTION 4. Vacancies. . . . . . . . . . . . . . . . . . . .5
---------
SECTION 5. Place of Meeting . . . . . . . . . . . . . . .6
------------------
SECTION 6. Annual Meeting . . . . . . . . . . . . . . . . .6
--------------
SECTION 7. Other Regular Meetings . . . . . . . . . . . . .6
----------------------
SECTION 8. Special Meetings . . . . . . . . . . . . . . . .6
----------------
SECTION 9. Quorum . . . . . . . . . . . . . . . . . . . . .6
------
SECTION 10. Adjournment. . . . . . . . . . . . . . . . . . .6
-----------
SECTION 11. Fees and Compensation. . . . . . . . . . . . . .7
----------------------
SECTION 12. Directors' Action Without Meetings . . . . . . .7

----------------------------------
SECTION 13. Meetings by Telecommunication. . . . . . . . .7
-------------------------------

Article IV - COMMITTEES
SECTION 1. Committees . . . . . . . . . . . . . . . . . . .7
----------
SECTION 2. Committee Rules . . . . . . . . . . . . . . . .7
----------------

Article V - OFFICERS
SECTION 1. Officers. . . . . . . . . . . . . . . . . . .8
--------
SECTION 2. Election. . . . . . . . . . . . . . . . . . .8
--------
SECTION 3. Removal and Resignation . . . . . . . . . . .8
-----------------------
SECTION 4. Vacancies . . . . . . . . . . . . . . . . . .8
---------
SECTION 5. Chairman of the Board . . . . . . . . . . . .8
---------------------
SECTION 6. Vice Chairman of the Board. . . . . . . . . .8
--------------------------
SECTION 7. Chief Executive Officer . . . . . . . . . . .9
-----------------------

i
SECTION 8. President . . . . . . . . . . . . . . . . . .9
---------
SECTION 9. Chief Operating Officer . . . . . . . . . . .9
-----------------------
SECTION 10. Executive Vice Presidents and Senior Vice
-----------------------------------------
Presidents . . . . . . . . . . . . . . . . . .9
----------
SECTION 11. Vice Presidents. . . . . . . . . . . . . . . . .9
---------------
SECTION 12. Secretary. . . . . . . . . . . . . . . . . . . .9
---------
SECTION 13. Treasurer. . . . . . . . . . . . . . . . . . . 10
---------
SECTION 14. Controller . . . . . . . . . . . . . . . . . . 10
----------
SECTION 15. Chief Administrative Officer . . . . . . . . . 11
----------------------------

Article VI - MISCELLANEOUS
SECTION 1. Record Dates . . . . . . . . . . . . . . . . . 11
------------
SECTION 2. Waiver of Notice of Meetings of Stockholders,
--------------------------------------------
Directors and Committees
------------------------.....................11
SECTION 3. Certificates of Stock. . . . . . . . . . . . . 11
---------------------
SECTION 4. Inspection of Stock Ledger . . . . . . . . . . 11
--------------------------
SECTION 5. Indemnification. . . . . . . . . . . . . . . . 12
---------------

Article VII - AMENDMENTS
SECTION 1. Adoption, Amendment or Repeal of By-laws . . . 12
----------------------------------------

AMENDED AND RESTATED
BY-LAWS
OF
KAISER ALUMINUM CORPORATION
(A Delaware corporation)

Article I - OFFICES

SECTION 1. Registered Office. The registered office of
-----------------
the Corporation shall be located at Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware. The name of
the registered agent in charge thereof is The Corporation
Trust Company.

SECTION 2. Offices. Offices may at any time be
-------
established by the Board of Directors at any place or places,
within or without the State of Delaware.

Article II - MEETINGS OF STOCKHOLDERS

SECTION 1. Place of Meetings. All meetings of
-------------------
Stockholders for the election of Directors shall be held at the
principal office of the Corporation or at such other place either
within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the
notice of the meeting. Meetings of the Stockholders for any
other purpose may be held at such place as shall be stated in the
notice of the meeting.

SECTION 2. Annual Meetings. The Board of Directors
---------------
acting by resolution may postpone and reschedule any previously
scheduled annual meeting of Stockholders.

Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be
considered by the Stockholders may be made at an annual meeting
of Stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of Directors, or
(c) by any Stockholder of the Corporation who was a Stockholder
of record at the time of giving of notice provided for in this
By-law, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in this By-law.

For nominations for Directors or other business to be
properly brought before an annual meeting by a Stockholder
pursuant to clause (c) of the foregoing paragraph of this By-law,
the Stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a
Stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 60
days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such
anniversary date, notice by the Stockholder to be timely must be
so delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of
the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of
such meeting is first made. Such Stockholder's notice shall set
forth (a) as to each person whom the Stockholder proposes to
nominate for election or reelection as a Director all information
relating to such person that is required to be disclosed in
solicitation of proxies for election of Directors, or is
otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a Director if
elected); (b) as to any other business that the Stockholder
proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material
interest in such business of such Stockholder and the beneficial
owner, if any, on whose behalf the nomination or proposal is made
as well as (i) the name and address of such Stockholder, as they
appear on the Corporation's books, and of such beneficial owner,
if applicable, and (ii) the class and number of shares of the
Corporation which are owned beneficially and of record by such
Stockholder and such beneficial owner, if applicable.

Notwithstanding anything herein to the contrary, in the
event that the number of Directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement naming all of the nominees for Director or
specifying the size of the increased Board of Directors made by
the Corporation at least 70 days prior to the first anniversary
of the preceding year's annual meeting, a Stockholder's notice
required by this By-law shall also be considered timely, but only
with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the
close of business on the 10th day following the day on which such
public announcement is first made by the Corporation.

Only such persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve
as Directors and only such business shall be conducted at an
annual meeting of Stockholders as shall have been brought before
the meeting in accordance with the procedures set forth in this
By-law. The chairman of the meeting shall have the power and
duty to determine whether any nomination or business proposed to
be brought before the meeting was made in accordance with the
procedures set forth in these By-laws and, if any proposed
nomination or business is not in compliance with these By-laws,
to declare that such defective proposal shall be disregarded.

For purposes of this By-law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Services, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Sections 13, 14 or
15(d) of the Exchange Act.

Notwithstanding the foregoing provisions of this By-law, a
Stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this By-law. Nothing in this
By-law shall be deemed to affect any rights of Stockholders to
request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.

SECTION 3. Special Meetings. Business transacted at all
----------------
special meetings shall be confined to the specific purpose or
purposes of the persons authorized to request such special
meeting as set forth in this Section 3 and only such purpose or
purposes shall be set forth in the notice of such meeting.
The Board of Directors acting by resolution may
postpone and reschedule any previously scheduled special meeting
of Stockholders.

Nominations of persons for election to the Board of
Directors may be made at a special meeting of Stockholders at
which Directors are to be elected (a) pursuant to the
Corporation's notice of meeting (b) by or at the direction of the
Board of Directors or (c) by any Stockholder of the Corporation
who is a Stockholder of record at the time of giving of notice
provided for in this By-law, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in
this By-law. Nominations by Stockholders of persons for election
to the Board of Directors may be made at such a special meeting
of Stockholders if the Stockholder's notice required by the third
paragraph of Section 2 of Article II of these By-laws shall be
delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the 90th day prior to such
special meeting and not later than the close of business on the
later of the 60th day prior to such special meeting or the 10th
day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed
by the Board of Directors to be elected at such meeting.

Only such persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve
as Directors and only such business shall be conducted at a
special meeting of the Stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this By-law. The chairman of the meeting shall have the power
and duty to determine whether any nomination or business
proposed to be brought before the meeting was made in accordance
with the procedures set forth in this By-law, and if any proposed
nomination or business is not in compliance with this By-law, to
declare that such defective proposal shall be disregarded.

SECTION 4. Adjourned Meetings, Notice. Any
---------------------------
Stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time, to be reconvened
at the same or some other place, by the vote of a majority of'
the shares entitled to vote thereon, the holders of which are
either present in person or represented by proxy thereat. At
the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting, but in
the absence of a quorum no other business may be transacted at
any such meeting.

When any Stockholders' meeting, either annual or
special, is adjourned for thirty (30) days or more or if after
the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the
case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business
to be transacted at an adjourned meeting, if the time and place
of the adjourned meeting are announced at the meeting at which
such adjournment is taken.

SECTION 5. Voting. At all meetings of Stockholders,
------
every registered Stockholder entitled to vote shall have the
right to vote in person or by proxy the number of shares standing
in his own name on the stock records of the Corporation; provid-
ed, however, that at all elections of Directors each holder of
record of stock entitled to vote for the election of Directors
shall be entitled to one vote for each share of such stock held
by such Stockholder for each Director's position to be filled.
Cumulative voting for Directors shall not be permitted. Voting
shall be conducted by ballot.

SECTION 6. Quorum. Subject to any provisions of the
------
Certificate of Incorporation relating to a quorum at meetings at
which the holders of shares of stock of any class are entitled to
vote separately as a class, the presence in person or by proxy of
the holders of a majority of the shares entitled to vote at any
meeting shall constitute a quorum for the transaction of busi-
ness. The Stockholders present at a duly called or held meeting
at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough
Stockholders to leave less than a quorum.

SECTION 7. Proxies. Every person entitled to vote at
-------
a meeting of Stockholders shall have the right to do so either in
person or by an agent or agents authorized by a proxy furnished
in accordance with applicable law. A Stockholder may revoke any
proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking
the proxy or another duly executed proxy bearing a later date
with the Secretary of the Corporation.

SECTION 8. Inspectors. Prior to any meeting of
----------
Stockholders, the Board of Directors or the President shall
appoint one or more inspectors to act at such meeting and make a
written report thereof and may designate one or more persons as
alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at the meeting of
Stockholders, the person presiding at the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of
his or her ability. The inspectors shall ascertain the number of
shares outstanding and the voting power of each, determine the
shares represented at the meeting and the validity of proxies and
ballots, count all votes and ballots, determine and retain for a
reasonable period a record of the disposition of any challenges
made to any determination by the inspectors and certify their
determination of the number of shares represented at the meeting
and their count of all votes and ballots. The inspectors may
appoint or retain other persons to assist them in the performance
of their duties. The date and time of the opening and closing of
the polls for each matter upon which the Stockholders will vote
at a meeting shall be announced at the meeting. No ballot, proxy
or vote, nor any revocation thereof or change thereto, shall be
accepted by the inspectors after the closing of the polls. The
inspectors shall determine the validity of proxies and ballots in
accordance with applicable law.

SECTION 9. Procedural Rules. The Board of Directors of
----------------
the Corporation shall be entitled to make such rules or
regulations for the conduct of meetings of Stockholders as it
shall deem necessary, appropriate or convenient. Subject to such
rules and regulations of the Board of Directors, if any, the
chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures and to do all
such acts as, in the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business
of the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation
in such meeting to Stockholders of record of the Corporation and their duly
authorized and constituted proxies, and such other persons as the
chairman of the meeting shall permit, restrictions on entry to
the meeting after the time fixed for the commencement thereof,
limitations on the time allotted to questions or comment by
participants and regulation of the opening and closing of the
polls for balloting determined by the Board of Directors or the
chairman of the meeting. Meetings of Stockholders shall not be
required to be held in accordance with rules of parliamentary
procedure.

Article III - DIRECTORS

SECTION 1. Powers. Subject to the limitations of the
------
Certificate of Incorporation, the By-laws and the General
Corporation Law of the State of Delaware as to action to be
authorized or approved by the Stockholders, and subject to the
duties of Directors as prescribed by the By-laws, all corporate
powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be managed by or
under the direction of, the Board of Directors.

SECTION 2. Number and Qualification of Directors. The
-------------------------------------
Board of Directors shall consist of not less than three (3) nor
more than ten (10) members. The Board of Directors may, by
resolution, designate the number of members of the Board of
Directors. Directors need not be Stockholders.

SECTION 3. Election and Term of Office. The Directors
---------------------------
shall be elected at each annual meeting of Stockholders, but if
any such annual meeting is not held, or the Directors are not
elected thereat, the Directors may be elected at any special
meeting of Stockholders held for that purpose. All Directors
shall hold office until their respective successors are elected
and qualified or until their earlier resignation or removal.

SECTION 4. Vacancies. Vacancies and newly created
---------
directorships in the Board of Directors may be filled by a
majority of the remaining Directors, though less than a quorum,
or by a sole remaining Director, and each Director so elected
shall hold office until his successor is elected at an annual or
a special meeting of the Stockholders. Whenever the holders of
any class or classes of stock or series thereof are entitled to
elect one or more Directors by the provisions of the Certificate
of Incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of
the Directors elected by such class or classes or series thereof
then in office, or by the sole remaining Director so elected.

A vacancy or vacancies shall be deemed to exist in case of
the death, resignation or removal of any Director.

The Stockholders may at any time elect Directors to fill any
vacancy not filled by the Directors.

Any Director may resign at any time by giving written notice
to the Board of Directors, the Chief Executive Officer or the
Secretary of the Corporation. Any such resignation shall take
effect at the time of receipt of such notice or at such later
time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall
not be necessary to make it effective. If any Director resigns,
the Board of Directors shall have power to elect a successor to
take office at such time as the resignation shall become
effective.

SECTION 5. Place of Meeting. Subject to the
------------------
provisions of Section 13 of this Article III, all meetings of the
Board of Directors shall be held at the principal office of the
Corporation or at such other place in the United States
designated at any time by the Board of Directors.

SECTION 6. Annual Meeting. Immediately following each
--------------
annual meeting of Stockholders, the Board of Directors shall hold
a regular meeting for the purpose of organization, election of
officers, and the transaction of other business. Notice of all
such regular meetings shall not be required.

SECTION 7. Other Regular Meetings. Other regular
----------------------
meetings of the Board of Directors shall be held without call at
such times as shall from time to time be determined by the Board
of Directors. Notice of all such regular meetings shall not be
required.

SECTION 8. Special Meetings. Special meetings of the
----------------
Board of Directors, for any purpose or purposes whatsoever, shall
be called at any time only by the Chairman of the Board or by any
two (2) of the Directors. Reasonable notice thereof shall be
given by the person or persons calling the meeting.

SECTION 9. Quorum. At all meetings of the Board of
------
Directors a majority of the entire Board of Directors shall be
necessary and sufficient to constitute a quorum for the
transaction of business, except to fill vacancies in the Board of
Directors as herein before provided, and except to adjourn as
hereinafter provided. Every act or decision done or made by a
majority of the Directors present at a meeting duly held at which
a quorum is present shall be regarded as the act of the Board of
Directors.

SECTION 10. Adjournment. A quorum of the Directors may
-----------
adjourn any Board of Directors' meeting to meet again at a stated
day and hour; provided, however, that in the absence of a Quorum
a majority of the Directors present at any Board of
Directors' meeting, either regular or special, may adjourn from
time to time until the time fixed for the next regular meeting of
the Board of Directors. Notice of the time and place of holding
an adjourned meeting of a Board of Directors' meeting, either
regular or special, need not be given to absent Directors if the
time and place are fixed at the meeting adjourned.

SECTION 11. Fees and Compensation. Directors shall
---------------------
receive such compensation for their services and reimbursement
for expenses as Directors as shall be determined from time to
time by resolution of the Board of Directors. Any Director may
serve the Corporation in any other capacity as an Officer, agent,
employee or otherwise and receive compensation therefor.

SECTION 12. Directors' Action Without Meetings. Any
----------------------------------
action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all
members of the Board of Directors or such
committee as the case may be, and such written consent is filed
with the minutes of proceedings of the Board of Directors or
committee.

SECTION 13. Meetings by Telecommunication. Any
-------------------------------
meeting, regular or special, of the Board of Directors or of any
committee thereof may be held by conference telephone or similar
communication equipment. Participation in such a meeting shall
constitute presence in person at the meeting.

Article IV - COMMITTEES

SECTION 1. Committees. The Board of Directors may, by
----------
resolution passed by a majority of the entire Board, designate
one or more committees, each committee to consist of one or more
Directors. The Board of Directors may designate one or more
Directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place
of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have power or authority
in reference to amending the Certificate of Incorporation,
adopting an agreement or merger or consolidation, recommending to
the Stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets,
recommending to the Stockholders dissolution of the Corporation
or a revocation of dissolution, or amending these By-laws.

SECTION 2. Committee Rules. Unless the Board of
----------------
Directors otherwise provides, each committee designated by the
Board of Directors may adopt, amend and repeal rules for the
conduct of its business. Reasonable notice of each committee
meeting (other than regularly scheduled meetings) shall be
furnished to all members of the committee. A majority of the
entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of
such vote if a quorum is then present shall be the act of such
committee, and in other respects each committee shall conduct its
business in the same manner as the Board of Directors conducts
its business pursuant to Article III of these By-laws.

Article V - OFFICERS

SECTION 1. Officers. The Officers of the Corporation shall
--------
be a Chief Executive Officer, a President, a Secretary, and a
Treasurer. The Board of Directors may also, at its discretion,
choose from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Corporation may also have, at the
discretion of the Board of Directors, a Chief Operating Officer,
a Chief Administrative Officer, one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, a Controller or two officers who together
perform the duties of a Controller, and one or more Assistant
Controllers. One person may hold two or more offices.

SECTION 2. Election. The Officers of the Corporation
----------
shall be elected by the Board of Directors and each shall hold
his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and
qualified.

SECTION 3. Removal and Resignation. Any Officer may be
-----------------------
removed, either with or without cause, by a majority of the
Directors at the time in office, at any regular or special
meeting of the Board of Directors, or, except in the case of an
Officer chosen by the Board, by the Chief Executive Officer.

Any Officer may resign at any time by giving written notice
to the Board of Directors, the Chief Executive Officer or the
Secretary of the Corporation. Any such resignation shall take
effect at the time of receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.

SECTION 4. Vacancies. A vacancy in any office because of
---------
death, resignation, removal, disqualification or any other
cause, shall be filled in the manner prescribed in the By-laws
for regular appointments to such office.

SECTION 5. Chairman of the Board. The Chairman of the
---------------------
Board, if any, shall preside at all meetings of the Board of
Directors and of the Stockholders at which he shall be present
and exercise and perform such powers and duties as generally
pertain to his office as well as such powers and duties as may be
from time to time assigned to him by the Board of Directors or
prescribed by the By-laws. If so designated by the Board of
Directors, the Chairman of the Board shall be the Chief Executive
Officer.

SECTION 6. Vice Chairman of the Board. In the absence of
--------------------------
the Chairman of the Board, the Vice Chairman of the Board, if
any, shall preside at all meetings of the Board of Directors and
of the Stockholders at which he shall be present. The Vice
Chairman of the Board shall exercise such powers and duties as
generally pertain to his office as well as such powers and duties
as may be from time to time assigned to him by the Board of
Directors or prescribed by the By-laws.

SECTION 7. Chief Executive Officer. Subject to such
-----------------------
supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board or the Vice Chairman of
the Board, if there be such Officers, the Chief Executive Officer
shall have such powers and duties as generally pertain to his
office as well as general supervision, direction and control of
the business and affairs of the Corporation.

SECTION 8. President. If the Chairman of the Board has
---------
not been designated as the Chief Executive Officer, the
President shall be the Chief Executive Officer with the powers
and duties set forth in Section 7 of this Article V. If the
Chairman of the Board has been so designated, the President shall
have such powers and duties as generally pertain to his office as
well as such powers and duties as from time to time may be prescribed
by the Board of Directors, the Chief Executive Officer or the By-laws.

In the absence of the Chairman of the Board and of the Vice
Chairman of the Board, the President shall preside at all
meetings of the Board of Directors and of the Stockholders at
which he shall be present.

SECTION 9. Chief Operating Officer. Subject to such
-----------------------
supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board or the Vice Chairman of
the Board or the Chief Executive Officer, if there be such
Officers, the Chief Operating Officer shall have such powers and
perform such duties as from time to time may be prescribed by the
Board of Directors, the Chief Executive Officer, or the By-Laws.

SECTION 10. Executive Vice Presidents and Senior Vice
-----------------------------------------
Presidents. The Executive Vice Presidents and Senior Vice
- ----------
Presidents, if any, shall have such powers and perform such
duties as generally pertain to their respective offices as well
as such powers and duties as from time to time may be prescribed
by the Board of Directors, the Chief Executive Officer or the By-
laws.

SECTION 11. Vice Presidents. The Vice Presidents, if
---------------
any, shall have such powers and duties as generally pertain to
their respective offices as well as such powers and duties as
from time to time may be prescribed by the Board of Directors,
the Chief Executive Officer or the By-laws.

SECTION 12. Secretary. The Secretary shall keep, or
---------
cause to be kept, a book of minutes at the principal office of
the Corporation or such other place as the Board of Directors may
order, of all meetings of the Board of Directors and any
committee thereof and of the Stockholders, with the time and
place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those
present at Board of Directors' and committee meetings, the number
of shares present or represented at Stockholders' meetings and
the proceedings thereof.

The Secretary shall keep, or cause to be kept, at the
principal office of the Corporation and at the office of the
Corporation is transfer agent, if a transfer agent shall
be appointed, a stock ledger, or a duplicate stock ledger,
showing the names of the Stockholders and their addresses; the
number and classes of shares held by each; the number and
date of certificates issued for the same, and the number and
date of cancellation of every certificate surrendered for
cancellation.

The Secretary shall give, or cause to be given, notice of
all the meetings of the Stockholders and of the Board of
Directors required by the By-laws or by law to be given, and he
shall keep the seal of the Corporation in safe custody, and shall
have such powers and duties as generally pertain to his office as
well as such powers and duties as may be prescribed by the Board
of Directors, the Chief Executive Officer or the By-laws.

SECTION 13. Treasurer. The Treasurer shall keep or
---------
cause to be kept full and accurate records of all receipts and
disbursements in the books of the Corporation and shall have the
care and custody of all funds and securities of the Corporation.

The Treasurer shall deposit all moneys and other valuables
in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. He
shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, shall render to the Chief Executive
Officer, the President and Directors, whenever they request it,
an account of all of his transactions as Treasurer and shall have
such powers and duties as generally pertain to his office as well
as such powers and duties as may be prescribed by the Board of
Directors, the Chief Executive Officer or the By-laws.

SECTION 14. Controller. The Controller shall be the
----------
principal accounting officer of the Corporation. He shall keep
or cause to be kept all books of accounts and accounting records
of the Corporation and shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the
properties and business transactions of the Corporation,
including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. Any
surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books
of account shall at all times be open to inspection by any
Director. He shall prepare or cause to be prepared appropriate
financial statements for the Corporation and shall have such
other powers and perform such other duties as may be prescribed
by the Board of Directors, the Chief Executive Officer or the
By-laws.

Notwithstanding the foregoing paragraph of this Section 14,
in the event that the Corporation shall not have a Controller and
shall have two officers who together perform the duties of a
Controller, then the duties of a Controller specified in the
foregoing paragraph shall be allocated among such two officers by
the Chief Executive Officer or the Chief Operating Officer of the
Corporation. The officer to whom is allocated the responsibility
of reporting financial information for external purposes shall be
deemed to be the principal accounting officer of the Corporation
for the purpose of signing documents to be filed with the
Securities and Exchange Commission and for similar purposes.
Such officers shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors, the Chief
Executive Officer, the Chief Operating Officer, or the By-laws.

SECTION 15. Chief Administrative Officer. Subject to
-----------------------------
such supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board or the Vice Chairman of
the Board or the Chief Executive Officer, if there be such
Officers, the Chief Administrative Officer shall have such powers
and perform such duties as from time to time may be prescribed by
the Board of Directors, the Chief Executive Officer, or the By-Laws.

Article VI - MISCELLANEOUS

SECTION 1. Record Dates. The Board of Directors may
------------
fix in advance a date as a record date for the determination of
the Stockholders entitled to notice of and to vote at any meeting
of Stockholders, or entitled to receive payment of any dividend,
or the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, or
the date for any other lawful action, and in such case such
Stockholders, and only such Stockholders as shall be Stockholders
of record on the date so fixed, shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof,
or to receive payment of such dividend, or to receive such allotment
of rights, or to exercise such rights, or to take such other action,
as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as aforesaid.

SECTION 2. Waiver of Notice of Meetings of Stockholders,
-------------------------------------------
Directors and Committees. Whenever notice is required to be
- ------------------------
given by law or under any provision of the Certificate of
Incorporation or these By-laws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.

SECTION 3. Certificates of Stock. A certificate for
---------------------
shares of the capital stock of the Corporation shall be issued to
each Stockholder when any such shares are fully paid up. All
such certificates shall be signed by or in the name of the
Corporation by the Chief Executive Officer or the President or a
Vice President and the Secretary or an Assistant Secretary. Any
or all of the signatures on the certificates may be a facsimile.
In case any Officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such
Officer before such certificate is issued, it may be issued by
the Corporation with the same effect as if such person were such
Officer at the date of issue.

SECTION 4. Inspection of Stock Ledger. The Secretary
--------------------------
shall prepare and make, at least ten (10) days before every
meeting of Stockholders, a complete list of the Stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each Stockholder and the number of
shares registered in the name of each Stockholder. Such list
shall be upon to the examination of any Stockholder, for any
purpose germane to the meeting, during ordinary business hours,
for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and
may be inspected by any Stockholder who is present.

SECTION 5. Indemnification. The Corporation shall
---------------
indemnify to the full extent authorized by law, whether by
statute, court decision or otherwise, and to the extent permitted
by the Certificate of Incorporation, any person made or
threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative,
by reason of the fact that such person or such person's testator
or intestate is or was a Director, Officer or employee of the
Corporation or serves or served at the request of the Corporation
any other enterprise as a director, officer or employee.

Subject to the Certificate of Incorporation, expenses
incurred by a Director or Officer of the Corporation in defending
a civil or criminal action, suit or proceeding shall be paid by
the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Director or Officer to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Corporation. Such expenses incurred by other
employees may be so paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate.

For purposes of this Section 5, the term "Corporation" shall
include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or
merger; the term "other enterprise" shall include any
corporation, partnership, joint venture, trust or employee
benefit plan; service "at the request of the Corporation" shall
include service as a Director, Officer or employee of the
Corporation which imposes duties on, or involves service by, such
Director, Officer or employee with respect to an employee benefit
plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan
shall be deemed to be indemnifiable expenses; and action by a
person with respect to any employee benefit plan which such
person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be
action not opposed to the best interests of the Corporation.

Article VII - AMENDMENTS

SECTION 1. Adoption, Amendment or Repeal of By-laws.
----------------------------------------
By-laws may be made, adopted, altered or repealed by the vote of
Stockholders entitled to exercise a majority of the voting power
of the Corporation. Subject to the right of Stockholders to
make, adopt, amend or repeal By-laws, By-laws may be made,
adopted, altered or repealed, at any time, by the Board of
Directors.

E x e c u t i o n C o p y

ELEVENTH AMENDMENT TO CREDIT AGREEMENT
--------------------------------------
AND LIMITED WAIVERS
-------------------

THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT AND LIMITED
WAIVERS (this "Amendment"), dated as of October 20, 1997 is by
----------
and between KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware
corporation (the "Company"), KAISER ALUMINUM CORPORATION, a
--------
Delaware corporation (the "Parent Guarantor"), the various
----------------
financial institutions that are or may from time to time become
parties to the Credit Agreement referred to below (collectively,
the "Lenders" and, individually, a "Lender"), and BANKAMERICA
------- ------
BUSINESS CREDIT, INC., a Delaware corporation, as agent (in such
capacity, together with its successors and assigns in such
capacity, the "Agent") for the Lenders. Capitalized terms used,
-----
but not defined, herein shall have the meanings given to such
terms in the Credit Agreement, as amended hereby.

W I T N E S S E T H:

WHEREAS, the Company, the Parent Guarantor, the Lenders
and the Agent are parties to the Credit Agreement, dated as of
February 15, 1994, as amended by the First Amendment to Credit
Agreement, dated as of July 21, 1994, the Second Amendment to
Credit Agreement, dated as of March 10, 1995, the Third Amendment
to Credit Agreement and Acknowledgement, dated as of July 20,
1995, the Fourth Amendment to Credit Agreement, dated as of
October 17, 1995, the Fifth Amendment to Credit Agreement dated
as of December 11, 1995, the Sixth Amendment to Credit Agreement
dated as of October 1, 1996, the Seventh Amendment to Credit
Agreement, dated as of December 17, 1996, the Eighth Amendment to
Credit Agreement, dated as of February 24, 1997, the Ninth
Amendment to Credit Agreement and Acknowledgment, dated as of
April 21, 1997, and the Tenth Amendment to Credit Agreement,
dated as of June 25, 1997 (the "Credit Agreement"); and
----------------

WHEREAS, the parties hereto have agreed to amend the
Credit Agreement as herein provided;

NOW, THEREFORE, the parties hereto agree as follows:

Section 1. Amendments to Credit Agreement.
------------------------------

1.1 Amendments to Article I: Definitions.
--------------------------------------

A. Section 1.1 of the Credit Agreement is hereby
-----------
amended by adding the following definitions in the appropriate
alphabetical order:

"'New Subordinated Debt' means Indebtedness of the
---------------------
Company or any of its Subsidiaries under the New
Subordinated Notes, the New Subordinated Indentures, or
any guaranty of such Indebtedness."

"'New Subordinated Debt Instruments' means the New
---------------------------------
Subordinated Notes, the New Subordinated Indentures,
and all other Instruments and agreements executed and
delivered by the Company or any of its Subsidiaries in
connection therewith."

"'New Subordinated Indentures' means one or more
---------------------------
indentures between the Company, and AJI, KJC, KFC,
KAAC, KMH, KSM, Texas Holdings, Texas Sierra and Kaiser
Bellwood, as Subsidiary Guarantors, and the trustee
named therein, pursuant to which the New Subordinated
Notes will be issued, as amended, supplemented,
restated, or otherwise modified from time to time in
accordance with the terms of any such indenture and
this Agreement."

"'New Subordinated Notes' means the promissory notes in
----------------------
a principal amount not exceeding $450,000,000 issued by
the Company in one or more tranches pursuant to the New
Subordinated Indentures, as amended, supplemented,
restated, or otherwise modified from time to time in
accordance with the terms of the New Subordinated
Indentures and this Agreement and all other promissory
notes accepted from time to time in substitution
therefor or renewal thereof in accordance with the
terms of the New Subordinated Indentures and this
Agreement."

1.2 Amendments to Article VIII: Representations and
------------------------------------------------
Warranties.
- -----------

A. Effective as of the first date on which any New
Subordinated Debt shall be issued, Section 8.16 of the Credit
------------
Agreement is hereby amended by (i) adding the phrase "and the New
Subordinated Indentures" after the phrase "Subordinated
Indenture" each time it appears in clause (a) thereof and (ii)
adding the phrase "or New Subordinated Debt, as the case may be,"
after the phrase "Subordinated Debt" in clause (a) thereof.

1.3 Amendments to Article IX: Covenants.
------------------------------------

A. Section 9.1.1 of the Credit Agreement is hereby
-------------
amended by (i) adding the phrase "or any New Subordinated Debt
Instrument" after the phrase "Subordinated Debt Instrument"
contained in clause (d)(ii)(A) thereof, and (ii) adding the
phrase "any New Subordinated Debt Instrument," after the phrase
"Subordinated Debt Instrument," each time it appears in clause
(h) thereof.

B. Section 9.1.10 of the Credit Agreement is hereby
--------------
amended by (i) adding the phrase "the New Subordinated
Indentures," after the phrase "Subordinated Indenture," the first
time it appears in clause (b)(ii) thereof, (ii) adding the phrase
"any similar provision of the New Subordinated Indentures," after
the phrase "Section 5.12(c) of the Subordinated Indenture," in
---------------
clause (b)(ii) thereof, (iii) adding the phrase "the New
Subordinated Indentures," after the phrase "Subordinated
Indenture," the first time it appears in clause (c)(i) thereof,
and (iv) adding the phrase "any similar provision of the New
Subordinated Indentures," after the phrase "Section 5.12(c) of
---------------
the Subordinated Indenture," in clause (c)(i) thereof.

C. Section 9.2.2 of the Credit Agreement is hereby
-------------
amended by amending clause (a)(iii) to read in its entirety as
follows:

"(iii) Indebtedness existing as of the Effective Date
which is identified in Item 4 ("Ongoing Indebtedness") of the
------ ---------------------
Disclosure Schedule; provided, however, that if the Company shall
-------- --------
redeem or retire any Subordinated Debt, then the aggregate
principal amount of Ongoing Indebtedness permitted by this clause
shall be reduced by an amount equal to the amount of such
Subordinated Debt redeemed or retired."

D. Section 9.2.2 of the Credit Agreement is hereby
--------------
further amended by amending clause (b)(i) to read in its entirety
as follows:

"(i) Indebtedness of the Company in respect of (A) the
Senior Debt, (B) the New Senior Debt, provided that (1) the
---------

aggregate principal amount thereof does not exceed $200,000,000,
(2) such Indebtedness is unsecured, (3) such Indebtedness is
issued on or prior to February 1, 1997, (4) such Indebtedness
does not mature prior to February 15, 2002 and (5) the New Senior
Indenture is substantially in the form of the Senior Indenture,
(C) the Additional New Senior Debt, provided that (1) the
---------
aggregate principal amount thereof does not exceed $50,000,000,
(2) such Indebtedness is unsecured, (3) such Indebtedness is
issued on or prior to March 1, 1997, (4) such Indebtedness does
not mature prior to February 15, 2002 and (5) the Additional New
Senior Indentures are substantially in the form of the New Senior
Indenture, and (D) the New Subordinated Debt, provided that (1)
--------
the aggregate principal amount thereof does not exceed $450,000,000,
(2) such Indebtedness is unsecured, (3) such Indebtedness does not
mature prior to 2004, (4) the proceeds received by the Company from
the offering of the New Subordinated Debt, net of the reasonable
costs and expenses (including, without limitation, reasonable legal
fees and expenses) associated with the incurrence of the New Subordinated
Debt, shall be applied to redeem, retire, repurchase or defease
the Subordinated Notes, in whole or in part, including (without
limitation) the payment of premium (whether required or
voluntary), if any, with respect thereto, the payment of accrued
interest thereon, and the payment of the reasonable costs and
expenses (including, without limitation, reasonable legal fees
and expenses) associated with such redemption, retirement,
repurchase or defeasance, and (5) the subordination provisions of
the New Subordinated Indentures are substantially in the form of
the subordination provisions of the Subordinated Indenture with
such changes therein as may be approved by the Agent in its sole
discretion; and Contingent Obligations of AJI, KJC, KFC, KAAC,
KMH, KSM, Texas Holdings, Texas Sierra and Kaiser Bellwood, as a
`Subsidiary Guarantor' (under and as defined in the Senior
Indenture, the New Senior Indenture, the Additional New Senior
Indentures, the Subordinated Indenture and the New Subordinated
Indentures) in respect of the Senior Debt, the New Senior Debt,
the Additional New Senior Debt, the Subordinated Debt and the New
Subordinated Debt, respectively;"

E. Section 9.2.6 of the Credit Agreement is hereby
--------------
amended by (i) adding the phrase "any New Subordinated Debt,"
after the phrase "Subordinated Debt," in clause (b)(iv) thereof,
and (ii) amending clause (b)(i) to read in its entirety as
follows:

"(i) make any payment or prepayment of principal
of, or any prepayment of interest on, any Subordinated
Debt or any New Subordinated Debt or make any payment
of interest on, or any payment in respect of, any
Subordinated Debt or any New Subordinated Debt which
would violate the subordination provisions of such
Subordinated Debt or New Subordinated Debt,
respectively;"

F. Section 9.2.11 of the Credit Agreement is hereby
--------------
amended by adding the phrase "any similar provisions of the New
Subordinated Indentures," after the phrase "Section 5.12 of the
-------------
Subordinated Indenture," in the paragraph following clause (m)
thereof.

G. Section 9.2.13 of the Credit Agreement is hereby
--------------
amended by (i) adding the phrase "any New Subordinated Debt,"
after the phrase "Subordinated Debt," contained in clause (a)
thereof, (ii) adding the phrase "or the New Subordinated
Indentures" after the phrase "Subordinated Indenture" each time
it appears in clause (b) thereof, (iii) adding the phrase "New
Subordinated Debt," after the phrase "Subordinated Debt," each
time it appears in clause (c) thereof, (iv) adding the phrase
"New Subordinated Debt," after the phrase "Subordinated Debt,"
contained in clause (d) thereof, and (v) adding the phrase "to
deliver any certificate and opinion permitted to be given to the
trustee under any similar provisions of the New Subordinated
Indentures with respect to any `Subsidiary Guarantor' (under and
as defined in the New Subordinated Indentures)," after the phrase
"(under and as defined in the Subordinated Indenture)," in clause
(e) thereof.

H. Section 9.2.15 of the Credit Agreement is hereby
--------------
amended by adding the phrase ", the New Subordinated Indentures"
after the phrase "the Additional New Senior Indentures" contained
therein.

I. Section 9.2.19 of the Credit Agreement is hereby
--------------
amended by adding the phrase ", the New Subordinated Debt
Instruments" after the phrase "the Additional New Senior Debt
Instruments" contained therein.

1.4 Amendments to Article X: Events of Default.
--------------------------------------------

A. Section 10.1.11 of the Credit Agreement is hereby
---------------
amended by (i) adding the phrase "any New Subordinated Debt
Instrument," after the phrase "Subordinated Debt Instrument,"
contained therein and (ii) adding the phrase "any New
Subordinated Debt," after the phrase "Subordinated Debt,"
contained therein.

Section 2. Limited Waivers.
---------------

1. In reliance on the representations and warranties of the
Company herein contained, Lenders hereby waive compliance with
the provisions of Section 9.2.14 of the Credit Agreement to the
--------------
extent necessary to permit the payment by the Company to MAXXAM
of $11,438,000 plus interest from June 30, 1997, under the Tax
Allocation Agreement.

A. In reliance on the representations and warranties
of the Company herein contained, (i) Lenders hereby waive
compliance with the provisions of Section 9.2.6(b)(i), Section
----------------------------
9.2.6(b)(iv), Section 9.2.13(d), and Section 10.1.11 of the
- ------------- ------------------ ----------------
Credit Agreement to the extent necessary to permit the
redemption, retirement, repurchase or defeasance by the Company
of the Subordinated Debt, in whole or in part, from time to time
and (ii) Lenders hereby waive compliance with the provisions of
Section 9.2.13(a) of the Credit Agreement to the extent necessary
- -----------------
to permit any amendment, supplement or other modification to the
Subordinated Indenture approved by the Agent in its sole
discretion in connection with the redemption, retirement,
repurchase or defeasance by the Company of the Subordinated Debt,
in whole or in part, from time to time; provided, however, that
--------- --------
the sum of (a) the aggregate principal amount of any Subordinated
Debt redeemed, retired, repurchased or defeased by the Company
pursuant to this waiver, plus (b) premium (whether required or
voluntary), if any, in respect of such redeemed,
retired, repurchased or defeased Subordinated Debt, shall not
exceed an amount equal to the sum of (1) the proceeds received by
the Company from the issuance of the New Subordinated Debt, net
of the reasonable costs and expenses (including, without
limitation, reasonable legal fees and expenses) associated with
the incurrence of the New Subordinated Debt, plus (2) the
proceeds of an offering or offerings by the Parent Guarantor of
securities of the Parent Guarantor consummated after the Eleventh
Amendment Effective Date and prior to December 31, 1998, net of
the reasonable costs and expenses (including, without limitation,
reasonable legal fees and expenses) associated therewith, loaned
to, contributed to, or used to purchase the stock of, the
Company.

Section 3. Conditions to Effectiveness.
----------------------------

This Amendment shall become effective as of the date
hereof only when the following conditions shall have been
satisfied and notice thereof shall have been given by the Agent
to the Parent Guarantor, the Company and each Lender (the date of
satisfaction of such conditions and the giving of such notice
being referred to herein as the "Eleventh Amendment Effective
-----------------------------
Date"):
- ----

A. The Agent shall have received for each Lender
counterparts hereof duly executed on behalf of the Parent
Guarantor, the Company, the Agent and the Required Lenders (or
notice of the approval of this Amendment by the Required Lenders
satisfactory to the Agent shall have been received by the Agent).

B. The Agent shall have received:

(1) Resolutions of the Board of Directors or of
the Executive Committee of the Board of Directors of the Company
and the Parent Guarantor approving and authorizing the execution,
delivery and performance of this Amendment, certified by their
respective corporate secretaries or assistant secretaries as
being in full force and effect without modification or amendment
as of the date of execution hereof by the Company or the Parent
Guarantor, as the case may be;

(2) A signature and incumbency certificate of the
officers of the Company and the Parent Guarantor executing this
Amendment;

(3) For each Lender an opinion, addressed to the
Agent and each Lender, from Kramer, Levin, Naftalis & Frankel, in
form and substance satisfactory to the Agent; and

(4) Such other information, approvals, opinions,
documents, or instruments as the Agent may reasonably request.

Section 4. Company's Representations and Warranties.
-----------------------------------------

In order to induce the Lenders and the Agent to enter
into this Amendment and to amend the Credit Agreement in the
manner provided herein, the Parent Guarantor and the Company
represent and warrant to each Lender and the Agent that, as of
the Eleventh Amendment Effective Date after giving effect to the
effectiveness of this Amendment, the following statements are
true and correct in all material respects:

A. Authorization of Agreements. The execution and
---------------------------
delivery of this Amendment by the Company and the Parent
Guarantor and the performance of the Credit Agreement as amended
by this Amendment (the "Amended Agreement") by the Company and
-----------------
the Parent Guarantor are within such Obligor's corporate powers
and have been duly authorized by all necessary corporate action
on the part of the Company and the Parent Guarantor, as the case
may be.

B. No Conflict. The execution and delivery by the
-----------
Company and the Parent Guarantor of this Amendment and the
performance by the Company and the Parent Guarantor of the
Amended Agreement do not:

(1) contravene such Obligor's Organic Documents;

(2) contravene the Senior Indenture, the New
Senior Indenture, the Additional New Senior Indentures, or the
Subordinated Indenture or contravene any other contractual
restriction where such a contravention has a reasonable
possibility of having a Materially Adverse Effect or contravene
any law or governmental regulation or court decree or order
binding on or affecting such Obligor or any of its Subsidiaries;
or

(3) result in, or require the creation or
imposition of, any Lien on any of such Obligor's properties or
any of the properties of any Subsidiary of such Obligor, other
than pursuant to the Loan Documents.

C. Binding Obligation. This Amendment has been duly
------------------
executed and delivered by the Company and the Parent Guarantor
and this Amendment and the Amended Agreement constitute the
legal, valid and binding obligations of the Company and the
Parent Guarantor, enforceable against the Company and the Parent
Guarantor in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors'
rights generally and by general principles of equity.

D. Governmental Approval, Regulation, etc. No
----------------------------------------
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or
any other Person is required for the due execution, delivery or
performance of this Amendment by the Company or the Parent Guarantor.

E. Incorporation of Representations and Warranties
------------------------------------------------
from Credit Agreement. Each of the statements set forth in
- ---------------------
Section 7.2.1 of the Credit Agreement is true and correct.
- -------------

Section 5. Acknowledgement and Consent.
----------------------------

The Company is a party to the Company Collateral
Documents, in each case as amended through the date hereof,
pursuant to which the Company has created Liens in favor of the
Agent on certain Collateral to secure the Obligations. The
Parent Guarantor is a party to the Parent Collateral Documents,
in each case as amended through the date hereof, pursuant to
which the Parent Guarantor has created Liens in favor of the
Agent on certain Collateral and pledged certain Collateral to the
Agent to secure the Obligations of the Parent Guarantor. Certain
Subsidiaries of the Company are parties to the Subsidiary
Guaranty and/or one or more of the Subsidiary Collateral
Documents, in each case as amended through the date hereof,
pursuant to which such Subsidiaries have (i) guarantied the
Obligations and/or (ii) created Liens in favor of the Agent on
certain Collateral. The Company, the Parent Guarantor and such
Subsidiaries are collectively referred to herein as the "Credit
------
Support Parties", and the Company Collateral Documents, the
- ---------------
Parent Collateral Documents, the Subsidiary Guaranty and the
Subsidiary Collateral Documents are collectively referred to
herein as the "Credit Support Documents".
------------------------

Each Credit Support Party hereby acknowledges that it
has reviewed the terms and provisions of the Credit Agreement as
amended by this Amendment and consents to the amendment of the
Credit Agreement effected as of the date hereof pursuant to this
Amendment.

Each Credit Support Party acknowledges and agrees that
any of the Credit Support Documents to which it is a party or
otherwise bound shall continue in full force and effect. Each
Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all
Collateral encumbered thereby will continue to guaranty or
secure, as the case may be, the payment and performance of all
obligations guaranteed or secured thereby, as the case may be.

Each Credit Support Party (other than the Company and
the Parent Guarantor) acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms
of the Credit Agreement or any other Loan Document to consent to
the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Loan Document shall be deemed to require
the consent of such Credit Support Party to any future amendments
to the Credit Agreement.

Section 6. Miscellaneous.
-------------

A. Reference to and Effect on the Credit Agreement and the
--------------------------------------------------------
Other Loan Documents.
- --------------------

(1) On and after the Eleventh Amendment Effective
Date, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring
to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean
and be a reference to the Amended Agreement.

(2) Except as specifically amended by this
Amendment, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified and
confirmed.

B. Applicable Law. THIS AMENDMENT SHALL BE DEEMED TO
--------------
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO
CONFLICTS OF LAWS.

C. Headings. The various headings of this Amendment
--------
are inserted for convenience only and shall not affect the
meaning or interpretation of this Amendment or any provision
hereof.

D. Counterparts. This Amendment may be executed by
------------
the parties hereto in several counterparts and by the different
parties on separate counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but
one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached
to the same document.

E. Severability. Any provision of this Amendment
------------
which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment or
affecting the validity or enforceability of such provisions in
any other jurisdiction.

IN WITNESS WHEREOF, this Amendment has been duly
executed and delivered as of the day and year first above
written.

KAISER ALUMINUM CORPORATION KAISER ALUMINUM & CHEMICAL
CORPORATION

By: /s/ Karen A. Twitchell By: /s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

BANKAMERICA BUSINESS CREDIT, BANKAMERICA BUSINESS CREDIT,
INC., as Agent INC.

By: /s/ Michael Jasaitis By: /s/ Michael Jasaitis
Name: Michael J. Jasaitis Name: Michael J. Jasaitis
Its: Vice President Its: Vice President

BANK OF AMERICA NATIONAL TRUST THE CIT GROUP/BUSINESS
AND SAVINGS ASSOCIATION CREDIT, INC.

By: /s/ James Johnson By: /s/ Timothy S. Culver
Name Printed: James P. Johnson Name Printed: Timothy S. Culver
Its: Managing Director Its: Assistant Vice President

CONGRESS FINANCIAL CORPORATION HELLER FINANCIAL, INC.
(WESTERN)

By: /s/ Kristine Metchikian By: /s/ Tara Hopkins
Name Printed: Kristine Metchikian Name Printed: Tara Hopkins
Its: Vice President Its: Assistant Vice President

LA SALLE NATIONAL BANK TRANSAMERICA BUSINESS CREDIT
CORPORATION

By: /s/ Douglas C. Colleth By: /s/ Thomas Fernandes
Name Printed: Douglas C. Colleth Name Printed: Thomas Fernandes
Its: First Vice President Its: Senior Account Executive

ABN AMRO BANK N.V.
San Francisco International Branch
by: ABN AMRO North America,
Inc., as agent

By: /s/ Bradford H. Leahy
Name Printed: Bradford H. Leahy
Its: Assistant Vice President

By: /s/ L. Osborne
Name Printed: L. T. Osborne
Its: Group Vice President

ACKNOWLEDGED AND AGREED TO:

AKRON HOLDING CORPORATION KAISER ALUMINUM & CHEMICAL
INVESTMENT, INC.

By: /s/ Karen A. Twitchell By: /s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

KAISER ALUMINUM PROPERTIES, KAISER ALUMINUM TECHNICAL
INC. SERVICES, INC.

By: /s/ Karen A. Twitchell By: /s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

OXNARD FORGE DIE COMPANY, INC. KAISER ALUMINIUM
INTERNATIONAL, INC.

By: /s/ Karen A. Twitchell By: /s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

KAISER ALUMINA AUSTRALIA KAISER FINANCE CORPORATION
CORPORATION

By: /s/ Karen A. Twitchell By: /s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

ALPART JAMAICA INC. KAISER JAMAICA CORPORATION

By: /s/ Karen A. Twitchell By:/s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

KAISER BAUXITE COMPANY KAISER EXPORT COMPANY

By:/s/ Karen A. Twitchell By:/s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

KAISER MICROMILL HOLDINGS, LLC KAISER SIERRA MICROMILLS, LLC

By:/s/ Karen A. Twitchell By:/s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

KAISER TEXAS SIERRA MICROMILLS, KAISER TEXAS MICROMILL
LLC HOLDINGS, LLC

By:/s/ Karen A. Twitchell By:/s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell Name Printed: Karen A. Twitchell
Its: Treasurer Its: Treasurer

KAISER BELLWOOD CORPORATION

By:/s/ Karen A. Twitchell
Name Printed: Karen A. Twitchell
Its: Treasurer