Kaiser Aluminum Board Approves $198 Million Gramercy Rebuild Plan; Company to Report One-time Gain of $85 Million On Insurance.

Business Editors

HOUSTON--(BUSINESS WIRE)--March 6, 2000

Kaiser Aluminum Corporation (NYSE: KLU) today announced that its board of directors has approved $198 million for projects to rebuild and upgrade the Gramercy, Louisiana, alumina refinery that was damaged by an explosion on July 5, 1999.

"The rebuild and upgrade of the Gramercy facility will entail a number of improvements in technology and other modifications that will help lower the plant's operating cost while boosting annual production capacity to 1.125 million metric tonnes from the previous level of 1.075 million metric tonnes," said Ray Milchovich, Kaiser's president and chief executive officer.

The company has a construction timetable from its general contractor, Kaiser Engineers Inc. (unaffiliated with Kaiser Aluminum), calling for the plant to return to partial operation in the third quarter of 2000 and full operation by the first quarter of 2001. Additional technical details are contained in an attachment to this release.

Construction on the project began in December 1999. Crews have completed excavation and are currently at work installing foundation pilings for the first phase of the two-phase rebuild of the digestion areas. Significant progress has been made to prepare the balance of the plant for restart, including descaling and inspection of the existing digesters, which were undamaged by the explosion. In addition, the company has placed orders for or arranged for supply of critical, long lead-time equipment and materials.

The company reconfirmed that, in advance of the Gramercy restart, it has continued to work with its customers to address their alumina requirements.

"The decision to proceed with this project comes on the heels of establishing a new level of cooperation with labor unions and government agencies in Jamaica, where Gramercy's bauxite supplier, Kaiser Jamaica Bauxite Company, is located; our receipt of the environmental operating permit; and the continued strong support we have enjoyed among state and local government officials in Louisiana," said Milchovich.

The company indicated that insurance recoveries are expected to provide between 50% and 80% of the funding of the project, with the balance of the funding provided by a combination of Kaiser's operating cash flow and existing credit agreement. The company had received proceeds of $75 million from insurers as of February 29, 2000 under its business interruption and property damage policy. The company will receive substantial additional payments throughout the rebuild period.

Kaiser's insurance policy provides that the company will be reimbursed for the costs of repairing or rebuilding the damaged portion of the facility using new materials of like kind and quality with no deduction for depreciation. Based on discussions with the insurance carriers and their representatives and third party engineering reports, Kaiser's fourth-quarter 1999 financial results will reflect a pretax gain of $85 million, or $.69 per share, representing the difference between the minimum expected property damage reimbursement amount and the net carrying value of the damaged property of $15 million. Kaiser is scheduled to release fourth-quarter and full-year financial results on March 7.

Kaiser Aluminum is a leading producer of alumina, primary aluminum, and fabricated aluminum products. MAXXAM Inc. directly and indirectly holds about 63 percent of Kaiser.

Company press releases may contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions 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 expressed or implied in the forward-looking statements as a result of various factors.

ATTACHMENT -- GRAMERCY REBUILD DETAIL

Engineering Contractor -- Kaiser Engineers Inc. of Richmond, Virginia (no relation to Kaiser Aluminum); firm has extensive international experience in building alumina refineries.

Project Cost - approximately $198 million. Project includes rebuild of digestion area; addition of "double digest" system; quality improvement; and powerhouse reliability modifications.

Capacity - The rebuilt plant will have an annual production capacity of 1.125 million metric tonnes of alumina. The previous annual capacity was 1.075 million metric tonnes.

Functional Detail

Double digest system - increases the efficiency of alumina extraction from bauxite and improves the energy efficiency of the digestion process, relative to the type of single-digest system formerly used by Gramercy. The double-digest system will be constructed in phases. Phase one, which is currently under way, involves the low-temperature portion of the system, which can be built relatively fast due to a clean excavation site, fewer large vessels, and shorter equipment lead times, among other factors. Phase two will involve the high-temperature portion of the system.

Quality improvement - upgrades to the precipitation area of the plant will enable Gramercy to produce 1) a smelter grade alumina with improved granulometry and attrition index, and 2) a chemical grade alumina with improved grinding and dissolving characteristics. These improvements result in product that is more easily and efficiently processed by customers.

Powerhouse upgrades - modifications to the powerhouse will ensure safe and reliable long-term performance and include: replacement of boiler superheaters; new boiler combustion firing systems; and replacement of electrical circuit breakers.

Improved environmental performance - the rebuilt plant will have a reduction in some categories of air emissions of up to 56% and the elimination of two point sources of emissions.

Timeline

3Q 2000 Low-temperature digestion operation

End 2000 Full digestion operation

1Q 2001 Achieve fully rated plant production