As previously announced, Algoma Steel has reached a tentative agreement on the terms of new labor agreements with the two USWA Locals. Ratification votes will be held over the next few days.

The tentative agreements consist of base wage and benefit increases including an extension of an existing pension benefit, a pension improvement and an additional funding contribution of $40 million in August 2004. The accounting cost of the extended benefit and improvement to the pension benefits is amortized over three years. The estimated pension expense and pension funding for 2005 are $47 million and $53 million respectively.

As in the current collective agreement, the proposed collective agreement includes a profit sharing plan that provides employees with significant participation in the profitability of the company. The profit sharing formula is based on a percentage of annual earnings before interest and taxes. The company has offered a profit sharing advance of $10,000 per employee that would be payable in the normal course based on the profit sharing formula applied to earnings before interest and taxes in 2004 of approximately $350 million. Algoma is confident that this level of annual earnings before interest and taxes will be realized in 2004.