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They recently sold their uranium property to Uranium One for $99 million (USE and CBAG). CBAG will be merging with USE if approved by the shareholders...already approved by the Board of Directors). In the past USE...CBAG and SGM have acquired property and sat on them until gold and uranium started skyrocketing. Recently they've been selling property while getting back the valuable Lucky Jack Molybdenum mine in Crested Butte (which they are working with Kobex Resources and the parent USE. The more I've learned the less I've liked the whole setup. They do a good job of lining their own pockets imo but not so good on shareholder value. The potential is there with any of the USE family but I guess I'll have to see it to believe it. SGM.V might have the best shot long term as they are in the historically rich Motherlode country with their Sutter project. However, that will be longer term as they are still core drilling and getting everything mapped out. I've never been in USE or CBAG myself only SGM. If you look into this...let me know and I can always find out more myself.
For Immediate Release
OPEN HOUSES GATHER INPUT FROM PUBLIC; POLL SAYS RESIDENTS BELIEVE MINING CAN BE DONE IN ENVIRONMENTALLY RESPONSIBLE WAY
RIVERTON, Wyoming (October 17, 2007) – U.S. Energy Corp. (NASDAQ: “USEG”), and its partner Kobex Resources Ltd.(Kobex) (TSX-V: KBX) (the Companies), recently held open houses in Crested Butte and Gunnison, Colorado at which mining and environmental experts working on the Lucky Jack Molybdenum Project provided information, answered questions and gathered public input.
The purpose of the open house meetings was to allow residents of Gunnison County to get first-hand information from expert consultants in the areas of transportation, socioeconomics, hydrology, siting and development of the Plan of Operations for the proposed mine.
“Public attendance at the open houses provided an opportunity for the County residents to learn about the project and provide important input that will be considered for the Plan of Operations, which is now estimated to be submitted to the U.S Forest Service in the first quarter of 2008. We strongly believe this project is going to bring significant economic and social benefits to Gunnison County and we look forward to continuing communication with the community. We sincerely want to encourage residents to help us make this a world class example of how mining can be done in an environmentally responsible manner.” said Maurice Tagami, Chief Operating Officer of Kobex.
A September poll conducted for the Lucky Jack Project found that 64 percent of Gunnison County residents polled said that mining in the County “can be done in an environmentally responsible way.” In addition, 66% of the respondents indicated agreement with the idea that “the community should work with the partners of the Lucky Jack Project, Kobex Resources and U.S. Energy, instead of working against them.”
The national opinion research firm, Public Opinion Strategies, conducted the survey of 300 residents throughout Gunnison County, Colorado. The margin of error associated with a sample of this type is plus or minus 5.66 percent. A summary of the findings from the poll are available on the following websites: www.kobexresources.com; www.luckyjack.us; and www.usnrg.com
In other news, the Town of Crested Butte has issued a temporary moratorium on development activities within its watershed that were not ongoing at the effective date of the moratorium. The Companies believe the Lucky Jack Project should not be affected by this moratorium and they are continuing all ongoing activities while reviewing and evaluating this matter.
The Companies recognize local concerns and are committed to the continuation of ongoing efforts to collaborate with the local stakeholders to address important issues affecting the Project and the County. “Public input is and will continue to be a very important element in the development of the Lucky Jack Project. The community meetings were held as part of the Companies’ effort to develop the Lucky Jack Project in an environmentally responsible manner,” stated Leo King, Chief Executive Officer of Kobex.
Keith Larsen, Chief Executive Officer of USEG said, “We’re encouraged to know the County residents are willing to work with us to ensure an approach that protects the environment while providing significant economic and social opportunities to the residents of this region.”
The Lucky Jack Project is a proposed exploration and mining project located in Gunnison County, Colorado which is managed and owned by Kobex Resources Ltd. and U.S. Energy Corp.
Press Release Source: U.S. Energy Corp.
U.S. Energy Corp. and Crested Corp. Announce Sutter Gold's Engagement of IBK Capital to Enhance Shareholder Value
Wednesday September 5, 2:16 pm ET
RIVERTON, Wyo., Sept. 5 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News), natural resource exploration and development Companies, announced that their subsidiary, Sutter Gold Mining Inc. (TSX VENTURE: SGM - News) has retained IBK Capital Corp. of Toronto to evaluate strategic alternatives to maximize shareholder value. These alternatives may include the sale of the Company or the merger of the Company with a strategic partner, or any number of other available options.
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SGM management and the board of directors will work with its financial advisor, IBK Capital Corp., to ensure that multiple alternatives available to the Company are properly considered and evaluated.
To date, SGM has invested approximately $24 million in its Lincoln Gold Project in California's Mother Lode for acquiring the properties, major exploration core drilling programs, acquisition of all major operating permits, and completion of the basic engineering design for a mill on the property. Behre Dolbear's NI 43-101 compliant pre-feasibility study on the Lincoln Project, which is anticipated to be completed in late September 2007, will incorporate an updated NI 43-101 compliant project resource estimate as a result of the recently completed Phase 1 (underground and surface) exploration drilling to develop the mine plan. A Phase 2 exploration program with a planned 2,300 meter surface drilling program is underway.
Hal Herron, president and CEO of SGM, said, "We're pleased to have engaged IBK and their professional staff to maximize value for our shareholders. IBK's reputation is first class and they have the worldwide network of contacts to help us evaluate the full range of alternatives available to us. Management and the board firmly believe that the Company is undervalued in light of the advanced stage of our gold project in the historic Mother Lode of northern California, our exploration program with Premier Gold Mines Limited in the historic gold district of El Alamo and the very strong gold market. With IBK Capital's expertise in handling mining transactions globally, I firmly believe they will effectively assist us in unlocking the true value of our assets for the substantial benefit of our shareholders."
Mark Larsen, President and COO of U.S. Energy Corp. said, "As the largest single shareholder in Sutter Gold, we are pleased that management has taken this step to improve the visibility of the company in an effort to maximize its value. We feel that Sutter is significantly undervalued in light of the status of its advanced stage gold mine in California and we are confident that this effort will ultimately reflect in a significantly enhanced value of our Sutter holdings."
About the Sutter Gold Mine
The Sutter Gold project contains a 3.2 mile segment of the Mother Lode belt from which 10 historic mines produced 2.3 million ounces of gold. The historic mines bracket a one-mile-long portion of the Mother Lode belt with no historic gold production and which contains the Lincoln and Comet zones. The Lincoln and Comet zones were blind discoveries that did not outcrop at surface and which represent the first significant new gold discoveries made along the Mother Lode belt in the last 50 years. The Sutter Gold project has been the subject of considerable modern exploration activity, most of it centering on the Lincoln and Comet zones, which are adjacent to each other and together referred to as the Lincoln project. A total of 101,385 feet of drilling have been accomplished in 230 diamond drill holes, and modern underground development consists of a 2,850-foot declined ramp with 2,400 feet of crosscuts plus five raises. The historic gold production was documented in a detailed report completed by Mark Payne, the consulting geologist to Sutter Gold and a qualified person as defined by National Instrument 43-101. Further information is available at the Company's Lincoln Project and El Alamo, Mexico gold concession at http://www.suttergoldmining.com.
ABOUT U.S. ENERGY CORP. AND CRESTED CORP.
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations;
And Forward-Looking Statements
The Company owns or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. Examples of these other companies are Sutter Gold Mining Inc., and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation"; and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
Source: U.S. Energy Corp.
Form 8-K for US ENERGY CORP
30-Jul-2007
Other Events
Item 8.01. Other Events
On July 27, 2007, U.S. Energy Corp. and Crested Corp. issued a press release concerning final sale of the shares of sxr Uranium One which the companies had received in April 2007 as partial consideration for the sale of their uranium assets to Uranium One. That press release, a copy of which is attached as exhibit 99.1, is incorporated by reference into this Form 8-K report.
As of March 31, 2007, Crested owed USE $12,963,900. As of June 30, 2007, Crested had paid this obligation.
.
Section 9: Financial Statements and Exhibits
For Immediate Release
U.S. ENERGY CORP. AND CRESTED CORP. ANNOUNCE COMPLETION OF SALE OF URANIUM ONE, INC. HOLDINGS
CONSOLIDATED CASH BALANCES CURRENTLY EXCEED $100 MILLION
Riverton, Wyoming (July 27, 2007) — U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) and Crested Corp. (OTCBB: “CBAG”), announced today that they have liquidated all of their shares of Uranium One, Inc. (TSE and JSE: “SXR”) related to their uranium assets sale on April 30, 2007. On May 1, 2007 USEG and CBAG liquidated 4.4 million shares of the 6,607,605 shares received on April 30, 2007. The net cash received from that transaction on a consolidated basis and as previously announced, totaled $61,044,600, or US $13.87 per share. On Thursday, July 26, 2007, USEG and CBAG received final net proceeds from the sale of their remaining 2,207,605 shares of $29,679,400 on a consolidated basis, or US $13.45 per share. The final sale of USEG’s and CBAG’s Uranium One shares was executed on July 12, 2006 and settled on July 26, 2007. In addition to the receipt of funds from the sale of Uranium One shares, USEG and CBAG also recently received approximately $7,300,000 in funds from various agencies related to the release of various uranium asset reclamation bonds that were assumed by Uranium One.
USEG and CBAG’s remaining uranium asset is a 4% Net Profits Interest on the reportedly 50 million pound uranium deposit at Green Mountain in Wyoming, which is owned by Rio Tinto, Inc. Additionally, if certain conditions are met by Uranium One under its Asset Purchase Agreement with USEG and CBAG, the companies stand to receive up to an additional $40 million in cash payments from Uranium One in the future.
“The sale of our shares of Uranium One in no way reflects any lack of confidence in Uranium One executing on their business plan to become a major global uranium producer. Rather, it is illustrative of our corporate vision to build our cash position and avoid speculation in the securities markets,” stated Mark J. Larsen, President of USEG. “With over $100 million in cash in the bank, our goal is to invest and leverage our resources effectively into select mineral investments including oil and gas, that can deliver recurring revenues to our shareholders. Meanwhile, we will continue to focus very strongly on working closely with our operating partner, Kobex Resources Ltd., to advance our ‘world class’ Lucky Jack molybdenum project,” he added.
* * * * *
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations;
and Forward-Looking Statements
The Company owns or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company’s mineral properties. Examples of these other companies are Sutter Gold Mining Inc. and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute “forward-looking” statements, usually containing the words “believe,” “estimate,” “project,” “expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company’s Form 10-K (“Disclosure Regarding Forward-Looking Statements”; “Disclosure Regarding Mineral Resources under SEC and Canadian Regulation”; and “Risk Factors”); and similar disclosures in the Company’s Forms 10-Q.
* * * *
For further information, please contact:
Keith G. Larsen, CEO or Mark J. Larsen, President
U.S. Energy Corp. (307) 856-9271
U.S. ENERGY CORP., CRESTED CORP. AND U.S. MOLY CORP. SIGN EXPLORATION, DEVELOPMENT AND MINE OPERATING
AGREEMENT WITH KOBEX RESOURCES LTD.
Riverton, WY (April 5, 2007)—U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) and Crested Corp. (OTCBB: “CBAG”), natural resource exploration and development companies, are pleased to announce the signing of a definitive Exploration, Development and Mine Operating Agreement with Kobex Resources Ltd. (“Kobex”). The agreement outlines the terms under which Kobex will operate the project and earn up to a 65% interest in the project if certain terms and conditions are met.
Upon receiving TSX Venture Exchange approval of the transaction, U.S. Energy Corp. and Kobex plan to issue a comprehensive project update.
“We are pleased to have signed an operating agreement that will govern the further exploration, development and ultimate operations of the Lucky Jack molybdenum property with Kobex”, stated Mark Larsen, President of U.S. Energy Corp. He added, “Kobex has been a tremendous partner to work with since signing our Amended Letter Agreement in December 2006. We look forward to continuing our work hand in hand with them and the local communities well into the future and to providing the market with a comprehensive update on the project in the near future”.
Disclosure Regarding Mineral Resources Under SEC and Canadian Regulations; and Forward-Looking Statements
USE and Crested (the “Company”) own or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company’s mineral properties. Examples of these other companies are Sutter Gold Mining Inc., Uranium Power Corp., sxr Uranium One, and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute “forward-looking” statements, usually containing the words “believe,” “estimate,” “project,” “expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward- looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company’s Form 10-K (“Disclosure Regarding Forward-Looking Statements”; ”Disclosure Regarding Mineral Resources under SEC and Canadian Regulation,”; and “Risk Factors”); and similar disclosures in the Company’s Forms 10-Q.
For further information, please contact:
Keith G. Larsen, CEO or Mark Larsen, President
U.S. Energy Corp. (307) 856-9271
Press Release Source: U.S. Energy Corp.
U.S. Energy Corp. and Crested Corp. Announce That They Have Settled Inter-Company Debt With Sutter Gold
Monday March 19, 7:14 pm ET
RIVERTON, Wyo., March 19 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (USE) (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News), natural resource exploration and development companies, announced the conversion of $2,025,702 in amounts due to the companies into 7,621,867 common shares of Sutter Gold Mining Inc. (TSX-VX: SGM) at Cdn$.31 per share. These common shares will be subject to a four-month hold period. The conversion of the long outstanding amounts will help to prepare Sutter Gold for future financings as it advances its gold projects in the U.S. and Mexico. The settlement is subject to the approval of the TSX Venture Exchange. As a result of this transaction, USE now holds (on a consolidated basis with Crested) approximately 56% of Sutter Gold.
In addition, the companies agreed to cancel the $4.6 million Contingent Stock Purchase Warrant they hold to purchase common stock in Sutter Gold, by Sutter Gold issuing to the companies a Net Profits Interest Royalty ("NPIR") of 5% on its Lincoln Project in the historic Mother Lode, until the total amount is repaid, and a 1% NPIR thereafter.
Subject to the Companies closing the sxr Uranium One transaction, USE and Crested have agreed to provide a revolving US$1 million line of credit ($500,000 from each Company) to Sutter Gold at 12% interest. USE and Crested have the sole option to have Sutter Gold repay the debt in cash or common shares should the facility be utilized by Sutter Gold.
Keith Larsen, CEO for U.S. Energy Corp. and Co-Chairman of Crested Corp. states that "Sutter Gold is now debt free and can concentrate on developing their valuable gold resources in the historic Mother Lode. The success of the continuing core drill program enhances the project's value and probability for gold production."
Hal Herron, President of Sutter Gold, commented that "this is one more step in moving the Sutter Gold Lincoln Project ahead. Over the past 12 months we have raised funds which are being spent on our large drill program, and recently, the engagement of Behre Dolbear to complete a pre-feasibility study on the project. With this settlement, Sutter Gold has a debt free balance sheet which will give our shareholders and investors more confidence in the value of Sutter."
About the Sutter Gold Mine
The Sutter Gold project contains a 3.2-mile segment of the Mother Lode belt from which 10 historic mines produced 2.3 million ounces of gold. The historic mines bracket a one-mile-long portion of the Mother Lode belt with no historic gold production that contains the Lincoln and Comet zones. The Lincoln and Comet zones were "blind" discoveries that did not outcrop at surface and represent the first significant new gold discoveries made along the Mother Lode belt in the last 50 years. A total of 85,085 feet of drilling has been accomplished in 190 diamond drill holes, and modern underground development consists of a 2,850-foot declined ramp with 2,400 feet of crosscuts and five raises. The project has received all of the major permits required for production. The historic gold production was documented in a detailed report completed by Mark Payne, the consulting geologist to Sutter Gold.
U. S. Energy Corp. is a large shareholder of SGM.
For additional information on U. S. Energy Corp., please visit:
www.usnrg.com.
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations; And Forward-Looking Statements
The Company owns or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. Examples of these other companies are Sutter Gold Mining Inc., Uranium Power Corp., sxr Uranium One, and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation," and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
Source: U.S. Energy Corp.
U.S. ENERGY CORP. AND SXR URANIUM ONE SIGN DEFINITIVE AGREEMENT
U.S. ENERGY AND CRESTED CORP. TO RECEIVE 6.6 MILLION URANIUM ONE SHARES AND ADDITIONAL CONSIDERATION FOR SALE OF URANIUM PROPERTIES
Riverton, WY (February 23, 2007)—U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) and Crested Corp. (OTCBB: “CBAG”), natural resource exploration and development companies, today announced the signing of a definitive Asset Purchase Agreement (“APA”) for the sale of their uranium assets to sxr Uranium One Inc. (Toronto Stock Exchange and Johannesburg Stock Exchange: “SXR”), in accordance with an Exclusivity Agreement announced July 10, 2006. Uranium One shares closed at a price of $17.68 on the Toronto Stock Exchange on February 22, 2007 (equivalent to approximately $15.22 per share in U.S. Dollars).
Subject to satisfaction of customary closing conditions, approval by the Toronto Stock Exchange, regulatory approval of the transfer of the radioactive material license related to the Shootaring Canyon Uranium Mill and receipt of a favorable Exon-Florio ruling, closing is anticipated to occur on or before April 30, 2007 or as soon thereafter as reasonably possible following satisfaction of all closing conditions.
“We are very pleased to announce the signing of this definitive agreement with Uranium One,” stated Keith Larsen, Chairman and Chief Executive Officer of U.S. Energy Corp. “The sale of our uranium properties in the United States represents a milestone accomplishment for our Company and management’s shareholder value enhancement strategy.”
“We look forward to having U.S. Energy as a shareholder,” commented Neal Froneman, Chief Executive Officer of sxr Uranium One Inc. “Upon completion of the asset purchase transaction, Uranium One will be well-positioned to realize its potential as a globally diversified uranium producer with properties in South Africa, Australia, the United States and Canada.”
“Through our shareholding in Uranium One, U.S. Energy Corp. shareholders will be able to participate in the bright future that we envision for the uranium industry,” stated Mark Larsen, President and Chief Operating Officer of U.S. Energy Corp. “In addition, the cash received from the asset sale, along with an expected reduction in our post-sale operating expenses, should bolster the resources available for U.S. Energy Corp. to pursue strategic opportunities in the future.”
While additional details of the definitive APA are provided in the Form 8-K filed with the Securities and Exchange Commission on February 23, 2007 (and we urge you to read the 8-K), the primary consideration to be paid to U.S. Energy Corp., for itself and as agent for Crested Corp. and various subsidiary companies, will include the following:
* $750,000 cash (paid in advance on July 13, 2006);
* 6,607,605 sxr Uranium One common shares, at closing;
* Approximately $5 million at closing, as a payment in accordance with a revised agreement between U.S. Energy Corp., Crested Corp., and Uranium Power Corp. (“UPC”) that grants U.S. Energy Corp. and Crested Corp. the right to transfer certain UPC agreements, including the right to receive all payments thereunder ($4.1 million cash plus 1.5 million UPC common shares) to Uranium One; and
* Approximately $1.3 million to reimburse U.S. Energy Corp. and Crested Corp. for certain expenditures from July 10, 2006 to the date of the APA related to the assets being sold.
Additional consideration, if and when certain events occur, will include:
* $20 million cash when commercial production occurs at the Shootaring Canyon Uranium Mill;
* $7.5 million cash on the first delivery to the Mill following commercial production of mineralized material from any of the claims being sold to Uranium One under the APA; and
* From and after the date commercial production occurs at the Shootaring Canyon Mill, a 5% production payment royalty up to but not more than $12.5 million.
Uranium One will assume certain specific liabilities associated with the assets to be sold, including future reclamation liabilities associated with the Shootaring Canyon Mill and the Sheep Mountain uranium properties. Subject to regulatory approval of replacement bonds issued by a Uranium One subsidiary as the responsible party, U.S. Energy Corp.’s cash bonds in the approximate amount of $7.0 million will also be released and the cash returned to U.S. Energy Corp. by the regulatory authorities.
U.S. Energy Corp.’s and Crested Corp.’s joint venture holds a 4% net profits interest on Rio Tinto’s Jackpot uranium property located on Green Mountain in Wyoming. This interest is not included in the APA.
The APA also provides that U.S. Energy Corp. and Crested Corp. and Uranium One will enter into a strategic alliance agreement at closing under which, for a period of two years, Uranium One will have the first opportunity to earn into or fund uranium property interests which may in the future be owned or acquired by U.S. Energy Corp. and Crested Corp. outside the five mile area surrounding the purchased properties. Keith Larsen further stated, “We believe that our strategic alliance with sxr Uranium One will lead to further opportunities that will enhance shareholder value for both U.S. Energy Corp. and Uranium One.”
More news on the possible/pending merger of USEG and CBAG!
U.S. ENERGY CORP. AND CRESTED CORP. BOARDS OF DIRECTORS APPROVE AND EXECUTE MERGER AGREEMENT; DEFINITIVE DOCUMENTS AND PROXY/PROSPECTUS TO BE PREPARED
Riverton, Wyoming (January 30, 2007) - U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) and Crested Corp. (OTCBB: “CBAG”) d/b/a USECC announced that on January 23, 2007, the boards of directors of U.S. Energy Corp. (“USE”) and Crested Corp. (“Crested”) approved and executed a Merger Agreement where Crested would merge into USE, by means of an offer to acquire the minority shares of Crested, based on an exchange ratio of one share of common stock of USE for every two shares of Crested common stock not held by USE (which owns 71% of the Crested common stock). The Merger Agreement also provides that USE would vote in line with the vote of a majority of the holders of the Crested minority shares.
Consummation of the merger is subject to execution of definitive documents; USE delivering to the Crested minority shareholders a proxy statement/prospectus (following declaration of effectiveness by the SEC of a Form S-4 to be filed by USE with the SEC) for a special meeting of the Crested shareholders; approval of the merger by the holders of a majority of the minority Crested shares; and satisfaction of customary representations and warranties to be contained in the definitive documents. The Board of Directors is recommending that approval of the merger agreement be given by the shareholders of Crested Corp. USE will not seek USE shareholder approval of the merger.
For information on the appointment of the special committees, please see the Forms 8-K filed by USE and Crested on January 24, 2007.
Keith G. Larsen, CEO of USE and Harold F. Herron, President of Crested jointly stated: “By merging the approximately 30% of Crested not already owned by USE, the structure and ownership of the company will be easier to understand for both USE and Crested shareholders and the investing public at a time when we see significant long-term opportunities in our industry. The combination of the two companies is expected to save approximately $500,000 per year in operating expenses, audit, compliance and legal fees, filing costs and other corporate fees and costs. As a combined company, we will continue to focus on aggressively pursuing business opportunities for the benefit of our shareholders. Further, it is anticipated that the merger will also provide existing Crested Shareholders greater liquidity through ownership of USE stock, which is listed on NASDAQ.”
U.S. ENERGY CORP. AND CRESTED CORP. APPOINT NEW DIRECTORS AND GENERAL COUNSEL AND SECRETARY
Riverton, Wyoming (January 30, 2007) - U.S. Energy Corp. (NASDAQ Capital Market: “USEG”) and Crested Corp. (OTCBB: “CBAG”) d/b/a USECC announced that on January 23, 2007, the boards of directors of U.S. Energy Corp. (“USE”) and Crested Corp. (“Crested”) elected one new director each and appointed a new General Counsel and Secretary. (i) Allen S. Winters was appointed to the Board of Directors of USE to fill the vacancy as the result of the retirement of Don C. Anderson; (ii) Robert Scott Lorimer was appointed to the Board of Directors of Crested to fill the vacancy as a result of the retirement of Daniel P. Svilar and (iii) Steven R. Youngbauer was appointed by the Board of Directors of USE and Crested as Secretary and General Counsel to fill the vacancy as a result of the retirement of Daniel P. Svilar. All three appointments were upon the unanimous recommendation of the Company’s Nominating Committee, which consists entirely of independent members of the Board of Directors.
Mr. Winters has over 40 years of experience in mining industry including Vice President and General Manager with Homestake Mining Company. Mr. Winters has a B.S. in Mining Engineering and a M.S. in Geological Engineering.
Robert Scott Lorimer is currently the Chief Financial Officer, Vice President of Finance and Treasurer for both USE and Crested and has held these positions for more than the past fifteen years. Mr. Lorimer received a B.S. in Finance, Accounting, Economics and German from Brigham Young University. Prior to joining USE and Crested, Scott served as Controller of all uranium production for Federal American Partners, a joint venture between Tennessee Valley Authority, Federal Resources and American Nuclear.
Steven R. Youngbauer has over 24 years experience in the legal profession and 30 years in the mining industry. Prior to joining USE in February 2004, Mr. Youngbauer was the President and CEO of Hi-Pro Production, LLC and was also previously employed for 25 years for Amax Coal Company as Vice President, General Counsel and Assistant Secretary. Mr. Youngbauer received a Juris Doctorate Degree from the University of Wyoming Law School and also served as a Wyoming State Senator, Chairman of the Wyoming Environmental Quality Council and on the Board of Directors of the Wyoming Mining Association.
Keith G. Larsen, CEO of USE and Co-Chairman of Crested stated: "These are exciting times for USE and Crested. Management's strategic plan for aggressively growing our business is working and we couldn't have achieved this success without the advice and support of our seasoned board members.
Don Anderson's sage advice to the Companies over the past 17 years has been invaluable. His keen insight and experience in the uranium industry helped chart the course of the Companies involvement in the uranium business. Fortunately, his expertise will be available over the next year in an advisory capacity and his friendship will last well into the future.
We are extremely fortunate to have Al Winters replace the vacancy created with Don's retirement. Al's hands on experience running all operations of Homestake Mining in North America will prove invaluable as the Companies and Kobex move forward with the development of the Lucky Jack molybdenum project. Al is also certain to be a great resource in evaluating future mineral acquisitions.
The retirement of Mike Svilar as general counsel and secretary of the Companies after over 30 years of exemplary service to USE and its subsidiaries is the culmination of what can only be described as a brilliant legal and business career. He will be sorely missed. Mike has been a mentor and a lifelong friend to me personally and to all members of the USE/Crested team.
Steve Youngbauer will be replacing Mike as general counsel and secretary of USE and Crested. Management has had the opportunity to work with Mr. Youngbauer for the past few years as Assistant General Counsel for the Companies. Steve has clearly demonstrated his legal and business ability and we welcome him as the new General Counsel and Secretary for the Companies. Steve’s experience working as a state senator and his tenure with AMAX Coal gives the Companies a big boost in developing our growing mineral business.
Adding the Companies CFO, Scott Lorimer, to the Crested Board brings a wealth of accounting and finance expertise to Crested. His in-depth understanding of financing of complex projects, SEC accounting rules, contemporary GAAP requirements as well as SOX compliance and requirements will be a valuable addition to the Crested Board.
As we move forward with new representation, I am confident that the boards of USE and Crested are made up of the right disciplines to lead the Companies towards future growth and sound business decisions.”
Uranium One extends purchase option (of all USECC Uranium assets) deadline by 3 months to 4/6/2007. With the price of Uranium, I'm sure SXR wants these properties. Looks good for CBAG.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 8, 2007 (January 2, 2007)
CRESTED CORP.
(Exact Name of Company as Specified in its Charter)
Colorado
0-8773
84-0608126
(State or other jurisdiction of
(Commission File No.)
(I.R.S. Employer
incorporation or organization)
Identification No.)
Glen L. Larsen Building
877 North 8th West
Riverton, WY
82501
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (307) 856-9271
Not Applicable
Former Name, Former Address or Former Fiscal Year,,
If Changed From Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
o Written communications pursuant to Rule 425 under the Securities Act
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
Section 1: Registrant’s Business and Operations
Item 8.01. Amendment of Exclusivity Agreement with SXR Uranium One Inc.
Background - Original Exclusivity Agreement. On July 10, 2006, U.S. Energy Corp. (“USE”) and Crested Corp. (“Crested), d/b/a the USECC Joint Venture (“USECC”) signed an Exclusivity Agreement with sxr Uranium One Inc. (“Uranium One” or “SXR”), which is headquartered in Toronto, Canada with offices in South Africa and Australia (TSE and JSE “SXR”). Upon signing the Exclusivity Agreement, the Term Sheet (signed by Uranium One and by USE and Crested on June 22, 2006) became effective. The Term Sheet sets forth the indicative terms of a proposed sale of the majority of the USE and Crested’s uranium assets to Uranium One. The signing of the Exclusivity Agreement was reported on Form 8-K (filed July 13, 2006).
Under the July 10, 2006 Exclusivity Agreement, Uranium One paid USECC US $750,000 cash (nonrefundable, except for material breach of the Exclusivity Agreement) for the exclusive right to purchase the USECC uranium assets, including the Shootaring Canyon uranium mill in southeast Utah (and all geological libraries and other intellectual property related to the acquired assets and the mill), for a period of up to 270 days (an initial six month period, to January 6, 2007, plus an optional three month extension if requested by Uranium One). During this time, the parties were to prepare definitive acquisition agreements. Subject to satisfactory results on Uranium One’s due diligence review and obtaining all required approvals associated with the sale and purchase of the assets, the definitive agreements would be signed and the sale closed as soon as possible.
Under the original Exclusivity Agreement, it was anticipated that USECC would continue exploratory and other work on some or all of the assets. The Exclusivity Agreement provides that when the assets acquisition is closed, Uranium One will reimburse USECC for those expenses which have been pre-approved by Uranium One. USECC has continued such exploratory and other work.
Under the Term Sheet, Uranium One has the right to purchase the assets under the following terms:
·
US $49,250,000 in Uranium One common stock at a set price (the volume weighted average price of Uranium One stock for the 10 days prior to signing the Exclusivity Agreement, which was US $7.45 per share or Cdn $8.32 or approximately 6.6 million shares). This represents the US $50 million portion, less the cash paid for the Exclusivity Agreement. On January 5, 2007, Uranium One stock closed at Cdn $14.48 per share. The value of the Uranium One common stock at the recent close would be approximately US $81 million. However, we can’t predict the value of the stock when and if there is a closing of the sale, nor can we predict the value we may receive on liquidation of the stock thereafter.
·
US $20 million in cash upon the start of commercial operation of the Shootaring Canyon uranium mill.
·
US $7.5 million in cash upon the first delivery of mineralized material to a commercial uranium mill from any of the purchased properties that are subject to the Agreement.
·
A cash royalty equivalent to 5% of the revenues derived from the sales value of any commodity produced from the Shootaring Canyon uranium mill, to a maximum royalty payment of US $12.5 million.
2
USECC holds a 4% net profits interest on Rio Tinto’s Jackpot uranium property located on Green Mountain in Wyoming. This interest will not be included in the agreement to sell uranium assets to SXR. SXR has announced that it may acquire the Sweetwater mill and the Green Mountain properties from Rio Tinto, separate from the proposed transaction with USECC.
Amendment to Exclusivity Agreement. On January 2, 2007, USE and Crested, and Uranium One, amended the Exclusivity Agreement to provide for a three month extension (to April 6, 2007) within which to buy the uranium assets. The extension was requested by Uranium One, and the extension was allowed by the original Exclusivity Agreement. No other terms have been changed.
It is USE’s and Crested’s understanding that Uranium One’s due diligence, and discussions on obtaining approvals required from regulatory agencies to close the sale, are proceeding with results satisfactory to Uranium One. Uranium One has informed USE and Crested that drafts of the sale transaction documents are expected to be provided to USE and Crested in January 2007. However, under the extension, the deadline for the closing is not until April 6, 2007.
Closing of the sale transaction will be subject to approval by the companies’ boards of directors of of definitive sale transaction documents, and the execution and delivery of such documents.
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 hereunto duly authorized.
Section 9. Financial Statements and Exhibits
Financial Statements: None
Exhibits: None.
SIGNATURES
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 hereunto duly authorized.
CRESTED CORP.
Dated: January 8, 2007
By:
/s/ HAROLD F. HERRON
President
Press Release Source: U.S. Energy Corp.; Crested Corp.
sxr Uranium One Inc. Exercises Its Right to Extend the Option to Purchase Uranium Assets From U.S. Energy Corp. and Crested Corp.
Monday January 8, 9:30 am ET
RIVERTON, Wyo., Jan. 8 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News) d/b/a USECC announced today that sxr Uranium One Inc. ("Uranium One"), which is headquartered in Toronto, Canada with offices in South Africa and Australia (TSE and JSE: SXR) has exercised its right to extend its option to purchase uranium assets from USEG and CBAG for an additional three months as defined under a July 10, 2006 Agreement ("Agreement").
Under the terms of the Agreement, Uranium One has agreed to negotiate the purchase of the Shootaring Canyon Uranium Mill, USECC's participating interest in the Sheep Mountain uranium properties in Wyoming and various mineral holdings in Colorado, Utah and Arizona.
In consideration for the asset purchase, subject to the execution of definitive acquisition documentation, Uranium One will deliver to USEG and Crested at closing approximately 6.6 million shares of freely trading Uranium One common stock, currently valued at approximately US $81 million and will pay an additional US $40 million in cash if the assets meet certain production criteria. See the 8-K filed July 13, 2006, and the 8-K filed on January 8, 2007.
Keith Larsen, CEO of USEG commented, "Although the extension is for three months, it is my belief that we will sign definitive documentation on this transaction before the April 6, 2007 deadline and potentially within 45 days."
*****
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations;
and Forward-Looking Statements
USE and Crested (the "Company") own or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. Examples of these other companies are Sutter Gold Mining Inc., Uranium Power Corp., sxr Uranium One, and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation,"; and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
Source: U.S. Energy Corp.; Crested Corp.
USEG/CBAG merger?? PR version:
Press Release Source: U.S. Energy Corp.; Crested Corp.
U.S. Energy Corp. and Crested Corp. Boards of Directors Vote to Approve Merger Offer; Definitive Documents and Proxy/Prospectus to Be Prepared
Tuesday December 26, 9:30 am ET
RIVERTON, Wyo., Dec. 26 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News), d/b/a USECC, today announced:
On December 20, 2006, the special committee of the board of directors of U.S. Energy Corp. ("USE") met with the special committee of the board of directors of Crested Corp. ("Crested"). Following extensive discussions between the two committees, the USE committee proposed a merger of Crested into USE, by means of an offer to acquire the minority shares of Crested, based on an exchange ratio of one share of common stock of USE for every two shares of Crested common stock not held by USE (which owns 71% of the Crested common stock). Both special committees are comprised of independent outside board members of the respective companies.
The offer also provided that:
(i) USE would vote in line with the vote of a majority of the holders
of the Crested minority shares;
(ii) USE may decline to consummate the merger, even after approval by
the holders of a majority of the minority Crested shares, if the
holders of more than 200,000 Crested shares perfect their rights to
dissent from the merger under Colorado law or for other reasons, in
USE's sole discretion; and
(iii) Crested shares of common stock issuable under options held by USE
officers, directors, and employees would participate in the offer
on the same exchange ratio basis as the Crested minority
shareholders (the number of Crested option shares would be
determined by the extent to which Crested's market price exceeds
the $1.71 option exercise price).
The Crested committee accepted the offer. Thereafter, the committees recommended to their respective full boards that the merger offer be approved. On December 20, 2006, the full boards of directors of USE and Crested Corp. voted to approve the merger offer.
Consummation of the merger is subject to execution of definitive documents; USE delivering to the Crested minority shareholders a proxy statement/prospectus (following declaration of effectiveness by the SEC of a Form S-4 to be filed by USE with the SEC) for a special meeting of the Crested shareholders; approval of the merger by the holders of a majority of the minority Crested shares; and satisfaction of customary representations and warranties to be contained in the definitive documents. The Board of Directors is recommending that approval of the merger agreement be given by the shareholders of Crested Corp. USE will not seek USE shareholder approval of the merger.
For information on the appointment of the special committees, please see the Forms 8-K filed by USE and Crested on October 13, 2006.
Navigant Capital Advisors, LLC is acting as financial advisor to the USE special committee, and Neidiger Tucker Bruner Inc. is acting as financial advisor to the Crested special committee. These firms will deliver opinions to USE and Crested, to the effects that the exchange ratio is fair to the USE shareholders, and to the Crested minority shareholders, respectively.
Keith G. Larsen, CEO of USE and Harold F. Herron, President of Crested jointly stated: "For the past 30 years USE and Crested have conducted most of their business operations as joint venture partners with 50/50 ownership in most corporate assets. By merging the approximately 30% of Crested not already owned by USE, the structure and ownership of the company will be easier to understand for both USE and Crested shareholders and the investing public at a time when we see significant long-term opportunities in our industry. The combination of the two companies is expected to save approximately $500,000 per year in operating expenses, audit, compliance and legal fees, filing costs and other corporate fees and costs. As a combined company, we will continue to focus on aggressively pursuing business opportunities for the benefit of our shareholders. Further, it is anticipated that the merger will also provide existing Crested Shareholders greater liquidity through ownership of USE stock, which is listed on NASDAQ."
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations;
And Forward-Looking Statements
USE and Crested (the "Company") own or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. Examples of these other companies are Sutter Gold Mining Inc., Uranium Power Corp., sxr Uranium One, and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward- looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward- looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation,"; and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
Source: U.S. Energy Corp.; Crested Corp.
USEG/CBAG merger???
Form 8-K for CRESTED CORP
26-Dec-2006
Other Events
Item 8.01. Other Events - Offer to Merge Crested Corp. into U.S. Energy Corp.
On December 20, 2006, the special committee of the board of directors of U.S. Energy Corp. ("USE") met with the special committee of the board of directors of Crested Corp. ("Crested"). Following extensive discussions between the two committees, the USE special committee proposed a merger of Crested into USE, by means of an offer to acquire the minority shares of Crested, based on an exchange ratio of one share of common stock of USE for every two shares of Crested common stock not held by USE (which owns 71% of the Crested common stock). Both special committees are comprised of independent outside board members of the respective companies.
The offer also provided that
(i) USE would vote in line with the vote of a majority of the holders of the Crested minority shares;
(ii) USE may decline to consummate the merger, even after approval by the holders of a majority of the minority Crested shares, if the holders of more than 200,000 Crested shares perfect their rights to dissent from the merger under Colorado law or for other reasons, in USE's sole discretion; and
(iii) Crested shares of common stock issuable under options held by USE officers, directors, and employees would participate in the offer on the same exchange ratio basis as the Crested minority shareholders (the number of Crested option shares would be determined by the extent to which Crested's market price exceeds the $1.71 option exercise price).
The Crested special committee accepted the offer. Thereafter, the special committees recommended to their respective full boards that the merger offer be approved. On December 20, 2006, the full boards of directors of USE and Crested Corp. voted to approve the merger offer.
Consummation of the merger is subject to execution of definitive documents; USE delivering to the Crested minority shareholders a proxy statement/prospectus (following declaration of effectiveness by the SEC of a Form S-4 to be filed by USE with the SEC) for a special meeting of the Crested shareholders; approval of the merger by the holders of a majority of the minority Crested shares; and satisfaction of customary representations and warranties to be contained in the definitive documents. The Board of Directors is recommending that approval of the merger agreement be given by the shareholders of Crested Corp. USE will not seek USE shareholder approval of the merger.
For information on the appointment of the special committees, please see the Forms 8-K filed by USE and Crested on October 13, 2006.
Navigant Capital Advisors, LLC is acting as financial advisor to the USE special committee, and Neidiger Tucker Bruner Inc. is acting as financial advisor to the Crested special committee. These firms will deliver opinions to USE and Crested, to the effects that the exchange ratio is fair to USE and to the Crested minority shareholders, respectively.
The associated 8K:
Form 8-K for CRESTED CORP
8-Dec-2006
Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement - Amendment
On October 6, 2006, U.S. Energy Corp. ("USEG") and its majority-owned subsidiary Crested Corp. ("Crested"), and U.S. Moly Corp. ("Moly," a Wyoming corporation which has been organized by USEG and Crested but is not yet active), on the one hand, and Kobex Resources Ltd. ("Kobex," a British Columbia company traded on the TSX Venture Exchange under the symbol "KBX"), on the other hand, signed a letter agreement (the "Original Letter Agreement") providing Kobex the opportunity to acquire an option to acquire up to a 50% interest in certain patented and unpatented claims held by USEG and Crested. The claims, located near Crested Butte, Colorado and referred to as the "Lucky Jack Property" contain significant deposits of molybdenum. For further information on the deposits in the Property, see the Form 10-K for the year ended December 31, 2005 (Part I, Item 1 and 2, Business and Properties). For information on the terms of the Original Letter Agreement's terms which have not been amended, please see the Form 8-K filed on October 10, 2006 and the original Letter Agreement attached as exhibit to that report.
On December 7, 2006, the parties signed an Amended Letter Agreement which is effective December 5, 2006.
The Amended Letter Agreement constitutes notice to USEG, Crested and Moly that Kobex wishes to proceed with the transaction, and also amends certain provisions of the Original Letter Agreement. The amendments provide that:
· By January 31, 2007, USEG, Crested and Moly must provide a title opinion showing USEG and Crested owning all of the claims material to operation of the Property.
· The initial Option Payment is reduced to $750,000 from $1.45 million. The $700,000 balance is due by the first anniversary of the Effective Date, payable either by Kobex paying an additional like amount in Expenditures, in the first year; or increasing the first anniversary option payment by a like amount (payable in cash or Kobex common stock); or a combination of the preceding.
· For one year after the gross overriding royalty (payable to USEG and Crested) has been reduced to 1.5% each, Kobex shall have the option to terminate 1% (.5% of each 1.5%) by paying $10 million in cash or Kobex common stock, at sole discretion of USEG and Crested (one-half to each of USEG and Crested).
· The parties shall use their best efforts to complete and execute the formal agreement for the transaction by January 31, 2007.
Capitalized terms not defined above have the meanings assigned in the Original Letter Agreement.
The foregoing is only a summary of the Amended Letter Agreement and is qualified by reference to the complete Amended Letter Agreement, filed as an exhibit to this report.
Section 9. Financial Statements and Exhibits
Financial Statements: None
Exhibits: 10.1 - Amended Letter Agreement between Kobex Resources Ltd., and U.S. Energy Corp. and Crested Corp. and U.S. Moly Corp. (without exhibits).
Time to catch up on recent news:
Press Release Source: U.S. Energy Corp.; Crested Corp.
U.S. Energy Corp. / Crested Corp. and Kobex Resources Ltd. to Proceed With an Agreement to Develop the Lucky Jack Molybdenum Property
Thursday December 7, 12:56 pm ET
Kobex Has Option to Acquire 50% Interest in 'World-Class' Moly Deposit for $50 Million in Option Payments and Expenditures
RIVERTON, Wyo., Dec. 7 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News), d/b/a USECC, today announced that Kobex Resources, Ltd. (TSX Venture Exchange: KBX.V - News) notified USECC effective December 5, 2006, they wish to proceed with the Transaction as amended and the execution of a Formal Agreement whereby Kobex can acquire a 50% interest in the Companies' Lucky Jack (formerly known as Mt. Emmons) molybdenum deposit in west-central Colorado (the "Project").
On October 6, 2006, U.S. Energy Corp. ("USEG"), its majority-owned subsidiary, Crested Corp. ("Crested"), and U.S. Moly Corp. ("U.S. Moly"), a Wyoming corporation organized by USEG and Crested but not yet active, entered into the "Letter Agreement" with Kobex Resources Ltd. ("KBX"), which is headquartered in Vancouver, B.C. The Letter Agreement outlined the terms under which Kobex can acquire a 50% interest in certain patented and unpatented mining claims held by USEG and Crested, for $50 million in option payments and expenditure funding. USEG and Crested each reserved a 3% gross royalty on the Project subject to being reduced to a 1.5% gross royalty each at such time as Kobex earns a 50% interest in the Project.
Under the terms of the amended Letter Agreement, the first option payment of US$1.45 million of KBX stock will be reduced by US$700,000 to US$750,000 payable to USECC. Kobex has the option to either: incur an additional US$700,000 in Expenditures prior to the first anniversary of the effective date; or pay an additional US$700,000 in Option Payments to USECC on the anniversary date. In addition, Kobex has a one year option after acquiring a 50% interest in the Project to reduce the 1.5% gross royalty to each USEG and Crested to a 1% gross royalty each by a total payment of US$10 million, in cash or KBX stock at USEG and Crested's sole option. Further details of the Letter Agreement are available in the Form 8-K filed by USEG and Crested with the Securities and Exchange Commission on October 10, 2006, and details of the Amended Letter Agreement will be available in the Form 8-K to be filed on December 7, 2006.
"It is with great pleasure that we welcome the Kobex team to the Lucky Jack project. Together, we plan to commence work immediately to advance this "world class" mineral development endeavor. At Kobex's request and based on their desire to access more funds for the advancement of the project in 2007, we have agreed to allow a portion of our year one consideration to be added to the 2007 project budget at Kobex's discretion" stated Mark J. Larsen, President and COO of U.S. Energy Corp. "Based on our preliminary budgets and our overall goals for the project in 2007, we feel that the added funds will advance the project in a meaningful way in an effort to develop a Plan of Operations and Mine Plan to present to the public in a more timely fashion and we are 100% on board with this plan" he added.
The mining claims, located on Mt. Emmons near Crested Butte, Colorado and referred to as the "Lucky Jack Property", contain a significant deposit of molybdenum. The Lucky Jack Project includes a total of 25 patented and approximately 520 unpatented mining claims covering approximately 5,400 acres, or over 8 square miles, in area. The United States Department of the Interior, in a report dated April 2, 2004, estimated that the Lucky Jack deposit contains approximately 23 million tons of mineable reserves averaging 0.689% molybdenite, and that about 267 million pounds of molybdenum trioxide should be recoverable from the Project. This report covered the high-grade mineralization, which represents only a portion of the total mineral deposit delineated to date.
AMAX Inc. originally acquired the Project from USEG and Crested in a series of transactions during the 1970s and 1980s. AMAX reportedly invested in excess of our estimated $150 million in the acquisition of the Project, the securing of water rights, extensive exploration, ore body delineation, mine planning, metallurgical testing, permitting and other activities involving the Lucky Jack project.
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations;
And Forward-Looking Statements
USE and Crested (the "Company") own or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company's mineral properties. Examples of these other companies are Sutter Gold Mining Inc., Uranium Power Corp., sxr Uranium One, and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute "forward- looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company's Form 10-K ("Disclosure Regarding Forward-Looking Statements"; "Disclosure Regarding Mineral Resources under SEC and Canadian Regulation,"; and "Risk Factors"); and similar disclosures in the Company's Forms 10-Q.
Source: U.S. Energy Corp.; Crested Corp.
Form 10-Q for CRESTED CORP
14-Nov-2006
Quarterly Report
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following is Management's Discussion and Analysis ("MD&A") of significant factors, which have affected the Company's liquidity, capital resources and results of operations during the periods included in the accompanying financial statements. For a detailed explanation of the Company's Business Overview, it is suggested that Management's Discussion and Analysis of Financial Condition and Results of Operations for the nine months ended September 30, 2006 be read in conjunction with the Company's Form 10-K for the year ended December 31, 2005. The discussion contains forward-looking statements that involve risks and uncertainties. Due to uncertainties in our business, actual results may differ materially from the discussion below.
General Overview
Crested Corp. ("Crested" or the "Company") historically has been involved in the acquisition, exploration, development and production of properties prospective for minerals including lead, zinc, silver, molybdenum, gold, uranium, and oil and gas. The Company also has been engaged to a limited extent in commercial real estate, primarily in connection with acquiring mineral properties which included commercial real estate.
The Company manages its operations through a non-consolidated joint venture, USECC Joint Venture ("USECC"), with its parent company, U.S. Energy Corp. ("USE"). USE owns 71% of the Company's common stock. The Company has entered into partnerships through which it either joint ventured or leased properties with non-related parties for the development and production of certain of its mineral properties. The Company had no production from any of its mineral properties during the nine months ended September 30, 2006.
Until the calendar year ended December 31, 2005, the Company's uranium and gold properties were shut down due to depressed metals prices. During 2005 and 2006, the market prices for gold, uranium and molybdenum increased to levels which may allow the Company to place these properties into production or sell part or all of them to industry participants. Continued strong demand, which has outpaced supply over the past several years (deficit market conditions), has reduced inventory levels throughout the industry.
Exploration work was resumed on the uranium properties in 2005 and new uranium properties have been acquired during 2006. The Company and USE re-acquired the Lucky Jack ("Lucky Jack") molybdenum property near Crested Butte, Colorado during the nine months ended September 30, 2006. The Company and USE's interest in gold is being developed at Sutter Creek, California through exploration and development drilling which is being paid for by funds raised in an offering of Sutter Gold Mining, Inc. ("Sutter") common stock.
Uranium - The price of uranium concentrate has increased from a five year low of $7.25 per pound in January 2001 to a five year high of $60.00 per pound on October 30, 2006 (Ux Weekly).
Gold - The five year low for gold was $265 per ounce in July of 2001. The market price for gold has risen since that time to a five year high of $719.88 per ounce on May 11, 2006. The price for gold on October 31, 2006 was $604.10 per ounce (Metal Prices.com).
-17-
Molybdenum - The five year low for molybdic oxide was $3.77 per pound in 2002. The five year high of molybdic oxide was $39.50 per pound on June 2, 2005. The price for molybdic oxide was $25.50 per pound on October 27, 2006. (Metal Prices.com).
Management's strategy to generate a return on shareholder equity is first, to demonstrate prospective value in the mineral properties sufficient to support substantial investments by industry partners and second, to structure these investments to bring capital and long term development expertise to move the properties into production.
The principal uncertainties in the successful implementation of our strategy are:
· Whether USECC can negotiate terms with industry partners which will return a substantial profit to the Company for its retained interest and the project's development costs to that point in time; and
· Whether a feasibility study will show volumes and grades of mineralization and manageable costs of mining, transportation and processing, which are sufficient to make a profit and to bring industry partners or other investors to the point of further investment.
To some extent, the economic feasibility of a particular property can be changed with modifications to the mining, transportation, milling and/or processing plans. However, the overall principal drivers to attainment of the business strategy are the quality and volume of the minerals in the ground, cost of production, and commodity prices.
Please see the risk factor disclosures of this Report for more information on the risks and uncertainties in the business.
Forward Looking Statements
This Report on Form 10-Q for the nine months ended September 30, 2006 and Form 10-K for the year ended December 31, 2005 includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). All statements other than statements of historical fact included in this Report are forward-looking statements. Whenever words like "expect", "anticipate", or "believe" are used, the Company is making forward looking statements. Actual results may vary materially from the forward-looking statements and there is no assurance that the assumptions used will be realized in fact.
Critical Accounting Policies
Asset Impairments - We assess the impairment of property and equipment whenever events or circumstances indicate that the carrying value may not be recoverable.
Asset Retirement Obligations - The Company's policy is to accrue the liability for future reclamation costs of its mineral properties based on the current estimate of the future reclamation costs as determined by internal and external experts.
Use of Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Income Taxes - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". This statement requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets, liabilities and carry forwards.
SFAS 109 requires recognition of deferred tax assets for the expected future effects of all deductible temporary differences, loss carry-forwards and tax credit carry-forwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for any tax benefits which, based on current circumstances, are not expected to be realized.
Marketable Securities - The Company accounts for its marketable securities under Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires certain securities to be categorized as either trading, available-for-sale or held-to-maturity. Based on the Company's intent to sell the securities, its equity securities are carried at market value with net gains or (losses) recorded in the Statement of Operations at each reporting period depending on the market value at close of accounting period.
Recent Accounting Pronouncements
SFAS 123(R) In December 2004, the FASB issued its final standard on accounting for employee stock options, FAS No. 123 (Revised 2004), "Share-Based Payment" ("FAS123(R)"). FAS 123(R) replaces FAS No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". FAS 123(R) requires companies to measure compensation costs for all share-based payments, including grants of employee stock options, based on the fair value of the awards on the grant date and to recognize such expense over the period during which an employee is required to provide services in exchange for the award. The pro forma disclosures previously permitted under FAS 123 will no longer be an alternative to financial statement recognition. FAS 123 (R) is effective for all awards granted, modified, repurchased or cancelled after, and to unvested portions of previously issued and outstanding awards vesting after, interim or annual periods, beginning after June 15, 2005, which for us was the first quarter of fiscal 2006. No stock-based employee compensation cost is reflected in net income for the nine months and quarter ended September 30, 2006, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant and they were issued and vested prior to June 15, 2005. All future issuances of options under the plan will be evaluated using the Black Scholes model and expensed over the term of the option.
The Company has reviewed other current outstanding statements from the Financial Accounting Standards Board and does not believe that any of those statements will have a material adverse affect on the financial statements of the Company when adopted.
Liquidity and Capital Resources
As of September 30, 2006 the Company had sold all of its Enterra Energy Trust ("Enterra") units, 245,759 units, that were converted from the Enterra Acquisitions Class D ("Acquisitions") shares on June 8, 2006. The Company received $2,991,000 in net cash proceeds. The Company also sold its minority interest in Pinnacle Gas Resources, Inc. ("Pinnacle") for $4,830,000.
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Although the Company received these cash proceeds during the quarter ended September 30, 2006 it continued to have a working capital deficit of $10,592,300 and a shareholders' deficit of $20,069,900. The principal component of the working capital deficit is a debt payable to USE in the amount of $14,335,400. The debt to USE increased $2,005,800 during the quarter ended September 30, 2006 and $3,513,600 during the nine months then ended.
During the nine months ended September 30, 2006 the Company consumed $3,641,000 in operations while investing and financing activities generated $4,749,700 and $3,317,800 respectively. The Company recorded a net loss of $4,758,700 during the nine months ended September 30, 2006. The major component of the loss was a negotiated settlement payment to Phelps Dodge Corporation ("PD") in the amount of $3.5 million. The settlement was as a result of an order from the Federal District Court of Colorado in favor of PD wherein the Company and USE were ordered to pay PD $7,538,300 plus interest at 5.5% per annum. Rather than appeal the award, the parties agreed on a settlement $7.0 million, of which the Company was obligated to pay one half. The Company had sufficient working capital to pay the settlement amount.
The Company believes that the current market prices for gold, uranium and molybdenum are at levels that warrant the exploration and development of the Company's mineral properties. Management of the Company anticipates these metals prices will remain at levels which will allow the properties to be produced economically. Management of the Company therefore believes that sufficient capital will be available to develop its mineral properties from strategic industry partners, debt financing, and the sale of equity or a combination of the three. The successful development and production of these properties could greatly enhance the liquidity and financial position of the Company.
Capital Resources
Uranium Power Corp.
On December 8, 2004 Uranium Power Corp. ("UPC") signed a Purchase and Sales Agreement with USECC to purchase an undivided 50% interest in the Sheep Mountain properties. The agreement was amended on January 13, 2006.
UPC paid USECC $850,000 in calendar 2005, and issued 1,000,000 UPC shares to USECC (1/2 each to USE and Crested) in 2004 and 2005. As a result of the amendment, UPC has paid an additional $2,100,000 and issued 1.5 million more shares for a total of 2.5 million shares, against the purchase price. USECC had sold 1,000,000 of these shares as of September 30, 2006 which generated $398,100 in net cash to USECC which is not a consolidated entity in the Company's financial statements. These funds are used to pay operating costs of USECC.
An additional $4.1 million and 1.5 million shares are required to pay the full purchase price: $1.0 million on April 29, 2007 and $1.5 million on October 29, 2007 (provided UPC is required to pay 50% of all money it raises after January 13, 2006 until the two $1.5 million payments are made); and two additional payments each of $800,000 cash and 750,000 UPC shares (total $1,600,000 cash and 1,500,000 UPC shares) on June 29, 2007 and December 29, 2007.
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The agreement with UPC calls for UPC to fund 50% of the expenses associated with maintaining the Sheep Mountain uranium properties in central Wyoming and five other uranium projects and performing exploration drilling on them. A budget of $2.3 million for the year ending December 31, 2006 has been approved, relating to exploration drilling, geological and engineering work, reclamation and other costs associated with the uranium properties. UPC has also agreed to fund the first $500,000 in expenditures for up to 20 projects up to a total of $10,000,000. The Company, USE and UPC each will be responsible for 50% of costs on each jointly approved project in excess of $500,000. As of September 30, 2006, UPC has funded a total of $1,696,500. USECC and UPC will each be responsible for paying 50% of (i) current and future Sheep Mountain reclamation costs in excess of $1,600,000, and (ii) all costs to maintain and hold the properties.
Closing of the agreement is required on or before December 29, 2007. UPC may terminate the agreement before closing, in which event UPC (i) would forfeit all payments made up to the termination date; (ii) lose all of its interest in the properties to be contributed by USECC under the agreement; (iii) lose all rights to additional properties acquired in the joint venture as well as forfeit all cash contributions to the joint venture, and (iv) be relieved of its share of reclamation liabilities existing at December 8, 2004.
sxr Uranium One Agreement
On July 10, 2006, the Company and USE signed an Exclusivity Agreement with sxr Uranium One Inc. ("Uranium One" or "SXR"), which is headquartered in Toronto, Canada with offices in South Africa and Australia (TSE and JSE "SXR"). Upon signing the Exclusivity Agreement, the Term Sheet (signed by Uranium One and by the Company and USE on June 22, 2006) became effective. The Term Sheet sets forth the terms of a proposed sale of the majority of the Company and USE uranium assets to Uranium One.
Under the terms of the Exclusivity Agreement, Uranium One paid USECC, which is not consolidated by the Company, $750,000 cash (nonrefundable, except for material breach of the Exclusivity Agreement) for the exclusive right to purchase the Company and USE uranium assets, including the Shootaring Canyon uranium mill in southeast Utah (and all geological libraries and other intellectual property related to the acquired assets and the mill), for a period of up to 270 days (an initial six month period, plus an optional three month extension). During this time, the parties will prepare definitive acquisition agreements. Subject to satisfactory results on Uranium One's due diligence review and obtaining all required approvals associated with the sale and purchase of the assets, the definitive agreements would be signed and the sale closed as soon as possible.
The Company and USE have continued exploratory and other work on some of the assets subject to the Exclusivity Agreement during the quarter ended September 30, 2006. The Exclusivity Agreement provides that when the assets acquisition is closed, Uranium One will reimburse the Company and USE for those expenses which have been pre-approved by Uranium One.
Under the Term Sheet, Uranium One has the right to purchase the assets under the following terms:
· $49,250,000 in Uranium One common stock at a set price at closing (the set price is the volume weighted average price of Uranium One stock for the 10 days prior to signing the Exclusivity Agreement, which is $7.45 U.S. or $8.32 Cdn per share). This represents the $50 million portion, less the cash paid for the Exclusivity Agreement.
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· $20 million in cash upon the start of commercial operation of the Shootaring Canyon uranium mill.
· $7.5 million in cash upon the first delivery of mineralized material to a commercial uranium mill from any of the purchased properties that are subject to the Agreement.
· A cash royalty equivalent to 5% of the revenues derived from the sales value of any commodity produced from the Shootaring Canyon uranium mill, to a maximum royalty payment of $12.5 million.
The Company and USE also hold a 4% net profits interest on Rio Tinto's Jackpot uranium property located on Green Mountain in Wyoming. This interest will not be included in the agreement to sell uranium assets to Uranium One. Uranium One has announced that it may acquire the Sweetwater mill and the Green Mountain properties from Rio Tinto, separate from the proposed transaction with the Company and USE.
If the Uranium One transaction closes, the Company and USE will own an equity interest in Uranium One. Capital and operating funds will not be required to maintain and modify the Shootaring Canyon Uranium Mill or any other uranium properties being sold to Uranium One.
Sutter Gold
During the second quarter of 2006, SGMI raised $3,173,700 of net proceeds from two private placements. Proceeds from these private placements will be used to fund additional exploratory/development core drilling on its Lincoln Gold Project.
Line of Credit
The Company, jointly with USE, has a $500,000 line of credit with a commercial bank. The line of credit is secured by certain real estate holdings and equipment jointly owned with USE. At September 30, 2006, the full line of credit was available to the Company and USE. This line credit is used for short term working capital needs associated with operations.
Cash on Hand
As discussed above the Company has monetized certain of its assets which have provided cash which will continue to be used to fund general and administrative expenses, limited exploration, development and required remedial work on its mineral properties and the maintenance of those properties and associated facilities such as the water treatment plant at the Lucky Jack property until such time as an industry partner is secured to develop the properties or they are sold.
Capital Requirements
The direct capital requirements of the Company during 2006 remain its general and administrative costs; expenses and funding of exploration drilling; the holding costs of the Sheep Mountain uranium properties in Wyoming and a uranium mill and uranium properties in southern Utah, Colorado and Arizona and the maintenance of jointly owned real estate. On February 28, 2006, the Company and USE re-acquired the Lucky Jack molybdenum property from PD. In addition to receiving the Lucky Jack property the Company and USE became the owners of a water treatment plant which is attached to the property and thereby responsible for the operation of the plant.
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Maintaining Mineral Properties
Uranium Properties
The average care and maintenance costs associated with the Sheep Mountain uranium mineral properties in Wyoming is approximately $200,000 per year of which UPC is required to pay 50% annually. There are also costs associated with the exploration and maintenance of the uranium properties in Utah, Colorado and Arizona. The majority of these costs are covered as a result of the agreements with UPC and SXR detailed above in Capital Resources. In the event that the sale of the properties to SXR is concluded all the costs of maintaining, exploring and developing and reclaiming these properties will be paid for by SXR and UPC.
Sutter Gold Mining Inc. (SGMI) Properties
Sutter initiated an 18,000 foot underground and surface drilling program during the second quarter 2006, to further delineate and define potential resources at the property. The 2006 drill program includes both underground and surface holes. As of September 30, 2006, 15 out of the 24 planned underground step-out and infill drill holes have been completed, which represents approximately 3,000 feet of the overall 18,000 foot surface and underground drill program. On September 14, 2006, Sutter announced that it intersected three new mineralized zones plus significant extensions to four shoots hosting previously reported mineral resources. The 9 to 12 hole surface drill program is to grid test an area containing what may be another significant mineralized zone in the K5 Vein, historically mined on Sutter's property at the South Spring Hill Mine.
The estimated cost of these projects is $897,500 also during the balance of calendar 2006. Capital to fund these projects was obtained from private placements of Sutter's common stock. See Capital Resources above.
Lucky Jack Molybdenum Property
The Company and USE re-acquired the Lucky Jack molybdenum property, from PD on February 28, 2006. The property was returned to the Company and USE by PD in accordance with a 1987 Amended Royalty Deed and Agreement between the Company and USE and Amax Inc. PD became the successor owner of the property in 1999.
Conveyance of the property by PD to the Company and USE also included the transfer of ownership and operational responsibility of the mine water treatment plant located on the properties. Operating costs for the water treatment plant are expected to approximate $1 million annually. In an effort to assure continued compliance, the Company and USE has retained the technical expert and contractor hired by PD on January 2, 2006 to operate the water treatment plant.
On September 26, 2006, the Company and USE paid PD $7,000,000 as the final settlement of the July 26, 2006 Judgment of $7,538,300 awarded by the U.S. Federal District Court of Colorado to PD. The Company paid one half of this amount or $3.5 million.
On October 6, 2006 the Company and USE entered into an agreement with Kobex Resources Ltd. ("KBX") (a British Columbia company traded on the TSX Venture Exchange under the symbol "KBX") to potentially pay these costs. See Subsequent Events below. Until such time as the Company and USE are able to find an industry partner to participate in the Lucky Jack property they will each be responsible for one half of the costs of holding the property which will be significant.
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Other
The employees of the Company are not given raises on a regular basis. In consideration of this and in appreciation of their work, the board of directors from time to time has accepted the recommendation of the Compensation Committee to grant a bonus to employees and directors.
Results of Operations
Quarter and Nine Months Ended September 30, 2006 compared with the Quarter and Nine Months Ended September 30, 2005
During the nine and three months ended September 30, 2006 the Company did not have any revenues from operations. Operating costs and expenses consisted of non cash accretion of asset retirement obligations of $149,100 for the nine months ended September 30, 2006 and $49,300 for the three months ended then. The increase in accretion expenses during the nine and three months ended September 30, 2006 as compared to those recorded at September 30, 2005 of $81,000 and $26,600 respectively was as a result of a re-estimation of the actual reclamation cost associated with the Sheep Mountain uranium properties and the addition of reclamation costs associated with the Lucky Jack project.
General and administrative expenses increased from $161,500 as of September 30, 2005 to $348,200 at September 30, 2006 for an increase during the nine months of $186,700. A similar increase of $148,100 was experienced during the quarter ended September 30, 2006 from that recorded during the quarter ended September 30, 2005. This increase is directly related to the re-valuation of the Executive Retirement Plan of the Company and USE for two of its executive officers, one of whom passed away during the quarter ended September 30, 2006 and the other whom determined that he would retire during the first quarter of 2007. The acceleration of their use of the retirement policy is within the requirements of the policy but was not anticipated so quickly. The change caused an acceleration of the accrual of the benefits due under the policy.
During the three and nine months ended September 30, 2006 the Company recorded a loss from the exchange of the Enterra Acquisition shares of $1,354,200 and a loss of $324,300 from the sale of Enterra units. The Company received exchangeable shares of Enterra Acquisitions when it sold RMG to Enterra in June of 2005. These shares were convertible to units of Enterra Energy Trust after a one year holding period. Prior to the actual conversion the conversion feature of the Enterra Acquisition shares was accounted for as an imbedded derivative. At the time the actual conversion took place the market price of Enterra Energy Trust units had significantly decreased. The Company sold all of the units of Enterra and recorded a loss on the sale of $324,300 while it recorded a net increase in cash of $2,991,000 from the sales.
During the nine months ended September 30, 2006 the Company recorded a net loss of $223,600 from the value of the derivative discussed above on the Enterra Acquisition shares. During the nine months ended September 30, 2005 the Company recognized revenue of $1,486,800 from the valuation of the derivative. Additionally, the Company recorded a net gain on the sale of RMG of $5,816,700 during the nine months ended September 30, 2005.
During the nine months and quarter ended September 30, 2006 the Company sold its equity ownership interest in Pinnacle to a third party. As a result of this sale the Company received $4,830,000 in cash proceeds and recognized a net gain on the sale of $3,794,800. The Company also settled its portion of the PD award ordered by the U.S. District Court of Colorado by paying $3.5 million to PD. There were no similar sales or litigation settlement transactions during the nine and three months ended September 30, 2005.
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Equity losses from USECC increased by $1,753,500 from $902,700 during the nine months ended September 30, 2005 to $2,656,200 during the nine months ended . . .(September 30, 2006)
More good news for CBAG!
For Immediate Release
U.S. ENERGY CORP. REPORTS AFFIRMATION OF RULING ON
MT. EMMONS PATENT CLAIMS LITIGATION
BY FEDERAL APPEALS COURT
RIVERTON, Wyoming (November 6, 2006) -- U.S. Energy Corp. (NASDAQ Capital Market: “USEG” or “USE”) and its subsidiary, Crested Corp. (OTC BB: “CBAG” or “Crested”), both natural resource exploration and development companies, today announced that the 10th Circuit Court of Appeals has issued an order dated October 27, 2006 reaffirming the decision of a panel of the 10th Circuit, upholding the validity of nine patented mining claims at the “Lucky Jack” molybdenum property on Mt. Emmons in west central Colorado. USE and Crested own these nine claims plus 16 other patented mining claims and about 500 nearby unpatented mining claims.
In a letter dated April 2, 2004, the U.S. Department of Interior, Bureau of Land Management (“BLM”) issued additional patents on nine mining claims on the Mt. Emmons property about 5 miles west of Crested Butte, CO. The patents now consist of a total of 25 patented claims or approximately 350 patented or fee acres. A lawsuit was later filed by the High Country Citizens’ Alliance, Town of Crested Butte, Colorado, and the Board of County Commissioners of the County of Gunnison, Colorado (“Appellants”) in the U. S. District Court of Colorado against the defendants: BLM, certain officials of that agency, and certain private defendants including Phelps Dodge Corporation. The District Court dismissed the Appellants’ allegations and held that they had no right to challenge the BLM’s issuance of the patents. The Appellants appealed the District Court’s ruling to the 10th Circuit and on July 21, 2006, the panel of the 10th Circuit ruled that Appellants have no federal right of action against the defendants.
On September 5, 2006, the Appellants filed a Petition for Rehearing En Banc of the foregoing case before the entire 10th Circuit. The October 27, 2006 Order from the 10th Circuit denied the Appellants’ Petition for Rehearing En Banc.
The property, known as the Lucky Jack molybdenum project, contains a significant deposit of molybdenum. The United States Department of the Interior, in a report dated April 2, 2004, estimated that the Lucky Jack deposit contains approximately 23 million tons of mineable reserves averaging 0.689% molybdenite, and that about 267 million pounds of molybdenum trioxide should be recoverable from the Project. This report covered the high-grade mineralization, which represents only a portion of the total mineral deposit delineated to date.
On October 10, 2006, USEG announced the signing of a Letter Agreement with Kobex Resources Ltd. (TSX Venture Exchange: “KBX.V”) whereby Kobex can acquire a 50% interest in the Lucky Jack molybdenum project. Further details of the Letter Agreement are available in a Form 8-K filed by USE and Crested with the Securities and Exchange Commission on October 10, 2006.
“We are very pleased with this ruling to uphold the validity of the patented mining claims at Lucky Jack”, stated Mark Larsen, President of U.S. Energy Corp. “We are confident that we will close our transaction with Kobex in the coming weeks and look forward to continuing our efforts with Kobex towards permitting and developing this ‘world class’ deposit side by side with local communities, organizations and governing bodies”, he added.
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Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations;
And Forward-Looking Statements
USE and Crested (the “Company”) own or may come to own stock in companies which are traded on foreign exchanges, and may have agreements with some of these companies to acquire and/or develop the Company’s mineral properties. Examples of these other companies are Sutter Gold Mining Inc., Uranium Power Corp., sxr Uranium One, and Kobex Resources Ltd. These other companies are subject to the reporting requirements of other jurisdictions.
United States residents are cautioned that some of the information available about our mineral properties, which is reported by the other companies in foreign jurisdictions, may be materially different from what the Company is permitted to disclose in the United States.
This news release includes statements which may constitute “forward-looking” statements, usually containing the words “believe,” “estimate,” “project,” “expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks. By making these forward- looking statements, the Company undertakes no obligation to update these statements for revision or changes after the date of this release.
For further information on the differences between the reporting limitations of the United States, compared to reports filed in foreign jurisdictions, and also concerning forward-looking statements, please see the Company’s Form 10-K (“Disclosure Regarding Forward-Looking Statements”; ”Disclosure Regarding Mineral Resources under SEC and Canadian Regulation,”; and “Risk Factors”); and similar disclosures in the Company’s Forms 10-Q.
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For further information, please contact:
Keith G. Larsen, CEO or Mark Larsen, President
U.S. Energy Corp. (307) 856-9271
Form 8-K for CRESTED CORP
19-Oct-2006
Other Events
Item 8.01. Other Events.
Cash Bonus to Employees. Upon the recommendation of the U.S. Energy Corp. Compensation Committee (made on September 29, 2006) of U.S. Energy Corp. (Crested Corp. is a majority-owned subsidiary of U.S. Energy Corp., referred to herein as "Crested" and "USE"), USE paid a cash bonus to all 29 employees (including officers) in the aggregate amount of $3,013,000. The bonus was paid for the extraordinary results of the employees' work on behalf of USE and Crested related to the sale of USE's and Crested stock in Pinnacle Gas Resources, Inc. and other transactions.
The USE Compensation Committee is comprised of the four independent directors of USE; none of these persons are directors or officers or employees of Crested. The Compensation Committee determined that the bonus amount allocated to each recipient should be based upon years of service and previous compensation. There was no distinction made in the allocation of benefits between management and nonmanagement participants.
All employees work for both USE and Crested. Under the long-standing joint venture agreement between USE and Crested, each corporation is responsible for paying one-half of all administrative expenses. Accordingly, one-half of the bonus is being charged to Crested.
Payment of $2 million to Enterra. USE and Crested are paying their $2 million obligation to Enterra Energy Trust ("Enterra"), which came due as a result of the sale by USE and Crested of their restricted common stock in Pinnacle Gas Resources, Inc. For information on the contractual provision with Enterra which created the obligation, please see the Form 8-K (Item 2.01) filed September 27, 2006.
USE and Crested have elected to pay the obligation to Enterra with USE common stock, held by Crested. Enterra has requested the shares to be paid to their U.S. subsidiary, Rocky Mountain Gas, Inc. ("RMG"). The shares being transferred have been valued at $3.95 per share (the average USE closing prices for the 15 trading days following the Pinnacle stock sale, which closed on September 22, 2006). The shares transferred are 506,329 of the total of 512,359 shares of USE common stock which were held by Crested. Crested is receiving a credit against its account payable to USE in the amount of $1.3 million for the transferred shares, and an additional credit of $23,800 for the net balance of 6,030 shares (out of the 512,359 shares) which are being returned to USE. These credits as well as the payment of the shares to RMG will be recorded in the fourth quarter of 2006.
Clyde Gillespie Joins U.S. Energy Corp.
Tuesday October 10, 2:15 pm ET
The Permitting Expert Will Head the Lucky Jack Molybdenum Project in Colorado
RIVERTON, Wyo., Oct. 10 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News), natural resource exploration and development companies, today announced that Mr. Clyde Gillespie has been hired to be the Project Manager for the Lucky Jack Molybdenum Project in Colorado for the Companies' U.S. Moly Corp. subsidiary.
Mr. Gillespie comes to the company from Kinross Gold Corporation (Kettle River Operations) as the Buckhorn Project Manager/Environmental Manager where his responsibilities included engineering design, permitting, and construction of the Buckhorn Mountain Project for mining and milling gold. He developed the project budget, schedule and cost accounting system for that project. Mr. Gillespie will coordinate similar efforts to obtain public support and work cooperatively with non-government organizations to address concerns and interact with the media and environmental groups on the Project. At Kettle River, he was responsible for obtaining required permits for the Buckhorn Mountain Project and the oversight of environmental compliance at the Kettle River Operations. He also oversaw design, permitting, construction and operation of three biological water treatment plants for operating and reclamation projects. The Buckhorn Mountain Project received its major permit in September 2006.
Mr. Gillespie has an extensive background as a specialist in environmental engineering and management. Over the past thirteen years (from 1993 to present), he had the responsibility in obtaining required permits to allow development of two sensitive mining projects, including compliance with environmental permit conditions. He has extensive experience in the pursuit of completion of a Supplemental Environmental Impact Statement (SEIS) and federal Environmental Assessment (EA) while expediting the process to obtain federal, state and local permits required to construct and operate an underground gold mine, ore transportation to the existing mill, along with design and permitting for an expansion of the tailing impoundment.
"We are pleased to bring someone with Clyde's expertise on board with U.S. Moly Corp.," stated Mark Larsen, President of both U.S. Energy Corp. and U.S. Moly Corp. "Clyde's extensive experience in the fields of permitting and engineering will surely enhance our efforts to move the Lucky Jack project forward in a positive light. He has worked on mineral projects in sensitive areas before and has found success based on his sensible approach to solutions. With today's announcement of our pending transaction with Kobex Resources Ltd., we look to Clyde to lead our permitting efforts and to manage the project from a local perspective hand in hand with the communities and the Kobex team.
"Ownership of the Lucky Jack molybdenum deposit was returned to U.S. Energy Corp. and Crested Corp. on February 28, 2006. U.S. Moly Corp. was then formed by the companies to identify and pursue the most effective means of realizing the value inherent in the property," added Larsen. "With Mr. Gillespie on board, we will continue to evaluate the timing of all components related to the commencement of permitting the moly property for production and the commissioning of a full mine/mill feasibility study. This is timely and appropriate since the price of molybdic oxide has risen from approximately $5.00 a pound three years ago to over $27.00 per pound today," concluded Larsen.
U.S. Energy Corp. / Crested Corp. and Kobex Resources Ltd. Enter Into Letter Agreement Involving Lucky Jack Molybdenum Property
Tuesday October 10, 1:57 pm ET
Upon Completion of Due Diligence, Kobex Has Option to Acquire 50% Interest in 'World-Class' Moly Deposit for $50 Million in Option Payments and Expenditures
RIVERTON, Wyo., Oct. 10 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News), d/b/a USECC, today announced the signing of a Letter Agreement with Kobex Resources Ltd. (TSX Venture Exchange: KBX.V - News) whereby Kobex can acquire a 50% interest in the Companies' Lucky Jack (formerly known as Mt. Emmons) molybdenum deposit in west-central Colorado (the "Project").
On October 6, 2006, U.S. Energy Corp. ("USEG"), its majority-owned subsidiary, Crested Corp. ("Crested"), and U.S. Moly Corp. ("U.S. Moly"), a Wyoming corporation organized by USEG and Crested but not yet active, entered into the "Letter Agreement" with Kobex Resources Ltd. ("KBX"), which is headquartered in Vancouver, B.C. The Letter Agreement outlines the terms under which Kobex can acquire a 50% interest in certain patented and unpatented mining claims held by USEG and Crested, for $50 million in option payments and expense funding. U.S. Energy and Crested Corp. each reserved a 3% gross royalty on the Project subject to being reduced to a 1.5% gross royalty each at such time as Kobex earns a 50% interest in the Project. Further details of the Letter Agreement are available in a Form 8-K filed by USEG and Crested with the Securities and Exchange Commission on October 10, 2006.
The mining claims, located on Mt. Emmons near Crested Butte, Colorado and referred to as the "Lucky Jack Property," contain a significant deposit of molybdenum. The Lucky Jack Project includes a total of 25 patented and approximately 520 unpatented mining claims covering approximately 5,400 acres, or over 8 square miles, in area. The United States Department of the Interior, in a report dated April 2, 2004, estimated that the Lucky Jack deposit contains approximately 23 million tons of mineable reserves averaging 0.689% molybdenite, and that about 267 million pounds of molybdenum trioxide should be recoverable from the Project. This report covered the high-grade mineralization, which represents only a portion of the total mineral deposit delineated to date.
AMAX Inc. originally acquired the Project from USEG and Crested in a series of transactions during the 1970s and 1980s. AMAX reportedly invested an estimated $150 million in the acquisition of the Project, the securing of water rights, extensive exploration, ore body delineation, mine planning, metallurgical testing, permitting and other activities involving the moly deposit.
"We are extremely pleased to have someone of the mining caliber of Dr. Roman Shklanka and his seasoned team at Kobex Resources join us in the development of our Lucky Jack molybdenum deposit," stated Mark Larsen, President of U.S. Energy Corp. "Roman has been extensively involved in the development of large-scale mining projects throughout the world and has more than 40 years' experience in the mining industry. If this agreement is formalized in the coming months, we have identified a number of synergies that should allow our two companies to ultimately bring this tremendous project to fruition. Kobex has recognized the 'world class' nature of this deposit, and we look forward to combining our efforts to realize the potentially tremendous value of the Lucky Jack property."
"Exploration and development work activities conducted by major mining companies in prior years suggest that the Lucky Jack molybdenum deposit is 'world class' in scope, with a sizeable portion of the deposit containing high-grade mineralization," noted Dr. Shklanka, Chairman of Kobex Resources Ltd. "With molybdenum prices currently trading in excess of $27.00 (US) per pound, compared with less than $6.00 per pound 3 years ago, we are very optimistic that the market for moly will remain healthy -- especially in light of strong economic growth in China, India and a number of other countries."
Dr. Shklanka is the former Chairman of Canico Resource Corp., the Chairman of International Barytex Resources Ltd., the Chairman of Kobex Resources Ltd. and the Vice Chairman of Pacific Imperial Mines. He is also Chairman of Polaris Minerals Corporation, a company that develops aggregate resources in British Columbia for the U.S. market. Canico Resource Corp., with an inferred resource of about 100 million tons of 2.1% lateritic nickel in Brazil that became one of the world's major nickel developments, was sold to Companhia Vale do Rio Doce (CVRD) for $865 million in 2005. CVRD has recently agreed to acquire Canadian mining giant Inco Ltd. for approximately $15 billion (US).
Dr. Shklanka was associated with Sutton Resources Ltd. as Chairman (1995-1999) and Vice Chairman (1993-95). He brought the Kabanga nickel deposit in Tanzania with him when he joined Sutton and was instrumental in acquiring the 15 million-ounce Bulyanhulu gold deposit, also in Tanzania. Sutton was acquired in 1999 by Barrick Gold Corp. for $525 million (Cdn). The Kabanga deposit, a major suphide nickel resource, is currently under option to Falconbridge by Barrick.
From 1969 to 1990, Dr. Shklanka was with the Placer organization, working in a variety of capacities, including General Manager of Exploration for Placer Development Ltd. and Vice President for Exploration for Placer Dome Inc. While with Placer, he was responsible for the acquisition of the Kidston gold mine, at that time the largest gold mine in Australia, and its evolution to feasibility. He was also involved in the acquisition of the Granny Smith gold mine and the Osbourne copper mine, both in Australia, and the exploration of the Misima and Porgera gold mines in Papua, New Guinea.
Dr. Shklanka was a recipient of the Viola R. MacMillan Developer's Award, which is named in honor of the Prospectors & Developers Association of Canada's longest-serving president and is awarded to those who have demonstrated leadership in management and financing for the exploration and development of mineral resources. The 2006 award was presented to Michael Kenyon and Roman Shklanka, co-founders of Canico Resource Corp., a Vancouver-based junior mining company and owner of the Onca-Puma, a large undeveloped nickel deposit in Brazil that was acquired by CVRD in 2005.
Disclosure Regarding Mineral Resources Under SEC and Canadian Regulations
USE/CC is in a joint venture with Uranium Power Corp. ("UPC") and a major shareholder of SGMI. The common stock of UPC and SGMI, both Canadian corporations, are traded on the TSX-V, and are subject to the reporting requirements of the TSX-V and Canadian securities regulatory authorities. Harold F. Herron, Senior Vice President and Director of USE and Crested, serves on the board of directors of SGMI and is also the Company's President and CEO. Chris Healey, who is Vice President Exploration of USE, serves on the board of directors of UPC.
From time to time, UPC and SGMI make public disclosures in compliance with National Instrument 43-101, "Standards of Disclosure for Mineral Properties." NI 43-101 establishes procedures and standards for determining the existence of, and the reporting of, Mineral Resources and Mineral Reserves. Mineral Resources are classified in ascending categories of geological confidence, as Inferred, Indicated, and Measured. Each definition relates to a resource that is determined to be of "such a grade or quality that it has reasonable prospects for economic extraction." Mineral Reserves are classified as Proven or Probable.
Kobex Resources Ltd's common stock is also traded on the TSX, and as such, Kobex is subject to the reporting requirements of the TSX and Canadian securities regulatory authorities. Kobex may make public disclosures on the TSX (and the JSE) in compliance with NI 43-101 (and comparable rules of the JSE).
The SEC allows public disclosure of the extent and grade of mineral deposits, and, under SEC Industry Guide 7, "Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, of Proven (Measured) Reserves and Probable (Indicated) Reserves. In contrast to NI 43-101, the United States SEC does not allow public disclosure of Inferred, Indicated, or Measured Resources. In addition, there are some significant differences in the standards allowed, and the procedures required to be followed by the SEC for public disclosure of the SEC's Proven (Measured) Reserves and Probable (Indicated) Reserves, as compared to NI 43-101 for Proven and Probable Mineral Reserves.
United States residents, who obtain information about those of our molybdenum properties, and about our uranium and gold properties, which are reported upon by UPC and SGMI to the TSX-V (and which may be reported upon by Kobex to TSX) in accordance with NI 43-101, and about SGMI's gold properties, are cautioned that such information may be materially different from what would be permitted under SEC rules for United States companies.
ABOUT U.S. ENERGY CORP. AND CRESTED CORP.
U.S. Energy Corp. and its majority-owned subsidiary, Crested Corp., are engaged in a joint venture to conduct various business operations as USE/CC. Through their subsidiaries, Sutter Gold Mining Inc., Plateau Resources Limited, Inc., U.S. Moly Corp, U.S. Uranium Ltd. and USE/CC, they own various interests or properties prospective for gold, uranium, vanadium and molybdenum.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks.
The profitable mining and processing of uranium and vanadium will depend on many factors: Obtaining properties in proximity to the Shootaring mill in southeastern Utah to keep transportation costs economic; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for uranium oxide and vanadium; obtaining the capital required to upgrade the Shootaring mill and add a vanadium circuit, and obtaining and continued compliance with operating permits.
The profitable mining and processing of gold will depend on many factors, including receipt of final permits and keeping in compliance with permit conditions; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for gold, and obtaining the capital required to initiate and sustain mining operations, and build and operate a gold processing mill.
We have not yet obtained feasibility studies on any of our mineral properties. These studies would establish the economic viability, or not, of the different properties based on extensive drilling and sampling; the design and costs to build and operate gold and uranium/vanadium mills; the cost of capital, and other factors. Feasibility studies can take many months to complete. We have not established any reserves (economic deposits of mineralized materials) on any of our uranium/vanadium or gold properties, and future studies may indicate that some or all of the properties will not be economic to put into production. The molybdenum property has had extensive work conducted by prior owners to establish the deposits of molybdenum, mine planning and other ancillary activities. This data will have to be updated to determine the viability of starting mining and milling operations. Obtaining mining and other permits to begin mining the molybdenum property may be very difficult, and, like any mining operation, capital requirements for a molybdenum mining operations will be substantial.
By making these forward-looking statements, the Companies undertake no obligation to update these statements for revision or changes after the date of this release.
Source: U.S. Energy Corp.
Press Release Source: U.S. Energy Corp.
U.S. Energy Corp. and Crested Corp. Sell Natural Gas-Related Assets and Settle Phelps Dodge Litigation
Wednesday September 27, 9:30 am ET
With $20 Million in Cash, Companies Well-Positioned to Pursue Natural Resource Initiatives in Uranium, Molybdenum, Gold and Other Minerals
RIVERTON, Wyo., Sept. 27 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News) d/b/a USE/CC today announced the sale of their minority ownership interests in Pinnacle Gas Resources, Inc. ("Pinnacle") and Enterra Energy Trust ("Enterra"). The companies have also settled outstanding litigation with Phelps Dodge Corporation ("PD") concerning the return of the Lucky Jack molybdenum project in Colorado to USE/CC.
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On September 22, 2006, USEG and CBAG sold all of the shares of common stock they owned (a minority interest) in Pinnacle to funds affiliated with DLJ Merchant Banking III, Inc. for an aggregate cash purchase price of $13.8 million. Pinnacle was formed in June 2003 via capital contributions by certain funds affiliated with DLJ Merchant Banking III, Inc. and contributions of coalbed methane production and properties by subsidiaries of Carrizo Oil & Gas, Inc., USEG and CBAG. The Pinnacle shares owned by USE/CC have now been sold to such funds in a private sale that is exempt from the registration requirements of the Securities Act of 1933. There is no relationship between USE/CC and any of the purchasers.
USE/CC also announced the sale of the rest of its minority interest in Enterra for approximately $8.3 million in cash. USEG and CBAG initially received Enterra units (and shares exchangeable into more units) in June 2005 upon the sale of USEG's and Crested's jointly-owned subsidiary Rocky Mountain Gas, Inc. ("RMG"). The initial units were sold before June 2006, and the additional units were acquired by automatic exchange of the exchangeable shares on June 1, 2006.
USE/CC has also settled the outstanding litigation with Phelps Dodge concerning the Lucky Jack molybdenum project. Under the terms of the settlement agreement, USE/CC will pay $7 million to settle all outstanding issues in regards to the operation of a water treatment plant and the transfer of the Mt. Emmons molybdenum properties (now referred to as the "Lucky Jack" molybdenum property) to USE/CC.
"While our participation in the natural gas industry created significant value for our shareholders in recent years, we elected to sell our interests in Pinnacle and Enterra in order to strengthen our financial position during settlement negotiations with PD and to allow the companies to aggressively pursue core strategic business initiatives in uranium, molybdenum, gold and other areas," stated Keith Larsen, Chief Executive Officer of U.S. Energy Corp. "We are on track to complete the sale of our uranium assets to sxr Uranium One (Toronto: SXR - News) possibly before the end of the year for term payments of $90 million in cash and sxr stock. Assuming this sale is closed, it will further strengthen our balance sheet and allow our shareholders to benefit from the strong market for uranium on a global scale. We are also pleased with the progress of our efforts to secure a joint venture partner to develop our 'world class' molybdenum project in Colorado. Additionally, Sutter Gold Mining is in the process of completing an underground and surface drilling program to expand its gold resources in the Mother Lode District in California."
"After the payment to PD, USEG and CBAG will collectively have over $20 million in cash and very little debt on their balance sheets, and the companies will be stronger financially than at any time in the past 20 years. This will allow us to continue our review of new mineral projects and other business opportunities, and to act upon such opportunities on a timely basis," Larsen concluded.
Disclosure Regarding Mineral Resources
Under SEC and Canadian Regulations
USE/CC is a joint venture partner with Uranium Power Corp. ("UPC") and a major shareholder of SGMI. The common stock of UPC and SGMI, both Canadian corporations, are traded on the TSX-V, and are subject to the reporting requirements of the TSX-V and Canadian securities regulatory authorities. Harold F. Herron, Senior Vice President and Director of USE and Crested, serves on the board of directors of SGMI and is also the Company's President and CEO and Chris Healey, Vice President Exploration of USE, serves on the board of directors of UPC.
From time to time, UPC and SGMI make public disclosures in compliance with National Instrument 43-101, "Standards of Disclosure for Mineral Properties." NI 43-101 establishes procedures and standards for determining the existence of, and the reporting of, Mineral Resources and Mineral Reserves. Mineral Resources are classified in ascending categories of geological confidence, as Inferred, Indicated, and Measured. Each definition relates to a resource that is determined to be of "such a grade or quality that it has reasonable prospects for economic extraction." Mineral Reserves are classified as Proven or Probable.
sxr's common stock is traded on the TSX, and as such, sxr is subject to the reporting requirements of the TSX and Canadian securities regulatory authorities. sxr may make public disclosures on the TSX (and the JSE) in compliance with NI 43-101 (and comparable rules of the JSE).
The SEC allows public disclosure of the extent and grade of mineral deposits, and, under SEC Industry Guide 7, "Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, of Proven (Measured) Reserves and Probable (Indicated) Reserves. In contrast to NI 43-101, the SEC does not allow public disclosure of Inferred, Indicated, or Measured Resources. In addition, there are some significant differences in the standards allowed, and the procedures required to be followed by the SEC for public disclosure of the SEC's Proven (Measured) Reserves and Probable (Indicated) Reserves, as compared to NI 43-101 for Proven and Probable Mineral Reserves.
United States residents, who obtain information about those of our uranium properties, and about the gold properties, which are reported upon by UPC and SGMI to the TSX-V (and which may be reported upon by sxr to TSX) in accordance with NI 43-101, and about SGMI's gold properties, are cautioned that such information may be materially different from what would be permitted under SEC rules for United States companies.
ABOUT U.S. ENERGY CORP. AND CRESTED CORP.
U.S. Energy Corp. and its majority-owned subsidiary, Crested Corp., are engaged in a joint venture to conduct various business operations as USE/CC. Through their subsidiaries, Sutter Gold Mining Inc., Plateau Resources Limited, Inc., U.S. Moly Corp, U.S. Uranium Ltd. and USE/CC, they own various interests or properties prospective for gold, uranium, vanadium and molybdenum.
This news release includes statements which may constitute " forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks.
The profitable mining and processing of uranium and vanadium will depend on many factors: Obtaining properties in proximity to the Shootaring mill in southeastern Utah to keep transportation costs economic; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for uranium oxide and vanadium; obtaining the capital required to upgrade the Shootaring mill and add a vanadium circuit, and obtaining and continued compliance with operating permits.
The profitable mining and processing of gold will depend on many factors, including receipt of final permits and keeping in compliance with permit conditions; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for gold, and obtaining the capital required to initiate and sustain mining operations, and build and operate a gold processing mill.
We have not yet obtained feasibility studies on any of our mineral properties. These studies would establish the economic viability, or not, of the different properties based on extensive drilling and sampling; the design and costs to build and operate gold and uranium/vanadium mills; the cost of capital, and other factors. Feasibility studies can take many months to complete. We have not established any reserves (economic deposits of mineralized materials) on any of our uranium/vanadium or gold properties, and future studies may indicate that some or all of the properties will not be economic to put into production. The molybdenum property has had extensive work conducted by prior owners to establish the deposits of molybdenum, mine planning and other ancillary activities. This data will have to be updated to determine the viability of starting mining and milling operations. Obtaining mining and other permits to begin mining the molybdenum property may be very difficult, and, like any mining operation, capital requirements for a molybdenum mining operations will be substantial.
By making these forward-looking statements, the Companies undertake no obligation to update these statements for revision or changes after the date of this release.
Source: U.S. Energy Corp.
Form 8-K for CRESTED CORP
27-Sep-2006
Entry into a Material Definitive Agreement, Completion of Acquisition or Disposition
Item 1.01. Entry into a Material Definitive Agreement
U.S. Energy Corp. and Crested Corp. sell minority interest in Pinnacle Gas Resources, Inc. On September 22, 2006, U.S. Energy Corp. ("USEG") and its majority-owned subsidiary Crested Corp. ("Crested) entered into a stock purchase agreement (the "SPA"), and closed the SPA on September 22, 2006. Pursuant to the SPA, USEG and Crested sold all of their common shares (a minority interest) in Pinnacle Gas Resources, Inc. ("Pinnacle") for an aggregate cash purchase price of $13.8 million. The purchasers are funds associated with DLJ Merchant Banking III, Inc. Pinnacle was formed in June 2003 by funds affiliated with DLJ Merchant Banking III, Inc., and subsidiaries of Carrizo Oil & Gas, Inc. and USEG and Crested.
The shares were sold in a private sale exemption from the registration requirements of the Securities Act of 1933. There is no relationship between USEG and Crested, on the one hand, and any of the purchasers, on the other hand.
Section 2.01: Financial Information
Item 2.01. Completion of Acquisition or Disposition of Assets
The allocation of the total $13.8 million sales price was $8,970,000 to USEG, and $4,830,000 to Crested. USEG and Crested sold the Pinnacle shares to provide additional working capital for the companies' (i) continued work on their molybdenum and uranium mineral properties; (ii) settling litigation with Phelps-Dodge Corporation (see Item 8.01(a) below); and (iii) paying an obligation to Enterra Energy Trust which has arisen as a result of the amount for which the companies sold the Pinnacle shares (see the following paragraph).
In June 2005, USEG and Crested closed the sale of their jointly-owned subsidiary Rocky Mountain Gas, Inc. ("RMG"), pursuant to the February 22, 2005 Pre-Acquisition Agreement between Enterra Energy Trust (the "PAA" and "Enterra"). RMG had been the owner of the Pinnacle shares; however, at the closing of the PAA, the Pinnacle shares were transferred to USEG and Crested, and the Pinnacle shares were not included in the sale of RMG.
Article 12 of the PAA provided that if USEG and Crested later were to sell their Pinnacle shares for more than $10.0 million, USEG and Crested would then be required to pay Enterra the difference between $10.0 million and the proceeds of sale of the Pinnacle shares (by both USEG and Crested), but not more than $2.0 million. Based on the $13.8 million sales proceeds, USEG and Crested will pay Enterra $2.0 million (65% by USEG and 35% by Crested).
The PAA allows USEG and Crested to make the payment in cash, restricted shares of USEG common stock (priced at the average of the 15 consecutive trading days following the sales transaction), or in a combination of cash and stock. USEG and Crested are evaluating the method of payment. To the extent the payment is made in USEG stock, Crested will be responsible for payment to USEG of Crested's pro rata share of the value of the USEG stock. Alternatively, Crested may pay some or all of the obligation to Enterra by transferring to Enterra some of the issued and outstanding USEG stock held by Crested. In that event, USEG would be responsible to pay Crested for the value of such transferred USEG stock.
To the extent the payment is made in USEG stock, USEG will file a resale registration statement (at its sole expense) for the benefit of Enterra to enable Enterra to sell the USEG stock in the public market, for a period of 12 months after the registration statement is declared effective.
Section 8: Other Events
Item 8.01. Other Events
(a) U.S. Energy Corp. and Crested Corp. settle outstanding litigation with Phelps Dodge Corporation. On September 26, 2006, USEG and Crested (d/b/a the USECC Joint Venture ("USECC")) signed an agreement with Phelps Dodge Corporation and Mt. Emmons Mining Company (collectively "Phelps Dodge") to settle the case of Phelps Dodge Corporation and Mt. Emmons Mining Company v. U.S. Energy Corp. and Crested Corp (Civil Case No. 02-cv-00796-LTB-PAC). Under the terms of the settlement agreement, USECC has paid Phelps Dodge $7,000,000 and Phelps Dodge has agreed to deliver to USECC all information, studies and records associated with the Mount Emmons molybdenum property. The parties also agreed to dismiss with prejudice all appeals and cross-appeals. Upon delivery of the information by Phelps Dodge, all disputes between the parties related to the lawsuit will have been settled, including the United States District Court's July 25, 2006 order that USEG and Crested pay Phelps Dodge $7,538,340.93 plus interest at the rate of 5.5% per annum for attorney fees and costs and operations expenses of the Mt. Emmons properties. On February 28, 2006, USEG and Crested re-acquired the Mount Emmons property (now known as the Lucky Jack molybdenum property) from Phelps Dodge.
(b) U.S. Energy Corp. and Crested Corp. complete the sale of Enterra Trust Units. As of September 25, 2006, USEG and Crested (d/b/a the USECC Joint Venture ("USECC")) have sold 100% of their interest (682,345 units of Enterra Energy Trust ("Enterra")). USECC received the Enterra units in June, 2006 as an automatic conversion of its shares of Enterra Acquisition, which shares were received as partial consideration for the June 2005 sale of RMG to Enterra. USEG and Crested have received $5,313,300 and $2,990,900, respectively, for the sales of the units since June 2006.
Founder and Chairman Emeritus of U.S. Energy Corp. Dies at Age 74
Monday September 18, 11:17 am ET
John L. Larsen Was a Mining Industry Leader for More Than 50 Years
RIVERTON, Wyo., Sept. 18 /PRNewswire-FirstCall/ -- U.S. Energy Corp., "USE", (Nasdaq: USEG - News) and Crested Corp. (OTC Bulletin Board: CBAG - News) today announced that the founder and Chairman Emeritus of the Company, John L. "Jack" Larsen, passed away after a prolonged, heart-related illness.
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Mr. Larsen, who founded USE in 1966 and took it public in 1970, was also the Co-Chairman and a director of Crested Corp., an affiliate of the Company. Mr. Larsen was Chief Executive Officer and Chairman of the board of directors of Plateau Resources Limited Inc., and a director of Sutter Gold Mining Inc. and U.S. Moly Corp. Past directorships include The Brunton Company and Rocky Mountain Gas, Inc. Mr. Larsen died on September 4, 2006.
Keith Larsen, Chairman of USE, noted, "While we have lost a great friend and one of the mining industry's true visionaries, Jack Larsen (my father) built a remarkable company that is fully prepared to carry forward his vision to capitalize on the tremendous opportunities we see in the minerals markets. We will always be deeply grateful for his leadership and the contributions he made during a career that spanned half a century. His legacy at U. S. Energy Corp. includes the ownership in a world class molybdenum deposit, the ownership of one of the last uranium mills in the United States and significant equity interests in both a publicly traded gold company, a natural gas company that is currently in registration and a royalty on a world class uranium deposit."
The Board of USE currently consists of Keith G. Larsen, Don C. Anderson, Michael T. Anderson, Michael H. Feinstein, H. Russell Fraser and Harold F. Herron. The Company is actively seeking a replacement for Mr. Larsen on the Board of Directors.
ABOUT U.S. ENERGY CORP. AND CRESTED CORP.
U.S. Energy Corp. and its majority-owned subsidiary, Crested Corp., are engaged in a joint venture to conduct various business operations as USECC. Through their subsidiaries, Sutter Gold Mining Inc., Plateau Resources Limited, Inc., U.S. Moly Corp, U.S. Uranium Ltd. and USECC, they own various interests or properties prospective for gold, uranium, vanadium and molybdenum.
This news release includes statements which may constitute "forward- looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks.
The profitable mining and processing of uranium and vanadium will depend on many factors: Obtaining properties in proximity to the Shootaring mill in southeastern Utah to keep transportation costs economic; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for uranium oxide and vanadium; obtaining the capital required to upgrade the Shootaring mill and add a vanadium circuit, and obtaining and continued compliance with operating permits.
The profitable mining and processing of gold will depend on many factors, including receipt of final permits and keeping in compliance with permit conditions; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for gold, and obtaining the capital required to initiate and sustain mining operations, and build and operate a gold processing mill.
We have not yet obtained feasibility studies on any of our mineral properties. These studies would establish the economic viability, or not, of the different properties based on extensive drilling and sampling; the design and costs to build and operate gold and uranium/vanadium mills; the cost of capital, and other factors. Feasibility studies can take many months to complete. We have not established any reserves (economic deposits of mineralized materials) on any of our uranium/vanadium or gold properties, and future studies may indicate that some or all of the properties will not be economic to put into production. The molybdenum property has had extensive work conducted by prior owners to establish the deposits of molybdenum, mine planning and other ancillary activities. This data will have to be updated to determine the viability of starting mining and milling operations. Obtaining mining and other permits to begin mining the molybdenum property may be very difficult, and, like any mining operation, capital requirements for a molybdenum mining operations will be substantial.
By making these forward-looking statements, the Companies undertake no obligation to update these statements for revision or changes after the date of this release.
DISCLOSURE REGARDING MINERAL RESOURCES UNDER SEC AND CANADIAN REGULATIONS
USE is a joint venture partner with Uranium Power Corp. ("UPC") and a major shareholder of SGMI. The common stock of UPC and SGMI, both Canadian corporations, are traded on the TSX-V, and are subject to the reporting requirements of the TSX-V and Canadian securities regulatory authorities. Harold F. Herron, Senior Vice President and Director of USE and Crested, serves on the board of directors of SGMI and is also the Company's President and CEO and Chris Healey, Vice President Exploration of USE, serves on the board of directors of UPC.
From time to time, UPC and SGMI make public disclosures in compliance with National Instrument 43-101, "Standards of Disclosure for Mineral Properties." NI 43-101 establishes procedures and standards for determining the existence of, and the reporting of, Mineral Resources and Mineral Reserves. Mineral Resources are classified in ascending categories of geological confidence, as Inferred, Indicated, and Measured. Each definition relates to a resource that is determined to be of "such a grade or quality that it has reasonable prospects for economic extraction." Mineral Reserves are classified as Proven or Probable.
The SEC allows public disclosure of the extent and grade of mineral deposits, and, under SEC Industry Guide 7, "Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, of Proven (Measured) Reserves and Probable (Indicated) Reserves. In contrast to NI 43-101, the SEC does not allow public disclosure of Inferred, Indicated, or Measured Resources. In addition, there are some significant differences in the standards allowed, and the procedures required to be followed by the SEC for public disclosure of the SEC's Proven (Measured) Reserves and Probable (Indicated) Reserves, as compared to NI 43-101 for Proven and Probable Mineral Reserves."
United States residents, who obtain information about those of our uranium properties, and about the gold properties, which are reported upon by UPC and SGMI to the TSX-V in accordance with NI 43-101, and about SGMI's gold properties, are cautioned that such information may be materially different from what would be permitted under SEC rules for United States companies.
Form 10-Q for CRESTED CORP
14-Aug-2006
Quarterly Report
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following is Management's Discussion and Analysis ("MD&A") of significant factors, which have affected the Company's liquidity, capital resources and results of operations during the periods included in the accompanying financial statements. For a detailed explanation of the Company's Business Overview, it is suggested that Management's Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2006 be read in conjunction with the Company's Form 10-K for the year ended December 31, 2005. The discussion contains forward-looking statements that involve risks and uncertainties. Due to uncertainties in our business, actual results may differ materially from the discussion below.
General Overview
Crested Corp. ("Crested" or the "Company") historically has been involved in the acquisition, exploration, development and production of properties prospective for hard rock minerals including; lead, zinc, silver, molybdenum, gold, uranium, and oil and gas. The Company also has been engaged to a limited extent in commercial real estate, primarily in connection with acquiring mineral properties which included commercial real estate.
The Company manages its operations through a non-consolidated joint venture, USECC Joint Venture ("USECC"), with its parent company, U.S. Energy Corp. ("USE"). USE owns 71% of the Company's common stock. The Company has entered into partnerships through which it either joint ventured or leased properties with non-related parties for the development and production of certain of its mineral properties. The Company had no production from any of its mineral properties during the six months ended June 30, 2006.
Until the calendar year ended December 31, 2005, the Company's uranium and gold properties were shut down due to depressed metals prices. During 2005 and 2006, the market prices for gold, uranium and molybdenum increased to levels which may allow the Company to place these properties into production or sell part or all of them to industry participants. Exploration work was resumed on the uranium properties in 2005 and new uranium properties have been acquired.
Uranium - The price of uranium concentrate has increased from a five year low of $7.25 per pound in January 2001 to a five year high of $46.50 per pound on June 30, 2006. (Ux Weekly)
Gold - The five year low for gold was $265 per ounce in July of 2001. The market price for gold has risen since that time to a five year high of $719.88 per ounce on May 11, 2006. The price for gold on June 30, 2006 was $613.50 per ounce. (Metal Prices.com).
Molybdenum - Annual Metal Week Dealer Oxide mean prices for molybdic oxide averaged $24.73 per pound during the six months ended June 30, 2006, compared with annual averages of: $32.94 per pound in 2005, $16.41 per pound in 2004, $5.32 per pound in 2003 and $3.77 per pound in 2002. The mean price for Dealer Oxide on June 30, 2006 was $25.75 per pound. (Metal Prices.com). Continued strong demand, which has outpaced supply over the past several years (deficit market conditions), has reduced inventory levels throughout the industry.
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The Company holds mineral and related properties in uranium and gold and, with USE, received the Mt. Emmons project which is now known as the Lucky Jack project, a significant molybdenum property from Phelps Dodge Corporation ("PD") on February 28, 2006. The rebound in uranium, gold and molybdenum therefore presents an opportunity for the Company to either develop or sell all or a portion of these properties to a third party.
Management's strategy to generate a return on shareholder equity is first, to demonstrate prospective value in the mineral properties sufficient to support substantial investments by large industry partners and second, to structure these investments to bring capital and long term development expertise to move the properties into production.
The principal uncertainties in the successful implementation of our strategy are:
· Whether a feasibility study will show volumes and grades of mineralization and manageable costs of mining, transportation and processing, which are sufficient to make a profit and to bring industry partners to the point of investment; and
· Whether USECC can negotiate terms with industry partners which will return a substantial profit to the Company for its retained interest and the project's development costs to that point in time.
To some extent, the economic feasibility of a particular property can be changed with modifications to the mining, transportation, milling and/or processing plans. However, the overall principal drivers to attainment of the business strategy are the quality and volume of the minerals in the ground, cost of production, and commodity prices.
Please see the risk factor disclosures of this Report for more information on the risks and uncertainties in the business.
Forward Looking Statements
This Report on Form 10-Q for the six months ended June 30, 2006 and Form 10-K for the year ended December 31, 2005 includes, "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). All statements other than statements of historical fact included in this Report are forward-looking statements. In addition, whenever words like "expect", "anticipate", or "believe" are used, the Company is making forward looking statements. Actual results may vary materially from the forward-looking statements and there is no assurance that the assumptions used will be realized in fact.
Critical Accounting Policies
Asset Impairments - We assess the impairment of property and equipment whenever events or circumstances indicate that the carrying value may not be recoverable.
Asset Retirement Obligations - The Company's policy is to accrue the liability for future reclamation costs of its mineral properties based on the current estimate of the future reclamation costs as determined by internal and external experts.
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Use of Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". This statement requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets, liabilities and carry forwards.
SFAS 109 requires recognition of deferred tax assets for the expected future effects of all deductible temporary differences, loss carry-forwards and tax credit carry-forwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for any tax benefits which, based on current circumstances, are not expected to be realized.
Marketable Securities - The Company accounts for its marketable securities under Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires certain securities to be categorized as either: trading, available-for-sale or held-to-maturity. Based on the Company's intent to sell the securities its equity securities are carried at market value with net gains or (losses) recorded in the Statement of Operations at each reporting period depending on the market value at close of accounting period.
Recent Accounting Pronouncements
SFAS 123(R) In December 2004, the FASB issued its final standard on accounting for employee stock options, FAS No. 123 (Revised 2004), "Share-Based Payment" ("FAS123(R)"). FAS 123(R) replaces FAS No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". FAS 123(R) requires companies to measure compensation costs for all share-based payments, including grants of employee stock options, based on the fair value of the awards on the grant date and to recognize such expense over the period during which an employee is required to provide services in exchange for the award. The pro forma disclosures previously permitted under FAS 123 will no longer be an alternative to financial statement recognition. FAS 123 (R) is effective for all awards granted, modified, repurchased or cancelled after, and to unvested portions of previously issued and outstanding awards vesting after, interim or annual periods, beginning after June 15, 2005, which for us was the first quarter of fiscal 2006. No stock-based employee compensation cost is reflected in net income for the six months and quarter ended June 30, 2006, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant and they were issued and vested prior to June 15, 2005. All future issuances of options under the plan will be evaluated using the Black Scholes model and expensed over the term of the option.
The Company has reviewed other current outstanding statements from the Financial Accounting Standards Board and does not believe that any of those statements will have a material adverse affect on the financial statements of the Company when adopted.
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Liquidity and Capital Resources
As of June 30, 2006 the Company had sold 100,000 units of its Enterra trading securities. The Company received $1,295,500 from the sales of this stock and therefore had $1,418,900 in cash as of June 30, 2006. The Company also has 145,759 units of Enterra which are recorded as trading securities with a market value of $1,966,400 at June 30, 2006.
Additionally, at June 30, 2006, the Company had a working capital deficit of approximately $9,050,600 and a shareholders' deficit of approximately $17,572,200. The principal component of the working capital deficit is a debt payable to USE in the amount of approximately $12,329,600, which USE has agreed not to demand payment of during the next 14 months. The debt to USE increased $919,600 during the quarter ended June 30, 2006 and $1,507,800 during the six months then ended.
During the six months ended June 30, 2006 the Company consumed $1,331,000 investing activities while operations and financing activities generated $1,241,200 and $1,413,600 respectfully. Although the Company recorded a net loss of $2,223,900 during the six months ended June 30, 2006 the majority of the loss were non-cash expenditures relating to an equity loss from USECC in the amount of $344,300, the exchange of the Enterra Acquisitions shares of stock to Enterra Energy Trust units of $1,354,200, the change in valuation of the derivative associated with the conversion feature of the Enterra Acquisition units of $223,600, the loss on the sale of Enterra units $53,500, noncash compensation of $94,200 and the accretion of reclamation liabilities of $99,800.
As a result of the decision of the U.S. Federal District Court of Colorado, and the Company's decision to appeal that decision, the Company and USE must bond $7,538,340 as an award granted by the Court to Phelps Dodge Corporation ("PD") in relation to ongoing litigation regarding the Lucky Jack molybdenum project in Colorado. The Company will also have to continue to pay interest at the rate of
5 ½% on the judgment until such time as the judgment is either overturned or ultimately paid. The Company has reviewed FAS 5, "Accounting for Contingencies", and has determined that the likelihood of prevailing in the appeal is reasonably possible. Although a completely accurate prediction can not be made of the ultimate outcome or timing of an appeal, the Company's legal expert in the matter believes that the Company will ultimately prevail in overturning the U.S. District Court's award of attorney fees and costs. The proceeds from the sale of the Enterra units are expected to be sufficient to fund the bonding requirements of the appeal.
The Company received $1,295,500 from the sale of Enterra stock during the six months ended June 30, 2006. These funds were invested into USECC in the amount of $1,331,000, which resulted in the consumption of $35,300 in Investing Activities. Financing activities during the six months ended June 30, 2006 consisted of borrowings from USE in the amount of $1,413,600.
The Company believes that the current market prices for gold, uranium and molybdenum are at levels that warrant the exploration and development of the Company's mineral properties. Management of the Company anticipates these metals prices will remain at levels which will allow the properties to be produced economically. Management of the Company therefore believes that sufficient capital will be available to develop its mineral properties from strategic industry partners, debt financing, and the sale of equity or a combination of the three. The successful development and production of these properties could greatly enhance the liquidity and financial position of the Company.
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Capital Resources
Enterra Energy Trust
The Company received 245,759 units of Enterra Energy Trust ("Enterra") in June of 2006 as an automatic conversion from Enterra Acquisition shares which it received when it sold its interest in Rocky Mountain Gas, Inc. ("RMG") during calendar 2005. During the month of June, 2006 the Company sold 100,000 of the Enterra units. It received $1,295,500 for the sale of these units. Management of the Company plans on selling the balance of the Enterra units, 145,759 units, during the third and fourth quarters of calendar 2006. At June 30, 2006 the market price for the Enterra units was $13.49 per share. The price for the Enterra units has decreased since that time and at July 28, 2006 it was $11.97 per share. Part of the decrease in the price of Enterra units is attributed to Enterra announcing that it was reducing its monthly dividend from $0.18 per share to $0.12 per share. In the event that the Company can obtain the current market price for the Enterra units it owns it would receive approximately $1.7 million.
Pinnacle Gas Resources, Inc.
USECC owns a minority interest in Pinnacle Gas Resources, Inc. ("Pinnacle"). Enterra is entitled to be paid an amount of up to (but not more than) $2,000,000, if proceeds from a future disposition by USECC to a third party of their minority equity interest in Pinnacle exceeds $10,000,000. On May 10, 2006, Pinnacle filed a registration statement with the Securities and Exchange Commission relating to sales of its common stock by the selling stockholders named therein. Information about Pinnacle can be obtained from its registration statement, on file with the SEC at www.sec.gov. This registration statement has not yet become effective. USECC owns 9.8% of the outstanding common stock of Pinnacle and is participating in the public offering. Once this registration statement becomes effective, management of the Company and USE may sell some or all of their equity in Pinnacle.
Uranium Power Corp.
On December 8, 2004 Uranium Power Corp. ("UPC") signed a Purchase and Sales Agreement with USECC to purchase an undivided 50% interest in the Sheep Mountain properties. The agreement was amended on January 13, 2006.
UPC paid USECC $850,000 in calendar 2005, and issued 1,000,000 UPC shares to USECC (1/2 each to USE and Crested) in 2004 and 2005. As a result of the amendment, UPC has paid an additional $1,975,000 and issued 1.5 million more shares for a total of 2.5 million shares, against the purchase price. USECC sold 203,500 of these shares as of June 30, 2006 which generated $78,000 in net cash. These funds are used to pay operating costs of USECC.
An additional $4.1 million and 1.5 million shares are required to pay the full purchase price: $1.5 million on April 29, 2007 and $1.25 million on October 29, 2007 (provided UPC is required to pay 50% of all money it raises after January 13, 2006 until the two $1.5 million payments are made); and two additional payments each of $800,000 cash and 750,000 UPC shares (total $1,600,000 cash and 1,500,000 UPC shares) on June 29, 2007 and December 29, 2007.
USECC and UPC will each be responsible for paying 50% of (i) current and future Sheep Mountain reclamation costs in excess of $1,600,000, and (ii) all costs to maintain and hold the properties. UPC will contribute up to $10,000,000 to the joint venture (at $500,000 for each of 20 exploration projects). USECC and UPC each will be responsible for 50% of costs on each jointly approved project in excess of $500,000. As of June 30, 2006, UPC had funded $613,600 of the costs related to the properties in the venture. Of that amount the venture had expended $568,500.
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Closing of the agreement is required on or before December 29, 2007. UPC may terminate the agreement before closing, in which event UPC (i) would forfeit all payments made up to the termination date; (ii) lose all of its interest in the properties to be contributed by USECC under the agreement; (iii) lose all rights to additional properties acquired in the joint venture as well as forfeit all cash contributions to the joint venture, and (iv) be relieved of its share of reclamation liabilities existing at December 8, 2004.
Sutter Gold
On April 11, 2006, SGMI announced that it closed a non-brokered $759,100 private placement of 4,250,000 shares of its common stock at $0.18 per share. Each share also had an attached transferable warrant exercisable for two years at $0.27. Proceeds from this private placement will be used to fund additional exploratory/development core drilling on its Lincoln Gold Project.
On May 31, 2006, SGMI announced successfully closing a $2,818,900. The private placement consisted of 12,062,000 units at $0.225 per unit. Each unit comprises one common share and one 24-month warrant. Each warrant can be exercised to purchase one common share at a price of $0.315 per share. Proceeds from this private placement will fund a combined underground and surface diamond drill program and, if warranted, a feasibility study on its Sutter Gold Mine which is an advanced stage gold project in the historic Mother Lode located about 50 miles southeast of Sacramento, California.
Line of Credit
The Company, jointly with USE, has a $500,000 line of credit with a commercial bank. The line of credit is secured by certain real estate holdings and equipment jointly owned with USE. At June 30, 2006, the full line of credit was available to the Company and USE. This line credit is used for short term working capital needs associated with operations.
Other
On May 15, 2006, the Arbitration Panel ("Panel") in the Nukem and Sheep Mountain Partners ("SMP") case issued a Clarification of the Arbitration Award as a result of the remand to the Panel by the United States District Court for the District of Colorado pursuant to the Order of the 10th Circuit Court of Appeals. In its Clarification of the Arbitration Award, the Panel held that the Constructive Trust was intended to secure the payment of the original damage award of $15 million and it was extinguished upon Nukem's payment of that damage award to USECC. The Company therefore will not receive its portion of the previously disclosed $20 million judgment from Nukem.
The Company's capital resources at June 30, 2006, are not sufficient to satisfy all the capital requirements of the Company. To provide the capital resources needed for the next calendar year, the Company will need to (1) continue to successfully negotiate the terms of its debt with USE and (2) sell its Enterra units and/or equity.
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Capital Requirements
The direct capital requirements of the Company during 2006 remain its general and administrative costs; expenses and funding of exploration drilling; the holding costs of the Sheep Mountain uranium properties in Wyoming and a uranium mill and uranium properties in southern Utah, Colorado and Arizona and the maintenance of jointly owned real estate. During the six months ended June 30, 2006, the Company and USE reacquired the Mt. Emmons molybdenum property, now known as the Lucky Jack Project ("Lucky Jack"), from PD. In addition to receiving the Lucky Jack property the Company and USE became the owners of a water treatment plant which is attached to the property and thereby responsible for the operation of the plant.
Maintaining Mineral Properties
Uranium Properties
The agreement with UPC calls for UPC to fund 50% of the expenses associated with maintaining the Sheep Mountain uranium properties in central Wyoming and five other uranium projects and performing exploration drilling on them. A budget of $2.3 million for the year ending December 31, 2006 has been approved, relating to reclamation work at the uranium properties, exploration drilling, geological and engineering work and other costs. UPC has also agreed to fund the first $500,000 of all approved projects up to a total of $10,000,000 and has advanced $613,600 against the 2006 approved budget. In the first half of 2006, a total of $568,500 was expended under these approved projects. The average care and maintenance costs associated with the Sheep Mountain uranium mineral properties in Wyoming is approximately $200,000 per year of which UPC is required to pay 50% annually.
Plateau Resources Limited, Inc., Uranium Properties
The Company is contractually obligated to fund 50% of the cash requirements of Plateau Resources Limited, Inc. ("Plateau") and will share in 50% of any cash receipts of Plateau. USE is responsible for the other 50%. Although the Company participates in 50% of the cash flow from Plateau; 100% of the common stock of Plateau is owned by USE. Plateau owns and maintains the Shootaring Canyon Uranium Mill (the "Shootaring Mill"). In March 2005, Plateau filed an application with the State of Utah to restart the Shootaring Mill. If management's projections of placing the Shootaring Mill into production hold, reclamation on the property is not anticipated to commence until some time in 2033.
It is anticipated that $31 million will be required to modify the Shootaring Mill's tailings facility to the State of Utah standards and complete other mill upgrades before production can begin. Additionally, a circuit to process vanadium, which is contained in almost all of the mineralized material found in nearby properties, may be added to the Shootaring Mill. In order to fund the refurbishment of the Shootaring Mill and acquire additional uranium properties from which to produce uranium bearing ores, USECC is seeking joint venture partners or equity participants. Once the State of Utah grants Plateau an operating license for the Shootaring Mill the bonding requirement will be increased.
On February 27, 2006, Plateau re-acquired, by Foreclosure Sale, the Ticaboo townsite operations ("Ticaboo") located in southern Utah near Lake Powell. The Ticaboo property includes a motel, restaurant and lounge, convenience store, recreational boat storage and service facility, and improved residential and mobile home lots. On April 12, 2006 Plateau signed a contract with ARAMARK Sports and Entertainment Services, Inc. for the management and operation of Ticaboo. Initially, the Company will be responsible for capital up-grades to the Ticaboo properties which are currently estimated to be approximately $250,000.
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Agreement with Uranium Power Corp.
USECC and Uranium Power Corp. ("UPC") signed an option agreement on May 11, 2006 to add two new projects; the Green River North and the Green River South projects, located in Emery County, Utah. USECC and UPC will hold equal interests in UPC's rights to earn 70% under the Initial Option, and another 10% under the Additional Option, in the Green River South project. For the Initial Option, UPC will provide the first $500,000, and USECC will provide the second $500,000. The cash payment and the exploration and development commitment for the Additional Option will be equally funded by UPC and USECC. For the UPC stock component on both the Initial Option and the Additional Option, USECC will pay UPC (in cash, UPC stock, or the Company and USE stock) 50% of the lesser of (i) UPC's stock price at the time the stock is issued by UPC , and (ii) Cdn$1.00 per share.
The Green River South project, previously known as the Sahara Property, was optioned by UPC from the Uranium Group ("UG") pursuant to an Amended and Restated Option and Joint Venture Agreement. Under this agreement, UPC has an option to earn a 70% interest (the "Initial Option") by making payments to UG of $585,000 and 200,000 shares of UPC stock and paying $1,365,000 for exploration and development activities, all over the four years ending December 31, 2009. Until the Initial Option is exercised, UPC will be solely responsible for paying property maintenance costs. At any time after UPC has paid the full price for the Initial Option (whether with the last installment on December 31, 2009, or earlier), UPC can earn a further 15% interest (the "Additional Option") by paying UG an additional $300,000, issuing to UG 400,000 more UPC shares, and spending an additional $700,000 (over the year following exercise of the Additional Option) on exploration and development work.
If the long term price of uranium oxide is below $20.00 per pound for four consecutive weeks in any calendar year, the payments for that year will be reduced by 50% and the balance deferred to the next year. If the uranium oxide price continues below $20.00, (or recovers but then falls below $20.00 in one or more subsequent years) the balance will be deferred to the next year or years after 2010.
After exercise of the Initial Option (and the Additional Option, if exercised), UG and UPC will fund programs and budgets in proportion to their interests in the property. A party's interest will be reduced in proportion to its non-funding of costs. If a party's interest is reduced to 10% or less, its interest will be converted to either a 10% net profits interest or a 2% gross income royalty.
At such time as the Initial Option is exercised, UPC is required to make available to UG a three year $1 million revolving loan (8% simple interest on outstanding balance) for purposes of UG funding its obligations on the project.
UPC (or its designee) is the manager of the project, and will be entitled to compensation (for reasonable management costs, not for profit) of not more than 10% of direct costs associated with exploration activities, plus not more than 2% of direct costs associated with contract work related to development and mining and the purchase of capital equipment. These percentages are subject to adjustment by the parties.
UPC will own a 50% interest in the Green River North project through its . . .
http://biz.yahoo.com/e/060814/cbag.ob10-q.html
U.S. Energy Corp. Reports Affirmation of Lower Court Ruling on Mt. Emmons Patent Claims Litigation by Federal Appeals Court
Monday July 31, 9:30 am ET
RIVERTON, Wyo., July 31 /PRNewswire-FirstCall/ -- U.S. Energy Corp. (Nasdaq: USEG - News; "the Company"), a natural resources exploration and development company, today announced that the 10th Circuit Court of Appeals has issued a ruling that reaffirms the validity of patented mining claims at the "Lucky Jack" molybdenum property on Mt. Emmons in southwestern Colorado, which is owned by USEG and its majority-owned subsidiary, Crested Corp. (OTC Bulletin Board: CBAG - News).
ADVERTISEMENT
In a letter dated April 2, 2004, the U.S. Department of Interior, Bureau of Land Management ("BLM") issued patents on nine additional mining claims on the Mt. Emmons property, for a total of 25 patented claims consisting of approximately 350 patented or fee acres. A lawsuit was subsequently filed by certain local and governmental entities and environmentalists (the "Plaintiffs") in the U. S. District Court for the District of Colorado (the "District Court"). Defendants in the lawsuit were the BLM, certain officials of that agency, and certain private dependents including Phelps Dodge Corporation (Phelps Dodge). The District Court dismissed the Plaintiffs' allegations and held that the Plaintiffs had no right to challenge the BLM's issuance of the patents. The Plaintiffs subsequently appealed the District Court ruling to the 10th Circuit Court of Appeals, which ruled on July 21, 2006 that the Plaintiffs have no federal right of action against the Defendants.
In March 2006, U.S. Energy Corp. and Crested Corp. announced the reacquisition from Phelps Dodge of the Mt. Emmons property (since renamed the "Lucky Jack" deposit), including a total of 25 patented and approximately 520 unpatented mining claims, which together approximate 5,400 acres, or over 8 square miles of mineral claims.
In its letter dated April 2, 2004, the BLM estimated that there were approximately 23 million tons of mineable reserves containing 0.689% molybdenite, and that about 267 million pounds of molybdenum trioxide was recoverable from the Mt. Emmons property. The BLM relied on a mineral report prepared by Western Mine Engineering (WME) for the U.S. Forest Service, which directed and administered the WME contract. WME's analysis was based on a price of $4.61 per pound of molybdic oxide and was used by the BLM in determining that the nine claims satisfied the patenting requirements that the mining claims contained a valuable mineral that could be mined profitably. (As of July 28, 2006, the average market price for molybdic oxide approximated $25.50 per pound). WME consulted a variety of sources in preparation of its report, including a study prepared in 1990 by American Mine Services, Inc. and a pre-feasibility report prepared by Behre Dolbear & Company, Inc. In its 1992 patent application to the BLM, Amax Inc. (subsequently merged into Phelps Dodge) stated that the size and grade of the Mt. Emmons deposit was determined to approximate 220 million tons grading 0.366% molybdenite.
U.S. Energy Corp. and Crested Corp. are currently evaluating the commissioning of a bankable feasibility study for the Lucky Jack Project and expect to proceed with this study during the third quarter of 2006. The feasibility study should be completed within 18-24 months following its commencement.
* * * * *
ABOUT U.S. ENERGY CORP. AND CRESTED CORP.
U.S. Energy Corp. and its majority-owned subsidiary, Crested Corp., are engaged in a joint venture to conduct various business operations as USECC. Through their subsidiaries, Sutter Gold Mining Inc., Plateau Resources Limited, Inc., U.S. Moly Corp, U.S. Uranium Ltd. and USECC, they own various interests or properties prospective for gold, uranium, vanadium and molybdenum.
This news release includes statements which may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks.
The profitable mining and processing of uranium and vanadium will depend on many factors: Obtaining properties in proximity to the Shootaring mill in southeastern Utah to keep transportation costs economic; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for uranium oxide and vanadium; obtaining the capital required to upgrade the Shootaring mill and add a vanadium circuit, and obtaining and continued compliance with operating permits.
The profitable mining and processing of gold will depend on many factors, including receipt of final permits and keeping in compliance with permit conditions; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for gold, and obtaining the capital required to initiate and sustain mining operations, and build and operate a gold processing mill.
We have not yet obtained feasibility studies on any of our mineral properties. These studies would establish the economic viability, or not, of the different properties based on extensive drilling and sampling; the design and costs to build and operate gold and uranium/vanadium mills; the cost of capital, and other factors. Feasibility studies can take many months to complete. We have not established any reserves (economic deposits of mineralized materials) on any of our uranium/vanadium or gold properties, and future studies may indicate that some or all of the properties will not be economic to put into production. The molybdenum property has had extensive work conducted by prior owners to establish the deposits of molybdenum, mine planning and other ancillary activities. This data will have to be updated to determine the viability of starting mining and milling operations. Obtaining mining and other permits to begin mining the molybdenum property may be very difficult, and, like any mining operation, capital requirements for a molybdenum mining operations will be substantial.
By making these forward-looking statements, the Companies undertake no obligation to update these statements for revision or changes after the date of this release.
Source: U.S. Energy Corp.
Form 8-K for CRESTED CORP
28-Jul-2006
Other Events
Item 8.01. Other Events
(a) Order for Payment of Attorney Fees and Costs Related to Litigation With Phelps Dodge Corporation. On July 25, 2006, the United States District Court for the District of Colorado entered an order granting a motion for attorney fees and costs in favor of Phelps Dodge Corporation and Mt. Emmons Mining Company. A hearing on the motion was held on July 20, 2006. The motion was made in the case of Phelps Dodge Corporation and Mt. Emmons Mining Company v. U.S. Energy Corp. and Crested Corp (Civil Cases No. 02-cv-00796-LTB-PAC), subsequent to the plaintiffs (Phelps Dodge Corporation and Mt. Emmons Mining Company) prevailing in a declaratory judgment action against U.S. Energy Corp. and Crested Corp. regarding the parties' rights related to molybdenum properties located near Crested Butte, Colorado (the "Mt. Emmons properties"). The court had entered an order in the declaratory judgment action on February 4, 2005. As a result of that earlier order, U.S. Energy Corp. and Crested Corp. have taken title to the subject mineral properties with an existing water treatment plant located thereon.
The court ordered that U.S. Energy Corp and Crested Corp. pay Phelps Dodge $7,538,340.93 for (i) attorney fees and costs of $3,223,047.48; plus (ii) operations expenses of $4,315,293.45 for the Mt. Emmons properties (including costs for Phelps Dodge to operate the water treatment plant for the period from July 2002 through August 2005).
U.S. Energy Corp. and Crested Corp. are reviewing the July 25, 2006 order in the context of applicable law, and may, or may not, appeal the order to the United States Tenth Circuit Court of Appeals.
(b) United States Tenth Circuit Court of Appeals Affirmation of Lower Court Dismissal of Challenges to Mt. Emmons Patents. On July 21, 2006, the United States Tenth Circuit Court of Appeals (the "10th CCA") affirmed the January 12, 2005 United States District Court for the District of Colorado dismissal of challenges to the issuance of mining patents (by the United States Bureau of Land Management) on certain of the properties comprising the Mt. Emmons properties, to Phelps Dodge Corporation and Mt. Emmons Mining Company. The case is High Country Citizen's Alliance, Town of Crested Butte, Colorado, and The Board of County Commissioners of the County of Gunnison, Colorado v. Kathleen Clarke, Director of the Bureau of Land Management et. al., Gale Norton, Secretary of Interior, U.S. Department of the Interior; Phelps Dodge Corporation; Mt. Emmons Mining Company (the 10th CCA case number is D.C. No. 04-MK-749PAC).
The subject patents (and adjacent properties) are held by U.S. Energy Corp. and Crested Corp. For further information on the Mt. Emmons property, and the background of this litigation (to which neither U.S. Energy Corp. nor Crested Corp. have been parties), please see the Form 10-Ks for the year ended December 31, 2005 filed by U.S. Energy Corp. and Crested Corp.
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