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.
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