SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 and 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 23, 1997
U.S. ENERGY CORP.
Exact Name of Registrant as Specified in its Charter)
Wyoming 0-6814 83-0205516
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(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
Glen L. Larsen Building
877 North 8th West
Riverton, WY 82501
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(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)
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ITEM 5. OTHER EVENTS
On June 23, 1997, Registrant and its 52% owned subsidiary, Crested
Corp., a Colorado corporation ("Crested") doing business with the Registrant in
a joint venture under the designation USECC, signed an Agreement with Kennecott
Uranium Company, a Delaware corporation ("Kennecott"), for the right to acquire
Kennecott's interest in the Green Mountain Mining Venture ("GMMV") for $15
million and other consideration. Registrant and Crested own one-half of the
GMMV, a joint venture formed to mine and mill uranium. Kennecott is directly
owned by Kennecott Energy and Coal Company, headquartered in Gillette, Wyoming
("KECC") and is ultimately owned by Rio Tinto plc of London England. Kennecott
paid Registrant and USECC the sum of $4 million on signing ($2 million each to
Registrant and Crested) and committed to provide the GMMV up to $16 million for
payment of reimbursable costs incurred by USECC in developing the proposed
underground Jackpot Uranium Mine for production and in changing the status of
the Sweetwater Mill from standby to operational. The work to develop the
proposed Jackpot Mine and ready the Sweetwater Mill for operations will be
undertaken by USECC as lessee under a Mineral Lease Agreement between the GMMV
and USECC (the "Mineral Lease") and as an independent contractor under a
Contract Services Agreement between Kennecott, as manager of the GMMV, and USECC
(the "Mill Contract"), respectively. Both the Mineral Lease and the Mill
Contract, as well as a Fourth Amendment of the GMMV Mining Venture Agreement
among Kennecott, Registrant and USECC (the "Fourth Amendment of the GMMV
Agreement"), were executed simultaneously with the Acquisition Agreement.
The $16 million to be provided by Kennecott to the GMMV was advanced to
Kennecott by an affiliate, Kennecott Energy Company ("KEC") under a Promissory
Note (the "Note") bearing interest at 10.5% per annum starting April 1999 until
paid in full. The Note is payable quarterly out of 20% of cash flow from the
GMMV properties, but not more than 50% of the earnings for such quarter from the
GMMV operations, before interest, income tax, depreciation and amortization. It
is secured by a first mortgage lien against Kennecott's interest in the GMMV
pursuant to a Deed of Trust, Mortgage, Security Agreement, Financing Statement
and Assignment of Proceeds, Rents and Leases granted by Kennecott to KEC (the
"Mortgage"). The failure to place into production an economically viable uranium
mine on the mortgaged property by December 31, 2005 would entitle the KEC to
accelerate payment of the Note. Otherwise, any balance remaining on the Note
will be due and payable in June 2010. Registrant and USECC or the legal entity
that acquires Kennecott's interest in the GMMV, will assume the Note and the
Mortgage at closing of the acquisition. If the acquisition does not close for
any reason KECC will assure that Kennecott performs it obligations under the
Note and the Mortgage.
The GMMV was formed in June 1990 (Registrant's fiscal 1991) among
Registrant, USECC and Kennecott to explore for, develop, mine and mill uranium
ore from the Jackpot deposit and other lode mining claims on Green Mountain in
Fremont County, Wyoming. (See Items 1 and 2, Business and Properties in
Registrant's Form 10-K/A for fiscal year ended May 31, 1996 for more information
concerning the GMMV.) At the time of the formation of the
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GMMV, Kennecott paid Registrant and USECC $15 million for a 50% interest in the
GMMV mining claims and certain other rights and agreed to fund the first $50
million (in dollars of the day) of GMMV expenditures pursuant to approved plans
and budgets. To date, Kennecott has spent approximately $20.3 million of such
planned expenditures on exploration drilling, maintaining the GMMV properties,
including the Sweetwater Mill that the GMMV acquired in Registrant's 1993 fiscal
year, on a care and maintenance basis and conducting numerous studies needed to
support GMMV's applications for permits to develop the proposed Jackpot Mine and
to convert the Sweetwater Mill license from standby to operational. With the
execution of the Mineral Lease and Mill Contract, USECC will take over from
Kennecott the development of the proposed Jackpot Mine and nearby Big Eagle Mine
and will work with Kennecott in preparing the Sweetwater Mill for renewed
operations. Such work will be funded from the $16 million to be provided to the
GMMV by Kennecott and, under the Fourth Amendment of the GMMV Agreement,
Kennecott will be entitled to a credit against the $50 million commitment, in
the amount of two dollars for each one dollar of such funds provided by
Kennecott to the GMMV and the $4 million paid to Registrant and USECC on signing
of the Acquisition Agreement. It is anticipated that such credits will satisfy
the balance of Kennecott's initial funding commitment to the GMMV.
Closing of the acquisition is scheduled for July 31, 1998 and is subject
to Registrant and USECC satisfying several conditions including: (i) the
acquiring entity must have a market capitalization of at least $200 million;
(ii) the parties to the Acquisition Agreement must have received all
authorizations, consents, permits and approvals of government agencies required
to transfer Kennecott's interest in the GMMV to the acquiring entity; (iii)
Registrant and USECC shall have replaced, or caused the replacement of,
approximately $25 million of reclamation bonds, guarantees, indemnification
agreements and suretyship agreements posted by Kennecott on behalf of the GMMV
and (iv) Registrant and USECC, or the acquiring entity, must pay $15 million to
Kennecott at closing and assume all obligations and liabilities of Kennecott
with respect to the GMMV (including repayment of the $16 million Note and the
Mortgage) from and after the closing. Under very limited circumstances, the
scheduled closing date may be postponed to another date not later than October
30, 1998. The parties to the Acquisition Agreement also executed a mutual
General Release with respect to any and all claims that they may have with
respect to prior disputes concerning the GMMV.
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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.
U. S. ENERGY CORP.
Dated: July 3, 1997 By: s/ Max T. Evans
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Max T. Evans, Secretary
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