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
CRESTED CORP.
Exact Name of Registrant as Specified in its Charter)
Wyoming 0-8773 83-0608126
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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 parent, U.S. Energy Corp., a
Wyoming corporation ("USE") 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. USE and USECC 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 USE
and USECC the sum of $4 million on signing ($2 million each to Registrant and
USE) 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, USE 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. USE 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 USE,
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 for fiscal year ended May 31, 1996 for more information concerning the
GMMV.) At the time of the formation of the GMMV,
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Kennecott paid USE 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 USE 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 USE 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) USE 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) USE 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.
CRESTED CORP.
Dated: July 3, 1997 By: s/ Daniel P. Svilar
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Daniel P. Svilar, Secretary
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