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): March 6, 1997
CRESTED CORP.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 0-8773 84-0608126
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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
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Not Applicable
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(Former Name, Former Address or Former Fiscal Year,
if Changed From Last Report)
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Item 5. - Other Events
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A. Registrant and U.S. Energy Corp. ("USECC") - Nukem/CRIC
Litigation/Arbitration
On March 6, 1997, Judge Lewis T. Babcock of the U. S. District Court of
Colorado entered an Amended Judgment, together with an "Order for Entry of
Amended Judgment as Final," dated March 3, 1997, following the hearing on
USECC's motion to correct the Court's November 5, 1996 Order and Judgment and
motions to enter a final judgment The Amended Judgment further confirms the
Order and Award of the panel of three arbitrators who presided over the
arbitration proceedings involving Crested Corp. (the "Registrant") and its
parent U.S. Energy Corp. ("USE") d/b/a USECC and Nukem, Inc. and its
wholly-owned subsidiary Cycle Resource Investment Corporation ("CRIC") of
Stamford, CT. In December 1996, Nukem and CRIC filed a notice with the 10th
Circuit Court of Appeals ("CCA") appealing the Court's judgment of November 5,
1996, which confirmed the Award. However, the 10th CCA held that appeal in
abeyance pending the issuance of the U. S. District Court's final judgment.
The Sheep Mountain Partners ("SMP") Partnership was formed in December 1988
between USECC and Nukem/CRIC to develop and mine uranium ore from the SMP mines
in Wyoming to be milled into uranium concentrates (U3O8) and to market U3O8
worldwide. Arbitration proceedings were initiated in June 1991 by Nukem and CRIC
concerning the SMP's uranium operations in Wyoming after disputes arose between
the parties. USECC filed suit in July 1991 against Nukem and CRIC in the U.S.
District Court of Colorado to rescind the Sheep Mountain Partnership Agreement
based on fraud in inducing USECC into the SMP Partnership. Thereafter in
February 1994, after lengthy discovery proceedings which brought out the
wrongdoings of Nukem, USECC agreed to arbitrate the disputes and affirmed the
SMP Partnership Agreement. Hearings on the consensual arbitration were commenced
on June 27, 1994 and consumed some 73 hearing days which ended on May 31, 1995.
On April 18, 1996, the Panel awarded USECC a net monetary amount of
approximately $7.4 million together with interest in damages against Nukem in
its Order and Award. An amount of $4.8 million was also awarded to USECC from
funds held in SMP trust and bank accounts for a total of $12.2 million.
Regarding Nukem's purchase contracts with the CIS republics, the Award also
provided, "Since the rights to purchase the CIS uranium were obtained through
the use of SMP contracts (partnership assets), those purchase rights, the
uranium acquired pursuant to those rights and the profits therefrom are
impressed with a constructive trust in favor of SMP."
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USECC then petitioned the U.S. District Court in Colorado for confirmation
of the Award. Nukem and CRIC filed motions to modify and/or vacate portions of
the Award, alleging that significant portions of the Award were erroneous.
Specifically, Nukem was seeking to set aside potentially $16 million which the
Panel had awarded USECC and to rewrite portions of the Award dealing with CIS
uranium. On May 31, 1996, the U.S. District Court remanded the Award to the
Panel for consideration of these motions.
On July 3, 1996, the Panel entered a supplemental order affirming its
earlier Award, stating that, "There was wrongdoing on the part of Nukem when it
used what were clearly partnership contracts to obtain financial benefits for
itself alone . . . Our Award . . . is premised upon wrongdoing by Nukem and a
judgment by us that Nukem ought not to be permitted to profit from that wrongful
conduct." The Panel further affirmed its April 18, 1996 Award imposing a
constructive trust in favor of SMP on the rights to purchase CIS uranium, the
uranium acquired pursuant to those rights and the profits therefrom. The Panel
stated, "We thus conclude that there is no inconsistency and no double recovery
and no subtraction that ought to be made from profits already realized. . . ."
In the March 6, 1997 Amended Judgment, which included rulings on some 12
monetary claims of the parties, Judge Babcock ordered Nukem to pay USECC a net
of approximately $8.465 million as monetary damages. In November 1996, USECC
received $4.367 million out of SMP escrowed funds and its bank account per the
Court's November 5, 1996 Order. Judge Babcock again confirmed the Panel's Awards
denying Nukem's motion to modify and/or vacate portions of the Award, and
granted USECC's motion to modify one paragraph of the Award deducting $265,213
from the amounts Nukem and CRIC claimed to have advanced to purchase uranium for
the SMP Partnership.
The notice of appeal filed by Nukem and CRIC to the 10th CCA in December
1996 may apply to the March 6, 1997 Amended Judgment. A hearing may be scheduled
to determine the amount of bond which Nukem/CRIC will be required to post as
security in favor of USECC, as a condition to Nukem/CRIC proceeding through the
appeals process. The purpose of the bond would be to protect and preserve the
amount of the final judgment in favor of USECC.
Despite the rulings of the Panel imposing a constructive trust in favor of
SMP on the rights to purchase CIS uranium, the uranium acquired pursuant to
those rights and the profits therefrom, the defendants-appellants Nukem/CRIC
continue to assert in both Court filings and public news releases that the Panel
did just the opposite and in fact, "denied" SMP's rights of the CIS contracts in
constructive trust. For Nukem and CRIC to appeal to the 10th CCA, they must post
a supersedeas bond to protect and preserve the final judgment in favor of USECC.
Thus, the amount of the bond is placed in question because of the assertions of
Nukem/CRIC. Registrant and Crested contacted Nukem/CRIC for a stipulation to
request the Court to order a limited remand to the Arbitration Panel on the
question of which CIS contracts are subject of the constructive trust referred
to in the Panel's Order and Award. Nukem and CRIC would not agree to such a
stipulation and stated they would oppose any such application to the U.S.
District Court. Consequently on March 14, 1997, USECC filed a motion with the
U.S. District Court of Colorado requesting the Court to enter an order remanding
to the Arbitration Panel the issue of which specific contracts are subject to
the constructive trust with SMP. The motion is pending.
B. Plateau's Application to NRC for Operational License
U.S. Energy Corp.'s wholly owned subsidiary Plateau Resources Limited
("Plateau") has received notification from the U.S. Nuclear Regulatory
Commission ("NRC") that it had conducted a review of Plateau's application to
amend its license on the Shootaring Canyon Uranium Processing Facility in Utah.
Plateau's application for the amendment consists of renewing its NRC license;
changing the license from standby to operational; proposing new environmental
and occupational monitoring procedures; and submitting a comprehensive
demolition and reclamation plan with adequate performance surety. The NRC
requested an increase in the financial surety from the present cash bond of
$2.549 million. In response thereto, Plateau increased the NRC surety to a cash
bond of $6.784 million. This will allow the NRC to maintain its review schedule
in completing the amended license by March 31, 1997. The surety amount posted
should be adequate for bonding requirements before resuming Mill operations.
Plateau has commenced reactivation of the Shootaring Mill for full
start-up. There is a stockpile at the Mill of some 90,000 tons of uranium ore
and additional ore in various stockpiles at one of its mines three miles from
the Mill. When the ore in these stockpiles is milled, it could produce in excess
of 500,000 lbs. of uranium concentrates. Since the cost of mining of the
stockpiled ore was paid by others, the production costs will be limited to
milling and haulage from the stockpiles. Plateau plans to commingle this ore
with higher grade ore from another of its mines to provide better mill feed when
the Mill commences production. Registrant owns a contingent interest in one-half
of Plateau's obligations and operating cash flows.
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C. USECC Option on Kennecott's Interest in the
Green Mountain Mining Venture
Registrant and USE have entered into negotiations with Kennecott Energy and
Coal Company for Registrant and Crested to acquire Kennecott Uranium Company's
interest in the Green Mountain Mining Venture. The Registrant expects such
discussions to continue, however, no definitive agreement has been reached.
Registrant will file a further 8-K if an agreement is reached regarding the
acquisition of Kennecott's interest.
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.
March 18, 1997 By: s/ Max T. Evans
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MAX T. EVANS, President
