UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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): April 9, 2007 (April 3,
2007)
U.S.
ENERGY CORP.
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(Exact
Name of Company as Specified in its
Charter)
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Wyoming
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0-6814
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83-0205516
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(State
or other jurisdiction of
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(Commission
File No.)
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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Glen
L. Larsen Building
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877
North 8th
West
Riverton,
WY
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82501
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(Address
of principal executive offices)
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(Zip
Code)
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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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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
1.01. Entry into a Material Definitive Agreement - Exploration, Development
and
Mine Operating Agreement with Kobex Resources Ltd. - Mt. Emmons “Lucky Jack”
Molybdenum Property.
General.
On
April 3, 2007, U.S. Energy Corp. (“USE”) and its majority-owned subsidiary
Crested Corp. (“CC”), and U.S. Moly Corp. (“U.S. Moly”), 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 formal
Exploration, Development and Mine Operating Agreement (the “agreement”) with
Kobex Resources Ltd. for the Mt. Emmons “Lucky Jack” Molybdenum Property. USE
and CC together are referred to as “USE/CC.”
The
terms
of the agreement generally are similar to the terms described in the Forms
8-K
filed on October 10, 2006 and December 8, 2006, which summarized the terms
of
the Letter Agreement, and its amendment, between USE/CC and Kobex. However,
as
previously disclosed, the parties agreed that at the end of the due diligence
period, they would use their best efforts to negotiate and sign a formal
agreement. The final agreement replaces the amended Letter Agreement.
The
agreement grants Kobex the exclusive option to acquire up to a 50% undivided
interest in patented and unpatented claims located near Crested Butte, Colorado,
which are held by USE/CC, for $50 million. The $50 million to be spent will
be
for all Project-related expenditures, the cost for a bankable feasibility
study,
and option payments to USE/CC. The balance between money spent on expenditures
and option payments, and $50 million, will be paid to USE/CC in cash.
Expenditures
and Option payments
Date
by When Expenditures and Options Must be Paid(1)
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Expenditures
Amount(2)
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$
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Option
Payment Amount (3)
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$
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Total
Expenditure and Option Payment
Amount
- $
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Cumulative
Total for Expenditures Amounts and Option Payments - $
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Later
of April 13, 2007 or TSX-V Approval(4)
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-0-
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750,000
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750,000
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750,000
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March
31, 2008
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3,500,000(5)
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1,200,000(5)
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4,200,000
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4,950,000
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Dec.
31, 2008
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5,000,000
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500,000
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5,500,000
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10,450,000
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Dec.
31, 2009
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5,000,000
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500,000
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5,500,000
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15,950,000
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Dec.
31, 2010
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2,500,000
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500,000
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3,000,000
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18,950,000
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Dec.
31, 2011
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-0-
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500,000
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500,000
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19,450,000
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Totals
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16,000,000
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3,950,000
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19,450,000
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19,450,000
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(1) |
Any
shortfall in expenditures may be paid direct, in cash, to USE/CC.
Except
for the initial payment of $3,500,000 in expenditures by March 31,
2008
(which is a firm commitment of Kobex), if any expenditures amount
is not
fulfilled and/or option payment is not made by 90 days after the
due date,
the agreement will be deemed to have been terminated by Kobex. However,
if
Kobex fails to incur an expenditures amount and/or does not make
an option
payment after the date when Kobex has earned a 15% interest, U.S.
Moly
will replace Kobex as manager of the
property.
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(2)
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Expenditures
include (but are not limited to) holding and permitting costs for
the
Property; geological, geophysical, metallurgical, and related work;
salaries and wages; and water treatment plant capital and operating
costs.
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(3) |
At
Kobex’ election, option payments may be made in cash or Kobex common stock
at market price on issue date. Kobex may accelerate these payments
in
advance of the scheduled dates.
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(4) |
The
agreement is subject to approval by the TSX Venture Exchange. If
not
approved by July 2, 2007, the agreement will immediately terminate
unless
the parties agree otherwise.
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(5) |
For
this period, Kobex may reduce the option payment by $700,000 by increasing
expenditures by that amount, or apportioning the $700,000 between
the
option payment and expenditures.
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Bankable
Feasibility Study
Kobex
is
required to deliver a bankable feasibility study (the “BFS”) for the Property
(including confirmation of advance permitting or issuance of a mining permit).
If option payments and expenditures, plus the costs to prepare the BFS, total
$50 million before the BFS is completed and delivered to USE/CC, Kobex and
USE/CC jointly (50% each) shall fund completion of the BFS,
If
option
payments and expenditures are less than $50 million, then, in order to fully
exercise the option to acquire an aggregate 50% interest in the Property,
Kobex
shall pay USE/CC the difference between $50 million, and the option payments
plus expenditures plus the costs to prepare and complete the BFS. This amount
is
the “study cash difference.” If the BFS is not completed by December 31, 2016,
Kobex’ interest will revert to 15% and U.S. Moly will assume operatorship of the
Property.
Exercise
of the Option.
The
option is exercisable in two stages. The “option period” is the time between
April 3, 2007, and that date when Kobex has earned the additional 35%
interest.
First
Stage: When
Kobex has incurred an initial $15 million in expenditures, Kobex shall have
earned a 15% interest in the Property.
Second
Stage: If
Kobex
completes the remaining option payments and expenditures and delivers the
BFS
(and pays the study cash difference, if applicable), Kobex shall have earned
an
additional 35% interest (for a total of 50%). This date will be the “50% option
exercise date.”
Management
During the Option Period.
On the
50% Option Exercise Date, Kobex may either (i) elect to form a joint venture
with USE/CC (50% interest each); or (ii) four months after such date, offer
USE/CC an election to form the joint venture and have Kobex arrange all future
financing for all operations on the Property, for an additional 15% interest
to
Kobex (for a total 65% interest in the joint venture); or (iii) acquire all
the
outstanding securities of the an entity formed by USE/CC to hold its joint
venture interest, for Kobex stock, with the purchase price determined by
negotiation or an independent valuator.
Throughout
the option period, Kobex shall be the manager of all programs on the property,
and its activities shall be subject to the direction and control of a management
committee. The management committee shall have four members (two each from
USE/CC and Kobex); in the event of a tie, the Kobex members shall have the
casting vote. A technical committee, also with two members from each party,
shall provide technical assistance to the management committee.
The
Joint Venture
After
the
50% option exercise date, a joint venture (the “Luck Jack Joint Venture”) shall
be deemed formed between USE/CC and Kobex, to hold and explore the Property;
if
feasible, develop a mine on the Property; and for so long as feasible, operate
the mine and exploit minerals from the Property. USE/CC and Kobex each shall
have a 50% interest in the joint venture and shall be obligated to contribute
funds to adopted programs and budgets in proportion to their interests.
Kobex
shall be the manager of the joint venture, subject to the direction and control
of a management committee (which may be the same as the management committee
during the option period).
Broker’s
Fee
Kobex
may
pay a broker’s fee in connection with the agreement. USE/CC and Kobex are
negotiating the terms of how much of this fee USE/CC would be obligated to
pay.
USE/CC does not expect its share to be more than Cdn$500,000 if Kobex pays
such
a fee and USE/CC will have the option to pay its share of such fee over a
five
year period (Cdn$100,000 annually to Kobex in cash or USE stock, or in shares
of
Kobex which USE/CC will have received for option payments from Kobex). If
the
master agreement with Kobex is terminated for any reason during the five
year
period, USE/CC’s obligations to reimburse Kobex for the broker’s fee also would
be terminated.
Continuing
Royalty held by USE/CC.
USE/CC
shall continue to retain a gross overriding royalty on production from the
Property, under the Amended and Restated Royalty Deeds and Agreement dated
May
29, 1987 between U.S. Energy and Crested, and Mt. Emmons Mining Company.
USE and
Crested expect this royalty to be subject to adjustment to be provided for
in
Royalty Adjustment Agreements to be finalized and executed by USE, Crested,
and
Kobex in the near future.
Section
9. Financial Statements and 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.
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U.S.
ENERGY CORP.
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Dated:
April 9, 2006
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By:
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/s/
Keith G. Larsen
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Keith
G. Larsen, CEO
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