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): October 25, 2005 (October 20,
2005)
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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 - Adoption of Retirement
Policy
U.S.
Energy Corp. (“USE”) and its subsidiary Crested Corp. (“Crested”) have adopted
retirement policies as of October 20, 2005. These policies include a mandatory
retirement age of 70 unless each Board requests the services of officers
or
employees past that age. Employees and officers are eligible for retirement
after the sum of their years of service with the USE and Crested plus their
age
total 70. Additionally the Board approved a retirement benefit for the
Chairman/CEO, President/COO, CFO/Treasurer, Senior Vice President, General
Counsel and Employee Board Members on the Executive Committee. Under the
terms
of the executive retirement plan, the named officers are to receive 50% of
their
base cash pay or the average annual pay, less all bonuses, received over
the
last five years of their employment which ever is greater. This benefit for
executives is to be paid for 5 years following retirement. In return for
this
benefit, the retired executive officer will be available to USE and Crested
for
up to 1,040 hours per year for consulting or any other services the Board
deems
needed. This retirement benefit can be extended beyond the five year period
at
the discretion of the Board of the respective corporation.
Section
8 Other Events
Item
8.01. Other Events - Uranium Mill, and Mineral Properties
Estimated
Replacement Value of the Shootaring Canyon (Utah) Uranium
Mill.
USE
and
Crested have received an independent Technical Review and Valuation of its
Shootaring Canyon Uranium Mill (“Shootaring Mill”), located in Garfield County,
Utah. The July 2005 report, by Behre Dolbear & Company (USA), Inc. of
Denver, Colorado (“BDC”), concludes that the replacement cost value of the
Shootaring Mill has been determined by BDC to be $80.5 million.
The
Shootaring Canyon Mill is owned 100% by Plateau Resources Ltd., a wholly-owned
subsidiary of USE. Crested has assumed 50% of Plateau’s obligation and is
entitled to 50% of the cash flows from the Plateau properties and assets.
The
Shootaring Mill is one of only four remaining licensed uranium mills in the
United States. The amendment of USEG’s State of Utah by-product material
license, which is currently on standby status, is in progress for full
operational status.
The
Shootaring Mill was the last uranium mill built (in the early 1980s) in the
United States. The BDC report analyzed the current replacement value of the
Shootaring Mill at $80.5 million. Further, BDC estimated capital expenditures
to
upgrade the Shootaring Mill and tailings facility for uranium processing
to be
$31.2 million. BDC also estimated that the costs to add a vanadium circuit
that
could produce an estimated 3.9 million lbs of vanadium (V2O6)
annually to be $18.8 million. The companies are seeking financing for the
upgrade and additional circuit; a minimum of approximately 24 months would
be
required to complete the work.
USE
and
Crested have been active in the acquisition of properties prospective for
uranium to provide feed to the Shootaring Mill. To provide immediate feed
for
the start-up of the Shootaring Mill, USE and Crested own a stockpile of
approximately 100,000 tons of mineralized material at the Shootaring Mill
site
with an average grade of about 0.12% U3O8.
USE
and
Crested currently hold over 33,000 acres of mineral claims and leases and
owns
historical libraries/data covering several mines and exploration areas in
Utah,
Colorado, Arizona and Wyoming. These properties range from exploration to
pre-production status. The property locations include the prolific historic
producing areas of Lisbon Valley in San Juan County, Utah, properties in
Colorado and the Arizona Strip area of Mohave County, Arizona, where high
grade
‘Breccia Pipe’ uranium mines operated in the early 1980s. Extensive and highly
prospective land holdings have also been acquired in the Henry Mountains
area,
within 20 - 40 miles of the Shootaring Mill.
USE
and
Crested have estimated that upon completion of the upgrade and added circuit
work, uranium from the Utah and Colorado properties could be produced at
the
Shootaring Mill for less than $25 per lb. assuming a 0.25% U3O8
average
grade, and vanadium for less than $8 per lb. assuming an average grade of
0.75%
V2O5,
with
full capital cost recovery in both cases. Actual production costs will depend
upon the upgrade and added circuit expenses, and upon other costs
(transportation, labor, power, and materials) as incurred. Production costs
may
vary considerably from the estimates.
Except
for the lower grade mineralized material which has been stockpiled at the
Shootaring Mill for over ten years, the grades of materials controlled at
other
properties in the vicinity have not been determined. Until such grades have
been
established with drilling and testing, and a feasibility study completed
on the
properties to determine the economics of running the Shootaring Mill to process
these materials, it cannot be determined if the properties contain any uranium
reserves. In any event, the feasibility of the mines, and therefore of operating
the Shootaring Mill, will be dependent on sustained high prices for uranium
concentrates, and the grade of material available for processing being economic
at such prices.
Drilling
Results on Sheep Mountain (Wyoming) Uranium Property
USE
and
Crested report encouraging results from the recent drilling program on the
Sheep
Mountain uranium project in Fremont County, Wyoming. This project is in the
joint venture with Uranium Power Corp. (50% owned by USE and Crested, and
50% by
UPC). As a result of the drilling program, the joint venture intends to
immediately initiate a pre-feasibility study on a potential open pit - heap
leach operation, as well as a full resource study on the Sheep Mountain
project.
Fifteen
holes have been completed (a total of 8,862 feet). The main target zone is
an
under-explored roll front system, which has been named the “58 Sand” and is
located approximately ½ mile north of the main Sheep 1 and 2 mines (currently on
care and maintenance status). This system dips to the south, towards the
Sheep
mines, and forms a stratigraphically deeper horizon than the defined
mineralization at the Sheep mines.
Earlier
drilling by a previous operator had resulted in the following intersections
in
this sand:
S16-58
8.0 feet
@ 0.81% eU3O8
S16-59 10.0
feet
@ 0.31% eU3O8
S16-233 13.0
feet
@ 1.49% eU3O8
S16-270
9.0 feet
@ 0.65% eU3O8
The
recent drilling has successfully outlined continuity of mineralization within
the front over a strike length of greater than one mile, with grades and
thicknesses consistent with those observed at the Sheep mines. Intersections
in
the 58 Sand from the current drill program include the following:
SM16-1006 6.5
feet
@ 0.21% eU3O8
SM16-1010 7.5
feet
@ 0.13% eU3O8
A
second
objective of the drilling program was to test the extent and grades of shallow
mineralization in what is known as the Congo Pit area. This is the up dip
extension of the main Sheep Mountain mineralization, where the dip and the
topography combine to bring the zone close to surface. Intersections obtained
in
this zone during the current program include:
SM16-1004
5.5 feet
@ 0.22% eU3O8
SM16-1005 11.5
feet
@ 0.08% eU3O8
SM16-1009
6.5 feet
@ 0.12% eU3O8
SM16-1015
2.5 feet
@ 0.23% eU3O8
SM16-1023
3.0 feet
@ 8.04% eU3O8
SM16-1025 19.0
feet
@ 0.05% eU3O8
SM16-1016
8.5 feet
@ 0.50% eU3O8
SM16-1017
3.5 feet
@ 0.18% eU3O8
These
grades and thicknesses confirm, and in some instances improve, the average
grade
of the previously drilled shallow mineralization, which earlier operators
estimated to be 0.12% U3O8.
The
newly
drilled-out 58 Sand may add to the historic uranium resources previously
identified by the drilling of approximately 1250 holes on the property by
previous operators. In addition, the 2005 drilling has confirmed the presence
of
a potential open pit resource at the north end of the project.
The
companies report that the objectives of the 2005 drilling program have been
met,
i.e., to map out the deep 58 Sand, and indicate the potential for a shallow
open
pit operation. The joint venture now plans to move immediately to the generation
of a full resource study for the Sheep Mountain project by independent
consultants. This will involve the digitization of the 1250 drill holes for
the
project and the hiring of an engineering firm to complete the study. In
addition, the joint venture plans to conduct a pre-feasibility study on a
possible open pit - heap leach operation in the Congo Pit area, again with
the
use of an independent engineering firm.
Concerning
the Uranium Mill and the Uranium Properties Generally
Feasibility
studies have not been obtained on any of the companies’ uranium/vanadium
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 the Shootaring Mill (for the Utah and Arizona
properties), the cost of capital, and other factors. Feasibility studies
can
take many months to complete. These studies are conducted by professional
third
party consulting and engineering firms, and will have to be completed, at
considerable cost, to determine if the deposits contain proved reserves (amounts
of minerals in sufficient grades that can be extracted profitably under current
pricing assumptions for development and operating costs and commodity prices).
A
feasibility study usually must be completed in order to raise the substantial
capital needed to put a property into production. We have not established
any
reserves (economic deposits of mineralized materials) on any of our
uranium/vanadium properties, and future studies may indicate that some or
all of
the properties will not be economic to put into production. Pre-feasibility
studies, and resource studies, are the initial steps which must be taken
before
a full feasibility study can be prepared.
There
is
no operating uranium mill near Sheep Mountain. The ultimate economics of
mining
the Sheep Mountain properties through underground mining will depend on access
to a mill or sufficiently high uranium oxide prices to warrant shipments
to
faraway mills. However, we are investigating the potential to mine portions
of
the deposit by open pit methods with heap leach extraction of the contained
uranium.
Gold
Property (California)
On
October 21, 2005, Sutter Gold Mining Inc. (“Sutter Gold”, a subsidiary of the
companies), received approval of their Waste Discharge Permit application
from
the California Central Valley Regional Water Quality Control Board. Approval
of
the Waste Discharge Permit will allow Sutter Gold to construct waste piles,
use
mill tailings for mine back fill and expand its mining operations at the
companies Sutter Gold Project, located close to Sutter Creek, California.
The
Waste Discharge Permit is the final major permit other than permits to construct
the mill and related infrastructure that may be required by Amador County
for
the project.
The
companies report that a newly compiled review of documentation of historic
gold
production from properties to the north and south of the Sutter Gold Project
shows that between 1857 and 1951 a total of 2,350,096 ounces of gold were
produced from ten historic mines to the north and south of the Project. The
detailed report was completed by Mark Payne, the consulting geologist to
Sutter
Gold and a Qualified Person as defined by Canadian NI 43-101. Mr. Payne is
a
registered Geologist in California (#7067), and a Qualified Person as defined
in
Canada’s National Instrument 43-101, “Standards of Disclosure for Mineral
Projects.”
The
report indicates the potential of Sutter Gold’s project. The 2.3 million ounces
of gold production came from zones ranging from the surface to 4,500 feet
vertical depth. Production was halted in most of the ten mines because of
the
Second World War, not because they ran out of ore. The report indicates that
these very productive mines chased veins to seven times the depth of Sutter
Gold’s present workings.
The
areas
of large historic gold production are found at the north and south ends of
the
Sutter Gold Project area, bracketing a one-mile long portion of the Mother
Lode
Belt with no historic gold production, and which hosts Sutter Gold’s Lincoln and
Comet Zones. The Lincoln and Comet Zones were blind discoveries that did
not
outcrop at surface, and which represent the first significant new gold
discoveries made along the Mother Lode Belt in the last 50 years, that are
unrelated to past-producing mines. We believe there is excellent potential
for
continued new discoveries within the area of the Lincoln and Comet Zones,
both
near the surface and at depth.
The
Sutter Gold Project is situated on a contiguous 535-acre block of mining
claims
45 miles east-southeast of Sacramento, Calif., in the central part of the
121-mile-long Mother Lode gold belt. The Sutter Gold project has been the
subject of considerable modern exploration activity, most of it centering
on the
Lincoln and Comet zones, which are adjacent to each other. A total of 85,085
feet of drilling has been accomplished in 190 diamond drill holes; modern
underground development consists of a 2,850-foot declined ramp with 2,400
feet
of crosscuts plus five raises.
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
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capital required to initiate and sustain mining operations and build and
operate
a gold processing mill. A feasibility study likely will be required to obtain
the capital necessary to put the mine into production and build a gold
processing mill.
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:
October 25, 2005
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By:
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/s/Mark
J. Larsen
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Mark
J. Larsen, President
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