U.S. Energy Corp. / Crested Corp. and Kobex Resources Ltd. Enter Into Letter Agreement Involving Lucky Jack Molybdenum Property

U.S. Energy Corp. / Crested Corp. and Kobex Resources Ltd. Enter Into Letter Agreement Involving Lucky Jack Molybdenum Property

U.S. Energy Corp. and Crested Corp. , d/b/a USECC, today announced the signing of a Letter Agreement with Kobex Resources Ltd. (TSX Venture Exchange: KBX.V – News) whereby Kobex can acquire a 50% interest in the Companies’ Lucky Jack (formerly known as Mt. Emmons) molybdenum deposit in west-central Colorado (the “Project”).

On October 6, 2006, U.S. Energy Corp. (“USEG”), its majority-owned subsidiary, Crested Corp. (“Crested”), and U.S. Moly Corp. (“U.S. Moly”), a Wyoming corporation organized by USEG and Crested but not yet active, entered into the “Letter Agreement” with Kobex Resources Ltd. (“KBX”), which is headquartered in Vancouver, B.C. The Letter Agreement outlines the terms under which Kobex can acquire a 50% interest in certain patented and unpatented mining claims held by USEG and Crested, for $50 million in option payments and expense funding. U.S. Energy and Crested Corp. each reserved a 3% gross royalty on the Project subject to being reduced to a 1.5% gross royalty each at such time as Kobex earns a 50% interest in the Project. Further details of the Letter Agreement are available in a Form 8-K filed by USEG and Crested with the Securities and Exchange Commission on October 10, 2006.

The mining claims, located on Mt. Emmons near Crested Butte, Colorado and referred to as the “Lucky Jack Property,” contain a significant deposit of molybdenum. The Lucky Jack Project includes a total of 25 patented and approximately 520 unpatented mining claims covering approximately 5,400 acres, or over 8 square miles, in area. The United States Department of the Interior, in a report dated April 2, 2004, estimated that the Lucky Jack deposit contains approximately 23 million tons of mineable reserves averaging 0.689% molybdenite, and that about 267 million pounds of molybdenum trioxide should be recoverable from the Project. This report covered the high-grade mineralization, which represents only a portion of the total mineral deposit delineated to date.

AMAX Inc. originally acquired the Project from USEG and Crested in a series of transactions during the 1970s and 1980s. AMAX reportedly invested an estimated $150 million in the acquisition of the Project, the securing of water rights, extensive exploration, ore body delineation, mine planning, metallurgical testing, permitting and other activities involving the moly deposit.

“We are extremely pleased to have someone of the mining caliber of Dr. Roman Shklanka and his seasoned team at Kobex Resources join us in the development of our Lucky Jack molybdenum deposit,” stated Mark Larsen, President of U.S. Energy Corp. “Roman has been extensively involved in the development of large-scale mining projects throughout the world and has more than 40 years’ experience in the mining industry. If this agreement is formalized in the coming months, we have identified a number of synergies that should allow our two companies to ultimately bring this tremendous project to fruition. Kobex has recognized the ‘world class’ nature of this deposit, and we look forward to combining our efforts to realize the potentially tremendous value of the Lucky Jack property.”

“Exploration and development work activities conducted by major mining companies in prior years suggest that the Lucky Jack molybdenum deposit is ‘world class’ in scope, with a sizeable portion of the deposit containing high-grade mineralization,” noted Dr. Shklanka, Chairman of Kobex Resources Ltd. “With molybdenum prices currently trading in excess of $27.00 (US) per pound, compared with less than $6.00 per pound 3 years ago, we are very optimistic that the market for moly will remain healthy — especially in light of strong economic growth in China, India and a number of other countries.”

Dr. Shklanka is the former Chairman of Canico Resource Corp., the Chairman of International Barytex Resources Ltd., the Chairman of Kobex Resources Ltd. and the Vice Chairman of Pacific Imperial Mines. He is also Chairman of Polaris Minerals Corporation, a company that develops aggregate resources in British Columbia for the U.S. market. Canico Resource Corp., with an inferred resource of about 100 million tons of 2.1% lateritic nickel in Brazil that became one of the world’s major nickel developments, was sold to Companhia Vale do Rio Doce (CVRD) for $865 million in 2005. CVRD has recently agreed to acquire Canadian mining giant Inco Ltd. for approximately $15 billion (US).

Dr. Shklanka was associated with Sutton Resources Ltd. as Chairman (1995-1999) and Vice Chairman (1993-95). He brought the Kabanga nickel deposit in Tanzania with him when he joined Sutton and was instrumental in acquiring the 15 million-ounce Bulyanhulu gold deposit, also in Tanzania. Sutton was acquired in 1999 by Barrick Gold Corp. for $525 million (Cdn). The Kabanga deposit, a major suphide nickel resource, is currently under option to Falconbridge by Barrick.

From 1969 to 1990, Dr. Shklanka was with the Placer organization, working in a variety of capacities, including General Manager of Exploration for Placer Development Ltd. and Vice President for Exploration for Placer Dome Inc. While with Placer, he was responsible for the acquisition of the Kidston gold mine, at that time the largest gold mine in Australia, and its evolution to feasibility. He was also involved in the acquisition of the Granny Smith gold mine and the Osbourne copper mine, both in Australia, and the exploration of the Misima and Porgera gold mines in Papua, New Guinea.

Dr. Shklanka was a recipient of the Viola R. MacMillan Developer’s Award, which is named in honor of the Prospectors & Developers Association of Canada’s longest-serving president and is awarded to those who have demonstrated leadership in management and financing for the exploration and development of mineral resources. The 2006 award was presented to Michael Kenyon and Roman Shklanka, co-founders of Canico Resource Corp., a Vancouver-based junior mining company and owner of the Onca-Puma, a large undeveloped nickel deposit in Brazil that was acquired by CVRD in 2005.

Disclosure Regarding Mineral Resources Under SEC and Canadian Regulations

USE/CC is in a joint venture with Uranium Power Corp. (“UPC”) and a major shareholder of SGMI. The common stock of UPC and SGMI, both Canadian corporations, are traded on the TSX-V, and are subject to the reporting requirements of the TSX-V and Canadian securities regulatory authorities. Harold F. Herron, Senior Vice President and Director of USE and Crested, serves on the board of directors of SGMI and is also the Company’s President and CEO. Chris Healey, who is Vice President Exploration of USE, serves on the board of directors of UPC.

From time to time, UPC and SGMI make public disclosures in compliance with National Instrument 43-101, “Standards of Disclosure for Mineral Properties.” NI 43-101 establishes procedures and standards for determining the existence of, and the reporting of, Mineral Resources and Mineral Reserves. Mineral Resources are classified in ascending categories of geological confidence, as Inferred, Indicated, and Measured. Each definition relates to a resource that is determined to be of “such a grade or quality that it has reasonable prospects for economic extraction.” Mineral Reserves are classified as Proven or Probable.

Kobex Resources Ltd’s common stock is also traded on the TSX, and as such, Kobex is subject to the reporting requirements of the TSX and Canadian securities regulatory authorities. Kobex may make public disclosures on the TSX (and the JSE) in compliance with NI 43-101 (and comparable rules of the JSE).

The SEC allows public disclosure of the extent and grade of mineral deposits, and, under SEC Industry Guide 7, “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, of Proven (Measured) Reserves and Probable (Indicated) Reserves. In contrast to NI 43-101, the United States SEC does not allow public disclosure of Inferred, Indicated, or Measured Resources. In addition, there are some significant differences in the standards allowed, and the procedures required to be followed by the SEC for public disclosure of the SEC’s Proven (Measured) Reserves and Probable (Indicated) Reserves, as compared to NI 43-101 for Proven and Probable Mineral Reserves.

United States residents, who obtain information about those of our molybdenum properties, and about our uranium and gold properties, which are reported upon by UPC and SGMI to the TSX-V (and which may be reported upon by Kobex to TSX) in accordance with NI 43-101, and about SGMI’s gold properties, are cautioned that such information may be materially different from what would be permitted under SEC rules for United States companies.


U.S. Energy Corp. and its majority-owned subsidiary, Crested Corp., are engaged in a joint venture to conduct various business operations as USE/CC. Through their subsidiaries, Sutter Gold Mining Inc., Plateau Resources Limited, Inc., U.S. Moly Corp, U.S. Uranium Ltd. and USE/CC, they own various interests or properties prospective for gold, uranium, vanadium and molybdenum.

This news release includes statements which may constitute “forward-looking” statements, usually containing the words “believe,” “estimate,” “project,” “expect,” or similar expressions. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, future trends in mineral prices, the availability of capital, competitive factors, and other risks.

The profitable mining and processing of uranium and vanadium will depend on many factors: Obtaining properties in proximity to the Shootaring mill in southeastern Utah to keep transportation costs economic; 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 uranium oxide and vanadium; obtaining the capital required to upgrade the Shootaring mill and add a vanadium circuit, and obtaining and continued compliance with operating permits.

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 the capital required to initiate and sustain mining operations, and build and operate a gold processing mill.

We have not yet obtained feasibility studies on any of our mineral 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 gold and uranium/vanadium mills; the cost of capital, and other factors. Feasibility studies can take many months to complete. We have not established any reserves (economic deposits of mineralized materials) on any of our uranium/vanadium or gold properties, and future studies may indicate that some or all of the properties will not be economic to put into production. The molybdenum property has had extensive work conducted by prior owners to establish the deposits of molybdenum, mine planning and other ancillary activities. This data will have to be updated to determine the viability of starting mining and milling operations. Obtaining mining and other permits to begin mining the molybdenum property may be very difficult, and, like any mining operation, capital requirements for a molybdenum mining operations will be substantial.

By making these forward-looking statements, the Companies undertake no obligation to update these statements for revision or changes after the date of this release.

Source: U.S. Energy Corp.

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