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US Energy Corp. (NASDAQ:USEG)

Wall Street Analyst Forum

February 14, 2007 11:50 am ET

Executives

Harold Herron - SVP

Presentation

Harold Herron

Thank you, Gerry. I appreciate that. The slide presentation is also available in print. Some of you, I noticed, already have them. But -- so everything you're going to see here is -- I guess, somebody could do on that.

First of all, thank you for the opportunity to present even though we paid for it. We will be able to go through and explain a little bit more about US Energy Corp., what we're doing. And I offer the apologies of Keith Larsen, the Chairman, and Mark Larsen, the President. They were going to accompany me. But we're in the midst of working on some deals, and we thought it might be prudent if they stayed back in the office.

So I'm going to try to fill their shoes in making this presentation. As an FYI, I started with the company in 1976. So I do have some history with the company and the Founders are Jack Larsen and rest of his family, as well as Mike Svilar, who will be coming in here shortly, I hope, our General Counsel who just retired at the end of this last year.

So the topic -- a little overview about US Energy is over a period of time, dating back to the '60s, this company was fortunate enough to acquire a suite of assets that have become extremely valuable today. And that's why you see "Strength in Natural Resources" as the headline slide.

I'm sure every presenter has shown the Safe Harbor. So what I'd like to do today is give you an overview about the company and talk about what our short term goals are and some of the catalyst that are affecting the change in the direction of US Energy Corp.

And as Gerry said of our portfolio, our suite of natural resource assets includes gold, uranium, molybdenum. And at the end of the conversation and our discussion here, we'll obviously entertain question and answers, and we'll talk about where we're going to be going from here.

Kind of an overview of US Energy, in terms of if somebody hasn't had a chance go -- whatever to find out what are our share capitalization is and so forth. We roughly have 20 million shares outstanding and the stock is trading about $5 a share, somewhere in that range. So our market cap is about $100 million.

Our cash position currently is about $15 million and we're looking to reload some of that with some of the transactions that are eminently close to coming to fruition, and we'll talk about those in a little bit.

The total assets of the company are about $38 million. That's the book assets. That's of 9/30/06. And it's interesting to know we have very little debt. And we -- a lot of the historic operations of the company have been in what we'll call a joint venture, called US Energy Crested Corp. Joint Venture, USECC for short.

Crested Corp. is a Bulletin Board company. The name used to be Crested Butte silver lining. So you are right about the source coming from Crested Butte Colorado. And what we recently have done is that we've made an offer to the minority shareholder of the company to acquire and merge Crested Corp. into US Energy, which will make the story a lot easier to tell. We'll be talking about one company versus two.

As with any company, the success of that company is really predicated not only on the material assets of the company, but the intellectual talent. And I'd like to just briefly give you an overview of who some of the players are. Keith Larsen is the son of Jack Larsen, as is Mark. And Jack Larsen was the founder of US Energy Corp. back in 1966. So Keith today is the CEO and the Chairman of the company, and he is also a Director on Crested Corp. He is a former director of Pinnacle Gas Resources, a private coalbed methane company founded by Credit Suisse First Boston.

Mark Larsen, the gentlemen -- the taller gentleman standing, we're moving left to right -- is the President and COO of US Energy Corp. and the former President of Rocky Mountain Gas. We'll touch on Rocky Mountain Gas here towards the end of the presentation. He is also a former Director of Pinnacle Gas Resources, the same reference to the coalbed methane company founded by Credit Suisse First Boston.

Scott Lorimer, a great guy, our CFO. And he has been with us since about 1980, cut his teeth working for Federal American Partners and others. So he has got a long history, not only dealing with natural resource accountancy, but also compliance and SOX issues.

Myself, I graduated with an MBA, went to the University of Nebraska. I got a BS degree in Business and a MBA from University of Wyoming. And right grad schooling to work for Jack Larsen and his group of companies. So I've been there for a while. I'm also the President of Plateau Resources, which is a uranium subsidiary, and also the President of our gold subsidiary called Sutter Gold Mining. And we will discuss that later as well.

Steve Youngbauer is filling the slot vacated by Mike Svilar. And Steve Youngbauer comes to us -- he was the President of Hi-Pro Production. It was a coalbed methane producing company operating in the Powder River Basin, and he was present in that entity. And so, once we acquired that, he came on board full time as our General Counsel. And he also served for Amax Coal.

US Energy is changing, and it's like all the stars have aligned for the first time in a long time. I mean who would have moly would be at $25 and uranium at $75. And uranium is going to go to $100 in my humble opinion. I am just repeating what other analysts are saying, because of supply/demand fundamentals. And of course, gold, gold's at what, at $660 today -- $665, somewhere in that nature, which is excellent.

So all of these entities that we're involved with and the commodities that they represent are now -- they're just doing so well, just right. And we're fortunate enough to have been able to hold on to them during the lean times. So right now, we're in the midst of working on closing the deal with SXR Uranium One.

Neal Froneman is the Chairman of that company and President, just a wonderful man and a wonderful company. And he has aggressively built up a suite of uranium assets that are quite enviable. He will end up with production worldwide from Australia, South Africa, and now he has his designs on the United States with the acquisition of our assets, our uranium assets.

So we want to get the Uranium One transaction closed, the extension. The extension that Neal signed with us goes into April of this year. We -- in my opinion, it’s going to close sooner than that. And we are going to move forward with our joint venture projects.

The Sutter Gold Mining property, we’ve got on drilling going there right now to expand the gold resource and tie two ore zones together, which is the Lincoln and the Comet. And we’ll show you a slide of that here shortly. And along that same line, we will be working on a pre-feasibility study with an outside engineering firm, and that has already been initiated.

The bankable feasibility study, we’re going to be working on that as well as continue to permitting for the Lucky Jack molybdenum project, which is located outside Crested Butte, Colorado.

Anticipating the cash in flows from some these of rather large deals, especially for a company of our size, we’re going to be looking for other M&A type products, primarily in the natural resource business, which is something that we know and kind of our modus operandi is to plan an acorn and hopefully harvest that in four to six years as a full-grown tree. So we’re going to continue doing that, looking for undervalued assets, polishing them and then selling them or joint venturing them.

We are going to close the merger with Crested Corp., and we are also looking to identify and expand into positive cash flow assets instead of just being focused on just doing deals. Let me introduce Mike Svilar who just walked in, the former -- one of the founders of the Company.

Mike, can your raise your hand just for a second so everybody can see you. And he is the gentleman I just referred to earlier that retired as our General Counsel and frankly one of my mentors. He is a sharp guy. Do I need to go into the fundamentals of the uranium market? Is there anybody here that is not familiar with what’s happening in uranium and…

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Unidentified Audience Member

What’s happening?

Harold Herron

What’s happening in uranium is we have a supply demand imbalance. And as you can see from this chart, productions are 105 million pounds annually, and the global demands are 175. So you might say where does that shortfall come from? And it comes from a variety of sources, stock piles, deblending of Russian highly enriched uranium, things of that nature that have helped fill this shortfall.

Now, what happens? Mining companies like ourselves did not put money on the ground in terms of developing uranium assets, because the price was so low. I mean I can remember many trips where Jack and Mike come in to New York and trying to talk about raising money for something that was trading around 12 bucks a pound and really kind fell on deaf ears. And I am sure it’s the same for a lot of other uranium mining companies. It was difficult.

And I think it is for the same power and the wisdom of Cameco and Jerry Grandey, those groups, so that there is an assured supply coming from the Canadians and the Australians. And it’s really important, because increasingly, nuclear power is going to be an important, very important source of clean power for the world.

I mean China really needs it. India needs it. We need it here, frankly, in our country as well. A number of years ago US Energy acquired from Consumers Power the Shootaring Canyon Uranium Mill and a host of related properties that were close to it. The Shootaring Canyon Uranium Mill is one of four uranium mills left in the United States. At one time there were 42. And they have all been buried and decommissioned expect for these four.

This is located in the Southeast Utah. And that’s an aerial view of the site itself. As you can see, it’s in a remote location. We believe, our geologists believe, that within an area of influence, which would make it economic to deliver product, uranium ores to this mill, whether from a primary production from our mines or from milling for outside, you know, buying ore from other people. But there is probably a captive audience of some north of 50 million pounds in this general area.

This is one of the principal assets that SXR Uranium One is acquiring. This is a four months stock pile at the mill. This burn that you see here, this was previously lying from the Tony M mine. And so it’s just there to help give the mill tweak as we -- as SXR goes in. And assuming the deal is completed and they redo the tailings cell and bring it up to current standards and that sort of thing.

The beauty of this mill it that it only operated for about four months. So there is really no legacy issues associated with it in terms of tailing cell breaches or anything like that. So it’s in excellent shape. And it was the last mill built in the United States.

The uranium portfolio that we have also includes properties in Central Wyoming. I’ll go into that here in a minute. Underground mines with a 12 to 20 million pounds remaining, that would be referenced to the Sheep Mountain mines. And we -- our portfolio right now is, most of which has been conveyed to SXR, totals about 35,000 acres in uranium and vanadium.

There is another aerial showing site of where is the mill located in Southeast Utah. Here is another photograph of the mill showing the conveyor belt coming from the Grizzly going over to the principal grinding circuit, the sag mill. What we are doing right now is -- the State of Utah became what’s called an agreement state.

Historically we were dealing with the Nuclear Regulatory Commission on all our permitting issues. But the state of Utah said that they wanted to have that ability and their government agreed. So now, we are moving -- we’re working with the State of Utah and have been since fall of last year to change our license from reclamation to full operational.

I already mentioned we are one of four US mills. The -- it can handle 750 to as high as a 1,000 tons per day. The estimated replacement cost on the mill from Behre Dolbear, which is an independent engineer firm out of Denver, is approximately $80 million as it stands today.

The anticipated production and feed to that mill is anticipated to start in 2010. And at that main plate milling capacity, we should be able to produce about 1.5 million tons of uranium, and if we add the vanadium circuit, about 4 million pounds of vanadium.

The cost to upgrade this facility to comply with all of the current and contemporaneous rules and requirements for the State of Utah and federal government and others is going to be about $31 million. And like I mentioned earlier, I think most people think uranium is going to go north of $75, which is where it’s at today…

We are in a joint venture with a company called Uranium Power Corp, a Canadian Junior traded on the venture exchange. And this slide depicts a series of cash flows that we will be receiving as a result of that joint venture.

Also, in 2007, we are going to be receiving $4.1 million and this shows the schedule, in April, June, October and December. There is an additional 1.5 million shares of their company stock. This also shows you that will be delivered 750,000 shares in June and 750,000 shares in December.

As part of joint venture, they agreed to fund up to 20 projects to the tune of $0.5 million each. And one of the reasons we did that was to help preserve US Energy’s cash. So we could do some of the other things that we have on our play.

Currently, there is four that they have bought into so far. The Green River of South, which is located in Utah for Sheep Mountain, which is the one I mentioned earlier with the reserves Burro Canyon, Wolverine Colorado and really exciting one called Breccia Pipes North Group and that’s on the North Rim of the Grand Canyon.

Breccia Pipes are an interesting geologic phenomena and they are actually big if you will just imagine taking a pipe and turn it up, you know straight, up and down. And these areas fill them with all types of conglamar and then they collapse. And a lot of times they contain anywhere 1 million to 8 million pounds of uranium, usually, highly enriched like 0.8 whereas this stuff in Wyoming averages 0.25, 0.3 some where in that nature. So they are highly enriched and they are -- it’s an exciting project for the companies.

So like as we hook or wagon up with SXR team. This slide kind of goes through in bullet point fashion as to why we did, first of all it was the people. It was their vision and where they were planned to go with the company. We enjoy the fact that they were going to -- they had a global appetite and they wanted to have production from several different countries.

We believe that they will be one of few juniors that will really emerge as a major, major player. Those of you that haven’t -- that didn’t see they recently announced that they will be merging with Eurasia with their production is over in Kazakhstan.

We signed a deal. The price was locked in at about $8 Canadian. We’re going to receive 6.6 million shares of SXR stock. And today I think it’s traded in $14 to $15 range somewhere in there.

SXR started as a result of a merger with Southern Cross resources out of Australia. So that’s where the SXR comes from. And like this bullet point says, how the 6.6 million shares -- since the announcement the value of our pro forma ownership their equities increased from $49 million to $80 million.

We received $20 million upon startup of our Shootaring Canyon Mill, which is anticipated in 2010. So as you can already start to see from the slide about half of the original deal, which was roughly 100 million, half is coming in SXR equity and the other half is coming in future cash payments, which are articulated again on the slide.

So 20 million cash payment upon the start-up of the Shootaring Canyon Mill in 2010 -- estimated 2010. 7.5 million cash upon the first delivery of mineralized material to a commercial uranium mill from any of the properties that we’re included in the sale to SXR.

And then we get a cash payment not to exceed $12.5 million -- sorry -- cash royalty equivalent to 5% of the revenues derived from the sales value of any commodity produced from the Shootaring Canyon Mill. And that again, that’s capped at 12.5 million.

This graph at the very bottom shows you a consumption and production and kind of what’s projected. You can’t see the dates across bottom, I apologize for that but basically you can see that productions shortfall.

A number of years ago, 1990 to be exactly we got involved with our uranium property -- a gold property outside the Sacramento, California. The gold property was called Sutter Gold mine. And it was previously, just a password without going through players. It was we actually buy from Regan Minerals.

Okay. And what happened and is they had a group of geologist that were out there and they -- where Sutter Gold is located outside the Sacramento is the site of the gold rush of 1849. So you’ll hear some people say in the mineral business, the best place to find a mine is in the shadow of the head frame. Well, that’s exactly what these guys did.

There is a production in the mother load over here -- production over here and they thought why there isn’t something in between. So they did their deal counts and went ahead and drilled it, and sure enough there wasn't a gold resource in between and that's the property that we now control.

Since that time, we put about $20 million in the project. We finally, get it all permitted. I got involved with the project year 2000 and so it's fully permitted for a 1000 tones a day. No, it took quite a bit of time dealing with the State of California, but we're finally permitted.

Projected year one and two production at a rate of about 300 tons a day versus the 1000, we kind of want to just get into and just kind of crawl, then walk, then run and being able to produced enough rock to feed that mill. We are planned to build the mill, initially to handle to 250 to 300 tons a day, but with the building size and expansion capabilities go to 500 tones a day.

By year-three, we should be up to the 500 tons a day and that will produce -- we will be producing about 52,000 ounces of gold a year at that rate. We are -- the plan of production is early 2009 and right now, I mentioned early we have a drill program. When we started that back in July of last year, it's a combination of underground drilling from the drifts to tie-two ore zones together and some surface drilling to help build the inferred resource category for the project.

In about 2005, we merged this company with a publicly traded shell out of a Canada. And then we changed the name which is what it is today Sutter Gold Mining Inc. and symbol is SGM.V and US Energy owns roughly 50% of the outstanding shares of that company.

Couple of salient points about who sits on the Board of Directors for Sutter Gold. One gentleman is by the name of Norm Anderson and he used to be the Chairman of Cominco, a very large mining company up in Canada. We're very pleased also have Al Winters on the Sutter Gold Board and he was in charge of Homestake Gold's operations North America for number of years, recently retired to Wyoming. Mark Brown the gentlemen we bought the shale is from is a Certified Public Accountant up in Canada and myself, that comprises the board.

So again, in summary on the Sutter Gold mine all the major mine mill permits are issued. The mill deigns is basically all completed. The water discharge permit, which was the second major permit we had to have on this project, we obtained that in 2005. I already told you about the drilling that will go through April of this year.

It's been extended we lost -- we had three drill rigs initially over on the surface and two of them left so it was beyond our control and if you want to take a look at the this project you go to "suttergoldmining.com" that's our website and you have links to all of our Cedar filings, all the press releases and what's going on with the drill program currently.

I think it's interesting to note that at this site, we also run a mine tour. You can actually go underground at the site and last year 60,000 people went through this tour. We have at least talked to an independent tour operator but it's our mine and so if you ever want to go in woods you might want to drop in and see, go underground in our mine.

So molybdenum, the word we had a hard time pronouncing. Here is some of the stats on moly, global production is about 380 and demands about 380, so they are about the same. But there is a lot analysts they are saying that we're going to be needing more molybdenum and it's used as an alloying agent with steel to make a very heat resistant product and a very corrosion resistant product and it's being used in pipelines and the double-hulling of these ocean going vessels, their hulling improved and things of that nature major.

The demand growth is 4 to 6% a year and they are anticipating, the analyst are a 30% growth over five years. So the market needs an extra 100 to 120 million pounds of new production within the next five years. Currently, the price is about $25 a pound. However, we are running our economics on the $10 to $15 sustainable price range. And of course, like many commodity prices especially industrial commodities, it's pretty closely tied with the growth of the economies in China, in India and of course, United States and other countries.

This is the sites map that will show you an idea where the location is, its located outside to the South East of Denver Colorado. I've got a better one here a second I will show you. This is photograph taken across the basin, across where the sea area is I guess. looking back on the mine, so you can see at the very top the elevation of Mount Emmons is about 12.3 and as you come down the mountain from Red Lady basin down you'll see down on the far right hand corner, this is the water treatment plant.

We recently received this property back from Phelps Dodge that's where we had it originally, we sold that the Amax. Amax through a series of mergers became Phelps Dodge and then, here, recently we got the property back based on some contractual obligations that we had with Amax.

This is probably a better map that shows you kind of where the location is coming from Denver, Henderson and Climax, referred a mines that are owned by Phelps Dodge. And ours is the third on that list that's also called the Colorado mineral belt. There is a lot of highly enriched structures along that belt and that just happens to be where Lucky Jack, it is -- we are the third one in the row.

The transfer from Phelps Dodge took place February 2006, this is an amazing deposit, it's probably the richest primary moly deposit in the world to our knowledge. We have update a pre-feasibility study with Behre Dolbear on October 2005, but the additional work on that work product going forward.

And here, recently we brought an joint venture partner by the name of Kobex Resources. And they are already TSX Venture Exchange listed company, but is rated the similar the deal with them is very similar to what -- how we handle the deal with that SXR and the deal was done with people not so much the company and their reputations. And I’ll get into that in a second, but basically so the 50% interest after the ARN for $50 million in this project.

This is -- if you took the mountain and just sliced it you can see -- the depiction of these colors shows you where the ore is located within the mountain on this one horizon. The green you see there are locations for the underground drill stations. There is 38 miles of drill core that have been taken out of this mountain. It has been north of $150 million spent on this project to date by predecessors.

This is a big project and a big resource. If you take a look at this next slide, and I mentioned earlier that this is a very high grade resource Lebanon resource. We’re going to have about 800 million pounds of MoO3 that are contained currently in this mountain. In the average grades 0.36 at 7.2 pound per ton.

But take a look at this slide and go down two sentences and take a look at what the grade is at Henderson and at Climax. They’re both great mines, but then compared that with a great amount MOS. So we definitely have a world class high grade in Lebanon deposit and also is located in democracy the Untied States of America which is --

Unidentified Audience Member

[Question Inaudible]

Harold Herron

I don’t know.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

Climax in Lebanon, but that was basically MX.

Unidentified Audience Member

Are two mines going to production at Henderson plant?

Harold Herron

Henderson is -- and its climax is we are coming back on Mike is that were you -- that’s what you understand. So we have to -- fuel is operational today the lucky Jack Lebanon deposit would be among the top 10 Lebanon producers in the year.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

Its going be 8 to 10 years would be my best guess. Something in that neighborhood. Typically, it takes about 17 years from discovery to start -- to have mine producing. It’s a long lead term that’s why I upgrade here. Here is summary of the cobalt transaction. The initial paying was $750,000 and these columns detect the date of the anniversary, date of payment. The payment and cash were stock as in final column expenditures.

So all in, they’re going paying us about $50 million, and if the amount of the money that they expand on the property moving that forward with permitting and the other things that we need to do. If it’s less than the $50 million, then they pay us that balance in cash. So what’s happening is the Kobex team is taking on the day-to-day financial obligations of this property as well as moving it forward.

That’s -- so that’s kind of we did in net share with Kobex. We also retained a gross royalty on the project, after Kobex earns the 50% interest. The royalty is reduced to 3%, and they have an option to buy one of that 3% for $10 million cash or their stock at your election. I was mentioning earlier, the quality of the management team at Kobex. And these guys are really sharp and they are very familiar with permitting and developing large projects in sensitive of areas.

Roman Shklanka is the Chairman of Kobex Resources, Chairman of International Barytex and Chairman of Polaris Minerals. Some of his is most recent transactions that he has been involved with selling the certain gold deposit to Barrick for $525 million in 1999 and then in 2005 they sold Canico Resources to CVRD of Brazil for $865 million. Leo King is the Present director also of Kobex Resources. He has got over 40 years experience developing big mine projects.

I mentioned earlier that, what we like to do is find an acorn plan it and develop it into an oak tree. But some of these projects are just gone over with you folks have been 15 to 20 years in the making. We hope to shorten that horizon as we grow these oak trees sell them.

And this is probably the best example I can give you that's current and that was the initiation to starting of Rocky Mountain gas and the subsequent sales of its assets about 6 years later.

And roughly speaking it was a coal bed methane play that we put together and it was run Mark Larsen, he did a great job, we attracted key industry players for Teresa Oil and Gas, Credit Suisse, First Boston and others, and in about six years we turned about a 300% return on that transaction.

We no longer in the coal bed methane business to step at as of this point. So the out look and where we are going with the company as we believe we are undervalued probably everybody that said it podium has said the same thing. But we think it's for very fundamental reasons that are just maths book you would see that this that statement make sense.

To value the SXR transaction alone is somewhere north of a $120 to $130 million and it's more than our entire current market cap, just that one transaction. The market value Sutter Gold while, right now is in Sutter trading in about in a $0.30 $0.35 range Canadians, so the attributable value of our 50% ownership and Sutter is in the magnitude of $11 to $12 million.

The Lucky Jack joint-venture concentrates $50 million worth of obligations and you could read more into that if you wanted to do some more analysis and discount of cash flow on your own. We are sitting on about $15 million in cash, we are looking forward to simplifying the message that we send about our company and where we going with the company by completing this merger with Crested Corp.

So we are talking about one entity instead of two. We are going to be looking -- we've been interviewing investment bankers in New York city over the past two months. So we are going to be looking to make an announcement on that regard here shortly. We are going to be more -- we've been so busy, we have a small staff and so we haven't really had the opportunity to go up and do these types of venues or we're going to be doing more of them.

So people understand who we are and where we are going. So we're going to be looking for acquisitions whether be natural resources projects or cash flow projects, we are going to be looking for both and that's kind of it and in a nut shell and I will open it up to questions and comments. Yes sir?

Question-and-Answer-Session

Unidentified Audience Member

[Question Inaudible]

Harold Herron

That's correct.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

To the best of my understanding, I think probably the most important one would be the SXR deal for right now.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

The stock that we have receive, some of that we will have to sell to pay income tax, we have a tax loss carry forward, I believe, it's in the magnitude of $30 million.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

I can't answer that question.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

Yes. And I apologize for not being able to or particularly talk about that before we came out here because of the how compressed the SXR deal is becoming in terms of getting this deal done and, we believe, it is going to happened, it was like you can't talk about SXR so -- sorry, I am sorry -- to be wag on that but --

Unidentified Audience Member

[Question Inaudible]

Harold Herron

And that was good question.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

That's a good question. The majority of that money being spend to, let's say, I don't want say necessarily to upgrade the mill, but really it's going to be spent in the tailings facility, we are going to have to go to five part liners systems. Currently the tailings facility is about 60 acres and its clay liner which was fine.

Unidentified Audience Member

Fundamental issue?

Harold Herron

That's correct, right. I mean there's a few things that will have to be changed in the instrumentation room. All of the pumps could feed back to our computer room and computers back down there, where as big this room and now you can run an of a laptop. So those changes are demonisms us compare to the amount of money that's going to the tailings facility.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

That will be SXR assuming this deal closes. That would be SXRs obligations. Yes sir.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

That's a good question as well. We've debated this a great deal within the Company and seeking advises from others such as yourself, you know, analyst and investment banking types. We hope if you were asking me personally. What we would end up doing? It would be a leveraging our cash position.

So if we were going to buy X we would put in $15 million and try to raise the balance based on the project itself. We're trying to avoid further dilution to the US Energy shareholders. And so if it makes sense to the banker and it makes sense to us. Then that's the type of transaction we'll be doing.

I don't know if that answers your question. But we were trying to avoid issuing any more shares. We want to build this thing up to a $0.5 billion and shareholder equity boom, boom. And we're going to be -- our plan is to go on the fast track to do that.

Unidentified Audience Member

Do you have any income on this deal?

Harold Herron

Interest income. We don't really have any operational entities at the present time. And so -- and that is one of the things that we're looking for right now for a sustainable cash flow.

Unidentified Audience Member

When you talking about projects that are 8 to 10 years away from, how do you get on the fast track quickly?

Harold Herron

Well let’s just take the molybdenum project for a second. Let's pack it up, let me answer the question in a different way. Let's look at our suite of projects. Probably the closest one to production would be probably set a goal. Then next one within a months would be, maybe six months would be uranium. And then the long-term one is the biggest.

But which is non Amex, we hope to take all of the work product that was done by Amex under EIS. And so for submitted to the floor services and we have the leverage that historic data and just update it. So our goal is to compress this timeline for permitting of that molybdenum deposit. And honest to go guys, the Cobalt guys are very sharp in that regard to.

So now we are on the same wave length. We want to get this to production as soon as possible. But there are just – some of these things just take time. I will give you an example out of Sutter we have to take water samples. I can list the State of California to allow us -- to accelerate the sampling.

So instead of eight quarters do it over eight months, because there's nothing that's changed in the mind. And they agreed with that. And so hopefully we'll be able to do the same thing with the regulators in the City of Colorado.

Unidentified Audience Member

[Question Inaudible]

Harold Herron

No we are not. The technology -- for extracting uranium oxide from this case sand-stone hasn't really changed. What we only do when we extract the uranium from at least from the deposits that we're involved with, is we just wash -- we are crushing and washing sand stone. The uranium is encapsulated around the little grains of sand – strike it – it's not coating of grains of sand. And really all the milling process does is wash it.

And so this was the last mill built in the United States and we being U.S. Energy we did not let it sit. It's been on care and maintenance. And so we have lifted the sag mill of with the bearings. We – there's like a 1100 pumps in the mill, we turn those once a month, every single one of them.

So the equipment and machinery that is there at the mill is still good at stock, the fire suppression system everything is up to date there will be some tweaking. But most of that money, and we've had somebody going in and estimate it – most of that money is going on calculated tailings stuff.

Unidentified Audience Member

And it only operated four months?

Harold Herron

Yes. And the mill we operated four months. It's not like a rampant flow over years and it's brand new. I wish you could go see it, it's impressive. Any other questions? I think my time is up. I think they are kicking me out. Well thank you. Okay. Well thank you for listening to the story, I appreciate that.

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