PAY DIRT
July 1996
Court affirms arbitration award from Nukem to U.S. Energy
Proceeds will be spent on reopening Utah uranium mill
U.S. Energy Corp. and its 52-percent owned subsidiary, Crested Corp., doing business as the joint venture, USECC, on July 8 received an order confirming the April 18 decision of an arbitration panel.
Confirmation of the three-member panel's earlier order and award decision in favor of USECC came after consensual arbitration of proceedings begun by Nukem Inc. and its 100-percent-owned subsidiary, Cycle Resource Investment Co. (CRIC).
The proceedings concerned the Sheep Mountain Partners (SMP) uranium operations in Wyoming. The partnership was formed in December,1988 between USECC and Nukem-CRIC to develop and mine uranium ore from the SMP mines and to mill the ore into concentrates that were to be marketed worldwide.
Disputes arose between the partners and arbitration was commenced by Nukem CRIC on June 1991. Hearings began June 27, 1994 and consumed 73 days, ending on May 31, 1995.
On April 18,1996, the arbitration panel awarded USECC about $7.4 million in damages. Another award of $4.8 million was also given to USECC from funds held in SMP bank accounts.
USECC reported on April 22 that additional cash and "significant sources of low price uranium may also be available" to Sheep Mountain Partners as a result of the award.
USECC petitioned the U.S. District Court in Colorado for confirmation of the award. Nukem filed two motions to set aside portions of the award, alleging that significant portions were erroneous. Nukem sought to set aside potentially $16 million which the panel had awarded USECC.
On May 31, the court remanded the award to the panel for consideration of Nukem's motions. On July 3, the panel entered a new order affirming the earlier award.
A panel statement said, "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 judgement by us that Nukem ought not to be permitted to profit by that wrongful conduct."
According to a U.S. Energy news release, the panel affirmed the order awarding Sheep Mountain Partners "the rights to purchase CIS uranium, the uranium acquired pursuant to those rights, and the profits therefrom which are impressed with a constructive trust in favor of SMP."
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 addition to the petition for confirmation of the award, USECC also filed a petition for appointment of a receiver for the Sheep Mountain Partnership as well as motions to dissolve the partnership and for an order directing distribution of the escrowed proceeds in the SMP account. These matters may be considered by the court soon.
"The money we expect to receive within the near future will be used to put the Shootaring Canyon uranium mill in Utah on line by late 1996 or early 1997," said John L. Larsen, US Energy's president.