Community members rejoice
In a victory for community members fighting the development of a molybdenum mine on Mt. Emmons, one of the mining companies has pulled out of the project. Vancouver B.C.- based Kobex Resources Ltd. announced on Monday, March 31 that it was terminating its partnership with U.S. Energy Corp. citing regulatory and legal uncertainties.
The announcement has been greeted with enthusiasm by community groups opposed to the mine. “The Red Lady Coalition views the decision of Kobex to terminate its agreement with U.S. Energy as a huge victory,” says Red Lady Coalition board president Bill Ronai. “It certainly appears that Kobex doesn't think the Lucky Jack represents an attractive use of their resources, particularly in light of the high hurdles set by the community, HCCA and the RLC, along with all the organizations and firms that have offered their assistance.”
In 2006, Kobex Resources, a Canadian-based junior resources company, signed on to partner with Lucky Jack owners U.S. Energy Corp. to develop a molybdenum mine on Mt. Emmons, which neighbors Crested Butte. Under terms of the now-severed agreement, Kobex operated the project, and stood to earn at least 50 percent and up to a 65 percent interest in the project. Last spring, Kobex put together a “bought deal basis,” which raised more than $28 million in capital.
In a press released dated March 31, Kobex Resources said the decision was made reluctantly because of the “Lucky Jack (Mt. Emmons) molybdenite property is still considered to be one of the best undeveloped primary molybdenum deposits in the world.” The release went on to state that “the regulatory and legal uncertainties which currently exist at the Federal, State, County and Municipal levels, in the Company's opinion, have become too great to justify the necessary time and major pre-development expenditures that are required to advance this property.”
At least one stock analyst predicted Kobex’s retreat earlier this month. Kaiser Bottom Fish Online owner John Kaiser suggested to his subscribers via email last month that they should buy Kobex stock now. Kaiser said Kobex president and director Leo King and chairman and director Roman Shklanka would cut their losses on the Lucky Jack project and pursue another, more profitable, mineral project elsewhere.
Kobex has already spent approximately $8 million on rehabilitation at the existing Keystone Mine, studies of the metal at the site, and investigating the molybdenum. The company was facing the choice of spending $14 million of its $23 million in capital on the new tunnel project—or “drift” in mining parlance—that it needs to prove the ore body’s value. The state of Colorado approved the tunnel but the Mined Land Reclamation Board tentatively agreed to review the decision. In addition, both Gunnison County and the Town of Crested Butte have permitting jurisdiction of the proposed tunnel.
While Kobex has opted to end its partnership, Ronai points out that U.S. Energy has not withdrawn and may continue the project. “Let’s not lose sight however of the fact that the mine is still in play, but getting another investor interested is bound to be tough given Kobex’ withdrawal,” he says.
In a press release dated March 31, Mark Larsen, President of U.S. Energy Corp. stated, “While we are disappointed to see Kobex leave the project, we are still very confident that the Lucky Jack Project will be mined in the future. We understand the political and regulatory environment involves uncertainty; however, we remain undeterred in our resolve to move this project forward.” Larsen went on to state that U.S. Energy Corp. is in a strong cash position and will continue studies and permitting efforts.
In the same release, Keith G. Larsen, CEO of U.S. Energy Corp. stated, “Kobex’s decision to move on to other opportunities means that U.S. Energy Corp. again owns and controls 100% of the ‘world-class’ Lucky Jack molybdenum deposit. Kobex spent over $8 million on the project, all for the benefit of our shareholders. This is in addition to over $150 million reportedly spent by the previous owners. We are evaluating all of our options in regards to the property, which may include bringing a much larger mining company in as a joint venture partner.”
For complete coverage of the story, check out this week’s issue of the Crested Butte News.