14-Mar-2000

Suit filed over uranium project

RIVERTON, Wyo. (AP) - Kennecott is suing a partner in a uranium mining venture to dissolve the 10-year-old project Kennecott claims costs too much and will not be profitable.

In a countersuit, U.S. Energy Corp. of Riverton accuses Kennecott and its parent company, U.K.-based Rio Tinto, of conspiring to get rid of the venture because it would compete with their other uranium projects worldwide.

U.S. Energy is seeking $3.25 billion in compensatory and punitive damages from Kennecott and Rio Tinto, according to court documents filed in Fremont County District Court.

Rio Tinto has uranium holdings in Namibia, Africa, Western Australia and Canada.

The Green Mountain Mining Venture was formed to explore the possibility of developing underground uranium at Green Mountain near Jeffrey City.

Kennecott claims the venture has cost more than $60 million and would cost substantially more before uranium is produced. Development was halted in July 1998 because the deteriorating market for uranium has not eased up since the partnership was formed.

"It is unlikely that (the venture) will ever realize a profit or earn money on a cash flow basis by further developing uranium properties," according to Kennecott's lawsuit, filed Nov. 10, 1999.

Kennecott claims U.S. Energy could have bought its share of the partnership but were unable to complete any such transaction.

Both sides were deadlocked over a budget, thus voiding the partnership agreement, the lawsuit said.

The partners have "substantial disagreements over the necessity for further exploration and the appropriate methods and means for further development," the lawsuit said.

Kennecott also cited "constant friction and disagreements" and threats made by U.S. Energy.

Kennecott wants a judge to dissolve the partnership and approve a plan to liquidate the assets. The company also seeks to absolve itself of responsibility for reclamation of the venture and the Sweetwater Uranium Mill, another partnership venture.

U.S. Energy claims the Green Mountain venture includes one of the largest deposits of uranium in the world, with potential reserves of up to 500 million pounds of uranium with a potential value of $2.5 billion.

Just last October, Kennecott proposed spending millions of dollars to maintain the venture, U.S. Energy said. The project is a long-term project with more than 20 years additional duration.

But Kennecott indicated plans to withdraw from the uranium business and lied when it said uranium was not a core business for Rio Tinto or Kennecott, the countersuit said.

U.S. Energy alleges that Rio Tinto "was committed to a strategy of expanding its participating investment and role in the uranium producing business."

Rio Tinto "was concerned that the (venture) ... would constitute serious competition for its existing properties and other uranium properties it sought to develop or discover."

No court date has been set. U.S. Energy is seeking a jury trial.

The lawsuit was brought by Kennecott Uranium Co. and Kennecott Energy Co. against U.S. Energy and its subsidiaries.