A plan to mine molybdenum near Crested Butte may have stalled with one of the partners in the venture pulling out due to questions about the viability of the project.

U.S. Energy Corp. (NASDAQ: USEG), based in Riverton, Wyo., said Monday that its partner in the Lucky Jack molybdenum project in Gunnison County, Kobex Resources Ltd., has terminated its participation in the project.

Kobex (TSX-V: KBX) is based in Vancouver, British Columbia, Canada.

Molybdenum is used to harden steel.

Kobex’s announcement said the company made the decision “reluctantly” because the property “is still considered to be one of the best undeveloped primary molybdenum deposits in the world.”

The company blamed “regulatory and legal uncertainties” at the local, county, state and federal levels, which “have become too great to justify the necessary time and major pre-development expenditures that are required to advance this property.”

Roman Shklanka, Kobex’s chairman, singled out HB 1165, a proposal before the Colorado Legislature intended to strengthen the state’s reclamation laws, as well as local efforts to revise land use regulations, and federal reforms to the 1872 Mining Law, as sources of the company’s concern.

“This has created an uncertain permitting process with no clear regulatory authority and places into question what [the] mineral title represents,” Shklanka said in Kobex’s announcement. “Resolving these uncertainties will be a time consuming process involving both legal challenges and the American electorate.”

Kobex’s pullout from the project leave U.S. Energy once again the sole owner of the Lucky Jack project, U.S. Energy said.

“Kobex spent over $8 million on the project, all for the benefit of our shareholders,” Keith G. Larsen, CEO of U.S. Energy, said in a statement. “This is in addition to over $150 million reportedly spent by the previous owners. We are evaluating all of our options to the property, which may include bringing a much larger mining company in as a joint venture partner.”

Via