ThompsonCreek

ThompsonCreek

METALS  COMPANY  INC

April 21, 2011

VIA EMAIL

U.S. Energy Corp.

000 Xxxxx 0000 Xxxx

Xxxxxxxx, XX 00000

Attention:          Xxxx X. Xxxxxx, President, xxxx@xxxxx.xxx

Xxxxx Xxxxxxxxxx, General Counsel, xxxxxxxxxx@xxxxx.xxx

Dear Messrs. Xxxxxx and Xxxxxxxxxx:

Reference is made to that certain Exploration, Development and Mine Operating Agreement (the "Agreement") dated as of August 19, 2008, by and between U.S. Energy Corp. and Mt. Xxxxxx Moly Company ("MEMCO").   All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement.

In accordance with Section 6.3(b) of the Agreement, MEMCO hereby terminates the Agreement.  MEMCO hereby acknowledges its obligation to fulfill its obligations set forth in Section 6.4 of the Agreement.  MEMCO also acknowledges that, pursuant to Section 6.l(b) of the Agreement, USE is entitled to all Advance Payments and interest, if any, remaining in escrow.

USE hereby acknowledges and agrees that, other than the obligation to fulfill its obligations under Section 6.4 of the Agreement, MEMCO shall have no further obligations to USE under the Agreement.

Best regards,

/s/Xxxxx Xxxxxxxx

Xxxxx Xxxxxxxx

President and CEO

Mt. Xxxxxx Moly Company

00  X. Xxx  Xxxxx Xxxxxx, Xxxxx 000  • Xxxxxxxxx XX 00000 XXX

Tel:  (000)000-0000 • Fax:  (000)000-0000 • xxx.xxxxxxxxxxxxxxxxxxx.xxx

U.S. Energy Corp.

April 21, 2011

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Agreed and acknowledged:

/s/Xxxxxx Xxxxx Xxxxxxx

Name:  Xxxxxx Xxxxx Xxxxxxx

Title:  CFO/V.P. Finance

Date:  4/21/11

With a copy to:

Xxxxx Xxxxxx & Xxxxxx LLP

0000 Xxxxxxxxxxx   Xx., Xxxxx 000

Xxxxxx, XX 00000

Attention:  Xxxx Xxxxxxxx, Esq., xxxx.xxxxxxxx@xxxxxx.xxx

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