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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                          AMENDMENT NO. 2 TO FORM 20-F


     [ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
                        SECURITIES EXCHANGE ACT OF 1934.

                                       OR

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.

                  For the fiscal year ended September 30, 1998

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934.

                 For the transition period from          to

                        Commission File Number: 0-24443

                       INTERNATIONAL URANIUM CORPORATION
             (Exact name of Registrant as specified in its charter)

                                ONTARIO, CANADA
                (Jurisdiction of incorporation or organization)

            INDEPENDENCE PLAZA, SUITE 950, 1050 SEVENTEENTH STREET,
                                DENVER, CO 80265
                    (Address of principal executive offices)

             Securities registered or to be registered pursuant to
                           Section 12(b) of the Act:
                                      NONE

             Securities registered or to be registered pursuant to
                           Section 12(g) of the Act:

                         COMMON STOCK WITHOUT PAR VALUE
                                (Title of Class)

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act:
                                      NONE

Indicate the number of outstanding shares of each of the Registrant's classes
of capital or common stock as of the close of the period covered by the annual
report:
                                               ISSUED AND OUTSTANDING
     TITLE OF CLASS                           AS OF SEPTEMBER 30, 1998
     --------------                           ------------------------

     Common Stock, Without Par Value          65,525,066 common shares

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed during the preceding 12 months (or shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES       X           NO
       -------            ---------

Indicate by check mark which financial statement item the registrant has
elected to follow:

ITEM 17   X           ITEM 18
       -------               ------


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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Except for the statements of historical fact contained therein, the information
under the headings "Item 1 - Description of Business", "Item 2 - Description of
Property", "Item 9 - Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Item 9A - Quantitative and Qualitalize
Disclosure About Market Risk," and elsewhere in this Registration Statement
constitutes forward looking statements ("Forward Looking Statements") within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such Forward
Looking Statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Registrant to differ materially from any future results, performance or
achievements projected or implied by such Forward Looking Statements. Such
factors include, among others, the factual results of current exploration
activities, conclusions of feasibility studies now underway, changes in project
parameters and the factors set forth in the section entitled "Risk Factors".

GLOSSARY OF TERMS

ALTERNATE FEED                      Ore or residues from other processing
                                    facilities that contain uranium in
                                    quantities or forms that are either
                                    uneconomic to recover or cannot be recovered
                                    at these other facilities, but can be
                                    economically recovered either alone or in
                                    conjunction with other co-products at the
                                    Registrant's facilities.

BLM                                 Means the United States Bureau of Land
                                    Management;

CCD CIRCUIT                         The counter current decantation circuit
                                    at the White Mesa Mill, in which
                                    uranium-bearing solution is separated from
                                    the crushed waste solids;

CONCENTRATES                        Means product from a uranium mining and
                                    milling or in situ leach facility, which is
                                    commonly referred to as yellowcake or
                                    U(3)O(8);

CONVERSION                          A process whereby the purified uranium
                                    obtained in the refining process is
                                    converted into forms suitable for making
                                    nuclear fuel (UO(2)) or for enrichment
                                    (UF(6));

$                                   Means United States dollars and "CDN $"
                                    means Canadian dollars;

ENRICHMENT                          A process whereby the U-235 isotope content
                                    is increased from the natural level of
                                    0.711% to a concentration of 3% to 5% as
                                    required in fuel for light water reactors;

EPA                                 The United States Environmental Protection
                                    Agency;

FEE LAND                            Means private land;

HECTARE                             Measurement of an area of land equivalent to
                                    10,000 square meters or 2.47 acres;

MINERALIZATION                      Means a natural aggregate of one or more
                                    metallic minerals;

MINERAL DEPOSIT                     Is a mineralized body which has been
                                    delineated by appropriately spaced drilling
                                    and/or underground sampling to support a
                                    sufficient tonnage and average grade of
                                    metal(s). Such a deposit does not qualify as
                                    a reserve until a comprehensive evaluation
                                    based upon unit cost, grade, recoveries, and
                                    other material factors conclude legal and
                                    economic feasibility. Often referred to in
                                    the industry as "resources".

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NATURAL URANIUM                     Means uranium, any one of U(3)O(8), UO(2) or
                                    UF(6), neither irradiated nor enriched and
                                    which has a U-235 isotope content of about
                                    0.711%;

NRC                                 The United States Nuclear Regulatory
                                    Commission;

PROBABLE (INDICATED) RESERVES       Reserves for which quantity and grade and/or
                                    quality are computed from information
                                    similar to that used for proven (measured)
                                    reserves, but the sites for inspection,
                                    sampling, and measurement are farther apart
                                    or are otherwise less adequately spaced. The
                                    degree of assurance, although lower than
                                    that for proven (measured) reserves, is high
                                    enough to assume continuity between points
                                    of observation;

PROVEN (MEASURED)  RESERVES         Reserves for which (a) quantity is computed
                                    from dimensions revealed in outcrops,
                                    trenches, workings or drill holes; grade
                                    and/or quality are computed from the results
                                    of detailed sampling and (b) the sites for
                                    inspection, sampling and measurement are
                                    spaced so closely and the geologic character
                                    is so well defined that size, shape, depth
                                    and mineral content of reserves are well
                                    established;

REFINING                            A process whereby concentrates, containing
                                    an average of 60-80% uranium, are chemically
                                    refined to separate the uranium from
                                    impurities to produce purified uranium;

RESERVE                             That part of a mineral deposit which could
                                    be economically and legally extracted or
                                    produced at the time of the reserve
                                    determination. Often referred to in the
                                    industry as "ore."

S2MS                                Saskatoon Mining & Mineral Services Ltd.;

SAG MILL                            The semi-autogenous grinding mill at the
                                    White Mesa Mill in which the uranium ore
                                    is ground prior to the leaching process;

TAILINGS                            Waste material from a mineral processing
                                    mill after the metals and minerals of a
                                    commercial nature have been extracted;

TON                                 A short ton (2,000 pounds);

TONNE                               A metric tonne (2,204.6 pounds);

URANIUM OR U                        Means natural uranium; 1% U=1.18% U(3)O(8);

(e)U(3)O(8)                         U(3)O(8) equivalent;

UF(6)                               Means natural uranium hexafluoride, produced
                                    by conversion from U(3)O(8), which is not
                                    yet enriched or depleted;

U(3)O(8)                            Triuranium octoxide. U(3)O(8) is often
                                    referred to as yellowcake.

V(2)O(5)                            Vanadium pentoxide;

WHITE MESA MILL                     Means the 2,000 ton per day uranium mill,
                                    with a vanadium or other co-product recovery
                                    circuit, located near Blanding, Utah that is
                                    owned by IUC White Mesa, LLC

YELLOWCAKE                          Means U(3)O(8).



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                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

International Uranium Corporation (the "Registrant") is in the business of
producing uranium concentrates and selling and trading these concentrates and
other fuel cycle products in the international nuclear fuel market. As a
co-product to its uranium production, the Registrant produces and sells
vanadium and other metals. In addition to mining and processing uranium from
natural ores, the Registrant also recovers uranium by recycling uranium-bearing
waste streams from other processing facilities.

International Uranium Corporation is the product of an amalgamation under the
Business Corporations Act (Ontario) (the "Act") of two companies; namely,
International Uranium Corporation, incorporated on October 3, 1996 under the
laws of the Province of Ontario pursuant to the Act, and Thornbury Capital
Corporation, incorporated under the laws of the Province of Ontario by Letters
Patent ("Thornbury") on September 29, 1950. The amalgamation was made effective
on May 9, 1997, pursuant to a Certificate of Amalgamation dated that date. The
amalgamated companies were continued under the name "International Uranium
Corporation" (see "Amalgamation").

The head office of the Registrant is located at Independence Plaza, Suite 950,
1050 Seventeenth Street, Denver, CO 80265. The registered office of the
Corporation is located at Suite 2100, Scotia Plaza, 40 King Street West,
Toronto, Ontario, M5H 3C2.

The Registrant entered the uranium industry in May 1997 by acquiring
substantially all of the uranium producing assets of Energy Fuels Ltd., Energy
Fuels Exploration Company, and Energy Fuels Nuclear, Inc. (collectively "Energy
Fuels"). The Registrant raised Cdn$47.25 million through a special warrant
private placement and used cash of approximately Cdn $29.3 million to purchase
the Energy Fuels' assets (see "Acquisition" for further details). Energy Fuels
was a uranium producer with properties in the United States and Mongolia.

The Energy Fuels' assets acquired included several developed mines on standby,
several partially developed mines, numerous targeted mines and exploration
properties within the states of Colorado, Utah, Arizona, Wyoming and South
Dakota, as well as the 2,000 ton per day White Mesa Mill near Blanding, Utah.
The White Mesa Mill is a fully permitted dual circuit uranium/vanadium mill in
the United States. As a result of the acquisition, the Registrant's U.S.
properties comprise over 50,000 acres and contain proven and probable reserves
of 1 million pounds of uranium and 7 million pounds of vanadium in the U.S.
Additional mineral deposits are estimated to contain 61 million pounds of
uranium and 55 million pounds of vanadium. In addition to the U.S. properties,
the Registrant also acquired a 70% interest in a joint venture with the
government of Mongolia and a Russian geological concern to develop and produce
uranium reserves in Mongolia. The Mongolia concessions encompass approximately
4,000,000 acres with estimated uranium mineral deposits of 22 million pounds.

The Registrant's principal strategy is to maintain and build upon its position
as a producer of uranium concentrates to the international nuclear fuel market.
The Registrant will also continue to produce and sell vanadium as a co-product
of its uranium production. The Registrant intends to implement its strategy
through (i) the continued mining of the Registrant's uranium-producing
properties; (ii) the processing of uranium bearing by-products; (iii) continued
capital expenditures for purposes of exploration and development; (iv) the
restart of developed mines currently on stand-by as economic market conditions
dictate. The Registrant continues to actively pursue a variety of exploration
programs and targets, primarily for uranium, in a number of countries around
the world.

                                  AMALGAMATION

The predecessor, International Uranium Corporation ("Old IUC"), and Thornbury
were amalgamated effective May 9, 1997 under the provisions of the Business
Corporations Act (Ontario) to form the Registrant in accordance with the terms
of an agreement entered into between Old IUC and Thornbury dated February 13,
1997 (the "Amalgamation Agreement"). The primary purpose of the Amalgamation
was to effect an acquisition of Thornbury by Old IUC in that upon completion of
the Amalgamation the shareholders of Old IUC immediately prior to the
Amalgamation would hold the controlling interest in the Registrant, a public
company.



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BACKGROUND ON THORNBURY

Thornbury was incorporated under the laws of Ontario on September 29, 1950.
Thornbury's common shares were quoted for trading on the Canadian Dealing
Network Inc. Thornbury's principal assets consisted of marketable securities
with a market value as at December 31, 1996 of Cdn$495,480 and eight mining
claims situated in the Mayo Mining District, Yukon Territory, which expire
between 1999 and 2009.

SHARE EXCHANGE RATIOS

The Amalgamation received the approval of the shareholders of both Old IUC and
Thornbury. On amalgamation, each shareholder of Old IUC received one (1) share
of the Registrant, a newly formed amalgamated company, for each one (1) common
share held in Old IUC, and each shareholder of Thornbury received one (1) share
of the Registrant for each five (5) common shares held in Thornbury. Fractional
shares resulting from the foregoing were rounded down to the next whole number.

After giving effect to the amalgamation, there were a total of 65,743,066
common shares of the Registrant issued and outstanding. This figure was based
on 26,500,000 previously issued common shares of Old IUC, 37,800,000 common
shares of Old IUC issued upon conversion of the special warrants and 7,215,334
common shares of Thornbury which were outstanding prior to the amalgamation
being effective (1,443,066 post-amalgamation common shares).

AMALGAMATION AGREEMENT

Old IUC and Thornbury entered into an amalgamation agreement (the "Amalgamation
Agreement") which contained such representations and warranties, covenants,
indemnification and other provisions as are customarily found in an
amalgamation agreement entered into by parties dealing at arm's length.

                                   ACQUISITION

The Registrant entered the uranium industry by acquiring substantially all of
the uranium producing assets of Energy Fuels. On December 19, 1996, Old IUC,
through its subsidiary, International Uranium Holdings Corporation, entered
into an agreement (the "Acquisition Agreement") to acquire the Energy Fuels'
Assets for cash of $20.5 million, subject to adjustment. The terms of the
acquisition were approved by the United States Bankruptcy Court following a
lengthy bidding procedure as required under United States bankruptcy laws (see
"Bankruptcy of Oren Benton and Nuexco"). The acquisition was completed on May
9, 1997.

ENERGY FUELS

HISTORICAL BACKGROUND

The Energy Fuels group of companies was founded in August 1976 to capitalize on
uranium mining, purchasing and processing opportunities in the Colorado Plateau
area of western Colorado and eastern Utah.

In order to process the ores mined and purchased from the Colorado Plateau,
Energy Fuels commenced construction of a 2,000 ton per day mill near Blanding,
Utah in June 1979 at a total cost of approximately $40 million. Known as the
White Mesa Mill, the facility is a dual-circuit uranium mill.

The cost of construction of the White Mesa Mill was funded in large part by
Kernkraftwerk Goesgen-Daeniken AG, and Nordostschweizerische Kraftwerke AG, the
former limited partners in certain of the Energy Fuels Assets (the "Swiss
Utilities"), who, in consideration for this funding, acquired a 40% limited
partnership interest in all of Energy Fuels' United States assets. In 1995,
this 40% limited partnership interest was converted into a 9% royalty on all
uranium produced and a 5% royalty on vanadium and all other minerals produced
from the United States properties. The Swiss utilities have agreed to a
reduction in this royalty on most properties until December 31, 2000. See
"Swiss Royalty Interest".



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In the early 1980's Energy Fuels expanded its operations to include breccia
pipe uranium mining in the Arizona Strip district of northern Arizona. The land
position of Energy Fuels in the Arizona Strip district acquired by the
Registrant includes three developed or partially developed mines as well as
several targeted mines and numerous other exploration targets.

In 1984, Energy Fuels formed a limited partnership with Union Carbide
Corporation ("Union Carbide") pursuant to which Union Carbide acquired a 70%
undivided interest in and became the operator of the White Mesa Mill. As a
result of subsequent negotiations in 1987, Union Carbide's mines and properties
in the Colorado Plateau were added to this limited partnership and, as a
result, Energy Fuels acquired a 25% undivided interest in those mines. In 1994
this partnership was dissolved and Energy Fuels re-acquired 100% of the White
Mesa Mill as well as certain of Union Carbide's mines on the Colorado Plateau.
In the Colorado Plateau district, Energy Fuels then owned several uranium and
vanadium mines on standby, several partially developed mines as well as
additional acreage with exploration potential.

In 1994, in an effort to expand into the global uranium marketplace, Energy
Fuels acquired a 70% interest in a joint venture with the government of
Mongolia and a Russian geological concern to develop and produce uranium
reserves in Mongolia over a vast area.

In the early 1990's, Energy Fuels also acquired two significant ore bodies
intended to be mined by in situ type mining technology: the Reno Creek property
in Wyoming, and the Dewey Burdock property in South Dakota.

In early 1995, Energy Fuels filed for protection under Chapter 11 of the United
States Bankruptcy Code as a result of providing guarantees to an affiliated
company and its majority shareholder. See "Bankruptcy of Oren Benton and
Nuexco".

BANKRUPTCY OF OREN BENTON AND NUEXCO

On February 23, 1995, Oren L. Benton ("Benton") and two entities which Benton
controlled - Nuexco Trading Corporation ("Nuexco") and CSI Enterprises, Inc.
("CSI") - filed for protection under Chapter 11 of the United States Bankruptcy
Code.

Energy Fuels, Ltd. ("EFL") and Energy Fuels Exploration Company ("EFEX") filed
for protection under Chapter 11 of the United States Bankruptcy Code on
February 23, 1995. EFL and EFEX were both controlled by Benton through Energy
Fuels Mining Joint Venture ("EFMJV"). EFL and EFEX were forced into bankruptcy
because Benton, as controlling shareholder, caused them to guarantee certain of
Benton's and Nuexco's investment and trading activities. EFMJV filed for
protection under Chapter 11 on August 12, 1996.

The bankruptcy of Benton, Nuexco, CSI, EFL, EFEX and EFMJV involved numerous
other affiliated and subsidiary entities, of which Energy Fuels was a
relatively small part.

Under the provisions of Chapter 11 of the United States Bankruptcy Code, Benton
maintained control of the assets of his estate, including the Energy Fuels
Assets, but was under a fiduciary duty to reorganize his estate either under a
plan of reorganization or through the sale of portions of the assets from time
to time ("Section 363 Sales"). In order to protect the rights of creditors in
this process, a committee of selected creditors was formed (the "Creditors
Committee") as required under the provisions of Chapter 11 of the United States
Bankruptcy Code.

Benton and the Creditors Committee filed a joint Section 363 Sale motion on
October 21, 1996 with the Registrant as the lead bidder for the sale of the
Energy Fuels Assets to the Registrant for cash of $20.5 million, subject to
adjustments.

On December 4, 1996, the bankruptcy court approved the Acquisition Agreement
and the sale of the Energy Fuels Assets to the Registrant. The effect of the
court order was to eliminate substantially all known and existing claims and
liabilities of all creditors against the Energy Fuels Assets, so that the
Registrant would acquire the Energy Fuels Assets free and clear of all such
liabilities.



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SUMMARY OF ENERGY FUELS ASSETS ACQUIRED BY THE REGISTRANT

UNITED STATES ASSETS

The Energy Fuels Assets acquired by the Registrant pursuant to the Acquisition
Agreement located in the United States included the following:

         o        the White Mesa Mill, a 2,000 ton per day uranium and vanadium
                  processing plant in Blanding, Utah. See "White Mesa Mill".

         o        the Arizona Strip Properties, developed and partially
                  developed mines and exploration properties in north central
                  Arizona, including the Arizona 1 and Canyon mines, both
                  currently on standby. See "Arizona Strip", "Arizona 1 Mine",
                  "Canyon Mine" and "Pinenut Mine".

         o        the Colorado Plateau properties, developed and partially
                  developed mines and exploration properties straddling the
                  south/central Colorado and Utah border, including the West
                  Sunday Mine Complex and the Rim Mine, both of which are
                  currently in production. See "Colorado Plateau" and "Sunday
                  Mine Complex".

         o        the Reno Creek in situ leach project, a uranium deposit in the
                  Powder River Basin area of Wyoming in advanced stages of
                  exploration and permitting. See "Reno Creek Property".

         o        the Dewey Burdock in situ leach project, a uranium deposit in
                  South Dakota. See "Dewey Burdock Property".

         o        the Bullfrog project, a uranium deposit in south central Utah.
                  See "Bullfrog Property".

         o        substantial mining equipment. See "Other Assets".

         o        various uranium supply, waste processing contracts, and joint
                  venture contracts. See "Other Assets" and "Alternate Feeds".

         o        various field and administrative offices. See "Other Assets".

THE MONGOLIA PROPERTY

Energy Fuels owned a 70% interest in the Gurvan-Saihan Joint Venture in
Mongolia. The Registrant, as a result of the Acquisition, acquired this
interest. The other parties are the Mongolian Government as to 15% and
Geologorazvedka, a Russian geological concern, as to the remaining 15%. The
Gurvan-Saihan Joint Venture currently holds some 4 million acres of uranium
exploration properties in Mongolia. See "Mongolia Property".

CLAIMS ARISING OUT OF THE ACQUISITION

Under the Acquisition Agreement, Energy Fuels represented to the Registrant
that Energy Fuels was conveying good title to the various properties and mining
claims acquired by the Registrant. Energy Fuels agreed to indemnify the
Registrant from any losses and damages incurred by the Registrant (subject to a
cap of $1,500,000) and arising out of a breach of Energy Fuels' representations
and warranties. A total of $1,500,000 of the purchase price paid by the
Registrant was placed in escrow to secure Energy Fuels' indemnity obligations.
On May 8 and 9, 1998, the Registrant submitted a claim against all amounts held
in escrow alleging various breaches of Energy Fuels' representations and
warranties.

The claims relate specifically to the Carnation claims in the Sunday Mine
Complex and a portion of the properties held by the Mongolia joint venture. The
sublease held by the Registrant on the Carnation claims may be invalid due to
the expiration of the primary lease. The Registrant is currently in the process
of contacting the land owners for the purpose of entering into a new lease. If
the Registrant is able to locate and enter into a new lease with all of the
land owners, the claims will be nominal in amount and limited to the amounts
paid for the new lease and the cost of securing such lease. If the Registrant
is unable to enter into a new lease with all of the land owners, the amount of



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the claim will be the net value of the uranium and vanadium mineral deposits on
the Carnation claims with an approximate net value to the Registrant of in
excess of $1,500,000).

A portion of the properties held by the Mongolian joint venture (approximately
6.3% of the total properties) is subject to a nature reserve area. Under
Mongolian Law, exploration and mining on nature reserve areas is prohibited
without permission of the Mongolian government. The nature reserve area was in
existence at the time of the closing of the Registrant's acquisition of Energy
Fuel's assets and was not disclosed by Energy Fuels to the Registrant. The
Registrant has been working with the Mongolia government on this matter and has
received permission to conduct limited exploration activities on these
properties. Until the results of this exploration are known, the Registrant
will not be able to quantify its potential claim against Energy Fuels. In
addition, the Registrant does not know at this time whether the Mongolian
government will permit mining on the nature reserve area if the exploration
results are positive.

During March 1999, the Registrant reached agreement with the liquidating
trustee to resolve all claims asserted by the Registrant under the Acquisition
Agreement. The principal terms of such settlement provide for the Registrant to
be paid $200,000 from the escrow, along with the interest earnings thereon, in
return for a complete release and waiver of such claims. The remaining amounts
held in escrow will be distributed to the liquidating trustee. The settlement
agreement for this matter has been finalized and agreed to by the parties, and
approved by the Bankruptcy Court.

                              THE URANIUM INDUSTRY

OVERVIEW

Considerable growth in world demand for electricity has created a strong market
for the development of nuclear power over the past 30 years, and it now
contributes 17% of world electricity supply. Today, world demand continues to
see rapid growth in developing countries, particularly in Asia, while
relatively low growth is expected in countries where nuclear power is well
established.

There are 105 nuclear reactors in the United States and a total of 347,
worldwide, representing a total world nuclear capacity of 346 GWe. Despite
lower growth in developed countries, the Uranium Institute reports in one case
that world nuclear generating capacity is expected to be 355 GWe by 2000, and
then grow to 422 GWe by 2010 and 483 GWe by 2020. With the only significant
commercial use for uranium being nuclear fuel for nuclear reactors, it follows
that reactor requirements will be a key indicator in the nuclear fuel market.

Generally, uranium is mined and milled, converted, enriched and fabricated prior
to use in a nuclear reactor. Once a uranium deposit is discovered and reserves
delineated, uranium ore is mined either by underground, open pit or in situ
method then partially refined at a nearby Mill to produce uranium concentrates.
Typically, the uranium concentrate or U(3)O(8) or yellowcake as it is referred
to in the industry, is sold by the mining companies to electricity utilities in
the form of U(3)O(8). Market participants, such as utilities, then contract with
the converters, enrichers, and fuel fabricators for services to further refine
the nuclear fuel for use in a nuclear reactor.

URANIUM SUPPLY AND DEMAND

According to the Uranium Institute ("UI"), annual Western World uranium
consumption has increased from approximately 56 million pounds U(3)O(8) in 1980
to about 149 million pounds U(3)O(8) in 1998 under a base case scenario. Demand
could be increased by trends toward increased plant operating capacities or
reduced by premature closing of nuclear power plants.

Demand for uranium can be supplied through either primary production (newly
mined uranium) or secondary sources (largely, inventories and alternate
production). Inventories are of particular importance to the uranium industry
when compared to other commodity markets as further described below.

Primary world uranium production had been in decline for a decade until the
first rise in production in 1995, which was reported to be 85 million pounds.
Of this, Canada and Australia accounted for roughly 50% of total production.
Increases continued in 1996 and 1997 to 90.9 and 92.7 million pounds,
respectively. The increase in world production was short lived with a drop in
production to 92.2 in 1998. Major production cut backs and delays had been
announced at the end of 1998 in Canada, Australia, United States and South
Africa which will result in a significant drop in production for 1999.



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Secondary sources of supply cover all uranium other than primary production
sourced to satisfy reactor requirements. These sources include inventories,
stockpiles (primarily, government and military related) and recycled uranium.
These supply sources can be held at any point of the nuclear fuel cycle and by
utilities and other fuel cycle companies or by governments, alike. Each source
must meet appropriate specifications to be utilized in nuclear reactors.

Inventories represent the largest portion of secondary sources of supply and
can be quite difficult to quantify. Inventories include production inventories
held by producers and utilities, and government and military stockpiles.
Inventories are held for a variety of reasons, for instance, government policy,
avoiding supply disruptions and taking advantage of favorable market prices.

In total, current inventories are estimated at over 7 years supply of the total
world consumption. However, utilities have been steadily consuming inventories
to reduce fuel carrying costs. It is estimated that utilities will consume 60
million pounds of uranium between 1998 and 2005. In addition, roughly 22% of
the utilities carry as strategic inventories 3 or more years of reactor
requirements as a matter of policy. Over the three-year period from 1995
through 1997 Western world inventories fell by 26 million pounds of uranium.

The recycling of Highly Enriched Uranium ("HEU") is a unique subset of
secondary sources of supply and is accounted for separately from inventories.
Surplus fissile military materials are converted from HEU into low enriched
uranium ("LEU") suitable for use in nuclear reactors. In February 1993, the
United States and Russia entered into an agreement (the "Russian HEU
Agreement") which provided for the United States to purchase 500 metric tons of
Russian HEU over a 20-year period. In April 1996, the USEC Privatization Act
gave, among other things, the United States Enrichment Corporation (as the
executive sales agent) the authority to sell Russian uranium in the United
States over the 20-year period under certain limits.

The USEC Privatization Act provides a framework for the orderly introduction of
Russian uranium into the commercial uranium market. In March 1999, an agreement
is expected to be signed between the Russian government and three western
companies to purchase the Russian uranium with the U.S. government acting as a
guarantor of sorts.

URANIUM PRICES

Most of the countries that use nuclear-generated electricity do not have a
sufficient domestic uranium supply to fuel their nuclear power reactors, and
their electric utilities secure a substantial part of their required uranium
supply by entering into medium-term and long-term contracts with foreign
uranium producers. These contracts usually provide for deliveries to begin one
to three years after they are signed and to continue for several years
thereafter. In awarding medium-term and long-term contracts, electric utilities
consider, in addition to the commercial terms offered, the producer's uranium
reserves, record of performance and cost competitiveness, all of which are
important to the producer's ability to fulfill long-term supply commitments.
Under medium-term and long-term contracts, prices are established by a number
of methods, including base prices adjusted by inflation indices, reference
prices (generally spot price indicators but also long-term reference prices)
and annual price negotiations. Many contracts also contain floor prices,
ceiling prices, and other negotiated provisions which affect the amount paid by
the buyer to the seller. Prices under these contracts are usually confidential.

Electric utilities procure their remaining requirements through spot and
near-term purchases from uranium producers and traders. Traders source their
uranium from organizations holding excess inventory, including utilities,
producers and governments.

Over the last ten years, annual spot market demand averaged roughly 26 million
pounds U(3)O(8) with a record high of 42 million pounds U(3)O(8) in 1995
followed by a low, over the period, to 9 million pounds U(3)O(8) in 1998. Spot
market prices reflect the price at which uranium may be purchased for delivery
within one year. Historically, spot prices have been more volatile than
long-term contract prices, increasing from $6.00 per pound in 1993 to $43.00 in
1977, then declining from $40.00 in 1980 to a low of $7.25 in October of 1991.
More recently, the record demand aided to push prices to $16.50 in June 1996.
The drop in demand in the following three years largely attributed to a
relatively steady drop in prices to $8.75 in December 1998. Recently, these
prices have rebounded slightly to $10.50 in March 1999.



                                       9
<PAGE>   10

Trade restrictions limiting the free flow of uranium from the CIS republics
into the Western World markets, including the negotiation by the DOC of
amendments to the Suspension Agreements with Kazakhstan and Uzbekistan
resulting in the elimination of European enrichment for uranium from these
republics as a vehicle to by-pass United States import restrictions, the Nuexco
bankruptcy under Chapter 11 of the United States Bankruptcy Code and related
defaults on deliveries (see "Bankruptcy of Oren Benton and Nuexco") and the
reluctance of uranium producers and inventory holders to sell at low spot price
levels, contributed to increases in demand and spot prices between 1995 and
1997. Since that time, these factors have had a diminishing impact on the
uranium market causing prices to over correct in a downward trend.
Particularly, in the case of NUEXCO bankruptcy.

Future uranium prices will depend largely on the amount of incremental supply
made available to the spot market from the remaining excess inventories,
primary production in Russia and other CIS republics, as well as supplies from
Russian HEU and its other stockpiles, from excess United States HEU and
increased production from unutilized capacity of other uranium producers.
Analysts believe, however, that prices will continue to stabilize and begin to
push higher over the next couple of years. A marked improvement in prices in
the beginning of 1999 supports this idea.

COMPETITION

The Registrant markets uranium to utilities in direct competition with supplies
available from various sources worldwide. The Registrant competes primarily on
the basis of price. Although the Registrant expects to be a significant United
States producer of uranium, its total production will be a small percentage of
total Western World production.

The uranium production is international in scope and is characterized by a
relatively small number of companies operating in only a few nations. In 1998,
six (6) companies, Cameco, Compagnie Generales des Matieres Nucleaires
("Cogema"), Energy Resources of Australia Ltd. ("ERA"), The RTZ Corporation PLC
("RTZ"), Uranerzbergbau-GmbH ("Uranerz") and WMC Limited, produced over 67% of
total world output. Most of Western World production was from only eight
nations: Canada, Niger, Australia, Namibia, South Africa, United States,
France, and Gabon. In 1988, the former Soviet Union, now known as the CIS, and
Mainland China began to supply significant quantities of uranium annually into
Western World markets.

The Canadian uranium industry has in recent years been the leading world
supplier, producing 31.3 million pounds U(3)O(8) in 1997, or about 35% of total
world production.

                               THE VANADIUM MARKET

As a co-product of the production of uranium from the Colorado Plateau District
ores, the Registrant will produce and sell vanadium. These deposits have been
mined for over 100 years, and significant reserves remain.

Vanadium is an essential alloying element for steels and titanium, and its
chemical compounds are indispensable for many industrial and domestic products
and processes. The principal uses for vanadium are: (i) carbon steels used for
reinforcing bars; (ii) high strength, low alloy steels used in construction and
pipelines; (iii) full alloy steels used in castings; (iv) tool steels used for
high speed tools and wear resistant parts; (v) titanium alloys used for jet
engine parts and air frames; and (vi) various chemicals used as catalysts.

Principal sources of vanadium are (i) titaniferous magnetites found in Russia,
China and South Africa; (ii) sludges and fly ash from the refining and burning
of the U.S., Caribbean and Middle Eastern oils; and (iii) uranium co-product
production from the Colorado Plateau. While produced and sold in a variety of
ways, vanadium production figures and prices are typically reported in pounds of
an intermediate product, vanadium pentoxide, or V(2)O(5). The White Mesa Mill is
capable of producing two products, ammonium metavanadate ("AMV"), an
intermediate product, and vanadium pentoxide ("flake", "black flake", "tech
flake" or "V(2)O(5)"). The majority of sales are as V(2)O(5), with AMV being
produced and sold on a request basis only.

Vanadium is generally produced as a by- or co-product of other metal
production. In the United States, the most significant source of production has
been as a by-product of uranium production from ores in the Colorado Plateau
District, accounting for over half of historic U.S. production. Vanadium in
these deposits occurs at an average ratio of seven pounds of vanadium for every
pound of uranium, and the financial benefit derived from the by-product sales
have helped to make the mines in this area profitable. However, low prices for
both uranium and vanadium in recent years have forced many producers in the
Colorado Plateau District to place their facilities on standby.



                                       10
<PAGE>   11

The market for vanadium has fluctuated greatly over the last 15 years. Over
capacity in the mid 1970's was caused by reduced demand for vanadium during the
recession that plagued the steel industry. By the end of the decade, steel
production had climbed to record levels and prices for V(2)O(5) firmed at around
$2.75 per pound. During the early 1980's, quoted prices were in the range of
$3.00 per pound, but increased exports from China and Australia, coupled with
the continued economic recession of the 1980's drove prices to as low as $1.30
per pound. Prices stabilized in the $2.00 - $2.45 per pound range until
perceived supply problems in 1988 caused by cancellation of contracts by China
and rumors of South African production problems resulted in a price run-up of
unprecedented magnitude, culminating in an all time high of nearly $12.00 per
pound in February of 1989. This enticed new producers to construct additional
capacity and over-supply problems again depressed the price in the early 1990's
to $2.00 per pound and below. Late in 1994, a reduction in supplies from Russia
and China, coupled with concerns about the political climate in South Africa and
a stronger steel market caused the price to climb to $4.50 per pound early in
1995. In the beginning of 1998, prices had climbed to a nine-year high of $7.00
caused by a supply deficit unable to keep pace with record demand from steel and
aerospace industries.

Vanadium supply and demand estimates for the near future show yearly consumption
to increase at a rate of 5% from its current level of 130 million pounds
V(2)O(5). World wide production capacity is expected to increase from its
current level of 120 million pounds beginning in the year 2000, notwithstanding
the Registrant's anticipated start up in 1998. Recent comments in trade journals
have indicated that the major South African producers have augmented their
production by the integration of their ferro-vanadium production. The net effect
of reduction in the flow of V(2)O(5) from South Africa to converters in Europe
and Japan, and lagging increases in production have caused consumers to scramble
for feedstocks. This, coupled with projected worldwide yearly steel consumption
of over 100 million tons in 1997 and 1998, and the apparent inability of Russia
and China to produce enough vanadium for even their internal needs, point to
sustained prices above the $2.70 per pound U(3)0(8) historical average.

Vanadium has been largely producer priced historically, but during the 1980's,
this came under pressure due to the emergence of new sources. As a result,
merchant or trader activity gained more and more importance. While a very large
portion of the supply continues to come from a few major producers in South
Africa, the prices for the products that will be produced by the Registrant will
be based on weekly quotations of the LME. Historically, vanadium production from
the White Mesa Mill has been sold into the world-wide market both through
traders, who take a 2% to 3% commission for their efforts and, to a lesser
extent, through direct contacts with domestic converters and consumers. While
priced in U.S. dollars per pound of V(2)O(5), the product is typically sold by
the container, which contains nominally 40,000 pounds of product packed in 55
gallon drums, each containing 550 pounds of product. Typical contracts will call
for the delivery of one to two containers per month over a year or two to a
customer with several contracts in place at the same time. Pricing is usually
based on the LME price and may include floor and ceiling price protection for
both the producer and seller. Spot sales are also made based on the current LME
quote.

                               CURRENT OPERATIONS

International Uranium Corporation has focussed on the following four areas:

     1)       Mining
     2)       Processing
     3)       Exploration and Development
     4)       Marketing

MINING OPERATIONS

The Registrant commenced conventional mining operations at its Sunday Mine
Complex in November 1997 and at its Rim Mine in January 1998 after completion
of minor development activities. These properties are located in the Colorado
Plateau District of western Colorado and eastern Utah, and contain high grades
of vanadium along with uranium.

To supplement its own production, the Registrant implemented an ore purchase
program where the Registrant would purchase ore from many small independent
mines in the Uravan district of the Colorado Plateau mining region.
Unfortunately, this program did not materialize to the degree hoped, as the
independent miners found that their operations were not economic at current
commodity prices due to new regulatory and environmental licensing requirements
that have come into effect since they last operated.



                                       11
<PAGE>   12

The Registrant's own production and the limited production purchased form
independents has been stockpiled at the Mill, where it will be processed during
the third and fourth quarter of fiscal year 1999.

The uranium concentrates produced from the processing of these ores will mark
the first uranium production in the United States by conventional means in
several years.

Total amounts stockpiled at the White Mesa Mill as of September 1998 totaled
44,000 tons containing approximately 200,000 pounds of recoverable U(3)O(8) and
approximately 1,170,000 pounds of recoverable V(2)O(5).

Due to unsatisfactory commodity prices, production at the Rim Mine was put on
standby in December 1998. Production at the Registrant's Sunday Mine was put on
standby in June 1998. Should uranium and vanadium market prices increase to
approximately $12 and $4 per pound, respectively, the Registrant would consider
restarting mining activities.

PROCESSING

The White Mesa Mill has processed conventional ores for the recovery of uranium
and vanadium for many years. In addition, the Registrant's license from the
Nuclear Regulatory Commission gives the Registrant the right to process other
uranium-bearing materials known as "alternate feeds." Alternate feeds are
uranium-bearing byproduct materials from other processing facilities, which
usually are classified as waste products to the generators of the materials.
Requiring a routine amendment to its license for each different alternate feed,
the Registrant can process these uranium-bearing materials and recover uranium,
in some cases, at a fraction of the cost of processing conventional ore. In
other cases, the generators of the alternate feed materials are willing to pay
a recycling fee to the Registrant to process these materials to recover uranium
and then dispose of the remaining byproduct, instead of just directly disposing
of the materials at a limited number of disposal sites. This gives the
Registrant the ability to process alternate feeds and generate earnings that
are largely independent of uranium market prices.

During fiscal 1998, the Registrant had several notable achievements associated
with the development of its alternate feed business. The Registrant completed
its processing run of uranium-bearing tantalum residues for a major tantalum
producer. While the costs were higher than originally expected and the tantalum
recoveries less than expected, the project nevertheless demonstrated the
ability of the White Mesa Mill to process uranium-bearing materials and recover
co-products other than vanadium. The project, which was completed at a profit,
also drew considerable attention from the tantalum and rare earth producers who
have these types of ores and materials that also contain recoverable amounts of
uranium. Several projects of this type are under consideration by the
Registrant at this time.

The Registrant also secured several other contracts to process alternate feeds.
Perhaps the most significant of these was the award of a contract to the
Registrant to process over 45,000 tons of uranium-bearing soils that were
excavated from a FUSRAP site near Buffalo, New York. These FUSRAP sites, which
stands for Formerly Utilized Site Remedial Action Program, are former defense
production sites that are being cleaned up by the U.S. Army Corps of Engineers.
Previously, material excavated from these sites was only directly disposed of
at a limited number of disposal sites, and at considerable cost. The Corps,
charged with the task of reducing the cost of this remediation program, awarded
a contract to the Registrant to recycle the materials from the Buffalo site and
recover uranium before disposing of the resulting tailings in the White Mesa
Mill's fully licensed tailings cells. By processing these soils through the
Mill for the recovery of uranium, the Registrant was able to allow the Corps to
clean up this site at a fraction of the cost that would have been incurred had
the disposal-only option been used. In addition to being more cost-effective,
this recycling technology is also environmentally superior to the disposal-only
option, since radioactive uranium is removed from the soils before final
disposal. There are potentially several million tons of uranium-bearing soils
and materials located at these former defense sites. The ability to recycle
these materials through the White Mesa Mill can be a profitable business for
the Registrant. However, while the progress we have made to date is
considerable, there are regulatory uncertainties associated with this uranium
recycling business. As noted, the Registrant's license gives the Registrant the
right, with appropriate amendments, to process alternate feeds. These
amendments are granted under the rules and regulations of the Nuclear
Regulatory Commission. Furthermore, these licensing actions are subject to
challenge by parties that may or may not have a legitimate reason to be heard
on our operations. Some of the Registrant's alternate feed projects have been
challenged by the State of Utah, which believes that the State should have
regulatory authority over these projects instead of the NRC. We have also seen
challenges to our activities by a commercial disposal company. IUC's White Mesa
Mill has been granted eight license amendments for processing alternate feeds
out of eight requests, and the Registrant has successfully defended all
challenges before the NRC, to date. While no guarantees can be given,



                                       12
<PAGE>   13

the Registrant remains confident that the issues between International Uranium
Corporation and the State of Utah can be resolved along with challenges to our
activities by competitors.




The Registrant continues to believe that the development of the business of
recycling uranium-bearing waste materials and the associated safe management of
the resulting waste byproduct will not only mitigate the effects of down cycles
in the uranium market, but will develop into a profitable stand-alone business
in its own right. The Registrant intends to continue to devote the resources
necessary to aggressively pursue this business opportunity.

Processing activities generated $13,050,576 of the Registrant's fiscal 1998
revenues which were approximately 40% of total revenues for the year.

EXPLORATION AND DEVELOPMENT

As part of its strategy to develop additional uranium resources, the Registrant
continued its exploration program in Mongolia during 1998. The Registrant
conducted 53,000 meters of exploration and resource delineation drilling during
the year. This program added another 5.5 million pounds of uranium resources to
the deposit discovered in the Hairhan region of the Registrant's exploration
lands last year, bringing total resources in this area to 16.2 million pounds.
Total resources on Company lands amenable to low cost, in situ leach mining are
now approximately 23 million pounds. The Company also successfully completed an
in situ leach amenability test, a precursor to a full pilot operation. The test
demonstrated that the Hairhan deposit is amenable to in situ leaching with
favorable recovery and reagent usage rates.

As a result of the declining uranium market during the year, the Company
intends to reduce the level of its exploration drilling budget for fiscal 1999.
After engaging in such a aggressive program over the last two years, 1999's
efforts will concentrate on correlation and analysis of the data acquired
during the past two years and the application of this work to expand our
inventory of favorable exploration and development targets. The Company will
also focus efforts on refining the production cost models for these projects in
Mongolia.

In the United States, the Registrant furthered its progress on the permitting
of its Reno Creek in situ leach property in Wyoming, which should be completed
in fiscal 1999. While the Registrant does not have any firm production plans
for this property at this time, Reno Creek could be put into production by the
end of 2000, if market conditions warrant.

The Registrant also continued underground drift development of its Topaz Mine;
however, these activities were placed on standby in October 1998 due to low
commodity prices. These activities could be resumed in the future should market
prices recover.

MARKETING

Despite the weak uranium market, the Registrant was an active seller of
U(3)O(8). The Registrant delivered over 1.5 million pounds of uranium to six
customers generating $19,890,300 of revenues; 16% of the material sold was
produced by the Registrant from its alternate feed processing, however, the
remaining 84% was purchased by the Registrant. Therefore, the Registrant was
able to take advantage of the low market prices to fill existing contracts at a
profit.

                                  RISK FACTORS

VOLATILITY AND SENSITIVITY TO PRICES, COSTS AND EXCHANGE RATES

Because a significant portion of the Registrant's revenues are expected to be
derived from the sale of uranium and vanadium, the Registrant's net earnings
will be closely related to the long- and short-term market price of U(3)O(8) and
V(2)O(5). Historically, uranium prices have been subject to fluctuation, and the
price of uranium has been and will continue to be affected by numerous factors
beyond the Registrant's control, such as demand for nuclear power, political and
economic conditions in uranium producing and consuming countries, such as the
United States, Canada and Russia and other republics of the CIS, and production
levels and costs of production in countries such as Russia, Canada and other
republics of the CIS and Australia.



                                       13
<PAGE>   14

During fiscal year 1998, U(3)O(8) prices declined from $11 on September 30, 1997
to $9.75 per pound as of September 30, 1998. V(2)O(5) prices were $4.10 on
September 30, 1997, rising to $6.90 in January 1998, and declining to $5.70 as
of September 30, 1998. Uranium prices have since recovered slightly to $10.50 in
March 1999, while vanadium prices have continued to decline to approximately
$2.80 per pound.

COMPETITION FROM OTHER ENERGY SOURCES AND PUBLIC ACCEPTANCE OF NUCLEAR ENERGY

Nuclear energy competes with other sources of energy, including oil and gas,
coal and hydro-electricity. These other energy sources are to some extent
interchangeable with nuclear energy, particularly over the longer term. Lower
prices of oil, gas, coal and hydro-electricity for an extended period of time
may make nuclear power a less attractive fuel source for the generation of
electricity, thus resulting in lower demand for uranium. It is anticipated that
production costs will become more of a factor for nuclear and other sources of
energy as utilities continue to be less regulated, receive fewer government
subsidies, and as electrical power becomes more freely traded. Furthermore, the
growth of the uranium and nuclear power industry beyond its current level will
depend upon continued and increased acceptance of nuclear technology as a means
of generating electricity. Because of unique political, technological and
environmental factors that affect the nuclear industry, the industry is subject
to public opinion risks which could have an adverse impact on the demand for
nuclear power and increase the regulation of the nuclear power industry.

URANIUM INDUSTRY COMPETITION AND INTERNATIONAL TRADE RESTRICTIONS

The international uranium industry is highly competitive in many respects,
including the supply of uranium. The Registrant markets uranium to utilities in
direct competition with supplies available from a relatively small number of
Western World uranium mining companies, from certain republics of the CIS and
Mainland China and from excess inventories, including inventories made
available from decommissioning of military weapons. To some extent the effects
of the supply of uranium from the CIS republics are mitigated by a number of
international trade agreements and policies, including suspension agreements
entered into by the United States with certain republics of the CIS, including
Russia, that restrict imports into the United States market. In addition, in
January 1994, the United States and Russia signed a 20-year agreement to
convert HEU from former Russian nuclear weapons to a grade suitable for use in
nuclear power plants. During 1995, the United States also amended its
suspension agreements with the Republics of Kazakhstan and Uzbekistan, which
increased the limit on the supply of uranium from those republics into the
United States for a 10-year period. The European Community also has an informal
policy limiting annual consumption of uranium sourced from the CIS republics.
These agreements and any similar future agreements, governmental policies or
trade restrictions are beyond the control of the Registrant and may affect the
supply of uranium available in the United States, which is the largest market
for uranium in the world.

IMPRECISION OF RESERVE AND MINERAL DEPOSIT ESTIMATES

Reserve and mineral deposit estimates included in this document for uranium and
vanadium are estimates, and no assurances can be given that the indicated
levels of recovery will be realized. Such estimates are expressions of judgment
based on knowledge, mining experience, and analysis of drilling results and
industry practices. Valid estimates made at a given time may significantly
change when new information becomes available. While the Registrant believes
that the reserve and mineral deposit estimates included in this document are
well established and reflect management's best estimates, by their nature,
reserve and mineral deposit estimates are imprecise and depend, to a certain
extent, upon statistical inferences which may ultimately prove unreliable.
Furthermore, market price fluctuations in uranium and vanadium, as well as
increased production costs or reduced recovery rates, may render ore reserves
containing lower grades of mineralization uneconomic and may ultimately result
in a restatement of reserves. The extent to which mineral deposits may
ultimately be reclassified as proven or probable reserves is dependent upon
future inspection, sampling, and measurement. The evaluation of mineral
deposits or reserves is also influenced by economic and technological factors,
which may change over time. Mineral deposit figures included here have not been
adjusted in consideration of these risks and, therefore, no assurances can be
given that any mineral deposit estimate will ultimately be reclassified as
proven or probable reserves.

REPLACEMENT OF RESERVES

The Sunday Mine Complex, Rim, Arizona 1, Canyon and Reno Creek Mines are the
Registrant's principal sources of uranium at this time. Unless uranium
properties such as Dewey Burdock and Mongolia are developed and placed into
production or other deposits on the Colorado Plateau, the Arizona Strip or
elsewhere are discovered or



                                       14
<PAGE>   15

extensions to existing ore bodies are found, the Registrant's total uranium
reserves will decrease over time as its current uranium producing properties are
depleted. There can be no assurance that additional uranium properties will be
developed and placed into production or that the Registrant's future
exploration, development and acquisition efforts will be successful.

MINING RISKS AND INSURANCE

The mining of uranium is a capital intensive commodity business, and is subject
to a number of risks and hazards. These risks are environmental pollution,
accidents or spills, industrial accidents, labor disputes, changes in the
regulatory environment, natural phenomena (such as inclement weather
conditions, underground flooding and earthquakes), and encountering unusual or
unexpected geological conditions. Depending on the size and extent of the
event, the foregoing risks and hazards could result in damage to, or
destruction of, the Registrant's mineral properties, personal injury or death,
environmental damage, delays in or cessation of production from the
Registrant's mines or in its exploration or development activities, monetary
losses, cost increases which could make the Registrant uncompetitive, and
potential legal liability. In addition, due to the radioactive nature of the
materials handled in uranium mining and milling, additional costs are incurred
by the Registrant on a regular and ongoing basis.

The Registrant maintains insurance against certain risks that are typical in
the uranium industry. This includes approximately $47,000,000 of fire and
casualty insurance for damage to the mill and mining properties, $3,000,000 of
business interruption insurance for the mill and mine activities caused by fire
or other insured casualty, and $20,000,000 of general liability insurance.
Although the Registrant maintains insurance in amounts it believes to be
reasonable, such insurance may not provide adequate coverage in the event of
certain unforeseen circumstances. Insurance against certain risks (including
certain liabilities for environmental pollution or other hazards as a result of
production, development or exploration), is generally not available to the
Registrant or to other companies within the uranium mining and milling
business.

GOVERNMENTAL REGULATION AND POLICY RISKS

Mining and milling operations and exploration activities, particularly uranium
mining and milling in the United States, are subject to extensive regulation by
state and federal governments. Such regulation relates to production,
development, exploration, exports, taxes and royalties, labor standards,
occupational health, waste disposal, protection and remediation of the
environment, mine reclamation, mine safety, toxic substances and other matters.
Compliance with such laws and regulations has increased the costs of exploring,
drilling, developing, constructing, operating and closing the Registrant's
mines and other facilities. It is possible that, in the future, the costs,
delays and other effects associated with such laws and regulations may have an
impact on the Registrant's decisions as to whether to continue to operate
existing mines or refining and other facilities or, with respect to exploration
and development properties, whether to proceed with exploration or development.
Furthermore, future changes in governments, regulations and policies, could
materially adversely affect the Registrant's results of operations in a
particular period or its long-term business prospects. In addition, should
certain recent proposals being considered by the U.S. Congress become law, a
royalty on production of minerals from unpatented mining claims located on
federal lands could be imposed, which could adversely impact the Registrant's
proposed business and uranium prospects.

Worldwide demand for uranium is directly tied to the demand for energy produced
by the nuclear electric industry, which is also subject to extensive government
regulation and policies in the United States and elsewhere. The development of
mines and related facilities is contingent upon governmental approvals which
are complex and time consuming to obtain and which, depending upon the location
of the project, involve various governmental agencies. The duration and success
of such approvals are subject to many variables outside the Registrant's
control. In addition, the international marketing of uranium is subject to
certain trade restrictions, such as those imposed by the suspension agreements
entered into by the United States with certain republics of the CIS and the
agreement between the United States and Russia related to the supply of Russian
HEU into the United States.

ENVIRONMENTAL RISKS

The Registrant is required to comply with environmental protection laws and
regulations and permitting requirements, and the Registrant anticipates that it
will be required to continue to do so in the future. The material laws and
regulations that the company must comply with are the Atomic Energy Act,
Uranium Mill Tailings Radiation Control Act of 1978, Clear Air Act, Clean Water
Act, Safe Drinking Water Act, National Environmental



                                       15
<PAGE>   16

Policy Act, Federal Land Policy Management Act, National Park System Mining
Regulations Act, and the State Mined Land Reclamation Acts or Department of
Environmental Quality regulations, as applicable. The Registrant complies with
the Atomic Energy Act as amended by the Uranium Mill Tailings Radiation Control
Act of 1978 ("UMTRCA") by applying for and maintaining operating licenses from
the U.S. Nuclear Regulatory Commission ("NRC"). Uranium milling operations must
conform to the terms of such licenses, which include provisions for protection
of human health and the environment from endangerment due to radioactive
materials. The licenses encompass protective measures consistent with the Clean
Air Act and the Clean Water Act, and as federally-issued licenses, are subject
to the provisions of the National Environmental Policy Act ("NEPA"). This means
that any significant action relative to issuance, renewal, or amendment of the
license must meet the NEPA provisions. At the present time, the NRC also
regulates in situ uranium mining operations. Therefore, for these types of
facilities, the company must comply with the NRC licensing requirements, as well
as with the Federal Land Policy Management Act, the National Park System Mining
Regulations Act, and State Mined Land Reclamation Acts or Department of
Environmental Quality regulations, as applicable. The Registrant utilizes
specific employees and consultants in order to comply with and maintain the
Registrant's compliance with the above laws and regulations.




Although the Registrant believes that its operations are in compliance, in all
material respects, with all relevant permits, licenses and regulations
involving worker health and safety as well as the environment, the historical
trend toward stricter environmental regulation may continue. The uranium
industry is subject to not only the worker health and safety and environmental
risks associated with all mining businesses, but also to additional risks
uniquely associated with uranium mining and milling. The possibility of more
stringent regulations exists in the areas of worker health and safety, the
disposition of wastes, the decommissioning and reclamation of mining and
milling sites, and other environmental matters, each of which could have a
material adverse effect on the costs or the viability of a particular project.

DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS

Long term demand for uranium is relatively fixed due to the fact that there are
a limited number of nuclear reactors in the world and the lead time for
construction of new reactors is many years. As a result, in any given year the
Registrant likely will rely on a relatively small number of customers to
purchase a significant portion of its production of uranium. The loss of any of
the Registrant's largest customers or curtailment of purchases by such
customers along with the inability to replace such customers with new customers
could have a material adverse effect on the Registrant's financial condition
and results from operations. Factors which may adversely affect purchases by
customers from the Registrant include decisions by customers to forego
purchases and use existing inventories of uranium and competition from other
uranium suppliers.

MONGOLIA PROPERTY

An important component of the Registrant's business plan is the development of
the Mongolia Property in Mongolia. As with any foreign operation, the Mongolia
Property may be subject to certain risks, such as adverse political and
economic developments in Mongolia, foreign currency controls and fluctuations,
as well as risks of war and civil disturbances. Other events may limit or
disrupt the project, restrict the movement of funds, result in a deprivation of
contract rights or the taking of property by nationalization or expropriation
without fair compensation, increases in taxation or the placing of limits on
repatriation of earnings. No assurance can be given that current policies of
Mongolia or the political situation within that country will not change so as
to affect adversely the value or continued viability of the Registrant's
interests in the Mongolia Property. The Registrant intends to monitor this
investment with a view to anticipating political, economic or other events that
may affect the Registrant's interests in the Mongolia Property. See
"Description of Property - Mongolian Property".

TITLE TO CERTAIN PROPERTIES

The Registrant may not have good title to the Carnation claims in its Sunday
Mine Complex and may not have the right to mine certain of the properties held
by the Mongolian joint venture. Such matters may adversely affect the ability
of the Registrant to mine these properties. See discussion under "Claims
Arising out of the Acquisition."

RELIANCE ON ALTERNATE FEED REVENUE; DEPENDENCE ON ISSUANCE OF LICENSE AMENDMENTS

A significant portion of the Registrant's expected revenues and income over the
next several years is expected to result from the processing of Alternate Feed
Materials through the White Mesa Mill. These Alternate Feeds are ores or
residues from other processing facilities that contain uranium in quantities
that are either uneconomical to recover



                                       16
<PAGE>   17

or can not be recovered at these other facilities. The Registrant has
demonstrated the capability to "recycle" these Alternate Feeds through the Mill,
recover whatever uranium is present, and dispose of the remaining waste in the
Registrant's tailing cells. The Mill's co-product recovery circuit also allows
the Registrant to recover other valuable materials that might be present in
these Alternate Feeds.

The Registrant's ability to process Alternate Feeds is dependent upon obtaining
amendments to its Mill license from the NRC. There can be no assurance that the
NRC will continue to issue such license amendments. See Item 1 - "Description
of Business" and Item 3 - "Legal Proceedings."

Although the Registrant believes that Alternate Feed sources will continue to
generate revenues and income for the Registrant over this time period, there
can be no guarantees or assurance that this will be the case.

DEPENDENCE ON KEY PERSONNEL

The Registrant's success will largely depend on the efforts and abilities of
certain senior officers and key employees. Certain of these individuals have
significant experience in the uranium mining industry. The number of
individuals with significant experience in this industry is small. While the
Registrant does not foresee any reason why such officers and key employees will
not remain with the Registrant, if for any reason they do not, the Registrant
could be adversely affected. The Registrant has not purchased key man life
insurance for any of these individuals.

CONFLICTS OF INTEREST

Certain of the directors of the Registrant also serve as directors of other
companies involved in natural resource exploration and development, and
consequently there exists the possibility for such directors to be in a
position of conflict. Any decision made by such directors involving the
Registrant will be made in accordance with the duties and obligations of
directors to deal fairly and in good faith with the Registrant and such other
companies. In addition, such directors must declare, and refrain from voting
on, any matter in which such directors may have a conflict of interest. The
Registrant believes that no material conflicts of interest currently exist.
Please refer to a further discussion at "Item 13 - Interest of Management in
Certain Transactions".

LIMITED OPERATING HISTORY

The Registrant began its business in May 1997, following the acquisition of
assets from Energy Fuels. As a result, the Registrant has had a limited history
of operations. Although the Registrant was profitable for the year period ended
September 30, 1998, there can be no assurance that the Registrant's operations
will remain profitable.

ITEM 2.  DESCRIPTION OF PROPERTIES

The following is an overview of the properties currently held by the
Registrant:

                                 WHITE MESA MILL

OVERVIEW

The White Mesa Mill is a fully permitted uranium mill with a vanadium and other
co-product recovery circuit that is strategically located in southeastern Utah
near the Colorado Plateau District and the Arizona Strip. The Mill is
approximately six (6) miles south of the city of Blanding, Utah. Access is by
state highway.

Construction of the White Mesa Mill (also referred to herein as the "Mill")
started in 1979, and ore was first processed in May 1980. The Mill cost $40
million to construct; with inflation, more stringent permitting requirements,
and the lack of suitable sites, the cost of constructing a facility such as the
White Mesa Mill, if possible, would be considerably more than that amount. The
Mill is in compliance with NRC and EPA standards and is a dual-circuit uranium
mill. The Mill is a standard design with both uranium and vanadium circuits.

The ore is received at the White Mesa Mill and stockpiled. Amenability tests
are run on ore lots from individual mines to determine if blending of the ores
will increase overall recovery. The ore is initially fed to an 18-foot diameter
SAG Mill, then stored in slurry form in one of the two pulp storage tanks. The
White Mesa Mill utilizes a two-stage leach process where overflow solution from
the No. 1 CCD Thickener is combined, in an "acid kill" step, with feed from the
pulp storage tanks. The slurry from this first stage leach is then separated in
the pre-leach



                                       17
<PAGE>   18

thickener, with the solids going to the second stage leach and the solution is
clarified and sent to the solvent extraction circuits. Concentrated sulfuric
acid, steam, and an oxidizer are added in the second stage leach. This slurry is
subsequently fed to the 8-stage CCD Circuit where the underflow is discharged to
tailings. In full operation, the Mill employs approximately 100 people.

CURRENT CONDITION

The Mill is generally in good operating condition, but with a need for capital
expenditures to reline tailings Cell No. 4A, and refurbish the vanadium circuit
before vanadium can be produced. The claricone clarifier has failed
structurally and has been repaired once. Further repairs are currently required
at an estimated cost of $15,000, should it be deemed that the claricone
clarifier will be necessary for future operations. Since the date of the
acquisition, approximately $200,000 has been spent refurbishing the vanadium
circuit, which is expected to be fully restored by May 1999.

TAILINGS

Synthetic lined cells are used to contain tailings and, in one case, solutions
for evaporation. Currently there is sufficient volume available for another
500,000 tons of tailings solids. Thereafter, an additional cell will be needed,
at a cost of approximately $2.5 million.

The current license for the Mill permits that a total of three forty-acre
tailings cells may be added. Each additional tailings cell can accommodate
approximately two million tons of tailings, for a total of nine years of
operation at 2,000 tons per day.

Difficulties have been encountered with leaking seams in the liner for Cell
#4A. This cell contains no tailings at present, and leaking is due to working
of the liner by thermal stress, since it is exposed to full sunlight. The cell
must be relined with a better quality material before using it to deposit
tailings. The Registrant estimates an expenditure of $1.5 million for this
purpose.

REQUIRED CAPITAL EXPENDITURES

Four significant capital projects are anticipated over the next three years
with respect to operation of the White Mesa Mill:

<TABLE>
<CAPTION>

               ITEM                                        ESTIMATED COSTS
     -----------------------------                         ---------------
<S>                                                        <C>
     Vanadium circuit refurbishing                              $  200,000

     Reclaim Cell 2                                              1,675,000

     Tailings Cell #4A reline                                    1,500,000

     Additional tailings cell                                    2,500,000
                                                                ----------
     TOTAL                                                      $5,875,000
                                                                ==========
</TABLE>

RECENT OPERATIONS

Since January of 1995 the White Mesa Mill has completed four campaigns: the
processing in 1995 and 1996 of approximately 200,000 tons of stockpiled ore,
mainly from the Arizona Strip; the processing in 1996 of an alternate feed
source, the processing in 1997 of three alternate feed sources, and in 1998,
the Registrant completed a processing run of uranium-bearing tantalum residues
for a major tantalum producer.

OPERATION AT REDUCED CAPACITY

Nameplate capacities of the Mill are 2000 tons per day of ore, which would
yield 6 million pounds uranium per year from Arizona Strip ore or 3-1/2 million
pounds per year of uranium and up to 18 million pounds per year of vanadium
from Colorado Plateau ores. The Mill at its 2,000 tons per day design capacity
is oversized for the foreseeable tonnages expected over the next few years. The
larger the capacity, the larger the interval between Mill runs, as ore is
stockpiled to provide adequate mill feed.

The Registrant has modified the White Mesa Mill to a reduced effective capacity
of approximately 750 tons per day. (1050 tons per day, operating 5 of 7 days
per week). This will allow the Mill to be run more frequently and will reduce
the amount of time that ore is stockpiled waiting for processing. However, the
unit cost of milling ore increases as the capacity of the Mill is reduced.



                                       18
<PAGE>   19




Running at a lower tonnage is possible if relatively minor modifications are
made to the Mill. The Registrant's capital expenditure's required to reduce the
capacity of the Mill were approximately $100,000, and that amount is
approximately the same amount that would be required to increase capacity at a
later date, should that alternative become economically attractive.

CLOSURE

THE FOLLOWING DISCUSSION OF THE REGISTRANT'S CURRENT PLANS FOR THE FUTURE
OPERATION OF THE MILL CONSTITUTES FORWARD LOOKING STATEMENTS WITHIN THE MEANING
OF FEDERAL SECURITIES LAWS. SEE "SPECIAL NOTE REGARDING FORWARD LOOKING
STATEMENTS."

The Registrant currently plans to operate the Mill continuously to process
conventional ores and/or alternate feed ores except for planned temporary shut
downs in between mill runs. As mentioned above, based on the Registrant's
current tailings capacity and planned construction of future tailings cells,
the Registrant currently anticipates operating the mill for at least nine (9)
years subject to unanticipated business and/or regulatory changes. In the
future, should the Registrant choose to shut down and close the Mill, it would
be subject to certain closure costs. The estimate of closure costs for the Mill
was revised by the Registrant after discussion with the NRC and reviewing costs
for demolition. These estimated closure costs are summarized as follows:

                          WHITE MESA MILL CLOSURE COSTS

<TABLE>
<CAPTION>

     CATEGORY
     --------
<S>                                                                                 <C>
     Mill dismantling and decommissioning(1)                                        $  1,438,636
     Cover tailings cell #2(2)                                                         1,674,447
     Cover tailings cell #3(2)                                                         2,107,991
     Cover tailings cell #4A(2)(4)                                                       304,819
     Cover tailings cell #1(2)                                                         1,663,119
     Miscellaneous - management, hygiene, radiation, etc                               1,395,372
                                                                                    ------------
     Direct Costs                                                                      8,584,384
     Contractors' Profit @ 10%                                                           858,438
     Contingency @ 15%                                                                 1,287,244
     Licensing and bonding                                                               171,976
     Long term care fund                                                                 567,417
                                                                                    ------------

     TOTAL ESTIMATED COSTS                                                          $ 11,469,459(3)
                                                                                    ============
</TABLE>


(1)      In the S2MS report, S2MS was asked to review the cost estimates for the
         reclamation of the Mill. As a check, S2MS determined that this equates
         to 35,000 hours @ $40/hour which S2MS concluded should be sufficient
         for this work. S2MS concluded that some equipment could be salvaged and
         resold, for example the grinding mill and drive, agitators, gearboxes,
         etc. S2MS concluded that as much as $1 million could be realized,
         although this has not been included.

(2)      The tailings cells are filled up to a 5 foot freeboard then the walls
         are "contoured" and the cell contents covered with four layers of
         material- a 4 foot random fill, then a 2 foot clay cover (to stop radon
         emission), then another 2 feet of random fill, and finally a 2 inch top
         cover of crushed and compacted rock. The last layer is meant to prevent
         re-vegetation on the surface that root action might open as a pathway
         for radon emission.

         The closure plan would involve transfer of solution from Cell #4A to
         Cell #3, followed by sediment and the plastic lining. Cell #2 is
         already nearly covered; Cell #3 is partially covered.

(3)      The total estimated reclamation costs are bonded. The Registrant has
         posted security in the amount of 65% of the bond amount. See "White
         Mesa Mill - Reclamation Bond".

(4)      The cost estimate for reclaiming tailings Cell #4A assumes that no
         tailings sands are deposited in Cell #4A. Tailings sands are expected
         to be deposited in to Cell #4A in the second year of operations. Once
         tailings sands are deposited in tailings Cell #4A, the reclamation cost
         of that cell will be approximately $2 million.



                                       19
<PAGE>   20

In March 1999, the Registrant submitted a fully revised cost estimate as the
annual update for the surety bond to the NRC. The revised cost estimate is
considerably less than the total amounts shown above. If the NRC approves the
Registrant's revised costs, the estimated costs shown above will then be
reduced accordingly.

SEQUENTIAL RECLAMATION

Under the Mill's NRC permit, the Mill is only allowed to have two tailings
cells open at any one time. Prior to depositing tailings into Cell No. 4A, the
Registrant is required to close tailings Cell No. 2. This will allow tailings
Cell No. 4A to be opened. The Registrant also intends to commence reclamation
of Cell #2 for approximately $1,675,000. The result is that the total cost of
reclamation at any one time, and hence the amount of the bond required, is not
expected to increase as Cell #4A is brought into use.

As each pond, or cell, is filled with tailings, the water is drawn off and
pumped to the evaporation pond and the sands allowed to dry. As each cell
reaches final capacity, reclamation will begin with placement of 6 to 8 feet of
clay and rock over the tailings. Additional cells are excavated into the
ground, and the overburden is used to reclaim previous cells. In this way there
is an ongoing reclamation process, and the total cost of reclamation at any
point in time is not expected to increase significantly over the amounts set
out in the table above, other than due to inflationary factors.

                    SUMMARY OF RESERVES AND MINERAL DEPOSITS

The following is a summary of the reserves and mineral deposits that the
Registrant acquired on completion of the Energy Fuels' Asset Acquisition:


<TABLE>
<CAPTION>

                                        MILLION LBS U(3)O(8) (5)                MILLION LBS V(2)O(5) (5)
                                   -----------------------------------     ---------------------------------
                                   PROVEN/PROBABLE          MINERAL        PROVEN/PROBABLE        MINERAL
                                     RESERVES(1)           DEPOSITS(2)       RESERVES(1)         DEPOSITS(2)
                                   ---------------        ------------     ---------------      ------------
<S>                                <C>                    <C>              <C>                  <C>
ARIZONA 1 MINE
(standby)                                   --                 1.0                  --                --

CANYON MINE
(partially developed)                       --                 2.0                  --                --

PINENUT MINE                                --                 0.9                  --                --
(standby)

COLORADO PLATEAU
(conventional mining)                      1.0(3)             10.3                   7(3)             55

BULLFROG PROJECT
(conventional mining)                       --                12.9                  --                --

RENO CREEK
(in situ  mining)                           --                 5.1                  --                --

DEWEY BURDOCK (in
situ mining)                                --                 6.6(4)               --                --

GURVAN SAIHAN JV (in
situ mining)                                --                22.6(4)               --                --

                                          ----               -----                 ---               ---
TOTALS                                     1.0                61.4                   7                55
                                          ====               =====                 ===               ===
</TABLE>

(1)  As delineated by S2MS in the S2MS Report.

(2)  As stated by management of Registrant.

(3)  Does not include 364,000 lbs. of U(3)O(8) and 3,460,000 lbs. of V(2)O(5)
     currently in the mine plan at the Rim Mine. See "Rim Mine".

(4)  Updated by Registrant.

(5)  Quantities represent total minerals contained in the deposits. Registrant
     estimates uranium recoveries of approximately 95% for conventional mining
     properties and 75% for in situ properties. Vanadium recoveries are
     estimated at 78% of the above quantities.



                                       20
<PAGE>   21

INDEPENDENT EXPERT'S REPORT

In September 1996, the Registrant engaged Saskatoon Mining & Mineral Services
Ltd. ("S2MS"), an independent engineering firm specializing in the uranium
industry, to review and report on certain of Energy Fuels' assets. S2MS
prepared a report entitled "Acquisition Study of Energy Fuels Nuclear Inc."
dated November 1996 (the "S2MS Report").

Where indicated, S2MS has reviewed certain of the reserves and other costs set
forth herein.

CALCULATION OF RESERVES AND MINERAL DEPOSITS

The Registrant maintains estimates of reserves and mineral deposits on the
various properties. The Registrant estimates that its properties (excluding
Mongolia) contained approximately 1 million pounds of U(3)O(8) as proven and
probable reserves. In addition, the Registrant estimates that there are at least
another 38 million pounds of potential mineral deposits of U(3)O(8). In both
cases, these estimates of mineral deposits were based upon years of historical
experience in those areas. See "Arizona Strip - Exploration Potential" and
"Colorado Plateau - Exploration Potential".

Of these reserves, the Registrant calculates 10.5 million pounds as minable in
its current mine plan: 1 million from the Sunday Mine Complex; 0.4 million from
the Rim Mine; 1 million from the Arizona 1 Mine; 3 million from the Canyon Mine
(which includes 1 million pounds that are technically in the potential mineral
deposit category but which management, based on years of experience with
breccia pipe mines, believes will be proven as minable reserves once
underground drilling is completed in the course of mine development); and 5.1
million pounds from the Reno Creek Property (to which a 75% recovery factor is
applied). See "Sunday Mine Complex", "Rim Mine", "Arizona 1 Mine", "Canyon
Mine" and "Reno Creek Property".

The Registrant's current mine plan covers anticipated production for the next
five (5) years, assuming favorable economic and market conditions, from the
Sunday Mine Complex, the Rim Mine, the Arizona 1 Mine and the Canyon Mine and
anticipated production from the Reno Creek Property over its expected mine life
of approximately 6 years. The Registrant's current mine plan does not address
other mines that may also be brought into production during the next 5 years at
various price levels of U(3)O(8) and vanadium, nor the additional reserves and
mines that are expected to be developed in the future, thereby extending the
mining plan beyond 5 years.

The Registrant has accepted these reserve numbers and recovery factors as its
base case, rather than the slightly lower numbers calculated by S2MS (see "S2MS
Calculation of Reserves and Mineral Deposits") because it believes that the
historic production on the Colorado Plateau will continue for many years to
come; that past experience with breccia pipes leads to the reasonable
expectation that additional reserves will be delineated in the Canyon Mine once
underground drilling is completed; and that a 75% recovery factor for the Reno
Creek Property is reasonable.

Furthermore, the Registrant believes that the production estimates set out in
its current mine plan for the next five years can be continued for many
additional years depending on commodity prices, with the additional potential
on the Colorado Plateau and the Arizona Strip.

S2MS' CALCULATIONS OF RESERVES AND MINERAL DEPOSITS

As part of the Registrant's due diligence prior to the completion of the
bidding procedures for the Energy Fuels Assets, S2MS carried out a review of
the Sunday Mine Complex, the Arizona 1 Mine, the Canyon Mine, the Reno Creek
Property, the Dewey Burdock Property, the Mongolia Property and the White Mesa
Mill during the two months prior to the December 4, 1996 Section 363 Sale
confirmation hearing. S2MS spent approximately 1,500 hours completing their
review of these properties. However, given the limited amount of time
available, S2MS was not asked to review any other mines or properties of Energy
Fuels, and in particular did not review the Deer Creek, Rim, Egnar Plains,
Thunderbolt or Monogram mines on the Colorado Plateau, the Pinenut Mine on the
Arizona Strip, the Bull Frog Property or any of the exploration properties on
the Colorado Plateau or the Arizona Strip. In addition, given the absence of
historical data in some cases, S2MS was not able to fully evaluate all of the
reserves and mineral deposits in the Sunday Mine Complex.



                                       21
<PAGE>   22

Based on their review, S2MS was able to delineate minable reserves of 9.1
million pounds. However, S2MS was unable to delineate all of the reserves in the
Registrant's mine plan. The reserve estimates for the Arizona 1 Mine of 1
million pounds of U(3)O(8) were confirmed. However, because S2MS was not able to
recognize formally the additional 1 million pounds that the Registrant
delineated as minable reserves at the Canyon Mine once underground drilling is
completed, S2MS was only able to delineate 2 million pounds of U(3)O(8) at the
Canyon Mine. Finally S2MS applied a recovery factor of 65% to the reserves at
the Reno Creek Property, compared to the 75% recovery factor applied by the
Registrant, thereby reducing the number of pounds of uranium that is expected to
be recovered from those reserves by approximately 500,000 pounds. In addition,
as S2MS was not asked to review the Rim Mine, the 364,000 lbs. of U(3)O(8) and
3,460,000 lbs. of V(2)O(5) in the current mine plan for the Rim Mine were not
included in S2MS's report. See "Rim Mine".

In its report, however, S2MS did recognize that it was unable to fully evaluate
all of the reserves at the Sunday Mine Complex, given the lack of time and data
and that additional potential exists. S2MS also acknowledged that it is
possible that with additional underground drilling at the Canyon Mine, the
Registrant's estimate of 3 million pounds of reserves at that mine could be
achieved. Finally, S2MS acknowledged that potential exists at the Reno Creek
Property to delineate additional reserves.

                            COLORADO PLATEAU DISTRICT

OVERVIEW

The Uravan mineral belt in the Colorado Plateau (the "Colorado Plateau
District") has a lengthy mining history, with the first ore shipment made to
France in 1898. World War II brought increased attention to the uranium ores in
the Uravan area, and by the 1950's this district was one of the world's foremost
producers of both uranium and vanadium. Production continued more or less
uninterrupted until 1984 when low uranium prices forced the closure of all
operations. Production resumed in 1987 but once again ceased in 1990. Total
production from the Union Carbide mines (many of which were later purchased by
Energy Fuels, and hence the Registrant) in the Uravan area is reported at 47
million pounds of U(3)O(8) and 273 million pounds of vanadium, yielding an
overall ratio of V(2)O(5)/U(3)O(8) of 5.79.

EXPLORATION POTENTIAL

The types of uranium reserves found in the Colorado Plateau were deposited as
alluvial fans by braided streams. The shape and size of the ore seams are
extremely variable. As a result, exploration and mining have historically to a
large part involved conducting exploration to find a seam and then merely
following its erratic path, with little additional exploration other than
development drilling in the course of following the seam. This is unlike other
types of mining where ore bodies are almost completely delineated by
explorative drilling prior to mining.

The unusual nature of these ore bodies has therefore traditionally resulted in
a limited amount of resources being dedicated to delineate reserves prior to
mining. Traditionally, there will be some ore reserves that have been
delineated at the beginning of each year, uranium will be mined during the year
and approximately the same amount of reserves will remain delineated at the end
of the year. This pattern has persisted since the 1940's.

Mining stopped on the Colorado Plateau in 1990 as a result of low uranium and
vanadium prices and not as a result of the depletion of reserves.

Based on this history of production from the Colorado Plateau, the Registrant
believes that the potential to continue this pattern of production exists and
that additional reserves will be delineated each year as mining continues.

Presently 1.3 million pounds of minable reserves of uranium and 10.3 million
pounds of additional geological mineral deposits of uranium have been
identified by the Registrant. The Registrant has also identified 10.5 million
pounds of minable reserves of vanadium and 55 million pounds of additional
mineral deposits of vanadium. In addition, the Registrant has identified
several previously unexplored prospective areas in the Colorado Plateau between
existing mines.



                                       22
<PAGE>   23



GEOLOGY

The Registrant's properties on this geographic area are typical uranium-vanadium
deposits of the Colorado Plateau type located in the southern end of the Uravan
mineral belt. The rocks of the Colorado Plateau are predominately sedimentary
ranging in age from Precambrian to Tertiary and, although uranium mineralization
occurs in sediments of different ages, the most important deposits of the Uravan
belt occur in the Salt Wash Member of the Jurassic Morrison Formation.

The Salt Wash Member consists of light gray to light brown sandstones
interbedded with red-green siltstones and mudstones. The sandstones, which are
generally fine-grained and well to moderately sorted, are considered to have
been deposited as alluvial fans by braided streams. The mineralization occurs
in the lenticular sandstone deposits as tabular, elongate bodies generally
parallel to the bedding following the palaeo-channels. All of the large
deposits within the Morrison Formation are in the upper sandstone lens of the
Salt Wash Member, commonly known as the third rim. Fine-grained uraninite is
the dominant uranium mineral accompanied by lesser amounts of coffinite. The
chief vanadium mineral is nontrosite. In the oxidized parts of the deposits the
distinctive yellow coloured uranyl-vanadate mineral, carnotite, is common.

Individual deposits are small, varying in length from a few hundred to several
thousand feet and in width from a hundred to a thousand feet. Thicknesses vary
from a few inches to several tens of feet, but generally average between two to
five feet. Mines often contain several such ore bodies. The host sediments are
generally flat lying to low dipping with little structural deformation.

The Registrant's principal mining complexes on the Colorado Plateau District
consist of the Deer Creek, Monogram, Thunderbolt, Sunday, Egnar Plains and East
Canyon (Rim) zones.

The Registrant has also established a central office, maintenance shop, and
equipment storage facility at Dove Creek, Colorado approximately 60 miles south
of the Sunday Mine Complex. This facility is used for major repair work such as
overhauls and is centrally located to serve several widely spaced mines.


The bulk of the reserves and mineral deposits and the nearest term mining
potential in the Colorado Plateau District are contained in three areas, the
Sunday Mine Complex, the Deer Creek complex, which includes the La Sal and
Pandora, mines and the East Canyon Area, which includes the Rim Mine, all of
these areas have developed, permitted mines, with the Sunday and Rim Mines
currently in production. Production at certain other mines in these areas could
be resumed on relatively short notice. Given the limited time available, only
the Sunday Mine Complex, which is currently in production, was examined by
S2MS. See "Sunday Mine Complex."


                               SUNDAY MINE COMPLEX

OVERVIEW

The Sunday Mine Complex is located in the Colorado Plateau District of Colorado
approximately 100 miles by road from the White Mesa Mill. Access is by state
highway and county roads. The Sunday Mine Complex is comprised of the Sunday,
West Sunday, Carnation, Topaz, Le May and Leonard Clark zones which are
contiguous or near contiguous partially worked mines and virgin exploration
areas. The Sunday Mine Complex is held by the Registrant under a large number
of 1,500 feet x 600 feet rectangular standard BLM mining claims, some of which
were owned outright and some of which were purchased or leased from former
holders and are subject to various NSR royalty agreements. The Sunday Mine
Complex is one of several mining areas owned by the Registrant in the Colorado
Plateau District. See "Colorado Plateau District".

PERMITTING

The Sunday Mine Complex is permitted for mining. However, recent changes in
Colorado laws gives the Colorado state authorities the right to require mines
such as the Sunday Mine Complex in certain circumstances to submit a revised
Environmental Protection Plan for approval when mining activities are
re-initiated. See "Permitting". Mining activities have commenced at the Sunday
Mine Complex and as of the filing date the Registrant has not been notified of
any additional permitting requirements.



                                       23
<PAGE>   24

GEOLOGICAL MINERAL DEPOSITS

The geological mineral deposits of the Sunday Mine Complex, calculated by the
Registrant, are 845,400 tons grading approximately 0.21% U(3)O(8) and
approximately 1.40% V(2)O(5) containing 3,493,700 pounds of U(3)O(8) and
23,612,300 pounds of V(2)O(5). As of September 30, 1998, the Registrant had
produced 37,100 tons of ore from these deposits.

Prior to the acquisition of the Energy Fuels assets, the Registrant asked S2MS
to evaluate the Sunday Mine Complex reserve estimates. Due to time constraints,
an assessment of the reserve by S2MS focused on the West Sunday area and new
areas immediately available to new development from the West Sunday workings.
These are the Le May zone, Leonard Clark zone and West Sunday zone itself. In
addition, S2MS spent some time attempting to verify the mineral deposit
estimate for the Sunday and Carnation zones but found that there was not
sufficient data to verify all these mineral deposits, in the time available.

The final probable mineral deposits for the Sunday Mine Complex zones calculated
by S2MS, including approximately 50,000 tons from the Carnation zone, were
318,190 tons grading approximately 0.25% U(3)O(8) and approximately 1.69%
V(2)O(5) containing 1,594,690 pounds of U(3)O(8) and 10,682,050 pounds of
V(2)O(5).

The overall total for the Le May, Leonard Clark and West Sunday zones compares
with 235,000 tons grading 0.24% U(3)O(8) quoted for the same areas by Energy
Fuels which makes the S2MS estimate 14% higher in tons and 19% higher in
contained pounds of U(3)O(8). As a result, S2MS has concluded that the estimates
made by Energy Fuels for these areas were slightly conservative and are
realistic numbers for planning future mining operations.

SUNDAY MINE COMPLEX - MINING

MINABLE RESERVES

The Registrant's mineral deposit for the Sunday Mine Complex includes a total of
845,400 tons at 1.40% V(2)O(5) and 0.21% U(3)O(8). As discussed above, only a
portion of the deposit areas addressed in that statement were independently
verified by S2MS and included in the S2MS Report. Based on the mineral deposits
that S2MS was able to verify with the available data, minable reserves as
calculated by S2MS were 221,579 tons grading approximately 0.24% U(3)O(8) and
approximately 1.67% V(2)O(5), containing 1,070,124 pounds of U(3)O(8) and
7,393,822 pounds of V(2)O(5).

MINE DEVELOPMENT

The Sunday Mine Complex is accessed by a number of declines from surface. The
declines grade at approximately minus 12% and are collared in the valley wall
and generally follow the ore zones down, which dip at about 11 degrees. The
valley rises up steeply over the ore zones such that at the top of the valley
wall the ore is some 800 feet below surface.

Originally each of the mines in the Sunday Mine Complex were developed as
separate stand alone mines, but now they have been joined together by drifts
such that they can be considered as one extensive mine.

The Sunday Mine Complex is an operating mine and as such has all the necessary
facilities required for operations. Adjacent to the West Sunday portal is a
building containing a single bay maintenance shop, change room, office and
small warehouse. A second building houses a compressor. Water, electricity, and
other services are all installed. At the Sunday portal one building houses a
four bay maintenance shop and a second building provides a change room and
offices. There are several other utility buildings as well at this site. As the
Sunday Mine was operated as a separate mine it is set up as a stand-alone
facility with all the required services installed. An additional building
housing a compressor is located on the hill above the West Sunday. A number of
ventilation fans remain installed on the collar of ventilation raises.

Additional access and ventilation development is required for mining of certain
ore zones. A 2,400-foot long drift from the Topaz to the Le May zone is being
driven and a new 700-foot long vertical borehole to surface would be bored to
supply ventilation to the zone. To further develop the West Sunday deposit, 600
feet of additional drifting is required to connect the upper and lower West
Sunday ore zones. The Registrant has completed 2226 feet of drift development
to date. However, these activities were placed on standby in October 1998, due
to low commodity prices.



                                       24
<PAGE>   25

MINING METHODS

The mining method is random room and pillar in which no set pillar pattern is
established but rather both the sizes of the rooms and the pillars is left up
to the operators on a day to day basis. Whenever possible, pillars would be
left in waste or low-grade areas. A typical room is about 20 feet wide with
pillars as small as 12 feet square in highly mined areas.

Because of the limited thickness of the reserve, mining must necessarily be
quite selective in order to maintain a satisfactory production grade. This is
done by following the reserve zones closely and by the technique of "split
shooting" wherein the reserve and waste are blasted separately in a two-stage
operation.

Miners are generally organized into small production teams, each operating in a
different area of the mine. Drilling is carried out by hand held jacklegs. Each
drill crew is assigned a vehicle equipped with a full set of gear for drilling
so that location changes can be made quickly and efficiently. Mucking is
accomplished by one or two cubic yard scooptrams loading ore or waste into 8 or
10 ton trucks for haulage to surface. Ore is dumped in a stockpile near the
portal collar.

The surface truck haulage contractor is responsible for loading his own trucks
as well as hauling the ore to the Mill near Blanding, Utah.

PRODUCTION FORECAST AND SCHEDULE

Based on 200 tons per day for a five-day week and 250 working days per year, an
annual production rate of 50,000 tons or 230,000 pounds of recoverable uranium
and 1.3 million pounds of recoverable vanadium is considered by the Registrant
to be reasonable.

The Registrant began actual ore production from the Sunday Mine Complex in
November of 1997 after several months of mine dewatering and general
refurbishment. The Registrant also began refurbishment of the old Topaz
decling, and driving new decline toward the LeMay orebody. As of the end of
September 1998, the Registrant had produced 37,100 tons of ore.

OPERATING COSTS

The Registrant based on experience and expected vanadium prices estimates that
its total mining and milling costs will be in the range of $9.00 to $14.00 per
pound of uranium produced from the Sunday Mine Complex.

The Registrant has contracted out a portion of the east-end of the Sunday Mine
Complex (the GMG area) to an independent contractor. The contract is an
all-inclusive one in which the contractor is responsible for all mining
activities and support services. The contractor pays for power, fuel,
maintenance of all equipment and buildings, roads, as well as direct mining
costs. The Registrant compensates the contractor by paying the contractor for
tons of ore delivered at the White Mesa Mill. To encourage good grade control,
the mining contract is set up to pay a premium for increasing ore grade
relative to the reserve grade. The payment basis is recalculated monthly based
on the current market prices of uranium and vanadium. The contractor assumes
all risk for profit and loss based on his ability to maintain profitable
quantities and grades of ore from a mostly depleted reserve area.

PURCHASED ORE

In order to supplement its own mining operations and production, the Registrant
has entered into agreements with other independent miners in the Colorado
Plateau region to purchase their ore based on a schedule which takes into
account the U(3)O(8) and V(2)O(5) content of the ore, current market prices, and
appropriate discounts for milling costs and profits. These purchase prices
compare favorably with the company's own mining costs for similar ore.

                                    RIM MINE

OVERVIEW

The Rim Mine is located in the Colorado Plateau District of Utah approximately
60 miles by road from the White Mesa Mill. Access is by state highway and
county roads. The Rim Mine is comprised of the Rim, Cressler, Columbus, and
Humbug claims, which are contiguous or near contiguous partially worked mines
and virgin



                                       25
<PAGE>   26

exploration areas. The Rim Mine is held by the Registrant under a large number
of 1,500 feet x 600 feet rectangular standard load mining claims, some of which
are owned outright and some of which are leased and are subject to various
royalty agreements. The Rim Mine is one of several mining areas owned by the
Registrant in the Colorado Plateau District. See "Colorado Plateau District."

PERMITTING

The Rim Mine is permitted for mining by the State of Utah Division of Oil, Gas
and Mining. The Mine has a current Utah NPDES (National Pollution Discharge
Elimination System) Permit allowing for treatment and discharge of excess mine
water.

GEOLOGICAL MINERAL DEPOSITS

The mineral deposits of the Rim Mine, calculated by the Registrant, are 108,000
tons grading approximately 0.18% U(3)O(8) and approximately 1.72% V(2)O(5)
containing approximately 394,800 pounds of U(3)O(8) and approximately 3,712,400
pounds of V(2)O(5). The Registrant projects an additional 40,000 tons of mineral
deposits based on geologic favorability and nearness to the known orebody at the
Rim Mine. These mineral deposits contain 152,000 pounds of U(3)O(8) and
1,528,000 pounds of V(2)O(5) at grades of 0.19% U(3)O(8) and 1.91% V(2)O(5).

MINABLE RESERVES

The Registrant's reserve for the Rim Mine includes a total of 100,000 tons at
0.182% U(3)O(8) and 1.73% V(2)O(5) containing 364,000 pounds of U(3)O(8) and
3,460,000 pounds of V(2)O(5).

MINE DEVELOPMENT

The Rim Mine is accessed by a single vertical shaft, 500 feet in depth, and a
decline from the adjacent canyon wall. The decline grades at approximately
minus 6%, and is collared in the valley wall and generally follows the ore
zones down.

The Rim Mine was an operating mine when it was shut down in 1990. The
Registrant re-commenced mining activities in early 1998. Adjacent to the shaft
is a small building containing a single bay maintenance shop, change room,
office and small warehouse. A second building houses a compressor. Water,
electricity, and other services are all installed. At the Rim portal only basic
surface facilities are in place. The mine plan calls for ventilation and mine
dewatering to be facilitated through the vertical shaft and for all mine waste
and ore removal to take place through the decline. The mine was allowed to
flood after it was shut down in 1990, and consequently required a significant
amount of cleanout and repair prior to mining.

MINING METHODS

The mining method is random room and pillar in which no set pillar pattern is
established but rather both the sizes of the rooms and the pillars are left up
to the operators on a day by day basis. Whenever possible, pillars are left in
waste or low-grade areas. A typical room is about 20 feet wide with pillars as
small as 12 feet square in highly mined areas.

Because of the limited thickness of the reserve, mining must necessarily be
quite selective in order to maintain a satisfactory production grade. This is
done by following the reserve zones closely and by the technique of "split
shooting" wherein the ore and waste are blasted separately in a two-stage
operation.

The Rim mine is being operated as a contract mine. The contractor is
responsible for all mining activities and support services. The contractor is
operating the mine and pays for power, fuel, maintenance of all equipment and
buildings, roads, as well as direct mining costs. The Registrant compensates
the contractor by paying the contractor for tons of ore delivered at the White
Mesa Mill. To encourage good grade control, the mining contract has been set up
to pay a premium for increasing ore grade relative to the reserve grade. The
payment basis is recalculated monthly based on the current market prices of
uranium and vanadium. The contractor has assumed all risk for profit and loss
based on his ability to maintain profitable quantities and grades of ore from
the current reserve area. The contractor is responsible for haulage of the ore
to the Mill near Blanding, Utah, as part of the per ton contract rate. Based on
the current payment schedule and current market prices, the Registrant is
estimating a production cost similar to that of the Registrant's own mining
operations.



                                       26
<PAGE>   27




PRODUCTION FORECAST AND SCHEDULE

Based on 75-100 tons per day for a five-day week and 250 working days per year,
an annual production rate of 18,750-25,000 tons or 65,500-87,300 pounds of
recoverable uranium and 506,000-675,000 pounds of recoverable vanadium is
considered by the Registrant to be reasonable.

The Registrant began actual production from the Rim Mine in January of 1998
after three months of mine dewatering and general refurbishment. As of the end
of September 1998, the contractor had produced 3,700 tons of ore. In December
of 1998, this mine was put on standby due to low commodity prices.

                                  ARIZONA STRIP
OVERVIEW

The Arizona Strip is an area bounded on the north by the Arizona/Utah state
line; on the east by the Colorado River and Marble Canyon; on the West by the
Grand Wash cliffs; and on the south by a mid-point between the city of
Flagstaff and the Grand Canyon. The area encompasses approximately 13,000
square miles. The Arizona Strip is separate and distinct from the Colorado
Plateau District. The two mining districts are located approximately 200 air
miles (310 road miles) apart and have been historically administered as two
separate mining camps.

The Registrant owns a number of permitted mines on standby, partially developed
mines, known deposits and well developed prospects in the Arizona Strip.

Since 1980, when mine development first began at Hack Canyon II, the Arizona
Strip has produced in excess of 19 million pounds of uranium, averaging 0.65%
U(3)O(8) from seven mines, each of which was owned and operated by Energy Fuels.
Of these mines, Hack Canyon I, II, and III and Pigeon are mined out and have
been reclaimed; Hermit is partially reclaimed; Pinenut, Kanab North, Canyon and
Arizona 1 have remaining reserves and have been placed on a standby basis.

Currently the Registrant has four mines in the Arizona Strip district, all of
which are permitted and have identified mineral reserves remaining. These are
the Kanab North, Pinenut, Arizona 1, and the Canyon. Due to time constraint
only two mines; the Arizona 1 and Canyon, are parts of the S2MS Report.

There is a central office, maintenance shop, and equipment storage facility at
Fredonia, Arizona to service the Arizona Strip mines. Fredonia is located north
of the Grand Canyon and approximately 45 miles from the Arizona 1 Mine. The
Canyon Mine is approximately 80 miles directly south of the Fredonia facility
but due to the Grand Canyon, the mine is over 200 road miles away, accessed via
highway 180.

Ore from both mines can be hauled by truck from the mine site to the White Mesa
Mill. The Arizona 1 Mine is 307 road miles and the Canyon Mine is 316 road
miles from the Mill.

DEVELOPMENT SEQUENCE IN THE ARIZONA STRIP

The mineral deposit zones occur in collapsed breccia pipes and range from 1,000
to 1,800 feet below surface with a vertical extent of up to 600 feet thick.
Each of the mines in the Arizona Strip consists of one breccia pipe. The pipes
typically are 200 to 400 feet in diameter. Within this envelope the deposit can
be at times massive but often is irregular and discontinuous. Some ore has also
been mined in "ring fractures" just outside the limits of the pipes.

Definition of the mineral deposit for these breccia pipe uranium ore bodies is,
by necessity a two stage process. Drilling from the surface provides the
initial data of depth, thickness and grade of ore intercepts determined by
downhole natural gamma logging. Depending on the diameter of the pipe, which
ranges from 200 to 400 feet, as many as 40 surface holes, controlled to
minimize drift, are completed, logged and drift surveyed.

From this surface drill data, computed proven, probable and possible reserves
are utilized for the decision as to whether or not the sinking of a shaft is
feasible.

A 1,000 to 1,600 foot deep shaft is generally required to access the deposits.
In the case of the Hack Canyon I, II, and III mines, access was obtained
through declines driven from nearby canyons. The average cost for sinking a
shaft is approximately $1,900 per foot.



                                       27
<PAGE>   28

Once the shaft sinking commences and stations are cut, the second phase of
reserve definition commences. Arrays of long holes and diamond core holes are
completed from the stations cut as the shaft sinking continues to total depth.
From natural gamma logs of the long holes and core holes, integrated and
correlated with the surface drill data, a final proven reserve is computed and
is regarded as the final feasibility study reserve.

In the case of the Arizona 1 Mine where the shaft is completed, the requisite
long hole and core drilling, ore definition is complete.

The Canyon Mine shaft is not complete, necessitating mineral deposit definition
from surface drilling only. Based on past experience, Energy Fuels projected
that a significant amount of further mineral deposits would be delineated once
underground drilling is completed.

An Energy Fuels feasibility study dated January 15, 1996 for Canyon Mine
attributed a mineral deposit of 3,094,000 pounds U(3)O(8) contained in 182,000
ore tons at 0.850% (e)U(3)O(8). S2MS supports only about 2/3 of this in its
current assessment. However, in the S2MS Report, S2MS notes that a portion of
the Canyon Mine breccia pipe has not been evaluated/drilled from the surface and
underground drilling has not been conducted. S2MS also notes that Energy Fuels
stated that it is realistic to expect that "fracture/ring ore" will be
discovered and that the calculated deposit will be extended to the 3 million
pound mineral deposit used in the above cited Energy Fuels feasibility study.

Typically, the life cycle of an Arizona Strip mine is approximately eight
years. The permitting process takes approximately one to two years. The average
mine development and mining phase takes approximately five years, and the
average decommissioning reclamation period is less than one year.

HISTORIC MINING METHODS

The mineral deposit zones are quite irregular in shape and can vary from large
areas several hundreds of feet high and wide to small lenses and discontinuous
pods. As a consequence, combinations of mining methods are used to mine the
breccia pipe mineral deposit.

Blasthole or slot mining is used to mine the larger zones. The smaller
irregular pods are mined with conventional methods, which include random room
and pillar, shrinkage, and open stoping. Following mining, all the stopes are
left open with no backfilling.

To develop a mine, four or five shaft stations spaced 200 feet apart are
excavated and drifts driven from them to establish the main production levels.
Raises are driven between the levels for ventilation and ore/waste transfer. A
ventilation supply incline is driven around the ore body as a slusher ramp.
Sublevels are driven from the incline at vertical spacings to provide access
for initial stope/slot development and conventional mining.

BACKGROUND GEOLOGY

Breccia pipes are collapse features engendered by cavern dissolution in the
Redwall Limestone, some 3,000 feet below present day surface. Overlying
sediments fracture as the cavern size increases and ultimately collapse forming
a pipe-like structure, which is filled with the rubble of the sediments.
Uranium mineralization occurs in this brecciated rock, forming deposits 200 to
400 feet in diameter, some 600 feet thick at depths up to 1,800 feet.

Uranium ore is hosted by the breccia in a sand, silt, and clay matrix. The
principal uranium mineral, pitchblende, occurs primarily in the matrix, filling
voids between sand grains and replacing rock fragments. Pyrite is the principal
gangue mineral. Calcite and gypsum are common cementing minerals. Copper, lead
and zinc minerals may also be present.

Nearly always, the pipe is haloed by alteration or a zone of bleaching
resulting from the partial removal of red iron minerals from formations
surrounding the pipe. "Ring fractures" are often seen at the pipe margins.
These fractures may also be an important host for associated mineralization and
ore reserves.



                                       28
<PAGE>   29




EXPLORATION POTENTIAL

Since 1980, Energy Fuels developed nine mine projects from which seven mines
produced a total of 19 million pounds of uranium, or approximately 2.7 million
pounds of uranium per mine.

Energy Fuels conducted an extensive exploration program in the Arizona Strip.
Since 1980, Energy Fuels identified in excess of 1,300 breccia pipe targets. Of
these, Energy Fuels drilled at least one hole on 140 breccia pipe targets, of
which 62 were verified to be breccia pipes, and identified mineralization in 42
of these. Subsequently all of these 42 breccia pipes were acquired by the
Registrant.

Energy Fuels targeted 32 mineralized breccia pipes for further exploration, and
based on past experience believed that these pipes could have mineral deposits
of 40 million pounds of uranium.

S2MS concluded that several up-side elements exist for the identification of
additional deposits in the Arizona Strip. They were:

1.    Energy Fuels' observation that portions of the Canyon Mine pipe was not
      explored by the surface drilling. These untested areas must be accorded
      potential for hosting additional deposits. That potential could not be
      quantified by S2MS.

2.    The shaft into Arizona 1 was stopped 400 feet short of design depth.
      Thus, planned underground delineation drilling stations designed to test
      that lower portion of the pipe were not available. That portion of
      Arizona 1 must also be accorded potential for hosting additional ore.
      This potential could not be quantified by S2MS.

3.    Energy Fuels' forecast that potentially in excess of 40 million pounds
      U(3)O(8) could exist in several undeveloped deposits in the area. S2MS did
      not review this potential.

S2MS concluded that no specific discernible downside elements were obvious
other than the risks that are a normal part of underground mining ventures.

                                 ARIZONA 1 MINE

LOCATION AND ACCESS

The Arizona 1 Mine is located approximately 45 miles south of Fredonia,
Arizona. Access is by state highway connecting to a well-maintained gravel
road. The project area encompasses 14.7 acres.

MINABLE RESERVES

The geological mineral deposits are 119,500 tons at a grade of 0.545% U(3)O(8).
The minable reserves accepted by S2MS are lower in tons than the mineral
deposits, as certain zones below the incremental cutoff grade have been excluded
from the mining plan.

Estimated minable diluted recoverable mineral deposits for Arizona 1 are shown
by S2MS as 80,085 tons grading approximately 0.651% U(3)O(8) resulting in
1,043,149 pounds of U(3)O(8).

PERMITTING

The Arizona 1 Mine is fully permitted for mining.

EXISTING MINE FACILITIES

Site construction for the Arizona 1 Mine began in March 1990. Work was
suspended and the project put on standby status in March 1992. The site is
fully developed to support the resumption of production except for minor
repairs.

The shaft has been sunk to a depth of 1,254 feet. The shaft was 400 feet from
the ultimate planned depth when sinking was curtailed.



                                       29
<PAGE>   30

PRODUCTION FORECAST

Based on 150 tons per day for a five-day week and 250 working days per year, an
annual production rate of 37,500 tons or 449,190 pounds of recoverable uranium
should be achieved.

MINING SCHEDULE

The Registrant has developed a preliminary schedule for development of the
Arizona 1 Mine. Under this schedule, production commences 8.5 months following
the commencement of mobilization. Production continues for 28 months followed
by 6 months of demobilization and reclamation.

CAPITAL COSTS

The total remaining pre-production capital costs for the Arizona 1 Mine have
been estimated by the Registrant to be approximately $2,100,000.

OPERATING COSTS

The Registrant estimates that its total mining and milling costs will be in the
range of $9.00 - $12.00 per lb. of U(3)O(8) produced.

                                   CANYON MINE

LOCATION AND ACCESS

The Canyon Mine is located 13 miles south of the Grand Canyon, two miles off
highway 180.

MINABLE RESERVES

The mineral deposits are 129,000 tons in the proven and probable category at a
grade of 0.801% U(3)O(8). All deposits are estimated from 24 near vertical holes
drilled from the surface.

Minable, diluted, recoverable ore deposits were estimated by S2MS as 108,168
tons grading approximately 0.902% U(3)O(8) resulting in 1,950,948 pounds of
U(3)O(8).

PERMITTING

The Canyon Mine is permitted to commence mining activities, although an Aquifer
Protection Permit is in the process of being obtained. See "Permitting".

EXISTING MINE FACILITIES

The project site encompasses 17.4 acres with the perimeter impounded by an
earthen berm with riprap stone placed along potential erosion locations. The
site is fully developed with full surface facilities for shaft sinking and
mining. The shaft was collared to a depth 53 feet. All the facilities required
to resume shaft sinking are in place. Completion of equipping of the headframe
is still required along with modifying or "debugging" the hoist electrics as
they are outdated. The hoist has to be tested and commissioned under load.

PRODUCTION FORECAST

Based on 275 tons per day for a five-day week and 250 working days per year, an
annual production rate of 68,750 tons or 1,190,000 pounds of recoverable
uranium should be achieved.

MINING SCHEDULE

The Registrant has developed a preliminary schedule for development of the
Canyon Mine. Under this schedule, shaft sinking would resume after a
three-month mobilization and equipping period. Shaft sinking would continue for
eight months followed by another 10 months of underground development.
Production would then commence and continue for at least 19 months followed by
six months of demobilization and reclamation.



                                       30
<PAGE>   31




CAPITAL COSTS

The remaining pre-production costs estimated by the Registrant to bring the
mine into production are approximately $9,450,000.

OPERATING COSTS

The Registrant estimates that its total mining and milling costs will be in the
range of $9.00-$12.00 per lb. Of U(3)O(8) produced.

                                  PINENUT MINE

LOCATION AND ACCESS

The Pinenut Mine is located approximately 58 miles from Fredonia, Arizona and
approximately 13 road miles from the Arizona 1 Mine. Access is by state highway
and well-maintained gravel road. The mine is 317 miles from the White Mesa
Mill. The shaft is complete to 1,380 feet and 25,807 tons at 1.02% uranium have
already been mined and 526,350 pounds of uranium produced. Pinenut is
permitted. The current deposit according to the Registrant is:

                       PINENUT POTENTIAL MINERAL DEPOSITS

<TABLE>
<CAPTION>

                                          MINERAL                GRADE               TOTAL LBS.
          CATEGORY                        DEPOSIT              %U(3)O(8)              U(3)O(8)
----------------------------            ------------          ------------          ------------
<S>                                     <C>                   <C>                   <C>
   Low grade:                           109,990 tons                 0.416               913,900
   High grade:                           58,700 tons                 0.463               543,200

</TABLE>

Based on the high-grade scenario, the Registrant estimates that its total mining
and milling costs will be in the range of $15.00-$18.00 per lb. of U(3)O(8)
produced from this mine.

PERMITTING

The Pinenut Mine is permitted to commence mining activities, although an Aquifer
Protection Permit is in the process of being obtained. See "Permitting".

                                BULLFROG PROPERTY

LOCATION

The Bullfrog property is located in eastern Garfield County, Utah, 20 miles
north of Bullfrog Basin Marina on Lake Powell, about 40 air miles south of
Hanksville, Utah, and 150 miles from the White Mesa Mill.

HISTORY OF THE PROPERTY

Exxon Minerals conducted reconnaissance in the area in 1974 and 1975 and staked
their first "Bullfrog" claims in 1975 and 1976. A first phase drilling program
in 1977 resulted in the discovery of what is now called the Southwest Deposit.
Additional claims were subsequently staked, and both Exxon's exploration and
pre-development groups continued drilling. Several ore pods were discovered in
the Southwest and Copper bench areas, and ore grade mineralization was also
discovered in the Indian Bench area. Because of declining uranium market
trends, Exxon decided not to proceed with development of the Bullfrog property.
The property was sold to Atlas in July 1982. Between July 1982 and July 1983,
Atlas completed 112 drill holes and delineated the Southwest and Copper Bench
deposits on approximately 100-foot centers. Between July 1983 and March 1984,
Atlas completed an additional 40 hole core drilling program on the Bullfrog
property as well as a 133 rotary drill hole program to delineate the Indian
Bench deposit on approximately 200-foot centers. Atlas was unable to sell the
property, and in 1991 returned the claims to Exxon. Thereafter, Energy Fuels
purchased the claims in 1992.



                                       31
<PAGE>   32

More than 2,200 rotary drill holes have been completed on the Bullfrog property.
Based on this drilling, independent consultants have estimated a mineral deposit
of some 2.6 million tons at an average grade of 0.385% U(3)O(8) containing 20.1
million pounds U(3)O(8) and 60 million pounds V(2)O(5). Not the entire prospect
has been thoroughly explored, and excellent potential exists to identify
additional reserves.

SUMMARY GEOLOGY AND MINERALIZATION

Geologically, the Bullfrog property is situated on the southeastern flank of
the Henry Basin syncline, which is surrounded by the Monument Uplift to the
southeast, Circle Cliffs Uplift to the southwest and the San Rafael Swell to
the north. Exposed rocks in the Bullfrog area are Jurassic and Cretaceous in
age. Host rocks for the Bullfrog uranium/vanadium deposits are Upper Jurassic
Sandstones of the Salt Wash Member of the Morrison formation. The host
sandstones range from 30 to 40 feet in thickness and are reasonably well
cemented.

The Bullfrog deposits, together with the smaller cluster of deposits discovered
by adjacent claim owners, comprise mineral deposits of over 30 million pounds
U(3)O(8) and represent the largest close-spaced cluster of Salt Wash uranium
deposits discovered on the Colorado Plateau.

MINERAL DEPOSIT MODELS

In 1993, Energy Fuels personnel calculated an in-place mineral deposit of
1,937,065 tons at a grade of 0.334% U(3)O(8) containing 12,923,468 pounds of
U(3)O(8). A higher-grade portion of the deposit contains 1,300,000 tons at a
grade of 0.417% U(3)O(8) or 11 million pounds of U(3)O(8).

                     UNITED STATES IN SITU LEACH PROPERTIES

GENERAL

The Reno Creek Property in Wyoming is amenable to the in situ leaching ("ISL")
method of mining uranium. The Registrant believes that its Dewey Burdock
Property in South Dakota is also amenable to ISL, however, no pilot plant
testing has been conducted.

THE ISL MINING PROCESS

The ISL mining process, a form of solution mining, differs significantly from
conventional mining techniques.

The ISL process was first tested for the production of uranium in the
mid-1960's and was first applied to a commercial scale project in 1975 in South
Texas. The ISL process had become well established in the South Texas uranium
district by the late 1970's where it was employed in connection with
approximately twenty commercial projects. ISL production has expanded
considerably, and major production centers now exist in Wyoming and Nebraska,
as well as in Texas.

In the ISL process, groundwater fortified with oxygen and other solubilizing
agents is pumped into a permeable ore body causing the uranium contained in the
ore to dissolve. The resulting solution is pumped to the surface where the
uranium is removed from the solution and processed to a dried form of uranium,
which is shipped to conversion facilities for sale to public utilities.

The uranium recovery process consists of a lixiviant circuit, an
elution/precipitation circuit and a drying and packaging process. The lixiviant
circuit flows from the ore body, where the uranium is extracted from the
lixiviant by absorption onto ion exchange resin. The lixiviant is then
refortified and reinjected into the ore body. When the ion exchange column's
resin beads are loaded with uranium, the resin is removed and placed into the
elution circuit where the uranium is flushed with a salt-water solution, which
strips the uranium from the beads. This leaves the uranium in slurry, which is
then dried and packaged for shipment as yellowcake.

At the conclusion of mining, the mine site is decommissioned and decontaminated
and the wellfield is restored and reclaimed. Wellfield restoration involves
returning the aquifer to a condition consistent with its pre-mining use and
removing evidences of surface disturbance. The restoration of the wellfield can
be accomplished by flushing the ore zone for a time with native ground water
and/or using reverse osmosis to remove ions, minerals, and salts to provide
clean water for reinjection to flush the ore zone. Decommissioning and
decontamination entail decontamination,



                                       32
<PAGE>   33

dismantling, and removal for disposal or reuse of the structures, equipment, and
materials used at the site during the mining or restoration activities.

COMPARISON OF RESERVES

Most ISL properties have relatively low grades of uranium. The ISL process was
designed to mine low-grade ores out of permeable sands in a cost-effective way.
Given the nature of these ores and of the ISL process, the thickness of the ore
deposits is very important in determining the value of the ore deposit. As a
result, the grade multiplied by the thickness, or "GT", is commonly used to
compare ore deposits that are amenable to the ISL process. Generally ISL
projects in the United States have average GT's of between 1 and 2 (ft %
U(3)O(8)).

                               RENO CREEK PROPERTY

DESCRIPTION, LOCATION AND ACCESS

The Reno Creek Property is a proposed uranium ISL mine project located in the
Powder River Basin of northeastern Wyoming, 47 miles south of Gillette. Access
to the property is by state highway, which cuts through the property.

A 3,613 acre mine permit area currently embraces 5 mining units, 4 of which
would be mined under current plans. The units to be mined are designated mine
units I-IV. Reno South, a sixth mining unit, is a uranium ore body 2 to 4 miles
south of the permit area and is included in the ore reserve attributed to the
project but is not yet in the current permit application. The permit area
includes 4 mine units, together with the planned processing facility and
ancillary installations.

EXPLORATION HISTORY

Since the inception of definition drilling at Reno Creek in the 1960's, the
properties have seen a transition of ownership by Union Pacific Railroad
subsidiaries and a joint venture. The majority of drilling was in the 1970's
with little done in the 1980's. Energy Fuels acquired the property in 1992 and
performed development drilling and commercial permitting work.

REGIONAL GEOLOGIC SETTING

Structurally, Reno Creek is on the east flank, near the synclinal axis, of the
Powder River Basin. The Black Hills bound this structural basin on the east and
it is bounded to the south by the Laramie Range and Hartville uplift and the
west by the Big Horn Mountains and Casper Arch.

Stratigraphy of the Powder River Basin is a sedimentary sequence approaching
15,000 feet in thickness along the synclinal axis. Fluvial and lacustrine
Tertiary sandstones, siltstones and shale's with interbedded coal and lignite
seams, compose the upper portions of the column. Downward, Cenozoic, Mesozoic,
and Paleozoic sediments extend to Precambrian basement igneous and metamorphic
rocks.

MINERAL DEPOSITS

Uranium at Reno Creek occurs in ore sands at depths from 300 to 420 feet below
surface. The roll fronts in the area are typically low grade (average less than
0.15% U(3)O(8) and thick (average up to 17 feet). About 4,000 drill holes are
completed and logged on the property. These holes are generally on lines normal
to the roll front, spaced approximately 200 feet apart with hole spacing
thereon 100 feet or greater.

The Registrant attributes a total mineral deposit to the project of 5,100,000
pounds U(3)O(8) with average thickness ranging from 14 to 17 feet. Average
grades are from 0.066 to 0.081% U(3)O(8). The Registrant applies a 75% recovery
factor, resulting in 3.8 million pounds recoverable. Average GT values at Reno
Creek range from 1.0 to 1.4.

POTENTIAL FOR ADDITIONAL MINERAL DEPOSITS

Reno Creek displays significant potential for definition of additional deposits
both within the project area and from properties adjacent or near the project.



                                       33
<PAGE>   34

Within the project area, potential deposit increases fall into two categories:

1.   A 1988 study prepared by Union Pacific Resources quoted reserves
     attributable to the project of 10.1 million pounds (e)U(3)O(8). This 1988
     deposit utilized a minimum of 20 feet of hydrologic head above the ore.

     The 10.1 million pound 1988 deposit quotation is 5 million pounds
     (e)U(3)O(8) greater than the mineral deposit now assigned the project.

2.   Further deposit additions may come from delineation drilling about and
     between identified deposit blocks. Also, wide spaced drilling has
     identified ore grade intercepts in isolated holes. Additional drilling is
     necessary to explore this potential.

Outside the project area, properties adjacent and nearby host drilled uranium
mineralization and, consequently, the potential for acquisition of additional
deposits also exists. For example, the Registrant attributes about 3.2 million
pounds (e)U(3)O(8) to a nearby property.

ISL PILOT PLANT

In the 1980's, a field pilot plant was operated on the property. Using
information from the pilot plant, a feasibility study for building and
operating a 4,000 gallon-per-minute ISL capable of producing about 900,000
pounds of yellowcake per year for about eleven years was completed in 1987. In
1995-96, the mine plan and costs were updated. The current plan is a 3,200
gallon-per-minute facility capable of producing 800,000 pounds of yellowcake
per year for about six years. This plan is for the extraction of only a portion
of the deposit used in the 1989 study. The recent study shows more attractive
economics by selectively mining the highest quality areas of the deposit.

The pilot plant demonstrated that an ISL process could mine uranium and that
the ground water can be restored after mining.

RENO CREEK YELLOWCAKE CALCINING AND PACKING AT WHITE MESA

The Registrant proposes to transport yellowcake slurry by truck to the White
Mesa Mill, where it would be calcined and packaged, so long as it remains cost
effective.

OPERATING AND CAPITAL COSTS

S2MS prepared a prefeasibility cost estimate of $14.68 per pound based on a
recovery of 3,315,000 pounds of uranium with a 65% recovery factor. Capital
development and wellfield costs of $22.5 million are included in the cost
estimates. Management of the Registrant estimates that the costs would be in
the range of $11.00-$14.00 per pound based on a recovery factor of 75%,
resulting in the recovery of 3,825,000 lbs. of uranium.

The capital costs are estimated to be $7 million and include plant, buildings,
restoration equipment, mobile equipment, and permit and license costs. The
purchase of the restoration facilities can be delayed until restoration
activities begin. Total project wellfield and development costs are estimated
to be $15.5 million. However, only the first wellfield needs to be installed
for the project to begin, but replacement wellfields need to be installed
before the first well field is depleted.

Commercial permitting of the Reno Creek project is expected to be completed in
1999. A $700,000 initial reclamation bond will need to be posted prior to
starting construction. The amount of the bond increases annually as mining
progresses, then it begins to decrease later in the mine life as restoration
and reclamation are completed. This cost is not in the operating cost estimates
because the bond is returned at the end of the project when the project site
has been successfully reclaimed. The project operating cost estimate includes
reclamation and restoration following mining operations.

PERMIT LICENSE STATUS

The Reno Creek Property is currently in the permitting process. See
"Permitting".



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<PAGE>   35

                             DEWEY BURDOCK PROPERTY

LOCATION AND PHYSICAL FEATURES

The project area is located near the Edgemont Mining District in southwest
South Dakota near the Wyoming-South Dakota border. The nearest larger centers
with air connections are Rapid City, South Dakota about 100 miles by road and
Casper, Wyoming, about 175 miles by road. Access to the project area is by an
all-weather gravel road following the course of the railway from Edgemont for
about 30 miles to Burdock and another 10 miles to Dewey.

GEOLOGY

The uranium mineralization at Dewey/Burdock occurs in early Cretaceous
sediments of the Inyan Kara Group which dips to the southwest off the uplifted
Precambrian granitic dome of the Black Hills. The Inyan Kara Group consists of
sandstones, siltstones and mudstones and is divided into the Lakota Formation
and overlying Fall River Formation. The sediments were deposited in a coastal
plain environment with the sandstones following channels so that stratigraphic
levels of the sandstones often change with sands passing into clays.

The deposits are of the typical roll front type with uranium precipitated along
a redox front from solutions percolating through the sandstones. As a result,
the outline of the mineralization follows long, narrow, sinuous courses along
the fronts between the oxidizing and reducing environments.

MINING AND EXPLORATION HISTORY

Uranium mineralization was first discovered in the Edgemont Mining District in
1952, and small quantities of uranium ore were mined in the early 1950's and
shipped to Grand Junction, Colorado for processing. In 1956 a small mill was
established in Edgemont and produced uranium and vanadium from a number of small
operations in the district, mainly open pits, but some production came from
underground workings accessed by adits. When mining finally ceased in the early
1970's a total of 2.4 million pounds of U(3)O(8) had been produced from ores
averaging 0.14% U(3)O(8).

There was considerable exploration activity for uranium in the district during
the 1970's with the major participants being Wyoming Mineral Corporation and
the Tennessee Valley Authority ("TVA"), though a number of other companies
including Union Carbide, Homestake Mining Company, Federal Resources and Kerr
McGee, were also involved. By 1983 TVA was the sole operator through its
contractor, Silver King Mines, and it continued its exploration efforts in the
Dewey and Burdock areas until 1986 when it relinquished all its land holdings.

In 1981, TVA completed a feasibility study on the Dewey and Burdock areas based
on an underground operation producing 750 tons per day from five shafts (three
at Burdock and two at Dewey). A total mining mineral deposit of five million
pounds U(3)O(8) at an average grade of 0.20% U(3)O(8) with a minimum six foot
mining width was estimated.

In 1991, R.B. Smith & Associates, Inc. of Austin, Texas undertook a review and
compilation of all data. This involved an independent mineral deposit
computation in addition to a hydrogeological study. This work identified the
potential favorability of these deposits for ISL. On the basis of this work
Energy Fuels secured property rights covering the Dewey and Burdock projects.

LAND CONTROL

Land control is in the form of a combination of leases with the ranchers in the
area, and unpatented mining claims held by the Registrant.

Any future production of uranium from most of the project area is subject to a
2% yellowcake royalty to the surface rights owner and a 3% yellowcake royalty
to the mineral rights owners.



                                       35
<PAGE>   36

MINERAL DEPOSIT ESTIMATE

DATA BASE

The total project mineral deposit is 6.66 million pounds U(3)O(8) with an
average GT grade-thickness of 1.28 (ft.% U(3)O(8)). Additional geologic
potential in excess of 1 million pounds of U(3)O(8) is projected on known trends
within the leased properties, but these trends have not been adequately
evaluated by drilling.

The Dewey/Burdock deposit is being considered as a candidate for ISL mining.
Although the mineral deposit computation has been confined to sands below the
water table, little is known concerning the permeability and flow rates of the
host sandstones. Comprehensive tests will have to be conducted before the
mineral deposit can be conclusively determined to be amenable to ISL. Test
wells will need to be drilled to depths of 300 to 550 feet in the Burdock area
and 550 to 750 feet in the Dewey area.

                                MONGOLIA PROPERTY

The Registrant owns a 70% interest and is the managing partner in the
Gurvan-Saihan Joint Venture, which holds significant uranium exploration and
mineral deposit properties in Mongolia.

THE REPUBLIC OF MONGOLIA

The Republic of Mongolia, known from 1924 to 1991 as the Mongolian People's
Republic, is a nation in Central Asia, bounded on the north by Russia and on
the east, south, and west by China. The country has a total area of 1,565,000
square kilometers (604,250 square miles). The capital and largest city of
Mongolia is Ulaanbaatar.

TOPOGRAPHY, CLIMATE AND RESOURCES

The topography of Mongolia consists mainly of a plateau between about 914 and
1,524 meters (about 3,000 and 5,000 feet) in elevation broken by mountain
ranges in the north and west. The Altai Mountains in the southwest rise to
heights above 4,267 meters (14,000 feet). The Gobi Desert covers a wide arid
tract in the central and southeastern areas. The most important rivers are the
Selenge Moron and its tributary, the Orhon Gol, in the north.

Mongolia's climate is harsh, with temperatures ranging between -15(degree) and
-45(degree) C (-5(degree) and -50(degree) F) in winter and 10(degree) and
45(degree) C (50(degree) and 115(degree) F) in summer. Winters are dry, and
summer rainfall seldom exceeds 380 millimeters in the mountains and 125
millimeters in the desert.

Mongolia contains forests of larch, pine, and cedar in the mountains, but these
are of little economic importance. Fur bearing animals, especially marmot and
squirrel, are abundant, and the country has a well-developed fur industry. Rich
prairie land in the northeast and northwest supports large herds of cattle,
sheep, and goats. Mineral resources such as coal, iron, copper, fluorspar,
gold, uranium, and silver have not been fully exploited.

POPULATION

The population of the Republic of Mongolia (1997 estimate) was 2.4 million,
yielding an overall population density of about 1.4 people per square
kilometer.

The ethnic composition of Mongolia is fairly homogeneous. Khalkha Mongols
constitute more than 75 percent of the population. Other groups are Buryat
Mongols and Kazakhs. The society is about 58 percent urban.

POLITICAL DIVISIONS AND PRINCIPAL CITIES

Mongolia is divided into 18 provinces and 3 independent cities. The independent
cities are Ulaanbaatar, the capital (population, 1992 estimate, 600,900);
Darhan (1991 estimate, 90,000); and Erdenet (1991 estimate, 58,200), a mining
center that developed rapidly in the 1970s.



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<PAGE>   37

RELIGION AND LANGUAGE

The traditional faith in Mongolia was Buddhist Lamaism, which was suppressed
beginning in 1929. Only one small monastery remains, at Ulaanbaatar. Buddhism
is enjoying a revival since the end of communism in the late 1980's. The
Mongolian language is one of the Altaic languages.

EDUCATION

Education in Mongolia is compulsory between the ages of 6 and 16. In the late
1980s some 443,000 pupils annually attended about 710 elementary and secondary
schools staffed by approximately 18,400 teachers. Some 22,200 students were
enrolled in vocational and teacher-training schools. About 22,600 students
attended institutions of higher education; some 4,000 of these were enrolled in
the Mongolian State University (1942), in Ulaanbaatar. Other institutions of
higher learning included schools of medicine, agriculture, and military
affairs. While Soviet influence predominated in Mongolia, Russian was taught in
all schools, and several thousand students each year were sent to study in the
Union of Soviet Socialist Republics ("USSR") and eastern European countries.

ECONOMY

The basis of the economy of Mongolia is crop farming and livestock breeding.
Manufacturing is devoted largely to the processing of agricultural and
livestock products. After the collapse of the socialist system and
disintegration of the former Soviet Union, Mongolia endured a severe decline in
GDP from 1989 to 1993. The economy has rebounded since 1994 with GDP growth of
6.3% in 1995, 2.6% in 1996, and 3.3% in 1997. The slower economic growth
reflects a decline of world market prices for copper and cashmere, Mongolia's
two largest exports.

The freeing of fuel and energy prices pushed inflation in 1996 to 59% and
dampened overall consumption. In 1997, a relatively stable exchange rate was
realized, and inflation was held below 18%. Economic trends point toward a
sustainable economic growth rate of 5-6% per annum, with inflation falling into
single digits by 1999.

Total foreign trade turnover in 1997 was $861.4 million; exports equaled $418
million, and imports totaled $443.4 million. Copper and molybdenum
concentrates, fluorspor, goat wool, and cashmere accounted for 66% of exports.

AGRICULTURE

Agricultural production in Mongolia is focused on animal husbandry and crop
farming (wheat, barley, oats, and vegetables). The national livestock herd is
31.3 million animals, comprised of 14.2 million sheep, 10.3 million goats, 3.6
million cattle, 2.9 million horses, and over 355,000 camels. Mongolia accounts
for more than 25% of world cashmere output and also exports skins, hides, wool,
meat and other animal products.

Crop farming is relatively new in the country and was developed through large
state farms. The most important crop is wheat, and the maximum arable area is
1,332,000 hectares. The government has drafted plans to privatize all state
farms and croplands by the end of 1998.

MINERAL DEPOSITS

Mongolia has substantial deposits of copper, molybdenum, gold, uranium, lead,
zinc, zeolites, rare earths, ferrous metals, fluorspor, phosphate, and precious
and semi-precious stones. Several mining operations were developed before 1989
with assistance of the Soviet Union and Eastern European countries, and in
recent years a number of private mining operations have begun. Due to isolation
from international trading systems and lack of infrastructure, many mining
prospects remain undeveloped. In recent years, gold production has emerged as
one of the most dynamic sectors of the Mongolian economy. Gold production has
grown seven-fold since 1990 and reached 8 metric tons (257,000 oz.) in 1997.

The Mongolian and Russian joint venture Erdenet has been operating since 1981
with an annual capacity of 20 million tons of copper ore; this capacity is being
expanded to 24 million tons of ore per year. Recoverable metal is estimated to
be 7,556,000 tons of copper and 43,600 tons of molybdenum in ore averaging 0.53%
copper and 0.018% molybdenum.



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<PAGE>   38

Mongolia has substantial proven reserves of coal. Coal is the major source of
energy production and is likely to remain so. Mongolia's coal reserves are
estimated at about 100 billion tons, 20% in hard coal deposits, and 80% in
lignite deposits. In 1997, domestic coal production totaled about 5 million
metric tons, the majority of which was consumed for domestic needs.

Mongolia has one operable oil field in the Gobi region, and initial results of
petroleum exploration in eastern and western Mongolia, carried out by companies
from the U.S., Europe, China, and Russia, appear to be promising.

ENERGY

The Central Energy System of Mongolia has four coal-fired power plants (two in
Ulaanbaatar, one in Darhan, one in Erdenet) with a total capacity of 690MW. At
peak demand times, additional power is imported from Russia. Power for small
towns in outlying areas is provided primarily by diesel generators or small
coal-fired plants.

CURRENCY AND FOREIGN TRADE

The currency of Mongolia is the tughrik (togrog), which consists of 100 mongo
(1,000 tughriks equal US$1.00; 1999).

Most of Mongolia's trade is with the countries that made up the former USSR and
other former Soviet-bloc countries. Since the early 1990s, Mongolia has made
efforts to expand trade with other countries. Principal exports in the late
1980s were minerals, cattle, meat products, wool, and consumer items. Imports
consisted mainly of machinery and transport equipment, consumer goods, and
industrial raw materials.

TRANSPORTATION AND COMMUNICATIONS

Mongolia is served by the Trans-Mongolian Railway, which connects Ulaanbaatar
with Russia and China. Truck services operate throughout the country. Steamer
services operate on the Selenge River and a tug and barge service on Lake
Hovsgol. Air service connects Ulaanbaatar with Moscow, Beijing, Seoul, and
cities in Central Asia. Domestic services are provided by Mongolian Civil Air
Transport.

Following dissolution of communist control in Mongolia in the early 1990's,
independent newspapers and journals proliferated. Mongolia is served by a
number of major daily papers. Mongolia has also moved rather quickly to keep up
with modern communications, but improvements are generally limited to
Ulaanbaatar. The central phone system is modern and reliable. Ulaanbaatar has
cellular phone service and access to the Internet became available in 1997. In
1998, an e-mail daily news service, published in English, became available.

Although electronic and printed communication is advancing in Mongolia, the
remoteness of the country limits communication with the country side.

GOVERNMENT AND JUDICIARY

Under Mongolia's 1960 constitution, the supreme organ of state power was the
People's Great Hural ("Khural"), a 430-member assembly that usually met twice a
year. The Mongolian People's Revolutionary (Communist) party ("MPRP") was the
sole legal party until 1990, when the constitution was amended to allow
opposition parties, to institute a presidential system of government, and to
add a 53-member standing legislature, the Small Hural. In January 1992, a new
constitution was adopted. By this constitution, the legislative power of the
republic resides in the 76-member Great Hural; the delegates of the Great Hural
are chosen for 4-year terms through free elections. The president is head of
state, and is also elected to a four-year term.

Mongolia is divided into 18 provinces, or aimags, which are subdivided into
districts, or somons. Local centers of power are hurals, or assemblies, of
working people's deputies. Ulaanbaatar, Darhan, and Erdenet are separate
administrative units, governed by city hurals.

In Mongolia, the Supreme Court, the city court of Ulaanbaatar, 18 provincial
courts, and local district courts administer justice. The assemblies at each
political level elect members of the courts.



                                       38
<PAGE>   39

HISTORY

Modern history of Mongolia begins with the rise of the great Mongol Empire at
the beginning of the 13th Century under Genghis (Chinggis) Khan. By 1280 the
Mongol's ruled from Peking to the Adriatic and from Siberia to Persia and the
northern border of India. Kublai Khan, grandson of Genghis, founded the Yuan
dynasty in China in 1271. The Manchu Empire subjugated Mongolia in 1691. The
period of Manchur colonialism, which lasted for 220 years, was a grim time in
Mongolian history.

After the Chinese revolution of 1911, Mongolia declared its independence from
China, but the Living Buddha continued to rule. In 1920 a military force
supplied and financed by Japan and led by a Russian anti-Bolshevik general,
Baron Roman Nikolaus von Ungern-Sternberg, took the capital, Urga, and set up a
puppet government. In 1921 the Mongolian People's Revolutionary Party, formed
by Soviet-trained Mongols, established an independent Provisional People's
Government and, with aid from the USSR, defeated Ungern-Sternberg and his
supporters. The theocratic monarchy, its powers limited, was retained by the
provisional government until 1924, when the last Living Buddha died. At that
time, the Mongolian People's Republic, modeled on Soviet lines, was founded,
but China did not recognize its independence until 1946. After the Communists
won power in China in 1949, trade and cultural relations were established
between the two nations, but the Sino-Soviet split in the late 1950s curtailed
these relations. A Sino-Mongolian border treaty was signed in 1962, but
Mongolia maintained its closest ties with the USSR, which in 1961 sponsored its
membership in the United Nations. The two countries signed a treaty of
friendship, trade, and mutual assistance in 1966, renewed in 1986. In the
1980s, the USSR was Mongolia's leading trade partner and aid donor; about
65,000 Soviet troops were stationed in Mongolia.

In March 1990, Punsalmaagiyn Ochirbat, former foreign trade minister, became
president, inaugurating a period of political and economic liberalization.
After the new constitution was adopted in January 1992, the reconstituted
Mongolian People's Revolutionary Party swept the parliamentary elections in
June of that year. In January 1993, President Ochirbat and the Russian
President Boris Yeltsin signed another treaty of friendship and cooperation, to
replace the treaty of 1986. In June 1993, President Ochirbat was re-elected. In
1996, the Social Democratic Party won a majority of seats in the Mongolian
Parliament. In 1997, N. Bagabondi defeated President Ochirbat.

FOREIGN INVESTMENT POLICY

Mongolia has publicly, via various international symposia, presented the
official position of the government to invite and encourage "foreign direct
investment" in Mongolia. Since the collapse of the Soviet Union, Mongolia has
been in a situation where it must develop foreign investment and trade to
attain economic independence and sustainability.

Mongolia enacted a Foreign Investment Law in July 1993. This law is currently
undergoing revision with the purpose to further enhance foreign direct
investment. Mongolia has passed the following laws to create a stable
investment environment:

     Companies and Partnership Law          1995
     Bankruptcy Law                         1991
     Consumer Protection Law                1991
     Accounting Law                         1993
     Business Income Tax Law                1993
     Copyright Law                          1993
     Patent Law                             1993
     Foreign Investment Law                 1993
     Securities Law                         1995

In 1991, the governments of the United States and Mongolia entered into an
agreement on trade relations to clarify some of the conditions for
international business between the two nations.

Energy Fuels was one of the first firms to establish an international joint
venture in the minerals sector in Mongolia. A Joint Venture Founding Agreement
was created between the parties in the venture, and a Mineral Agreement was
entered into between the Joint Venture and the government of Mongolia. This
Mineral Agreement serves as the definitive grant and authorization for the
Joint Venture to conduct uranium exploration development, and mining in
Mongolia.



                                       39
<PAGE>   40

No restrictions are known to exist on foreign investment of the nature being
conducted by the Registrant. The Mineral Agreement with the government of
Mongolia specifically addresses and allows the export and marketing of uranium
and the import and export of all necessary equipment and materials needed to
explore, mine, process, store, and transport uranium.

The Mineral Agreement also specifically addresses taxation stability for the
Joint Venture, including the tax holiday provided to the Joint Venture. Foreign
exchange controls and restrictions on repatriation of profits are not addressed
in the Mineral Agreement, but no limitations currently exist on repatriation of
profits.

Mongolia previously maintained an import duty of 15%, plus fees of 1.5%, on all
imports. This duty has been entirely removed; a 10% sales tax was in place, but
this has now been replaced by a 13% Value Added Tax on goods and equipment
brought into Mongolia.

Because of the limited history of the current Mongolian government, the
existing laws governing foreign investment may change in the future and such
changes may adversely affect the Registrant's investment in Mongolia.

ENVIRONMENTAL REGULATIONS

In July 1997, Mongolia enacted the Mineral Law of Mongolia. This Law has
specific language regarding environmental protection for mining operations.
While the Joint Venture is exempt from certain provisions of the Minerals Law
due to the pre-existing Mineral Agreement, the Registrant, as the operator of
the Joint Venture, is in compliance and intends to continue to comply with
appropriate rules and laws of Mongolia regarding environmental protection.

The environmental protection provisions of the Mineral Law require notification
and consultation with local administrative bodies and the filing and approval
of environmental plans. Prior to receiving a mining license, an environmental
impact assessment and an environmental protection plan must be filed and
approved. The assessment and the plan are intended to identify possible adverse
environmental impacts and to provide measures to ensure that mining operations
are conducted in the least damaging way to the environment. Environmental
protection measures must be specified for handling of toxic materials,
utilization and protection of surface and ground water, tailings management (if
appropriate), and other protective measures associated with mining operations.

Compliance with the environmental plan is through inspections, reporting and
determination of reclamation/closure surety. If a license holder fails to
comply with the provisions of the approved environmental plan, local
administrative authorities can use the deposited funds to bring the project
into compliance.

Nothing in the Mineral Law specifically allows revocation of a License for
failure to comply with environmental plans or regulations. The Registrant is in
compliance with all notification, reporting, and inspection provisions and has
received no adverse comments or reports.

To demonstrate its commitment to responsible environmental management, the
Joint Venture voluntarily had an independent environmental review conducted of
its field work in 1996. The report of this review was voluntarily provided to
the government of Mongolia.

MONGOLIA PROPERTY

OWNERSHIP AND SUMMARY OF JOINT VENTURE TERMS

The joint venture company, Gurvan-Saihan BBHK, was formed in Mongolia in
January 1994 by Energy Fuels, Geologorazvedka ("GRZ"), a unit of the Russian
Ministry of Geology, and URAN, a state enterprise under the Ministry of Energy,
Geology and Mining of Mongolia. The purpose of the joint venture is to explore,
develop and mine uranium deposits, if commercially viable.

The contributions of each member to the Joint Venture are described below. GRZ
contributed the historical data and records from past uranium exploration work
in Mongolia. URAN contributed the grant of mineral rights and the necessary
licenses and permits. Energy Fuels contributed $4 million in cash which was
used for exploration operations. GRZ and URAN were each granted a 15% interest
in the joint venture and Energy Fuels was granted a 70% interest.



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<PAGE>   41

The Joint Venture participants and the government of Mongolia entered into a
Mineral Agreement which serves as the grant by the government of Mongolia of
the right to explore, develop and mine uranium deposits on the properties
described below. The Mineral Agreement also serves as the grant by the
government of Mongolia to issue licenses and permits to conduct exploration and
mining and to store, transport, market, process and export uranium and import
and export all necessary equipment and materials without the need for
additional licenses or permits, and free of any duties, taxes, or levies. The
term of the Mineral Agreement is until January 14, 2009, or as long thereafter
that exploration, development, mining or reclamation is being conducted.

The Joint Venture is exempt from taxes on profits from production for five
years following start of commercial production. For the next five years, the
tax rate is 50% of the rate that would normally apply, and after ten years of
production, the Joint Venture will pay the then applicable taxes, subject to a
maximum rate of 40% of net profits. The government of Mongolia was also granted
a 4% royalty on production.

The Registrant acquired Energy Fuels interest in the Joint Venture via its
asset purchase and has assumed all of Energy Fuels' rights and obligations as
per the agreements. Even though the Registrant has a 70% ownership interest in
the Joint Venture, it is currently funding 100% of the JV's activities. The JV
Agreement provides that the Registrant will receive preference distributions on
future production and profits until the Registrant has recovered, from net
profits of the venture, 150% of its contributions on behalf of the non-funding
members.

LOCATION AND PHYSICAL FEATURES

The Mongolian joint venture is comprised of five separate concession blocks, in
the original grant by the Mongolian government that cover a total area of
12,100 square kilometers in central eastern Mongolia. Based on encouraging
exploration results in the 1996 and 1997 field seasons, the joint venture added
4365 square kilometers in eight additional parcels in early 1998. Following
reconnaissance exploration in 1998, four of the eight new areas were dropped;
the total land position of the joint venture as of early 1999 is 14,780 square
kilometers.

The East Gobi region of Mongolia is a plateau at 3,000 to 3,500 feet above sea
level characterized by low hills and gently rolling topography. The climate is
harsh with typical extremes of an intercontinental climate similar to the
southern prairies of Canada and northern plains of the United States. The
region is semi-arid with numerous dry lake beds and salt marshes and no
permanent rivers.

The Choir concession, where most of the work has been undertaken prior to 1997,
is on the Trans-Mongolian Railway about 250 kilometers southeast of Ulaanbaatar
and about 1,100 kilometers from Beijing. A network of numerous unpaved trails
connects most centers, and truck or 4x4 vehicles following tracks or driving
cross-country can reach the various concession areas.

EXPLORATION HISTORY

Uranium prospecting was started by the Russians in 1955 and resulted in the
discovery of several showings in the Choir Depression and the location of
uranium anomalies in several other sites on the properties now held by the
joint venture. Detailed work, which began in 1970 with an airborne gamma-ray
spectrometer survey and ground follow up, resulted in the identification of the
Haraat deposit in the Choir Depression.

In 1988 and 1989, a major drilling program was undertaken in the Choir
Depression with a series of drill hole fences across the full 10 to 20
kilometers width of the depression. Fence spacings ranged from 8 to 12
kilometers with hole spacings at 100 to 800 meters. A total of 47,000 meters of
drilling was completed in over 1,000 holes ranging in depth from 20 to 400
meters. The vast majority of the drilling was shallow down to 40 metres,
testing the shallow mineralization in the Upper Cretaceous with efforts
concentrated on defining the mineralization at Haraat. A few deeper holes were
drilled to test the potential of the basin at depth.

Extensive drilling resumed in 1994 with the formation of the Gurvan-Saihan
Joint Venture, and delineation drilling was undertaken at Haraat on a 200
metres x 100 metres grid with some closer spacing at 100 metres x 50 metres.
Preliminary field ISL studies were also conducted at Haraat in 1994.

In 1995, modern probing equipment using digital recording was sent to Mongolia
from the United States and has been used on probing of all holes since then.
This allows for a more efficient use of data, and also allows for
discrimination of individual lithologic units.



                                       41
<PAGE>   42

In 1996, the Joint Venture focused its efforts on the Choir Depression and in
the Haraat area in particular. An ISL Pilot test using acid solution was run on
ore horizons both above and below the water table (leaching above the water
table is a promising technology that requires further refinement). The 1996
pilot testing demonstrated that the deposits at Haraat, both above and below
the water table, are suitable for ISL. Additional testing and research is
needed to refine the leach chemistry.

The total exploration-drilling program in 1996 was in excess of 30,000 meters,
with the majority of the work in the Choir Depression. Based on detailed
radiometric surveys, initial reconnaissance drilling was conducted in 1996 in
both the Hairhan and the Gurvan Saihan Depressions. Ore-grade discoveries were
made in both basins, and the discovery hole at Hairhan was the thickest,
highest-grade hole drilled to date in the Mongolia venture.

Following the 1996 exploration results, drilling was increased substantially in
1997 and 1998. Emphasis shifted from the Choir Depression to the Hairhan
Depression and the Ulziit Depression. A summary of joint venture drilling is
presented on the following table:

                          DRILLING ACTIVITIES IN METERS

<TABLE>
<CAPTION>

  DEPRESSION
    AREA                             1994              1996              1997              1998              TOTAL
----------------                   --------          --------          --------          --------          --------
<S>                                <C>               <C>               <C>               <C>               <C>
Choir                                 8,439            25,699            18,816                --            52,954
Hairhan                                  --             1,014            32,426            33,058            66,498
Gurvan Saihan                            --             3,495                --                --             3,495
Ulziit                                   --                --             4,179            16,900            21,079
Undurshil                                --                --                --             2,360             2,360
New Properties                           --                --                --               672               672
                                      -----            ------            ------            ------           -------
Total:                                8,439            30,208            55,421            52,990           147,058
                                      =====            ======            ======            ======           =======
</TABLE>

GEOLOGY

Uranium exploration is focused on large depression areas filled with Cretaceous
sediments and flanked by Proterozoic schists, gneisses and limestones as well
as Permian acid volcanics, Palaeozoic granites and Mesozoic leucogranites and
volcanics. The Lower Cretaceous, which is up to 1,500 metres thick, is
comprised of two facies: (1) low-sorted gravels, conglomerates and sandstones,
and (2) lake sediments (clays, argillaceous sandstones) and brown coals. The
Upper Cretaceous is five to 40 metres thick, consists largely of sand and
gravel formations cemented by limonite-goethite, and is confined to small areas
near the centres and margins of the major depressions. The dips are flat, but
may steepen to 5(degree) to 10(degree) near margins. There is some block
faulting, and dips may increase to 70(degree) to 80(degree) against faults.

The uranium mineralization is found in paleo channels and alluvial/fluvial
systems and is thought to have been deposited from solutions percolating
through the porous sandstones and precipitating uranium at reducing interfaces
with organic detritus. The granites as the most likely sources, and
consequently rate the areas of the depressions flanked by granitic rocks as the
most prospective. The main uranium minerals in the reducing environment below
the water table are uraninite and coffinite. Above the water table, a number of
different secondary minerals have been identified and include autunite,
torbernite, bergenite and phosphuranylite. Geochemical studies show that small
amounts of RE, rhenium and selenium accompany the uranium mineralization.

THE HARAAT DEPOSIT

Two areas of mineralization have been identified and drilled on close spacing
at Haraat; these are referred to as the N1 and N2 ore bodies. In addition, a
number of outlying mineralized areas have been delineated, but they are not as
extensively drilled.

Mineral deposit estimates were prepared in 1997 for the Haraat area. The
estimation methodology, utilizing a 0.01% U cutoff, is basically a block or
polygonal technique wherein ore-being coefficient and average thickness and
grade values are determined for each mineralized area. The mineral deposits in
the most heavily investigated areas, the N-1 and N-2 deposits, were calculated
by a joint American-Russian team in early 1997; the combined mineral deposits
total for the Haraat area deposits is presented in the following table:

                                       42
<PAGE>   43


<TABLE>
<CAPTION>

BELOW WATER TABLE

AREA                                  GRADE (%U(3)O(8))       POUNDS U(3)O(8)         THICKNESS(ft)
------------------                    -----------------       ---------------         -------------
<S>                                     <C>                    <C>                    <C>
Haraat N-1 & N-2                                0.046              2,787,000                   26.7
Shar Oortsog                                    0.018              2,146,000                    9.9
Haraat West                                     0.025              1,089,000                    9.2
Haraat East                                     0.030                375,000                    4.7
                                        -------------          -------------          -------------
     Subtotal                                   0.027              6,397,000                   13.8


ABOVE WATER TABLE

Haraat N-1 & N-2                                0.025             16,084,000                   19.8
Shar Oortsog                                    0.025              6,983,000                    7.1
Haraat West                                     0.018              1,641,000                   10.2
Haraat East                                     0.026              9,600,000                   10.6
                                        -------------          -------------          -------------
     Subtotal                                   0.024             34,308,000                   13.8
</TABLE>

     Total  Mineral Deposits = 40,705,300 Pounds U(3)O(8)

THE HAIRHAN DEPOSIT

By the end of 1996 exploration season, a 23km anomalous trend, based on
radiometric surveys, was delineated in the Hairhan depression. A major
exploration and delineation program in 1997 followed the initial reconnaissance
drilling, and this program in 1997 led to the identification of the Hairhan
uranium deposit.

Extensive exploratory and delineation drilling were conducted at the Hairhan
deposit and on other targets in the Hairhan Depression in 1997 and 1998.
Through the end of 1998, a total of 780 exploration holes, hydrology wells, and
ISL test wells have been drilled in the Hairhan Depression. The total volume of
drilling through the end of 1998 is 66,500 meters. The majority of the holes
are in the main block (1500m by 2000m); much of which has been drilled on
100mx50m spacing to support calculation of probable mineral deposits.

The Hairhan deposit is hosted in sandy sediments deposited in a fault graben,
which focused the deposition of a sequence of alternating sands, siltstones,
clays, and carbonaceous layers. The graben aligns with a structural valley in
the nearby granitic highlands. Erosion, weathering, and leaching of the
granites and the derived sediments formed uranium deposits in multiple layers.
The ore deposition is related to reduction-oxidation interfaces. The ore ranges
from 10m to at least 100 m deep, with as many as six stacked horizons in some
locations.

Core holes have been drilled to obtain rock samples for testing, and
hydrogeological test wells were installed to evaluate aquifer properties. The
water table is shallow at Hairhan, and all mineralization of interest is below
the water table. The Hairhan deposit exhibits favorable characteristics for
ISL.

Proven and probable mineral deposits have been calculated as of the end of 1998
at 0.024% U(3)O(8) cutoff for the area of detail drilling at Hairhan.

<TABLE>
<CAPTION>

                                                                           AVERAGE GT
                                                                         --------------
    ZONE                 THICKNESS (ft)        GRADE (%U(3)O(8))            (ft. %)              POUNDS U(3)O(8)
---------------          --------------        -----------------         --------------          ---------------
<S>                      <C>                     <C>                     <C>                     <C>
f2                                 15.1                   0.078                    1.18                 994,000
f5.25                              33.8                   0.061                    2.05               4,876,000
f7.5                               26.2                   0.114                    3.00               4,777,000
f8.5                               22.3                   0.097                    2.17               2,077,000
f12                                39.1                   0.072                    2.81               2,361,000
f18-fM                             16.2                   0.106                    1.72               1,103,000
---------------          --------------          --------------          --------------          --------------
 Total                             27.1                   0.084                    2.27              16,188,000
</TABLE>

TOTAL = 16,188,000 Pounds U(3)O(8)
AVG THICKNESS 27.1 Feet
AVG GRADE= .084% U(3)O(8)


                                       43
<PAGE>   44


GURVAN-SAIHAN JOINT VENTURE PROJECT - IN SITU MINING CONSIDERATIONS

In Situ Leach is viewed as the most viable technique for exploitation of the
uranium deposits in Mongolia. Not only does ISL enjoy the benefits of lower
capital and front-end development expenditures than conventional open pit or
underground operations, it also often has more attractive operating costs.
Another major appeal of ISL is the minimal surface and related environmental
impacts incurred in comparison with conventional mining and milling operations.

The deposits at Haraat and at Hairhan are suitable for ISL. Pilot tests have
been run at Haraat, and preliminary testing was conducted in 1998 at Hairhan.
The 1998 work at Hairhan confirmed that this deposit is amenable to acid ISL,
and the test yielded favorable recovery and reagent usage rates.

The substantially richer deposit at Hairhan, coupled with the fact that the ore
is below the water table, has elevated Hairhan ahead of Haraat as a potential
commercial project. Although laboratory and field data are encouraging, full
scale testing must be successfully conducted to confirm the operating
parameters and costs for an ISL mine in Mongolia.

OTHER AREAS

Work in other concession areas has been mainly of a reconnaissance nature
involving prospecting, car-borne scintillometer surveys and regional drilling.
Initial exploratory drilling was conducted at Gurvan-Saihan and Hairhan in 1996
and in the Ulziit Depression in 1997. A total of seven widely spaced fences
over an 18 km long trend were drilled at Gurvan-Saihan with mineralization
intersected in six of the seven fences. The best results was 0.102% U over 1.3
meters. Examples of other intersections are 0.062% U over 1.2 meters, 0.06% U
over 1.6 meters, 0.04% U over 1.9 meters, 0.036% U over 4.8 meters, 0.024% U
over 1.1 meters, and 0.018% U over 4.0 meters.

In the Ulziit Depression, reconnaissance work between 1958 to 1963 located five
uranium occurrences and 10 radiometric anomalies. After initial stratigraphic
drilling in 1996, prospect drilling was begun in 1998. A total of 123 holes,
totaling 17,300 meters, were drilled in 1998, which included initial
reconnaissance drilling on two of the areas acquired in 1997. A 60 kilometer
oxidation-reduction interface has been identified, and several uranium
anomalies have been located. Additional exploration work is required in this
very large area.

Reconnaissance drilling was also conducted in 1998 in the Undurshil Depression.
This work determined that much of the Undurshil Depression is not as
prospective as the other areas held by the joint venture.

                                   PERMITTING

The permitting status of the various mines is set out below.

ARIZONA 1 MINE

The Arizona 1 Mine is fully permitted for mining.

SUNDAY MINE COMPLEX

The Sunday Mine Complex is fully permitted for its mining activities. Recent
changes in the laws of Colorado could give rise to additional future permitting
requirements.

In recent years, the State of Colorado passed a law that provides that the
Colorado Division of Minerals and Geology ("DMG") can determine that a mine is
a Designated Mining Operation (a "DMO") if it is a mining operation at which
"toxic or acidic chemicals used in extractive metallurgical processing are
present on site or acid- or toxic-forming materials will be exposed or
disturbed as a result of mining operations". If a mine is determined to be a
DMO, the most significant result is the requirement that it submit an
Environmental Protection Plan (an "EPP"). The EPP must identify the methods the
operator will utilize for the protection of human health, wildlife, property
and the environment from the potential toxic-or acid-forming material or acid
mine drainage associated with the operations. The EPP must be submitted to the
DMG for review, and after a public hearing, a decision must be made within 120
days of the submission of a complete application, unless the application is
considered to be complicated, which would extend the deadline to 180 days.



                                       44
<PAGE>   45

In 1995, DMG notified Energy Fuels that they believed that the Sunday Mine
Complex was a DMO, because of the potential that storm water could come in
contact with the low grade waste rock on site. Energy Fuels disputed this
assertion. Testing was performed on the waste rock. In November 1996, the DMG
advised Energy Fuels that the test results of the average uranium content of the
waste dumps at the mine sites satisfied the DMG that the Sunday Mine Complex is
not a DMO. However, the DMG also advised that its determination could change if
site conditions or circumstances change. Therefore, if mining activities are
re-initiated at these mines, the DMG reserved the right to submit a new notice
of determination, which may require additional environmental review. As of this
filing date, the Registrant has not been notified of any additional permitting
requirements relating to its current mining activities at the Sunday Mine
Complex.

CANYON MINE

The Canyon Mine is the first mine to be permitted in the portion of the Arizona
Strip that is south of the Grand Canyon. The Canyon Mine is located on federal
lands administered by the United States Forest Service and is near the southern
rim of the Grand Canyon. The plan of operations submitted by Energy Fuels in
1984 for development and operation of the mine generated significant public
comment resulting in the invitation of an environmental impact statement
process by the United States Forest Service. The United States Forest Service
for the State of Arizona approved the plan of Energy Fuels and issued all
necessary federal and state permits and approvals. The Havasupai Indian Tribe
and others filed appeals. The United States Forest Service for the State of
Arizona and Energy Fuels prevailed on all appeals. During the permitting
process, Energy Fuels constructed all the necessary service facilities at the
mine site. Energy Fuels agreed with the United States Forest Service not to
implement underground development during the environmental impact statement
process. Energy Fuels did not resume underground development at the mine site
when the appeals were determined due to the decrease in uranium prices at that
time.

In 1992, the State of Arizona updated its laws relating to groundwater issues,
requiring that an Aquifer Protection Permit be obtained. It is not expected
that there will be any problems of any significance in obtaining this permit,
and the Registrant is currently permitted to commence mining at the Canyon Mine
during submittal, review and update to the Aquifer Protection Permit.

PINENUT AND KANAB NORTH MINES

As with the Canyon Mine, these mines both require that an Aquifer Protection
Permit be obtained. Energy Fuels did not expect that there will be any problems
of any significance in obtaining this permit and is currently permitted to
commence mining at each of these mines during submittal, review and update to
these Aquifer Protection Permits.

RENO CREEK PROPERTY

Energy Fuels filed applications for commercial operating licenses and permits
to mine the Reno Creek by ISL methods. In January 1995, the Wyoming Department
of Environmental Quality declared the Reno Creek Mine Permit application
complete, and the applications are now in the technical review phase.

The Registrant re-initiated commercial permitting late in 1997. The Permit to
Mine from the Wyoming Department of Environmental Quality is in final review.
Permits have been obtained to construct a Storage Reservoir and to install two
Class Waste Injection Wells. Upon completion of review by the State of Wyoming,
final application review will be conducted by the U.S. Regulatory Commission
for a Source Material License. All commercial permitting is expected to be
completed in 1999.

                                   RECLAMATION

The Registrant is responsible for the environmental and reclamation obligations
relating to all of its existing mines and assets, as well as for all
reclamation and environmental obligations associated with all mined out,
inactive, reclaimed or partially reclaimed mines and properties acquired from
Energy Fuels on the Acquisition.

The total amount of the estimated reclamation liability is approximately
$13,265,000 with cash of approximately $8 million securing the liability. All
of the Registrant's mines and the White Mesa Mill were permitted through either
state or federal authorities. As a part of permit requirements, reclamation and
decommissioning bonds are in place to cover the estimated cost of final project
closures. The major cost is for closure of the White Mesa Mill and



                                       45
<PAGE>   46

tailings cells which is estimated at $11.5 million. The Registrant has posted a
reclamation's bond to the NRC for this amount.

                             SWISS ROYALTY INTEREST

As consideration for funding a large part of the cost of construction of the
White Mesa Mill, the Swiss Utilities acquired a 40% limited partnership
interest in all of Energy Fuels' properties in the United States. This limited
partnership interest did not apply to the Mongolia Property.

In 1995, after commencement of the bankruptcy proceedings against Energy Fuels,
the Swiss Utilities agreed to fund the milling of approximately 200,000 tons of
stockpiled ore, the proceeds of which were used to repay this funding provided
by the Swiss Utilities, and to provide working capital to the bankrupt estates.
As part of this financing and Mill run, Energy Fuels and the Swiss Utilities
agreed to convert the Swiss Utilities' 40% limited partnership interest in the
United States properties, into a royalty (the "Swiss Royalty") of 9% of all
uranium and 5% of vanadium and all other minerals produced from the United
States properties owned by Energy Fuels at the time that the royalty was
granted. The Swiss Royalty will apply to all production from the Colorado
Plateau District properties and Arizona Strip properties acquired on the
Acquisition, as well as the Reno Creek Property, a portion of the Dewey Burdock
Property and the Bull Frog Property. The Swiss Royalty Interest does not apply
to the Mongolia Property, nor to any tolled ore, or purchased ore from third
parties, or Alternate Feeds that are processed in the White Mesa Mill, nor to
any properties acquired by Energy Fuels after the date that the Swiss Royalty
Interest was granted.

Subsequent to the Acquisition, the Registrant has amended the Swiss Royalty
amount to 4.5% of all uranium and 2.5% of vanadium for the period from January
1, 1998 to December 31, 2000. The Registrant will make an advance royalty
payment of $250,000 per year, which is fully recoupable annually against any
royalties for the applicable calendar year. Subsequent to December 31, 2000,
the royalty reverts to its original terms.

                          INTERCOMPANY ROYALTY INTEREST

The Registrant has purchased production royalties from International Uranium
Holdings Corporation and its 100% owned subsidiaries for a total purchase price
of approximately $25 million. This amount will be repaid from future
production.

                           OTHER ASSETS OF REGISTRANT

EMPLOYEES

The Registrant currently employs a total of 141 people, of which 22 are located
at the head office in Denver, 83 are located at the White Mesa Mill, 34 are
located at the Colorado Plateau offices and the Sunday Mine, and two are
located at the Fredonia, Arizona field office for the Arizona Strip.

ADMINISTRATIVE OFFICES

The Registrant has a head office in Denver, Colorado, as well as field offices
in Fredonia, Arizona, Dove Creek, Colorado and Blanding, Utah.

EQUIPMENT

The Registrant has extensive mining and milling equipment capable of sustaining
operations at the four mines that the Registrant has included in its business
plan, with only a few additions.

SUPPLY CONTRACTS

The Registrant currently has entered into uranium supply contracts with certain
U.S. and foreign customers under which the Registrant has the obligation to
supply to those utilities a total of approximately 2,900,000 pounds of uranium
during the next 5 years at prices in excess of the Registrants current
estimated mining costs.



                                       46
<PAGE>   47

ITEM 3.  LEGAL PROCEEDINGS

On July 23, 1998, the Nuclear Regulatory Commission (the "NRC") issued an
amendment to the Registrant's mill license allowing the receipt and processing
of certain alternate feed material (the "Ashland 2 Materials") from a Formerly
Utilized Sites Remedial Action Program ("FUSRAP") site at the White Mesa Mill.
On July 22, 1998, Envirocare of Utah, Inc., a company licensed by the NRC to
dispose of uranium bearing byproduct materials at its facility in Tooele
County, Utah, filed a request for a hearing with the NRC for the purpose of
challenging the issuance of the Registrant's license amendment. On August 19,
1998, the NRC Presiding Officer assigned to the matter dismissed Envirocare's
petition for lack of standing. Envirocare appealed its decision to the
Commission on August 31, 1998. The Registrant and the NRC Staff both filed
oppositions to Envirocare's appeal on September 15, 1998. On November 14, 1998,
the NRC denied Envirocare's appeal. On September 23, 1998, Envirocare filed a
Petition for Review in the United States Court of Appeals for the District of
Columbia Circuit, appealing the decision in a prior case (In the Matter of
Quivira Mining Company) upon which the dismissal of Envirocare's claim against
the Registrant was based. On October 22, 1998, the Registrant was added as an
intervener in the Quivira appeal. This appeal is pending.

On July 23, 1998, the State of Utah also filed a petition requesting a hearing
on the Registrant's aforementioned license amendment relating to the Ashland 2
Materials. By Order dated September 1, 1998, Utah's Petition was granted. Utah's
Petition articulates two substantive concerns: 1) that hazardous wastes, as
defined by the Resource Conservation and Recovery Act (42 U.S.C. Section 690 et
seq.) contained in the alternate feed material to be processed at the site would
be disposed of at the site, and 2) that the Registrant was not in fact
processing the alternate feed material primarily for its uranium source material
content, in alleged contravention of NRC regulations and State law. Utah alleges
that the NRC Staff misinterpreted NRC Guidance on this matter. The first of
these two issues was amicably resolved between the parties (Utah indicated to
the Registrant that its concerns that the alternate feed material might contain
hazardous wastes was resolved by additional analytical and other data which was
forwarded to Utah by the Registrant). On February 9, 1999, the NRC Presiding
Officer ruled in favor of the Registrant on the second issue, finding that the
Registrant's license amendment met all of the requirements of the applicable
statutes and regulations and was appropriately granted. The State of Utah has
indicated it intends to appeal the decision of the NRC Presiding Officer to the
Commissioners of the NRC for review. While the Registrant believes that the NRC
Presiding Officer's decision was legally correct, there can be no assurance that
such decision will be upheld on appeal.

On October 15, 1998, the Registrant submitted a request to the NRC to amend the
Registrant's Mill license to allow for the receipt and processing of additional
FUSRAP alternate feed materials (the "Ashland 1 Materials"). This amendment
relating to the Ashland 1 Materials was approved and issued in February 1999.
Anticipating that the license amendment for the Ashland 1 Materials would be
granted, on December 2, 1998, the State of Utah filed a petition requesting a
hearing on the requested Ashland 1 license amendment, on essentially the same
grounds as for the Ashland 2 amendment. On December 18, the Registrant
responded by not contesting the State's request for a hearing.

In addition to the State of Utah, Envirocare, Pack Creek Ranch Company, a group
called the Concerned Citizens of Utah and the Navajo Utah Commission filed
petitions requesting a hearing on the Ashland 1 license amendment. The
Registrant has filed submissions with the NRC Presiding Officer assigned to the
Ashland 1 license amendment opposing standing with respect to each of these
additional submissions. No hearing schedule has yet been set for the Ashland 1
license amendment.

The Registrant is vigorously defending its positions and the validity of the
license amendment or proposed license amendment in all of the foregoing
described actions. If the Registrant does not ultimately prevail in such
actions and any appeals therefrom, the Registrant's ability to process
alternate feeds containing lower levels of uranium, in certain circumstances,
may be adversely effected since NRC license amendments are required for each
alternate feed transaction.



                                       47
<PAGE>   48






ITEM 4.  CONTROL OF THE REGISTRANT

(a)      As far as it is known to the Registrant, the Registrant is not directly
         or indirectly owned or controlled by another corporation(s) or any
         foreign government.

(b)      Information is set forth below with respect to persons known to the
         Registrant to be the owner of more than ten percent of the Registrant's
         voting securities as of February 19, 1999, and the total amount of
         these securities owned by the officers and directors as a group.

<TABLE>
<CAPTION>

IDENTITY OF PERSON OR GROUP                             NUMBER OF COMMON SHARES OWNED        PERCENTAGE
---------------------------------------------           -----------------------------      ---------------
<S>                                                     <C>                                <C>
Adolf H. Lundin                                                  22,500,000(1)                34.3%
Directors and Officers as a group (8 persons)                    24,595,926                   37.5%
</TABLE>

(1)      These shares are held in escrow pursuant to the terms of an Escrow
         Agreement among the Registrant, Adolf H. Lundin, Lukas H. Lundin and
         The Montreal Trust Company of Canada. Pursuant to the terms of the
         agreement, one-fifth of the shares have been released from escrow one
         year following the date of listing of the Registrant's common shares on
         The Toronto Stock Exchange, i.e. on May 16, 1998. The balance of the
         shares will be released as to one-fifth on each of the following
         anniversary dates so that all of the shares will be released by May 16,
         2002.

ITEM 5.  NATURE OF THE TRADING MARKET

The Ontario Business Corporations Act, the Securities Act of the Province of
Ontario and the rules and policies of the Toronto Stock Exchange govern
issuance and trading of the Registrant's common stock.

As of February 19, 1999, approximately 10,953,000 of the Registrant's
outstanding common stock were registered in the names of residents of the
United States. The Registrant's common stock is issued in registered form and
the percentage of shares reported to be held by U.S. shareholders of record is
taken from the records of The Montreal Trust Company of Canada, the registrar
and transfer agent for the Common Stock.

The common shares of the Registrant are currently listed on The Toronto Stock
Exchange in Canada. The Registrant's common shares commenced trading on The
Toronto Stock Exchange on May 16, 1997. The following table sets forth the high
and low market prices and the volume of the common shares traded on The Toronto
Stock Exchange during the periods indicated:

<TABLE>
<CAPTION>

                                           HIGH                LOW
THE TORONTO STOCK EXCHANGE                (Cdn $)             (Cdn $)            VOLUME
--------------------------              ----------          ----------          ----------
<S>                                     <C>                 <C>                 <C>
May-June 1997                                 1.50                1.00          16,785,754
July-September 1997                           1.32                0.96          10,353,679
October-December 1997                         1.45                0.84           7,910,042
January-March 1998                            1.40                0.92           4,192,792
April-June 1998                               1.08                0.50          19,140,463
July-September 1998                            .57                 .38           8,669,927
October-December 1998                          .59                 .38           9,520,910
</TABLE>

The closing price of the common shares on The Toronto Stock Exchange on March
12, 1999, was Cdn$0.52


                                       48
<PAGE>   49

CURRENCY TRANSLATIONS

As the Registrant's stock is traded in Canadian dollars, the following table
sets forth the exchange rates for one Canadian dollar expressed in terms of one
U.S. dollar for the past five fiscal years and the calendar quarters ended
12/31/97, 3/31/98, 6/30/98, 9/30/98 and December 31, 1998.

<TABLE>
<CAPTION>

        YEAR               AVERAGE               LOW - HIGH                SEPTEMBER 30
      --------            ---------            ---------------            --------------
<S>                       <C>                  <C>                        <C>
        1994                0.7365             0.7166 - 0.7731                0.7457
        1995                0.7275             0.7023 - 0.7478                0.7438
        1996                0.7329             0.7235 - 0.7513                0.7301
        1997                0.7221             0.6947 - 0.7483                0.7236
        1998                0.6898             0.6321 - 0.7292                0.6533
</TABLE>


<TABLE>
<CAPTION>

      CALENDAR QUARTER ENDED          AVERAGE         LOW-HIGH             LAST DAY OF QUARTER
      -----------------------        ----------     ---------------        ---------------------
<S>                                  <C>            <C>                    <C>
            12/31/97                   0.7127       0.6947 - 0.7292               0.6995
            03/31/98                   0.6994       0.6821 - 0.7105               0.7045
            06/30/98                   0.6911       0.6782 - 0.7051               0.6817
            09/30/98                   0.6607       0.6321 - 0.6835               0.6533
            12/31/98                   0.6484       0.6427 - 0.6578               0.6501
</TABLE>


Exchange rates are based upon the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York.

The noon rate of exchange on March 12, 1999 reported by the United States
Federal Reserve Bank of New York for the conversion of United States dollars
into Canadian dollars was $0.6564 (Cdn.$1.00 = U.S.$).

ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

Canada has no system of exchange controls. There are no foreign exchange
restrictions on the export or import of capital or on the remittance of
dividends, interest, or other payments to non-resident holders of the Company's
securities.

The Registrant is subject to the Investment Canada Act. Under the Investment
Canada Act, the acquisition of "control" of certain "businesses" by
"non-Canadians" is subject to either notification or review requirements by
Investment Canada , a governmental agency, and where review is required, will
not be allowed unless they are found likely to be of net benefit to Canada. The
term "control" is defined as any one or more non-Canadian persons acquiring all
or substantially all of the assets used in the Canadian business, or
acquisition of the voting shares of a Canadian corporation carrying on the
Canadian business or the acquisition of the voting interests of an entity
controlling the Canadian corporation. The acquisition of the majority of the
outstanding shares or the acquisition of less than a majority but 1/3 or more
of the voting shares unless it can be shown in fact that the purchaser will not
control the Canadian company shall be deemed to be "control".

An acquisition will be reviewable by Investment Canada only if the value of the
assets of the Canadian business being acquired is Cdn$5 million or more in the
case of a "direct" acquisition (or where the Canadian asset acquired constitute
more that 50% of the value of all entities acquired), or Cdn$50 million or more
in the case of an "indirect" acquisition.

These thresholds have been increased for the purpose of acquisition of Canadian
businesses by investors from members of the World Trade Organization ("WTO"),
including Americans, or WTO member-controlled companies. A direct acquisition
by a WTO investor is reviewable only if it involves the direct acquisition of a
Canadian business with assets of Cdn$179 million or more (this figure is
adjusted annually to reflect inflation). Indirect acquisitions by WTO investors
are not reviewable, regardless of the size of the Canadian business acquired,
unless the Canadian, assets acquired constitute more than 50% of the value of
all entities acquired, in which case the Cdn$179 million threshold applies.



                                       49
<PAGE>   50

These increased thresholds do not apply to acquisitions of Canadian businesses
engaged in certain sensitive areas such as uranium production, financial
services, transportation or cultural heritage or national identity. If the
forgoing thresholds are not met, the acquisition of a Canadian business will
not be subject to review unless it relates to Canada's cultural heritage or
national identity.

If an investment is reviewable, an application for review in the form
prescribed by regulation is normally required to be filed with the Agency
(established by the Act) prior to the investment taking place and the
investment may not be consummated until the review has been completed. There
are, however, certain exceptions. Applications concerning indirect acquisitions
may be filed up to 30 days after the investment is consummated; applications
concerning reviewable investments in culture-sensitive sectors are required
upon receipt of a notice for review.

There is, moreover, provision for the Minister (a person designated as such
under the Act) to permit an investment to be consummated prior to completion of
review if he is satisfied that delay would cause undue hardship to the acquirer
or jeopardize the operation of the Canadian business that is being acquired.
The Agency will submit the application to the Minister, together with any other
information or written undertakings given by the acquirer and any
representation submitted to the Agency by a province that is likely to be
significantly affected by the investment.

The Minister will then determine whether the investment is likely to be of net
benefit to Canada, taking into account the information provided and having
regard to factors of assessment where they are relevant. Some of the factors to
be considered are the effect of the investment on the level and nature of
economic activity in Canada, including the effect on employment, on resource
processing on the utilization of parts, components and services produced in
Canada, and on exports from Canada. Additional factors of assessment include
(i) the degree and significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part; (ii) the
effect of the investment on productivity, industrial efficiency, technological
development, product innovation and product variety in Canada; (iii) the effect
of the investment on competition within any industry or industries in Canada;
(iv) the compatibility of the investment with national industrial, economic and
cultural policies taking into consideration industrial, economic and cultural
policy objectives enunciated by the government or legislature of any province
likely to be significantly affected by the investment; and (v) the contribution
of the investment to Canada's ability to compete in world markets.

If an acquisition of control of a Canadian business by a non-Canadian is not
reviewable, the non-Canadian must still give notice to Investment Canada of the
acquisition of a Canadian business within 30 days after its completion.

There are no limitations under Canadian law on the right of nonresident or
foreign owners to hold or vote the common stock of the Registrant.

ITEM 7.  TAXATION

The following paragraphs set forth United States and Canadian income tax
considerations about the ownership of common shares of the Registrant. There
may be relevant state, provincial or local income tax considerations, which are
not discussed.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of possible United States federal income tax
consequences, under current law, applicable to a U.S. Holder (as defined below)
of common shares of the Registrant. This discussion does not address
consequences peculiar to persons subject to special provisions of federal
income tax law, such as those described below as excluded from the definition
of a U.S. Holder. In addition, this discussion does not cover any state, local
or foreign tax consequences. (See "Taxation - Certain Canadian Federal Tax
Considerations" below.)

The following discussion is based upon the sections of the Internal Revenue
Code of 1986, as amended (the "Code"), Internal Revenue Service ("IRS")
rulings, published administrative positions of the IRS and court decisions that
are currently applicable, any or all of which could be materially and adversely
changed, possibly on a retroactive basis, at any time. This discussion does not
consider the potential effects, both adverse and beneficial, of any recently
proposed legislation which, if enacted, could be applied, possibly on a
retroactive basis, at any time. Accordingly, holders and prospective holders of
common shares of the Registrant are urged to consult their own tax advisors
about the state, and local tax consequences of purchasing, owning and disposing
of common shares of the Registrant.



                                       50
<PAGE>   51

U.S. HOLDERS

As used herein, a "U.S. Holder means a holder of common shares of the
Registrant who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof or a trust whose income
is taxable in the United States irrespective of source. This summary does not
address the tax consequences to, and U.S. Holder does not include persons
subject to specific provisions of federal income tax law, such as tax-exempt
organizations, qualified retirement plans, individual retirement accounts and
other tax-deferred accounts, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
non-resident alien individuals, persons or entities that have a "functional
currency" other than the U.S. dollar, shareholders who hold common shares as
part of a straddle, hedging or a conversion transaction, and shareholders who
acquired their stock through the exercise of employee stock options or
otherwise as compensation for services. This summary is limited to U.S. Holders
who own common shares as capital assets. This summary does not address the
consequences to a person or entity holding an interest in a shareholder or the
consequences to a person of the ownership exercise or disposition of any
options, warrants or other rights to acquire common shares.

DISTRIBUTIONS ON COMMON SHARES OF THE REGISTRANT

U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to common shares of the Registrant are required to
include in gross income for United States federal income tax purposes the gross
amount of such distributions equal to the U.S. dollar value of such dividends
on the date of receipt (based on the exchange rate on such date) to the extent
that the Registrant has current or accumulated earnings and profits, without
reduction for any Canadian income tax withheld from such distributions. Such
Canadian tax withheld may be credited, subject to certain limitations, against
the U.S. Holder's United States federal income tax liability or, alternatively,
may be deducted in computing the U.S. Holder's United States federal taxable
income by those who itemize deductions. (See discussion that is more detailed
at "Foreign Tax Credit" below.) To the extent that distributions exceed current
or accumulated earnings and profits of the Registrant, they will be treated
first as a return of capital up to the US. Holders' adjusted basis in the
common shares and thereafter as gain from the sale or exchange of the common
shares. Preferential tax rates for long-term capital gains are applicable to a
U.S. Holder which is an individual, estate or trust. There are currently no
preferential tax rates for long-term capital gains for a U S. Holder, which is
a corporation.

In the case of foreign currency received as a dividend that is not converted by
the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have
a tax basis in the foreign currency equal to its U.S. dollar value on the date
of receipt. Any gain or loss recognized upon a subsequent sale or other
disposition of the foreign currency, including an exchange for U.S. dollars,
will be ordinary income or loss.

Dividends paid on the common shares of the Registrant will not generally be
eligible for the dividends received deduction provided to corporations
receiving dividends from certain United States corporations. A U.S. Holder
which is a corporation may, under certain circumstances, be entitled to a 70%
deduction of the United States source portion of dividends received from the
Registrant (unless the Registrant qualifies as a "foreign personal holding
Registrant" or a "passive foreign investment company," as defined below) if
such U.S. Holder owns shares representing at least 10% of the voting power and
value of the Registrant. The availability of this deduction is subject to
several complex limitations, which are beyond the scope of this discussion.

FOREIGN TAX CREDIT

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of common shares of the Registrant may be
entitled, at the option of the U.S. Holder, to either a deduction or a tax
credit for such foreign tax paid or withheld. Generally, it will be more
advantageous to claim a credit because a credit reduces United States federal
income taxes on a dollar-for-dollar basis, while a deduction merely reduces the
taxpayer's income subject to tax. This election is made on a year-by-year basis
and applies to all foreign taxes paid by (or withheld from) the U.S. Holder
during that year. There are significant and complex limitations which apply to
the credit, among which is the general limitation that the credit cannot exceed
the proportionate share of the U.S. Holder's United States income tax liability
that the U.S. Holder's foreign source income bears to his or its worldwide
taxable income. In the determination of the application of this limitation, the
various items of income and deduction must be classified into foreign and
domestic sources. Complex rules govern this classification process. In
addition, this limitation is calculated separately with respect to specific
classes of income such as "passive income", "high withholding tax interest",
"financial services income", "shipping income", and certain other
classifications of



                                       51
<PAGE>   52

income. Dividends distributed by the Registrant will generally constitute
"passive income" or, in the case of certain U.S. Holders, "financial services
income" for these purposes. The availability of the foreign tax credit and the
application of the limitations on the credit are fact specific, and holders and
prospective holders of common shares of the Registrant should consult their own
tax advisors regarding their individual circumstances.

DISPOSITION OF COMMON SHARES OF THE REGISTRANT

A U.S. Holder will recognize gain or loss upon the sale of common shares of the
Registrant equal to the difference, if any, between (i) the amount of cash plus
the fair market value of any property received, and (ii) the shareholder's tax
basis in the common shares of the Registrant. This gain or loss will be capital
gain or loss if the common shares are a capital asset in the hands of the U.S.
Holder, which will be a short-term or long-term capital gain or loss depending
upon the holding period of the U.S. Holder. Gains and losses are netted and
combined according to special rules in arriving at the overall capital gain or
loss for a particular tax year. Deductions for net capital losses are subject
to significant limitations. For U.S. Holders who are individuals, any unused
portion of such net capital loss may be carried over to be used in later tax
years until such net capital loss is thereby exhausted. For U.S. Holders that
are corporations (other than corporations subject to Subchapter S of the Code),
an unused net capital loss may be carried back three years from the loss year
and carried forward five years from the loss year to be offset against capital
gains until such net capital loss is thereby exhausted.

OTHER CONSIDERATIONS

In the following circumstances, the above sections of this discussion may not
describe the United States federal income tax consequences resulting from the
holding and disposition of common shares:

FOREIGN PERSONAL HOLDING REGISTRANT

If at any time during a taxable year more than 50% of the total combined voting
power or the total value of the Registrant's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of the Registrant's gross income
for such year was derived from certain passive sources (e.g., from dividends
received from its subsidiaries), the Registrant may be treated as a "foreign
personal holding Registrant". In that event, U.S. Holders that hold common
shares would be required to include in gross income for such year their
allocable portions of such passive income to the extent the Registrant does not
actually distribute such income.

FOREIGN INVESTMENT REGISTRANT

If 50% or more of the combined voting power or total value of the Registrant's
outstanding shares are held, directly or indirectly, by citizens or residents
of the United States, United States domestic partnerships or corporations, or
estates or trusts other than foreign estates or trusts (as defined by the Code
Section 7701 (a)(31)), and the Registrant is found to be engaged primarily in
the business of investing, reinvesting, or trading in securities, commodities,
or any interest therein, it is possible that the Registrant may be treated as a
"foreign investment company" as defined in Section 1246 of the Code, causing
all or part of any gain realized by a U.S. Holder selling or exchanging common
shares to be treated as ordinary income rather than capital gain.

PASSIVE FOREIGN INVESTMENT REGISTRANT

As a foreign corporation with U.S. Holders, the Registrant could potentially be
treated as a passive foreign investment company ("PFIC"), as defined in section
1296 of the Code, depending upon the percentage of the Registrant's income
which is passive, or the percentage of the Registrant's assets which is
producing passive income. U.S. Holders owning common shares of a PFIC are
subject to an additional tax and to an interest charge based on the value of
deferral of tax for the period during which the common shares of the PFIC are
owned, in addition to treatment of gain realized on the disposition of common
shares of the PFIC as ordinary income rather than capital gain. However, if the
U.S. Holder makes a timely election to treat a PFIC as a qualified electing
fund ("QEF") with respect to such shareholders interest therein, the
above-described rules generally will not apply. Instead, the electing U.S.
Holder would include annually in his gross income his pro rata share of the
PFIC's ordinary earnings and net capital gain regardless of whether such income
or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to
defer the payment of United States federal income tax on such income
inclusions. Special rules apply to U.S. Holders who own their interests in a
PFIC through intermediate entities or persons.



                                       52
<PAGE>   53

The Registrant believes that it was not a PFIC for its fiscal year ended
September 30, 1997, and quarters ended December 31, 1997 and March 31, 1998. If
in a subsequent year the Registrant concludes that it is a PFIC, it intends to
make information available to enable an U.S. Holder to make a QEF election in
that year. There can be no assurance that the Registrant's determination
concerning its PFIC status will not be challenged by the IRS, or that it will be
able to satisfy record keeping requirements which will be imposed on QEF's.

CONTROLLED FOREIGN CORPORATION

If more than 50% of the voting power of all classes of stock or the total value
of the stock of the Registrant is owned, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships and
corporations or estates or trusts other than foreign estates or trusts, each of
whom own 10% or more of the total combined voting power of all classes of stock
of the Registrant ("United States shareholder"), the Registrant could be
treated as a "controlled foreign corporation" under Subpart F of the Code. This
classification would effect many complex results including the required
inclusion by such United States shareholders in income of their pro rata shares
of "Subpart F income" (as specially defined by the Code) of the Registrant. In
addition, under Section 1248 of the Code, gain from the sale or exchange of
stock by a holder of common shares of the Registrant who is or was a United
States shareholder at any time during the five year period ending with the sale
or exchange is treated as ordinary dividend income to the extent of earnings
and profits of the Registrant attributable to the stock sold or exchanged.
Because of the complexity of subpart F and because it is not clear that Subpart
F would apply to the holders of common shares of the Registrant, a more
detailed review of these rules is outside of the scope of this discussion.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The summary below is restricted to the case of a holder (a "Holder") of one or
more common shares who for the purposes of the Income Tax Act (Canada) (the
"Act") is a non-resident of Canada, holds his common shares as capital property
and deals at arm's length with the Registrant.

DIVIDENDS

A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to
25%, or such lower rate as may be available under an applicable tax treaty, of
the gross amount of any dividend paid or deemed to be paid on his common
shares. Under the Canada-U.S. Income Tax Convention (1980) (the "Treaty") the
rate of Part XIII Tax applicable to a dividend on common shares paid to a
Holder who is a resident of the United States is generally reduced to 15% of
the gross amount of the dividend or to 5% if the Holder is a company that
beneficially owns at least 10% of the voting stock of the Registrant. The
Registrant will be required to withhold the applicable amount of Part XIII Tax
from each dividend so paid and remit the withheld amount directly to the
Receiver General for Canada for the account of the Holder.

DISPOSITION OF COMMON SHARES

A Holder who disposes of a common share, including by deemed disposition on
death, will not be subject to Canadian tax on any capital gain (or capital
loss) thereby realized unless the common share constituted "taxable Canadian
property" as defined by the Act. Generally, a common share will not constitute
taxable Canadian property of a Holder unless he held the common share as
capital property used by him carrying on a business (other than an insurance
business) in Canada, or he or persons with whom he did not deal at arm's length
alone or together held or held options to acquire, at any time within the five
years preceding the disposition, 25% or more of the shares of any class of the
capital stock of the Registrant.

A Holder who is a resident of the United States and who realizes a capital gain
on a disposition of a common share that was taxable Canadian property will
nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax
thereon unless (a) more than 50% of the value of the common share is derived
from, or for an interest in, Canadian real estate, including Canadian mineral
resource properties, (b) the common share formed part of the business property
of a permanent establishment that the Holder has or had in Canada within the 12
months preceding the disposition, or (c) the Holder (i) was a resident of
Canada at any time within the ten years immediately, and for a total of 120
months during the 20 years, preceding the disposition, and (ii) owned the
common share when he ceased to be resident in Canada.



                                       53
<PAGE>   54

A Holder who is subject to Canadian tax in respect of a capital gain realized
on a disposition of a common share must include three quarters of the capital
gain (taxable capital gain) in computing his taxable income earned in Canada.
The Holder may, subject to certain limitations specified in the Act, deduct
three quarters of any capital loss (allowable capital loss) arising on
disposition of taxable Canadian property from taxable capital gains realized in
the year of disposition in respect to taxable Canadian property and, to the
extent not so deductible, from such taxable capital gains of any of the three
preceding years or any subsequent year.

ITEM 8.  SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data of the
Registrant for the periods ended September 30, 1998 and 1997, and was prepared
in accordance with Canadian generally accepted accounting principles ("Canadian
GAAP"). The table also summarizes certain corresponding information prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP"). This selected consolidated financial data include the accounts of the
Registrant and its subsidiaries. All amounts stated are in United States
dollars.


<TABLE>
<CAPTION>

                                             FISCAL YEAR ENDED        FISCAL YEAR ENDED
                                             SEPTEMBER 30, 1998       SEPTEMBER 30, 1997
                                             ------------------       ------------------
<S>                                          <C>                       <C>
Revenues                                     $    32,940,876           $       523,865

Net Income (loss)
- Canadian GAAP                              $     1,617,331           $        18,694
- US GAAP                                    $    (2,349,312)          $    (1,674,797)

Net Income (loss) per
equity share
- Canadian GAAP                              $          0.02           $            --
- US GAAP                                    $         (0.04)          $          (.04)

Total assets
- Canadian GAAP                              $    54,770,714           $    57,200,339
- US GAAP                                    $    48,494,610           $    54,890,878

Total long-term debt,
Including reclamation
obligations                                  $    13,319,872           $    13,285,662

Cash Dividends                               $            --           $            --
</TABLE>


ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
         AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations
of the Registrant for the fiscal year ending September 30, 1998, should be read
in conjunction with the consolidated financial statements of the Registrant and
related notes therein. THIS DISCUSSION CONTAINS FORWARD LOOKING STATEMENTS -
SEE "SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS." The Registrant's
consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles. Please refer to Note 18 of the
Consolidated Financial Statements for a discussion of the differences between
Canadian and United States accounting principles and practices that affect the
Registrant.

RESULTS OF OPERATIONS

International Uranium Corporation (the "Registrant") completed its first full
fiscal year on September 30, 1998. Net income for the year was $1,617,331 which
was approximately $0.02 per share (approximately Cdn$0.04 per share). During
the year, the Registrant had total sales of $32,940,876. Of these revenues,
$19,890,300 was from sales of uranium (60%) and $13,050,576 (40%) was derived
from the Registrant's process milling of alternate feeds. Approximately 62% of
total revenues were from three major customers, one of which accounted for 37%
of total revenues.



                                       54
<PAGE>   55

These results are significantly higher than the corresponding results for the
fiscal period ended September 30, 1997, where the Registrant had net income of
$18,694 resulting from revenues of $523,865. Although the Registrant was formed
on October 3, 1996, its primary operating activities did not commence until
after the purchase of Energy Fuels' assets in May 1997. The Registrant had no
sales of uranium for the year ending September 30, 1997, and its $523,865 of
process milling revenues were derived from the startup of a major alternate
feed processing run which was completed during the fiscal year ending in
September 1998.

The spot market value of uranium (value reflected in contracts with a single
delivery which generally call for material to be delivered within a one-year
period) began the fiscal year at $11.00 per pound U(3)O(8), rose to $12.75 in
November, then declined during the remainder of the fiscal year to $9.75 in
September. The base market price for long-term contracts (contracts which call
for deliveries in multiple future years) was approximately $11.10 per pound
U(3)O(8) in September 1998.

Of the Registrant's 1998 uranium sales, approximately 84% of the material was
sourced from uranium purchases and 16% of the material was produced from the
Registrant's alternate feed production. The $19,890,300 of uranium sales
proceeds resulted from seven separate sales transactions. Approximately 41% of
the sales revenues (24% of the material delivered) arose from long-term
contracts and the balance was from transactions in the spot market. The cost of
uranium sold was $17,829,592 resulting in gross profits of $2,060,708.

The Registrant's $13,050,576 of alternate feed revenue consisted of $12,304,604
which was derived from the processing of alternate feed containing uranium,
tantalum, and niobium from a single customer. This particular alternate feed
run required extensive design and engineering work, along with certain circuit
modifications, which were more than originally contemplated. Therefore, this
processing run took considerably longer to complete than planned. Additionally,
the Registrant was expecting to achieve more satisfactory recoveries at lower
costs than those actually achieved. Even though these complexities caused
results to not be as favorable as originally projected, the Registrant's
alternate feed activities were profitable. The Registrant's processing costs
relating to alternate feeds totaled $10,066,538 for 1998 resulting in a gross
profit of $2,984,038.

Selling, general and administrative expenses for 1998 totaled $3,580,149,
compared to $1,008,012 in 1997. The increase was due to the Registrant
expanding to a full operating status during 1998, along with the fact that the
1997 expenses only reflect approximately five months of activity. Depreciation
and amortization expense was $734,267 in 1998, compared to $41,387 in 1997.
Interest income and other income increased to $1,128,562 in 1998 from $781,947
in 1997. These total revenues and expenses resulted in net income before taxes
of $1,858,892 in 1998 compared to $18,694 in 1997.

A $241,561 provision for taxes is shown for 1998. No provision was necessary in
1997. The 1998 provision is lower than the amount that would normally be
applicable should the combined federal and provincial expected tax rate be
applied to 1998 net income before taxes of $1,858,892 primarily due to lower
rates on certain income the Registrant received from its United States
operations during the period. It is not anticipated that these lower rates will
be available in the future.

The above resulted in 1998 net income of $1,617,331 compared to 1997 net income
of $18,694.

The Registrant continued mining uranium and vanadium bearing ores from its
Sunday and Rim Mine complexes in the Colorado Plateau District of western
Colorado and eastern Utah. To supplement its own production, the Registrant
also commenced an "Ore Purchase Program", buying ore from other independent
miners in the district. Ore from the Registrant's mines and purchased ore is
being delivered and stockpiled at the Registrant's White Mesa Mill where it
will be processed in 1999. These ore stockpiles have been included in the
Registrant's inventory as of September 30, 1998, at a cost of $3,117,441. These
ore stockpiles contain approximately seven pounds of vanadium for each pound of
uranium. Thus at year end values, vanadium accounted for approximately 70% of
the revenue potential from these stockpiles. The Registrant has been able to
produce ore from its Sunday and Rim Mines at costs within its forecast budget
and at satisfactory production levels. However, the amount of ore supplied via
the ore purchase program has been significantly below projections. Independent
miners have had difficulty in arranging the capital necessary to re-establish
their mining properties and have faced delays in completing regulatory and
environmental licensing requirements.

The Registrant continued development work on certain of its mining properties
including continued underground drift development of its Topaz Mine. The
Registrant renewed the application and review process for a permit to mine from
the Wyoming Department of Environmental Quality and for a source material
license from the Nuclear



                                       55
<PAGE>   56

Regulatory Commission for the Reno Creek in situ leach project located in the
Powder River Basin of Wyoming. This review process is expected to be completed
in 1999. The Registrant's investment and development expenditures on its U.S.
mining properties totaled $1,895,814 in 1998. This compares with the
approximately $729,000 that was expended in 1997 for the period after purchase
of the assets in May through September 30,1997.

The Gurvan Saihan Joint Venture, the Registrant's uranium development and
exploration program in Mongolia, completed its 1998 drilling program and leach
amenability testing with favorable results. The Joint Venture has now
delineated over 22.5 million pounds of uranium resources for this program.
Total expenditures by the Registrant relating to this Joint Venture were
$3,209,363 in 1998, compared to the $1,191,525 expended after the purchase of
the Joint Venture interest in May and continuing through September 30, 1997.

The Registrant continued to increase its focus on acquiring and processing
alternate feeds during the year. This resulted in the Registrant successfully
contracting to receive and process over 41,000 cubic yards of material from a
former defense, or FUSRAP (Formerly Utilized Sites Remedial Action Program)
site near Tonawanda, New York. Shipments of material commenced in the fourth
quarter of the Registrant's fiscal year and successful processing was
substantially completed in the first quarter of fiscal 1999.




CAPITAL RESOURCES AND LIQUIDITY

The Registrant's working capital at September 30, 1998 was $20,298,166, of
which $6,282,275 consisted of cash and cash equivalents. This compares to
September 30, 1997 working capital of $24,283,678, of which $13,953,355
consisted of cash and cash equivalents. Income from operations, after
adjustments for expenses not affecting cash (depreciation, amortization of
contract purchase costs, and other), provided $3,887,429 of cash compared to
$267,766 in 1997. However, net cash used by operations increased from
$3,163,190 in 1997 to $5,178,612 in 1998, primarily due to the utilization of
cash to reduce short-term liabilities during the year. The Registrant has also
continued to utilize cash to increase its inventory levels. This inventory
increase is primarily due to the Registrant's ore stockpiles which will be
processed during the next year.

Expenditures for property, plant and equipment totaled $3,812,556, of which
$2,204,791 represents improvements and circuit modifications at the Mill to
allow for more efficient ore and alternate feed processing. Investments in the
Gurvan Saihan Joint Venture totaled $3,209,363.

The Registrant is projecting fiscal year 1999 expenditures for property, plant
and equipment of approximately $2,300,000, of which $1,250,000 will be for
further improvements at the Mill. Expenditures on the Mongolia mineral
properties are projected to be $1,300,000. Additionally, the Registrant is
projecting to purchase approximately $7,950,000 of uranium next year under a
long-term purchase contract at prices approximating the then current spot
price. These purchases will be utilized for delivery under its current sales
contracts or future contracts depending on the Registrant's uranium production
levels. The Registrant is anticipating funding these outlays from current
operations and working capital (which is sufficient to cover these planned
expenditures). Nevertheless, the Registrant is considering the possibility of
negotiating and having available a short-term revolving credit facility during
the coming fiscal year to assist and supplement inventory and project
financing, in addition to providing short-term cash flexibility, as necessary.

ENVIRONMENTAL RESPONSIBILITY

Each year, the Registrant reviews the anticipated costs of decommissioning and
reclaiming its mill and mine sites as part of its environmental planning
process. These estimated costs are also formally reviewed by the Registrant
when it submits license renewal applications to regulatory authorities. Based
on this review, it was determined that the Registrant's estimated reclamation
obligation of $13,265,700 is currently sufficient to cover these projected
future costs.

The Registrant has also posted bonds securing these liabilities and has
deposited marketable securities on account of these obligations. The amount of
these restricted marketable securities collateralizing the Registrant's
reclamation obligation was $8,300,375 at September 30, 1998.

1999 FISCAL YEAR OUTLOOK

The Registrant's profitability is highly dependent upon uranium and vanadium
prices. These commodity prices both softened considerably in the last half of
fiscal 1998 and have continued to fall. As mentioned above, uranium spot



                                       56
<PAGE>   57


prices began the year at $11.00 per pound U(3)O(8), rose to $12.75 then declined
to $9.75 in September. Subsequent to year-end, the price continued to fall to
$8.75 per pound U(3)O(8) prior to recovering to $10.50 in January 1999. Vanadium
prices began the year at approximately $4.10 per pound V(2)O(5), rose to
approximately $6.70 in the early summer and then declined to approximately $5.70
by the end of September. Since year-end, the vanadium price declined
significantly to approximately $2.80 per pound V(2)O(5). Most market analysts
are expecting a rebound in the vanadium prices during 1999; however, they do not
expect to see the high price levels that were experienced during 1998. The
uranium market continues to face uncertainty, particularly over the impact of
new supply sources, such as highly enriched uranium from Russia and U.S.
government stockpiles and the potential sale of 62 million pounds from uranium
inventories held by USEC, Inc. through 2005. Due to these uncertainties, the
Registrant has discontinued further development of its Topaz Mine until prices
recover. Should the spot prices for both uranium and vanadium remain depressed,
the Registrant will re-evaluate its current mining operations and other
properties in order to determine the appropriate level of future production and
development. Although the Registrant has deliveries scheduled under its current
contracts in 1999, any additional sales revenue will be dependent on market
prices and new demand. To mitigate this exposure in future years, the Registrant
will continue its focus on long-term contracts. The mobility of the Registrant
to obtain new long-term contracts will adversely affect revenue and net income.
Sales contracts associated with amounts allocated to favorable uranium sales
contracts on acquisition expire in the first quarter of 1999. Accordingly, the
remaining balance will be charged to earnings in the first quarter of 1999.


In order to lessen its dependence on these commodity prices, the Registrant
continues to expand its alternate feed processing activities. With the
expansion of the alternate feed business, the Registrant is faced with
continued regulatory review and third party challenges with respect to
receiving the required approvals and license amendments for each alternate feed
project. The Registrant could be unsuccessful in acquiring the necessary
approvals or in defending itself against such challenges to these license
amendments. Additionally, processing these materials could require different
procedures for each type of material depending on its composition. These
efforts will increase the Registrant's costs relating to processing alternate
feeds; however, the Registrant believes that alternate feed processing will
provide significant future profits.

The Registrant anticipates processing alternate feeds at the White Mesa Mill
through the first half of fiscal year 1999. The Registrant will then either
process its conventional ores or process alternate feeds from proposed future
transactions which are currently being pursued. The processing order of these
runs will be dependent on future market values, the amount of conventional or
alternate feed ore available at the White Mesa Mill, the profitability of each
run, and other operating factors.

The Registrant will continue its current mining efforts as long as market
prices remain at a level that supports such activity. Should prices continue to
decline, the Registrant could place its mining properties in a care and
maintenance status in order to reduce development and production expenditures.
This will enable the Registrant to conserve its working capital and maintain
its reserve position while preserving the opportunity for the Registrant to
benefit from any future price recovery.

RISKS AND UNCERTAINTIES

INFLATION

The effects of inflation on the Registrant's operations has not been
significant since its formation.

YEAR 2000

This risk involves the potential for the Registrant's operations to be
disrupted by the failure of computer systems, which were not designed to
function using dates for the new century. The Registrant has completed initial
reviews to assess the risks of Year 2000 compliance and has developed and
implemented plans for making necessary program conversions and software
upgrades.

These steps will be continued in 1999 in order to finalize adjustment plans,
implement required changes, and complete necessary compliance testing. Expenses
related to Year 2000 compliance are not expected to be material to the
Registrant's financial results or condition. Note that it is not possible to be
certain that all aspects of the Year 2000 issue affecting the Registrant,
including those related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.



                                       57
<PAGE>   58




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Registrant wishes to caution readers that disclosures made in the foregoing
Management's Discussion and Analysis and elsewhere in this annual report which
are not historical facts are forward-looking statements that involve risks,
uncertainties and other factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements.
Such factors that affect the Registrant's results and the above discussion of
the 1999 outlook include, but are not limited to, volatility and sensitivity to
market prices for uranium and vanadium, competition, environmental regulations,
the impact of changes in foreign currencies' exchange rates, political risk
arising from operating in Mongolia, changes in government regulation and
policies including trade laws and policies, demand for nuclear power,
dependence on a limited number of customers, replacement of reserves and
production, receipt of permits and approvals from governmental authorities
(including amendments for each alternate feed transaction) and other operating
and development risks.

As a result of the foregoing and other factors, no assurance can be given as to
the future results, levels of activity and achievement.

ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY EXCHANGE RATE SENSITIVITY

The Registrant's functional currency is the U.S. dollar and its activities are
predominantly executed using the U.S. dollar. The Registrant incurs a small
portion of its expenditures in Canadian and Mongolian currencies; however, is
not subject to significant operational exposures due to fluctuations in these
currencies.

The Common shares of the Registrant are currently only listed on The Toronto
Stock Exchange in Canada and thus, the shares are purchased and sold in
Canadian dollars. Therefore, please refer to Item 5 for more information
relating to the Registrant's share price information and the tables relating to
the U.S./Canadian dollar currency translations.

The Registrant has not entered into any agreements or purchased any instruments
to hedge any possible currency risks at this time.

INTEREST RATE SENSITIVITY

The Registrant currently has no significant long-term or short-term debt
requiring interest payments. Thus, the Registrant has not entered into any
agreement or purchased any instrument to hedge against possible interest rate
risks at this time.

The Registrant's interest earning investments are primarily short-term, or can
be held to maturity, and thus, any reductions in future income or carrying
values due to future interest rate declines are believed to be immaterial.

COMMODITY PRICE SENSITIVITY

The Registrant is subject to price risk due to changes in the market value of
uranium and vanadium regarding its future sales revenues and carrying values
relating to its finished goods, ore stockpiles and property holdings.

The Registrant's finished goods and ore stockpile inventories are recorded at
the lower of cost or net realizable value as of September 30, 1998.

The Registrant has entered into future long-term sales contracts for uranium at
prices in excess of its carrying value and market value for its inventory as of
September 30 1998. Thus, the Registrant has limited its current exposure to
future uranium price decreases. However, if future prices decrease, and the
Registrant chooses to sell its material in the spot market, it could be subject
to reductions in its inventory carrying values. The Registrant is unable to
quantify this amount as it currently has not entered into any future spot sales
of this type.



                                       58
<PAGE>   59
 The Registrant has not entered into any future vanadium sales contracts at this
time and is thus subject to future price changes. A $0.50 decrease in the market
value of V(2)O(5) would correspond to approximately a $1,200,000 reduction in
projected fiscal year end 1999 revenues.

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

The names, municipalities of residence, positions with the Registrant, and
principal occupations of the directors and executive officers of the Registrant
as of March 12, 1999, are as follows:

<TABLE>
<CAPTION>

 NAME AND MUNICIPALITY                                                                                     FIRST
      OF RESIDENCE                     OFFICE HELD                       PRINCIPAL OCCUPATION             ELECTED
-----------------------     ----------------------------------    ---------------------------------     -----------
<S>                         <C>                                   <C>                                   <C>
LUNDIN, LUKAS H. (1)        Chairman of the Board and Director    Chairman of the Board of the May
Vancouver, Canada                                                 Corporation;  Director and Officer        1997
                                                                  of a number of publicly-traded
                                                                  natural resource companies.

HOELLEN, EARL E.            President, Chief Executive            President and Chief Executive             May
Denver, USA                 Officer and Director                  Officer of the Corporation.               1997

FRYDENLUND, DAVID C.        Vice President, General Counsel,      Vice President, General Counsel and       May
Denver, USA                 Corporate Secretary and Director      Corporate Secretary of the                1997
                                                                  Corporation.

CRAIG, JOHN H.              Director                              Lawyer, partner, Cassels Brock &          May
Toronto, Canada                                                   Blackwell, Barristers and Solicitors      1997

HARROP, CHRISTOPHER J.F.    Director                              Chairman of Northern Securities,          May
                                                                  Inc.                                      1997
Toronto, Canada

RAND, WILLIAM A.            Director                              Self-employed businessman.                May
Vancouver, Canada                                                                                           1997

LUNDIN, ADOLF H.(1)         Director                              Director  and Officer of a number of      May
Geneva, Switzerland                                               publicly-traded   natural   resource      1997
                                                                  companies.

ROBERTS, HAROLD R.          Vice President                        Vice President of the Registrant          May
Denver, USA                                                                                                 1997

MEYER, THAD L.              Vice President, Treasurer and         Vice President Finance, Chief           October
Denver, USA                 Chief Financial Officer               Financial Officer of the Registrant       1997
</TABLE>


(1)  Lukas H. Lundin is the son of Adolf H. Lundin

Directors are elected annually to one year terms at the annual meeting of
shareholders and serve until the next annual meeting or until their successor
is duly elected. Executive Officers are appointed by the directors and serve
until replaced by the directors or their resignation.

Please note Item 13 below for information relating to interests of Management
in certain transactions.

ITEM 11.  COMPENSATION OF DIRECTORS AND OFFICERS

DIRECTOR COMPENSATION

No remuneration has been paid to directors of the Registrant in their
capacities as directors since the date of incorporation. The directors are
reimbursed for their expenses incurred to attend meetings of the Registrant.

AGGREGATE COMPENSATION FOR ALL OFFICERS AND DIRECTORS

An aggregate amount of $601,954 as compensation, was paid by the Registrant
during its fiscal year ended September 30, 1998, to all directors and officers
as a group.

SUMMARY COMPENSATION

The following table summarizes the compensation of each of the named executive
officers of the Registrant for the year ended September 30, 1998.



                                       59
<PAGE>   60





                               ANNUAL COMPENSATION
                      FOR THE YEAR ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>

                                                                             OTHER ANNUAL         SECURITIES UNDER
   NAME AND PRINCIPAL                                                        COMPENSATION          OPTIONS GRANTED
        POSITION                 SALARY                  BONUS                   (US$)                   (#)
-------------------------     -----------------     --------------         ----------------      --------------------
<S>                           <C>                   <C>                    <C>                   <C>
Earl E. Hoellen
President and Chief
Executive(1)                           $180,000           Nil              $          2,500(2)           Nil

David C. Frydenlund,
Vice President, General
Counsel and Corporate
Secretary(1)                           $150,000           Nil              $          9,000(3)           Nil

Harold R. Roberts
Vice President,
Operations                             $140,000           Nil              $          2,025(2)           Nil

Thad L. Meyer,
Vice President,  Finance
and Chief Financial
Officer                                $118,429(4)        Nil                            --         125,000 shares
</TABLE>


NOTES TO SUMMARY COMPENSATION TABLE

(1)      Each of Messrs. Earl E. Hoellen and David C. Frydenlund have contracts
         of employment with the Corporation's subsidiary, International Uranium
         (USA) Corporation. There is no compensatory plan or arrangement
         provided in such contracts in respect of resignation, retirement,
         termination, change in control of the Corporation or responsibilities.
         The expiry date of the employment contracts are January 31, 2000 for
         Mr. Hoellen and June 30, 1999 for Mr. Frydenlund.

(2)      Amounts represent 401(k) matching contributions made to the named
         executive's retirement account per the Corporation's 401(k) Benefit
         Plan available to all eligible employees.

(3)      Other annual compensation is $9,000, being the dollar value of imputed
         interest benefits from a loan provided to Mr. Frydenlund.

(4)      Mr. Meyer commenced employment with the Corporation on October 23,
         1997. Compensation figures for Mr. Meyer represent the amounts earned
         between October 23, 1997 and September 30, 1998.

ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM THE REGISTRANT

STOCK OPTION PLAN

The shareholders of the Registrant adopted an employee stock option plan (the
"Stock Option Plan"), under which the board of directors, or a committee
appointed for such purposes, may from time to time grant to directors,
officers, eligible employees of, or consultants to, the Registrant or its
subsidiaries, or to employees of management companies providing services to the
Registrant (collectively, the "Eligible Personnel") options to acquire Common
Shares in such numbers, for such terms and at such exercise prices as may be
determined by the board or such committee. The purpose of the Stock Option Plan
is to advance the interests of the Registrant by providing Eligible Personnel
with a financial incentive for the continued improvement of the Registrant's
performance and encouragement to stay with the Registrant.

The maximum number of Common Shares that may be reserved for issuance for all
purposes under the Stock Option Plan is 6,700,000 Common Shares and the maximum
number of Common Shares which may be reserved for issuance to any one insider
pursuant to share options and under any other share compensation arrangement
may not exceed 5% of the Common Shares outstanding at the time of grant (on a
non-diluted basis). Any Common Shares subject to a share option which for any
reason is cancelled or terminated without having been exercised will again be
available for grant under the Stock Option Plan.



                                       60
<PAGE>   61




The maximum number of Common Shares that may be reserved for issuance to
insiders of the Registrant under the Stock Option Plan and under any other share
compensation arrangement is limited to 10% of the Common Shares outstanding at
the time of grant (on a non-diluted basis).

The board of directors of the Registrant has the authority under the Stock
Option Plan to establish the option price at the time each share option is
granted. The option price may not be lower than the market price of the Common
Shares at the time of grant.

Options granted under the Stock Option Plan must be exercised no later than 10
years after the date of grant and options are not transferable other than by
will or the laws of dissent and distribution. If an optionee ceases to be an
Eligible Person for any reason whatsoever other than death, each option held by
such optionee will cease to be exercisable 30 days following the termination
date (being the date on which such optionee ceases to be an Eligible Person).
If an optionee dies, the legal representative of the optionee may exercise the
optionee's options within one year after the date of the optionee's death but
only up to and including the original option expiry date.

The following table sets out information with respect to the options to
purchase common shares of the Registrant outstanding as of March 12, 1999:

<TABLE>
<CAPTION>

        CLASS OF                   NUMBER OF          DATE OF GRANT        OPTION PRICE           OPTION
       OPTIONEES                 COMMON SHARES                                (CDN $)           EXPIRY DATE
                                 UNDER OPTION
--------------------------    ------------------    -----------------      -------------     ------------------
<S>                           <C>                   <C>                    <C>               <C>
  Executive officers and           1,625,000            May 9, 1997            1.25             May 8, 2000
  directors as a group               250,000           July 1, 1997            1.25            June 30, 2000
                                     125,000          October 8, 1997          1.25           October 7, 2000
                                     775,000         January 14, 1999          0.75           January 13, 2002
                                   ---------
  Total:                           2,775,000

                                     764,000*           May 9, 1997            0.75             May 8, 2000
  All option holders as a          1,625,000            May 9, 1997            1.25             May 8, 2000
  group (including                   250,000           July 1, 1997            1.25             May 8, 2000
  executive directors)               125,000          October 8, 1997          1.25           October 7, 2000
                                      50,000*         March 20, 1998           0.75            March 8, 2001
                                     900,000         January 14, 1999          0.75           January 13, 2002
                                   ---------
  Total:                           3,714,000
</TABLE>


     * Represents options repriced from Cdn $1.25 to Cdn. $.75 on June 17, 1998.

The following table summarizes individual grants of options to purchase or
acquire securities of the Registrant or any of its subsidiaries to each of the
named executive officers and directors as of March 12, 1999.

<TABLE>
<CAPTION>

                                   NUMBER OF
     EXECUTIVE OFFICER           COMMON SHARES                               OPTION PRICE         OPTION EXPIRY
      AND DIRECTORS               UNDER OPTION           DATE OF GRANT          (CDN $)               DATE
--------------------------    ----------------------   -----------------   ------------------   --------------------
<S>                           <C>                      <C>                 <C>                  <C>
Earl E. Hoellen                            1,000,000         May 9, 1997           1.25               May 8, 2000
                                             375,000    January 14, 1999           0.75          January 13, 2002

David C. Frydenlund                          250,000         May 9, 1997           1.25               May 8, 2000
                                             250,000        July 1, 1997           1.25             June 30, 2000
                                             200,000    January 14, 1999           0.75          January 13, 2002

Harold R. Roberts                            250,000         May 9, 1997           1.25               May 8, 2000
                                              75,000    January 14, 1999           0.75          January 13, 2002


Thad L. Meyer                                125,000      October 8, 1997           1.25          October 7, 2000
                                             125,000     January 14, 1999           0.75         January 13, 2002


Adolf H. Lundin                               25,000          May 9, 1997           1.25              May 8, 2000


Lukas H. Lundin                               25,000          May 9, 1997           1.25              May 8, 2000


William A. Rand                               25,000          May 9, 1997           1.25              May 8, 2000


John H. Craig                                 25,000          May 9, 1997           1.25              May 8, 2000


Christopher J.F. Harrop                       25,000          May 9, 1997           1.25              May 8, 2000
                                           ---------

TOTAL:                                     2,775,000
</TABLE>



                                       61
<PAGE>   62

ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

Lukas H. Lundin, John H. Craig, Christopher J.F. Harrop, Adolf H. Lundin, and
William A. Rand are also directors and officers of other natural resource
companies and, consequently, there exists the possibility for such directors
and officers to be in a position of conflict relating to any future
transactions or relationships between the company or common third parties.
However, the Registrant is unaware of any such pending or existing conflicts
between these parties. Any decision made by any of such directors and officers
involving the Registrant are made in accordance with their duties and
obligations to deal fairly and in good faith with the Registrant and such other
companies. In addition, each of the directors of the Registrant, discloses and
refrains from voting on, any matter in which such director may have a conflict
of interest.

None of the present directors, senior officers or principal shareholders of the
Registrant and no associate or affiliate of any of them has any material
interest in any transaction of the Registrant or in any proposed transaction
which has materially affected or will materially affect the Registrant except
as described herein.

During the year ended September 30, 1998 the Registrant incurred legal fees of
$50,197 to Cassels Brock & Blackwell, a law firm of which John H. Craig is a
partner.

During the year ending September 30, 1998, the Registrant paid management and
administrative service fees of $99,383 to a company owned by the Chairman of
the Registrant, Lukas H. Lundin, which provides office premises, secretarial
and other services in Vancouver. The Registrant continues to pay monthly fees
of Cdn $12,840 to this service company.

During the period ended September 30, 1997 the Registrant loaned $850,000 to
David C. Frydenlund, an Officer and Director of the Registrant, in order to
facilitate relocation to the Registrant's headquarters. Of this amount,
$650,000 was repaid prior to September 30, 1997, leaving $200,000 outstanding
at September 30, 1997 and 1998. This loan is non-interest bearing and is
payable on the earlier of termination of employment or June 30, 1999. The loan
is secured by the Officer's personal residence.

                                     PART II


ITEM 14 . DESCRIPTION OF SECURITIES TO BE REGISTERED

Not applicable.
                                    PART III

ITEM 15.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 16.  CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
          SECURITIES

None
                                     PART IV

ITEM 17.  FINANCIAL STATEMENTS

See Pages F-1 through F-13 incorporated herein by reference.

ITEM 18.  FINANCIAL STATEMENTS

Not applicable.



                                       62
<PAGE>   63

ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

      a) The following consolidated statements, together with the report of
         PricewaterhouseCoopers LLP thereon, are filed as part of this Annual
         Report:

<TABLE>
<CAPTION>

                                                                           Page
                                                                           ----
<S>                                                                        <C>
Index to Consolidated Financial Statements ...........................     F-i
Auditors' Report to the Shareholders .................................     F-1
Consolidated Balance Sheets at September 30, 1998 and 1997 ...........     F-2
Consolidated Statements of Operations and Retained Earnings
   For the Periods Ended September 30, 1998 and 1997 .................     F-3
Consolidated Statements of Cash Flows for the Periods Ended
   September 30, 1998 and 1997 .......................................     F-4
Notes to the Consolidated Financial Statements .......................     F-5
</TABLE>

         All other schedules are omitted because they are not applicable or
         because the required information is contained in the Consolidated
         Financial Statements or Notes thereto.

      b) Documents filed as exhibits to this Annual Report:

         *1.1      Registrant's Corporate Structure Chart

         *23.1     Consent of Independent Accountants

         *23.2     Consent of Expert - Saskatoon Mining and Mineral Services,
                   Letter, Independent Accountants

         --------------
         * Previously filed.




                                       63
<PAGE>   64





                                   SIGNATURES


Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

INTERNATIONAL URANIUM CORPORATION



By:  /s/ EARL E. HOELLEN
     --------------------------------------------------------
     Earl E. Hoellen, President and Chief Executive Officer


Dated:       January 13, 2000
       -----------------------------









                                       64