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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the fiscal year ended December 31, 2009OR

[   ]  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:001-32974



URANERZ ENERGY CORPORATION(Exact Name of Registrant as Specified in its Charter)

|Nevada                                                               | 98-0365605                          
|-------------------------------------------------------------------- | ------------------------------------
|(State of other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|1701 East E Street                                                 |                                     
|PO Box 50850, Casper, Wyoming                                        | 82605-0850                          
|(Address of Principal Executive Offices)                             | (Zip Code)                          

(307) 265-8900(Registrants Telephone
Number, including Area Code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

|Title of Each Class               | Name of Each Exchange on Which Registered
|--------------------------------- | -----------------------------------------
|                                  |                                          
|Common Stock: $0.001 par value    | NYSE Amex Equities                       
|Preferred Stock: $0.001 par value | Toronto Stock Exchange                   

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[   ]    No[X]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes
[   ]    No[X]

Indicate by checkmark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such 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 whether the Registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes [X]    No [   ]

Indicate by checkmark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to the Form 10-K. [   ]

1

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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of Accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act (Check one): Large Accelerated Filer [  
]            
Accelerated Filer
[X]             
Non-Accelerated Filer  [  
]            Smaller
Reporting Company [   ]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes [   ]    No
[X]

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrants most
recently completed second fiscal
quarter:         $86,000,000

The number of shares of the Registrants Common Stock
outstanding as of March 1, 2010 was 64,194,887.

Documents Incorporated by Reference: To the extent herein
specifically reference in Part III, portions of the Registrants Definitive
Proxy Statement of Schedule 14A for the 2010 Annual General Meeting of
Shareholders. See Part III.

---

TABLE OF CONTENTS

|PART
      1                                                                                                                         | 3 
|------------------------------------------------------------------------------------------------------------------------------------ | --
|                                                                                                                                     |   
|ITEM
      1. DESCRIPTION OF BUSINESS                                                                                                | 3 
|                                                                                                                                     |   
|ITEM
      1A. RISK FACTORS AND UNCERTAINTIES                                                                                        | 8 
|                                                                                                                                     |   
|ITEM
      1B. UNRESOLVED STAFF COMMENTS                                                                                             | 16
|                                                                                                                                     |   
|ITEM
      2. DESCRIPTION OF PROPERTIES                                                                                              | 16
|                                                                                                                                     |   
|ITEM
      3. LEGAL PROCEEDINGS                                                                                                      | 41
|                                                                                                                                     |   
|ITEM
      3A. EXECUTIVE OFFICERS OF THE COMPANY                                                                                     | 41
|                                                                                                                                     |   
|PART
      II                                                                                                                        | 44
|                                                                                                                                     |   
|ITEM
      4. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 44
|                                                                                                                                     |   
|ITEM
      5. SELECTED FINANCIAL DATA                                                                                                | 50
|                                                                                                                                     |   
|ITEM
      6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS                            | 51
|                                                                                                                                     |   
|ITEM
      6A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                            | 59
|                                                                                                                                     |   
|ITEM
      7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                            | 60
|                                                                                                                                     |   
|ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE                             | 62
|                                                                                                                                     |   
|ITEM
      8A. CONTROLS AND PROCEDURES                                                                                               | 62
|                                                                                                                                     |   
|ITEM
      8B. OTHER INFORMATION                                                                                                     | 63
|                                                                                                                                     |   
|PART
      III                                                                                                                       | 63
|                                                                                                                                     |   
|ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                                 | 63
|                                                                                                                                     |   
|ITEM
      10. EXECUTIVE COMPENSATION                                                                                                | 64
|                                                                                                                                     |   
|ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS                  | 64
|                                                                                                                                     |   
|ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE                                        | 64
|                                                                                                                                     |   
|ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                | 64
|                                                                                                                                     |   
|PART
      IV                                                                                                                        | 64
|                                                                                                                                     |   
|ITEM
      14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                            | 64
|                                                                                                                                     |   
|GLOSSARY
      OF TECHNICAL TERMS                                                                                                    | 67
|                                                                                                                                     |   
|SIGNATURES                                                                                                                           | 68

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS

This Annual Report on Form 10-K and the exhibits attached
hereto contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
concern the Companys anticipated results and developments in the Companys
operations in future periods, planned exploration and, if warranted, development
of its properties, plans related to its business and other matters that may
occur in the future. These statements relate to analyses and other information
that are based on forecasts of future results, estimates of amounts not yet
determinable and assumptions of management.

Any statements that express or involve discussions with respect
to predictions, expectations, beliefs, plans, projections, objectives,
assumptions, future events or performance (often, but not always, using words
or phrases such as expects or does not expect, is expected, anticipates
or does not anticipate, plans, estimates or intends, or stating that
certain actions, events or results may, could, would, might or will be
taken, occur or be achieved) are not statements of historical fact and may be
forward-looking statements. Forward-looking statements are subject to a variety
of known and unknown risks, uncertainties and other factors which could cause
actual events or results to differ from those expressed or implied by the
forward-looking statements, including, without limitation:

- risks related to our limited operating history;
- risks related to the probability that our properties contain reserves;
- risks related to our past losses and expected losses in the near future;
- risks related to our need for qualified personnel for exploring for,
  starting and operating a mine;
- risks related to our lack of known reserves;
- risks related to the fluctuation of uranium prices;
- risks related to environmental laws and regulations and environmental
  risks;
- risks related to using our in-situ recovery mining process;
- risks related to exploration and, if warranted, development of our
  properties;
- risks related to our ability to acquire necessary mining licenses or
  permits;
- risks related to our ability to make property payment obligations;
- risks related to the competitive nature of the mining industry;
- risks related to our dependence on key personnel;
- risks related to requirements for new personnel;
- risks related to securities regulations;
- risks related to stock price and volume volatility;
- risks related to dilution;
- risks related to our lack of dividends;
- risks related to our ability to access capital markets;

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- risks related to recent market events;
- risks related to our issuance of additional shares of common stock;
- risks related to acquisition and integration issues; and
- risks related to defects in title to our mineral properties.

This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section headings Item 1. Description of the Business, Item 1A. Risk Factors  and Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

We qualify all the forward-looking statements contained in
this Annual Report by the foregoing cautionary statements.

PART 1

ITEM 1.DESCRIPTION OF BUSINESS

Corporate Background

Uranerz Energy Corporation (Uranerz or the Company) was
incorporated under the laws of the State of Nevada on May 26, 1999. On July 5,
2005, we changed our name from Carleton Ventures Corp. to Uranerz Energy
Corporation. Our executive and operations office is located at 1701 East E
Street, P.O. Box 50850, Casper, Wyoming USA 82605-0850. Our administrative
office is located at Suite 1410 - 800 West Pender Street, Vancouver, British
Columbia, Canada V6C 2V6. The telephone number for our executive office is (307)
265-8900. The telephone number for our administrative office is (604)
689-1659.

Our common stock is traded on the NYSE Amex Equities and the
Toronto Stock Exchange under the symbol URZ and on the Frankfurt Exchange
under the symbol U9E.

History

Uranerz was relatively inactive from 1999 until 2005 when it
acquired mineral prospecting permits in Saskatchewan, mineral licenses in
Mongolia and mining claims and leases in Wyoming. Exploration commenced in 2005
and has continued through 2009. In 2007 we filed uranium mining applications for
a project in Wyoming. In 2008 and 2009 we acquired additional mineral properties
and conducted exploration drilling while pursuing mining permits in Wyoming. We
have increased our personnel and operational consultants to move some of our
Wyoming properties into the mine planning and permitting stage; activities which
continue.

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Our Business

We are an exploration stage company engaged in the acquisition,
exploration and, if warranted, development of uranium properties. We have an
interest in the properties described below.

We are principally focused on the exploration of our properties
in the Powder River Basin area of Wyoming. We are exploring these properties
with the objective of assessing their viability for commercial in-situ recovery
(which we refer to as ISR) uranium mining projects. ISR is a  mining
process that uses a leaching solution to extract uranium from underground ore
bodies. We also own interests in properties in the Great Divide Basin area of
Wyoming, in Texas and in Saskatchewan, Canada.

We have applied for mine operating permits on two of our
properties in the Powder River Basin area of Wyoming that we feel have the
potential, based on data in our possession, of being developed into commercial
in-situ recovery uranium mines. We are also assembling baseline data to permit
additional properties in the Powder River Basin area of Wyoming which appear to
have potential for development.

Recent Corporate Developments

The following significant corporate developments occurred
during our fiscal year ended December 31, 2009:

1.           We
issued 242,500 common shares upon the exercise of stock options for gross cash
proceeds of $166,125;

2.           We
completed a public offering of 8,500,000 units, comprised of 8,500,000 common
shares and 4,250,000 common share purchase warrants, at $2.00 per unit, for
gross cash proceeds of $17,000,000;

3.           We
continued our exploration program in Wyoming  see details under the section
heading Item 2  Description of Properties

4.           We
completed the design of our proposed Nichols Ranch and Hank mining and
processing facilities;

5.           Our
applications to the U.S. Nuclear Regulatory Commission and the Land Quality
Division of the Wyoming Department of Environmental Quality for licenses and
permits to construct and operate in-situ recovery uranium facilities on our
Nichols Ranch and Hank projects located in the central Powder River Basin of
Wyoming continue to be evaluated as scheduled. For more details of our
permitting plans see the discussion below under the section heading Item 2 
Description of Properties  Wyoming Properties  Environmental Permitting; and

6.           We
leased an additional 320 acres of mineral properties in the Powder River Basin
of Wyoming, USA.

Competition

Our industry is highly competitive. We compete with other
mining and exploration companies in connection with the acquisition of uranium
mineral properties and the equipment, materials and personnel necessary to
explore and develop such properties. There is competition for the limited number
of uranium acquisition opportunities, some of which is with other companies
having substantially greater financial resources, staff and facilities than we
do. As a result, we may have difficulty acquiring attractive exploration properties, staking claims related to
our properties, and exploring and developing our properties.

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ISR Mining Process

We plan to use the process of in-situ recovery mining (which we
refer to as ISR), a process that uses a 'leaching' solution to extract uranium
from underground ore bodies. The 'leaching' agent, which contains an oxidant
such as oxygen with sodium bicarbonate (commonly known as baking soda), is added
to the native groundwater and injected through wells into the ore body in a
sandstone aquifer to dissolve the uranium. This solution is then pumped via
other wells to the surface for processing -- resulting in a cost-efficient and
environmentally friendly mining process.

The ISR mining process differs dramatically from conventional
mining techniques in that ISR mining leaves the rock matrix in place. The ISR
technique avoids the movement and milling of rock and ore as well as mill
tailing waste associated with more traditional mining methods.

Minerals Exploration Regulation

Our uranium mineral exploration and development activities are,
and our production activities (if and when they occur) will be subject to
extensive laws and regulations governing exploration, development, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
and remediation of the environment, protection of endangered and protected
species, mine safety, toxic substances and other matters. Uranium minerals
exploration is also subject to risks and liabilities associated with pollution
of the environment and disposal of waste products occurring as a result of
mineral exploration and production.

Compliance with these laws and regulations may impose
substantial costs on us and will subject us to significant potential
liabilities. Changes in these regulations could require us to expend significant
resources to comply with new laws or regulations or changes to current
requirements and could have a material adverse effect on our business
operations.

Minerals exploration operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated, causing an adverse effect on our business operations. Minerals exploration operations are subject to federal and state, laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Minerals exploration operations are also subject to federal and state laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal and state authorities may be changed and any such changes may have material adverse effects on our activities. As of the date of this annual report, other than with respect to the posting of a performance bond, we have not been required to spend material amounts on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations. Environmental regulation is discussed in further detail in the following section.

Environmental Regulation

Exploration, development and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations. In general, our exploration and production activities are subject to certain federal and state laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges, and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state and federal authorities.

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Waste Disposal

The Resource Conservation and Recovery Act ("RCRA"), and comparable state statutes, affect minerals exploration and production activities by imposing regulations on the generation, transportation, treatment, storage, disposal and cleanup of hazardous wastes and on the disposal of non-hazardous wastes. Under the auspices of the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements.

CERCLA

The federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") imposes joint and several liability for costs of
investigation and remediation and for natural resource damages, without regard
to fault or the legality of the original conduct, on certain classes of persons
with respect to the release into the environment of substances designated under
CERCLA as hazardous substances ("Hazardous Substances"). These classes of
persons or potentially responsible parties include the current and certain past
owners and operators of a facility or property where there is or has been a
release or threat of release of a Hazardous Substance and persons who disposed
of or arranged for the disposal of the Hazardous Substances found at such a
facility. CERCLA also authorizes the EPA and, in some cases, third parties to
take actions in response to threats to the public health or the environment and
to seek to recover the costs of such action. We may also in the future become an
owner of facilities on which Hazardous Substances have been released by previous
owners or operators. We may in the future be responsible under CERCLA for all or
part of the costs to clean up facilities or property at which such substances
have been released, and for natural resource damages.

Air Emissions

Our operations are subject to state and federal regulations for
the control of emissions of air pollution. Major sources of air pollutants are
subject to more stringent, federally imposed permitting requirements.
Administrative enforcement actions for failure to comply strictly with air
pollution regulations or permits are generally resolved by payment of monetary
fines and correction of any identified deficiencies. Alternatively, regulatory
agencies could require us to forego construction, modification or operation of
certain air emission sources.

Clean Water Act

The Clean Water Act ("CWA") imposes restrictions and strict controls regarding the discharge of wastes, including mineral processing wastes, into waters of the United States, a term broadly defined. Permits must be obtained to discharge pollutants into federal waters. The CWA provides for civil, criminal and administrative penalties for unauthorized discharges of hazardous substances and other pollutants. It imposes substantial potential liability for the costs of removal or remediation associated with discharges of oil or hazardous substances. State laws governing discharges to water also provide varying civil, criminal and administrative penalties, and impose liabilities in the case of a discharge of petroleum or its derivatives, or other hazardous substances, into state waters. In addition, the EPA has promulgated regulations that require us to obtain permits to discharge storm water runoff. In the event of an unauthorized discharge of wastes, we may be liable for penalties and costs.

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Underground Injection Control ("UIC") Permits

The federal Safe Drinking Water Act creates a nationwide
regulatory program protecting groundwater. This act is administered by the
United States Environmental Protection Agency (the "EPA"). However, to avoid the
burden of dual federal and state (or Indian tribal) regulation, the Safe
Drinking Water Act allows for the UIC permits issued by states (and Indian
tribes determined eligible for treatment as states) to satisfy the UIC permit
required under the Safe Drinking Water Act under two conditions. First, the
state's program must have been granted primacy. Second, the EPA must have
granted, upon request by the state, an aquifer exemption. The EPA may delay or
decline to process the state's application if the EPA questions the state's
jurisdiction over the mine site.

Segment Information

Segment information relating to the Company is provided in Note
15 to our financial statements under the section heading Item 7. Financial
Statements and Supplementary Data below.

Employees

Currently we have eleven full-time employees, seven full time operational consultants and one part-time operational consultant. We operate in established mining areas, which we believe have sufficient available personnel for our business plans.

Available Information

Detailed information about us is contained in our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other reports, and amendments to those reports, that we file with or furnish to the SEC. These reports are available free of charge on our website, www.uranerz.com, as soon as reasonably practicable after we electronically file such reports with or furnish such reports to the SEC. However, our website and any contents thereof should not be considered to be incorporated by reference into this document. We will furnish copies of such reports free of charge upon written request to our Investor Relations department. You can contact our Investor Relations department at:

Uranerz Energy CorporationInvestor RelationsSuite 1410
 800 West Pender Street
  Vancouver, BC, Canada V6C 2V6

Additionally, our corporate governance guidelines, code of
ethics and the charters of each of our Board of Directors standing committees
are available on our website. We will furnish copies of such information free of
charge upon written request to our Investor Relations department.

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ITEM 1A. RISK FACTORS AND UNCERTAINTIES

Readers should carefully consider the risks and uncertainties
described below before deciding whether to invest in shares of our common
stock.

Our failure to successfully address the risks and uncertainties
described below would have a material adverse effect on our business, financial
condition and/or results of operations, and the trading price of our common
stock may decline and investors may lose all or part of their investment. We
cannot assure you that we will successfully address these risks or other unknown
risks that may affect our business.

Risks Related to Our Business

Our future performance is difficult to evaluate because
we have a limited operating history.

We were incorporated in 1999 and we began to implement our
current business strategy in the uranium industry in the beginning of 2005. Our
operating cash flow needs have been financed primarily through issuances of our
common stock. As a result, we have little historical financial and operating
information available to help you evaluate our performance or an investment in
our common stock and warrants.

Because the probability of an individual prospect ever
having reserves is remote, our properties may not contain any reserves, and any
funds spent on exploration may be lost.

We have no uranium producing properties and have never
generated any revenue from our operations. Because the probability of an
individual prospect ever having reserves is remote, our properties may not
contain any reserves, and any funds spent on exploration may be lost.
Notwithstanding our disclosures to Canadian authorities under National
Instrument 43-101, we do not know with certainty that economically recoverable
uranium exists on any of our properties. We may never discover uranium in
commercially exploitable quantities and any identified deposit may never qualify
as a commercially mineable (or viable) reserve. We will continue to attempt to
acquire the surface and mineral rights on lands that we think are geologically
favorable or where we have historical information in our possession that
indicates uranium mineralization might be present.

The exploration and development of mineral deposits involves
significant financial and other risks over an extended period of time, which
even a combination of careful evaluation, experience and knowledge may not
eliminate. While discovery of a uranium, precious or base metal deposit may
result in substantial rewards, few properties which are explored are ultimately
developed into producing mines. Major expenditures are required to establish
reserves by drilling and to construct mining and processing facilities at a
site. Our uranium properties are all at the exploration stage and do not contain
any reserves at this time. It is impossible to ensure that the current or
proposed exploration programs on properties in which the Company has an interest
will result in the delineation of mineral deposits or in profitable commercial
operations. Our operations are subject to the hazards and risks normally
incident to exploration, development and production of uranium, precious and
base metals, any of which could result in damage to life or property,
environmental damage and possible legal liability for such damage. While we may
obtain insurance against certain risks, the nature of these risks is such that
liabilities could exceed policy limits or could be excluded from coverage. There
are also risks against which we cannot insure or against which we may elect not
to insure. The potential costs which could be associated with any liabilities
not covered by insurance, or in excess of insurance coverage, or compliance with
applicable laws and regulations may cause substantial delays and require
significant capital outlays, adversely affecting our future earnings and
competitive position and, potentially our financial viability.

8

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We have a limited operating history and have losses which
we expect to continue into the future. As a result, we may have to suspend or
cease exploration activities.

We were incorporated in 1999 and are engaged in the business of
mineral exploration. We have not realized any revenue from our operations. We
have a relatively limited exploration history upon which an evaluation of our
future success or failure can be made. We have incurred losses since inception.
Our ability to achieve and maintain profitability and positive cash flow is
dependent upon:

| | * | our ability to locate a profitable mineral
    property;
| | - | --------------------------------------------------------
| | * | our ability to generate revenues;                       
| | * | our ability to control costs.                           

Based upon current plans, we expect to incur operating losses
in future periods. This will happen because there are expenses associated with
the research and exploration of our mineral properties plus development costs to
produce saleable product. We cannot guarantee we will be successful in
generating revenues in the future. Failure to generate revenues may cause us to
go out of business.

Because some of our officers and directors do not have
technical training or experience in exploring for, starting, and operating a
mine, we may have to hire qualified personnel. If we cant locate qualified
personnel, we may have to suspend or cease exploration activity which may result
in the loss of your investment.

Some, but not all, of our officers and directors do have
experience with exploring for, starting, and operating a mine. Because some of
our officers and directors are inexperienced with exploring for, starting, and
operating a mine, we may have to hire qualified persons to perform surveying,
exploration, and water management of our properties. Some of our officers and
directors have no direct training or experience in these areas and as a result
may not be fully aware of many of the specific requirements related to working
within the industry. Their decisions and choices would typically take into
account standard engineering or managerial approaches mineral exploration
companies commonly use. However, our exploration activities, earnings and
ultimate financial success could suffer irreparable harm due to certain of
managements decisions. As a result we may have to suspend or cease exploration
activities, or any future warranted development activities, which would likely
result in the loss of your investment.

Our future profitability will be dependent on uranium
prices.

Because a significant portion of our anticipated revenues are
expected to be derived from the sale of  uranium, our net earnings, if any,
can be affected by the long- and short-term market price of
U3O8. Uranium prices are subject to fluctuation. The price
of uranium has been and will continue to be affected by numerous factors beyond
our control. With respect to uranium, such factors include the demand for
nuclear power, political and economic conditions in uranium producing and
consuming countries, uranium supply from secondary sources, uranium
production levels and costs of production. Spot prices for
U3O8 were at $20.00 per pound U3O8
in December 2004, and then, to $35.25 per pound in December 2005 and $72.00 per
pound in December 2006. During 2007 the spot price reached a high of
$138.00 per pound. The U.S. monthly spot price of U3O8 was
approximately $90.00 per pound in December 2007. The spot price declined during
2008, reaching a low of $44.00 per pound in October. In 2009, the U.S. monthly
spot price of U3O8 had a high of $51.50 (June) and a low
of $42.00 (March). The U.S. monthly spot price of U3O8was
approximately $44.50 per pound and the long term price was approximately $61.00
per pound in December 2009.

9

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Our operations are subject to environmental regulation
and environmental risks.

We are required to comply with applicable environmental protection laws and regulations and permitting requirements, and we anticipate that we will be required to continue to do so in the future. The material laws and regulations within the U.S. that the Company must comply with are the National Environmental Protection Act (NEPA), Atomic Energy Act, Uranium Mill Tailings Radiation Control Act of 1978 (UMTRCA), Clean Air Act, Clean Water Act, Safe Drinking Water Act, Federal Land Policy Management Act, National Park System Mining Regulations Act, and the State Mined Land Reclamation Acts or State Department of Environmental Quality regulations, as applicable. We also are required to comply with environmental protection laws in Canada. We are required to comply with the Atomic Energy Act, as amended by UMTRCA, by applying for and maintaining a Source Material license from the US Nuclear Regulatory Commission. Uranium operations must conform to the terms of such license, which include provisions for protection of human health and the environment from endangerment due to radioactive materials. The license encompasses protective measures consistent with the Clean Air Act and the Clean Water Act. We intend to utilize specific employees and consultants in order to comply with and maintain our compliance with the above laws and regulations.

The uranium industry is subject not only to the worker health and safety and environmental risks associated with all mining businesses, but also to additional risks uniquely associated with uranium mining and processing. The possibility of more stringent regulations exists in the areas of worker health and safety, the disposition of wastes, the decommissioning and reclamation of exploration and in-situ recovery mining sites, and other environmental matters, each of which could have a material adverse effect on the costs or the viability of a particular project. We cannot predict what environmental legislation, regulation or policy will be enacted or adopted in the future or how future laws and regulations will be administered or interpreted. The recent trend in environmental legislation and regulation, generally, is toward stricter standards and this trend is likely to continue in the future. This recent trend includes, without limitation, laws and regulations relating to air and water quality, mine reclamation, waste handling and disposal, the protection of certain species and the preservation of certain lands. These regulations may require the acquisition of permits or other authorizations for certain activities. These laws and regulations may also limit or prohibit activities on certain lands. Compliance with more stringent laws and regulations, as well as potentially more vigorous enforcement policies or stricter interpretation of existing laws, may necessitate significant capital outlays, may materially affect our results of operations and business, or may cause material changes or delays in our intended activities.

Our operations may require additional analysis in the future including environmental and social impact and other related studies. Certain activities require the submission and approval of environmental impact assessments. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers, and employees. There can be no assurance that we will be able to obtain or maintain all necessary permits that may be required to continue  operations or exploration of properties or, if feasible, to commence development, construction or operation of mining facilities at such properties at economically justifiable costs.

We intend to extract uranium from our properties using
the in-situ recovery mining process which may not be successful.

We intend to extract uranium from our properties using in-situ
recovery mining, which is suitable for extraction of certain types of uranium
deposits. This process requires in-situ recovery mining equipment and trained
personnel. Competition and unforeseen limited sources of supplies in the
industry could result in occasional spot shortages of supplies, and certain
equipment such as drilling rigs and other equipment that we might need to
conduct exploration and, if warranted, development. We will attempt to locate
additional products, equipment and materials as needed. If we cannot find the
products and equipment we need, we will have to suspend our exploration and, if
warranted, development plans until we do find the products and equipment we
need.

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We face risks related to exploration and development, if
warranted, on our properties.

Our level of profitability, if any, in future years will depend
to a great degree on uranium prices and whether any of our exploration stage
properties can be brought into production. The exploration for and development
of mineral deposits involves significant risks. It is impossible to ensure that
the current and future exploration programs and/or feasibility studies on our
existing properties will establish reserves. Whether a uranium ore body will be
commercially viable depends on a number of factors, including, but not limited
to: the particular attributes of the deposit, such as size, grade and proximity
to infrastructure; uranium prices, which cannot be predicted and which have been
highly volatile in the past; mining, processing and transportation costs;
perceived levels of political risk and the willingness of lenders and investors
to provide project financing; labor costs and possible labor strikes; and
governmental regulations, including, without limitation, regulations relating to
prices, taxes, royalties, land tenure, land use, importing and exporting
materials, foreign exchange, environmental protection, employment, worker
safety, transportation, and reclamation and closure obligations.

We are subject to the risks normally encountered in the mining
industry, such as:

- the discovery of unusual or unexpected geological formations;
- accidental fires, floods, earthquakes, volcanic eruptions, and other
  natural disasters;
- unplanned power outages and water shortages;
- controlling water and other similar mining hazards;
- operating labor disruptions and labor disputes;
- the ability to obtain suitable or adequate machinery, equipment, or labor;
- our liability for pollution or other hazards; and
- other known and unknown risks involved in the conduct of exploration, the
  operation of mines and the market for uranium.

The development of mineral properties is affected by many
factors, including, but not limited to: the cost of operations, variations in
the grade of ore, fluctuations in metal markets, costs of extraction and
processing equipment, availability of equipment and labor, labor costs and
possible labor strikes, and government regulations, including without
limitation, regulations relating to taxes, royalties, allowable production,
importing and exporting of minerals, foreign exchange, employment, worker
safety, transportation, and environmental protection. Depending on the price of
uranium, we may determine that it is impractical to commence, or, if commenced,
continue, commercial production. Such a decision would negatively affect our
profits and may affect the value of your investment.

Because we may be unable to meet property payment
obligations or be able to acquire or maintain necessary mining licenses, we may
lose interests in our exploration properties.

The agreements pursuant to which we acquired our interests in
some of our properties provide that we must make a series of cash payments over
certain time periods, expend certain minimum amounts on the exploration of the
properties or contribute our share of ongoing expenditures. If we fail to make
such payments or expenditures in a timely fashion, we may lose our interest in
those properties. Further, even if we do complete exploration activities, we may
not be able to obtain the necessary licenses to conduct mining operations on the
properties, and thus would realize no benefit from our exploration activities on
the properties.

Our mineral properties may be subject to defects in
title.

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We own, lease, or have under option, unpatented and patented
mining claims, mineral claims or concessions and fee mineral leases which
constitute our property holdings. The ownership and validity or title of
unpatented mining claims and concessions are often uncertain and may be
contested. We also may not have, or may not be able to obtain, all necessary
surface rights to develop a property. We have not conducted title research in
relation to many of our mining claims and concessions to ensure clean title. We cannot guarantee that title to our properties will not be
challenged. Title insurance is generally not available for mineral properties
and our ability to ensure that we have obtained secure claim to individual
mineral properties or mining concessions may be severely constrained. Our
mineral properties may be subject to prior unregistered agreements, transfers or
claims, and title may be affected by, among other things, undetected defects. We
may incur significant costs related to defending the title to our properties. A
successful claim contesting our title to a property may cause us to compensate
other persons or perhaps reduce our interest in the affected property or lose
our rights to explore and, if warranted, develop that property. This could
result in us not being compensated for our prior expenditures relating to the
property. Also, in any such case, the investigation and resolution of title
issues would divert our management's time from ongoing exploration and
development programs.

Because we may be unable to secure access rights, we may
be unable to explore and/or develop our properties.

Our mineral rights do not always include rights of access or
use of the surface of lands. We require agreements with land owners for these
rights which may be difficult to obtain and which may require cash payments.

Because mineral exploration and development activities
are inherently risky, we may be exposed to environmental liabilities. If such an
event were to occur it may result in a loss of your investment.

The business of mineral exploration and extraction involves a
high degree of risk. Few properties that are explored are ultimately developed
into production. At present, none of our properties has a known body of
commercial ore. Unusual or unexpected formations, formation pressures, fires,
power outages, labor disruptions, flooding, explosions and the inability to
obtain suitable or adequate machinery, equipment or labor are other risks
involved in extraction operations and the conduct of exploration programs.
Although we intend to carry liability insurance with respect to our mineral
exploration operations, we may become subject to liability for damage to life
and property, environmental damage or hazards against which we cannot insure or
against which we may elect not to insure. Previous mining operations may have
caused environmental damage at certain of our properties. It may be difficult or
impossible to assess the extent to which such damage was caused by us or by the
activities of previous operators, in which case, any indemnities and exemptions
from liability may be ineffective. If any of our properties is found to have
commercial quantities of ore, we would be subject to additional risks respecting
any development and production activities. Most exploration projects do not
result in the discovery of commercially mineable deposits of ore.

Because we have not put a mineral deposit into production
before, we may have to acquire outside expertise. If we are unable to acquire
such expertise we may be unable to put our properties into production and you
may lose your investment.

The Board of Directors includes six individuals, two of whom
are in operational management, that have technical or financial experience in
placing mining projects into production. However, we will be dependent upon
using the services of appropriately experienced personnel or entering into
agreements with other companies that can provide such expertise. There can be no
assurance that we will have available to us the necessary expertise when and if
we place mineral deposit properties into production.

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Acquisitions and integration issues may expose us to
additional risks which could have a material adverse effect on our business.

Our business strategy includes making targeted acquisitions.
Any acquisition that we make may be of a significant size, may change the scale
of our business and operations, and may expose us to new geographic, political,
operating, financial and geological risks. The success of our acquisition
activities depends on our ability to identify suitable acquisition candidates,
negotiate acceptable terms for any such acquisition and integrate the acquired
operations successfully with our own. Any acquisitions would be accompanied by
risks which could have a material adverse effect on our business. For example,
there may be significant decreases in commodity prices after we have committed
to complete the transaction and have established the purchase price or exchange
ratio; a material ore body may prove to be below expectations; we may have
difficulty integrating and assimilating the operations and personnel of any
acquired companies, realizing anticipated synergies and maximizing the financial
and strategic position of the combined enterprise and maintaining uniform
standards, policies and controls across the organization; the integration of the
acquired business or assets may disrupt our ongoing business and our
relationships with employees, customers, suppliers and contractors; and the
acquired business or assets may have unknown liabilities which may be
significant. If we choose to use equity securities as consideration for such an
acquisition, existing stockholders may suffer dilution. Alternatively, we may
choose to finance any such acquisition with our existing resources. There can be
no assurance that we would be successful in overcoming these risks or any other
problems encountered in connection with such acquisitions.

The mining industry is highly competitive.

The business of the acquisition, exploration, and development
of uranium properties is intensely competitive. We will be required to compete,
in the future, directly with other corporations that may have better access to
potential uranium resources, more developed infrastructure, more available
capital, and better access to necessary financing, and more knowledgeable and
available employees than us. We may encounter competition in acquiring uranium
properties, hiring mining professionals, obtaining mining resources, such as
manpower, drill rigs, and other mining equipment. Such competitors could outbid
us for potential projects or produce minerals at lower costs. Increased
competition could also affect our ability to attract necessary capital funding
or acquire suitable producing properties or prospects for uranium exploration in
the future.

Risks Related to Corporate and Financial Structure

We are dependent upon key management employees.

The success of our operations will depend upon numerous
factors, many of which are beyond our control, including (i) our ability to
enter into strategic alliances through a combination of one or more joint
ventures, mergers or acquisition transactions; and (ii) our ability to attract
and retain additional key personnel in sales, marketing, technical support and
finance. We currently depend upon our management employees to seek out and form
strategic alliances and find and retain additional employees. There can be no
assurance of success with any or all of these factors on which our operations
will depend. We have relied and may continue to rely, upon consultants and
others for operating expertise.

Our growth will require new personnel, which we will be
required to recruit, hire, train and retain.

We expect significant growth in the number of our employees if
we determine that a mine at any of our properties is commercially feasible, we
are able to raise sufficient funding and we elect to develop the property. This
growth will place substantial demands on us and our management. Our ability to
assimilate new personnel will be critical to our performance. We will be
required to recruit additional personnel and to train, motivate and manage employees. We will also have to
adopt and implement new systems in all aspects of our operations. This will be
particularly critical in the event we decide not to use contract miners at any
of our properties. We have no assurance that we will be able to recruit the
personnel required to execute our programs or to manage these changes
successfully.

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New legislation, including the Sarbanes-Oxley Act of
2002, may make it difficult for us to retain or attract officers and directors.

We may be unable to attract and retain qualified officers,
directors and members of board committees required to provide for our effective
management as a result of the recent and currently proposed changes in the rules
and regulations which govern publicly-held companies. Sarbanes-Oxley Act of 2002
has resulted in a series of rules and regulations by the Securities and Exchange
Commission that increased responsibilities and liabilities of directors and
executive officers. The increased personal risk associated with these changes
may deter qualified individuals from accepting these roles.

Stock market price and volume volatility.

The market for our common shares may be highly volatile for reasons both related to the performance of the Company or events pertaining to the industry (i.e. mineral price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry. In particular, market demand for uranium fluctuates from one business cycle to the next, resulting in change of demand for the mineral and an attendant change in the price for the mineral. Our common shares can be expected to be subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding our business, and changes in estimates and evaluations by securities analysts or other events or factors. In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small-capitalization companies, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values, or prospects of such companies. For these reasons, the price of our common shares can also be expected to be subject to volatility resulting from purely market forces over which we will have no control.

Dilution through the granting of options.

Because the success of the Company is highly dependent upon its
respective employees, we may in the future grant to some or all of our key
employees, directors and consultants, options to purchase our common shares as
non-cash incentives. Those options may be granted at exercise prices equal to
market prices at times when the public market is depressed. To the extent that
significant numbers of such options may be granted and exercised, the interests
of the other stockholders of the Company may be diluted.

The issuance of additional shares of common stock may
negatively impact the trading price of our shares of common stock.

We have issued equity securities in the past and may continue
to issue equity securities to finance our activities in the future, including to
finance future acquisitions, or as consideration for acquisitions of businesses
or assets. In addition, outstanding options and warrants to purchase shares of
common stock may be exercised, resulting in the issuance of additional shares of
common stock. The issuance by us of additional shares of common stock would
result in dilution to our stockholders, and even the perception that such an
issuance may occur could have a negative impact on the trading price of our
shares of common stock.

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You may lose your entire investment in our shares.

An investment in our common stock is highly speculative and may
result in the loss of your entire investment. Only investors who are experienced
investors in high risk investments and who can afford to lose their entire
investment should consider an investment in us.

In the event that your investment in our shares is for
the purpose of deriving dividend income or in expectation of an increase in
market price of our shares from the declaration and payment of dividends, your
investment may be compromised because we do not intend to pay dividends in the
foreseeable future.

We have never paid a dividend to our shareholders, and we
intend to retain our cash for the continued development of our business. We do
not intend to pay cash dividends on our common stock in the foreseeable future.
As a result, your return on investment will be solely determined by your ability
to sell your shares in a secondary market.

We depend on our ability to successfully access the
capital and financial markets. Any inability to access the capital or financial
markets may limit our ability to execute our business plan or pursue investments
that we may rely on for future growth.

We rely on access to long-term capital markets as a source of
liquidity for capital and operating requirements. If we are not able to access
financial markets at competitive rates, our ability to implement our business
plan and strategy may be affected. Certain market disruptions may increase our
cost of borrowing or affect our ability to access one or more financial markets.
Such market disruptions could result from:

- adverse economic conditions;
- adverse general capital market conditions;
- poor performance and health of the uranium industry in general;
- bankruptcy or financial distress of unrelated uranium companies or
  marketers;
- significant decrease in the demand for uranium;
- adverse regulatory actions that affect our exploration and development
  plans; and
- terrorist attacks on our potential customers.

Recent market events and conditions, including
disruptions in the U.S. and international credit markets and other financial
systems and the deterioration of the U.S. and global economic conditions, could,
among other things, impede access to capital or increase the cost of capital,
which would have an adverse effect on our ability to fund our working capital
and other capital requirements.

In 2007 and 2008, the U.S. credit markets experienced serious
disruption due to a deterioration in residential property values, defaults and
delinquencies in the residential mortgage market (particularly, subprime and
non-prime mortgages) and a decline in the credit quality of mortgage backed
securities. These problems led to a slow-down in residential housing market
transactions, declining housing prices, delinquencies in non-mortgage consumer
credit and a general decline in consumer confidence. These negative conditions
peaked in 2008, causing a loss of confidence in the broader U.S. and global
credit and financial markets and resulting in the collapse of, and government
intervention in, major banks, financial institutions and insurers and creating a
climate of greater volatility, less liquidity, widening of credit spreads, a
lack of price transparency, increased credit losses and tighter credit
conditions. Various actions by the U.S. and foreign governments are targeting
general conditions of the capital markets, financial instruments, banks,
investment banks, insurers and other financial institutions to stabilize and
improve the broader credit and stock markets. The general economic
indicators, including low consumer sentiment, high unemployment and low economic
growth indicate continued economic uncertainty.

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These unprecedented disruptions in the current credit and
financial markets have had a significant material adverse impact on a number of
financial institutions and have limited access to capital and credit for many
companies. These disruptions could, among other things, make it more difficult
for us to obtain, or increase our cost of obtaining, capital and financing for
our operations. Our access to additional capital may not be available on terms
acceptable to us or at all.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We do not have any unresolved comments from the SEC staff
regarding our periodic or current reports under the Securities Exchange Act of
1934, as amended.

ITEM 2.DESCRIPTION OF PROPERTIES

Overview

We are an exploration stage company engaged in the acquisition,
  exploration and, if warranted, development of uranium properties. Uranium
  used in this context refers to U3O8. U3O8,
  also called yellowcake, is triuranium octoxide produced from uranium ore and
  is the most actively traded uranium-related commodity.

We are principally focused on the exploration of our properties
in the Powder River Basin area of Wyoming. We are exploring these properties
with the objective of assessing their viability for commercial ISR uranium
mining. ISR is a low cost mining process that uses a leaching solution to
extract uranium from underground ore bodies.

Concurrent with our exploration activities, we continue to
progress permitting activities associated with our plan to construct a
commercial ISR project, which we refer to as our Nichols Ranch ISR Project. We
have applied for mine operating permits on two of our properties in the Powder
River Basin area of Wyoming, known as the Nichols Ranch and Hank properties,
that we feel have the potential, based on data in our possession, of being
developed into commercial ISR uranium mines. These permits, if received, should
allow us to produce uranium yellowcake concentrate, which can be sold directly
to utilities for fuel used in nuclear electrical generating facilities. Because
of the long lead times for environmental permitting of mining operations in
North America, we filed applications to the State of Wyoming (WDEQ) and the US
Nuclear Regulatory Commission (NRC) for permits for the Nichols Ranch Uranium
ISR Project in December 2007. The status of our permitting activities is
described more fully below under the heading Nichols Ranch ISR Project.

Our Powder River Basin properties include:

- our 100% owned properties, which totaled 29,251 acres as of December 31,
  2009;
- properties of Arkose Mining Venture, in which we hold an 81% interest,
  which totaled 88,367 acres as of December 31, 2009; and
- additional properties that we have acquired in the Powder River Basin area totaling 1,694 acres as of December 31, 2009.

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We completed a substantial exploration program on our Powder
River Basin properties in 2009. A total of 565 drill holes and 15 wells were
completed in 2009, representing approximately 377,642 feet of drilling at an
average depth of 668 feet per hole. Uranium trend and delineation holes were
drilled utilizing three drill rigs and two electric log probing units.

The objective of the 2009 drilling program was to find
previously unknown or little-known uranium mineralization trends and to
delineate known trends, which would provide data for permitting and eventual
production operations in favorably identified areas. During the 2009 drilling
program, approximately 11.5 miles of uranium roll front trends were
investigated. Approximately 3 miles of the 11.5 miles of trends had favorable
uranium mineralization. Uranium mineralization ranged from less than
0.01% eU3O8to 1.18% eU3O8.
Approximately 36% of the 565 holes drilled during 2009 met or exceeded our
minimum cut-off grade of 0.03% eU3O8
(eU3O8is equivalent natural uranium, U3O8, as
determined from down-hole radiometric probing rather than by chemical analysis).

Our 2009 drilling program lead to the preparation and filing of three National Instrument 43-101 Technical Reports, which are described in more detail below under  2009 Drilling Program.

In anticipation of receiving all the approvals necessary to mine in 2010, we have commenced a marketing program for conditional sales of uranium from our Nichols Ranch ISR Project. In July of 2009, we entered into a sales agreement with Exelon Generation Company, LLC for the sale of uranium over a five-year period. In August of 2009 we entered into a second contract for the sale of uranium to another U.S. utility, also over a five-year period.

Our plan of operations during 2010 is to:

- continue with our exploration of our Powder River Basin Properties as
  detailed below under 2010 Exploration Program;
- continue with our permitting, mine planning and design efforts in
  connection with the Nichols Ranch ISR Project, as detailed below under
  Nichols Ranch ISR Project; and
- once permitting has been achieved, to commence construction of our Nichols
Ranch ISR Project.

We have sufficient financing to continue our exploration and
permitting activities and design and early stage construction activities over
the next twelve months. However, we will require additional financing in order
to complete construction of our Nichols Ranch ISR Project. There is no assurance
that we will be able to obtain the necessary financing to complete construction
or carry out mining activities, if mining is warranted.

All of our projects are at the exploration stage and there can
be no assurance that a commercially viable mineral deposit, or reserve, exists
on any of our properties until appropriate exploratory work is done and a
comprehensive evaluation based on such work concludes legal and economic
feasibility. Further exploration will be required before a final evaluation as
to the economic, technical and legal feasibility of mining of any of our
properties is determined. There is no assurance that further exploration will
result in a final evaluation that a commercially viable mineral deposit exists
on any of our mineral properties.

Operations

Our exploration program in the Wyoming Powder River Basin is directed by Mr. Kurtis Brown, Senior Vice-President Exploration and is supervised by Mr. George Hartman, our Executive Vice-President and Chief Operating Officer. We engage contractors to carry out our exploration programs under Mr. Browns supervision. Contractors that we plan to engage include project geologists, drilling companies and geophysical logging companies, each according to the specific exploration program on each property.

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Our management will make determinations as to whether to
proceed with the additional exploration of our Wyoming Powder River Basin
mineral properties based on the results of the preliminary exploration that we
undertake. In completing these determinations, we will make an assessment as to
whether the results of the exploration are sufficiently positive for us to
proceed with more advanced exploration.

Wyoming Properties

We have several properties in two distinct geographical areas
known as the Great Divide and Powder River Basins of Wyoming as shown in the map
below:

Uranerz Energy Corporation  Wyoming Property Locations  March
2010



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Source: Uranerz Energy Corporation 2010

Legend: A  Powder River Basin Properties 
B  Great
Divide Basin Properties

We plan to maintain, explore and, if warranted, develop our
properties in the Powder River Basin area of Wyoming.

At this time we do not have immediate plans for further
exploration or development activities on our Great Divide Basin properties,
which are not considered material at present.

Powder River Basin Properties

As of December 31, 2009, our Powder River Basin properties
include both our 100% owned properties and those properties included within the
Arkose Mining Venture. These principal properties comprise in total
approximately 117,618 acres and consist of a combination of federal mining
claims, state mineral leases and private fee mineral leases. We have also
acquired additional properties in the Powder River Basin area which total
approximately 1,694 acres and are discussed below under Other Powder River
Basin Projects. A map showing the location of our 100% owned Powder River Basin
and Arkose Mining Venture properties is provided below:

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Uranerz Energy Corporation  Powder River Basin  March
2010



Source: Uranerz Energy Corporation 2010

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An additional map showing the location of our properties within
the general Powder Basin property area and our key property units is presented
below:

Uranerz Energy Corporation  Powder River Basin  Property Units 
March 2010



Source: Uranerz Energy Corporation 2010

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Ownership Interests

Our ownership interests in the properties within the Powder
River Basin are summarized as follows:

100% Owned Properties

Our 100% owned properties are comprised of unpatented lode
mining claims, state leases and fee (private) mineral leases, as summarized as
follows:

|                              | Ownership Interest | Number of Claims/ | Acreage      
|----------------------------- | ------------------ | ----------------- | -------------
|Property Composition          | (1)                | Leases            | (Approximate)
|                              |                    |                   |              
|Unpatented Lode Mining Claims | 100%               | 1,076             | 21,520 acres 
|                              |                    |                   |              
|State Leases                  | 100%               | 7                 | 6,480 acres  
|                              |                    |                   |              
|Fee (private) Mineral Leases  | 100%               | 5                 | 1,251 acres  
|                              |                    |                   |              
|Total                         |                    |                   | 29,251 acres 

(1)      Subject to royalties, as discussed further
below.

These 100% owned properties in the Powder River Basin include
the following core property units:

|Property          | No. Claims | Approximate Acreage
|----------------- | ---------- | -------------------
|Doughstick        | 22         | 440                
|Collins Draw      | 38         | 760                
|North Rolling Pin | 65         | 1300               
|Hank              | 66         | 1320               
|Nichols Ranch     | 36         | 720                
|C-Line            | 40         | 800                
|Willow Creek      | 11         | 220                
|West North-Butte  | 145        | 2900               
|East Nichols      | 44         | 880                
|North Nichols     | 107        | 2140               
|TOTAL             | 574        | 11,480             

We continue to look for more prospective lands in the Powder
River Basin and as a result may locate, purchase or lease additional unpatented
lode mining claims; and/or purchase or lease additional fee mineral (private)
lands during the next twelve months, however there is no assurance any
additional properties will be acquired.

Arkose Mining Venture

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The Arkose Mining Venture properties are comprised of
unpatented mineral lode claims, state leases and fee (private) mineral leases,
as summarized as follows:

|Property                       | Ownership Interest | Number of Claims/ | Acreage      
|------------------------------ | ------------------ | ----------------- | -------------
|Composition                    | (1)                | Leases            | (Approximate)
|                               |                    |                   |              
|Unpatented Mineral Lode Claims | 81%                | 4,109             | 67,221 acres 
|                               |                    |                   |              
|State Leases                   | 81%                | 3                 | 2,080 acres  
|                               |                    |                   |              
|Fee (private) Mineral Leases   | 81%                | 69                | 19,066 acres 
|                               |                    |                   |              
|Total                          |                    |                   | 88,367 acres 

(1)        Subject to
royalties, as discussed further below.

We completed the acquisition of an undivided 81% interest in
the Arkose Mining Venture mineral properties on January 15, 2008. This
acquisition was completed pursuant to a purchase and sale agreement with mining
venture previously announced on September 19, 2007 between Uranerz, and NAMMCO,
Steven C. Kirkwood, Robert W. Kirkwood and Stephen L. Payne (collectively, the
NAMMCO Sellers). The total purchase price that we paid to acquire this 81%
interest in the Arkose Mining Venture included cash of $5,757,000 and 5,750,000
shares of our common stock issued to the NAMMCO Sellers. The NAMMCO Sellers
entered into a voting agreement with us effective January 15, 2008 pursuant to
which each of such sellers granted to our management or our appointed agent the
right to vote fifty percent (50%) of the outstanding and currently held shares
issued as consideration for the acquisition, whether held directly or indirectly
by such sellers, for a period of three (3) years following the date of the
issuance.

In connection with our acquisition of an 81% interest in the Arkose Mining Venture, we entered into a venture agreement dated as of January 15, 2008 (the Venture Agreement) with United Nuclear, LLC (United Nuclear), a limited liability company wholly owned by the NAMMCO Sellers and their designee under the purchase and sale agreement. Under the Venture Agreement, we agreed that United Nuclear will hold (and contribute to) its nineteen percent (19%) working interest in the Arkose Mining Venture, and we will operate and be the manager of the Arkose Mining Venture under the name Arkose Mining Venture. We and United Nuclear agreed to contribute funds to programs and budgets approved under the Arkose Mining Venture in accordance with our respective interests in the Venture.

The Venture Agreement provides that we, as manager, will have management and control over operations carried out by the Venture. We are obligated to present proposed programs and budgets to the management committee of the Venture on an annual basis. The proposed programs and budgets may include exploration programs, pre-feasibility studies, feasibility studies, development, mining, and expansion or modification of operation plans. Proposed programs and budgets are reviewed by the management committee appointed under the Venture which includes at least two members from each company appointed by Uranerz and United Nuclear respectively. Unless otherwise provided in the Venture Agreement, the vote of the participant with a participating interest greater than 50% will determine decisions of the management committee. A participant may elect to participate in an approved program and budget either (i) in proportion to the participants respective interest in the Venture, or (ii) not at all. In the event that a participant elects not to participate in a program and budget, then its participating interest in the Venture Agreement is subject to recalculation in accordance with the Venture Agreement to reflect the decision not to participate.

23

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This overview of the Venture Agreement does not provide a full discussion of all terms and conditions of the Venture Agreement. Investors are encouraged to read the entire copy of the Venture Agreement that was filed with the SEC as an exhibit to our Current Report on Form 8-K filed on January 22, 2008.

The Arkose Mining Venture includes the following property units
on which we have conducted exploration:

- South Doughstick
- Cedar Canyon
- East Buck
- South Collins Draw
- Sand Rock
- Little Butte
- House Creek
- Beecher Draw
- Lone Bull

Other Powder River Basin Projects

Through a combination of claim staking, purchasing, and
leasing, we also have acquired interests in several projects that lie within the
Powder River Basin but outside of the project areas discussed above. These
properties include the Verna Ann, Niles Ranch, North Reno Creek, and South Reno
Creek projects which cover approximately 1,694 acres. In general, these projects
are located in sandstone basins of Tertiary age with known uranium
mineralization. However, due to our focused approach we have not yet initiated
exploration work on these projects. Additional leasing in the North Reno Creek
Project has prompted us to look into acquiring past exploration and development
data for this area in an attempt to support a future National Instrument 43-101
report. If warranted, environmental base line work may begin thereafter with the
goal of submitting an environmental permit application for ISR facilities as
soon as possible.

Forfeiture of certain Powder River Basin and Great Divide
Basin interests

During August 2009, we decided to forfeit our interests in
certain mining claims in the Powder River Basin and the Great Divide which we
determined, based on the review, analysis and recommendations of our geological
staff, did not merit further exploration and accordingly were no longer of
strategic interest or value to the Company. The claims, which were forfeited,
effective September 1, 2009, when the annual renewal fee would have become due,
were comprised of: 285 claims in which we had held a 100% interest in the
Streeter, Collins Draw, East Nichols, North Nichols, Eagle and Cyclone Rim
project areas and 132 claims in the Little Butte and South Collins project
areas, in which we held an 81% interest through the Arkose Mining Venture. We
will continue to review our property portfolio and may decide to forfeit other
interests in the future if we determine that they are no longer of strategic
interest.

NI 43-101 Technical Reports

We have obtained technical reports on the following material
properties:

|Name of Report                                                               | Authors of Technical Report                                            | Date of Report  
|---------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------
|                                                                             |                                                                        |                 
|Technical Report, Doughstick Project,
      Campbell County, Wyoming, U.S.A. | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601 | January 26, 2010

24

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|Technical Report, South Doughstick
      Property, Campbell and Johnson Counties, Wyoming, U.S.A.                       | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601                                                           | February 25, 2010
      (Amended) October 12, 2009
|----------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------
|                                                                                                                        |                                                                                                                                  |                                                   
|Technical Report, Nichols Ranch
      Property, Johnson and Campbell 
    Counties, Wyoming, U.S.A.                     | Kurtis J. Brown, P.G., Senior
      Vice President, Uranerz Energy Corporation, 1701 East E
      Street, Casper Wyoming 82605 | June 5, 2009                                      
|                                                                                                                        |                                                                                                                                  |                                                   
|Technical Report - West North- Butte
      Satellite Properties, Campbell County, Wyoming,                              | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601                                                           | December 9, 2008                                  
|U.S.A.                                                                                                                  |                                                                                                                                  |                                                   
|                                                                                                                        | Don R. Woody, P.G, Woody
      Enterprises, 9005 Sypes Canyon Road, Bozeman, Montana 58715                                       |                                                   
|                                                                                                                        |                                                                                                                                  |                                                   
|Preliminary Assessment  Nichols Ranch
      Uranium In-Situ Recovery Project, Powder River Basin, Wyoming,
      U.S.A | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601                                                           | July 25, 2008                                     
|                                                                                                                        |                                                                                                                                  |                                                   
|Technical Report  The Hank Unit
      Property, Campbell Country, Wyoming, U.S.A.                                      | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601                                                           | May 1, 2008                                       
|                                                                                                                        |                                                                                                                                  |                                                   
|                                                                                                                        | Don R. Woody, P.G, Woody
      Enterprises, 9005 Sypes 
      Canyon Road, Bozeman, 
      Montana 58715                         |                                                   
|                                                                                                                        |                                                                                                                                  |                                                   
|Technical Report on the Arkose Mining
      Venture Project, Campbell and Johnson Counties, Wyoming,                    | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601                                                           | February 27, 2008                                 
|U.S.A.                                                                                                                  |                                                                                                                                  |                                                   
|                                                                                                                        | Don R. Woody, P.G, Woody
      Enterprises, 9005 Sypes Canyon Road, Bozeman, Montana 58715                                       |                                                   
|                                                                                                                        |                                                                                                                                  |                                                   
|Nichols Ranch Uranium Project, Campbell
      and Johnson Counties, Wyoming, U.S.A.                                     | Douglas Beahm, PE, PG
      Andrew Anderson, PE, PG BRS Inc.                                                                     | October 26, 2007                                  

|Cautionary Note to United States Investors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|As a company listed on the TSX, we are required by
      Canadian law to provide disclosure in accordance with Canadian Securities
      Administrators National Instrument 43-101  Standards of Disclosure for
      Mineral Projects (NI 43-101). This required disclosure includes the
      preparation and filing of technical reports on our material mineral
      properties with Canadian securities commissions under NI 43-101. These
      technical reports are furnished by us to the U.S. Securities and Exchange
      Commission (the "SEC") on Form 8-K in order to satisfy our public
      disclosure obligations under SEC Regulation FD and are not filed
      with the SEC. U.S. reporting requirements for disclosure of mineral
      properties, including disclosure required in this Annual Report on Form
      10-K, are governed by the Industry Guide 7 ("SEC Guide 7") of the SEC. The
      standards of disclosure of mineral properties under NI 43-101 and SEC
      Guide 7 are substantially different. All mineral resources disclosed in
      our NI 43-101 technical reports referenced herein have been estimated in
      accordance with the definition standards on mineral resources and mineral
      reserves of the Canadian Institute of Mining, Metallurgy and Petroleum
      referred to in National Instrument 43-101, commonly referred to as "NI
      43-101". The terms "mineral reserve", "proven mineral reserve" and
      "probable mineral reserve" are Canadian mining terms as defined in
      accordance with NI 43-101. These definitions differ from the definitions
      in SEC Guide 7. Under SEC Guide 7 standards, a "final" or "bankable"
      feasibility study is required to report reserves, the three-year
      historical average price is used in any reserve or cash flow analysis to
      designate reserves and the primary environmental analysis or report must
be filed with the appropriate governmental authority.

25

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|The NI
      43-101 technical reports referenced herein use the terms "mineral
      resource," "measured mineral resource," "indicated mineral resource" and
      "inferred mineral resource". We advise investors that these terms are
      defined in and required to be disclosed by NI 43-101; however, these terms
      are not defined terms under SEC Guide 7 and are normally not permitted to
      be used in reports and registration statements filed with the SEC.
      Investors are cautioned not to assume that any part or all of mineral
      deposits in these categories will ever be converted into SEC Guide 7
      reserves. "Inferred mineral resources" have a great amount of uncertainty
      as to their existence, and great uncertainty as to their economic and
      legal feasibility. It cannot be assumed that all or any part of an
      inferred mineral resource will ever be upgraded to a higher category.
      Under Canadian rules, estimates of inferred mineral resources may not form
      the basis of feasibility or pre-feasibility studies, except in rare cases.
      Investors are cautioned not to assume that all or any part of any mineral
      resource exists or is economically or legally mineable. Disclosure of
      "contained pounds" in a resource is permitted disclosure under Canadian
      regulations; however, the SEC normally only permits issuers to report
      mineralization that does not constitute "reserves" by SEC standards as
in-place tonnage and grade without reference to unit measures.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following information regarding our ownership interests in
our material properties, their geology and their exploration history is taken
from these technical reports.

Hank Unit and Nichols Ranch Unit

Within the Nichols Ranch Unit we have 36 unpatented lode mining
claims, two fee surface and mineral leases, and one surface use agreement. There
is an overriding royalty interest in favor of Excalibur Industries on all
federal unpatented lode mining claims that were acquired by us from Excalibur
Industries. Many of the unpatented lode mining claims located at the Hank Unit
and at the Nichols Ranch Unit have an associated gross royalty payable to
Excalibur Industries of 6 percent when the spot price of uranium is less than
$45.00 per pound and of 8 percent if the uranium spot price is $45.00 per pound
or higher. In addition, there is a portion of the Nichols Ranch Unit that
includes private (fee) mineral that is subject to the above Excalibur Industries
royalty, plus an additional royalty payable to the fee mineral owner under the
fee leases (equaling a 12 percent or 16 percent royalty depending upon the spot
price of uranium).

Within the Hank Unit, we have 66 unpatented lode mining claims,
two fee surface and mineral leases, and one surface use agreement. The Hank Unit
permit boundary encompasses approximately 2,250 acres. Within the permit
boundary, we have the right to mine approximately 1,393 acres of mineral rights.
Of the 66 unpatented lode mining claims comprising the Hank Unit, 56 of the
claims have a royalty interest burden, payable to Excalibur Industries, of six
or eight percent depending on the selling price of uranium. This royalty
interest is based on uranium produced from these claims.

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West North-Butte Satellite Properties

The West North-Butte property covers approximately 2,360 acres
of land and is comprised of 145 unpatented lode mining claims and one surface
use agreement, of which 6 unpatented lode mining claims are subject to a royalty
interest burden, payable to Excalibur Industries, of six or eight percent
depending on the price of uranium.

The east portion of the West North-Butte property covers approximately 325 acres of land and is comprised of 17 unpatented lode mining claims and one surface use agreement. None of the claims in  this property are subject to a royalty.

The Willow Creek property covers approximately 220 acres of
land and is comprised of 11 unpatented lode mining claims and one surface use
agreement, all of which unpatented lode mining claims are subject to a royalty
interest burden, payable to Excalibur Industries, of six or eight percent
depending on the price of uranium.

Arkose Mining Venture

The Arkose Mining Venture properties consist of unpatented lode mining claims, fee mineral leases, and state mineral leases. The land surface consists of private, federal and state lands. There are 4,109 unpatented lode mining claims included in the Arkose Property which comprise 67,221 acres and 69 fee mineral leases and 3 state leases included in the Arkose Property which comprise 21,146 acres. All of the unpatented lode mining claims are owned by us subject to the beneficial interests of the participants in the Arkose Mining Venture.

Of the 4,109 unpatented lode mining claims, 1,218 unpatented
lode mining claims have an overriding royalty interest burden of 0.25%. This
overriding royalty interest is based on production of uranium on these
claims.

The title of the Arkose Mining Venture to the leased property
included in the Arkose Property is a leasehold interest subject to the various
terms as set forth in the applicable leases (the Arkose Leases). The Arkose
Leases are mineral leases only and the Arkose Mining Venture obtained surface
use agreements with the various surface owners of said lands prior to commencing
any activities. The majority of the Arkose Leases (other than the three state
leases, which are paid annually) are paid up for either five or ten years. The
five-year paid-up leases have an option to extend for a second five-year term,
and for so long thereafter as the property under the lease is in production. The
Arkose Leases only cover uranium and other fissionable minerals. Commingling of
ores from adjacent lands is allowable under the fee mineral leases.

Royalties under the fee mineral leases are variable and can
range from a flat 4% on uranium production to a sliding scale of 2-10% with
different intermediate break points with the 10% rate applying to sales prices
of $100 per pound of uranium and greater.

Unpatented Lode Mining Claims

Our unpatented lode mining claims, including those subject to
the Arkose Mining Venture, are located on minerals owned by the federal
government and open to location, with the surface being owned either by the
federal government or private individuals. In addition, the unpatented lode
mining claims are recorded in the appropriate county and filed with the state
office of the Bureau of Land Management (the BLM).

The unpatented lode claims do not have an expiration date.
However, affidavits must be filed annually with the BLM and respective county
recorders offices in order to maintain the claims validity. All of the unpatented lode claims have annual filing requirements
($140 per claim) with the BLM, to be paid on or before September 1 of each year.

27

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Most of the above-mentioned unpatented lode claims are located
on Stock Raising Homestead land where the U.S. government has issued a patent
for the surface to an individual and reserved the minerals to the U.S.
government subject to the location rights by claimants as set forth in the 1872
Mining Law.

Mining Leases

Our leasehold interests within our 100% owned properties are
subject to the various terms as set forth in the applicable leases. The state
leases and leases on fee mineral lands usually have annual payments, royalty
obligations, and the term of the leases vary, but for the most part can be
extended by production. The fee surface and mineral leases apply only to uranium
and other fissionable minerals and typically have a 10-year term with the right
to extend the leases with production. Commingling of production from adjacent
lands is allowable under the fee mineral leases.

Surface Rights

The Powder River Basin area has surface rights under applicable
laws that allow for exploration disturbance, road construction and facility
siting. The claimant must first notify the surface owner of its intention to
locate unpatented lode mining claims on the owners surface and then try and
reach an agreement with the surface owner to pay for damages caused by the
claimants operations. If an agreement cannot be reached, the claimant may post
a bond with the Bureau of Land Management to cover the amount of the damages
caused by the claimants operations.

We have negotiated surface use agreements with various surface
owners covering a majority of our project areas. We are currently negotiating
with various surface owners to enter into surface agreements covering the
balance of the unpatented lode claims not already covered by surface use
agreements. The surface use agreements typically provide for reimbursement to
the surface owner of actual damages resulting from our operations.

Taxes and Fees

We will be required to pay severance tax and ad valorem tax to
the State of Wyoming, in addition to various maintenance, land impact and access
fees as well as other consideration to surface holders.

Location and Access; Topography, Elevation and Vegetation;
  Climate

The Powder River Basin area is located approximately 50 miles
southwest of Gillette, Wyoming and 100 miles northeast of Casper, Wyoming. The
area is accessed from State Highway 50 from the east or State Highway 387 from
the south, and various internal gravel surface county and private roads. Casper
is on Interstate 25, approximately one hour by air from either Denver, Colorado
or Salt Lake City, Utah.

Our Powder River Basin properties are located in portions of
Campbell and Johnson Counties, Wyoming, U.S.A., and are approximately 60 air
miles northeast of Casper, Wyoming. The Powder River Basin properties cover
lands in various sections in the Townships 41 to 44 North and Ranges 74 to 78
West.

The center of our properties (centered east-west) is
approximately eight miles west of the junction of Wyoming Highways 50 and 387.
The properties are accessible via two-wheel drive on existing county and/or
private gravel and dirt roads. Accessibility for drilling at this time appears
acceptable with the exception of very wet or snowy ground surface conditions.
Road development and improvements may be required at a later time in order to
support future development, if warranted, of well fields and processing
facilities.

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The Powder River Basin properties are located within the
Wyoming Basin physiographic province in the central portion of the Powder River
Basin, within the Pumpkin Buttes Mining District. The Pumpkin Buttes are a
series of small buttes rising several hundred feet above the surrounding plains.
Portions of the Powder River Basin properties are located east, west and south
of these buttes. The cap rocks on top of the buttes are erosional remnants of
the Tertiary White River Formation that is believed to have overlain the
majority of the Powder River Basin. The volcanic tuffs in the White River
Formation have been cited as the source of uranium in this basin.

The area in which the Powder River Basin properties is located is a low lying plain, and elevations range from approximately 4,390 feet (1,440 meters) in the northwest to approximately 5,450 feet (1,790 meters) in the southeast. Historically and currently the land is used for livestock and wildlife grazing. Vegetation is characteristically sagebrush grassland with some pines on elevated terrain and some deciduous trees within drainages.

The climate is semi-arid and receives an annual precipitation
of approximately 9.4 inches, the most falling in the form of late autumnal to
early spring snows. The summer months are usually hot, dry and clear except for
infrequent heavy rains. Cold, wind and snow/blizzards can make winter
exploration work in this area difficult but not impossible. The weather may
limit the time periods for capital construction but should not have any
significant adverse impacts on the operation of an ISR facility.

Geology

Our Powder River Basin properties encompass approximately
119,312 acres, and potential target mineralized zones are expected to occur
throughout the properties. The potential target mineralization within the Powder
River Basin properties is believed to be alteration-reduction trends hosted in
the Eocene age channel sands that lie at depths of approximately 300 to 1,100
feet from the surface. Roll front deposits of uranium mineralized material are
anticipated to occur within these properties. An alteration reduction trend is a
natural chemical boundary trend line in a sandstone aquifer where reduced
(non-oxidized) sand is in contact with altered (oxidized) sand. Uranium
mineralization may be found along the trend line.

Our Powder River Basin properties contain alteration-reduction
trends hosted in Eocene age channel sands. Alteration-reduction trends in the
Pumpkin Buttes Mining District are typically composed of multiple, stacked roll
front deposits that often contain associated uranium mineralization. A stacked
role front is a type of uranium occurrence found in thick sandstone where a
number of mineralization trends are stacked on top of each other. Uranium
mineralization within and adjacent to the Powder River Basin properties are
found in the Eocene Wasatch Formation (Wasatch). The Wasatch is a fluvial
deposit composed of arkosic sandstones that are typically 25% or more feldspar
grains and indicates a source rock where chemical weathering was not extreme and
the sediments have not been transported far. A fluvial deposit is a deposit of
uranium mineralization found in sandstones that originated from sediments laid
down by streams and rivers. The arkosic sandstone is a type of sandstone that
contains a high percentage of feldspar grains. The medium grain size and
relatively good sorting of this sediment implies water transportation, probably
in a meandering river/stream system. The Wasatch formation is interlaid with
sandstones, claystones, siltstones, carbonaceous shale, and thin coal seams that
overlie the Paleocene Fort Union Formation, another fluvial sedimentary
unit.

Exploration History

Our Powder River Basin properties are located within the Pumpkin Buttes Mining District which was the first commercial uranium production district in Wyoming. Uranium was first discovered in the Pumpkin Buttes in 1951. Intermittent production from some 55 small mines through 1967 produced 36,737 tons of ore containing 208,143 pounds of uranium. This early mining focused on shallow oxidized ores exploited by small open pit mines. The ore was generally transported to the Atomic Energy Commission buying station in Edgemont, South Dakota. Modern mining in the district has focused on deeper reduced ores. Uranium Ones Christensen Ranch and Irigaray ISR uranium mining areas and processing facilities are located within the Pumpkin Buttes Mining District, approximately 10 and 16 air miles, respectively, from the Arkose Property. These mines have completed successful ISR mining and aquifer restoration in the Wasatch formation.

29

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These properties were originally part of a large exploration
area encompassing Townships 33 through 50 North of Ranges 69 through 79 West, on
the 6th principal meridian. In 1966, Mountain West Mines Inc. (MWM, now
Excalibur Industries) began a successful drilling exploration program in a
portion of this area. In 1967, MWM entered into an agreement with
Cleveland-Cliffs Iron Company (CCI) for further exploration and option if
suitable resources were found. CCI exercised its option in 1976 with plans to
begin underground mining operations in the vicinity of North Butte. Changing
economic conditions and the development of ISR mining technology reportedly
ended much of CCIs interest in the area. By the late 1980s they began selling
select properties or allowing them to revert back to the federal government.

In addition to CCI, other uranium exploration companies during the last forty years have controlled property either within or near our Powder River Basin properties. These included Kerr McGee, Conoco, Texaco, American Nuclear, Tennessee Valley Authority and Uranerz U.S.A., Inc. Uranium One NC (via subsidiary Cogema Resources Inc. (Cogema) and Power Resources Inc. (a subsidiary of Cameco Corporation) have retained portions of their original land positions in the area. The mining claims and leases originally controlled by most of these companies were let go over the years due to market conditions. These property abandonments continued into 2004.

As a result of this history of exploration and our own
exploration efforts, there is available to us for our exploration of the Powder
River Basin properties published and unpublished mineral trend projections,
mineral resource summaries and historic and current mineral resource reports
developed by us or other operators from these properties or adjacent mineral
properties, as applicable. In addition, there are publicly available drill
results from approximately 1,250 coal bed methane (CBM) exploration/production
wells in the region of the Arkose Mining Venture properties, which are discussed
further below.

Nichols Ranch ISR  Project

Between 1968 and 1980 CCI drilled 117 holes and installed 3
water wells on the Nichols Ranch property. Texas Eastern Nuclear Inc. in 1985
completed limited drilling and exploration on the property and in early 1990s
Rio Algom Co. also completed limited drilling in the area.

Hank Unit

Between 1968 and 1980, CCI drilled 197 holes within the Hank
Unit. In 1985, Texas Eastern Nuclear, Inc. completed limited drilling and
exploration on the property (approximately 28 borings). In the early 1990s, Kerr
McGee Corporation and Rio Algom Mining Corporation also completed limited
drilling in the area.

We drilled 61 exploratory holes and seven wells within the Hank
Unit during 2006 and 2007 and eight additional wells in 2009. We drilled 257
exploration holes, including three core holes, and three water wells at Nichols
Ranch during 2006 and 2007 and 25 exploration holes and seven wells in 2009.

West North- Butte Satellite Properties

Between 1968 and 1985, CCI drilled approximately 380
exploratory holes with the satellite properties. From 1983 to 1985, Texas
Eastern Nuclear drilled approximately 12 exploratory holes in the satellite
properties and from approximately 1990 to 1992 Rio Algom Mining Corporation
drilled approximately 5 exploratory holes. In 2006, we completed an acquisition of the
satellite properties, and in 2007 and 2008, drilled approximately 127
exploratory holes.

30

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Arkose Mining Venture

It is estimated that over 4,000 historic uranium exploration holes may have been drilled within the Arkose Property. This exploration was conducted by numerous exploration companies from the 1960s through the 1990s. Although this historic exploration data are known to exist, obtaining information on all but a handful (less than 50) of specific drill hole data, such as gamma, resistivity, and lithology logs, was not possible. Coal bed methane (CBM) exploration/production wells were drilled by numerous companies for development of CBM resources in the area. A total of approximately 1,250 CBM exploration/production wells have been drilled on or immediately adjacent to the Arkose Property. Most of this drilling was completed from 1,200 to 2,000 feet deep and is on-going. CBM exploration/production wells and their associated gamma logs are all drilled and logged through the uranium mineralization-bearing sand horizons. Utilizing the available uranium drill data and the CBM drill data base, we had a technical report prepared in February 2008 to independently address the geology and potential uranium mineralization within our mineral holdings on the Arkose Mining Venture. This technical report was prepared in accordance with Canadian National Instrument 43-101 requirements, as discussed above under NI 43-101 Technical Reports.

The NAMMCO Sellers commenced acquiring rights to the properties
comprising the Arkose Property in 2005, and continued to do so through 2006 and
2007. On January 15, 2008, we completed the acquisition of an undivided 81%
percent interest in the Arkose Property and formed the Arkose Mining Venture
with the vendors of these properties, the NAMMCO Sellers, as described in
greater detail above under Arkose Mining Venture.

Local Resources and Properties Infrastructure

Infrastructure at the site of the Powder River Basin properties
is dominantly related to local oil, gas, and CBM exploration and development.
Mineralized locations will affect future siting of well fields and processing
facilities. Generally, the proximity of the Powder River Basin properties to
paved roads will be beneficial with respect to transportation of equipment,
supplies, personnel and product to and from the properties. Power transmission
lines are located on or near parts of the Powder River Basin properties. Based
upon discussions with the local electrical service provider, overhead power is
currently committed but additional power for future projects can be made
available. Water is available from wells developed at planned facility locations
(potable) and water for in-situ recovery (ISR) operations, if necessary, will
come from the operation itself, i.e. the extracted groundwater. Therefore, the
basic infrastructure (power, water and transportation) required to support an
ISR mining operation is located within reasonable proximity of the Powder River
Basin properties.

Personnel required for exploration, construction and operation
at the Powder River Basin properties are expected to come from Gillette, Wright,
Buffalo and Casper, Wyoming.

Typical ISR mining operations also require a disposal well for
limited quantities of fluids that cannot be returned to the production aquifers.
Commonly, oil and gas wells within aquifers that have been or can be condemned
for public use, are utilized for such purposes. Oil and gas wells, both
abandoned and producing, are located in the immediate vicinity of the
properties.

Our Powder River Basin properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or mining equipment
located on any of our Wyoming mineral properties. There are no pre-existing
mineral processing facilities or related wastes on the property.

31

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Exploration Completed by Uranerz

2009 Drilling Program

During 2009 we were engaged in drilling exploration efforts on
both our 100% owned Powder River Basin properties and on the Arkose Mining
Venture Powder River Basin properties. The purpose of the 2009 drilling program
was to find previously unknown or little-known uranium mineralization trends and
to delineate known trends, which would provide data for permitting and eventual
production operations in favorably identified areas. During the 2009 drilling
program, approximately 11.5 miles of uranium roll front trends were
investigated. Approximately 3 miles of the 11.5 miles of trends had favorable
uranium mineralization. Uranium mineralization ranged from less than 0.01%
eU3O8 to 1.18%
eU3O8. Approximately 36% of the 565 holes drilled
during 2009 met or exceeded our minimum cut-off grade of 0.03%
eU3O8.

On our 100% owned properties, 51 delineation holes were drilled
on our Nichols Ranch, Doughstick and North Nichols Ranch properties. The purpose
of this drilling was primarily to prepare for the installation of baseline
monitor wells for our planned Nichols Ranch ISR production facility. A National
Instrument 43-101 report was completed on the Nichols Ranch property in June of
2009. It estimated indicated mineral resources of approximately 2,949,546
pounds of eU3O8 at an average grade of 0.114%.

Additional drilling was carried out on the Companys 100% owned
Doughstick properties, which lead to the preparation of a combined National
Instrument Report, as described above, in respect of this property as well as
Arkoses North Jane and Doughstick properties.

During 2009, on Arkose Mining Venture properties, a total of
514 holes were drilled. At Arkoses North Jane Property a total of 51 holes were
drilled with mineralization found in two horizons of the 100 sand. A combined
National Instrument 43-101 independent report in respect of the Companys 100%
owned Doughstick property and Arkoses North Jane and Doughstick properties was
prepared in respect of the 2009 drilling results from those properties and filed
in January of 2010. The report estimated, for all such properties, measured and
indicated mineral resources of approximately 967,883 pounds of
eU3O8 and inferred mineral resources of approximately
87,981 pounds.

At Arkoses South Doughstick property 104 delineation drill
holes were completed. Favorable mineralization led to the completion of an
independent National Instrument NI 43-101 technical report dated October 12,
2009 and subsequently amended on February 25, 2010. The amended report estimates
a measured and indicated mineral resource of approximately 2,287,250 pounds of
eU3O8 at an average grade of 0.121% and an inferred mineral resource of
approximately 189,305 pounds at an average grade of 0.096%.

2008 Exploration Program

In 2008 we were engaged in drilling exploration efforts on both
our 100% owned Powder River Basin properties, and on the Arkose Mining Venture
properties. During the 2008 drilling program, approximately 19 miles of uranium
roll front trends were investigated. Approximately 7 miles of the 19 miles of
trends had favorable uranium mineralization. Uranium mineralization ranged from
<0.01% eU3O8 to 2.65% eU3O8. A
cut-off grade of 0.03% eU3O8 was established for the
Uranerz and Arkose properties. Approximately 34.5% of the 933 holes drilled
during 2008 met or exceeded the minimum cutoff grade.

For the 2008 drilling season, March 6, 2008 through December 12, 2008, a total of 933 exploration and delineation holes were completed. The average depth per hole was 687 feet and a total of 640,578 feet was drilled. Breakout of the drilling was 165 holes on our 100% owned properties and 768 holes on Arkose Mining Venture properties.

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We determined based on the results of this drilling program to complete a NI 43-101 technical report on the South Doughstick property. We received this technical report in February of 2010.

During 2008 no new exploration work was undertaken in the
immediate Nichols Ranch proposed mine area.

In December 2008 we received an independent NI 43-101 technical
report for the nearby West North-Butte Satellite Properties. A copy of this
technical report was filed on SEDAR on December 11, 2008 and a copy furnished to
the SEC on December 11, 2008.

2006 and 2007 Exploration Programs

We drilled a total of 78 rotary drill holes on the Hank,
Nichols Ranch, and Doughstick projects during 2006, with 46 holes demonstrating
uranium mineralization.

During 2006 environmental permitting activities also continued at the Hank and Nichols Ranch projects with the completion of a total of five hydrogeologic test wells, and the drilling of six core holes. The core was submitted for laboratory testing to support radiation permitting requirements as well as to define resource disequilibrium attributes.

From February 19 to December 20, 2007, we drilled a total of 486 uranium trend delineation holes and eight hydrologic sampling wells on our 100%owned properties located in the central Powder River Basin, utilizing as many as three drill rigs and one electric log probing unit. This represents a total of approximately 300,000 feet of drilling with an average depth of 617 feet per hole.

A total of 214 delineation holes were drilled on Nichols Ranch
in 2007. In the final months of the 2007 drilling program, we focused our
exploration efforts on our West North-Butte, Collins Draw, Hank and Nichols
Ranch properties to facilitate sub-surface geologic mapping with cross sections
and to refine previous geologic models delineating known trends of uranium
mineralization.

2010 Exploration/ Development Program

For 2010, the Arkose Mining Venture plans to utilize two drill
rigs and one company electric logging unit. Supervision in the field would be
conducted by a Uranerz field geologist. The drilling is planned to concentrate
on exploration for uranium in the northeast targets of East Buck and Kermit
project areas and in the South Doughstick area.

The goal of the 2010 exploration plan is to continue uranium exploration momentum that began in 2008 and to demonstrate commitment to finding and developing uranium mineralization that is commercially profitable on the Arkose properties. The plan includes drilling a total of 400 holes with an aggregate footage of 280,000 feet. In 2009, the average hole depth was 681 feet. In 2010, the average hole depth is thought to be around 700 feet. Approximately 225 holes will be drilled in the East Buck project area where mineralization was found in 2008 but due to surface ownership access and/or mineral fee leasing issues, was not available until 2010. Another 125 holes will be drilled in the Kermit area immediately south of East Buck. In addition, 50 holes are planned for South Doughstick to follow-up on exploration to the south of the main mineralization on a subsidiary roll trend. Drilling is planned to begin in April 2010 and continue through October 2010 for about 7 months depending on cooperation from the weather.

During 2010, the Uranerz plan for the development of production and monitor wells at Nichols Ranch, Mining Unit 1 (MU1) will be undertaken. The plan includes a 5 month drilling program beginning upon issue of the mining permits and will require up to 6 contract drill rigs; existing company electric logging unit, cementing unit, backhoe; a cement mix truck, 2 cement storage silos; an air compressor for well development; a pump pulling unit; and contract or hire 6 new field personnel to conduct cementing and well equipment installation.

33

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It is estimated that one well pilot hole per two installed wells will be Drilled Not Completed (DNC) due to the irregular mineralization outline. These holes will be abandoned with cement using the company cementing unit.

The weld field installation includes drilling, casing, cementing, well development, pump, wire, drop pipe, O2 system, and a weather enclosure. After the wells have their completion zones finished a pump pulling unit will install the production/monitor pumps. A total of 270 wells are planned to be installed including 30 perimeter monitor wells, 132 injection wells, 108 production wells, and 120 DNCs. Approximately 50% of MU1 wells would be installed during 2010.

Nichols Ranch ISR Project

The mine plan for the Nichols Ranch ISR Uranium Project
includes a central processing facility at our Nichols Ranch property and a
satellite ion exchange facility at our Hank property. The ultimate production
level from these two properties is planned to be in the range of 600,000 to
800,000 pounds per year (as U3O8). The central processing
facility is planned for a licensed capacity of 2 million pounds per year of
uranium (as U3O8) and it is intended that it will process
uranium-bearing well-field solutions from Nichols Ranch, as well as
uranium-loaded resin transported from the Hank satellite facility, plus
uranium-loaded resin from any additional satellite deposits that may be
developed on our other Powder River Basin properties. We believe this
centralized design enhances the economics of our potential additional satellite
projects by maximizing production capacity while minimizing further capital
expenditures on processing facilities. The project is progressing through
detailed engineering and design with 95% of design work completed by end of
December 2009.

Preliminary Assessment

We obtained a preliminary assessment or scoping study of the
Nichols Ranch Uranium In-Situ Recovery Project (Project) in July 2008. The
preliminary assessment was prepared for us in accordance with the guidelines set
forth under NI 43-101 and the Standards and Guidelines of the Canadian Institute
of Mining, Metallurgy and Petroleum incorporated by reference therein for the
submission of technical reports on mining properties. The purpose of the
assessment was to perform a preliminary evaluation of the technical and economic
viability of the Project using the most current scientific, engineering and cost
information available. The preliminary assessment was prepared to support our
development and licensing strategy for our Nichols Ranch and Hank properties.
Investors are cautioned that this assessment was preliminary in nature and is
not based on capital and operating costs estimates that are sufficiently refined
to support a feasibility study evaluating the project.

The assessment analyzed the planned development of a commercial
  uranium ISR and processing operation. The evaluation uses available design information
  to develop capital and operating cost estimates for the proposed well fields,
  processing plants, infrastructure and associated facilities. Capital and operating
  cost estimates were provided in the preliminary assessment along with an economic
  analysis based on these costs and projected revenue from the recovery and sale
  of uranium (U3O8).

Location of the Nichols Ranch ISR Project

The Nichols Ranch ISR Project would be on the properties
comprising our Nichols Ranch ISR main unit and our Hank ISR satellite unit, as
illustrated below:

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Uranerz Energy Corporation  Nichols Ranch ISR Project Map  March
2010



Source: Uranerz Energy Corporation 2010

35

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Targeted Mineralization

The targeted mineralized zones for the Nichols Ranch Unit in
the A sand unit are 300 to 700 feet below the surface and occur in two long
narrow trends meeting at the nose. The nose is in the northwest corner of the
deposit where the two narrow trends meet to form the tip of the geochemical
front. The Hank Units two targeted mineralized zones in the F Sand unit range
from 200 to 600 feet below the ground surface depending on the topography and
changes in the formation elevation and stratigraphic horizon.

Mining Plan

In order to mine the uranium resources at the Project,
infrastructure, including four well fields, a central processing plant (the
Nichols Ranch CPP) and a satellite ion exchange (IX) plant (the Hank
Satellite Facility) are being designed and will need to be constructed. Well
fields are designated areas above the mineralized zone that are sized to achieve
the desired production goals. The piping/well system will inject water-leaching
solution into the mineralized zone and recover the uranium-enriched water after
it has flowed through the mineralization. The mineralized zone is the geological
sandstone unit where the recovery solutions are injected and recovered in an
in-situ recovery well field, and it is bounded between impermeable aquitards.
Production areas are the individual areas that will be mined in the well field.
The injection and recovery wells are completed in the mineralized zone intervals
of the production sand.

We anticipate the patterns for the injection and recovery wells
to follow the conventional five-spot pattern. Depending on the mineralized zone
shape, seven spot or line drive patterns may be used in some locations. A
typical five spot pattern contains four injections wells and one recovery well.
The dimensions of the pattern vary depending on the mineralized zone, but the
injection wells will likely be between 50 to 150 feet apart. In order to
effectively recover the uranium and also to complete the groundwater
restoration, the wells will be completed so that they can be used as either
injection or recovery wells. During mining operations, a slightly greater volume
of water will be recovered from the mineralized zone aquifer than injected in
order to create a cone of depression or a flow gradient towards the recovery
wells.

The Nichols Ranch Unit is anticipated to include the Nichols
Ranch CPP and two production areas, NR-1 and NR-2. As the productivity or
solution grade (uranium concentration in the lixiviant) of some patterns for
NR-1 decrease below the economic limit, replacement patterns from NR-2 will be
placed into operation in order to maintain the desired flow rate and solution
grade at the processing plant. Eventually, all the patterns in NR-1 will reach
their economic limit and all production flow in that area will cease. At that
time, all production flow will be coming from NR-2 and restoration activities
will commence at NR-1.

Each planned Nichols Ranch Unit production area includes a
number of injection wells, recovery wells, monitoring wells, header houses and
associated piping and power supply. Header houses will be located within the
well field and will distribute recovered fluids from recovery wells to trunk
lines, and injection fluids from the processing facility through the trunk lines
to injection wells. The planned Nichols Ranch Unit is anticipated to include the
following:

- 486 injection wells;
- 418 recovery wells;
- 95 monitoring wells; and
- 23 header houses.

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The planned Hank Unit will include a satellite IX facility and
two production areas, H-1 and H-2. The Hank Unit production areas will follow a
similar developmental, production, and restoration schedule as outlined above
for the Nichols Ranch Unit production areas.

Each planned Hank Unit production area includes a number of
injection wells, recovery wells, monitoring wells, header houses and associated
piping and power supply. The planned Hank Unit is anticipated to include the
following:

- 402 injection wells;
- 318 recovery wells;
- 80 monitoring wells; and
- 19 header houses.

Two Underground Injection Control (UIC) deep disposal wells
will also be required, one at the Nichols Ranch Unit and one at the Hank Unit,
for disposal of liquid wastes from well field bleed, processing plant operations
and restoration.

Mine Planning and Permitting

We are proceeding with mine planning for the Nichols Ranch
Uranium In-Situ Recovery Project that would initially be sited on the Hank and
Nichols Ranch properties. Because of the long lead times for environmental
permitting of mining operations in North America, in 2007 we filed applications
to the State of Wyoming (WDEQ) and the US Nuclear Regulatory Commission
(NRC) for permits to conduct ISR mining of uranium for the Nichols Ranch and
Hank properties. We engaged TRC based in Laramie, Wyoming as the prime
contractor for performing the several environmental baseline studies. We have
engaged Hydro Engineering from Casper, Wyoming to perform the necessary aquifer
pump tests, and prepare the hydrology section of the environmental permit
applications. We have to date completed environmental surveys such as
vegetation, soils, wildlife, cultural resources, radiation and water quality.
Reports were prepared and incorporated into our applications which were
submitted to the WDEQ and NRC in the last quarter of 2007. Approval of the
environmental permit applications is expected to allow us to proceed with
commercial advancement of the two properties leading to production of yellowcake
using the ISR method of uranium mining should it be determined that development
is warranted.

The primary regulatory approvals for an ISR uranium mine come from the WDEQ at the state level, and from the NRC at the federal level. The WDEQ issues a Permit to Mine, and the NRC issues a Source Material License. The NRC has completed a Generic Environmental Impact Statement applying to new uranium ISR production activities. Both the state and federal agencies look at all environmental aspects of a proposed ISR mine including reclamation of the land surface following mining operations, and restoration of impacted ground water. Work place safety and the safety of the public are also closely monitored by regulatory agencies. Posting of a reclamation bond by the mine operator with the regulatory agencies in an amount to cover the total estimated cost of reclamation by a third party is also a requirement of the law. The reclamation bond must be a "hard" bond which means it must be either cash, certificate of deposit, letter of credit or some other similar type of financial instrument.

In April 2008 the NRC deemed our application acceptable to advance to the detailed technical and environmental stage of review. In August 2008 the WDEQ deemed our application to build and operate an in-situ recovery mine complete and ready to move to the next stage of review. The next stage includes a detailed technical and environmental review of the application and public discussion. Concurrently, the NRC review of our application for a Source Material License is proceeding in a normal manner. Approval of the permit applications is expected to allow us to proceed with commercial advancement of the two properties leading to production of yellowcake using the ISR method of uranium mining.

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In March of 2009 we submitted our response to a Request for
Additional Information (RAI) which was received in the fall of 2008 following
the NRCs technical reviews. During 2009 we responded to a further RAI issued by
the NRC in respect of its environmental review.

In October of 2009 WDEQ - Air Quality Division approved and issued the air quality permit for our Nichols Ranch ISR Project in the form of a Permit to Construct the Project, including the Nichols Ranch Central Processing facility and the Hank Satellite Plant. This is the first operational permit for construction of the Project received by the Company.

In December of 2009 the NRC issued a draft Supplemental Environmental Impact Statement ("SEIS") for the Nichols Ranch ISR Project. The draft SEIS for the Nichols Ranch ISR Project was issued as a "Supplement to the Generic Environmental Impact Statement for In-Situ Leach Uranium Milling Facilities". The draft SEIS was open for public comment until March 3, 2010. On March 3, 2010 the U.S. Environmental Protection Agency (the “EPA”) submitted, in a letter to the NRC, a comment on the draft SEIS. In its comment letter the EPA raises certain concerns, the primary of which are that, in its view: (a) the draft SEIS does not sufficiently analyze water disposal alternatives or discuss waste management impacts ; and (b) the draft SEIS lacks sufficient information regarding air pollutants and the impact of emissions. The EPA requests a revised or supplemental SEIS.  Comment letters in response to the draft SEIS were not unexpected, however the impact of the EPA letter on our permitting application and how the NRC might respond to the letter is not yet known. It is possible that the letter or any other comments in response to the draft SEIS may delay our permit application or otherwise negatively impact or influence the outcome of our application.

During late 2008 and early 2009, leach amenability studies were performed on sample cores obtained from the Doughstick and South Doughstick properties. Standard ISR leach “bottle roll” tests were conducted on the samples by Energy Laboratories in Casper, Wyoming. The leach amenability studies intend to demonstrate that the uranium mineralization is capable of being leached using conventional ISR chemistry. The leach solution was prepared using sodium bicarbonate as the source of the carbonate complexing agent. Hydrogen peroxide was added as the uranium oxidizing agent. The study is an indication of the ore’s reaction rate and the potential uranium recovery. The test results showed the uranium recovery percentage for South Doughstick as 87.8%, and the uranium recovery percentage for Doughstick as 77.1%. The 88% and 77% results are greater than the 73% that Uranerz used in its Preliminary (Economic) Assessment of the Nichols Ranch ISR Project. Doughstick and South Doughstick properties are located approximately two miles south of Nichols Ranch.

We caution investors that we have not at this stage completed
any comprehensive feasibility studies on these properties demonstrating that
development of any of the properties is commercially warranted. Proceeding with
these advanced activities prior to completing detailed feasibility analysis adds
risk to our plan of operations and we may incur costs which might not otherwise
have been incurred.

Prior to the start of mining (the injection of lixiviant into
the ore body aquifer), we must have obtained all the necessary permits,
licenses, and approvals required by the Wyoming Department of Environmental
Quality  Land, Water and Air Divisions and the U.S. Nuclear Regulatory
Commission. The various state and federal permits and licenses that are needed
or have been obtained for the Project are summarized below:

Permits and Licenses for the Nichols Ranch ISR Project

|Permit, License, or Approval Name     | Agency   | Status                                                                                              
|------------------------------------- | -------- | ----------------------------------------------------------------------------------------------------
|                                      |          |                                                                                                     
|Source Material License               | NRC      | Submitted fourth quarter 2007                                                                       
|                                      |          |                                                                                                     
|Permit to Mine                        | WDEQ-LQD | Submitted fourth quarter 2007                                                                       
|                                      |          |                                                                                                     
|Permit to Appropriate Groundwater     | SEO      | Existing wells are approved,
      applications for new well permits will be filed prior to drilling
|                                      |          |                                                                                                     
|Well field Authorization (UIC Permit) | WDEQ-LQD | In preparation                                                                                      

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|Deep Disposal Well Permits                | WDEQ-WQD  | In preparation
|----------------------------------------- | --------- | --------------
|                                          |           |               
|WYPDES                                    | WDEQ- WQD | In preparation
|                                          |           |               
|11(e)2 Byproduct/Waste Disposal Agreement | N/A       | In preparation
|                                          |           |               
|Permit to Construct Septic Leach Field    | County    | In preparation
|                                          |           |               
|Air Quality Permit                        | WDEQ-AQD  | Obtained.     

|Notes: | NRC - Nuclear Regulatory
      Commission                                          
|------ | -----------------------------------------------------------------------------------
|       | WDEQ-LQD - Wyoming Department of
      Environmental Quality Land Quality Division 
|       | WDEQ-WQD - Wyoming Department of
      Environmental Quality Water Quality Division
|       | WDEQ-AQD - Wyoming Department of
      Environmental Quality Air Quality Division  
|       | WYPDES  Wyoming Pollution
      Discharge Elimination System                      
|       | SEO - State Engineer's Office                                                      

2010 Plan of Operations for Powder River Basin Properties

During 2010, we plan to:

- continue with our exploration of our Powder River Basin Properties as
  outlined above under 2010 Exploration Plan;
- continue with our permitting and mine planning efforts, including
  proceeding with environmental studies and engineering and design, in
  connection with the Nichols Ranch ISR Project, as outlined above under
  Nichols Ranch ISR Project; and
- once permitting has been achieved, to commence construction of our Nichols
Ranch ISR Project.

All of our projects are at the exploration stage and there can be no assurance that a commercially viable mineral deposit, or reserve, exists on any of our properties until appropriate exploratory work is done and a comprehensive evaluation based on such work concludes legal and economic feasibility. Further exploration will be required before a final evaluation as to the economic, technical and legal feasibility of mining of any of our properties is determined. There is no assurance that further exploration will result in a final evaluation that a commercially viable mineral deposit exists on any of our mineral properties. We anticipate that we will require additional financing in order to pursue full development of these projects. We have sufficient financing to continue exploration and development planning of our mineral claims but there is no assurance that we will be able to obtain the necessary financing to conduct mining activities, if warranted. Because of the long lead times for environmental permitting of mining operations in North America, we have collected environmental baseline data and filed the environmental permitting applications on two of our properties in the Powder River Basin area of Wyoming that we feel may have the potential, based on data in our possession, of being developed into commercial in-situ recovery uranium mines. However, we have not at this stage completed any comprehensive feasibility studies on these properties demonstrating that development of any of the properties is commercially warranted. Proceeding with these advanced activities prior to completing detailed feasibility analysis adds risk to our plan of operations and we may incur costs which might not otherwise have been incurred.

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Wyoming - Great Divide/Red Desert Properties

Our Great Divide Basin properties comprise the Cyclone Rim and
Eagle projects. The Cyclone Rim project consists of 23 federal mining claims.
The Eagle property consists of 28 federal mining claims and an adjacent 640 acre
Wyoming State Lease. Both projects are located in Sweetwater County,
Wyoming.

During 2006, we entered into an option agreement with Black
Range Minerals Limited (Black Range) on two of our exploration properties
located within the Red Desert area of southwest Wyoming. Black Range carried out
certain exploration activities on these properties during 2007 and 2008. During
2009, Black Range elected to cease further participation in the exploration and
development of these properties and to forfeit its rights under the option
agreement. Our Great Divide Basin properties are not actively under exploration
and are therefore not considered material properties. These will not be
considered a material property until more data and information on the project
can be obtained.

Saskatchewan  Cochrane River Property

Cochrane River-Ownership Interest

Our Cochrane River property extends to the northeast of the
northern portion of Wollaston Lake, in Northern Saskatchewan, Canada. Our
Cochrane River property originally consisted of two Mineral Prospecting Permits
(MPP 1237 and MPP 1238) with a combined total areal extent of 67,480 hectares
(166,747 acres) which the Company acquired from Ubex Capital Inc. Ubex Capital
Inc. is 100% owned by Dennis Higgs, one of our Directors. Ubex retains a royalty
of 2% on the properties.

Saskatchewan mineral dispositions including permits are administered by SIR on behalf of the Crown of Canada in accordance with The Mineral Disposition Regulations, 1986. The holder of a permit is granted the exclusive right to explore for minerals (though not to extract, recover or produce minerals except for testing and scientific purposes) within the permit outline. A permit is valid for a period of two years and may not be renewed. While in compliance with the requirements of the regulations, a permit holder is entitled to convert any portion of a permit to mineral claims which may be held indefinitely. The two-year life on the permits ended on January 31, 2007. In late January and early February, 2007, a total of seven claims were staked within the boundaries of MPP 1237 and 1238, for a total of 28,012 hectares. The new claims have been recorded with the Saskatchewan mine recorder office in La Ronge. The staked area covered the most interesting area of interest as interpreted from the exploration programs conducted by Triex, as described below. A claim holder may subsequently convert his claim into a mineral lease which allows for commercial extraction of minerals.

Cochrane River -Present Condition of the Property and
Proposed Exploration Program

There is presently no road access to the Cochrane River
property.

During late 2005, we signed an agreement to joint venture our Cochrane River property with Triex Minerals Corporation. Triex completed detailed helicopter-borne geophysical surveys, follow-up ground exploration programs, an extensive lake sediment survey, ground-based resistively surveys, a lake sediment sample program, a pole-dipole array D.C. resistively survey, property-scale geological mapping of outcrops, and systematic geochemical sampling of boulders and glacial till. Total cumulative expenditures by Triex on the Cochrane River property over approximately two and one-half years were Cdn$1.23 million.

During 2008, our Cochrane River Saskatchewan Joint Venture was
terminated with Triex forfeiting its right to earn an interest in the project.
The properties are currently in good standing; two (2) claims expired on January
30, 2010 and the remaining five (5) claims will expire on January 30, 2011 unless
further expenditures are incurred. We will continue to evaluate options for
these properties, which include possible arrangements with other potential joint venture
partners, further exploration by ourselves, or disposition.

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The Saskatchewan properties are presently not considered
material properties and will not be considered material properties until more
data and information can be obtained.

Texas

In 2007 we completed an initial leasing program of
approximately 7,200 acres in the State of Texas. Based on geologic reports and
more than 90 historic drill holes, these 7,200 acres are believed to cover a
northeast-southwest uranium mineralization trend.

Geologic study has been completed on the historic data we
obtained from third parties. Plans for field work on these properties have been
deferred due to our focus on our Wyoming properties. Our Texas project is
presently not considered a material property and will not be considered a
material property until more data and information on the project can be
obtained.

2010 Property Expenditures

Our cash expenditures in 2010, excluding capital assets and
major property acquisitions, are estimated to be $14 million, as follows:

|Wyoming                                 |   |           |  |   |            | 
|--------------------------------------- | - | --------- |  | - | ---------- | 
|Exploration                             |   |           |  |   |            | 
|Wholly owned properties                | $ | 140,000   |  |   |            | 
|Arkose properties                       | $ | 2,350,000 |  | $ | 2,490,000  | 
|Environmental                           |   |           |  | $ | 690,000    | 
|Development                             |   |           |  | $ | 3,760,000  | 
|Land                                    |   |           |  | $ | 560,000    | 
|Production and well planning            |   |           |  | $ | 1,400,000  | 
|General and Administrative expenditures |   |           |  | $ | 5,100,000  | 
|                                        |   |           |  |   |            | 
|Total                                   |   |           |  | $ | 14,000,000 | 

These estimates are subject to change.

ITEM 3.LEGAL PROCEEDINGS

We are not aware of any material pending or threatened
litigation or of any proceedings known to be contemplated by governmental
authorities which are, or would be, likely to have a material adverse effect
upon us or our operations, taken as a whole. There are no material proceedings
pursuant to which any of our directors, officers or affiliates or any owner of
record or beneficial owner of more than 5% of our securities or any associate of
any such director, officer or security holder is a party adverse to us or has a
material interest adverse to us.

ITEM 3A. EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth certain information with respect
to our current executive officers and key employees. The ages of the executive
officers and key employees are shown as of December 31, 2009.

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|Name              | Current Office with Company                                           | Principal Occupation                                                                         | Director/Officer
      Since | Age
|----------------- | --------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ---------------------------- | ---
|                  |                                                                       |                                                                                              |                              |    
|Glenn Catchpole   | President and Chief
      Executive Officer; Director                 | President and
      Chief Executive Officer, Uranerz Energy Corporation                      | March 1, 2005                | 66 
|                  |                                                                       |                                                                                              |                              |    
|George Hartman    | Executive Vice- President
      and Chief Operating Officer; Director | Executive
      Vice-President and Chief Operating Officer, Uranerz Energy
      Corporation | May 9, 2005                  | 70 
|                  |                                                                       |                                                                                              |                              |    
|Dennis Higgs      | Chairman                                                              | Chairman Uranerz
      Energy Corporation                                                    | May 26, 1999                 | 51 
|                  |                                                                       |                                                                                              |                              |    
|Benjamin Leboe    | Chief Financial Officer                                               | Chief Financial
      Officer of Uranerz Energy Corporation                                  | May 23, 2006                 | 64 
|                  |                                                                       |                                                                                              |                              |    
|Kurtis Brown      | Senior Vice-President,
      Exploration                              | Senior
      Vice-President, Exploration of Uranerz Energy Corporation                       | March 8, 2007                | 59 
|                  |                                                                       |                                                                                              |                              |    
|Douglas Hirschman | Vice President, Lands                                                 | Vice President,
      Lands of Uranerz Energy Corporation                                    | December 6, 2007             | 57 

The following is a description of the business background of
the executive officers of Uranerz Energy Corporation.

Mr. Glenn Catchpole was appointed to the Board and
became our President on March 1, 2005. Mr. Catchpole is a licensed engineer who
holds an M.S. in civil engineering from Colorado State University. He has been
active in the uranium solution mining industry since 1976, holding various
positions including well field engineer, project manager, general manager and
managing director of several uranium solution mining operations.

In 1988 Mr. Catchpole joined Uranerz U.S.A., Inc. and Uranerz
Exploration and Mining Ltd. and became Director of Regulatory Affairs,
Environmental Engineering and Solution Mining. Mr. Catchpoles responsibilities
included the monitoring and oversight of the environmental and regulatory
aspects of two large uranium mines in Canada and the operational aspects of one
uranium solution mine in the United States. In 1996 Mr. Catchpole was appointed
General Manager and Managing Director of the Inkai uranium solution mining
project located in the Republic of Kazakhstan (Central Asia). In 1998 Cameco
Corporation acquired Uranerz U.S.A. Inc., and Mr. Catchpole continued his post
with the Inkai project. Mr. Catchpole spent six years taking the Inkai project
from acquisition through feasibility study, joint venture formulation,
government licensing, environmental permitting, design, construction and first
phase start-up.

Following his departure from Cameco in 2002, Mr. Catchpole has
been an independent consulting engineer providing project management to the oil
and gas, mining, and construction industries from 2002 until joining our company
in March 2005.

Mr. George Hartman was appointed to the Board of Directors and the role of Vice-President, Mining on May 9, 2005 and subsequently appointed Executive Vice-President and Chief Operating Officer. He has thirty-seven years experience in developing green field projects into mining production companies including both metals and industrial mineral projects. He has an M. S. degree in Mineral Economics (Colorado School of Mines) and a B. S. in Chemistry (University of Denver). Four process patents have been granted in his name. His experience includes thirteen years managing several in-situ recovery uranium mines from green field exploration sites through commercial production.

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For the past fourteen years Mr. Hartman was General Manager for
Fort Cady Minerals Corporation where he had complete responsibility for solution
mining and process development, permitting, design, procurement, construction,
production and property management. Property management included federal mining
claims and private leases for a large deposit of borate mineral. He managed the
project from test stage through construction and operation of a demonstration
production facility. He was also involved with product marketing.

From 1982 to 1989 Mr. Hartman was General Manager, In Situ Leach Projects, for Uranerz USA. During this period he managed the interests of all in-situ uranium projects which Uranerz USA owned including Ruth, Crow Butte, and North Butte. Under his management, Uranerz USA served as the contract operator for the successful test solution mining of the Christensen Ranch uranium property now owned by Uranium One. He was on the Uranerz USA acquisition team that studied potential uranium and precious and base metal properties in Nebraska, Colorado, Texas, New Mexico, Utah, California and Wyoming.

Prior to joining Uranerz USA, Mr. Hartman was president of Ogle
Petroleum Inc. from 1979 to 1982 where he was in overall operating charge of
this uranium production company that joint ventured with Duke Power on a
commercial solution mine in Wyoming. He was responsible for managing the project
from green field exploration through commercial production (shipped filtered
yellowcake to the converter). Mr. Hartman personally designed the processing
plant facilities.

Also, previous to his work with Uranerz USA, Mr. Hartman was the Texas Mines Manager for Wyoming Mineral Corporation (Westinghouse) from 1976 to 1979, where he was responsible for the management of two production in-situ uranium mines with ion exchange processing plants in Bruni, and Three Rivers, Texas (shipped dried yellowcake to the converter).

Mr. Dennis Higgs is a member of the board of directors. Mr. Higgs was appointed to the Board of Directors as President and Chief Executive Officer on May 26, 1999, and resigned as President and Chief Executive Officer on March 1, 2005. Mr. Higgs became Chairman of our Board of Directors on February 1, 2006.

Mr. Higgs has been involved in the financial and venture capital markets for over twenty-five years, raising several millions of dollars in the United States, Canada and Europe. He founded his first junior exploration company in 1983 and took it public through an initial public offering in 1984. Since then, Mr. Higgs has been involved in the founding, financing and initial public listing of several companies.

In July 1990, Mr. Higgs established Senate Capital Group Inc.,
a private venture capital company which provides management consulting and
investor relations services. At present, Mr. Higgs also serves as a director of
Miranda Gold Corp., a Canadian public gold exploration company, which he founded
in May 1993.

Mr. Benjamin Leboe was appointed as the Companys Chief
Financial Officer on May 23, 2006 and acted as our Corporate Secretary from
October, 2006 to December, 2007 and from January 2009 to July 2009. Mr. Leboe
was a Senior Consultant, management consulting, of the Business Development Bank
of Canada from January 2005 to February 2006. Previously, from 1994 to 2004, Mr.
Leboe was a senior financial officer and executive in public companies based in
Vancouver and Montreal.

Mr. Leboe has been the Principal of Independent Management Consultants of British Columbia from 1990 to date. Concurrently, Mr. Leboe was previously Vice-President and Chief Financial Officer of VECW Industries Ltd. from 1990 to 1993, and a partner of KPMG Consulting from 1978 to 1990. Mr. Leboe received his bachelor of commerce degree from the University of British Columbia. Mr. Leboe is a Chartered Accountant and a Certified Management Consultant in the Province of British Columbia.

43

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Mr. Kurtis Brown, a thirty-five year veteran of the mining industry, was appointed our Senior Vice-President, Exploration in March 2007. Mr. Brown was Manager, Health and Safety for a large oil and gas company for the five years prior to joining Uranerz. He has previously assisted with the start up of the Christensen Ranch ISR commercial uranium mine now owned by Uranium One. Mr. Brown is a professional geologist.

Mr. Douglas Hirschman was appointed our Vice-President, Lands in December 2007. From January 2006 to June 2007 Mr. Hirschman was Manager of Lands, International Newmont Gold Corporation. He was an independent Consulting Landman from 2002 through 2005 and, as a graduate of the University of Wyoming, has over thirty years of experience in the mineral exploration industry.

Arrangements between Officers and Directors

To our knowledge, there is no arrangement or understanding
between any of our executive officers and any other person, including directors,
pursuant to which the officer was selected to serve as an officer.

Family Relationships

None of our executive officers are related by blood, marriage, or adoption to any other director or executive officer.

Legal Proceedings

We are not aware of any material legal proceedings to which any
of our executive officers or any associate of any of our executive officers is a
party adverse to us or any of our subsidiaries or has a material interest
adverse to us or any of our subsidiaries.

We are not aware of any of our executive officers being
involved in any legal proceedings in the past ten years relating to any matters
in bankruptcy, insolvency, criminal proceedings (other than traffic and other
minor offenses) or being subject to any of the items set forth under Item 401 of
Regulation S-K.

PART II

ITEM 4.MARKET FOR THE REGISTRANTS COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

Market Information

Our common stock began trading on the NYSE Amex Equities
exchange (formerly, the American Stock Exchange) on August 10, 2006 under the
symbol URZ, and previously, since May 6, 2004, on the Financial Industry
Regulatory Authoritys Over the Counter Bulletin Board (OTCBB) under the
symbol URNZ, formerly known as CVTU. Our common stock also trades, since
August 2007, on the Toronto Stock Exchange under the symbol URZ and on the
Frankfurt Exchange under the symbol U9E.

The following table shows the high and low sales price or bid
  price for our common shares for the calendar quarters indicated, as reported
  by the NYSE Amex Equities, www.nyse.com.

|Period         | High      |  | Low      
|-------------- | --------- |  | ---------
|               |           |  |          
|2009           |           |  |          
|               |           |  |          
|Fourth Quarter | $    2.39 |  | $    1.20
|               |           |  |          
|Third Quarter  | $    2.50 |  | $    1.32
|               |           |  |          
|Second Quarter | $    2.21 |  | $    0.58
|               |           |  |          
|First Quarter  | $    1.10 |  | $    0.57

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|Period         | High      |  | Low      
|-------------- | --------- |  | ---------
|               |           |  |          
|2008           |           |  |          
|               |           |  |          
|Fourth Quarter | $    1.45 |  | $    0.40
|               |           |  |          
|Third Quarter  | $    3.40 |  | $    1.10
|               |           |  |          
|Second Quarter | $    3.70 |  | $    1.98
|               |           |  |          
|First Quarter  | $    3.28 |  | $    2.11

As of March 1, 2010, the closing bid quotation for our common
stock was $1.93 per share as quoted by the NYSE Amex Equities.

As of March 1, 2010, we had 64,194,887 shares of common stock
issued and outstanding, held by approximately 7,000 shareholders. Many shares
are registered through intermediaries, making the precise number of shareholders
difficult to obtain.

Dividend Policy

We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any further determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent on the financial condition, operating results, capital requirements and other factors that our Board deems relevant. We have never declared a dividend.

There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:

1.           We
would not be able to pay our debts as they become due in the usual course of
business; or

2.           Our
total assets would be less than the sum of our total liabilities plus the amount
that would be needed to satisfy the rights of shareholders who have preferential
rights superior to those receiving the distribution.

We have never paid cash dividends on our capital stock. We
currently intend to retain any profits we earn to finance the growth and
development of our business. We do not anticipate paying any cash dividends in
the foreseeable future.

Repurchase of Securities

During 2009, neither the Company nor any affiliate of the
Company repurchased common shares of the Company registered under Section 12 of
the Securities Exchange Act of 1934, as amended.

Equity Compensation Plan Information

As at December 31, 2009, we had one equity compensation plan
under which our common shares have been authorized for issuance to our officers,
directors, employees and consultants, namely our 2005 Stock Option Plan. Our
2005 Stock Option Plan has been approved by our shareholders.

The following summary information is presented for our 2005
Stock Option Plan as of December 31, 2009.

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|                                                                       | Number of Securities to be
      Issued Upon Exercise of Outstanding Options | Weighted Average
      Exercise Price of Outstanding Options | Number of Securities Remaining
      Available for Future Issuance Under Equity
      Compensation Plans
|---------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------
|                                                                       |                                                                              |                                                              |                                                                                                         
|Plan Category                                                          | (a)                                                                          | (b)                                                          | (c)                                                                                                     
|                                                                       |                                                                              |                                                              |                                                                                                         
|Equity Compensation       Plans Approved By
      Security Holders     | 5,949,700                                                                    | $1.88                                                        | 3,129,860                                                                                               
|                                                                       |                                                                              |                                                              |                                                                                                         
|Equity Compensation       Plans Not Approved
      By Security Holders | Not Applicable                                                               | Not Applicable                                               | Not Applicable                                                                                          

2005 Stock Option Plan Information

The following is a summary of important Stock Option Plan
provisions. It is not a comprehensive discussion of all of the terms and
conditions of the Stock Option Plan. The information provided below may be
modified or altered by some provisions in the Stock Option Plan. Readers are
advised to review the full text of the Stock Option Plan to fully understand all
terms and conditions of the Stock Option Plan.

Purpose

The purpose of the Stock Option Plan is to advance the best
interests of the Company by providing additional incentive to those persons who
have a substantial responsibility for its management, affairs, and growth by
increasing their proprietary interest in the success of the Company, thereby
encouraging them to maintain their relationships with the Company. Further, the
availability and offering of Stock Options under the Plan supports and increases
the Companys ability to attract, engage and retain individuals of exceptional
talent upon whom, in large measure, the sustained progress growth and
profitability of the Company for the shareholders depends.

Persons Eligible

Any employee, director, general partner, officer, attorney,
accountant, consultant or advisor providing services to the Company or any
parent, affiliate, or subsidiary of the Company is eligible to be designated a
participant in the Stock Option Plan. However, stock option grants may only be
granted to full- or part-time employees, officers, or directors of the Company
or one of its subsidiaries.

Administration

The Companys Compensation Committee administers the Stock
Option Plan, or such other committee as the Board may assign administrative
responsibility in the best interests of the Company. The administering committee (the Committee) has the power to: (i)
designate Stock Option Plan participants; (ii) grant stock options; (iii)
establish rules and regulations for the administration of the Stock Option Plan;
(iv) determine the amount, price, type and timing of each stock option grant;
(v) cancel any stock option awarded under the Stock Option Plan, under certain
circumstances; (vi) correct defects in the Plan or in any granted stock option;
and (vii) make any other determination or take any other action that the
Committee deems necessary or desirable to the administration of the Stock Option
Plan.

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Shares Available under the Stock Option Plan

The total number of shares of the Company available for grants of stock options under the Stock Option Plan shall be 10,000,000 Common Shares, subject to adjustment as herein provided, which shares may be either authorized but unissued or reacquired Common Shares of the Company. If a stock option or portion thereof shall expire or terminate for any reason without having been exercised in full, the unpurchased shares covered by such nonqualified stock option shall be available for future grants of stock options under the Stock Option Plan. Shares issuable upon exercise of stock options have been registered under the U.S. Securities Act of 1933, as amended, pursuant to the Companys Registration Statement on Form S-8, filed with the Securities and Exchange Commission on November 21, 2005.

Terms and Conditions of Stock Options

Stock options may be granted to any person who is performing or
who has been engaged to perform services of special importance to management in
the operation, development and growth of the Company. As of June 11, 2008 the
option price of stock options is set at the weighted average market price for
the five days preceding the grant. All stock options granted under the Stock
Option Plan must be granted within ten years of the date the plan was adopted
and all granted stock options must be exercised within ten years of the date of
grant. The Committee may grant stock options which vest in installment periods
and may modify such periods to accelerate vesting. Stock options are evidenced
by a form stock option agreement.

Exercise of Stock Options

The exercise of vested stock options is made upon written
notice to the Company of intent to exercise and payment of the exercise price.
The exercise price may be paid (i) in cash, cashiers check, certified check,
bank draft or money order, or (ii) at the discretion of the Committee, by
delivery of fully paid non-assessable common shares of the Company, valued at
the fair market value for such shares, determined by the average of the high and
low sales price of the Companys common shares on the date of exercise.

Transfer of Stock Options

Except by will, the laws of descent and distribution, or with
the written consent of the Committee, no right or interest in any stock option
granted under the Stock Option Plan is assignable or transferable, and no right
or interest of any optionee is liable for, or subject to, any lien, obligation
or liability of the optionee. Upon petition to, and thereafter with the written
consent of the Committee, an optionee may assign or transfer all or a portion of
the optionees rights and interest in any stock option granted under the Stock
Option Plan. Stock options are exercisable during the optionees lifetime only
by the optionee or assignees, or the duly appointed legal representative of an
incompetent optionee, including following an assignment consented to by the
Committee.

Adjustments to Stock Options

In the event that the outstanding common shares of the Company
are changed into or exchanged for a different number or kinds of shares or other
securities of the Company by reason of merger, consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up or stock dividend:

47

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- Prompt, proportionate, equitable, lawful and adequate adjustment shall be
  made of the aggregate number and kind of shares subject to stock options which
  may be granted under the Stock Option Plan, such that the optionee shall have
  the right to purchase such common shares as may be issued in exchange for the
  common shares purchasable on exercise of the nonqualified stock option had
  such merger, consolidation, other reorganization, recapitalization,
  reclassification, combination of shares, stock split-up or stock dividend not
  taken place;
- Rights under unexercised stock options or portions thereof granted prior to
  any such change, both as to the number or kind of shares and the exercise
  price per share, will be adjusted appropriately, provided that such
  adjustments will be made without change in the total exercise price applicable
  to the unexercised portion of such nonqualified stock options but by an
  adjustment in the price for each share covered by such nonqualified stock
  option; or
- Upon any dissolution or liquidation of the Company or any merger or
  combination in which the Company is not a surviving corporation, each
  outstanding stock option granted hereunder shall terminate, but the optionee
  shall have the right, immediately prior to such dissolution, liquidation,
  merger or combination, to exercise his nonqualified stock option in whole or
  in part, to the extent that it shall not have been exercised, without regard
  to any installment exercise provisions in such nonqualified stock option.

Also, upon the occurrence of any person acquiring more than 20%
of the common shares of the Company through a tender offer, exchange offer, or
otherwise, upon a change in control of the Company or upon the sale of
substantially all the assets of the Company, any optionee who is also a Company
insider will be entitled to receive cash for their nonqualified stock options
equal to the final offer price per share paid in the offer or similar event, or
in the case of a change in control or sale of assets, the aggregate fair market
value of the shares.

Amendment of the Plan

The Board of Directors may at any time suspend or terminate the
Plan, in whole or in part or amend it from time to time as appropriate in the
best interests of the Company. No amendments will, without the consent of the
optionee, affect previously granted stock options.

Recent Sales of Unregistered Securities

We did not sell any securities in 2009 that were not registered
under the Securities Act of 1933, as amended.

48

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Stock Performance Graph

The performance graph below shows Uranerz Energy Corporations cumulative total return based on an initial investment of $100 in Uranerz common stock, as compared with the Russell 2000 Index, AMEX Natural Resources Index, AMEX Composite, NASDAQ Composite Total Return, and a peer group consisting of Uranium Energy Corp., UR Energy Corp., and Powertech Uranium Corp. The chart shows yearly performance marks since Uranerz common stock began trading in July of 2005. This performance chart assumes: (1) $100 was invested on July 28, 2005 in Uranerz common stock at the initial price of $1.00, in the Russell 2000 Index, AMEX Natural Resources Index, AMEX Composite, NASDAQ Composite Total Return, and the peer groups common stock; and (2) all dividends are reinvested. Canadian dollar closing price quotes on the Toronto Stock Exchange are converted to US dollars using the noon exchange rates as quoted by the Federal Reserve Bank on the date of the closing price quote. Dates on the chart represent the last trading day of the indicated fiscal year.



49

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ITEM 5.SELECTED FINANCIAL DATA

Selected financial data about Uranerz for the last five years
is set forth in the table below. You should read the data in the table in
conjunction with the consolidated financial statements and related notes set
forth in Item 8, Financial Statements and Supplementary Data.

|Dollars and shares in thousands, except per *share
        amounts* |   | 2009    |   |  | 2008   |   |  | 2007   |   |  | 2006   |   |  | 2005   |  
|------------------------------------------------------------------- | - | ------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                    |   |         |   |  |        |   |  |        |   |  |        |   |  |        |  
|Operating expenses                                                  |   |         |   |  |        |   |  |        |   |  |        |   |  |        |  
|Depreciation                                                        | $ | 176     |   |  | 129    |   |  | 57     |   |  | 15     |   |  | 1      |  
|Foreign
      exchange                                              | $ | 3       |   |  | (4     | ) |  | 24     |   |  | 1      |   |  | 4      |  
|General and
      administrative                                    | $ | 4,599   |   |  | 6,153  |   |  | 7,858  |   |  | 5,871  |   |  | 4,482  |  
|Impairment loss on mineral properties                               | $ | -       |   |  | -      |   |  | -      |   |  | -      |   |  | 315    |  
|Mineral property expenditures                                       | $ | 4,778   |   |  | 30,505 |   |  | 7,008  |   |  | 1,218  |   |  | 89     |  
|Total operating expenses                                            | $ | 9,556   |   |  | 36,784 |   |  | 14,947 |   |  | 7,105  |   |  | 4,891  |  
|Gain on sale on investment
      securities                         | $ | -       |   |  | -      |   |  | -      |   |  | 79     |   |  | -      |  
|Interest income                                                     | $ | 155     |   |  | 610    |   |  | 710    |   |  | 411    |   |  | -      |  
|Loss on settlement of debt                                          | $ | -       |   |  | -      |   |  | -      |   |  | -      |   |  | (132   | )
|Mineral property options received                                   | $ | -       |   |  | -      |   |  | 44     |   |  | 87     |   |  | 21     |  
|Gain (Loss) on discontinued operations                              | $ | -       |   |  | 977    |   |  | (3     | ) |  | (22    | ) |  |        |  
|Non-controlling interest                                            | $ | 702     |   |  | 949    |   |  |        |   |  |        |   |  |        |  
|Net loss for the year                                               | $ | 8,699   |   |  | 34,247 |   |  | 14,197 |   |  | 6,548  |   |  | 5,002  |  
|                                                                    |   |         |   |  |        |   |  |        |   |  |        |   |  |        |  
|Common stock data                                                   |   |         |   |  |        |   |  |        |   |  |        |   |  |        |  
|Weighted average shares
      outstanding                           |   | 57,060  |   |  | 52,263 |   |  | 38,438 |   |  | 29,738 |   |  | 12,995 |  
|Net loss per share  basic and diluted                              | $ | 0.15    |   |  | 0.66   |   |  | 0.37   |   |  | 0.22   |   |  | 0.38   |  
|Total shares outstanding at December 31                             |   | 64,195  |   |  | 55,452 |   |  | 39,224 |   |  | 34,560 |   |  | 21,995 |  
|Balance sheet data at December 31                                   |   |         |   |  |        |   |  |        |   |  |        |   |  |        |  
|Total assets                                                        | $ | 30,810  |   |  | 22,866 |   |  | 12,216 |   |  | 12,492 |   |  | 1,978  |  
|Property, plant and equipment  net                                 | $ | 541     |   |  | 643    |   |  | 406    |   |  | 123    |   |  | 9      |  
|Working capital                                                     | $ | 29,228  |   |  | 21,405 |   |  | 11,114 |   |  | 11,980 |   |  | 1,776  |  
|Total debt                                                          | $ | -       |   |  | 18     |   |  | 52     |   |  | -      |   |  | -      |  
|Common shareholders equity                                         | $ | 30,033  |   |  | 22,278 |   |  | 11,518 |   |  | 12,113 |   |  | 1,785  |  
|Cash flow data                                                      |   |         |   |  |        |   |  |        |   |  |        |   |  |        |  
|Net cash used for operating
      activities                        | $ | 7,483   |   |  | 13,164 |   |  | 9,259  |   |  | 1,692  |   |  | 581    |  
|Net cash used for investing activities                              | $ | (11,590 | ) |  | 20,161 |   |  | 281    |   |  | 472    |   |  | 326    |  
|Net cash provided by financing activities                           | $ | 15,497  |   |  | 22,803 |   |  | 8,590  |   |  | 12,532 |   |  | 2,824  |  

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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in
conjunction with our financial statements for the three years ended December 31,
2009, and the related notes thereto, which have been prepared in accordance with
generally accepted accounting principles (GAAP) in the United States. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of many
factors, including, but not limited to, those set forth under the section
heading Item 1A. Risk Factors and elsewhere in this Annual Report. See section
heading Cautionary Statement Regarding Forward-Looking Statements.

Overview

We are an exploration stage company engaged in the acquisition
and exploration of uranium properties. We own interests in properties in Wyoming
and Texas, USA; and Saskatchewan, Canada. We are principally focused on the
exploration of our projects in the Powder River Basin area of Wyoming. We plan
to maintain, explore and, if warranted, develop our projects in the Powder River
Basin area of Wyoming.

In December 2007 we filed permit applications to mine two of
our properties in the Powder River Basin area of Wyoming that we feel may have
the potential, based on data in our possession, of being developed into
commercial in-situ recovery uranium mines. These permit applications for our
Nichols Ranch Uranium In-Situ Recovery Project are being reviewed.

In support of our goals for 2009, we focused our efforts on the
following six key operating priorities:

- Exploration in Wyoming
- Mine planning for our Nichols Ranch In-Situ Recovery Project
- Environmental and mine planning for additional permitting in the Powder
  River Basin, Wyoming
- Acquisition of properties with uranium potential
- Investor relations and financing
- Facilities planning

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Results of Operations

Twelve-month period ended December 31, 2009 compared to
twelve-month period ended December 31, 2008

Revenue

We have not earned any revenues to date and we anticipate that
we will not generate any revenues during the twelve month period following the
date of this report.

Operating Expenses and Other Expenses (Income)

We incurred total operating expenses of $9,556,528 for the twelve-month period ended December 31, 2009, as compared to $36,783,869 for the corresponding period in 2008. The decrease of operating expenses in the amount of $27,227,341 (74%) was primarily attributable to the $23,496,936 expenditure in 2008 to acquire and explore mineral properties in Wyoming, as described in detail under the section heading Item 7  Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Our general and administrative expenses consisted primarily of stock based compensation, payroll, consulting, investor relations and general overhead which decreased $1,553,821 or 25% less than 2008 reflecting a $1,759,152 reduction in stock based compensation and a $205,331 increase in corporate affairs, investor relations and Casper operations.

Our interest expense for the twelve-month period ended December
31, 2009, imputed on an interest free loan, was 2,941 (2008  $5,551). We earned
$155,402 of interest income for the twelve-month period ended December 31, 2009
as compared to $610,408 for the corresponding period in 2008. This income
resulted from short term investments. We sold all our mineral properties in
Mongolia in 2008 for a gain on discontinued operations of $977,077. The
non-controlling interest of our Arkose Mining Venture absorbed $701,972 of our
2009 operating loss ($949,185 in 2008). Net loss for the twelve-month period
ended December 31, 2009 was $8,699,154, as compared to $34,247,199 for the
corresponding period in 2008, a decrease of $25,548,045 (75%). This decrease was
largely due to our 2008 acquisition of mineral properties related to the Arkose
Mining Venture.

As we anticipated, our exploration expenses, excluding property
acquisitions, continued at a high level throughout the 2009 fiscal year as a
result of our planned exploration activities, primarily related to our Arkose
properties, and as a result of payments required to maintain our interests in
our mineral properties. In addition, as we anticipated, general and
administrative expenses continued to increase as we complied with our
obligations to many stockholders as a reporting company under the Securities
Exchange Act of 1934, listed on the NYSE Amex Equities and the Toronto stock
exchanges. As anticipated, we did not earn any revenues during the 2009 fiscal
year as we were engaged in exploration and the permitting of our mineral
properties.

Cash Used in Operating Activities

Net cash used in operating activities was $7,483,069 for the twelve-month period ended December 31, 2009, compared to $13,163,715 for the corresponding period in 2008. The decrease in net cash used in operations includes a decrease of $6,636,946 for mineral related cash expenditures, primarily from reduced acquisitions.

Cash Used in Investing Activities

We invested $74,663 in equipment and reclamation bonds in the twelve- month period ended December 31, 2009, compared to $633,956 the corresponding period in 2008. In 2008 we received $905,092 cash on the sale of our Mongolian subsidiary, Rolling Hills Resources LLP and, during the twelve-month period ended December 31, 2009, we reduced our investment in securities guaranteed by Canadian banks by $11,665,092.

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Cash Provided by Financing Activities

Net cash provided by financing activities amounted to $15,497,430 for the twelve-month period ended December 31, 2009, primarily from a public issue of common stock, compared to $22,802,600 for the corresponding period in 2008.

Twelve-month period ended December 31, 2008 compared to
twelve-month period ended December 31, 2007

Revenue

We have not earned any revenues to date and we anticipate that we will not generate any revenues during the twelve-month period following the date of this report.

Operating Expenses and Other Expenses (Income)

We incurred total operating expenses of $36,783,869 for the
twelve-month period ended December 31, 2008, as compared to $14,947,046 for the
corresponding period in 2007. The increase of operating expenses in the amount
of $21,836,823 (146%) was primarily attributable to increased spending of
$23,496,936 on acquiring and exploring mineral properties in Wyoming as
described in detail in Item 8 of this Annual Report on Form 10-K. Our general
and administrative expenses consisted primarily of stock based compensation,
payroll, consulting, investor relations and general overhead which decreased
$1,705,161 or 22% less than 2007 reflecting a $2,310,074 reduction in stock
based compensation and growth in corporate affairs, investor relations and
Casper operations.

Our interest expense for the twelve-month period ended December
31, 2008 was imputed on an interest free loan as $5,551 (2007  $3,692). We
earned $610,408 of interest income for the twelve-month period ended December
31, 2008 as compared to $710,226 for the corresponding period in 2007. This
income resulted from short term investments. We sold all our mineral properties
in Mongolia in 2008 for a gain on discontinued operations of $977,077. The
non-controlling interest of our Arkose Mining Venture absorbed $949,185 of our
2008 operating loss. Net loss for the twelve-month period ended December 31,
2008 was $34,247,199, as compared to $14,197,366 for the corresponding period in
2007, an increase of $20,049,833 (141%). This increase was largely due to our
acquisition of mineral properties related to the Arkose Mining Venture.

As we anticipated, our exploration expenses continued to
increase throughout the 2008 fiscal year in comparison with 2007 as a result of
our planned exploration activities, our acquisition of mineral properties and as
a result of payments required to maintain our interests in our mineral
properties. In addition, as we anticipated, general and administrative expenses
continued to increase as we complied with our obligations to many stockholders
as a reporting company under the Securities Exchange Act of 1934, listed on the
NYSE Amex Equities and the Toronto Stock Exchange. As anticipated, we did not
earn any revenues during the 2008 fiscal year as we were engaged in exploration
and the permitting of our mineral properties.

Cash Used in Operating Activities

Net cash used in operating activities was $13,163,715 for the
twelve-month period ended December 31, 2008, compared to $9,258,752 for the
corresponding period in 2007. The increase in net cash used in operations
reflects the growth of our operations, including an increase of $4,406,936 for
mineral related cash expenditures.

53

---

Cash Used in Investing Activities

We invested $633,956 in equipment and reclamation bonds in the twelve- month period ended December 31, 2008, compared to $281,306 the corresponding period in 2007. We received $905,092 cash on the sale of our Mongolian subsidiary, Rolling Hills Resources LLP and, during the twelve-month period ended December 31, 2008, invested $20,432,035 (2007 - $Nil) in short term securities guaranteed by Canadian banks.

Cash Provided by Financing Activities

Net cash provided by financing activities amounted to
$22,802,600 for the twelve-month period ended December 31, 2008, primarily from
private placements of common stock, compared to $8,589,966 for the corresponding
period in 2007.

Assets and Liabilities

We had total assets of $30,810,289 at December 31, 2009
compared to $22,865,737 at December 31, 2008, primarily cash accumulated from
the sale of shares. Property and Equipment was $540,979 compared to $642,572 at
December 31, 2008. Our liabilities were $722,826 compared to $517,818 at
December 31, 2008. Liabilities include due to related parties of` $54,920 (2008
- $50,000) and long term debt of $Nil (2008  $18,079).

Liquidity and Capital Resources

Our operations are primarily financed by proceeds from
issuances of common stock. Our cash and short term security position at December
31, 2009 was $29,192,975 compared to $21,253,277 as of December 31, 2008. We had
working capital of $29,227,701 as of December 31, 2009, compared to working
capital of $21,405,022 as of December 31, 2008.

Financings

During the year ended December 31, 2009, the Company:

1.         
 Issued 242,500 shares of common stock upon the exercise of stock options
for cash proceeds of $166,125.

2.          
Completed a public offering of 8,500,000 units, comprised of 8,500,000 common shares and 4,250,000 common share purchase warrants, at $2.00 per unit for gross proceeds of $17,000,000. Each warrant entitles the holder to purchase one common share for $3.00 for a period ending April 27, 2012. In the event that the Companys shares of common stock trade in the United States at a closing price of greater than US$3.50 per share for a period of 20 consecutive trading days at any time following the closing of this offering, the Company may accelerate the expiry date of the warrants by giving notice via a press release to the holders thereof and in such case the warrants will expire on the 30th day after the date on which such notice is given. The Company incurred share issuance costs of $1,634,628 in connection with the issue.

During the year ended December 31, 2008, the Company:

1.          
Issued 96,100 shares of common stock upon the exercise of share purchase
warrants for cash proceeds of $240,250.

2.         
 Issued 356,300 shares of common stock upon the exercise of stock options
for cash proceeds of $305,025.

3.          
Issued 5,750,000 shares of common stock and paid $5,757,043 cash for mineral
properties valued at $24,847,043.

4.          
Issued 160,900 shares of common stock to settle debt of $402,250.

54

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5.          
Completed a private placement of 9,865,000 units, comprised of 9,865,000 common shares and 4,932,498 common share purchase warrants, at $2.40 per unit for gross proceeds of $23,676,000. Each warrant entitles the holder to purchase one common share for $3.50 for a two year period ending April 15, 2010. In the event that the trading price of the Companys common shares on the American Stock Exchange closes above U.S. $4.50 per share for a period of 20 consecutive trading days at any time after August 16, 2008, the Company may accelerate the expiry time of these warrants by giving notice to the warrantholders by press release and in such case these warrants will expire on the 30th day after the date on which notice is given via press release. The Company paid cash commissions of $1,100,640 and 120,000 warrants to purchase 120,000 common shares at $2.60 per share exercisable for a one year period ending April 15, 2009. The Company incurred share issuance costs in connection with the private placement of $1,347,098 including agents warrants with a fair value of $68,041.

During the year ended December 31, 2007, the Company:

1.          
Issued 4,481,749 shares of common stock upon the exercise of share purchase
warrants for cash proceeds of $8,316,678.

2.          
Issued 182,000 common shares upon the exercise of stock options for cash
proceeds of $288,100.

Capital Requirements

Our cash position of $20,426,032 at December 31, 2009, plus $8,766,943 of bank guaranteed short term securities provide approximately $29.2 million for future operations. We estimate that our cash expenditures for operations over the next twelve months will be approximately $14,000,000 as outlined below. Therefore, we believe that we have sufficient capital to fund expenditures for operations over the next twelve months. Property acquisitions and operations beyond 2010 will be financed through cash on hand, debt and one or more equity issues which may include the exercise of common stock purchase warrants. We intend to focus our exploration efforts in Wyoming.

Our plan of operation for the next twelve months is to continue
with exploration and permitting of our expanded Wyoming Powder River Basin
properties. Our planned geological exploration programs are described in Item 2
of this Report. Our planned cash operating expenditures for the year ending
December 31, 2010 for corporate expenses, exploration on our Wyoming mineral
properties and general and administrative expenses are summarized as follows:

|Category                                          | Planned Expenditures Over the Next
      Twelve Months
|------------------------------------------------- | ------------------------------------------------------
|Exploration                                       | $6,800,000                                            
|Environmental,
      production and well planning | $2,100,000                                            
|General and
      Administrative expenses         | $5,100,000                                            
|TOTAL                                             | $14,000,000                                           

In addition to our planned operating expenditures we may make
additional property acquisitions beyond the above as opportunities arise and, if
warranted, we may commence capital expenditures for our mining project which is
under review by licensing authorities. Our exploration and development plans
will be continually evaluated and modified as exploration and permitting results
become available. Modifications to our plans will be based on many factors,
including: results of exploration, assessment of data, weather conditions,
exploration costs, the price of uranium and available capital. Further, the
extent of our operations and investment programs that we undertake will be
dependent upon the amount of financing available to us.

55

---

During the twelve-month period following the date of this
Annual Report, we anticipate that we will not generate any revenues. We
anticipate that funding to carry out our 2010 plans will be from existing
resources.

Future Financings

We may require additional financing to carry out an expanded
program of exploration, mine planning and property acquisitions during 2010.
This may require debt financing and/or additional sales of our common stock in
order to raise the funds necessary to pursue opportunities and to fund our
working capital.

Issuances of additional shares would result in dilution to our
existing shareholders. There is no assurance that we will be successful in
completing any financings. Failure to obtain additional financing on a timely
basis could require a reduced plan of operations and acquisitions beyond 2010.

As we expect our reliance on equity financings to continue into
the future, the future market conditions will be critical for us to raise
necessary funds to meet our capital requirements. If we are unable to obtain
acceptable financing through equity investments, we will seek multiple solutions
including, but not limited to, credit facilities or debenture issuances.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.

Contractual Obligations

Our contractual obligations extending beyond the fiscal year
ended December 31, 2009 are described in Note 13 of the audited consolidated
financial statements following under the section heading Item 7- Financial
Statements and Supplementary Data.

Critical Accounting Policies

The preparation of financial statements in conformity with
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.

We have identified certain accounting policies, described
below, that are most important to the portrayal of our current financial
condition and results of operations. Our significant accounting policies are
disclosed in Note 2 to the audited financial statements included in this Annual
Report.

Mineral Property Costs

The Company is primarily engaged in the acquisition,
exploration and development of mineral properties. Mineral property acquisition
costs are capitalized when management has determined that probable future
benefits consisting of a contribution to future cash inflows have been
identified and adequate financial resources are available or are expected to be
available as required to meet the terms of property acquisition and budgeted
exploration and development expenditures. Mineral property acquisition costs are
expensed as incurred if the criteria for capitalization are not met. In the
event that a mineral property is acquired through the issuance of the Companys shares, the
mineral property will be recorded at the fair value of the respective property
or the fair value of common shares, whichever is more readily determinable.

56

---

When mineral properties are acquired under option agreements
with future acquisition payments to be made at the sole discretion of the
Company, those future payments, whether in cash or shares, are recorded only
when the Company has made or is obliged to make the payment or issue the shares.
When it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves and bankable
feasibility, the costs incurred to develop such property are capitalized.

During the year ended December 31, 2009, mineral property
expenditures totaling $4,778,386 (2008 -$30,505,332, 2007 - $7,008,396) were
expensed and the Company received mineral property option payments of $Nil (2008
- $Nil, 2007 - $43,810).

Stock-based Compensation

The Company records stock-based compensation in accordance with
ASC 718, Compensation  Stock Based Compensation, which requires the
measurement and recognition of compensation expense based on estimated fair
values for all share-based awards made to employees and directors, including
stock options.

ASC 718 requires companies to estimate the fair value of
share-based awards on the date of grant using an option-pricing model. The
Company uses the Black-Scholes option-pricing model as its method of determining
fair value. This model is affected by the Companys stock price as well as
assumptions regarding a number of subjective variables. These subjective
variables include, but are not limited to the Companys expected stock price
volatility over the term of the awards, and actual and projected employee stock
option exercise behaviors. The value of the portion of the award that is
ultimately expected to vest is recognized as an expense in the statement of
operations over the requisite service period.

No tax benefits were attributed to stock-based compensation
expense because a full valuation allowance was maintained for all net deferred
tax assets.

Accounting Developments

In May 2009, FASB issued ASC 855, Subsequent Events, which establishes general standards for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009. The adoption of ASC 855 did not have a material effect on the Companys financial statements. Refer to Note 14.

In June 2009, the FASB issued guidance now codified as ASC 105,
Generally Accepted Accounting Principles as the single source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not
change current U.S. GAAP, but is intended to simplify user access to all
authoritative U.S. GAAP by providing all authoritative literature related to a
particular topic in one place. The adoption of ASC 105 did not have a material
impact on the Companys financial statements, but did eliminate all references
to pre-codification standards.

The Company has implemented all new accounting
  pronouncements that are in effect and that may impact its financial statements
  and does not believe that there are any other new accounting pronouncements that
  have been issued that might have a material impact on its financial position or
  results of operations.

57

---

In May 2008, the Financial Accounting Standards Board (FASB)
issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts
 An interpretation of FASB Statement No. 60. SFAS 163 requires that an
insurance enterprise recognize a claim liability prior to an event of default
when there is evidence that credit deterioration has occurred in an insured
financial obligation. It also clarifies how Statement 60 applies to financial
guarantee insurance contracts, including the recognition and measurement to be
used to account for premium revenue and claim liabilities, and requires expanded
disclosures about financial guarantee insurance contracts. It is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
except for some disclosures about the insurance enterprises risk-management
activities. SFAS 163 requires that disclosures about the risk-management
activities of the insurance enterprise be effective for the first period
beginning after issuance. Except for those disclosures, earlier application is
not permitted. The adoption of this statement is not expected to have a material
effect on the Companys consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles. SFAS 162 identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SECs approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The adoption of this statement is not expected to have a
material effect on the Companys consolidated financial statements.

In March 2008, the Financial Accounting Standards Board
(FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities  an amendment to FASB Statement No. 133. SFAS No. 161 is intended to improve financial standards for
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position, financial performance, and cash flows. Entities are required to
provide enhanced disclosures about: (a) how and why an entity uses derivative
instruments; (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations; and (c) how
derivative instruments and related hedged items affect an entitys financial
position, financial performance, and cash flows. It is effective for financial
statements issued for fiscal years beginning after November 15, 2008, with early
adoption encouraged. The adoption of this statement is not expected to have a
material effect on the Companys consolidated financial statements.

In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141R, Business Combinations. This statement replaces
SFAS 141 and defines the acquirer in a business combination as the entity that
obtains control of one or more businesses in a business combination and
establishes the acquisition date as the date that the acquirer achieves control.
SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. SFAS 141R also requires the
acquirer to recognize contingent consideration at the acquisition date, measured
at its fair value at that date. This statement is effective for fiscal years and
interim periods within those fiscal years, beginning on or after December 15,
2008 and earlier adoption is prohibited. The adoption of this statement is not
expected to have a material effect on the Companys consolidated financial
statements.

In December 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial Statements Liabilities an
Amendment of ARB No. 51. This statement amends ARB 51 to establish accounting
and reporting standards for the Non-controlling interest in a subsidiary and for
the deconsolidation of a subsidiary. This statement is effective for fiscal
years and interim periods within those fiscal years, beginning on or after
December 15, 2008 and earlier adoption is prohibited. The adoption of this
statement is not expected to have a material effect on the Companys
consolidated financial statements.

58

---

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities  Including an Amendment
of FASB Statement No. 115. This statement permits entities to choose to measure
many financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115 Accounting for Certain
Investments in Debt and Equity Securities applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entitys first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, Fair Value Measurements. The adoption of this
statement is not expected to have a material effect on the Companys
consolidated financial statements.

ITEM 6A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

We are not exposed to risks associated with commodity prices,
interest rates and credit. Commodity price risk is defined as the potential loss
that we may incur as a result of changes in the fair value of uranium. Interest
rate risk results from our debt and equity instruments that we issue to provide
financing and liquidity for our business. Credit risk would arise from the
extension of credit throughout all aspects of our business but is not yet
significant.

59

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ITEM 7.FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

60

---

Uranerz Energy Corporation 
  (An Exploration Stage Company)

December 31, 2009





|                                                              | Index
|------------------------------------------------------------- | -----
|                                                              |      
|Report
      of Independent Registered Public Accounting Firm | F1  
|                                                              |      
|Consolidated
      Balance Sheets                             | F2  
|                                                              |      
|Consolidated
      Statements of Operations                   | F3  
|                                                              |      
|Consolidated
      Statements of Cash Flows                   | F4  
|                                                              |      
|Consolidated
      Statements of Stockholders Equity         | F5  
|                                                              |      
|Notes
      to the Consolidated Financial Statements          | F7  

---

logo

Report of Independent Registered Public Accounting Firm



To the Directors and Stockholders 
  Uranerz Energy
  Corporation 
  (An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of
  Uranerz Energy Corporation as of December 31, 2009 and 2008, and the related
  consolidated statements of operations, cash flows and stockholders' equity for
  each of the three years in the period ended December 31, 2009 and accumulated
  from May 26, 1999 (Date of Inception) to December 31, 2009. These consolidated
  financial statements are the responsibility of the Company's management. Our
  responsibility is to express an opinion on these consolidated financial
  statements based on our audits.

We conducted our audits in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards
  require that we plan and perform the audits to obtain reasonable assurance about
  whether the consolidation financial statements are free of material
  misstatement. An audit includes examining, on a test basis, evidence supporting
  the amounts and disclosures in the consolidated financial statements. An audit
  also includes assessing the accounting principles used and significant estimates
  made by management, as well as evaluating the overall financial statement
  presentation. We believe that our audits provide a reasonable basis for our
  opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Uranerz Energy Corporation as of December 31, 2009 and 2008, and the results of
  its operations and its cash flows for each of the three years in the period
  ended December 31, 2009 and accumulated from May 26, 1999 (Date of Inception) to
  December 31, 2009, in conformity with accounting principles generally accepted
  in the United States.

We also have audited, in accordance with the standards of the
  Public Company Accounting Oversight Board (United States), Uranerz Energy
  Corporations internal control over financial reporting as of December 31, 2009,
  based on criteria established in Internal Control-Integrated Framework issued by
  the Committee of Sponsoring Organizations of the Treadway Commission and our
  report dated March 10, 2010 expressed an unqualified opinion thereon.





/s/ MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 10, 2010

F-1

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Consolidated Balance Sheets 
  (Expressed in US dollars)

|                                                                                                                                                        |  | December 31, |   |  | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                                                                                                        |  | 2009         |   |  | 2008         |  
|                                                                                                                                                        |  | $            |   |  | $            |  
|                                                                                                                                                        |  |              |   |  |              |  
|ASSETS                                                                                                                                                  |  |              |   |  |              |  
|                                                                                                                                                        |  |              |   |  |              |  
|Current Assets                                                                                                                                          |  |              |   |  |              |  
|                                                                                                                                                        |  |              |   |  |              |  
|Cash                                                                                                                                                    |  | 20,426,032   |   |  | 821,242      |  
|Marketable securities                                                                                                                                   |  | 8,766,943    |   |  | 20,432,035   |  
|Prepaid expenses and deposits (Note 7)                                                                                                                  |  | 733,843      |   |  | 641,215      |  
|Other
      current assets                                                                                                                              |  | 23,709       |   |  | 10,269       |  
|Total Current Assets                                                                                                                                    |  | 29,950,527   |   |  | 21,904,761   |  
|                                                                                                                                                        |  |              |   |  |              |  
|Mineral Property Reclamation Bonds (Note
      6(i))                                                                                                    |  | 318,783      |   |  | 318,404      |  
|Property and
      Equipment (Note 5)                                                                                                                   |  | 540,979      |   |  | 642,572      |  
|                                                                                                                                                        |  |              |   |  |              |  
|Total Assets                                                                                                                                            |  | 30,810,289   |   |  | 22,865,737   |  
|                                                                                                                                                        |  |              |   |  |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                    |  |              |   |  |              |  
|                                                                                                                                                        |  |              |   |  |              |  
|Current Liabilities                                                                                                                                     |  |              |   |  |              |  
|                                                                                                                                                        |  |              |   |  |              |  
|Accounts payable                                                                                                                                        |  | 185,962      |   |  | 186,872      |  
|Accrued liabilities (Note 7)                                                                                                                            |  | 463,865      |   |  | 228,800      |  
|Due to related parties (Note 9)                                                                                                                         |  | 54,920       |   |  | 50,000       |  
|Current portion of loan payable (Note 8)                                                                                                                |  | 18,079       |   |  | 34,067       |  
|                                                                                                                                                        |  |              |   |  |              |  
|Total Current Liabilities                                                                                                                               |  | 722,826      |   |  | 499,739      |  
|                                                                                                                                                        |  |              |   |  |              |  
|Loan Payable (Note 8)                                                                                                                                   |  |             |   |  | 18,079       |  
|                                                                                                                                                        |  |              |   |  |              |  
|Total Liabilities                                                                                                                                       |  | 722,826      |   |  | 517,818      |  
|                                                                                                                                                        |  |              |   |  |              |  
|Commitments and Contingencies
      (Notes 1, 6, and 13) 
      Subsequent Events (Note 16)                                                             |  |              |   |  |              |  
|                                                                                                                                                        |  |              |   |  |              |  
|Stockholders Equity                                                                                                                                    |  |              |   |  |              |  
|                                                                                                                                                        |  |              |   |  |              |  
|Preferred Stock, 10,000,000
      shares authorized, $0.001 par value; 
      No shares issued and outstanding                                          |  |             |   |  |             |  
|                                                                                                                                                        |  |              |   |  |              |  
|Common Stock, 200,000,000
      shares authorized, $0.001 par value; 
      64,194,887 and 55,452,387 shares
      issued and outstanding, respectively |  | 64,195       |   |  | 55,452       |  
|                                                                                                                                                        |  |              |   |  |              |  
|Additional Paid-in Capital                                                                                                                              |  | 98,811,898   |   |  | 82,366,879   |  
|                                                                                                                                                        |  |              |   |  |              |  
|Deficit Accumulated During the Exploration Stage                                                                                                        |  | (68,843,151  | ) |  | (60,143,997  | )
|                                                                                                                                                        |  |              |   |  |              |  
|Total Uranerz Shareholders
      Equity                                                                                                                |  | 30,032,942   |   |  | 22,278,334   |  
|                                                                                                                                                        |  |              |   |  |              |  
|Non-controlling Interest                                                                                                                                |  | 54,521       |   |  | 69,585       |  
|                                                                                                                                                        |  |              |   |  |              |  
|Total Equity                                                                                                                                            |  | 30,087,463   |   |  | 22,347,919   |  
|                                                                                                                                                        |  |              |   |  |              |  
|Total Liabilities and Stockholders Equity                                                                                                              |  | 30,810,289   |   |  | 22,865,737   |  

(The accompanying notes are an integral part of these
  consolidated financial statements)

F-2

---

Uranerz Energy Corporation
  (An Exploration Stage Company) 
  Consolidated Statements of Operations 
  (Expressed in US dollars)

|                                                        |  | Accumulated From    |   |  |            |   |  |              |   |  |             |  
|------------------------------------------------------- |  | ------------------- | - |  | ---------- | - |  | ------------ | - |  | ----------- | -
|                                                        |  | May 26, 1999        |   |  |            |   |  |              |   |  |             |  
|                                                        |  | (Date of Inception) |   |  |            |   |  | Years Ended  |   |  |             |  
|                                                        |  | to December 31,     |   |  |            |   |  | December 31, |   |  |             |  
|                                                        |  | 2009                |   |  | 2009       |   |  | 2008         |   |  | 2007        |  
|                                                        |  | $                   |   |  | $          |   |  | $            |   |  | $           |  
|                                                        |  |                     |   |  |            |   |  |              |   |  |             |  
|                                                        |  |                     |   |  |            |   |  |              |   |  |             |  
|Revenue                                                 |  |                    |   |  |           |   |  |             |   |  |            |  
|                                                        |  |                     |   |  |            |   |  |              |   |  |             |  
|Expenses                                                |  |                     |   |  |            |   |  |              |   |  |             |  
|Depreciation                                            |  | 377,419             |   |  | 175,877    |   |  | 129,268      |   |  | 56,669      |  
|Foreign exchange                                        |  | 27,421              |   |  | 2,868      |   |  | (3,949       | ) |  | 23,602      |  
|General and administrative (Note
      9)               |  | 29,072,502          |   |  | 4,599,397  |   |  | 6,153,218    |   |  | 7,858,379   |  
|Mineral property expenditures                           |  | 43,955,018          |   |  | 4,778,386  |   |  | 30,505,332   |   |  | 7,008,396   |  
|Total Operating
      Expenses                          |  | 73,432,360          |   |  | 9,556,528  |   |  | 36,783,869   |   |  | 14,947,046  |  
|Operating Loss                                          |  | (73,432,360         | ) |  | (9,556,528 | ) |  | (36,783,869  | ) |  | (14,947,046 | )
|Other Income (Expense)                                  |  |                     |   |  |            |   |  |              |   |  |             |  
|Gain on sale of
      investment securities             |  | 79,129              |   |  |           |   |  |             |   |  |            |  
|Interest income                                         |  | 1,887,469           |   |  | 155,402    |   |  | 610,408      |   |  | 710,226     |  
|Loss on
      settlement of debt                        |  | (132,000            | ) |  |           |   |  |             |   |  |            |  
|Mineral property option payments received               |  | 152,477             |   |  |           |   |  |             |   |  | 43,810      |  
|Total Other Income                                      |  | 1,987,075           |   |  | 155,402    |   |  | 610,408      |   |  | 754,036     |  
|Loss from continuing operations                         |  | (71,445,285         | ) |  | (9,401,126 | ) |  | (36,173,461  | ) |  | (14,193,010 | )
|Discontinued operations (Note 4)                        |  |                     |   |  |            |   |  |              |   |  |             |  
|Loss from discontinued
      operations                 |  | (28,732             | ) |  |           |   |  | (2,632       | ) |  | (4,356      | )
|Gain on disposal of
      discontinued operations       |  | 979,709             |   |  |           |   |  | 979,709      |   |  |            |  
|Gain (Loss) on
      discontinued operations            |  | 950,977             |   |  |           |   |  | 977,077      |   |  | (4,356      | )
|Net Loss                                                |  | (70,494,308         | ) |  | (9,401,126 | ) |  | (35,196,384  | ) |  | (14,197,366 | )
|Net loss
      attributable to non-controlling Interest |  | 1,651,157           |   |  | 701,972    |   |  | 949,185      |   |  |            |  
|Net loss attributable to the Company                    |  | (68,843,151         | ) |  | (8,699,154 | ) |  | (34,247,199  | ) |  | (14,197,366 | )
|Other Comprehensive Loss                                |  |                     |   |  |            |   |  |              |   |  |             |  
|Foreign currency translation
      adjustment           |  |                    |   |  |           |   |  | (481         | ) |  | (61         | )
|Comprehensive Loss                                      |  | (68,843,151         | ) |  | (8,699,154 | ) |  | (34,247,680  | ) |  | (14,197,427 | )
|Amounts attributable to Company
      shareholders      |  |                     |   |  |            |   |  |              |   |  |             |  
|Loss from continuing operations                         |  | (70,494,308         | ) |  | (9,401,126 | ) |  | (35,196,384  | ) |  | (14,197,366 | )
|Gain (loss) on discontinued operations                  |  | 950,977             |   |  |           |   |  | 977,077      |   |  | (4,356      | )
|Net
      loss attributable to the Company              |  | (69,543,331         | ) |  | (9,401,126 | ) |  | (34,219,307  | ) |  | (14,201,722 | )
|Net Loss Per Share Attributable to Company              |  |                     |   |  |            |   |  |              |   |  |             |  
|Shareholders  Basic and Diluted                        |  |                     |   |  |            |   |  |              |   |  |             |  
|Continuing Operations                                   |  |                     |   |  | (0.15      | ) |  | (0.68        | ) |  | (0.37       | )
|Discontinued
      Operations                           |  |                     |   |  |           |   |  | 0.02         |   |  | (0.00       | )
|Net Loss Per Share  Basic and Diluted                  |  |                     |   |  | (0.15      | ) |  | (0.66        | ) |  | (0.37       | )
|                                                        |  |                     |   |  |            |   |  |              |   |  |             |  
|Weighted Average Shares Outstanding                     |  |                     |   |  | 57,060,000 |   |  | 52,263,000   |   |  | 38,438,000  |  

(The accompanying notes are an integral part of these
  consolidated financial statements)

F-3

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Consolidated Statements of Cash Flows 
  (Expressed in US dollars)

|                                                                                                  |  | Accumulated From     |   |  |            |   |  |              |   |  |             |  
|------------------------------------------------------------------------------------------------- |  | -------------------- | - |  | ---------- | - |  | ------------ | - |  | ----------- | -
|                                                                                                  |  | May 26, 1999         |   |  |            |   |  |              |   |  |             |  
|                                                                                                  |  | (Date of  Inception) |   |  |            |   |  | Years Ended  |   |  |             |  
|                                                                                                  |  | to December 31,      |   |  |            |   |  | December 31, |   |  |             |  
|                                                                                                  |  | 2009                 |   |  | 2009       |   |  | 2008         |   |  | 2007        |  
|                                                                                                  |  | $                    |   |  | $          |   |  | $            |   |  | $           |  
|Operating Activities                                                                              |  |                      |   |  |            |   |  |              |   |  |             |  
|Net loss                                                                                          |  | (68,843,151          | ) |  | (8,699,154 | ) |  | (34,247,199  | ) |  | (14,197,366 | )
|Adjustments
      to reconcile net loss to cash used in operating activities:                     |  |                      |   |  |            |   |  |              |   |  |             |  
|Depreciation                                                                                      |  | 377,418              |   |  | 175,877    |   |  | 129,268      |   |  | 56,668      |  
|Equity loss on investment                                                                         |  | 74,617               |   |  |           |   |  | 74,617       |   |  |            |  
|Gain on
      disposition of discontinued operations                                              |  | (979,709             | ) |  |           |   |  | (979,709     | ) |  |            |  
|Gain on sale of investment securities                                                             |  | (79,129              | ) |  |           |   |  |             |   |  |            |  
|Loss on settlement
      of debt                                                                  |  | 132,000              |   |  |           |   |  |             |   |  |            |  
|Mineral property option payment received                                                          |  | (37,500              | ) |  |           |   |  |             |   |  |            |  
|Non-controlling
      interest                                                                    |  | 54,521               |   |  | (15,064    | ) |  | 69,585       |   |  |            |  
|Shares issued to acquire mineral properties                                                       |  | 19,090,000           |   |  |           |   |  | 19,090,000   |   |  |            |  
|Stock-based
      compensation                                                                    |  | 16,634,173           |   |  | 922,265    |   |  | 2,681,417    |   |  | 4,991,491   |  
|Changes in operating
      assets and liabilities:                                                |  |                      |   |  |            |   |  |              |   |  |             |  
|Prepaid expenses
      and deposits                                                               |  | (727,606             | ) |  | (92,628    | ) |  | (317,538     | ) |  | (252,570    | )
|Other current assets                                                                              |  | (23,684              | ) |  | (13,440    | ) |  | 82,175       |   |  | (92,419     | )
|Accounts payable
      and accrued liabilities                                                    |  | 780,498              |   |  | 234,154    |   |  | 272,534      |   |  | (35,624     | )
|Due to related
      parties                                                                      |  | 525,679              |   |  | 4,921      |   |  | (18,865      | ) |  | 271,068     |  
|Net Cash Used in
      Operating Activities                                                       |  | (33,021,873          | ) |  | (7,483,069 | ) |  | (13,163,715  | ) |  | (9,258,752  | )
|Investing Activities                                                                              |  |                      |   |  |            |   |  |              |   |  |             |  
|Reclamation bonds                                                                                 |  | (318,783             | ) |  | (379       | ) |  | (268,404     | ) |  | (40,000     | )
|Acquisition of
      subsidiary, net cash paid                                                    |  | (48                  | ) |  |           |   |  |             |   |  |            |  
|Proceeds from sale of investment
      securities                                                 |  | 11,781,721           |   |  | 11,665,092 |   |  |             |   |  |            |  
|Purchase of property
      and equipment                                                          |  | (819,983             | ) |  | (74,284    | ) |  | (365,552     | ) |  | (241,306    | )
|Purchase of investment securities                                                                 |  | (20,432,035          | ) |  |           |   |  | (20,432,035  | ) |  |            |  
|Disposition of subsidiary                                                                         |  | 905,092              |   |  |           |   |  | 905,092      |   |  |            |  
|Net Cash Provided
      By (Used In) Investing Activities                                         |  | (8,884,036           | ) |  | 11,590,429 |   |  | (20,160,899  | ) |  | (281,306    | )
|Financing Activities                                                                              |  |                      |   |  |            |   |  |              |   |  |             |  
|Repayment of loan payable                                                                         |  | (80,335              | ) |  | (34,067    | ) |  | (31,456      | ) |  | (14,812     | )
|Advances to related
      party                                                                   |  | 10,700               |   |  |           |   |  |             |   |  |            |  
|Proceeds from issuance of common stock                                                            |  | 65,706,676           |   |  | 17,166,125 |   |  | 24,221,275   |   |  | 8,604,778   |  
|Share issuance costs                                                                              |  | (3,305,100           | ) |  | (1,634,628 | ) |  | (1,387,219   | ) |  |            |  
|Net Cash Provided
      By Financing Activities                                                   |  | 62,331,941           |   |  | 15,497,430 |   |  | 22,802,600   |   |  | 8,589,966   |  
|Effect of Exchange Rate Changes on Cash                                                           |  |                     |   |  |           |   |  | (481         | ) |  | (61         | )
|Increase (Decrease) In Cash                                                                       |  | 20,426,032           |   |  | 19,604,790 |   |  | (10,522,495  | ) |  | (950,153    | )
|Cash - Beginning of Period                                                                        |  |                     |   |  | 821,242    |   |  | 11,343,737   |   |  | 12,293,890  |  
|Cash - End of
      Period                                                                        |  | 20,426,032           |   |  | 20,426,032 |   |  | 821,242      |   |  | 11,343,737  |  
|Non-cash Investing and Financing Activities                                                       |  |                      |   |  |            |   |  |              |   |  |             |  
|Sale of 60% of subsidiary for interest
      in mineral property                                  |  | 774,216              |   |  |           |   |  | 774,216      |   |  |            |  
|Investment securities
      received as a mineral 
                 property option
      payment |  | 37,500               |   |  |           |   |  |             |   |  |            |  
|Purchase of equipment with loan payable                                                           |  | 98,414               |   |  |           |   |  |             |   |  | 98,414      |  
|Common stock issued to
      settle debt                                                          |  | 744,080              |   |  |           |   |  | 402,250      |   |  |            |  
|Common stock issued for mineral property costs                                                    |  | 19,105,000           |   |  |           |   |  | 19,090,000   |   |  |            |  
|Supplemental Disclosures                                                                          |  |                      |   |  |            |   |  |              |   |  |             |  
|Interest paid                                                                                     |  | 12,184               |   |  | 2,941      |   |  | 5,551        |   |  | 3,692       |  
|Income taxes paid                                                                                 |  |                     |   |  |           |   |  |             |   |  |            |  

(The accompanying notes are an integral part of these
  consolidated financial statements)

F-4

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Consolidated Statements of Stockholders Equity (Deficit) 
  For the Period
  from May 26, 1999 (Date of Inception) to December 31, 2009 
  (Expressed in US
  dollars)

|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  | Deficit         |   |  |          |  |  |            |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- | - |  | ----------- |  |  | --------------- | - |  | -------- |  |  | ---------- | -
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  | Accumulated |  |  | Accumulated     |   |  |          |  |  |            |  
|                                                                                                                 |  |              |  |  |         |  |  | Additional    |   |  | Other       |  |  | During the      |   |  |          |  |  |            |  
|                                                                                                                 |  | Common Stock |  |  | Paid-in |  |  | Comprehensive |   |  | Exploration |  |  | Non-Controlling |   |  |          | 
|                                                                                                                 |  | Shares       |  |  | Amount  |  |  | Capital       |   |  | Income      |  |  | Stage           |   |  | Interest |  |  | Total      |  
|                                                                                                                 |  | #            |  |  | $       |  |  | $             |   |  | $           |  |  | $               |   |  | $        |  |  | $          |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, May 26, 1999 (Date of inception)                                                                        |  |             |  |  |        |  |  |              |   |  |            |  |  |                |   |  |         |  |  |           |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the period                                                                                          |  |             |  |  |        |  |  |              |   |  |            |  |  | (2,465          | ) |  |         |  |  | (2,465     | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 1999                                                                                       |  |             |  |  |        |  |  |              |   |  |            |  |  | (2,465          | ) |  |         |  |  | (2,465     | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the year                                                                                            |  |             |  |  |        |  |  |              |   |  |            |  |  |                |   |  |         |  |  |           |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 2000                                                                                       |  |             |  |  |        |  |  |              |   |  |            |  |  | (2,465          | ) |  |         |  |  | (2,465     | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for cash at $0.001 per share                                                                       |  | 1,500,000    |  |  | 1,500   |  |  |              |   |  |            |  |  |                |   |  |         |  |  | 1,500      |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for cash at $0.01 per share                                                                        |  | 2,500,000    |  |  | 2,500   |  |  | 22,500        |   |  |            |  |  |                |   |  |         |  |  | 25,000     |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued to acquire mineral property 
          interest at $0.01 per share                                 |  | 1,500,000    |  |  | 1,500   |  |  | 13,500        |   |  |            |  |  |                |   |  |         |  |  | 15,000     |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for cash at $0.35 per share                                                                        |  | 90,500       |  |  | 91      |  |  | 31,584        |   |  |            |  |  |                |   |  |         |  |  | 31,675     |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the year                                                                                            |  |             |  |  |        |  |  |              |   |  |            |  |  | (47,158         | ) |  |         |  |  | (47,158    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 2001                                                                                       |  | 5,590,500    |  |  | 5,591   |  |  | 67,584        |   |  |            |  |  | (49,623         | ) |  |         |  |  | 23,552     |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for cash at $0.35 per share                                                                        |  | 50,000       |  |  | 50      |  |  | 17,450        |   |  |            |  |  |                |   |  |         |  |  | 17,500     |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the year                                                                                            |  |             |  |  |        |  |  |              |   |  |            |  |  | (51,671         | ) |  |         |  |  | (51,671    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 2002                                                                                       |  | 5,640,500    |  |  | 5,641   |  |  | 85,034        |   |  |            |  |  | (101,294        | ) |  |         |  |  | (10,619    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the year                                                                                            |  |             |  |  |        |  |  |              |   |  |            |  |  | (26,916         | ) |  |         |  |  | (26,916    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 2003                                                                                       |  | 5,640,500    |  |  | 5,641   |  |  | 85,034        |   |  |            |  |  | (128,210        | ) |  |         |  |  | (37,535    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the year                                                                                            |  |             |  |  |        |  |  | -            |   |  |            |  |  | (20,096         | ) |  |         |  |  | (20,096    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 2004                                                                                       |  | 5,640,500    |  |  | 5,641   |  |  | 85,034        |   |  |            |  |  | (148,306        | ) |  |         |  |  | (57,631    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for cash at $0.10 per share                                                                        |  | 6,959,500    |  |  | 6,959   |  |  | 688,991       |   |  |            |  |  |                |   |  |         |  |  | 695,950    |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for cash at $0.40 per unit                                                                         |  | 5,420,000    |  |  | 5,420   |  |  | 2,162,580     |   |  |            |  |  |                |   |  |         |  |  | 2,168,000  |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Share issuance costs                                                                                             |  |             |  |  |        |  |  | (43,987       | ) |  |            |  |  |                |   |  |         |  |  | (43,987    | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued to settle debt                                                                                     |  | 200,000      |  |  | 200     |  |  | 211,800       |   |  |            |  |  |                |   |  |         |  |  | 212,000    |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Shares issued for compensation to 
         
      related parties at a fair value of $1.01 
          per share |  | 3,775,000    |  |  | 3,775   |  |  | 3,808,975     |   |  |            |  |  |                |   |  |         |  |  | 3,812,750  |  
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Net loss for the year                                                                                            |  |             |  |  |        |  |  |              |   |  |            |  |  | (5,002,225      | ) |  |         |  |  | (5,002,225 | )
|                                                                                                                 |  |              |  |  |         |  |  |               |   |  |             |  |  |                 |   |  |          |  |  |            |  
|Balance, December 31, 2005                                                                                       |  | 21,995,000   |  |  | 21,995  |  |  | 6,913,393     |   |  |            |  |  | (5,150,531      | ) |  |         |  |  | 1,784,857  |  

(The accompanying notes are an integral part of these
  consolidated financial statements)

F-5

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Consolidated Statements of Stockholders Equity (Deficit) 
  For the Period
  from May 26, 1999 (Date of Inception) to December 31, 2009 
  (Expressed in US
  dollars)

|                                              |  |              |  |  |         |  |  |               |   |  |             |   |  | Deficit         |   |  |           |   |  |             |  
|--------------------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- | - |  | ----------- | - |  | --------------- | - |  | --------- | - |  | ----------- | -
|                                              |  |              |  |  |         |  |  |               |   |  | Accumulated |   |  | Accumulated     |   |  |           |   |  |             |  
|                                              |  |              |  |  |         |  |  | Additional    |   |  | Other       |   |  | During the      |   |  |           |   |  |             |  
|                                              |  | Common Stock |  |  | Paid-in |  |  | Comprehensive |   |  | Exploration |   |  | Non-Controlling |   |  |           |  
|                                              |  | Shares       |  |  | Amount  |  |  | Capital       |   |  | Income      |   |  | Stage           |   |  | Interest  |   |  | Total       |  
|                                              |  | #            |  |  | $       |  |  | $             |   |  | $           |   |  | $               |   |  | $         |   |  | $           |  
|                                              |  |              |  |  |         |  |  |               |   |  |             |   |  |                 |   |  |           |   |  |             |  
|Balance, December 31, 2005                    |  | 21,995,000   |  |  | 21,995  |  |  | 6,913,393     |   |  |            |   |  | (5,150,531      | ) |  |          |   |  | 1,784,857   |  
|Shares issued for cash at $1.00 per share     |  | 7,245,000    |  |  | 7,245   |  |  | 7,237,755     |   |  |            |   |  |                |   |  |          |   |  | 7,245,000   |  
|Shares issued for cash at $1.75 per share     |  | 2,142,200    |  |  | 2,142   |  |  | 3,746,708     |   |  |            |   |  |                |   |  |          |   |  | 3,748,850   |  
|Share issuance costs                          |  |             |  |  |        |  |  | (516,964      | ) |  |            |   |  |                |   |  |          |   |  | (516,964    | )
|Shares issued for finders fees                |  | 238,498      |  |  | 238     |  |  | 277,460       |   |  |            |   |  |                |   |  |          |   |  | 277,698     |  
|Shares issued upon the exercise of warrants   |  | 2,700,000    |  |  | 2,700   |  |  | 1,774,550     |   |  |            |   |  |                |   |  |          |   |  | 1,777,250   |  
|Shares issued for services at $0.91 per share |  | 100,000      |  |  | 100     |  |  | 90,900        |   |  |            |   |  |                |   |  |          |   |  | 91,000      |  
|Shares and options issued to settle debt      |  | 139,640      |  |  | 140     |  |  | 129,690       |   |  |            |   |  |                |   |  |          |   |  | 129,830     |  
|Fair value of stock options granted           |  |             |  |  |        |  |  | 4,124,025     |   |  |            |   |  |                |   |  |          |   |  | 4,124,025   |  
|Foreign currency translation adjustments      |  |             |  |  |        |  |  |              |   |  | 542         |   |  |                |   |  |          |   |  | 542         |  
|Net loss for the year                         |  |             |  |  |        |  |  |              |   |  |            |   |  | (6,548,901      | ) |  |          |   |  | (6,548,901  | )
|Balance, December 31, 2006                    |  | 34,560,338   |  |  | 34,560  |  |  | 23,777,517    |   |  | 542         |   |  | (11,699,432     | ) |  |          |   |  | 12,113,187  |  
|Shares issued upon the exercise of warrants   |  | 4,481,749    |  |  | 4,482   |  |  | 8,312,196     |   |  |            |   |  |                |   |  |          |   |  | 8,316,678   |  
|Shares issued upon the exercise of options    |  | 182,000      |  |  | 182     |  |  | 287,918       |   |  |            |   |  |                |   |  |          |   |  | 288,100     |  
|Fair value of stock options granted           |  |             |  |  |        |  |  | 4,997,753     |   |  |            |   |  |                |   |  |          |   |  | 4,997,753   |  
|Foreign currency translation adjustments      |  |             |  |  |        |  |  |              |   |  | (61         | ) |  |                |   |  |          |   |  | (61         | )
|Net loss for the year                         |  |             |  |  |        |  |  |              |   |  |            |   |  | (14,197,366     | ) |  |          |   |  | (14,197,366 | )
|Balance, December 31, 2007                    |  | 39,224,087   |  |  | 39,224  |  |  | 37,375,384    |   |  | 481         |   |  | (25,896,798     | ) |  |          |   |  | 11,518,291  |  
|Shares issued to acquire mineral properties   |  | 5,750,000    |  |  | 5,750   |  |  | 19,084,250    |   |  |            |   |  |                |   |  |          |   |  | 19,090,000  |  
|Shares issued upon the exercise of warrants   |  | 96,100       |  |  | 96      |  |  | 240,154       |   |  |            |   |  |                |   |  |          |   |  | 240,250     |  
|Shares issued upon the exercise of options    |  | 356,300      |  |  | 356     |  |  | 304,669       |   |  |            |   |  |                |   |  |          |   |  | 305,025     |  
|Shares issued pursuant to private placement   |  | 9,865,000    |  |  | 9,865   |  |  | 23,666,135    |   |  |            |   |  |                |   |  |          |   |  | 23,676,000  |  
|Shares issued to settle debt                  |  | 160,900      |  |  | 161     |  |  | 402,089       |   |  |            |   |  |                |   |  |          |   |  | 402,250     |  
|Share issuance costs                          |  |             |  |  |        |  |  | (1,387,219    | ) |  |            |   |  |                |   |  |          |   |  | (1,387,219  | )
|Fair value of stock options granted           |  |             |  |  |        |  |  | 2,681,417     |   |  |            |   |  |                |   |  |          |   |  | 2,681,417   |  
|Foreign currency translation adjustments      |  |             |  |  |        |  |  |              |   |  | (481        | ) |  |                |   |  |          |   |  | (481        | )
|Net loss for the year                         |  |             |  |  |        |  |  |              |   |  |            |   |  | (34,247,199     | ) |  | (949,185  | ) |  | (35,196,384 | )
|Change in non-controlling interest            |  |             |  |  |        |  |  |              |   |  |            |   |  |                |   |  | 1,018,770 |   |  | 1,018,770   |  
|Balance, December 31, 2008                    |  | 55,452,387   |  |  | 55,452  |  |  | 82,366,879    |   |  |            |   |  | (60,143,997     | ) |  | 69,585    |   |  | 22,347,919  |  
|Shares issued upon the exercise of options    |  | 242,500      |  |  | 243     |  |  | 165,882       |   |  |            |   |  |                |   |  |          |   |  | 166,125     |  
|Shares issued pursuant to public offering     |  | 8,500,000    |  |  | 8,500   |  |  | 16,991,500    |   |  |            |   |  |                |   |  |          |   |  | 17,000,000  |  
|Share issuance costs                          |  |             |  |  |        |  |  | (1,634,628    | ) |  |            |   |  |                |   |  |          |   |  | (1,634,628  | )
|Fair value of stock options granted           |  |             |  |  |        |  |  | 922,265       |   |  |            |   |  |                |   |  |          |   |  | 922,265     |  
|Net loss and comprehensive loss for the year  |  |             |  |  |        |  |  |              |   |  |            |   |  | (8,699,154      | ) |  | (701,972  | ) |  | (9,401,126  | )
|Change in non-controlling interest            |  |             |  |  |        |  |  |              |   |  |            |   |  |                |   |  | 686,908   |   |  | 686,908     |  
|Balance, December 31, 2009                    |  | 64,194,887   |  |  | 64,195  |  |  | 98,811,898    |   |  |            |   |  | (68,843,151     | ) |  | 54,521    |   |  | 30,087,463  |  

(The accompanying notes are an integral part of these
  consolidated financial statements)

F-6

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|1. | Nature of Operations                                                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                 
|   | Uranerz Energy Corporation (the Company) was
      incorporated in the State of Nevada, U.S.A. on May 26, 1999. Effective
      July 5, 2005, the Company changed its name from Carleton Ventures Corp. to
      Uranerz Energy Corporation. The Company has mineral property interests in
      Canada and the United States.
|   |                                                                                                                                                                                                                                                                                                                                 
|   | The Company is an Exploration Stage Company, as defined
      by Financial Accounting Standards Board (FASB) Accounting Standards
      Codification (ASC) 915, Development Stage Entities. The Companys
      principal business is the acquisition and exploitation of uranium and
      mineral resources.              
|   |                                                                                                                                                                                                                                                                                                                                 
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                 
|   | a)                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   | c)                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   | d)                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 
|   | e)                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                 

F-7

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|2. | Summary of Significant Accounting Policies
      (continued)
|-- | ------------------------------------------------------------
|   |                                                             
|   | f)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   | g)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   | h)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   | i)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   | j)                                                          
|   |                                                             
|   |                                                             

F-8

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|2. | Summary of Significant Accounting Policies
      (continued)
|-- | ------------------------------------------------------------
|   |                                                             
|   | k)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   | l)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   | m)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   | n)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   | o)                                                          
|   |                                                             
|   |                                                             

F-9

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|2. | Summary of Significant Accounting Policies
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | p)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | Cash, Cash Equivalents and Marketable
      Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | At December 31, 2009 the Company had $29,192,975 (2008 
      $21,253,277) in cash, cash equivalents and marketable securities. Our
      marketable securities consist of $8,766,943 (2008 - $20,432,035) of bank
      guaranteed deposits with terms longer than three months and classified as
      held-to-maturity. Pursuant to ASC 820 the fair value of all of our cash
      equivalents and marketable securities is determined based on Level 1
      inputs, which consist of quoted prices in active markets for identical
      assets. The Company places cash investments in instruments that meet
      credit quality standards, as specified in our investment policy
    guidelines.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4. | Investment in Rolling Hills                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Rolling Hills was formerly a wholly owned subsidiary
      incorporated in Mongolia. On June 18, 2008, the Company disposed of 60% of
      its investment pursuant to the option and joint venture agreement referred
      to in Note 6(d). On August 25, 2008, the Company disposed of its remaining
      40% investment. During the year ended December 31, 2008, the Company
      recognized a gain on the disposal of $979,709.                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | As a result of the Companys disposal of Rolling Hills
      all operations related to the former subsidiary have been classified as
      discontinued operations. Cash flows from discontinued operations were not
      material and were combined with cash flows from continuing operations
      within the consolidated statement of cash flows categories.                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|5. | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                |  |         |  |  |              |  |  | December 31, |  |  | December 31, | 
| | ------------------------------ |  | ------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                |  |         |  |  |              |  |  | 2009         |  |  | 2008         | 
| |                                |  |         |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                                |  | Cost    |  |  | Depreciation |  |  | Value        |  |  | Value        | 
| |                                |  | $       |  |  | $            |  |  | $            |  |  | $            | 
| |                                |  |         |  |  |              |  |  |              |  |  |              | 
| | Computers and office equipment |  | 185,311 |  |  | 95,223       |  |  | 90,088       |  |  | 108,757      | 
| | Field equipment                |  | 733,087 |  |  | 282,196      |  |  | 450,891      |  |  | 533,815      | 
| |                                |  | 918,398 |  |  | 377,419      |  |  | 540,979      |  |  | 642,572      | 

F-10

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|6. | Mineral Properties
|-- | ------------------
|   |                   
|   | a)                
|   |                   
|   | b)                
|   |                   
|   | c)                
|   |                   
|   | d)                
|   |                   
|   | e)                
|   |                   
|   | f)                
|   |                   
|   | g)                
|   |                   
|   | h)                
|   |                   
|   | i)                

F-11

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|6. | Mineral Properties (continued)
|-- | ------------------------------
|   |                               
|   | j)                            

|Prepaid expenses              | $ | 229,247    | 
|----------------------------- | - | ---------- | 
|Mineral property expenditures |   | 24,617,796 | 
|                              |   |            | 
|                              | $ | 24,847,043 | 

| | k) | On August 20, 2008 the Company leased 891 acres of
      mineral properties near the Companys Nichols Ranch project area in
      Wyoming for an advance royalty payment of $22,275.                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                   
| | l) | On August 20, 2008 the Company, on behalf of the Arkose
      Mining Venture, leased 6,073 acres of mineral properties within Arkoses
      area of interest in Wyoming for an advance royalty payment of
      $151,828.                        
| |    |                                                                                                                                                                                                                                                   
| | m) | On September 18, 2008 the Company leased 984 acres of
      mineral properties within the Companys North Reno Creek project area in
      Wyoming.                                                                                               
| |    |                                                                                                                                                                                                                                                   
| | n) | On December 3, 2008 the Company, on behalf of the Arkose
      Mining Venture, leased 1,680 acres of mineral properties within Arkoses
      area of interest in Wyoming for a five year advance royalty payment of
      $83,993.               
| |    |                                                                                                                                                                                                                                                   
| | o) | On July 7, 2009, the Company, on behalf of the Arkose
      Mining Venture, leased 320 acres of mineral properties within Arkoses
      area of interest in Wyoming.                                                                             
| |    |                                                                                                                                                                                                                                                   
| | p) | On August 21, 2009, the Company decided not to pay annual
      maintenance fees totaling $58,380 for 285 100% owned mining claims and 132
      mining claims with an 81% interest that are no longer of strategic
      interest to the Company.

|7. | Balance Sheet Details
|-- | ---------------------

| | a) | The components of prepaid expenses are as
      follows:
| | -- | --------------------------------------------------------

| |                              |  | December 31, |  |  | December 31, | 
| | ---------------------------- |  | ------------ |  |  | ------------ | 
| |                              |  | 2009         |  |  | 2008         | 
| |                              |  | $            |  |  | $            | 
| |                              |  |              |  |  |              | 
| | Deposits                     |  | 37,000       |  |  | 37,000       | 
| | Insurance                    |  | 82,929       |  |  | 92,092       | 
| | Lease costs                  |  | 560,023      |  |  | 505,564      | 
| | Other                        |  | 8,672        |  |  | 6,559        | 
| | Surface use and damage costs |  | 45,219       |  |  |             | 
| |                              |  |              |  |  |              | 
| | Total prepaid expenses       |  | 733,843      |  |  | 641,215      | 

| | b) | The components of accrued liabilities are as
      follows:
| | -- | -----------------------------------------------------------

| |                                    |  | December 31, |  |  | December 31, | 
| | ---------------------------------- |  | ------------ |  |  | ------------ | 
| |                                    |  | 2009         |  |  | 2008         | 
| |                                    |  | $            |  |  | $            | 
| |                                    |  |              |  |  |              | 
| |                                    |  |              |  |  |              | 
| | Reclamation costs                  |  | 75,540       |  |  | 228,800      | 
| | Mineral
      exploration expenses |  | 388,325      |  |  |             | 
| |                                    |  |              |  |  |              | 
| | Total accrued
      liabilities    |  | 463,865      |  |  | 228,800      | 

F-12

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|8. | Loan Payable
|-- | ------------

| |                                                                                                                    |   | December 31, |   |   | December 31, |  
| | ------------------------------------------------------------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
| |                                                                                                                    |   | 2009         |   |   | 2008         |  
| | Loan payable to vendor, interest imputed at
      8% per annum, maturing June 2010, and secured by field equipment | $ | 18,079       |   | $ | 52,146       |  
| |                                                                                                                    |   |              |   |   |              |  
| | Less current portion:                                                                                              |   | (18,079      | ) |   | (34,067      | )
| |                                                                                                                    |   |              |   |   |              |  
| |                                                                                                                    | $ |             |   | $ | 18,079       |  

|9. | Related Party Transactions / Balances
|-- | -------------------------------------
|   |                                      
|   | a)                                   
|   |                                      
|   | b)                                   
|   |                                      
|   | c)                                   
|   |                                      
|   | d)                                   
|   |                                      
|   | e)                                   
|   |                                      
|   | f)                                   
|   |                                      
|   | g)                                   
|   |                                      
|   | h)                                   
|   |                                      
|   | i)                                   

F-13

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|10. | Common Stock                                                  
|--- | --------------------------------------------------------------
|    |                                                               
|    | Share transactions for the year ended December 31,
      2009:
|    |                                                               
|    | a)                                                            
|    |                                                               
|    | b)                                                            
|    |                                                               
|    | c)                                                            
|    |                                                               
|    | a)                                                            

Share transactions for the year ended
  December 31, 2008:

| | a) | In January, 2008 the Company issued 270,000 shares of
      common stock pursuant to the exercise of common share purchase options for
      proceeds of $202,500.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | b) | In January, 2008 the Company issued 5,750,000 shares of
      common stock with a fair value of $19,090,000 for the acquisition of
      mineral properties. The Company incurred share issuance costs of $75,654.
      Refer to Note 6(j).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | c) | In March, 2008 the Company issued 96,100 shares of common
      stock pursuant to the exercise of common share purchase warrants for
      proceeds of $240,250.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | d) | In March, 2008 the Company issued 160,900 shares of
      common stock with a fair value of $402,250 to settle $402,250 owed to a
      Director of the Company. Refer to Note 7(a).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | e) | In March, 2008 the Company issued 16,300 shares of common
      stock pursuant to the exercise of common share purchase options for
      proceeds of $12,225.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | f) | In April, 2008 the Company completed a private placement
      of 9,865,000 units, comprised of 9,865,000 common shares and 4,932,498
      common share purchase warrants, at $2.40 per unit for gross proceeds of
      $23,676,000. Each warrant entitles the holder to purchase one common share
      for $3.50 for a two year period ending April 15, 2010. The Company paid
      cash commissions of $1,100,640 and 120,000 warrants to purchase 120,000
      common shares at $2.60 per share exercisable for a one year period ending
      April 15, 2009. The Company incurred share issuance costs in connection
      with the private placement of $1,347,098 including agents warrants with a
      fair value of $68,041.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | g) | In June, 2008 the Company issued 50,000 shares of common
      stock pursuant to the exercise of stock options for proceeds of
      $37,500.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | h) | In August, 2008 the Company issued 20,000 shares of
      common stock pursuant to the exercise of common share purchase options for
      proceeds of $52,800.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Share transactions for the year ended
  December 31, 2007:

| | a) | During January, February and March 2007, the Company
      issued 4,481,749 shares of common stock, pursuant to the exercise of
      common share purchase warrants, for proceeds of $8,316,678.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                  
| | b) | In January 2007, the Company issued 10,000 shares of
      common stock, pursuant to the exercise of stock options, for proceeds of
      $7,500.                                                
| |    |                                                                                                                                                                                                  
| | c) | In May 2007, the Company issued 32,000 shares of common
      stock, pursuant to the exercise of stock options, for proceeds of
      $28,900.                                                   
| |    |                                                                                                                                                                                                  
| | d) | In June 2007, the Company issued 75,000 shares of common
      stock, pursuant to the exercise of stock options, for proceeds of
      $117,500.                                                 
| |    |                                                                                                                                                                                                  
| | e) | In September 2007, the Company issued 45,000 shares of
      common stock, pursuant to the exercise of stock options, for proceeds of
      $95,000.                                             
| |    |                                                                                                                                                                                                  
| | f) | In October 2007, the Company issued 20,000 shares of
      common stock, pursuant to the exercise of stock options, for proceeds of
      $39,200.                                               

F-14

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|11. | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company adopted a Stock Option Plan dated November 7,
      2005 under which the Company is authorized to grant stock options to
      acquire up to a total of 10,000,000 shares of common stock. No options
      shall be issued under the Stock Option Plan at a price per share less than
      the defined Market Price. On June 11, 2008, the Company modified the Stock
      Option Plan to define Market Price as the volume weighted average trading
      price of the Companys common shares on the Toronto Stock Exchange or
      American Stock Exchange, whichever has the greater trading volume for the
      five trading days before the date of grant. At December 31, 2009, the
      Company had 3,129,860 shares of common stock available to be issued under
      the Plan.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | During the year ended December 31, 2009, the Company
      granted 1,502,500 stock options with immediate vesting to directors,
      officers, employees and consultants to acquire 1,327,500 common shares at
      an exercise price of $0.65 per share for 2 - 7 years, 100,000 common
      shares at an exercise price of $2.07 per share for 10 years and 75,000
      common shares at an exercise price of $1.37 for 2 years. During the year
      ended December 31, 2009, the Company recorded stock-based compensation for
      the vested options of $922,265, as general and administrative
      expense.                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | During the year ended December 31, 2008, the Company
      granted stock options to directors, officers, employees and consultants to
      acquire 1,063,000 common shares at exercise prices from $2.13 to $3.22 per
      share exercisable for 5 years and recorded stock-based compensation for
      the vested options of $2,681,417, as general and administrative
      expense.                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | During the year ended December 31, 2007, the Company
      granted stock options with immediate vesting to directors, officers,
      employees and consultants to acquire 1,920,000 common shares at exercise
      prices from $2.71 of $4.73 per share exercisable for 5 years and recorded
      stock-based compensation for the vested options of $4,922,613, as general
      and administrative expense.                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The fair value for stock options granted was estimated at
      the date of grant using the Black-Scholes option-pricing model and the
      weighted average fair value of stock options granted during the year ended
      December 31, 2009, 2008 and 2007 was $0.60, $2.20 and $2.97 per share,
      respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The weighted average assumptions used are as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                                 |  |              |  |  | Years Ended  |  |  |              | 
| | ------------------------------- |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                 |  | December 31, |  |  | December 31, |  |  | December 31, | 
| |                                 |  | 2009         |  |  | 2008         |  |  | 2007         | 
| |                                 |  |              |  |  |              |  |  |              | 
| | Expected dividend yield         |  | 0%           |  |  | 0%           |  |  | 0%           | 
| | Risk-free interest rate         |  | 1.34%        |  |  | 2.94%        |  |  | 4.7%         | 
| | Expected volatility             |  | 1.29%        |  |  | 134%         |  |  | 168%         | 
| | Expected option life (in years) |  | 3.89         |  |  | 4.14         |  |  | 3.1          | 

The total intrinsic value of stock
  options exercised during the year ended December 31, 2009, 2008 and 2007, was
  $276,400, $641,954 and $592,730 respectively.

F-15

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|11. | Stock Based Compensation (continued)                                               
|--- | -----------------------------------------------------------------------------------
|    |                                                                                    
|    | The following table summarizes the continuity of the
      Companys stock options:

| |                                      |  |           |   |  |          |  |  | Weighted-    |  |  |           | 
| | ------------------------------------ |  | --------- | - |  | -------- |  |  | ------------ |  |  | --------- | 
| |                                      |  |           |   |  | Weighted |  |  | Average      |  |  |           | 
| |                                      |  |           |   |  | Average  |  |  | Remaining    |  |  | Aggregate | 
| |                                      |  | Number of |   |  | Exercise |  |  | Contractual  |  |  | Intrinsic | 
| |                                      |  | Options   |   |  | Price    |  |  | Term (years) |  |  | Value     | 
| |                                      |  |           |   |  | $        |  |  |              |  |  | $         | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2006       |  | 2,545,000 |   |  | 1.01     |  |  |              |  |  |           | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Granted                              |  | 1,920,000 |   |  | 3.26     |  |  |              |  |  |           | 
| | Exercised                            |  | (182,000  | ) |  | 1.58     |  |  |              |  |  |           | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2007       |  | 4,283,000 |   |  | 2.00     |  |  |              |  |  |           | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Granted                              |  | 1,063,000 |   |  | 2.64     |  |  |              |  |  |           | 
| | Cancelled                            |  | (150,000  | ) |  | 3.36     |  |  |              |  |  |           | 
| | Exercised                            |  | (356,300  | ) |  | 0.86     |  |  |              |  |  |           | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2008       |  | 4,839,700 |   |  | 2.18     |  |  |              |  |  |           | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Granted                              |  | 1,502,500 |   |  | 0.78     |  |  |              |  |  |           | 
| | Forfeited                            |  | (150,000  | ) |  | 2.61     |  |  |              |  |  |           | 
| | Exercised                            |  | (242,500  | ) |  | 0.69     |  |  |              |  |  |           | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding,
      December 31, 2009 |  | 5,949,700 |   |  | 1.88     |  |  | 2.71         |  |  | 1,559,035 | 
| |                                      |  |           |   |  |          |  |  |              |  |  |           | 
| | Exercisable, December 31, 2009       |  | 5,822,700 |   |  | 1.87     |  |  | 2.62         |  |  | 1,559,035 | 

A summary of the status of the Companys non-vested stock options as of December 31, 2009, and changes during the years ended December 31, 2009, 2008 and 2007 is presented below:

|                                      |  |            |   |  | Weighted   | 
|------------------------------------- |  | ---------- | - |  | ---------- | 
|                                      |  |            |   |  | Average    | 
|                                      |  | Number of  |   |  | Grant Date | 
|Non-vested stock options              |  | Options    |   |  | Fair Value | 
|                                      |  |            |   |  | $          | 
|                                      |  |            |   |  |            | 
|Non-vested at January 1, 2007         |  |           |   |  |           | 
|                                      |  |            |   |  |            | 
|Granted                               |  | 1,920,000  |   |  | 2.97       | 
|Vested                                |  | (1,595,000 | ) |  | 2.95       | 
|                                      |  |            |   |  |            | 
|Non-vested at December 31, 2007       |  | 325,000    |   |  | 3.14       | 
|                                      |  |            |   |  |            | 
|Granted                               |  | 1,063,000  |   |  | 2.20       | 
|Vested                                |  | (1,229,500 | ) |  | 2.36       | 
|                                      |  |            |   |  |            | 
|Non-vested at December 31,
      2008 |  | 158,500    |   |  | 2.86       | 
|                                      |  |            |   |  |            | 
|Granted                               |  | 1,502,500  |   |  | 0.78       | 
|Vested                                |  | (1,529,000 | ) |  | 0.77       | 
|Forfeited                             |  | (5,000     | ) |  | 2.89       | 
|                                      |  |            |   |  |            | 
|Non-vested at December 31, 2009       |  | 127,000    |   |  | 1.33       | 

As at December 31, 2009, there was
  $111,937 of total unrecognized compensation cost related to non-vested stock
  option agreements. That cost is expected to be recognized over a weighted
  average period of 0.77 years.

F-16

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|12. | Stock Purchase Warrants
|--- | -----------------------

| | a) | On October 27, 2009, as part of a registered financing
      (Note 10(d)), the Company issued 4,250,000 common share purchase warrants
      exercisable for $3.00 per share during the thirty month period ending
      April 27, 2012.                                                                                                                                                                                                                                                                                                                                                                      
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | b) | On April 15, 2008, as part of a private placement, the
      Company issued 4,932,498 common share purchase warrants exercisable for
      $3.50 per share during the twenty-four month period ending April 15,
      2010.                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | c) | On April 15, 2008 the Company issued 120,000 Agents common share purchase warrants (see Note 10(f)), exercisable for $2.60 per share during the twelve month period ending April 15, 2009. The fair value of these Agents warrants issued was estimated at the date of grant to be $68,041 ($0.57 each) using the Black-Scholes option-pricing model assuming an expected life of 1 year, a risk-free rate of 1.70%, an expected volatility of 83% and no expected dividends. The fair value of these share purchase warrants was recorded as stock issue costs.                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | d) | On March 3, 2008, 96,100 share purchase warrants were exercised and 96,100 common shares were issued for cash proceeds of $240,250.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | e) | On February 1, 2007, the Company issued 50,000 share purchase warrants to a consultant, exercisable at $3.69 per share on or before February 1, 2008. The fair value of warrants issued was estimated at the date of grant to be $75,140 ($1.50 each) using the Black-Scholes option-pricing model assuming an expected life of 1 year, a risk-free rate of 4.86%, an expected volatility of 103% and no expected dividends During the year ended December 31, 2008, the Company recorded stock-based compensation of $6,262 (2007 - $68,878) as general and administrative expense related to these warrants.

A summary of the changes in the
  Companys common share purchase warrants is presented below:

|                           |  |           |   |  | Weighted Average | 
|-------------------------- |  | --------- | - |  | ---------------- | 
|                           |  | Number    |   |  | Exercise Price   | 
|                           |  |           |   |  | $                | 
|Balance, December 31, 2007 |  | 166,100   |   |  | 2.86             | 
|Issued                     |  | 5,052,498 |   |  | 3.48             | 
|Exercised                  |  | (96,100   | ) |  | 2.50             | 
|Expired                    |  | (70,000   | ) |  | 3.35             | 
|Balance December 31, 2008  |  | 5,052,498 |   |  | 3.48             | 
|Expired                    |  | (120,000  | ) |  | 2.60             | 
|Issued                     |  | 4,250,000 |   |  | 3.00             | 
|Balance December 31, 2009  |  | 9,182,498 |   |  | 3.27             | 

As at December 31, 2009, the following
  common share purchase warrants were outstanding:

|Number of Warrants | Exercise Price | Expiry Date   
|------------------ | -------------- | --------------
|                   | $              |               
|4,250,000          | 3.00           | April 27, 2012
|4,932,498          | 3.50           | April 15, 2010
|                   |                |               
|9,182,498          |                |               

F-17

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|13. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|14. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company has adopted the provisions of ASC 740, Income Taxes. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in the consolidated financial statements because the Company cannot be assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company has approximately $16,139,493 of net operating losses to carry forward which are available to offset taxable income in future years which expire through fiscal 2028. For the years ended December 31, 2009, 2008 and 2007 the valuation allowance established against the deferred tax assets increased by $2,879,107, $11,299,163, and $3,442,858 respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The components of the net deferred tax asset at December
      31, 2009, 2008, and 2007, the statutory tax rate, the effective tax rate,
      and the amount of the valuation allowance are indicated
      below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                    |   | December 31, |   |   | December 31, |   |   | December 31, |  
| | ---------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
| |                                    |   | 2009         |   |   | 2008         |   |   | 2007         |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Loss before taxes                  | $ | (8,699,154   | ) | $ | (34,247,199  | ) | $ | (14,197,366  | )
| | Statutory rate                     |   | 35%          |   |   | 35%          |   |   | 35%          |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Computed expected tax (recovery)   | $ | (3,044,704   | ) | $ | (11,986,520  | ) | $ | (4,969,078   | )
| | Stock-based compensation           |   | 322,793      |   |   | 938,496      |   |   | 1,517,262    |  
| | Joint venture chargeback           |   | (166,268     | ) |   | (251,140     | ) |   |             |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Miscellaneous                      |   |             |   |   |             |   |   | 8,958        |  
| | Increase in valuation allowance:   |   |              |   |   |              |   |   |              |  
| | Net operating loss                 |   | 1,215,744    |   |   | 622,297      |   |   | 989,919      |  
| | Exploration and development        |   | 4,672,435    |   |   | 1,980,401    |   |   |             |  
| | Mineral property acquisition costs |   |             |   |   | 8,696,466    |   |   | 2,452,939    |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Reported income
      taxes        | $ |             |   | $ |             |   | $ |             |  

F-18

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|14. | Income Taxes
|--- | ------------

| |                                                                   |   | December 31, |   |   | December 31, |   |   | December 31, |  
| | ----------------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
| |                                                                   |   | 2009         |   |   | 2008         |   |   | 2007         |  
| |                                                                   |   |              |   |   |              |   |   |              |  
| | Deferred tax asset                                                |   |              |   |   |              |   |   |              |  
| | - Net operating losses                                            | $ | 5,648,823    |   | $ | 3,700,530    |   | $ | 3,078,233    |  
| | - Mineral property acquisition, exploration
      and development |   | 15,347,332   |   |   | 13,674,897   |   |   | 2,998,031    |  
| | - Less valuation
      allowance                                  |   | (20,996,155  | ) |   | (17,375,427  | ) |   | (6,076,264   | )
| |                                                                   |   |              |   |   |              |   |   |              |  
| | Net deferred tax
      asset                                      | $ |             |   | $ |             |   | $ |             |  

The Company has incurred operating losses of approximately $16,139,493 which, if unutilized, will expire through to 2029. Future tax benefits, which may arise as a result of these losses, have not been recognized in these consolidated financial statements, and have been offset by a valuation allowance. The following table lists the fiscal year in which the loss was incurred and the expiration date of the loss.

|     |   | Net        |  |  | Expiration | 
|---- | - | ---------- |  |  | ---------- | 
|     |   | Loss       |  |  | Date       | 
|     |   |            |  |  |            | 
|1999 | $ | 329        |  |  | 2019       | 
|2000 |   | 493        |  |  | 2020       | 
|2001 |   | 18,389     |  |  | 2021       | 
|2002 |   | 46,564     |  |  | 2022       | 
|2003 |   | 23,560     |  |  | 2023       | 
|2004 |   | 18,367     |  |  | 2024       | 
|2005 |   | 4,420,398  |  |  | 2025       | 
|2006 |   | 1,438,511  |  |  | 2026       | 
|2007 |   | 2,828,339  |  |  | 2027       | 
|2008 |   | 3,870,989  |  |  | 2028       | 
|2009 |   | 3,473,554  |  |  | 2029       | 
|     |   |            |  |  |            | 
|     | $ | 16,139,493 |  |  |            | 

|15. | Segment Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company has two operating segments both involving the
      acquisition and exploitation of uranium and mineral resources. These
      operating segments consist of the Arkose Joint Venture (Arkose) and the
      Companys remaining operations.                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Factors used to identify the Companys reportable
      segments include the organizational structure of the Company and the
      financial information available for evaluation by the chief operating
      decision-maker in making decisions about how to allocate resources and
      assess performance. The Companys operating segments have been broken out
      based on similar economic and other qualitative criteria. The Company
      operates both reporting segments in one geographical area, the United
      States.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Chief Executive Officer is the Companys Chief
      Operating Decision Maker (CODM) as defined by ASC 280, Segment
        Reporting. The CODM allocates resources and assesses the performance
      of the Company based on the results of operations.                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Prior to the year ended December 31, 2008, the Company
      only had one operating segment. Financial statement information by
      operating segment for the years ended December 31, 2009 and 2008 is
      presented below:                                                                                                                                                                                                                                                                                                           

|                 |  | December 31, 2009 |  
|---------------- |  | ----------------- | -
|                 |  | Total             |  
|                 |  | $                 |  
|                 |  |                   |  
|Assets           |  | 30,810,289        |  
|                 |  |                   |  
|Net loss         |  | (8,699,154        | )
|Interest expense |  | (2,941            | )
|Interest revenue |  | 155,402           |  
|Depreciation     |  | (175,877          | )

F-19

---

Uranerz Energy Corporation 
  (An Exploration Stage Company) 
  Notes to the Consolidated Financial Statements 
  December 31, 2009 
  (Expressed in US dollars)

|15. | Segment Disclosures
      (continued)
|--- | -------------------------------------

|                                            |  | December 31, 2008 |  
|------------------------------------------- |  | ----------------- | -
|                                            |  | Total             |  
|                                            |  | $                 |  
|                                            |  |                   |  
|Assets                                      |  | 22,865,737        |  
|                                            |  |                   |  
|Net loss                                    |  | (34,247,199       | )
|Interest expense                            |  | (5,551            | )
|Interest revenue                            |  | 610,408           |  
|Depreciation                                |  | (129,268          | )
|Gain on disposal of discontinued operations |  | 979,709           |  
|Loss from discontinued operations           |  | (2,632            | )

|16. | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                          
|    | In accordance with ASC Topic 855-10, Subsequent Events 
      Overall, the Company evaluated subsequent events through March 10, 2010, the date of issuance of the financial
      statements. During this period we did not have any material recognizable
      subsequent events, except as disclosed below.                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                          
|    | In January 2010, the Company granted 702,500 stock
      options to directors, officers, employees and consultants at an exercise
      price of $1.33 per share expiring from January 5, 2015 to January 5,
      2020.                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                          
|    | In March 2010, the Company extended the expiry periods of
      5,286,700 of its outstanding options held by employees and directors. The
      expiry period of each such option was extended to a period of ten years
      from the original grant date. All other terms of such options, including
      the exercise price, remain unchanged from those of the original
      grant.

F-20

---

Supplemental Financial Information ($,000)

|2009                                      |  |   | 4th Quarter |   |   | 3rd Quarter |   |   | 2nd Quarter |  |   | 1st Quarter |  
|----------------------------------------- |  | - | ----------- | - | - | ----------- | - | - | ----------- |  | - | ----------- | -
|Revenue                                   |  | $ | -           |   | $ | -           |   | $ | -           |  | $ | -           |  
|Net profit (loss)                         |  | $ | (2,977      | ) | $ | (2,549      | ) | $ | (1,887}     |  | $ | (1,987      | )
|Basic and diluted profit (loss) per share |  |   | (0.05       | ) |   | (0.05       | ) |   | (0.03       |  |   | (0.04       | )

|2008                                      |  |   | 4th Quarter |   |   | 3rd Quarter |   |   | 2nd Quarter |   |   | 1st Quarter |  
|----------------------------------------- |  | - | ----------- | - | - | ----------- | - | - | ----------- | - | - | ----------- | -
|Revenue                                   |  | $ | -           |   | $ | -           |   | $ | -           |   | $ | -           |  
|Net profit (loss)                         |  | $ | (2,085      | ) | $ | (2,363      | ) | $ | (1,452      | ) | $ | (28,319     | )
|Basic and diluted profit (loss) per share |  |   | (0.04       | ) |   | (0.04       | ) |   | (0.03       | ) |   | (0.64       | )

61

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ITEM 8.CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 8A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

During the period covered by this Annual Report on Form 10-K for the fiscal year ended December 31, 2009, an evaluation was carried out under the supervision of and with the participation of the Companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operations of the Companys disclosure controls and procedures (as defined in Rule 13a  15(e) and Rule 15d  15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO have concluded that as of the end of the period covered by this report, the Companys disclosure controls and procedures were adequately designed and effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms; and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

Internal Control over Financial Reporting

Managements Report on Internal Control over Financial
Reporting

The Companys management is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation and fair
presentation of financial statements for external purposes in accordance with
generally accepted accounting principles.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the design and operation
of the Companys internal control over financial reporting as of December 31,
2009, based on the criteria set forth in Internal Control  Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This evaluation included review of the documentation of controls, evaluation of
the design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation,
management has concluded that the Companys internal control over financial
reporting was effective as of December 31, 2009 and no material weaknesses were
discovered.

The effectiveness of internal control over financial reporting
as of December 31, 2009 has been audited by Manning Elliott LLP, the independent
registered public accounting firm that audited the Companys financial
statements included in this Annual Report.

62

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The Companys independent registered public accounting firm, Manning Elliott LLP, has issued an attestation report on the Companys internal control over financial reporting.

Attestation Report of the Independent Registered Public
Accounting Firm

logo

Report of Independent Registered Public Accounting Firm



To the Directors and Stockholders 
  Uranerz Energy
  Corporation 
  (An Exploration Stage Company)

We have audited Uranerz Energy Corporations internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Uranerz Energy Corporations management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Uranerz Energy Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Uranerz Energy Corporation as of December 31, 2009 and 2008, and the related consolidated statements of operations, cash flows, and stockholders equity for each of the three years in the period ended December 31, 2009 and accumulated from May 26, 1999 (Date of Inception) to December 31, 2009 and our report dated March 10, 2010 expressed an unqualified opinion thereon.

/s/ MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 10, 2010



Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial
reporting identified in connection with the above-referenced evaluation by
management of the effectiveness of our internal control over financial reporting
that occurred during the fourth quarter ended December 31, 2009, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 8B. OTHER INFORMATION.

None

PART III

ITEM 9.DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE

Reference is made to the information set forth under the
captions Election of Directors and Executive Officers in our definitive
proxy statement to be filed with the Securities and Exchange commission pursuant
to Regulation 14A, which information is incorporated by reference to this Annual
Report on Form 10-K.

Code of Ethics

We have adopted a Corporate Code of Ethics administered by our Chief Financial Officer, Benjamin Leboe. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct, to provide full, fair, accurate, timely and understandable disclosure in public reports, to comply with applicable laws, to ensure prompt internal reporting of code violations, and to provide accountability for adherence to the code. Our code of ethics provides written standards that are reasonably designed to deter wrongdoing and to promote:

- Honest and ethical conduct, including the ethical handling of actual or
  apparent conflicts of interest between personal and professional
  relationships;
- Full, fair, accurate, timely and understandable disclosure in reports and
  documents that are filed with, or submitted to, the SEC and in other public
  communications made by an issuer;
- Compliance with applicable governmental laws, rules and regulations;
- The prompt internal reporting of violations of the code to an appropriate
  person or persons identified in the code; and
- Accountability for adherence to the code.

Our Code of Ethics is available at our website at www.uranerz.com. We intend to disclose any waiver from a provision of our code of ethics that applies to any of our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions that relates to any element of our Code of Ethics on our website. No waivers were granted from the requirements of our Code of Ethics during the year ended December 31, 2009, or during the subsequent period from January 1, 2010, through the date of this report.

63

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ITEM 10.EXECUTIVE COMPENSATION

Reference is made to the information set forth under the
captions Election of Directors and Executive Officers in our definitive
proxy statement to be filed with the Securities and Exchange commission pursuant
to Regulation 14A, which information is incorporated by reference to this Annual
Report on Form 10-K.

ITEM 11.SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Reference is made to the information set forth under the
captions Security Ownership of Principal Shareholders and Management in our
definitive proxy statement to be filed with the Securities and Exchange
commission pursuant to Regulation 14A, which information is incorporated by
reference to this Annual Report on Form 10-K.

ITEM 12.CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE

Reference is made to the information set forth under the
caption Certain Transactions in our definitive proxy statement to be filed
with the Securities and Exchange commission pursuant to Regulation 14A, which
information is incorporated by reference to this Annual Report on Form 10-K.

ITEM 13.PRINCIPAL ACCOUNTANT FEES AND
SERVICES

Reference is made to the information set forth under the
captions Audit Committee Report in our definitive proxy statement to be filed
with the Securities and Exchange commission pursuant to Regulation 14A, which
information is incorporated by reference to this Annual Report on Form 10-K

PART IV

ITEM 14.EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES

Documents Filed as Part of This Report.

|(1) | Financial Statements
|--- | --------------------
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     
|    |                     

64

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(2) Financial Statement Schedules

Schedules are omitted and are not applicable or not required,
or the required information is shown in the financial statements or notes
thereto.

(3) Exhibits

Where an exhibit is filed by incorporation by reference to a
previously filed registration statement or report, such registration statement
or report is identified in parentheses.

|Exhibit |                                                                                                                                                                                                            
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                
|3.1     | Articles of
      Incorporation (1)                                                                                                                                                                        
|3.2     | Bylaws, as amended (1)                                                                                                                                                                                     
|3.3     | Articles of
      Amendment filed July 5, 2005 (3)                                                                                                                                                         
|3.4     | Articles of Amendment filed
      August 8, 2008(16)                                                                                                                                                       
|3.5     | Articles of Amendment filed July 8, 2009(17)                                                                                                                                                               
|4.1     | Share Certificate(1)                                                                                                                                                                                       
|4.2     | Form of Lock-up Agreement(19)                                                                                                                                                                              
|4.3     | Warrant Indenture, dated October 27, 2009(20)                                                                                                                                                              
|4.4     | Supplemental Warrant Indenture, dated December 8,
      2009(21)                                                                                                                                           
|10.1    | Office and Administration Services Agreement between the
      Company and Senate Capital Group Inc. dated September 1, 2005 (2)                                                                           
|10.2    | Agreement for Services between the Company and Highlands
      Capital, Inc. dated November 1, 2005 (2)                                                                                                    
|10.3    | Financial Public Relations Agreement between the Company
      and Accent Marketing Ltd. dated November 1, 2005 (2)                                                                                        
|10.4    | Mineral Property Purchase Agreement between the Company
      and Ubex Capital Inc. dated April 26, 2005 (2)                                                                                               
|10.5    | Joint Venture Agreement between the Company and Triex
      Minerals Corporation dated November 4, 2005 (2)                                                                                                
|10.6    | Consulting Agreement between the Company and Ubex Capital
      Inc. for management and consulting services (2)                                                                                            
|10.7    | Consulting Agreement between Catchpole Enterprises and
      the Company (3)                                                                                                                               
|10.8    | Joint Venture Agreement between the Company and Bluerock
      Resources Ltd. (3)                                                                                                                          
|10.9    | Option and Purchase Agreement for federal mining claims
      in Wyoming (3)                                                                                                                               
|10.10   | Agreement to Purchase ten mining claims in Wyoming
      (3)                                                                                                                                               
|10.11   | 2005 Stock Option Plan as amended June 10, 2009 (17)                                                                                                                                                       
|10.12   | Mr. George Hartman letter agreement. (3)                                                                                                                                                                   
|10.13   | Black Range Minerals Agreement dated June 7, 2006
      (5)                                                                                                                                                
|10.14   | Amendment to Joint Venture Agreement dated September 12,
      2006 between the Company and Bluerock Resources Ltd. (6)                                                                                    
|10.15   | Agreement dated February 1, 2007 between the Company and
      Robert C. Shook to acquire three projects separate uranium projects
      located in northeast Wyoming, in central Powder River Basin (7)(8)
|10.16   | Consulting Agreement dated February 1, 2007 between the
      Company and O & M Partners, LLC (7) (8)                                                                                                      
|10.17   | Christensen Ranch Agreement dated October 30, 2006
      between the Company and George Hartman (9) (10)                                                                                                   
|10.18   | Amendment Agreement dated January 1, 2007 between the
      Company and Ubex Capital Inc. (10)                                                                                                             

65

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|Number | Description                                                                                                                                                                                                        
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19  | Amendment Agreement
        dated January 1, 2007 between the Company and Catchpole Enterprises Inc.
        (10)                                                                                                  
|10.20  | Amendment Agreement dated January
        1, 2007 between the Company and Senate Capital Group Inc. (10)                                                                                                           
|10.21  | Purchase and
        Sale Agreement with NAMMCO dated September 19, 2007, as amended (11)
        (12)                                                                                                             
|10.22  | Venture Agreement with United
        Nuclear LLC dated January 15, 2008 (13)                                                                                                                                      
|10.23  | Agreement with
        Independent Management Consultants of British Columbia                                                                                                                                      
|10.24  | Subscription Agreement with Denison
        Mines dated March 27, 2008                                                                                                                                             
|10.25  | Agency Agreement
        with Haywood Securities and Cormark Securities Inc. dated April 15, 2008(14)                                                                                                              
|10.26  | Amendment to Joint Venture Agreement
        dated March 20, 2008 between the Company and Bluerock Resources Ltd. (15)                                                                                             
|10.27  | Amended Hartman
        Letter Agreement effective January 1, 2008(18)                                                                                                                                             
|23.1   | Consent of Manning Elliott LLP,
    independent registered accountants                                                                                                                                             
|31.1   | Certification
        of Chief Executive Officer pursuant to Rule 13a-15(f) of the Exchange
        Act                                                                                                            
|31.2   | Certification
        of Chief Financial Officer pursuant to Rule 13a-15(f) of the Exchange
        Act                                                                                                            
|32.1   | Certification
        of Chief Executive Officer pursuant to Rule 13a or 15(d) of the Exchange
        Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002
|32.2   | Certification
        of Chief Financial Officer pursuant to Rule 13a or 15(d) of the Exchange
        Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002

|(1)  | Previously filed with the Securities and Exchange
      Commission as an exhibit to the Registrants Form SB-2 filed March 15,
      2002
|---- | -----------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Previously filed as an exhibit to the Quarterly Report on
      Form 10-QSB filed November 21, 2005                                      
|(3)  | Previously filed as an exhibit to the Annual Report on
      Form 10-KSB filed April 14, 2006                                            
|(4)  | Filed as an exhibit to our Registration Statement on Form
      S-8 filed with the SEC on November 21, 2005.                             
|(5)  | Previously filed as an exhibit to the Quarterly Report on
      Form 10-QSB filed August 15, 2006                                        
|(6)  | Filed as an exhibit to our Quarterly Report on Form
      10-QSB filed November 13, 2006.                                                
|(7)  | As reported in two separate Current Reports on Form 8-K
      filed on February 8, 2007.                                                 
|(8)  | Previously filed as an exhibit to the Annual Report on
      Form 10-KSB filed April 2, 2006                                             
|(9)  | As in Current Report on Form 8-K filed on November 2,
      2006.                                                                        
|(10) | Filed as an exhibit to our Quarterly Report on Form
      10-QSB filed August 14, 2007.                                                  
|(11) | As reported and filed in Current Report on Form 8-K filed
      on September 24, 2007.                                                   
|(12) | As reported and filed in Current Report on Form 8-K filed
      on January 16, 2008.                                                     
|(13) | Filed as an exhibit to our Annual Report on Form 10-K
      filed on March 17, 2008.                                                     
|(14) | As reported and filed in Current Report on Form 8-K filed
      on April 18, 2008.                                                       
|(15) | Filed as an exhibit to our Quarterly Report on Form 10-Q
      filed May 9, 2008.                                                        
|(16) | Filed as an exhibit to our Quarterly Report on Form 10-Q
      filed August 11, 2008.                                                    
|(17) | Filed as an exhibit to our Registration Statement on Form
      S-3 filed July 9, 2009.                                                  
|(18) | Filed as an exhibit to our Quarterly Report on Form 10-Q
      filed August 10, 2009.                                                    
|(19) | Filed as an exhibit to our Current Report on Form 8-K
      filed October 22, 2009.                                                      
|(20) | Filed as an exhibit to our Current Report on Form 8-K
      filed October 27, 2009.                                                      
|(21) | Filed as an exhibit to our Current Report on Form 8-K
      filed December 8, 2009.                                                      

66

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GLOSSARY OF TECHNICAL TERMS

The following defined technical terms are used in this Annual
Report:

Exploration drilling:drilling done in search of new
mineral deposits or for the possible extensions of existing deposits up to the
time a company decides that sufficient ore reserves are present to justify
commercial development.

FASB:Financial Accounting Standards Board

GAAP:Accounting principles generally accepted in the
United States of America

In-situ recovery (ISR):the recovery, by chemical
leaching, of the uranium component of an ore body without physically extracting
the ore from the ground. ISR mining utilizes injection of appropriate oxidizing
chemicals into an ore-bearing sandstone deposit with extraction by production
wells; also referred to as solution mining.

SEC:Securities and Exchange Commission

SFAS:Statement of Financial Accounting Standards

Uranium:a heavy, naturally radioactive, metallic
element of atomic number 92. Its two principal isotopes are 235U and 238U, of
which the 235U is the necessary component for the nuclear fuel cycle.

Uranium concentrate (yellowcake):a yellowish to
yellow-brownish powder obtained from the chemical processing of uranium ore.
Yellowcake typically contains 70 to 90% U3O8by
weight.

67

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this 2009 Form
10K report to be signed on its behalf by the undersigned, thereunto duly
authorized.

URANERZ ENERGY CORPORATION

|By: | /s/
      Glenn Catchpole                                          | 
|--- | ------------------------------------------------------------------ | 
|    | Glenn Catchpole, President and Principal Executive Officer         | 
|    | Director                                                           | 
|    | Date: March 12, 2010                                               | 
|    |                                                                    | 
|By: | /s/
      Benjamin Leboe                                           | 
|    | Benjamin Leboe, Chief Financial Officer                            | 
|    | Principal Financial Officer and Principal
      Accounting Officer | 
|    | Date: March 12, 2010                                               | 

In accordance with the Securities Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated

|Per: | /s/
      Glenn Catchpole                                | 
|---- | -------------------------------------------------------- | 
|     | Glenn Catchpole, President, Director                     | 
|     | Date: March 12, 2010                                     | 
|     |                                                          | 
|Per: | /s/
      Dennis Higgs                                   | 
|     |                                                          | 
|     | Date: March 12, 2010                                     | 
|     | Dennis Higgs, Executive Chairman, Director               | 
|     |                                                          | 
|Per: | /s/
      Gerhard Kirchner                               | 
|     | Dr. Gerhard Kirchner, Director                           | 
|     | Date: March 12, 2010                                     | 
|     |                                                          | 
|Per: | /s/
      George Hartman                                 | 
|     | George Hartman, Executive Vice President,
      Director | 
|     | Date: March 12, 2010                                     | 
|     |                                                          | 
|Per: | /s/
      Peter Bell                                     | 
|     | Peter Bell, Director,                                    | 
|     | Date: March 12, 2010                                     | 
|     |                                                          | 
|Per: | /s/
      Paul Saxton                                    | 
|     | Paul Saxton, Director                                    | 
|     | Date: March 12, 2010                                     | 
|     |                                                          | 
|Per: | /s/
      Arnold Dyck                                    | 
|     | Arnold Dyck, Director                                    | 
|     | Date: March 12, 2010                                     | 
|     |                                                          | 
|Per: | /s/
      Richard Holmes                                 | 
|     | Richard Holmes, Director                                 | 
|     | Date: March 12, 2010                                     | 

68

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