---

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, 2010OR

[ ] 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 | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|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. [ ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See the
definitions of large accelerated filer, accelerated filer, and smaller
reporting company 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: $60,000,000
|                                                                                                                                                                                                                                                                                                                                                                            
|The number of shares of the Registrants Common Stock
      outstanding as of March 1, 2011 was 75,699,074.                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                            
|Documents Incorporated by Reference: To the extent herein
      specifically referenced in Part III, portions of the Registrants
      Definitive Proxy Statement on Schedule 14A for the 2011 Annual General
      Meeting of Shareholders.                                                                                                                               

---

TABLE OF CONTENTS

|PART 1                                                                                                                           | 3 
|-------------------------------------------------------------------------------------------------------------------------------- | --
|ITEM 1. DESCRIPTION OF BUSINESS                                                                                                  | 3 
|ITEM 1A. RISK FACTORS
      AND UNCERTAINTIES                                                                                    | 7 
|ITEM 1B. UNRESOLVED STAFF COMMENTS                                                                                               | 14
|ITEM 2. DESCRIPTION OF PROPERTIES                                                                                                | 14
|ITEM 3. LEGAL PROCEEDINGS                                                                                                        | 40
|ITEM 3A. EXECUTIVE OFFICERS OF THE COMPANY                                                                                       | 40
|ITEM 4. (Removed and Reserved)                                                                                                   | 43
|PART II                                                                                                                          | 43
|ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY,
        RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 43
|ITEM 6. SELECTED FINANCIAL DATA                                                                                                  | 48
|ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                | 49
|ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                                                          | 55
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                              | 55
|ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    ON ACCOUNTING AND FINANCIAL DISCLOSURE                                 | 55
|ITEM 9A. CONTROLS AND PROCEDURES                                                                                                 | 56
|ITEM 9B. OTHER INFORMATION                                                                                                       | 57
|PART III                                                                                                                         | 57
|ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE                                                              | 57
|ITEM 11. EXECUTIVE COMPENSATION                                                                                                  | 57
|ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                      | 58
|ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    AND DIRECTOR INDEPENDENCE                                            | 58
|ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                  | 58
|PART IV                                                                                                                          | 58
|ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                              | 58
|GLOSSARY OF TECHNICAL TERMS                                                                                                      | 61
|SIGNATURES                                                                                                                       | 62

---

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;
- risks related to 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 2010. In 2007 we filed uranium mining applications for
a project in Wyoming. In 2008 we sold our Mongolian properties and have
terminated exploration in Saskatchewan. We continue to acquire additional
mineral properties and conduct 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. The development of our first mine, Nichols Ranch ISR Uranium Project, is
expected to begin in 2011.

Our Business

We are an exploration stage company engaged in the acquisition,
exploration and, when 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 may also refer to herein 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, and in Texas.

We have applied for mine operating permits on two of our
properties in the Powder River Basin area of Wyoming. We have received the
Wyoming DEQ permits and are currently awaiting the NRC Source Materials License
for developing our 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, 2010:

1. We issued 454,100 common shares upon
the exercise of stock options for gross cash proceeds of $431,915;

2. We completed a public offering of
6,147,446 common shares, for gross cash proceeds of $20,000,000;

---

3. We continued our exploration program
in Wyoming and significantly increased resources reported under NI 43-101
guidelines  see details under the section heading Item 2  Description of
Properties;

4. We continued to advance the
licensing and permitting process to construct and operate in-situ recovery
uranium facilities on our Nichols Ranch and Hank projects;

5. We started the licensing and
permitting process to construct and operate in-situ recovery uranium facilities
on our Jane Dough project;

6. We acquired extensive Geological
Data on our North Reno Creek uranium prospect located in Campbell County,
Wyoming;

7. We acquired the Excalibur/Mountain
West log library of some 15,902 drill logs, drill hole maps and geologic cross
sections for the Pumpkin Buttes area and commenced a detailed assessment of the
data;

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

9. We adopted a Shareholder Rights Plan
designed to ensure that all of the Companys shareholders receive fair and equal
treatment in situations where an unsolicited offer to acquire the Company is
made.

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.

ISR Mining Process

We plan to use the process of in-situ recovery mining, 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) or carbon dioxide, 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.

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 United States Environmental Protection Agency
(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.

Underground Injection Control ("UIC") Permits

The federal Safe Drinking Water Act creates a nationwide regulatory program protecting groundwater. This act is administered by 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 16 to our financial statements under the section heading Item 8. Financial Statements and Supplementary Data below.

Employees

Currently we have sixteen full-time employees, five 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 Corporation          |                        
|----------------------------------- | -----------------------
|Investor Relations                  |                        
|Suite 1410  800 West Pender Street |                        
|Vancouver, BC, Canada V6C 2V6       |                        
|Telephone: 1 800 689 1659           | Email: info@uranerz.com

---

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

ITEM 1A. RISK FACTORS

Stockholders should carefully consider the risks and
uncertainties described below.

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 securities.

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.

---

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.

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 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 spot price of U3O8
  had a high of $51.50 and a low of $42.00. In 2010 the spot price had a
  high of $62.50 and a low of $40.75. The spot price of U3O8
  was approximately $62.25 per pound and the long term price was approximately
  $65.00 per pound in December 2010.

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.

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.

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.

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.

Our 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 may also be dependent upon
using the services of appropriately experienced personnel or entering into
agreements with other companies that can provide such expertise.

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.

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 stock 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 stock 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 stock can also be expected to be subject to volatility resulting from
purely market forces over which we will have no control.

---

Granting of options may negatively impact the value of
our common shares.

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 shares of our common
stock 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.

The value of an investment in our shares of common stock
could decline substantially.

The market price for shares of our common stock has been and
can be expected to remain highly volatile. As a result, shareholders might
experience an extreme variation in the value of their holdings. Trading prices
of many exploration stage companies, including us, have experienced price and
volume fluctuations which have, at times, been seemingly unrelated to the
performance of the companies whose securities were affected.

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.

Beginning in late 2007, the U.S. credit markets began to
experience 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.

---

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 focused on both the exploration and development 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 mining process that uses a leaching solution to
extract uranium from underground ore bodies.

Concurrent with our exploration activities, we are also
preparing the Nichols Ranch Unit for construction of the central processing
plant and well field which is expected to begin in 2011. We applied for and
expect to receive our mine construction and operating permits on two of our
properties in the Powder River Basin area of Wyoming, known as the Nichols Ranch
and Hank Units in 2011. We believe that these properties have the potential,
based on data in our possession, of being developed into commercial ISR uranium
mines. These permits will 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 ISR Uranium Project in December 2007. The status
of our permitting activities is described more fully below under the heading
Nichols Ranch ISR Uranium Project.

Our Wyoming properties totaling 100,337 acres include:

Powder River Basin

- 100% owned properties, which totaled 26,544 acres as of December 31, 2010;
- properties of Arkose Mining Venture, in which we hold an 81% interest,
  which totaled 67,273 acres as of December 31, 2010.

---

Great Divide Basin

- 100% owned properties, which totaled 6,520 acres as of December 31, 2010.

We completed a substantial exploration program on our Powder
River Basin properties in 2010. A total of 312 drill holes and 24 wells were
completed in 2010, representing approximately 241,600 feet of drilling at an
average depth of 719 feet per hole. Uranium trend holes, delineation holes and
wells were drilled utilizing two drill rigs and two electric log probing
units.

The objective of the 2010 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 2010 drilling
program, approximately ten miles of uranium roll front trends were investigated.
The water wells were installed to facilitate environmental data collection for
future project permitting purposes.

Our 2010 drilling program led to the preparation and filing of
two National Instrument 43-101 Technical Reports, which are described in more
detail below under 2010 Drilling Program.

In anticipation of receiving all the approvals necessary to
mine, we have commenced a marketing program for conditional sales of uranium
from our Nichols Ranch ISR Uranium 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 2011 is to:

- continue with our exploration of our Powder River Basin Properties as
  detailed below under 2011 Exploration Program;
- commence construction of our Nichols Ranch ISR Uranium Project; and
- continue the permitting process for our Jane Dough property.

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 may require additional financing in order to
complete construction of our Nichols Ranch ISR Uranium 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 may 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.

---

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 analysis.

Wyoming  Powder River Basin

Our Powder River Basin properties in Wyoming as shown in the
map below:

Uranerz Energy Corporation  Wyoming Property Location 
December 2010

---



Source: Uranerz Energy Corporation 2010

---

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

Powder River Basin Properties

As of December 31, 2010, 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 93,816 acres and consist of a combination of federal mining
claims, state mineral leases and private fee mineral leases. A map showing the
location of our 100% owned Powder River Basin and Arkose Mining Venture
properties is provided below:

---

Uranerz Energy Corporation  Powder River Basin  December
2010



---

Source: Uranerz Energy Corporation 2010

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  December 2010

---



---

Source: Uranerz Energy Corporation 2010

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          | (i)                | Leases            | (Approximate)
|Unpatented Lode Mining Claims | 100%               | 877               | 17,540 acres 
|State Leases                  | 100%               | 7                 | 6,480 acres  
|Fee (private) Mineral Leases  | 100%               | 23                | 2,524 acres  
|Total                         |                    |                   | 26,544 acres 

| | (i) | 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      | 32         | 640                
|North Rolling Pin | 54         | 1,080              
|Hank              | 66         | 1320               
|Nichols Ranch     | 36         | 720                
|Willow Creek      | 11         | 220                
|West North-Butte  | 125        | 2,500              
|East Nichols      | 44         | 880                
|North Nichols     | 107        | 2,140              
|Reno Creek        | 13         | 260                
|TOTAL             | 510        | 10,200             

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

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                    | (i)                | Leases            | (Approximate)
|Unpatented Mineral Lode Claims | 81%                | 2,857             | 46,763 acres 
|State Leases                   | 81%                | 3                 | 2,080 acres  
|Fee (private) Mineral Leases   | 81%                | 70                | 18,430 acres 
|Total                          |                    |                   | 67,273 acres 

|(i) | Subject to royalties, as discussed further
      below.
|--- | -------------------------------------------------------

We completed the acquisition of an undivided 81% interest in
the Arkose Mining Venture (the Venture) mineral properties on January 15,
2008. This acquisition was completed pursuant to a purchase and sale agreement
with the 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 the NAMMCO 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 each of the NAMMCO 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.

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, and Reno Creek projects which
cover approximately 1,673 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 Reno Creek Project has prompted us to
acquire past exploration and development data for this area to support a
National Instrument 43-101 report which was published on October 13, 2010. If
warranted, environmental base line work may begin thereafter with the goal of
submitting an environmental permit application for ISR facilities.

Forfeiture of certain Powder River Basin and Great Divide
Basin interests

During August 2010, we decided to forfeit our interests in
certain mining claims in the Powder River Basin and the Great Divide Basin 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, 2010 when the annual renewal fee would have
become due, were comprised of: 295 claims in which we had held a 100% interest
in the Collins Draw, Eagle, Cyclone Rim, WM, Bison Basin, JS, Divide, C-Line,
and West North Butte project areas and 1269 claims in the Little Butte, South
Collins, East Buck, Kermit, Sand Rock, Cedar Canyon, Lone Bull, Stage, and
Beecher Draw 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 properties 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, Reno Creek Property,
      Campbell County, Wyoming, U.S.A.                     | TREC, Inc., 951 Werner Court
      Suite 395, Casper Wyoming 82601 | October 13, 2010                                  
|                                                                                                  |                                                                    |                                                   
|Technical Report, North Rolling Pin
      Project, Campbell County, Wyoming, U.S.A.               | TREC, Inc., 951 Werner Court
      Suite 395, Casper Wyoming 82601 | June 4, 2010                                      
|                                                                                                  |                                                                    |                                                   
|Technical Report, Doughstick Project,
      Campbell County, Wyoming, U.S.A.                      | TREC, Inc., 951 Werner Court
      Suite 395, Casper Wyoming 82601 | January 26, 2010                                  
|                                                                                                  |                                                                    |                                                   
|Technical Report, South Doughstick
      Property, Campbell and Johnson Counties, Wyoming, U.S.A. | TREC, Inc., 951 Werner Court
      Suite 395, 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, U.S.A.                       | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601 Don R. Woody,
      P.G., Woody Enterprises, 9005 Sypes Canyon Road, Bozeman,
      Montana 58715 | December 9, 2008 
|                                                                                                                        |                                                                                                                                                                          |                  
|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 Don R. Woody,
      P.G., Woody Enterprises, 9005 Sypes Canyon Road, Bozeman,
      Montana 58715 | May 1, 2008      
|                                                                                                                        |                                                                                                                                                                          |                  
|Technical Report on the Arkose Mining
      Venture Project, Campbell and Johnson Counties, Wyoming, U.S.A.             | TREC, Inc., 341 East E
      Street, Suite 200, Casper Wyoming 82601 Don R. Woody,
      P.G., Woody Enterprises, 9005 Sypes Canyon Road, Bozeman,
      Montana 58715 | February 27, 2008
|                                                                                                                        |                                                                                                                                                                          |                  
|Nichols Ranch Uranium Project, Campbell
      and Johnson Counties, Wyoming, U.S.A.                                     | Douglas Beahm, PE, P.G.
      Andrew Anderson, PE, P.G. 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.

---

|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 shareholders 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. Shareholders 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. Shareholders 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.

West North-Butte Satellite Properties

The West North-Butte property covers approximately 1,960 acres
of land and is comprised of 125 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 2,857 unpatented lode
mining claims included in the Arkose Property which comprise 46,763 acres and 70
fee mineral leases and 3 state leases included in the Arkose Property which
comprise 20,510 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 2,857 unpatented lode mining claims, 775 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 U3O8and 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.

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 road
miles southwest of Gillette, Wyoming and 100 road 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 is acceptable with the
exception of during occasional 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.

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

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.

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 Uranium 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.
There was no new drilling activity at Nichols Ranch or Hank during 2010.

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.

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 until 2010 when
Uranerz acquired the Excalibur/Mountain West log library. 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.
Oil and gas wells within aquifers that have been or can be condemned for public
use, are commonly 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.

Exploration Completed by Uranerz

2010 Drilling Program

During 2010 we were engaged in drilling exploration/development
efforts on both our 100% owned Powder River Basin properties and on the Arkose
Mining Venture Powder River Basin properties. The purpose of the 2010 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
2010 drilling program, approximately 10 miles of uranium roll front trends were
investigated.

On our 100% owned properties, 49 delineation holes and one well
were drilled on our Reno Creek properties. The purpose of this drilling was for
confirmation of historic drilling data prior to publishing an independent
National Instrument 43-101 report on the property which was completed on October
13, 2010. At the Uranerz North Rolling Pin property an independent National
Instrument NI 43-101 Technical Report dated June 4, 2010 was published.

In our Jane Dough project area, composed of the Doughstick,
South Doughstick, and North Jane areas, a total of 24 baseline environmental
monitor wells and one exploration hole were drilled. The wells were drilled in
four clusters of four to six wells, with each well completed in a different sand
horizon. The purpose of the well installation program was to collect water
quality and hydrologic data for future mining permit purposes. These wells and
the exploration hole equaled some 10,525 feet of drilling.

During 2010, on Arkose Mining Venture properties, a total of
311 holes were drilled. At Arkoses South Doughstick Extension Property a total
of 52 holes were drilled with targets in the 100 sand. At the Arkose Kermit
project area 57 exploration holes were drilled in the 100 sand with
mineralization found in pod-like structures. Drilling was also conducted at the
East Buck project area with 202 exploration holes drilled. Targets were in the
100 through the 130 sands.

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. During the 2009 drilling program,
approximately 11.5 miles of uranium roll front trends were investigated.

---

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.

Additional drilling was carried out on the Companys 100% owned
Doughstick properties, which lead to the preparation of a combined National
Instrument Report 43 - 101, 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.

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.

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. 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.

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.

2011 Exploration/ Development Program

For 2011, the Arkose Mining Venture plans to utilize two drill
rigs and one 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 to finish exploration that was started in 2010. New drilling is also
planned in the southern portion of the Arkose property. Drilling in the southern
area would be largely greenfield with wide space holes to explore for and
bracket uranium trends encountered at depths up to 1000 feet. On Uranerz 100%
properties, confirmation drilling will be conducted in preparation of completing
a NI 43-101 report on the Collins Draw property.

During 2011, the Uranerz plan for the development of production
and monitor wells at Nichols Ranch, Mining Area 1 (MA1) will be undertaken. The
plan includes a year-long drilling program beginning after the NRC Materials
License has been issued. This work will require up to six contract drill rigs,
existing company electric logging unit, cementing unit, backhoe, a cement mix
truck, a cement storage silo, air compressor for well development, a pump
pulling unit, a staff of 12 new field personnel to conduct cementing, well
equipment installation, and other surface facilities.

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 well field installation includes drilling, casing,
cementing, well development, pump, wire, drop pipe, oxygen 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 556 wells are planned
to be installed including 75 perimeter monitor wells, 263 injection wells, 218
recovery wells, and 241 DNCs. Most of Mining Area 1 wells should be installed
during 2011.

Nichols Ranch ISR Uranium 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 initial production
level from these two properties is planned to be in the range of 600,000 to
800,000 pounds per year of uranium (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 detailed engineering is complete and
the project is ready to be bid for construction.

Preliminary Assessment

We obtained a preliminary assessment or scoping study of the
Nichols Ranch ISR Uranium 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 Uranium Project

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

Uranerz Energy Corporation  Nichols Ranch ISR Uranium
Project Map  December 2010

---



Source: Uranerz Energy Corporation 2010

---

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 Nichols ranch ISR
Uranium 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 shared injection 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 120 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 (Mining Units 1 and 2) is
anticipated to include the following:

- 445 injection wells;
- 381 recovery wells;
- 126 monitoring wells; and
- 15 header houses.

---

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:

- 168 injection wells;
- 150 recovery wells;
- 53 monitoring wells; and
- 6 header houses.

Four Underground Injection Control (UIC) deep disposal wells
will also be required, two at the Nichols Ranch Unit and two 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 ISR
Uranium Project that will be sited on the Hank and Nichols Ranch properties. 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 Materials License. We filed applications for
these permits to the State of Wyoming (WDEQ) and the US Nuclear Regulatory
Commission (NRC) in 2007. As part of the permitting application and review
process, 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 October of 2009 WDEQ - Air Quality Division approved and
issued the air quality permit for our Nichols Ranch ISR Uranium Project in the
form of a permit to construct the project, including the Nichols Ranch central
processing plant and the Hank Satellite facility. This is the first operational
permit for construction of the Project.

In December 2010, after we satisfied all requirements including
the posting of a reclamation bond, the WDEQ issued a Permit to Mine for our
Nichols Ranch ISR Uranium Project.

In January of 2011, the final Supplemental Environmental Impact
Statement (SEIS) for our Nichols Ranch ISR Uranium Project was posted on the
NRC website and published in the Federal Register. In the SEIS, the NRC reported
its conclusion that there were no major environmental impacts that would
preclude licensing of the Nichols Ranch ISR Uranium Project. The NRC may issue
the final Source Materials License 30 days after the publication of the final
SEIS. We intend to commence construction of the Nichols Ranch ISR Uranium
Project once the Source Materials License is issued by the NRC.

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 Uranium
Project

|Permit, License, or Approval Name         | Agency        | Status                                                                                              
|----------------------------------------- | ------------- | ----------------------------------------------------------------------------------------------------
|Source Material License                   | NRC           | Received in draft form November
      2010                                                          
|Permit to Mine                            | WDEQ-LQD      | Received December 2010                                                                              
|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      | Received December 2010                                                                              
|Deep Disposal Well Permits                | WDEQ-WQD      | Submitted fourth quarter 2010                                                                       
|WYPDES                                    | WDEQ- WQD     | Submitted first quarter 2011                                                                        
|11(e)2 Byproduct/Waste Disposal Agreement | Private Party | In preparation                                                                                      
|Permit to Construct Septic Leach Field    | County        | In preparation                                                                                      
|Air Quality Permit                        | WDEQ-AQD      | Received October 2009                                                                               

|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                                                      

2011 Plan of Operations for Powder River Basin Properties

During 2011, we plan to:

- continue with our exploration of our Powder River Basin Properties as
  outlined above under 2011 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 Uranium Project and potential
  satellites, as outlined above under Nichols Ranch ISR Uranium Project ; and
- commence construction of our Nichols Ranch ISR Uranium Project once the
  Source Materials License has been received.

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 may 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.

---

Wyoming - Great Divide/Red Desert Properties

Our Great Divide Basin properties currently consist of the
Eagle project and various Wyoming State Leases totaling 6,520 acres. The Eagle
property is comprised of a 640 acre Wyoming State Lease. This project is located
in Sweetwater County, Wyoming. The Eagle project and these leases will not be
considered a material property until more data and information on the project
can be obtained.

Saskatchewan Canada

Our Cochrane River property in Saskatchewan extends to the
northeast of the northern portion of Wollaston Lake, in Northern Saskatchewan,
Canada. In 2007, a total of seven claims were staked within the boundaries of
the original two mineral prospecting permits. Four of the seven claims were
allowed to expire in 2010 and the remaining three claims expired on January 30,
2011. We have no other property interests in Saskatchewan.

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.

2011 Property Expenditures

Our cash expenditures in 2011, excluding capital assets and
major property acquisitions, are estimated to be $9.8 million, as follows:

|Wyoming                                 |   |           |  |   |           | 
|--------------------------------------- | - | --------- |  | - | --------- | 
|Exploration                             |   |           |  |   |           | 
|Wholly owned properties                | $ | 300,000   |  |   |           | 
|Arkose properties                       | $ | 1,970,000 |  | $ | 2,270,000 | 
|Environmental                           |   |           |  | $ | 680,000   | 
|Land                                    |   |           |  | $ | 610,000   | 
|Production and well planning            |   |           |  | $ | 10,000    | 
|General and Administrative expenditures |   |           |  | $ | 6,190,000 | 
|                                        |   |           |  |   |           | 
|Total                                   |   |           |  | $ | 9,760,000 | 

---

These estimates are subject to change. When the Nichols Ranch
ISR Uranium Project is approved, capital costs in the range of $34 million may
be incurred.

Mine Safety Disclosure

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank
Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), issuers
that are operators, or that have a subsidiary that is an operator, of a coal or
other mine in the United States are required to disclose in their periodic
reports filed with the SEC information regarding specified health and safety
violations, orders and citations, related assessments and legal actions, and
mining-related fatalities. During the fiscal year ended December 31, 2010, the
Company had no such specified health and safety violations, orders or citations,
related assessments or legal actions, mining-related fatalities, or similar
events in relation to the Companys United States operations requiring
disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

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, 2010.

|                  |  | Current Office with                                                                     |  |                                                                                              |  | Director/Officer |  |    
|----------------- |  | --------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | ---------------- |  | ---
|Name              |  | Company                                                                                 |  | Principal Occupation                                                                         |  | Since            |  | Age
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|Glenn Catchpole   |  | President and Chief
      Executive Officer;
      Director                             |  | President and Chief Executive
      Officer, Uranerz Energy
      Corporation                |  | March 1, 2005    |  | 67 
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|George Hartman    |  | Executive Vice-
      President
      and Chief
      Operating Officer;
      Director |  | Executive Vice-President and
      Chief Operating Officer,
      Uranerz Energy Corporation |  | May 9, 2005      |  | 71 
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|Dennis Higgs      |  | Executive Chairman;
      Director                                                      |  | Executive Chairman, Uranerz
      Energy Corporation                                         |  | May 26, 1999     |  | 52 
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|Benjamin Leboe    |  | Senior Vice-President,
      Finance and Chief
      Financial Officer                  |  | Chief Financial Officer of
      Uranerz Energy Corporation                                  |  | May 23, 2006     |  | 65 
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|Kurtis Brown      |  | Senior Vice-President,
      Exploration                                                |  | Senior Vice-President,
      Exploration of Uranerz Energy
      Corporation                 |  | March 8, 2007    |  | 60 
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|Douglas Hirschman |  | Vice-President, Lands                                                                   |  | Vice President, Lands of
      Uranerz Energy Corporation                                    |  | December 6, 2007 |  | 58 
|                  |  |                                                                                         |  |                                                                                              |  |                  |  |    
|Sandra MacKay     |  | Vice-President, Legal and
      Corporate Secretary                                     |  | Vice President, Legal and      Corporate Secretary of Uranerz Energy Corporation             |  | July 1, 2009     |  | 51 

---

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.

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 Executive 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 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.

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. He was
appointed Senior Vice-President, Finance and Chief Financial Officer on July 1,
2010. Mr. Leboe was a Senior Consultant, of the Business Development Bank of
Canada from January 2005 to February 2006. Previously, from 1990 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. Mr. Leboe was previously 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.

Mr. Kurtis Brownwas appointed Senior Vice-President,
Exploration in March 2007. Mr. Brown, a 35 year veteran in the mineral
extraction industry, started his uranium geology career with the OPI-Western
Joint Venture in Wyoming in 1977. Mr. Brown managed the daily operation of the
well fields, and developed innovative methods for regulating flow balance,
conducting well field maintenance, and performing well work-over. He also served
as the designated mine site radiation safety officer. In the mid-1980s Mr. Brown
assisted with the start-up of the Christensen Ranch ISR commercial uranium mine
performing environmental permitting and compliance duties. Mr. Brown was also
involved with aquifer restoration activities at the Irigaray ISR mine.

Mr. Brown joined Uranerz USA, Inc. (former Uranerz Group and
unrelated to Uranerz Energy) in 1989 to conduct detailed feasibility studies for
the proposed North Butte ISR mine. His work included well field geology,
reserves estimation, design and selection of surface and down hole equipment,
and cost analysis. He also conducted claims assessment drilling and assisted in
the procurement of required state and federal mining permits. Prior to joining
the Company full-time in 2007, Mr. Brown was a Company consultant, providing
geology services including the acquisition evaluations of Great Divide and
Powder River Basin projects.

Mr. Brown received his Bachelor's degree in Geology from the
University of Wyoming. He is a Registered Professional Geologist in Wyoming and
a Certified Safety Professional. In addition to his uranium background, he has
extensive experience in coal and industrial minerals mining as well as oil and
gas extraction.

Mr. Douglas Hirschman was appointed our Vice-President,
Lands in December 2007. Mr. Hirschman is a graduate of the University of Wyoming
and has over 30 years of experience in the mineral exploration industry serving
in various capacities and most recently as Manager of Lands, International,
Newmont Mining Corporation. Mr. Hirschman has supervised mineral property
acquisitions, prepared and negotiated agreements including joint ventures,
performed land status investigations on federal, state and private mineral
interests in the Western USA, and maintained land records insuring timely
satisfaction of land payments and agreement obligations.

---

Ms. Sandra MacKaywas appointed our Vice-President,
Legal and Corporate Secretary in July 2010. From July 2009 to June 2010 Ms.
MacKay was Legal Counsel and Corporate Secretary of Uranerz. Ms. MacKay obtained
her Bachelor of Laws in 1983 from the University of British Columbia. She
practiced as a commercial and securities lawyer with a major Vancouver law firm
before joining Chevron Canada Limited as in-house counsel. Ms. MacKay has over
20 years of experience working as counsel within business organizations in a
variety of industries including petrochemical, engineering, and biotechnology.
She has most recently acted as corporate counsel to QLT Inc., a Vancouver based
dual listed (Nasdaq/TSX) international biotechnology company, and as Vice
President and General Counsel to Aker Solutions Canada Inc., a Vancouver based
international supplier of engineering technology which is part of the Aker group
of Companies based in Oslo, Norway. Ms. MacKay has acted for both public and
private companies on a wide variety of corporate-commercial transactions
including acquisitions, licensing transactions, and joint ventures and has
provided general counsel to her clients on various subject matters including
securities law compliance, employment law, corporate governance and general
corporate-commercial matters.

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.

ITEM 4. (Removed and Reserved)

PART II

ITEM 5. 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 has also traded, 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 stock for the calendar quarters indicated, as reported by
the NYSE Amex Equities, www.nyse.com.

---

|Period         | High   | Low   
|-------------- | ------ | ------
|2010           |        |       
|Fourth Quarter | $ 4.13 | $ 1.51
|Third Quarter  | $ 1.73 | $ 0.87
|Second Quarter | $ 1.99 | $ 1.02
|First Quarter  | $ 2.24 | $ 1.10
|               |        |       
|Period         | High   | Low   
|2009           |        |       
|Fourth Quarter | $ 2.39 | $ 1.20
|Third Quarter  | $ 2.50 | $ 1.40
|Second Quarter | $ 2.21 | $ 0.58
|First Quarter  | $ 1.10 | $ 0.47

As of March 1, 2011, the closing bid quotation for our common
stock was $4.93 per share as quoted by the NYSE Amex Equities.

As of March 1, 2011, we had 75,699,074 shares of common stock
issued and outstanding, held by approximately 11,500 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 of Directors 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 2010, neither the Company nor any affiliate of the
Company repurchased shares of common stock of the Company registered under
Section 12 of the Securities Exchange Act of 1934, as amended.

Equity Compensation Plan Information

As at December 31, 2010, we had one equity compensation plan
under which our shares of common stock 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, 2010.

|                                                                       | 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     | 6,735,600                                                                    | $1.86                                                        | 1,889,860                                                                                               
|                                                                       |                                                                              |                                                              |                                                                                                         
|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.

Administration

The Companys Compensation Committee administers the Stock
Option Plan 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 for the administration of the Stock Option Plan.

---

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 is 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 expires or terminates 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 closing 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:

- 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 2010 that were not registered
under the Securities Act of 1933, as amended.

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 over a five year period. This
performance chart assumes: (1) $100 was invested on January 1, 2006 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.

---



ITEM 6. 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                              |   | 2010   |  |  | 2009   |  |  | 2008   |   |  | 2007   |   |  | 2006   |  
|                                               |   |        |  |  |        |  |  |        |   |  |        |   |  |        |  
|Operating expenses                             |   |        |  |  |        |  |  |        |   |  |        |   |  |        |  
|Depreciation                                   | $ | 200    |  |  | 176    |  |  | 129    |   |  | 57     |   |  | 15     |  
|Foreign exchange                               | $ | 6      |  |  | 3      |  |  | (4     | ) |  | 24     |   |  | 1      |  
|General and administrative                     | $ | 8,424  |  |  | 4,599  |  |  | 6,153  |   |  | 7,858  |   |  | 5,871  |  
|Mineral property expenditures                  | $ | 6,662  |  |  | 4,778  |  |  | 30,505 |   |  | 7,008  |   |  | 1,218  |  
|Total operating expenses                       | $ | 15,292 |  |  | 9,556  |  |  | 36,783 |   |  | 14,947 |   |  | 7,105  |  
|Gain on sale on investment
      securities    | $ | -      |  |  | -      |  |  | -      |   |  | -      |   |  | 79     |  
|Interest income                                | $ | 52     |  |  | 155    |  |  | 610    |   |  | 710    |   |  | 411    |  
|Loss on settlement of debt                     | $ | -      |  |  | -      |  |  | -      |   |  | -      |   |  | -      |  
|Mineral property options received              | $ | -      |  |  | -      |  |  | -      |   |  | 44     |   |  | 88     |  
|Gain (Loss) on discontinued operations         | $ | -      |  |  | -      |  |  | 977    |   |  | (4     | ) |  | (22    | )
|Non-controlling interest - portion of net loss | $ | 640    |  |  | 702    |  |  | 949    |   |  |        |   |  |        |  
|Net loss for the year                          | $ | 14,600 |  |  | 8,699  |  |  | 34,247 |   |  | 14,197 |   |  | 6,549  |  
|                                               |   |        |  |  |        |  |  |        |   |  |        |   |  |        |  
|Common stock data                              |   |        |  |  |        |  |  |        |   |  |        |   |  |        |  
|Weighted average shares outstanding            |   | 64,433 |  |  | 57,060 |  |  | 52,263 |   |  | 38,438 |   |  | 29,738 |  
|Net loss per share  basic and diluted         | $ | 0.23   |  |  | 0.15   |  |  | 0.66   |   |  | 0.37   |   |  | 0.22   |  

---

|Total shares outstanding at December 31              |   | 70,821 |   |  | 64,195  |   |  | 55,452 |  |  | 39,224 |  |  | 34,560 | 
|---------------------------------------------------- | - | ------ | - |  | ------- | - |  | ------ |  |  | ------ |  |  | ------ | 
|Balance sheet data at December 31                    |   |        |   |  |         |   |  |        |  |  |        |  |  |        | 
|Total assets                                         | $ | 40,634 |   |  | 30,810  |   |  | 22,866 |  |  | 12,216 |  |  | 12,492 | 
|Property, plant and equipment  net                  | $ | 503    |   |  | 541     |   |  | 643    |  |  | 406    |  |  | 123    | 
|Working capital                                      | $ | 36,526 |   |  | 29,191  |   |  | 21,405 |  |  | 11,114 |  |  | 11,980 | 
|Total debt                                           | $ | -      |   |  | -       |   |  | 18     |  |  | 52     |  |  | -      | 
|Common shareholders equity                          | $ | 39,767 |   |  | 30,033  |   |  | 22,278 |  |  | 11,518 |  |  | 12,113 | 
|Cash flow data                                       |   |        |   |  |         |   |  |        |  |  |        |  |  |        | 
|Net cash used for operating activities               | $ | 10,897 |   |  | 8,170   |   |  | 14,182 |  |  | 9,259  |  |  | 1,692  | 
|Net cash used for (provided by) investing activities | $ | (6,904 | ) |  | (11,590 | ) |  | 20,161 |  |  | 281    |  |  | 472    | 
|Net cash provided by financing activities            | $ | 20,004 |   |  | 16,184  |   |  | 23,821 |  |  | 8,590  |  |  | 12,532 | 

ITEM 7. 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,
2010, 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. We are principally focused on the exploration of our projects in the
Powder River Basin area of Wyoming. We plan to maintain, explore and, when
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 ISR Uranium Project are expected to be approved in 2011.
Construction will proceed after receipt of all permits.

In support of our goals for 2010, we focused our efforts on the
following six key operating priorities:

- Exploration in Wyoming
- Mine planning for our Nichols Ranch ISR Uranium 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

---

Results of Operations

Twelve-month period ended December 31, 2010 compared to
twelve-month period ended December 31, 2009

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 $15,291,692 for the
twelve-month period ended December 31, 2010, as compared to $9,556,528 for the
corresponding period in 2009. The increase of operating expenses in the amount
of $5,735,165 (60%) was primarily attributable to an increase of non-cash
expenses amounting to $4,081,900 for warrants issued for mineral properties and
stock- based compensation. Mineral property expenditures, for exploration and
mine planning, increased $625,523 over 2009. Our general and administrative
expenses consisted primarily of stock based compensation, payroll, consulting,
investor relations and general overhead increased $3,824,054 or 83% more than
2009 reflecting a $2,823,900 increase in stock based compensation and a
$1,000,154 increase in corporate affairs, investor relations and Casper
operations.

Our interest expense for the twelve-month period ended December
31, 2010, imputed on an interest free loan, was $404 (2009  $2,941). We earned
$52,290 of interest income for the twelve-month period ended December 31, 2010
as compared to $155,402 for the corresponding period in 2009. This reduction was
due to low rates of short term investments. The non-controlling interest of our
Arkose Mining Venture absorbed $639,419 of our 2010 net loss ($701,972 in 2009).
Net loss for the twelve-month period ended December 31, 2010 was $14,599,983, as
compared to $8,699,154 for the corresponding period in 2009, an increase of
$5,900,829 (68%). This increase was largely due to the 2010 increase in
operating expenses.

Our 2010 Plan of Operations, described in our Form 10K filed
March 15, 2010, outlined planned expenditures which were subsequently
substantially incurred as expected. Geological data acquisition and stock-based
compensation were additional, non-cash expenditures. As we anticipated, our
exploration expenses, excluding property acquisitions, continued at a high level
throughout the 2010 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. Our
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, as amended, listed on the NYSE Amex Equities and the
Toronto stock exchanges. As anticipated, we did not earn any revenues during the
2010 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 $10,896,545 for the
twelve-month period ended December 31, 2010, compared to $8,169,977 for the
corresponding period in 2009. The increase in net cash used in operations
includes an increase of $625,523 for mineral related cash expenditures,
$1,000,756 for general and administrative expenses and $815,381 of prepaid
expenses and deposits.

Cash Used in Investing Activities

We invested $1,863,353 in equipment and reclamation bonds in
the twelve- month period ended December 31, 2010, compared to $74,663 the
corresponding period in 2009.During the twelve-month period ended December 31,
2010, we reduced our allocation in securities invested over 90 days by
$8,766,943.

Cash Provided by Financing Activities

Net cash provided by financing activities amounted to
$20,004,293 for the twelve-month period ended December 31, 2010, primarily from
a public issue of common stock, compared to $16,184,338 for the corresponding
period in 2009.

---

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 8  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 $8,169,977 for the
twelve-month period ended December 31, 2009, compared to $14,182,485 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.

Cash Provided by Financing Activities

Net cash provided by financing activities amounted to
$16,184,338 for the twelve-month period ended December 31, 2009, primarily from
a public issue of common stock, compared to $23,821,370 for the corresponding
period in 2008.

---

Assets and Liabilities

We had total assets of $40,634,083 at December 31, 2010
compared to $30,810,289 at December 31, 2009, primarily cash accumulated from
the sale of shares. Prepaid expenses and deposits amounted to $3,661,573 at
December 31, 2010 (2009 - $1,052,626), reflecting our expanded operations.
Property and Equipment was $503,129 compared to $540,979 at December 31, 2009.
Our liabilities were $759,485 compared to $722,826 at December 31, 2009.
Liabilities include due to related parties of` $49,186 (2009 - $54,920) and a
loan of $Nil (2009  $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, 2010 was $36,437,370 compared to $29,192,975 as of December 31, 2009. We had
working capital of $36,526,165 as of December 31, 2010, compared to working
capital of $29,190,701 as of December 31, 2009.

Financings

During the year ended December 31, 2010, the Company:

1. Issued 25,000 shares of common stock
upon the exercise of share purchase warrants for cash proceeds of $75,000.

2. Issued 454,100 shares of common
stock upon the exercise of stock options for cash proceeds of $431,915.

3. Issued 2,000,000 warrants, valued at
$1,258,000, for common stock for mineral properties.

4. Issued 6,147,446 shares of common
stock pursuant to public offering for cash proceeds of $20,000,000 less offering
expenses of $1,177,395.

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.

3. 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 warrant holders 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.

---

Capital Requirements

Our cash position of $36,437,370 at December 31, 2010 is
available for future operations. We estimate that our cash expenditures for
operations over the next twelve months will be approximately $9.8 million 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 2011 will be financed through cash on hand, debt and one
or more equity issues. We intend to focus our exploration and mine development
efforts in Wyoming.

Subsequent to December 31, 2010 we received additional cash
from the exercise of stock options and warrants. See Note 17 of the audited
consolidated financial statements following under the section heading Item 8-
Financial Statements and Supplementary Data.

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, 2011 for corporate expenses, exploration on our Wyoming mineral
properties and general and administrative expenses are summarized as follows:

|Category                                          | Planned Cash Expenditures Over the Next
      Twelve Months
|------------------------------------------------- | -----------------------------------------------------------
|Exploration                                       | $2,880,000                                                 
|Environmental,
      production and well planning | $690,000                                                   
|General and
      Administrative expenses         | $6,190,000                                                 
|TOTAL                                             | $9,760,000                                                 

In addition to our planned operating expenditures we may
increase exploration expenditures and make additional property acquisitions
beyond the above as opportunities arise and, if warranted, commence capital
expenditures for our Nichols Ranch ISR Uranium 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.

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 2011 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 2011.
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 2011.

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, 2010 are described in Note 14 of the audited consolidated
financial statements following under the section heading Item 8. 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.

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, 2010, mineral property
expenditures totaling $6,661,909 (2009 -$4,778,386, (2008 - $30,505,332) were
expensed.

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

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.

ITEM 7A. 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|Uranerz Energy Corporation    
|------------------------------
|(An Exploration Stage Company)
|                              
|December 31, 2010             

|                                                              | 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 Statement
      of Stockholders Equity          | F5  
|Notes to the Consolidated Financial Statements                | F8  

---



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, 2010 and 2009, and the related
  consolidated statements of operations, cash flows and stockholders' equity for
  each of the three years in the period ended December 31, 2010 and accumulated
  from May 26, 1999 (Date of Inception) to December 31, 2010. 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, 2010 and 2009, and the results of
  its operations and its cash flows for each of the three years in the period
  ended December 31, 2010 and accumulated from May 26, 1999 (Date of Inception) to
  December 31, 2010, 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), the Companys
  internal control over financial reporting as of December 31, 2010, 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 11, 2011 expressed an unqualified opinion thereon.

/s/ MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 11, 2011

---

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

|                                                                                                                                                        |  | December 31, |   |  | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                                                                                                        |  | 2010         |   |  | 2009         |  
|                                                                                                                                                        |  | $            |   |  | $            |  
|ASSETS                                                                                                                                                  |  |              |   |  |              |  
|Current Assets                                                                                                                                          |  |              |   |  |              |  
|Cash                                                                                                                                                    |  | 36,437,370   |   |  | 20,426,032   |  
|Marketable securities                                                                                                                                   |  |             |   |  | 8,766,943    |  
|Prepaid expenses and deposits
      (Note 7(a))                                                                                                         |  | 816,269      |   |  | 696,843      |  
|Other
      current assets                                                                                                                              |  | 32,011       |   |  | 23,709       |  
|Total Current Assets                                                                                                                                    |  | 37,285,650   |   |  | 29,913,527   |  
|Prepaid Expenses and Deposits (Note 7(a))                                                                                                               |  | 825,583      |   |  | 37,000       |  
|Mineral Property Reclamation Surety
      Deposits (Note 6(g))                                                                                          |  | 2,019,721    |   |  | 318,783      |  
|Property and
      Equipment (Note 5)                                                                                                                   |  | 503,129      |   |  | 540,979      |  
|Total Assets                                                                                                                                            |  | 40,634,083   |   |  | 30,810,289   |  
|                                                                                                                                                        |  |              |   |  |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                    |  |              |   |  |              |  
|Current Liabilities                                                                                                                                     |  |              |   |  |              |  
|Accounts payable                                                                                                                                        |  | 93,115       |   |  | 185,962      |  
|Accrued liabilities (Note 7(b))                                                                                                                         |  | 617,184      |   |  | 463,865      |  
|Due to related parties (Note
      9)                                                                                                                   |  | 49,186       |   |  | 54,920       |  
|Loan
      payable (Note 8)                                                                                                                             |  |             |   |  | 18,079       |  
|Total Liabilities                                                                                                                                       |  | 759,485      |   |  | 722,826      |  
|                                                                                                                                                        |  |              |   |  |              |  
|Commitments and Contingencies (Notes 6 and
      14)                                                                                                    |  |              |   |  |              |  
|Subsequent Events (Note 17)                                                                                                                             |  |              |   |  |              |  
|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; 
      70,821,433 and 64,194,887 shares issued
      and outstanding, respectively |  | 70,821       |   |  | 64,195       |  
|Additional Paid-in Capital                                                                                                                              |  | 123,138,957  |   |  | 98,811,898   |  
|Deficit Accumulated During the Exploration Stage                                                                                                        |  | (83,443,134  | ) |  | (68,843,151  | )
|Total Stockholders Equity                                                                                                                              |  | 39,766,644   |   |  | 30,032,942   |  
|Non-controlling Interest                                                                                                                                |  | 107,954      |   |  | 54,521       |  
|Total Equity                                                                                                                                            |  | 39,874,598   |   |  | 30,087,463   |  
|Total Liabilities and Stockholders Equity                                                                                                              |  | 40,634,083   |   |  | 30,810,289   |  

(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, |  
|                                                        |  | 2010                |   |  | 2010         |   |  | 2009       |   |  | 2008        |  
|                                                        |  | $                   |   |  | $            |   |  | $          |   |  | $           |  
|                                                        |  |                     |   |  |              |   |  |            |   |  |             |  
|                                                        |  |                     |   |  |              |   |  |            |   |  |             |  
|Revenue                                                 |  |                    |   |  |             |   |  |           |   |  |            |  
|                                                        |  |                     |   |  |              |   |  |            |   |  |             |  
|Expenses                                                |  |                     |   |  |              |   |  |            |   |  |             |  
|Depreciation                                            |  | 577,685             |   |  | 200,266      |   |  | 175,877    |   |  | 129,268     |  
|Foreign exchange                                        |  | 32,885              |   |  | 5,464        |   |  | 2,868      |   |  | (3,949      | )
|General and administrative (Note
      11)              |  | 37,496,555          |   |  | 8,424,053    |   |  | 4,599,397  |   |  | 6,153,218   |  
|Mineral property expenditures                           |  | 50,616,927          |   |  | 6,661,909    |   |  | 4,778,386  |   |  | 30,505,332  |  
|Total Operating
      Expenses                          |  | 88,724,052          |   |  | 15,291,692   |   |  | 9,556,528  |   |  | 36,783,869  |  
|Operating Loss                                          |  | (88,724,052         | ) |  | (15,291,692  | ) |  | (9,556,528 | ) |  | (36,783,869 | )
|Other Income (Expense)                                  |  |                     |   |  |              |   |  |            |   |  |             |  
|Gain on sale of
      investment securities             |  | 79,129              |   |  |             |   |  |           |   |  |            |  
|Interest income                                         |  | 1,939,759           |   |  | 52,290       |   |  | 155,402    |   |  | 610,408     |  
|Loss on
      settlement of debt                        |  | (132,000            | ) |  |             |   |  |           |   |  |            |  
|Mineral property option payments received               |  | 152,477             |   |  |             |   |  |           |   |  |            |  
|Total Other Income                                      |  | 2,039,365           |   |  | 52,290       |   |  | 155,402    |   |  | 610,408     |  
|Loss from continuing operations                         |  | (86,684,687         | ) |  | (15,239,402  | ) |  | (9,401,126 | ) |  | (36,173,461 | )
|Discontinued operations (Note 4)                        |  |                     |   |  |              |   |  |            |   |  |             |  
|Loss from discontinued
      operations                 |  | (28,732             | ) |  |             |   |  |           |   |  | (2,632      | )
|Gain on disposal of discontinued
      operations       |  | 979,709             |   |  |             |   |  |           |   |  | 979,709     |  
|Gain on
      discontinued operations                   |  | 950,977             |   |  |             |   |  |           |   |  | 977,077     |  
|Net Loss                                                |  | (85,733,710         | ) |  | (15,239,402  | ) |  | (9,401,126 | ) |  | (35,196,384 | )
|Net loss
      attributable to non-controlling interest |  | 2,290,576           |   |  | 639,419      |   |  | 701,972    |   |  | 949,185     |  
|Net loss Attributable to the Company                    |  | (83,443,134         | ) |  | (14,599,983  | ) |  | (8,699,154 | ) |  | (34,247,199 | )
|                                                        |  |                     |   |  |              |   |  |            |   |  |             |  
|Other Comprehensive Loss                                |  |                     |   |  |              |   |  |            |   |  |             |  
|Foreign currency translation adjustment                 |  |                    |   |  |             |   |  |           |   |  | (481        | )
|Comprehensive Loss                                      |  | (83,443,134         | ) |  | (14,599,983  | ) |  | (8,699,154 | ) |  | (34,247,680 | )
|Amounts attributable to Company stockholders            |  |                     |   |  |              |   |  |            |   |  |             |  
|Loss from continuing
      operations                   |  | (84,394,111         | ) |  | (14,599,983  | ) |  | (8,699,154 | ) |  | (35,224,276 | )
|Gain
      on discontinued operations                   |  | 950,977             |   |  |             |   |  |           |   |  | 977,077     |  
|Net loss attributable to the Company                    |  | (83,443,134         | ) |  | (14,599,983  | ) |  | (8,699,154 | ) |  | (34,247,199 | )
|Net Loss Per Share Attributable to Company              |  |                     |   |  |              |   |  |            |   |  |             |  
|Shareholders  Basic and Diluted                        |  |                     |   |  |              |   |  |            |   |  |             |  
|Continuing Operations                                   |  |                     |   |  | (0.23        | ) |  | (0.15      | ) |  | (0.68       | )
|Discontinued Operations                                 |  |                     |   |  |             |   |  |           |   |  | 0.02        |  
|Net Loss Per Share
       Basic and Diluted            |  |                     |   |  | (0.23        | ) |  | (0.15      | ) |  | (0.66       | )
|                                                        |  |                     |   |  |              |   |  |            |   |  |             |  
|Weighted Average
      Shares Outstanding               |  |                     |   |  | 64,433,000   |   |  | 57,060,000 |   |  | 52,263,000  |  

(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, |  
|                                                                              |  | 2010                  |   |  | 2010         |   |  | 2009       |   |  | 2008        |  
|                                                                              |  | $                     |   |  | $            |   |  | $          |   |  | $           |  
|Operating Activities                                                          |  |                       |   |  |              |   |  |            |   |  |             |  
|Net loss                                                                      |  | (85,733,710           | ) |  | (15,239,402  | ) |  | (9,401,126 | ) |  | (35,196,384 | )
|Adjustments to
      reconcile net loss to cash used in operating activities: |  |                       |   |  |              |   |  |            |   |  |             |  
|Depreciation                                                                  |  | 577,685               |   |  | 200,266      |   |  | 175,877    |   |  | 129,268     |  
|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               |   |  |             |   |  |           |   |  |            |  
|Non-cash mineral property option payment                                      |  | (37,500               | ) |  |             |   |  |           |   |  |            |  
|Shares issued to
      acquire mineral properties                             |  | 19,105,000            |   |  |             |   |  |           |   |  | 19,090,000  |  
|Warrants issued for mineral property costs                                    |  | 1,258,000             |   |  | 1,258,000    |   |  |           |   |  |            |  
|Stock-based
      compensation                                                |  | 20,365,338            |   |  | 3,746,165    |   |  | 922,265    |   |  | 2,681,417   |  
|Changes in operating
      assets and liabilities:                            |  |                       |   |  |              |   |  |            |   |  |             |  
|Prepaid expenses
      and deposits                                           |  | (1,635,615            | ) |  | (908,009     | ) |  | (92,628    | ) |  | (317,538    | )
|Other current assets                                                          |  | (31,986               | ) |  | (8,302       | ) |  | (13,440    | ) |  | 82,175      |  
|Accounts payable
      and accrued liabilities                                |  | 840,967               |   |  | 60,471       |   |  | 234,154    |   |  | 272,534     |  
|Due to related parties                                                        |  | 519,945               |   |  | (5,734       | ) |  | 4,921      |   |  | (18,865     | )
|Net Cash Used in
      Operating Activities                                   |  | (45,624,097           | ) |  | (10,896,545  | ) |  | (8,169,977 | ) |  | (14,182,485 | )
|Investing Activities                                                          |  |                       |   |  |              |   |  |            |   |  |             |  
|Reclamation surety deposits                                                   |  | (2,019,721            | ) |  | (1,700,938   | ) |  | (379       | ) |  | (268,404    | )
|Acquisition of
      subsidiary, net of cash paid                             |  | (48                   | ) |  |             |   |  |           |   |  |            |  
|Proceeds from sale of marketable
      securities                             |  | 20,548,664            |   |  | 8,766,943    |   |  | 11,665,092 |   |  |            |  
|Purchase of property
      and equipment                                      |  | (982,398              | ) |  | (162,415     | ) |  | (74,284    | ) |  | (365,552    | )
|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                     |  | (1,980,446            | ) |  | 6,903,590    |   |  | 11,590,429 |   |  | (20,160,899 | )
|Financing Activities                                                          |  |                       |   |  |              |   |  |            |   |  |             |  
|Repayment of loan payable                                                     |  | (98,414               | ) |  | (18,079      | ) |  | (34,067    | ) |  | (31,456     | )
|Advances to related
      party                                               |  | 10,700                |   |  |             |   |  |           |   |  |            |  
|Contributions from non-controlling
      interest                             |  | 2,398,530             |   |  | 692,852      |   |  | 686,908    |   |  | 1,018,770   |  
|Proceeds from issuance
      of common stock                                  |  | 86,213,592            |   |  | 20,506,915   |   |  | 17,166,125 |   |  | 24,221,275  |  
|Share issuance costs                                                          |  | (4,482,495            | ) |  | (1,177,395   | ) |  | (1,634,628 | ) |  | (1,387,219  | )
|Net Cash Provided By Financing Activities                                     |  | 84,041,913            |   |  | 20,004,293   |   |  | 16,184,338 |   |  | 23,821,370  |  
|Effect of Exchange
      Rate Changes on Cash                                 |  |                      |   |  |             |   |  |           |   |  | (481        | )
|Increase (Decrease) In Cash                                                   |  | 36,437,370            |   |  | 16,011,338   |   |  | 19,604,790 |   |  | (10,522,495 | )
|Cash - Beginning
      of Period                                              |  |                      |   |  | 20,426,032   |   |  | 821,242    |   |  | 11,343,737  |  
|Cash - End of Period                                                          |  | 36,437,370            |   |  | 36,437,370   |   |  | 20,426,032 |   |  | 821,242     |  
|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                |   |  |             |   |  |           |   |  |            |  
|Common stock issued to settle debt                                            |  | 744,080               |   |  |             |   |  |           |   |  | 402,250     |  
|Warrants issued for
      mineral property costs                              |  | 1,258,000             |   |  | 1,258,000    |   |  |           |   |  |            |  
|Common stock issued for mineral property costs                                |  | 19,105,000            |   |  |             |   |  |           |   |  | 19,090,000  |  
|Supplemental Disclosures                                                      |  |                       |   |  |              |   |  |            |   |  |             |  
|Interest paid                                                                 |  | 12,184                |   |  | 404          |   |  | 2,941      |   |  | 5,551       |  
|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 Statement of Stockholders Equity                                 
|For the Period from May 26, 1999 (Date of Inception) to
      December 31, 2010
|(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                                
|For the Period from May 26, 1999 (Date of Inception) to
      December 31, 2010
|(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 | )
|Contribution from 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 for the year                               |  |             |  |  |        |  |  |              |   |  |            |   |  | (8,699,154      | ) |  | (701,972  | ) |  | (9,401,126  | )
|Contribution from 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)                                                 
|Consolidated Statement of Stockholders Equity                                 
|For the Period from May 26, 1999 (Date of Inception) to
      December 31, 2010
|(Expressed in US dollars)                                                      

|                                                               |  |              |  |  |         |  |  |             |   |  | Deficit         |   |  |          |   |  |             |  
|-------------------------------------------------------------- |  | ------------ |  |  | ------- |  |  | ----------- | - |  | --------------- | - |  | -------- | - |  | ----------- | -
|                                                               |  |              |  |  |         |  |  |             |   |  | Accumulated     |   |  |          |   |  |             |  
|                                                               |  |              |  |  |         |  |  | Additional  |   |  | During the      |   |  |          |   |  |             |  
|                                                               |  | Common Stock |  |  | Paid-in |  |  | Exploration |   |  | Non-Controlling |   |  |          |  
|                                                               |  | Shares       |  |  | Amount  |  |  | Capital     |   |  | Stage           |   |  | Interest |   |  | Total       |  
|                                                               |  | #            |  |  | $       |  |  | $           |   |  | $               |   |  | $        |   |  | $           |  
|                                                               |  |              |  |  |         |  |  |             |   |  |                 |   |  |          |   |  |             |  
|Balance, December 31, 2009                                     |  | 64,194,887   |  |  | 64,195  |  |  | 98,811,898  |   |  | (68,843,151     | ) |  | 54,521   |   |  | 30,087,463  |  
|Fair value of stock options granted                            |  |             |  |  |        |  |  | 3,746,165   |   |  |                |   |  |         |   |  | 3,746,165   |  
|Fair value of warrants issued
      for mineral property costs |  |             |  |  |        |  |  | 1,258,000   |   |  |                |   |  |         |   |  | 1,258,000   |  
|Shares issued upon the exercise of options                     |  | 454,100      |  |  | 454     |  |  | 431,461     |   |  |                |   |  |         |   |  | 431,915     |  
|Shares issued upon the
      exercise of warrants              |  | 25,000       |  |  | 25      |  |  | 74,975      |   |  |                |   |  |         |   |  | 75,000      |  
|Shares issued pursuant to public offering                      |  | 6,147,446    |  |  | 6,147   |  |  | 19,993,853  |   |  |                |   |  |         |   |  | 20,000,000  |  
|Share issuance costs                                           |  |             |  |  |        |  |  | (1,177,395  | ) |  |                |   |  |         |   |  | (1,177,395  | )
|Net loss and comprehensive loss for the year                   |  |             |  |  |        |  |  |            |   |  | (14,599,983     | ) |  | (639,419 | ) |  | (15,239,402 | )
|Contribution from non-controlling interest                     |  |             |  |  |        |  |  |            |   |  |                |   |  | 692,852  |   |  | 692,852     |  
|Balance, December 31, 2010                                     |  | 70,821,433   |  |  | 70,821  |  |  | 123,138,957 |   |  | (83,443,134     | ) |  | 107,954  |   |  | 39,874,598  |  

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

F-7

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(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
      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-8

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

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

F-9

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

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

F-10

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|2. | Summary of Significant Accounting Policies
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | o)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | p)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3. | Cash and Marketable Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | At December 31, 2010, the Company had $36,437,370 (2009 
      $29,192,975) in cash and marketable securities. The marketable securities
      consist of $Nil (2009  $8,766,943) 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 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 an option and joint venture agreement. On
      August 25, 2008, the Company disposed of the remaining 40% of its
      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, | 
| | ------------------------------ |  | --------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                |  |           |  |  |              |  |  | 2010         |  |  | 2009         | 
| |                                |  |           |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                                |  | Cost      |  |  | Depreciation |  |  | Value        |  |  | Value        | 
| |                                |  | $         |  |  | $            |  |  | $            |  |  | $            | 
| |                                |  |           |  |  |              |  |  |              |  |  |              | 
| | Computers and office equipment |  | 219,431   |  |  | 133,495      |  |  | 85,936       |  |  | 90,088       | 
| | Field equipment                |  | 861,382   |  |  | 444,189      |  |  | 417,193      |  |  | 450,891      | 
| |                                |  |           |  |  |              |  |  |              |  |  |              | 
| |                                |  | 1,080,813 |  |  | 577,684      |  |  | 503,129      |  |  | 540,979      | 

F-11

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

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

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


| | i) | On August 20, 2008, the Company leased 891 acres of
      mineral properties near the Companys Nichols Ranch project area in
      Wyoming for an advanced royalty payment of $22,275.                                     
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                             
| | j) | 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 advanced royalty payment of
      $151,828.
| |    |                                                                                                                                                                                                                             
| | k) | On September 18, 2008, the Company leased 984 acres of
      mineral properties within the Companys North Reno Creek project area in
      Wyoming.                                                                        

F-12

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|6. | Mineral Properties (continued)
|-- | ------------------------------
|   |                               
|   | l)                            
|   |                               
|   | m)                            
|   |                               
|   | n)                            
|   |                               
|   | o)                            
|   |                               
|   | p)                            
|   |                               
|   | q)                            
|   |                               
|   | r)                            
|   |                               
|7. | Balance Sheet Details         
|   |                               
|   | a)                            

| |                                                 |  | December 31, |  |  | December 31, | 
| | ----------------------------------------------- |  | ------------ |  |  | ------------ | 
| |                                                 |  | 2010         |  |  | 2009         | 
| |                                                 |  | $            |  |  | $            | 
| |                                                 |  |              |  |  |              | 
| | Consulting                                      |  | 5,295        |  |  |             | 
| | Insurance                                       |  | 66,905       |  |  | 82,929       | 
| | Lease costs                                     |  | 405,012      |  |  | 560,023      | 
| | Reclamation bonding                             |  | 224,655      |  |  |             | 
| | Surface use and damage costs                    |  | 109,806      |  |  | 45,219       | 
| | Other                                           |  | 4,596        |  |  | 8,672        | 
| |                                                 |  |              |  |  |              | 
| | Current prepaid
      expenses and deposits     |  | 816,269      |  |  | 696,843      | 
| |                                                 |  |              |  |  |              | 
| | Deposits                                        |  | 29,233       |  |  | 37,000       | 
| | Power supply advance                            |  | 674,200      |  |  |             | 
| | Power supply
      deposit                      |  | 122,150      |  |  |             | 
| |                                                 |  |              |  |  |              | 
| | Non-current
      prepaid expenses and deposits |  | 825,583      |  |  | 37,000       | 

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

| |                              |  | December 31, |  |  | December 31, | 
| | ---------------------------- |  | ------------ |  |  | ------------ | 
| |                              |  | 2010         |  |  | 2009         | 
| |                              |  | $            |  |  | $            | 
| |                              |  |              |  |  |              | 
| | Mineral exploration expenses |  | 457,100      |  |  | 388,325      | 
| | Reclamation costs            |  | 78,084       |  |  | 75,540       | 
| | Other                        |  | 82,000       |  |  |             | 
| |                              |  |              |  |  |              | 
| | Total accrued liabilities    |  | 617,184      |  |  | 463,865      | 

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

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

F-13

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|9.  | Related Party Transactions / Balances                         
|--- | --------------------------------------------------------------
|    |                                                               
|    | a)                                                            
|    |                                                               
|    | b)                                                            
|    |                                                               
|    | c)                                                            
|    |                                                               
|    | d)                                                            
|    |                                                               
|10. | Common Stock                                                  
|    |                                                               
|    | Share transactions for the year ended December 31,
      2010:
|    |                                                               
|    | a)                                                            
|    |                                                               
|    | b)                                                            
|    |                                                               
|    | c)                                                            
|    |                                                               
|    | Share transactions for the year ended December 31,
      2009:
|    |                                                               
|    | a)                                                            
|    |                                                               
|    | b)                                                            
|    |                                                               
|    | c)                                                            
|    |                                                               
|    | d)                                                            
|    |                                                               
|    | Share transactions for the year ended December 31,
      2008:
|    |                                                               
|    | a)                                                            
|    |                                                               
|    | b)                                                            
|    |                                                               
|    | c)                                                            
|    |                                                               
|    | d)                                                            

F-14

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|10. | Common Stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|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, now the NYSE Amex, whichever has the greater
      trading volume for the five trading days before the date of grant. At
      December 31, 2010, the Company had 1,889,860 shares of common stock
      available to be issued under the Stock Option Plan.                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | On March 3, 2010, the Company modified the terms of
      5,286,700 outstanding options. The weighted average grant date fair value
      of the modified stock options was $0.49 and the Company recognized an
      additional $2,535,808 stock-based compensation expense which is included
      in general and administrative expense related to the modification of these
      options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | During the year ended December 31, 2010, the Company
      granted 1,240,000 stock options to directors, officers, employees and
      consultants to acquire 702,500 common shares at an exercise price of $1.33
      per share for 5 - 10 years, 185,000 common shares at an exercise price of
      $1.35 per share for 1.5 years, 100,000 common shares at an exercise price
      of $1.40 per share for 10 years, 200,000 common shares at an exercise
      price of $1.64 per share for 1.5 years, 2,500 common shares at an exercise
      price of $1.20 per share for 1.5 years, and 50,000 common shares at an
      exercise price of $3.19 per share for two years. During the year ended
      December 31, 2010, the Company recorded stock-based compensation for the
      vested options of $1,210,357 as general and administrative expense related
      to these options.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The fair value of stock options granted during the years
      ended December 31, 2010, 2009 and 2008 was $0.93, $0.60 and $2.20 per
      share, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The weighted average assumptions used for each of the
      years ended December 31, are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                 |  | 2010  |  |  | 2009  |  |  | 2008  | 
| | ------------------------------- |  | ----- |  |  | ----- |  |  | ----- | 
| |                                 |  |       |  |  |       |  |  |       | 
| | Expected dividend yield         |  | 0%    |  |  | 0%    |  |  | 0%    | 
| | Risk-free interest rate         |  | 1.57% |  |  | 1.34% |  |  | 2.94% | 
| | Expected volatility             |  | 107%  |  |  | 129%  |  |  | 134%  | 
| | Expected option life (in years) |  | 3.27  |  |  | 3.89  |  |  | 4.14  | 

F-15

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|11. | Stock-based Compensation (continued)                                                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                               
|    | The total intrinsic value of stock options exercised
      during the years ended December 31, 2010, 2009 and 2008, was $1,003,198,
      $276,400 and $641,954, respectively.
|    |                                                                                                                                                                               
|    | 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, 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     |  |  |              |  |  |            | 
| |                                      |  |           |   |  |          |  |  |              |  |  |            | 
| | Granted                              |  | 1,240,000 |   |  | 1.46     |  |  |              |  |  |            | 
| | Exercised                            |  | (454,100  | ) |  | 0.95     |  |  |              |  |  |            | 
| |                                      |  |           |   |  |          |  |  |              |  |  |            | 
| | Outstanding,
      December 31, 2010 |  | 6,735,600 |   |  | 1.86     |  |  | 6.05         |  |  | 14,372,749 | 
| |                                      |  |           |   |  |          |  |  |              |  |  |            | 
| | Exercisable,
      December 31, 2010 |  | 6,660,600 |   |  | 1.86     |  |  | 6.02         |  |  | 14,195,249 | 

A summary of the status of the
  Companys non-vested stock options as of December 31, 2010, and changes during
  the years ended December 31, 2010, 2009 and 2008 is presented below:

WeightedAverageNumber of
      
      
      Grant DateNon-vested stock options
      
      Options
      
      
      Fair Value$Non-vested at December 31, 2007
      
      325,000
      
      
      3.14Granted
      
      1,063,000
      
      
      2.20Vested
      
      (1,229,500
      )
      
      2.36Non-vested at December 31, 2008
      
      158,500
      
      
      2.86Granted
      
      1,502,500
      
      
      0.78Vested
      
      (1,529,000
      )
      
      0.77Forfeited
      
      (5,000
      )
      
      2.89Non-vested at December 31, 2009
      
      127,000
      
      
      1.33Granted
      
      1,240,000
      
      
      0.93Vested
      
      (1,292,000
      )
      
      0.95Non-vested at December 31, 2010
      
      75,000
      
      
      1.16


As at December 31, 2010, there was
  $30,110 of unrecognized compensation cost related to non-vested stock option
  agreements. This cost is expected to be recognized over a weighted average
  period of 0.40 years.

F-16

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|12. | Stock Purchase Warrants
|--- | -----------------------
|    |                        
|    | a)                     
|    |                        
|    | b)                     
|    |                        
|    | c)                     
|    |                        
|    | d)                     

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

Weighted AverageNumber
      
      
      Exercise Price$Balance, December 31, 2008
      
      5,052,498
      
      
      2.86Issued
      
      4,250,000
      
      
      3.00Expired
      
      (120,000
      )
      
      2.60Balance December 31, 2009
      
      9,182,498
      
      
      3.27Issued
      
      2,000,000
      
      
      3.00Expired
      
      (4,932,498
      )
      
      3.50Exercised
      
      (25,000
      )
      
      3.00Balance December
        31, 2010
      
      6,225,000
      
      
      3.00


As at December 31, 2010, the following
  common share purchase warrants were outstanding:

Number of Warrants
      Exercise Price
      Expiry Date$4,225,000
      3.00
      April 27, 2012 *2,000,000
      3.00
      June 30, 20146,225,000
      
      *(Subsequently accelerated to February 25,
        2011. Refer to Note 17(e))


|13. | Shareholder Rights Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company has adopted a Shareholder Rights Plan (the
      "Plan") effective August 25, 2010. The Plan confers one right (a "Right")
      for each of the Companys outstanding share of common stock, as at August
      25, 2010 and for shares of common stock issued thereafter. Each Right will
      be evidenced by the Company's shares of common stock and will trade with
      the Company's shares of common stock. Under the terms of the Plan, the
      Rights separate and become exercisable upon a flip-in event: if a person
      or group acquires 20% or more of the Company's common stock other than
      through a take-over bid which meets certain requirements, among them that
      the offer be extended to all shareholders, that it remain open for 60
      days, and that it receive approval of not less than 50% of independent
      shareholders. If a flip-in event occurs as described in the Plan, the
      Rights entitle the holder of each Right to purchase for $8.75 per share
      (the exercise price) that number of shares of common stock of the
      Company which has a market value of twice the exercise price, subject to
      certain adjustments as provided under the Plan. The Plan is effective for
      a three-year period.

F-17

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|14. | Commitments 
|--- | ------------
|    |             
|    | a)          
|    |             
|    | b)          
|    |             
|    | c)          
|    |             
|    | d)          
|    |             
|    | e)          
|    |             
|    | f)          
|    |             
|15. | Income Taxes

| |                                                                   |  | December 31, |   |  | December 31, |   |  | December 31, |  
| | ----------------------------------------------------------------- |  | ------------ | - |  | ------------ | - |  | ------------ | -
| |                                                                   |  | 2010         |   |  | 2009         |   |  | 2008         |  
| |                                                                   |  | $            |   |  | $            |   |  | $            |  
| |                                                                   |  |              |   |  |              |   |  |              |  
| | Deferred tax asset                                                |  |              |   |  |              |   |  |              |  
| | - Net operating losses                                            |  | 7,775,836    |   |  | 5,648,823    |   |  | 3,700,530    |  
| | - Mineral property acquisition, exploration
      and development |  | 17,679,000   |   |  | 15,347,332   |   |  | 13,674,897   |  
| | - Less valuation
      allowance                                  |  | (25,454,836  | ) |  | (20,996,155  | ) |  | (17,375,427  | )
| |                                                                   |  |              |   |  |              |   |  |              |  
| | Net deferred tax
      asset                                      |  |             |   |  |             |   |  |             |  

The Company has incurred operating
  losses of approximately $22,216,673 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 years in which
  the loss was incurred and the expiration dates of the losses.

Net
      
      
      ExpirationLoss
      
      
      Date1999
      $
      329
      
      
      20192000
      
      493
      
      
      20202001
      
      18,389
      
      
      20212002
      
      46,564
      
      
      20222003
      
      23,560
      
      
      20232004
      
      18,367
      
      
      20242005
      
      4,420,398
      
      
      20252006
      
      1,438,511
      
      
      20262007
      
      2,828,339
      
      
      20272008
      
      3,870,989
      
      
      20282009
      
      4,934,131
      
      
      20292010
      
      4,616,603
      
      
      2030$
      22,216,673


F-18

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|16. | 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 Mining 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, 2010, 2009 and 2008 is
      presented below:                                                                                                                                                                                                                                                                                                     

| |                  |  | December 31, 2010 |  
| | ---------------- |  | ----------------- | -
| |                  |  | Total             |  
| |                  |  | $                 |  
| |                  |  |                   |  
| | Assets           |  | 40,634,083        |  
| |                  |  |                   |  
| | Net loss         |  | (14,599,983       | )
| | Interest expense |  |                  |  
| | Interest revenue |  | 52,290            |  
| | Depreciation     |  | (200,266          | )

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

| |                                             |  | 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            | )

F-19

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2010                             
|(Expressed in US dollars)                     

|17. | Subsequent Events
|--- | -----------------
|    |                  
|    | a)               
|    |                  
|    | b)               
|    |                  
|    | c)               
|    |                  
|    | d)               
|    |                  
|    | e)               
|    |                  
|    | f)               

F-20

---

Supplemental Financial Information ($, 000)

|                                          |  |   | 4th     |   |   | 3rd     |   |   | 2nd     |   |   | 1st     |  
|----------------------------------------- |  | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | -
|2010                                      |  |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |  
|Revenue                                   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Net profit (loss)                         |  | $ | (2,189  | ) | $ | (4,064  | ) | $ | (2,652  | ) | $ | (5,695  | )
|Basic and diluted profit (loss) per share |  |   | (0.04   | ) |   | (0.06   | ) |   | (0.04   | ) |   | (0.09   | )

|                                          |  |   | 4th     |   |   | 3rd     |   |   | 2nd     |   |   | 1st     |  
|----------------------------------------- |  | - | ------- | - | - | ------- | - | - | ------- | - | - | ------- | -
|2009                                      |  |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter |  
|Revenue                                   |  | $ | -       |   | $ | -       |   | $ | -       |   | $ | -       |  
|Net profit (loss)                         |  | $ | (2,276  | ) | $ | (2,549  | ) | $ | (1,887  | ) | $ | (1,987  | )
|Basic and diluted profit (loss) per share |  |   | (0.05   | ) |   | (0.05   | ) |   | (0.03   |   |   | (0.04   | )

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None

---

ITEM 9A. 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, 2010, 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, 2010 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.

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

---



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, 2010, 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, 2010, 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,
  2010 and 2009, and the related consolidated statements of operations, cash
  flows, and stockholders equity for each of the three years in the period ended
  December 31, 2010 and accumulated from May 26, 1999 (Date of Inception) to
  December 31, 2010 and our report dated March 11, 2011 expressed an unqualified
  opinion thereon.

/s/ MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada 
  March 11, 2011

---

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, 2010, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None

PART III

ITEM 10. 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
Senior Vice-President, Finance and 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, 2010, or during the subsequent period
from January 1, 2011, through the date of this Annual Report.

ITEM 11. 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, in connection with our 2011 annual general meeting of
shareholders, which information is incorporated by reference to this Annual
Report on Form 10-K.

---

ITEM 12. 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, in connection with our 2011 annual
general meeting of shareholders , which information is incorporated by reference
to this Annual Report on Form 10-K.

ITEM 13. 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, in
connection with our 2011 annual general meeting of shareholders , which
information is incorporated by reference to this Annual Report on Form 10-K.

ITEM 14. 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, in
connection with our 2011 annual general meeting of shareholders , which
information is incorporated by reference to this Annual Report on Form 10-K

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents Filed as Part of This Report.

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

---

(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)                                                                      
|4.5     | Shareholder Rights Plan, dated August 25,
      2010(22)                                                                              
|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)                                                                                                                       
|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)                                                                                                                                                 
|10.28 | Sales Agreement
        with Haywood Securities, November 30, 2010  Form 8K filed December
        1, 2010(23)                                                                                                        
|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.                                                
|(22) | Form of Shareholder Rights Plan filed as an exhibit
        to our definitive proxy statement on Form 14A filed April 27, 2010.      
|(23) | Filed as an exhibit to our Form 8K filed December 1, 2010.                                                                           

---

GLOSSARY OF TECHNICAL TERMS

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

DEQ/WDEQ:Department of Environmental Quality, State of
Wyoming

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.

NRC: Nuclear Regulatory Commission 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.

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this 2010 Form
10K report to be signed on its behalf by the undersigned, thereunto duly
authorized.

URANERZ ENERGY CORPORATION

|By: | /s/
      Glenn Catchpole          |  | /s/
      Benjamin Leboe                      
|--- | ---------------------------------- |  | ----------------------------------------------
|    | Glenn Catchpole, President and CEO |  | Benjamin Leboe, Senior Vice President, Finance
|    | Principal Executive Officer        |  | Principal Financial Officer and               
|    | Director                           |  | Principal Accounting Officer                  
|    | Date: March 11, 2011               |  | Date: March 11, 2011                          

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 11, 2011                             | 
|     |                                                  | 
|Per: | /s/ Dennis Higgs                                 | 
|     | Dennis Higgs, Executive Chairman,
      Director | 
|     | Date: March 11, 2011                             | 
|     |                                                  | 
|     |                                                  | 
|Per: | /s/ Gerhard Kirchner                             | 
|     | Dr. Gerhard Kirchner, Director                   | 
|     | Date: March 11, 2011                             | 
|     |                                                  | 
|Per: | /s/ George Hartman                               | 
|     | George Hartman, Executive Vice
      President,  | 
|     | Director                                         | 
|     | Date: March 11, 2011                             | 
|     |                                                  | 
|Per: | /s/ Peter Bell                                   | 
|     | Peter Bell, Director                             | 
|     | Date: March 11, 2011                             | 
|     |                                                  | 
|Per: | /s/ Paul Saxton                                  | 
|     | Paul Saxton, Director                            | 
|     | Date: March 11, 2011                             | 
|     |                                                  | 
|Per: | /s/ Arnold Dyck                                  | 
|     | Arnold Dyck, Director                            | 
|     | Date: March 11, 2011                             | 
|     |                                                  | 
|Per: | /s/ Richard Holmes                               | 
|     | Richard Holmes, Director                         | 
|     | Date: March 11, 2011                             | 

---