---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-KSB

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
  Exchange Act of 1934
  For the fiscal year ended December 31, 2006

[   ] Transition Report Under 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(Name of Small Business Issuer as Specified in its Charter)

|NEVADA                                                               | 98-0365605                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|Suite 1410  800 West Pender Street                                  |                                     
|Vancouver, British Columbia                                          | V6C 2V6                             
|(Address of principal executive offices)                             | (Zip Code)                          

(604) 689-1659(Issuers telephone
number)

Securities registered under Section 12(b) of the Exchange
Act:**Common stock, $0.001 par value, American Stock Exchange**

Securities registered under Section 12(g) of the Exchange Act:

Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the past
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 [   ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [   ]

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

State issuers revenues for its most recent fiscal year. $NIL

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 sold, or the average bid and asked price of such
common equity, as of a specified date within the past 60 days. $156,572,000
based on a price of $4.79 per share, being the last sale price of the Companys
common stock as of March 15, 2007.

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date: as of March
15, 2007, the Issuer had 39,039,587Shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (Check one): Yes
[   ] No [X]

---

URANERZ ENERGY CORPORATION FORM 10 -KSBTABLE
OF CONTENTS

|PART 1     |          | 3                                                                                                                    
|---------- | -------- | ---------------------------------------------------------------------------------------------------------------------
|           | ITEM 1.  | DESCRIPTION OF BUSINESS                                                                                              
|           | ITEM 2.  | DESCRIPTION OF PROPERTIES                                                                                            
|           | ITEM 3.  | LEGAL PROCEEDINGS                                                                                                    
|           | ITEM 4.  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                  
|PART II    |          | 29                                                                                                                   
|           | ITEM 5.  | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                             
|           | ITEM 6.  | MANAGEMENTS DISCUSSION AND ANALYSIS OF OPERATIONS
      AND FINANCIAL CONDITION                                     
|           | ITEM 7.  | FINANCIAL STATEMENTS                                                                                                 
|           | ITEM 8.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE                           
|           | ITEM 8A. | DISCLOSURE CONTROLS AND PROCEDURES                                                                                   
|           | ITEM 8B. | OTHER INFORMATION                                                                                                    
|PART III   |          | 39                                                                                                                   
|           | ITEM 9.  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|           | ITEM 10. | EXECUTIVE COMPENSATION                                                                                               
|           | ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                       
|           | ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                       
|           | ITEM 13. | EXHIBITS                                                                                                             
|           | ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                               
|SIGNATURES | 58      

2

---

PART 1

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form
10-KSB constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements, identified by words
such as plan, anticipate, believe, estimate, should, expect and
similar expressions include our expectations and objectives regarding our future
financial position, operating results and business strategy. These statements
reflect the current views of management with respect to future events and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Information
concerning the interpretation of drill results and mineral resource estimates
also may be deemed to be forward-looking statements; as such information
constitutes a prediction of what mineralization might be found to be present if
and when a project is actually developed. You are cautioned that any such
forward-looking statements are not guarantees or assurances and may involve
risks and uncertainties. Our actual results may differ materially from those in
the forward-looking statements due to risks facing us or due to actual facts
differing from the assumptions underlying our predictions. Some of these risks
and assumptions include:

- general economic and business conditions, including changes in interest
  rates, fluctuations in the prices for uranium, fluctuations in prices for
  securities in the uranium resource sector, demand for uranium and other
  economic and business conditions;
- natural phenomena or disasters that may affect completion of drill
  programs, exploration work, completion of feasibility studies or development,
  if warranted;
- actions by government authorities, including changes in government
  regulation, permitting requirements or environmental legislation;
- the companys ability to raise sufficient financing to complete its planned
  exploration work on its properties and to place its properties into
  development, if warranted, and to acquire and maintain additional properties;
- future decisions by management in response to changing conditions, and
- misjudgments, inaccurate assumptions or changes in conditions related to
  forward-looking statements.

Some of the risks and uncertainties include those set forth in
  Item 1 under the caption “Risk Factors and Uncertainties” in this
  Form 10-KSB. We advise you to carefully review the reports and documents we
  file from time to time with the Securities and Exchange Commission (the “SEC”),
  particularly our quarterly reports on Form 10-QSB and our current reports on
  Form 8-K.

We advise you that these cautionary remarks expressly qualify
  in their entirety all forward-looking statements attributable to us or persons
  acting on our behalf. We assume no obligation to update our forward-looking
  statements to reflect actual results, changes in assumptions or changes in other
  factors affecting such statements. You should not place undue reliance on such
  forward-looking statements.

3

---

EXPLANATORY NOTES

As used in this Annual Report, the terms we, us, our,
Uranerz, Uranerz Energy, and the Company mean Uranerz Energy Corporation
unless otherwise indicated. All dollar amounts in this Annual Report are
expressed in U.S. dollars unless otherwise indicated.

Glossary of Technical Terms

The following defined technical terms are used in this Annual
Report: Alluvium: sedimentary deposits formed by streams and rivers.

Anomaly: an irregularity or inconsistency; something which is
  unusual.

Development drilling: drilling done to determine more precisely
  the areal extent, grade and morphology of an ore deposit subsequent to the determination
  of the commercial viability of mining development.

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.

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 utilize injection of appropriate oxidizing chemicals into an
ore-bearing sandstone deposit with extraction by production wells. Also referred
to as solution mining.

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 milling of uranium ore.
Yellowcake typically contains 70 to 90% U3O8 by weight.

ITEM
1.                   
 DESCRIPTION OF BUSINESS

CORPORATE BACKGROUND

Uranerz Energy Corporation 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 offices
  are located at Suite 1410 - 800 West Pender Street, Vancouver, British Columbia
  Canada V6C 2V6. The telephone number for our executive offices is (604) 689-1659.

Our principal business offices are located at Suite 1410-800
West Pender Street, Vancouver, British Columbia, Canada V6C 2V6. The telephone
number for the business offices is (604) 689-1659. Our operations office is
located at 1701 East "E" Street, PO Box 50850, Casper, Wyoming 82605-0850. The
telephone number for the operations office is (307) 265-8900.

HISTORY

Uranerz was relatively inactive from 1999 until 2005 when it
  acquired mineral prospecting permits in Saskatchewan, mineral licenses in Mongolia
  and mining claims in Wyoming. Exploration commenced in 2005 and continued through
  2006 while additional mineral properties were acquired and development drilling
  was initiated in Wyoming. We have increased our personnel and operational consultants
  to move some of our Wyoming properties into the mine planning and permitting
  stage, activities which continue.

4

---

OUR BUSINESS

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

We own interests in properties in Wyoming, USA; Saskatchewan,
Canada; and Mongolia. We have entered into joint venture agreements for each of
our Saskatchewan and Mongolia properties whereby the joint venture partner for
each property can earn an ownership interest in the property in exchange for
exploration and development expenditure commitments and/or cash and equity
consideration. We have also joint ventured our uranium projects in the Great
Divide Basin area of Wyoming, and plan to maintain, explore or, if warranted,
develop our projects in the Powder River Basin area of Wyoming. We anticipate
that our joint venture partners will conduct exploration of our Wyoming Great
Divide Basin, Saskatchewan and Mongolian mineral properties.

We are an exploration stage company. Because of the long lead
times for environmental permitting of mining operations in North America, we
have started collecting environmental baseline data on two of our properties in
the Powder River Basin area of Wyoming that we feel have the potential, based on
data in our possession, of being developed into commercial in-situ recovery
uranium mines.

As of January 9, 2006, we own one subsidiary which is a
Mongolian limited liability company with the name Rolling Hills Resources, LLC.
Our Mongolian exploration licenses are held in the name of our subsidiary
company.

RECENT CORPORATE DEVELOPMENTS

The following significant corporate developments occurred
during our fiscal year ended December 31, 2006:

|1. | We signed a letter agreement dated February 17, 2006,
      amended March 22, 2006, and September 8, 2006, to option and joint venture
      our eight Mongolian exploration licenses to Bluerock Resources Ltd.
      (Bluerock). Under the terms of the amended agreement, we have granted to
      Bluerock the option to acquire an undivided 70% interest in the
      properties, subject to a joint venture agreement to be entered into by
      Bluerock and us upon exercise of the option. The joint venture agreement
      to be entered into will be based upon the Rocky Mountain Mineral Law
      Foundation's Model Exploration, Development and Mine Operating Agreement,
      1996 Edition ("Form 5A"). 
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As consideration for the grant of the option, Bluerock
      paid us a total of $35,000 and issued to us 150,000 common shares of
      Bluerock. The cash payments were completed and the shares issued after an
      initial due diligence period and receipt by Bluerock of TSX Venture
      exchange approval.                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Bluerock has the option to earn a 70% interest in our
      Mongolian properties by paying to us additional cash payments totaling
      $85,000 and by incurring exploration expenditures in the amount of
      $1,500,000 on the properties by October 18, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | Our board of directors approved on May 23, 2006, an
      amendment to our bylaws to increase the quorum requirement for meetings of
      our shareholders such that holders of not less than 33 1/3% of the
      outstanding shares of our common stock entitled to vote shall constitute a
      quorum for the transaction of business. The amendment to the bylaws is
      effective May 23, 2006. Our bylaws previously stated that holders of not
      less than 1% of the outstanding shares of our common stock entitled to
      vote constitute a quorum for the transaction of business. We effected this
      amendment to comply with corporate governance requirements of the American
      Stock Exchange.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | In June 2006, we entered into an Agreement with Black
        Range Minerals Limited (“Black Range”) of West Perth, Australia,
        on two of our exploration projects (the “projects”) located
        within the Red Desert area of southwest Wyoming. Black Range was granted
        the exclusive right to earn equity interests in the two exploration projects.
        We will form a joint venture to conduct further exploration and to develop
        the properties.                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4. | On August 10, 2006 our shares were listed for trading on
      the American Stock Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

5

---

|5. | On September 20, 2006, we announced that we staked and
      recorded an additional 54 federal lode mining claims at the Nichols Ranch
      property and an additional 28 claims have been staked and recorded at the
      Hank property. This recent claim staking activity is based on the results
      of the exploration drilling program conducted during the past two
      months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|6. | On October 30, 2006, we entered into an agreement with
        George Hartman, our Vice President, Mining and Chief Operating Officer
        and a Director to use certain geological reports held by Mr. Hartman for
        the purposes of staking and acquiring potential areas of interest. Under
        the terms of the agreement, we agreed to pay Mr. Hartman the sum of $0.40
        for each measured and indicated pound of uranium staked and/or acquired
        by the Company and a fee of $750 for each claim registered with the Bureau
        of Land Management, based on the use of the geological reports. This fee
        is payable to Mr. Hartman in shares of common stock of the Company. In
        connection with the issuance of the shares, we granted Mr. Hartman registration
        rights for the resale of such shares and agreed to obtain listing approval
        and other regulatory approval in connection with the issuance of such
        shares. The geological reports were owned by Mr. Hartman prior to his
        joining Uranerz and fully disclosed to us. Our Board approved this transaction
        as a related party transaction after evaluating the transaction.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|7. | On December 27, 2006, we entered into a binding letter of
      intent with Mr. Robert C. Shook (Shook) of Casper, Wyoming, to acquire
      three separate uranium projects located in northeast Wyoming in the
      central portion of the Power River Basin. The three projects are named
      West Flank, North Rolling Pin and C-line.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The locations of these three properties are adjacent to,
      or nearby mining claims already owned by us, including our West North
      Butte, Nichols Ranch, Hank, and Doughstick properties, thus providing
      synergistic opportunities for potential in-situ recovery. The surface area
      covered by these acquisitions is on land already covered by our surface
      use agreement with the rancher.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The total purchase price for the three project
      acquisitions was $3,120,000 in cash. The Letter of Intent provides for a
      35-day due diligence period to review all reports, maps, drill logs and
      like material covering the Uranium properties that Shook has in his
      possession or control and a title search will be performed. Uranerz Energy
      may elect, at its sole discretion, to cancel the Letter of Intent and not
      close on the transaction if the Company is not satisfied with the results
      of the due diligence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | On February 1, 2007, we completed such due diligence,
      were satisfied with the results and on February 7, 2007 we paid $3,120,000
      in cash and completed the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

COMPETITION

We compete with other mining and exploration companies in
connection with the acquisition of mineral properties. There is competition for
the limited number of uranium acquisition opportunities, some of which is with
other companies having substantially greater financial resources than we do. As
a result, we may have difficulty acquiring attractive exploration properties and
staking claims related to our properties.

EMPLOYEES

Currently we have five full time employees, four full time
operational consultants and six part time operational consultants. We operate in
established mining areas, which we believe have sufficient available personnel
for our business plans.

**RISK FACTORS AND UNCERTAINTIES**

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

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

6

---

***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. We have had no
significant operations and since incorporation our operating cash flow needs
have been financed solely through an offering of our common stock. As a result,
we have little historical financial and operating information available to help
you evaluate our performance or an investment in our common stock and
warrants.

Because
the probability of an individual prospect ever having reserves is extremely
remote, in all probability our properties do not contain any reserves, and any
funds spent on exploration will 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 extremely remote, in all probability our properties do not contain
any reserves, and any funds spent on exploration will be lost. It is not known
with certainty that 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 expenses 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 are 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 no
exploration history upon which an evaluation of our future success or failure
can be made. Our net loss since inception through December 31, 2006 is
$11,699,432. 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
reduce exploration 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 may not guarantee we will be successful in
generating revenues in the future. Failure to generate revenues may cause us to
go out of business.

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

Some,
but not all, of our officers and directors do have experience with exploring
for, starting, and operating a mine. Because some of our officers and directors
are inexperienced with exploring for, starting, and operating a mine, we will
have to hire qualified persons to perform surveying, exploration, and excavation
of our property. Some of our officers

7

---

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 development activities, which would likely
result in the loss of your investment.

We
have no known reserves. Without reserves we may not be able to generate income
and if we cannot generate income we will have to cease exploration activities
which result in the loss your investment.

We
have no known reserves. Without reserves, we may not be able togenerate income and if we cannot generate income we will have to cease
exploration activities which would likely result in the loss of your investment.
We have attempted 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. It is not
known with certainty that uranium exists on any of our properties.

Even
in the event commercial quantities of uranium are discovered, the mining
properties might not be brought into a state of commercial production. Estimates
of mineral resources are inherently imprecise and depend to some extent on
statistical inferences drawn from limited methods, which may prove unreliable.
Fluctuations in the market prices of uranium may render reserves and deposits
containing relatively low grades of uranium uneconomic. Whether a uranium,
precious or base metal deposit will be commercially viable depends on a number
of factors, some of which are: the particular attributes of the deposit, such as
its size and grade; costs and efficiency of the recovery methods that can be
employed; proximity to infrastructure; financing costs; and governmental
regulations, including regulations relating to prices, taxes, royalties,
infrastructure, land use, importing and exporting of minerals and environmental
protection. The effect of these factors cannot be accurately predicted, but the
combination of these factors may result in us not receiving an adequate return
on our invested capital.

***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 and uranium
production levels and costs of production. Spot prices for U3O8 were at $20.00
per pound U3O8 in December 2004, and then increased to $31.25 per pound in
September 2005 and to $35.25 per pound as of December 31, 2005. As of December
31, 2006, the U.S. weekly spot price of U3O8 was $72.00 per pound.

***Our
operations are subject to environmental risks*.**

We
are required to comply with 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 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 Mongolia. We are
required to comply with the Atomic Energy Act, as amended by UMTRCA, by applying
for and maintaining an operating license from the State of Wyoming. Uranium
operations must conform to the terms of such licenses, which include provisions
for protection of human health and the environment from endangerment due to
radioactive materials. The licenses encompass protective measures consistent
with the Clean Air Act and the Clean Water Act. 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 milling.
The possibility of more stringent regulations exists in the areas of worker
health and safety, the disposition of wastes, the decommissioning and
reclamation of exploration, mining and in-situ sites, and other environmental
matters, each of which could have a material

8

---

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 its operation or its
exploration of its properties or, if feasible, to commence development,
construction or operation of mining facilities at such properties on terms which
enable operations to be conducted 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 recoverymining, which is suitable for extraction of certain types of uranium
deposits. This process requires in-situ recoverymining 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 bulldozers, drilling rigs, and other equipment that we might
need to conduct exploration and 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
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 an 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:

- unusual or unexpected geological formations;
- fires, floods, earthquakes, volcanic eruptions, and other natural
  disasters;
- power outages and water shortages;
- cave-ins, land slides, and other similar mining hazards;
- labor disruptions and labor disputes;
- inability to obtain suitable or adequate machinery, equipment, or labor;
- liability for pollution or other hazards; and
- other known and unknown risks involved in the operation of mines and the
  conduct of exploration.

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,

9

---

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
some of our officers and directors have other outside business activities and
may not be in a position to devote a majority of their time to our exploration
and development activities, our exploration and development activities may be
sporadic which may result in periodic interruptions or suspensions.

Because
some of our officers and directors have other outside business activities and
may not be in a position to devote a majority of their time to our exploration
and development activities, these activities may be sporadic and occur only at
times which are convenient to our officers and directors. As a result,
exploration and development of our properties may be periodically interrupted or
suspended.

Because
we may be unable to meet property payment obligations or be able to acquire
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.

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

The
business of mineral exploration and extraction involves a high degree of risk.
Few properties that are explored are ultimately developed into production. At
present, none of our properties has a known body of commercial ore. Unusual or
unexpected formations, formation pressures, fires, power outages, labor
disruptions, flooding, explosions, cave-ins, landslides 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, cave-ins or hazards against which we cannot
insure or against which we may elect not to insure. There are also physical
risks to the exploration personnel working in the rugged terrain of Mongolia,
often in poor climate conditions. 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 will have to
acquire outside expertise. If we are unable to acquire such expertise we may be
unable to put our properties into production and you may lose your investment.

The
board of directors includes six individuals that have technical or financial
experience in placing mining projects into production. However, we have no
experience in placing mineral deposit properties into production, and our
ability to do so will be dependent upon using the services of appropriately
experienced personnel or entering into agreements with other major resource
companies that can provide such expertise. There can be no assurance that we
will have available to us the necessary expertise when and if we place mineral
deposit properties into production.

Because
Mongolian regulations require the State Administration of Exchange Control to
approve the remittance of certain types of income out of Mongolia, we may be
unable to repatriate our earnings. If we are unable to repatriate our earnings
from Mongolia, you may lose your investment.

Mongolian
  regulations provide that, subject to payment of applicable taxes, foreign investors
  may remit out of Mongolia, in foreign exchange, profits or dividends derived
  from a source within Mongolia. Remittance by foreign

10

---

investors of any other amounts (including, for instance,
proceeds of sale arising from a disposal by a foreign investor of any of his
investment in Mongolia) out of Mongolia is subject to the approval of the State
Administration of Exchange Control or its local branch office. No assurance can
be given that such approval would be granted if we dispose of all or part of our
interest in our Mongolia projects. Further, there can be no assurance that
additional restrictions on the repatriation of earnings in Mongolia will not be
imposed in the future.

Because
certain of our mineral interests are in Mongolia, you will be exposed to
political risk. Such political risk could result in us losing interests in our
properties in Mongolia. If this occurs you could lose your investment.

Some
of our mineral interests are in Mongolia and may be affected by varying degrees
of political instability and the policies of other nations in respect of these
countries. These risks and uncertainties include military repression, political
and labor unrest, extreme fluctuations in currency exchange rates, high rates of
inflation, terrorism, hostage taking and expropriation. Some of our material
mineral interests are currently located in Mongolia. Our mining, exploration and
development activities may be affected by changes in government, political
instability and the nature of various government regulations relating to the
mining industry, including but not limited to, environmental regulation, labor
regulations, worker health and safety regulations, and royalties, taxes, import
and export laws and regulations. Any changes in regulations or shifts in
political conditions are beyond our control and may adversely affect our
business and/or holdings. Operations may be affected in varying degrees by
government regulations with respect to restrictions on production, price
controls, export controls, income taxes, expropriation of property,
environmental legislation, imposition of new, high government royalties and
ownership interests, and safety factors. Our operations in Mongolia entail
significant governmental, economic, social, medical and other risk factors
common to all developing countries. The status of Mongolia as a developing
country may make it more difficult for us to obtain any required financing
because of the investment risks associated with these countries.

Because
some of our operations are in Mongolia we may be adversely affected by economic
uncertainty characteristic of developing countries. Such adverse affects could
result in a loss of your investment.

Our
operations in Mongolia may be adversely affected by the economic uncertainty
characteristic of developing countries. Operations in Mongolia are subject to
risks relating to Mongolias relatively recent transition to a market economy
administered by an elected government. While Mongolia has recently permitted
private economic activities, the government of Mongolia has exercised and
continues to exercise substantial control over virtually every sector of
Mongolias economy through regulation and state ownership. Our prospects,
results of operations and financial condition may be adversely affected by
political, economic and social uncertainties in Mongolia, changes in Mongolias
leadership, diplomatic developments and changes or lack of certainty in the laws
and regulations of Mongolia.

Because
the acquisition of title to resource properties in Mongolia is a very time
consuming process that may be subject to dispute we may not be able to acquire
title to our properties. This may result in a loss of the properties and your
investment.

The
acquisition of title to resource properties or interests therein is a very
detailed and time-consuming process. Title to and the area of resource
concessions may be disputed. Our resource properties or interests in Mongolia
are registered in the name of our wholly-owned subsidiary. There is no guarantee
of title to any of our properties. The properties may be subject to prior
unregistered agreements or transfers and title may be affected by undetected
defects. Title may be based upon interpretation of the countrys laws, which
laws may be ambiguous, inconsistently applied and subject to reinterpretation or
change. We have not surveyed the boundaries of any of our mineral properties and
consequently the boundaries of the properties may be disputed.

Because
our subsidiary company may require certain approvals to advance our operations
we are at risk of not receiving such approvals. If we dont receive the
necessary approvals we may lose our property interests resulting in a loss of
your investment.

While
we are authorized to explore for uranium on our projects, we may be required to
obtain further approvals from regulatory authorities in Mongolia in order to
explore for minerals or to conduct mining operations. There is no assurance that
such approvals would be granted by the Mongolian authorities at all or on terms
favorable to the continued operations. The laws of Mongolia are ambiguous,
inconsistently applied and subject to reinterpretation or change. While we
believe that we will be properly established and that we have taken the steps
necessary to obtain our interest in the projects, there can be no guarantee that
such steps will be sufficient to preserve our interests in the projects.

11

---

***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, 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 SECURITIES**

***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.

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

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

***While
  we believe we have adequate internal control over financial reporting, we are
  required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley
  Act of 2002. Any adverse results from such evaluation could result in a loss
  of investor confidence in our financial reports and have an adverse effect on
  the price of our shares of common stock.***

Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we expect that beginning with
our annual report on Form 10-KSB for the fiscal year ended December 31, 2007, we
will be required to furnish a report by management on our internal control over
financial reporting. Such report will contain among other matters, an assessment
of the effectiveness of our internal control over financial reporting, including
a statement as to whether or not our internal control over financial reporting
is effective. This assessment must include disclosure of any material weaknesses
in our internal control over financial reporting identified by our management.
Beginning with our annual report on Form 10-KSB for the fiscal year ended
December 31, 2007, such report must also contain a statement that our auditors
have issued an attestation report on our managements assessment of such
internal controls. Public Company Accounting Oversight Board Auditing Standard
No. 2 provides the professional standards and related performance guidance for
auditors to attest to, and report on, our managements assessment of the
effectiveness of internal control over financial reporting under Section
404.

12

---

While
we believe our internal control over financial reporting is effective, we are
still compiling the system and processing documentation and performing the
evaluation needed to comply with Section 404, which is both costly and
challenging. We cannot be certain that we will be able to complete our
evaluation, testing and any required remediation in a timely fashion. During the
evaluation and testing process, if we identify one or more material weaknesses
in our internal control over financial reporting, we will be unable to assert
that such internal control is effective. If we are unable to assert that our
internal control over financial reporting is effective as of December 31, 2007
(or if, by December 31, 2007, our auditors are unable to attest that our
managements report is fairly stated or they are unable to express an opinion on
the effectiveness of our internal controls), we could lose investor confidence
in the accuracy and completeness of our financial reports, which would have a
material adverse effect on our stock price.

Failure
to comply with the new rules may make it more difficult for us to obtain certain
types of insurance, including director and officer liability insurance, and we
may be forced to accept reduced policy limits and coverage and/or incur
substantially higher costs to obtain the same or similar coverage. The impact of
these events could also make it more difficult for us to attract and retain
qualified persons to serve on our board of directors, on committees of our board
of directors, or as executive officers.

***Stock
market price and volume volatility***

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

***Dilution
through the granting of options***

Because
the success of the Company is highly dependent upon its respective employees, we
may in the future grant to some or all of our key employees, directors and
consultants options to purchase our common shares as non-cash incentives. Those
options may be granted at exercise prices below those for the common shares
prevailing in the public trading market at the time or 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.

***You
  may lose your entire investment in our shares.***

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

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

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.

13

---

**ITEM
2.**                         **DESCRIPTION
OF PROPERTIES**

We hold interests in the following mineral properties:

Name of Property
    LocationState Mineral Leases, Federal Mining Claims and Private
      (Fee) Mineral
    Powder River Basin, Wyoming, USAState Mineral Leases, Federal Mining Claims (joint venture
      agreement in place)
    Great Divide Basin, Wyoming, USACochrane River Property (joint venture agreement in place)
    Saskatchewan, CanadaEight Exploration Licenses (joint venture agreement in
      place)
    Mongolia


Our plan of operations is to carry out exploration of our
Wyoming Powder River Basin properties while our joint venture partners will be
responsible for carrying out exploration of our Wyoming Great Divide Basin
properties, Saskatchewan, and Mongolia properties. Most of our exploration
programs are preliminary in nature in that their completion may not result in a
determination that our properties contain commercially exploitable quantities of
uranium mineralization.

Our exploration program in the Wyoming Powder River Basin will
be directed by our management and will be supervised by Mr. George Hartman, our
vice-president of mining and chief operating officer. We will engage contractors
to carry out our exploration programs under Mr. Hartmans supervision.
Contractors that we plan to engage include project geologists, drilling
companies and geophysical logging companies, each according the specific
exploration program on each property. Exploration of our Wyoming Great Divide
Basin, Saskatchewan and Mongolian mineral properties will be undertaken by our
partners, Black Range Minerals, Triex Minerals Corporation and Bluerock
Resources Ltd., respectively.

Our management will make determinations as to whether to
proceed with the additional exploration of our Wyoming mineral properties based
on the results of the preliminary exploration that we undertake. In completing
these determinations, we will make an assessment as to whether the results of
the exploration are sufficiently positive for us to proceed with more advanced
exploration. On our Wyoming Great Divide Basin, Saskatchewan and Mongolian
mineral properties. Our partners are committed to certain minimum exploration
expenditures over the earn-in period. The management of Black Range, Triex
Minerals and Bluerock Resources will be responsible for overseeing the
exploration in Wyoming Great Divide Basin, Saskatchewan and Mongolia,
respectively. Triex and Bluerock are required to submit reports on the results
of their exploration efforts in Canada and Mongolia.

We plan to continue exploration of our mineral properties for
so long as the results of the geological exploration that we complete indicate
that further exploration of our mineral properties is warranted, and we are able
to obtain the additional financing necessary to enable us to continue
exploration.

DESCRIPTION OF PROPERTIES

We currently have properties that are prospective for uranium
mineralization located in Saskatchewan, Mongolia and Wyoming.

COCHRANE RIVER PROPERTY, SASKATCHEWAN, CANADA

Location and Access

The original Cochrane River property was a single contiguous
block of irregular outline, extending for approximately 62 km in a
northeast-southwest direction and approximately 15 km in a northwest-southeast
direction. The centre of the property was approximately 102< 40 W, 58<
45 N. The property occupied portions of NTS map sheets 64 L/9, 10, 15 and 16.

14

---

The property extended to the northeast of the northern portion
of Wollaston Lake. The closest community is the Village of Wollaston Lake which
is located 50 km to the south. This community is served by a year-round
scheduled air link to the cities of Saskatoon and Prince Albert in central
Saskatchewan. A winter road (during January, February and March) links the
Wollaston Lake community with Provincial Highway 905 (and the provincial road
network) on the west side of Wollaston Lake.

There is presently no road access to the Cochrane River
property. Numerous lakes within the property can be accessed by float- and
ski-equipped light aircraft which are available for charter at Points North
Landing (75 km to the southwest) and at the Town of La Ronge (400 km to the
south-southwest).

Property Location Map



15

---

Ownership Interest

Our Saskatchewan property, called the Cochrane River property
originally consisted of two Mineral Prospecting Permits (MPP 1237 and MPP 1238)
with a combined total areal extent of 67,480 hectares (166,747 acres). The
property is located in northern Saskatchewan. Ubex Capital Inc. (Ubex) filed
an application with Saskatchewan Industry and Resources (SIR) to acquire the
permits on 31st January, 2005, and certificates confirming title were
subsequently issued by SIR on 4th March, 2005. The permits were
registered in the name of Ubex Capital Inc. with 100% unencumbered ownership.

Permit application fees which were submitted by Ubex, payable
to SIR, were as follows:

For each permit, a refundable deposit of $15,000, and a
recording fee of $0.15 per hectare.

The legal description of the permits consists of a listing of
corner coordinates (NAD 27), as follows:

Permit MPP 1237

1.
    102< 47' 19.68" W 58< 45
      00 N2.
    102< 34 58.80 W58< 4030
      N3.
    102< 52 08.40 W 58< 30
      00 N4.
    103< 00 00 W 58< 30 00
      N5.
    103< 00' 00" W 58< 39'
      19.08" N


Permit MPP 1238

1.
    102< 47' 19.68" W 58< 45'
      00" N2.
    102< 34' 58.80" W 58< 40'
      30" N3.
    102< 25' 01.20" W58< 46'
      16.32" N4.
    102< 27' 52.20" W 58< 47'
      44.88" N5.
    102< 15' 34.20" W58< 54'
      11.16" N6.
    102< 17' 14.28" W 58< 55'
      02.64" N7.
    102< 34' 00" W 58< 49'
      55.56" N8.
    102< 40' 22.08" W58< 48'
      05.94" N


Title to MPP1237 and MPP 1238 has been sold to us by Ubex. We
have entered into a mineral property purchase agreement with Ubex dated April
26th, 2005, to acquire an undivided 100% right, title and interest in
the two mineral exploration properties. The agreement is subject to Ubex
retaining a 2% royalty. Total consideration for this acquisition consists of a
cash payment in the amount of $40,756.95 Canadian dollars (Cdn$), which is
Ubexs cost of acquisition of the two permits. The sale of the properties to us
has been completed.

Ubex Capital Inc. is 100% owned by Dennis Higgs, one of our
directors. Ubex will retain a royalty of 2% on the property and will split the
royalty with Darcy Higgs, Dennis Higgs brother.

On October 20, 2005, an amendment to this agreement was signed
that allows us the one time right exercisable for 90 days following completion
of a bankable feasibility study to buy up to one half (50.0%) of Ubexs royalty
interest (i.e. an amount equal to 1% Royalty) for Cdn$1,000,000, leaving Ubex to
retain not less than a 1% Royalty.

Saskatchewan mineral dispositions including permits are
administered by SIR on behalf of the Crown of Canada in accordance with The
Mineral Disposition Regulations, 1986. The holder of a permit is granted the
exclusive right to explore for minerals (though not to extract, recover or
produce minerals except for testing and scientific purposes) within the permit
outline. A permit is valid for a period of two years and may not be renewed.
While in compliance with the requirements of the regulations, a permit holder is
entitled to convert any portion of a permit to mineral claims which may be held
indefinitely. The two-year life on the permits ended on January 31, 2007. In
late January and early February, 2007, a total of seven claims were staked
within the boundaries of MPP 1237 and 1238, for a

16

---

total of 27,884.4 hectares. The new claims have been recorded
  with the Saskatchewan mine recorder office in la Ronge, and they now are posted
  on the government website. Granting of the title to these claims is dependant
  on sufficient assessment work performed and filed on the permits to hold them
  in good standing up to January 31, 2007. It is planned that this assessment
  report will be written and submitted (by Triex) before the 90-day period after
  January 31, 2007 elapses. The staked area covered the most interesting “area
  of interest” as interpreted from the DIGHEM V survey, as well as areas
  of anomalous lake sediment chemistry. A claim holder may subsequently convert
  his claim into a mineral lease which allows for commercial extraction of minerals.

To maintain a mineral prospecting permit in good standing, SIR
requires the filing of reports documenting acceptable exploration expenditures
of $1.25 per hectare in the first permit year, and $4.00 per hectare in the
second permit year. Reports and statements of expenditures must be filed not
later than 90 days following the permit anniversary dates.

Excess expenditures may be carried over and applied to the
following permit year or claim year. Annual expenditure requirements to maintain
mineral claims in good standing are $12 per hectare for the first 10 years and
$25 per hectare thereafter. In the case of claims converted from exploration
permits, the deemed effective dates are the effective dates of the permits.

After the first permit year, and subject to acceptance of the
required filing of exploration expenditures, a permit may be reduced in size to
a single block not less than 10,000 hectares in size.

The deposit of $15,000 per permit is refundable to the
registered holder after the first or second permit years if acceptable
exploration expenditures have been filed. The deposit would normally be rolled
over to apply to the second permit year unless the holder elected to surrender
the permit after the first year. We have received the refund of Cdn$30,000.

On November 4, 2005, we signed an agreement to joint venture
our Cochrane River property located in northern Saskatchewan, Canada, with Triex
Minerals Corporation. Triex can earn a 60% interest in the Cochrane River
property by making payments to us of Cdn$75,000 and spending Cdn$1,500,000 on
the property by May 1, 2008. After completing the 60% earn-in phase, Triex can
elect to earn an additional 10% interest in the project by spending an
additional Cdn$1,500,000 by November 1, 2009.

History of Operations

A first phase of exploration work has been conducted by our
joint venture partner (Triex) on the Cochrane River property. No mineralized
material is known to exist.

Present Condition of the Property and Proposed Exploration
Program

Our Saskatchewan mineral properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or equipment
located on our Saskatchewan mineral properties.

Since we have signed an agreement to joint venture our Cochrane
River property with Triex Minerals Corporation, Triex will be the operator of
the exploration programs for this joint venture. Any exploration undertaken by
Triex will be at its expense under the terms of the joint venture agreement.
There is no assurance that Triex will make the cash payments or undertake the
full amount of the exploration expenditures necessary for it to earn an interest
in our Saskatchewan properties.

A compilation and analysis of prior exploration was prepared
  by Robertshaw Geophysics Ltd. of Saskatoon, Saskatchewan. Previous exploration
  on the Cochrane River property has identified several electromagnetic conductors.
  By January 2006 Triex had completed a detailed airborne geophysics survey on
  the Cochrane River properties. Fugro Airborne Surveys completed helicopter-borne
  geophysical surveys over four grids on the Cochrane River property for a total
  of 1,949 line kilometers. All the grids were flown at 100 meter line spacing
  to produce high resolution data. The grid areas covered major boundary zones
  on regional airborne magnetic maps, and on the location of known mineral occurrences,
  geochemical anomalies and previously defined conductors.

17

---

A follow-up ground exploration program commenced in August,
2006 to focus on grid-based and lakeshore prospecting and geological mapping, as
well completing an extensive lake sediment survey facilitated by a Bell 206
helicopter equipped with floats. Recent advances in the understanding and
modeling of the structural geometries of basement-hosted uranium deposits in the
Athabasca Basin, such as Millennium, Sue C and Eagle Point, were applied to
advance targets. Additional geophysical and remotely sensed data sets have been
acquired from the public and private domain and integrated into the existing
project GIS database in order to facilitate a detailed lineament analysis and
integrated structural study which is focused on the potential for structurally
controlled uranium deposits.

Ground-based resistivity surveys were completed which follows
up on key targets identified from helicopter-borne DIGHEM V geophysical surveys
(EM and magnetic) flown in January 2006, and an extensive lake sediment
geochemical program completed in September.

During September, 2006 a program consisted of a lake sediment
sample program covering both permits MPP 1237 and 1238 as well as some
prospecting and mapping designed primarily as a ground truth of the 2006 DIGHEM
V airborne magnetic/EM survey.

A total of 390 lake sediment samples were taken. The
approximate density of sampling was 1 per 1.5 sq. km.

This current winter, from mid-November, 2006 until
mid-February, 2007 a pole-dipole array D.C. resistivity survey was conducted on
the Cochrane River project. Work on Cochrane River focused on MPP 1238, in an
area that overlapped with a portion of the 2006 DIGHEM V survey. 14.8 line-km of
grid was established but only 5.9 line-km of geophysics survey was covered on
the grid on MPP 1238. The survey was cut short because the harsh winter
conditions and extreme frozen ground affected the production rate of the survey.

The target on the Cochrane River property is structurally
controlled, basement-hosted deposits at or near surface. It is planned that the
structural models prepared for Eagle Point and other deposits in the eastern
Athabasca Basin over the past 5 years will be incorporated into the program.
Conductors were the focus of exploration in the 1970s. Triex plans to build on
that work, not repeat it, by prioritizing targets related to conductors based on
their structural setting.

Geology

The property is underlain by highly deformed Paleoproterozoic
Wollaston Group metasediments and Archean age granites which form part of a 60
km wide, northeast trending fold-thrust belt known as the Wollaston Domain. The
Cochrane River property is located within the western portion of the Wollaston
Domain where the metasediments contain abundant graphitic horizons.

The Athabasca Basin, which extends for some 425 km east-west x
220 km north-south, hosts several world class uranium deposits (McArthur River,
Cigar Lake, Key Lake, and others). These deposits occur at and around the
contact between western Wollaston Group metasediments and overlying Athabasca
Group sandstone units and are generally termed unconformity-type deposits.
Although much of the uranium ore is generally hosted by the overlying Athabasca
Group sandstones, significant uranium mineralization commonly extends vertically
beneath into the Wollaston Group rocks. This is particularly evident at the
McArthur River deposit, where the majority of the uranium ore and the highest
grades of mineralization occur in the underlying basement rocks.

The Athabasca Group sandstone rocks are approximately 1.7
billion years in age, and there is evidence that these rocks were once thicker
(by probably 2 km or more) and much more extensive in area. The Cochrane River
property may have been overlain by Athabasca Group sandstones for a significant
portion of its geological history. Unconformity-type uranium deposits could have
formed within the property at that time. Although now eroded to below the level
of Athabasca Group coverage, any underlying basement-hosted or root zones of
mineralization should be preserved. These are the targets of the present
exploration program at the Cochrane River property.

18

---

Faults, particularly the common northeast-oriented strike slip
faults of this region, tend to be localized within the soft, graphitic horizons
of the Wollaston Group sediments, particularly where adjacent to relatively
rigid basement units such as Archean granites. Fault movements, particularly
strike-slip movements, enhance the electrical conductivity of graphitic horizons
by aligning the graphite grains and promoting electrical continuity. Reactivated
basement faults also provide enhanced fluid permeability in the basement which
facilitates fluid flow and mixing which are thought to be key components in the
formation of the uranium deposits of the Athabasca Basin region. Thus, faults
and particularly graphitic conductors are commonly sought as exploration targets
for uranium mineralization. Graphitic conductor horizons which are in close
proximity to Archean granite bodies are thought to be particularly favorable.

MONGOLIA

Location and Access

Our eight exploration licenses in Mongolia are spread out
across the country into four regional areas that we call the North Gobi Project,
the East Gobi Tamtsag Project, the Central Gobi Project, and the West Central
Highland Project. A tabulation of the eight licenses is presented below that
includes location coordinates. Generally speaking, access to all eight licenses
is by vehicles departing from the capital city of Ulaan Baatar. Roads, except in
the immediate vicinity of Ulaan Baatar, are unimproved dirt/gravel and often
just two tracks. Four wheel drive vehicles are the standard means of travel by
western field crews on the Mongolian road system. Access to the capital city of
Ulaan Baatar from outside of the country is by commercial air.

Table of Mongolian Licenses

No.
      License 
        No
      Name 
        Of license
      Coordinates
      Aimag* 
        and Soum 
        (Province)
      Area 
        (Hectares)1
      8560X
      Ulaankhushu u (Khavtsal)
      109 01 20 
        10911 20 
        109 11 20 
        109 01 20
      45 34 10 
        45 34 10 
        45 27 30 
        45 27 30
      DG (Airag)
      160912
      10166X
      Ovor bel
      116 01 00 
        116 19 00 
        116 19 00 
        116 01 00
      47 20 10 
        47 20 10 
        46 50 30 
        46 50 30
      DO Matad
      1245273
      10167X
      Tasarkhai
      115 30 00 
        116 00 00 
        116 00 00 
        115 30 00
      47 00 00 
        47 00 00 
        46 54 00 
        46 54 00
      DO Matad
      423254
      10165X
      Khudgiin us
      109 20 00 
        109 29 50 
        109 29 50 
        109 20 00
      45 42 40 
        45 42 40 
        45 40 00 
        45 40 00
      DG Airag
      63085
      10168X
      Khartolgoi
      105 05 00 
        105 25 00 
        105 25 00 
        105 05 00
      45 00 00 
        45 00 00 
        44 51 30 
        44 51 30
      DU Khuld, Delger khangai
      414306
      10169X
      Chuluut
      105 55 00 
        106 08 00 
        106 08 00 
        106 05 40 
        106 05 40 
        106 08 00 
        106 08 00
      45 00 00 
        45 00 00 
        44 58 50 
        44 58 50 
        44 56 40 
        44 56 40 
        44 47 00
      DU Khuld, Olziit
      39987


19

---

105 55 00
      44 47 007
      10241X
      Chuluut
      100 27 00  100 30 00 
        100 30 00 
        100 36 00 
        100 36 00 
        100 27 00
      48 17 00
        48 17 00
        48 17 10
        48 17 10
        48 11 30
        48 11 30
      AR Ondor ulaan, Tariat
      115898
      10315X
      Tolgod
      109 00 00  109 05 20 
        109 05 20 
        109 00 00
      45 54 00
        45 54 00
        45 52 00
        45 52 00
      DG Dalan jargalan
      2558


DG - Dornogobi, DU - Dundgobi, AR - Arkhangai, DO – Dornod

Location Map of the Uranerz Mongolian Exploration Licenses

Khavtsal Location Map



The Khavtsal property (license no. 8560X), our most advanced
exploration property in Mongolia, is 321 kilometers south-southeast of Ulaan
Baatar, the capital city of Mongolia in the Dornogovi province and Armag sub
province. The approximate geographic center of the property is at 45(32'42" and
109(07'08'. Access to the property is by

20

---

surfaced and undeveloped roads that head southerly from Ulaan
Baatar. These roads parallel the main railway between Ulaan Baatar and southern
Mongolia. The property is 30 kilometers south from the station Khar Armag along
this railway.

License numbers 10168X and 10169X are located 108km southwest
and 80km southwest respectively from the city of Mandalgobi in the Dungovi
province of Mongolia. Access is by primary improved and secondary roads.

License numbers 10165X and 10315X are located 108km southeast
from the city of Sumber in the Dornogovi province of Mongolia. Access is
provided by primary and secondary roads that parallel the central Mongolia
railway between the capital of Ulaan Baatar and the border with China to the
south.

License number 10241X is within an area known as Chuluut,
approximately 102km northwest of the city of Tsetserleg in the province of
Arhangav of Mongolia.

License numbers 10167X and 10166X are located 139km and 145km
southeast respectively southeast of Choibalsan. Access is by primary and
secondary roads.

Ownership Interest

In May 2005, Glenn Catchpole, our president, acquired a 100%
interest in the Khavtsal property through a purchase of an exploration license
legally recorded and transferred in accordance with the Mongolian Mining Law.
The Khavtsal property is recorded at the OGMC by license number #8560X and
covers 16,091 hectares.

Mongolia allows for the application of a mineral exploration
license through the Office of Geological and Mining Cadastre Office ("OGMC"), an
agency of the Mineral Resource Authority of Mongolia. Exclusive rights to
explore are granted to individuals or companies, subject to approval of a
correctly submitted license application and exploration conducted in compliance
with specified mineral law.

Glenn Catchpole entered into a purchase agreement, subject to
due diligence and confirmation of title, to purchase a 100% interest in the
Khavtsal project including the historical files of data on past work on the
project, and commissions, for a total purchase price of $105,945. No additional
payments or work commitments will be required subsequent to closing of the sale.
The permit was recorded in the name of Glenn Catchpole because we had not set up
a Mongolian corporation at the time the transaction was negotiated. Glenn
Catchpole subsequently provided us with a signed or executed bill of sale in our
favor and we transferred ownership of the property to our wholly owned Mongolian
subsidiary, Rolling Hills Resources LLC.

The exploration license that was being held by our consulting
geologist, Dr. Tumenbayar, is license number 10315X. Dr. Tumenbayar has
transferred title to the property, which was acquired on January 9, 2006, to our
wholly owned Mongolian subsidiary, Rolling Hills Resources. There is no known
previous exploration for uranium on this license area.

The legal status of exploration licenses are maintained by the
payment of $0.10 per hectare in annual fees (for the second and third years) on
or before the anniversary dates of the issuance of the licenses, and by
submitting exploration plans and reports annually.

We can maintain all our exploration licenses in good standing
by paying the annual license fees on or before the license issuance anniversary
dates, and by filing suitable exploration plans and reports to the OGMC of
Mongolia. Exploration Licenses may be held for seven years during which the
exclusive right to obtain a mining license within the boundary of the license is
held by the owner.

We signed a letter agreement dated February 17, 2006, amended
March 22, 2006, and September 8, 2006, to option and joint venture our eight
Mongolian exploration licenses to Bluerock Resources Ltd. (Bluerock). Under
the terms of the amended agreement, we have granted to Bluerock the option to
acquire an undivided 70% interest in the properties, subject to a joint venture
agreement to be entered into by Bluerock and us upon exercise of the

21

---

option. The joint venture agreement to be entered into will be
based upon the Rocky Mountain Mineral Law Foundation's Model Exploration,
Development and Mine Operating Agreement, 1996 Edition ("Form 5A").

As consideration for the grant of the option, Bluerock paid us
a total of $35,000 and issued to us 150,000 common shares of Bluerock. The cash
payments were completed and the shares issued after an initial due diligence
period and receipt by Bluerock of TSX Venture exchange approval.

Bluerock has the option to earn a 70% interest in our Mongolian
properties by paying to us additional cash payments totaling $85,000 and by
incurring exploration expenditures in the amount of $1,500,000 on the properties
by October 18, 2009. The required cash payments and exploration expenditures
required in order to enable Bluerock to exercise the option and acquire a 70%
interest are summarized as follows:

| | (a) | Cash Consideration      
| | --- | ------------------------
| |     | (i)                     
| |     | (ii)                    
| |     | (ii)                    
| |     | (iii)                   
| | (b) | Exploration Expenditures
| |     | (i)                     
| |     | (ii)                    
| |     | (iii)                   
| |     | (iv)                    

In the event that Bluerock does not complete the full $200,000
expenditure by October 18, 2006, any shortfall will be carried forward to be
incurred by October 18, 2007.

We have retained the right to acquire back a 21% interest in
the joint venture, exercisable within 120 days following receipt by the parties
of a feasibility study on the Mongolian properties. We can exercise this back-in
right by paying to Bluerock an amount calculated in relation to the quantity of
U3O8 within the Mongolian properties, as determined by the feasibility study.
For measured mineral resources, we would pay a price of $0.42 per pound of U3O8;
for indicated mineral resources, we would pay a price of $0.26 per pound of
U3O8.

Similar terms allow for us to acquire back a 21% interest in
the joint venture if a gold deposit is discovered, based on a back-in price of
$5.25 per ounce of measured gold resources and $3.15 per ounce of indicated gold
resources.

The joint venture agreement will be entered into upon Bluerock
having completed the cash payments and having incurred $1,500,000 in exploration
expenditures on the Mongolian properties by October 18, 2009. In this event,
Bluerock will own a 70% interest in the Mongolian properties and we will own a
30% interest. Upon Bluerock earning a 70% interest in the project, the parties
will enter a joint venture for the further development of the properties. Upon
receipt of a feasibility study we have the right to acquire back a 21% interest
in the joint venture, as described above. If we exercise this right, then we
would hold a 51% interest in the joint venture, with Bluerock holding a 49%
interest in the joint venture.

We believe that the joint venturing of the exploration of these
Mongolian projects will allow us to focus our resources on the exploration of
our Wyoming Powder River Basin projects.

History of Operations

In late September and early October of 2005, we had two
contract geologists visit the properties covered by four of our exploration
licenses (8560X, 10315X, 10165X & 10241X), and perform a limited amount of
surface exploration. No other exploration by Uranerz has occurred on our eight
exploration licenses. Bluerock Resources, our joint venture partner, is
currently conducting exploration on these licenses. With the exception of the
Khavtsal license (8560X) discussed below, we do not have in our possession any
prior geologic information on our Mongolian exploration licenses except that of
a general nature discussed below.

22

---

Previous occupiers of the Khavstal property have conducted some
exploration activity. A summary report on file at the Geologic Information
Center within the offices of the Mineral Resource Authority of Mongolia (MRAM)
provides the following summary of exploration work completed on the Khavtsal
property:

|1. | Geologic and radiometric exploration                                    
|-- | ------------------------------------------------------------------------
|2. | Gamma Spectrometry Mapping                                              
|3. | Surface trenching totaling 3046m3                                       
|4. | Drilling totaling 1808 meters (44 holes
  estimated)                    
|5. | Channel sampling of 43.25 meters                                        
|6. | Rock sampling totaling 625 samples                                      
|7. | Magnetic Survey at 100m by 20m stations over
      12.4km2              
|8. | Electric (geophysical) profiles on 100m by 20m stations
      over 10km2

The Khavtsal property was the subject of historic work
completed and reported on by the Russian-Mongolian Survey in 1987.

Exploration on Khavtsal was conducted by the Russian-Mongolian
Geologic Survey. This work consisted of an airborne gamma spectrometry survey in
1981 that identified a significant anomaly and the work described above that was
conducted in 1987. No other exploration work is recorded in information acquired
by us.

We have acquired two Russian-Mongolian Survey reports from the
Geologic Information Center in the offices of the Mineral Resource Authority of
Mongolia. Translations and additional data searches are being provided to us by
a Mongolian consultant based in Ulaan Baatar, Mongolia.

We have not completed any exploration work on the other seven
properties except as noted above. All our licenses fall within areas that the
Russian-Mongolian Survey completed airborne radiometric surveys during regional
uranium exploration in the 1980s. Some properties will have summary reports on
file at the Geologic Information Center within the offices of the Mineral
Resource Authority of Mongolia (MRAM). These reports will be researched to
determine the extent of ground work completed by the Russian-Mongolian survey in
following up selected radiometric anomalies that may fall on our license areas.
The license acquisitions are for the purpose of uranium exploration and do not
have proven reserves. Some of the licenses may have limited
drill-indicated or trench-sampled uranium mineralization suggesting favorable
exploration potential but this is not yet substantiated by a thorough review of
data files and reports at the Geologic Information Center of MRAM or other
sources.

Exploration work on these seven license areas in some cases is
limited to airborne radiometric surveys conducted by the Russian-Mongolian
Geologic Survey. The extent of other ground work conducted, if any, is still
under review.

We have acquired only very preliminary summaries (brief
translations) of Russian-Mongolian Survey reports from the Geologic Information
Center in the offices of the Mineral Resource Authority of Mongolia that may
have information useful for exploring on our license areas. Most of these
reports are of a general nature, and regional studies are not necessarily
property specific. Translations and additional data searches are being provided
to us by a Mongolian geologic consultant based in Ulaan Baatar, Mongolia.

23

---

Present Condition of the Property and Current State of
Exploration

Our Mongolian mineral properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or equipment
located on our Mongolian mineral properties.

The exploration programs to be carried out on our Mongolian
properties during the term of our agreement with Bluerock will be managed by
Bluerock. Any exploration undertaken by Bluerock will be at its expense under
the terms of the agreement. There is no assurance that Bluerock will make the
cash payments or undertake the full amount of the exploration expenditures
necessary for it to earn an interest in our Mongolian properties.

Exploration license fees are established by law and paid
annually on or before the anniversary of license issue as:

|Per hectare: | $0.05 for the first year, and
      $0.10 for each of the second and third years.
|------------ | ---------------------------------------------------------------------------------
|Per hectare: | $1.00 for each of the fourth and
      fifth year of the license.                
|Per hectare: | $1.50 for each of the sixth and
      seventh year of the license.               

Geology

Khavtsal is one of approximately sixty significant
sediment-hosted uranium occurrences identified and explored by the
Russian-Mongolian Survey during the 1980s. The local geologic setting is
referred to as the Ulaan Nuur depression. Uranium occurs within a sedimentary
sequence that includes significant amounts of organic and carbonaceous material.

The geology of the area includes a basement of Proterozoic to
Paleozoic metamorphic igneous rocks that are covered by Jurassic basalts and
quartz-porphyries. This sequence of Jurassic igneous rocks is covered by Upper
Jurassic and Lower Cretaceous conglomerates and sandstones which are covered by
young alluvial deposits.

All of our license areas have prospective characteristics that
indicate favorability for hosting sediment-hosted, near-surface uranium deposits
including a proximity to known sandstone-hosted uranium occurrences as
identified by Russian-Mongolian survey work, radiometric anomalies and/or
favorable geology. The licenses fall within areas surface mapped as or inferred
to contain Upper Jurassic to Lower Cretaceous sedimentary sequences, and
generally occur within basins framed by uplands comprised of crystalline rocks
likely to provide a source for secondary transport of uranium into the basin by
groundwater flow. These geologic settings in Mongolia have demonstrated uranium
deposit potential by comparison to known deposit occurrences. Similar geologic
settings in China, the Commonwealth of Independent States ("CIS") and Russia,
countries surrounding Mongolia, have demonstrated economic uranium production as
well.

Since July 2006, Bluerock employees and contractors have
prospected five of the eight license areas and conducted additional research
relating to the Khavtsal permit 8560X (in Ulaanbaatar and Irkutsk). Bluerock has
provided a brief description of exploration results for each license area, as
follows (technical data omitted):

- The Fall 2006 Exploration Program was successful in identifying five
  uranium anomalies and three gold anomalies. Once data is analyzed, targets
  will be prioritized and a program for 2007 designed. It is expected this
  program will include infill geophysical and geochemical surveys as well as
  drill testing.
- Work in late December, 2006 and January, 2007 was primarily consumed with
  preparing and filing the appropriate government reports. We (Bluerock) are
  currently seeing if we can run an economical seismic survey in the Ulaan Nuur
  Basin and beyond that looking to what the best drill target is for 2007.

Bluerock also acquired some oil and gas gamma logs from the
Tamtsag project but they are incomplete and generally start down hole from where
they would consider to be economic target depths, i.e. >250m.

24

---

WYOMING

We have several projects in the Great Divide and Powder River
Basins of Wyoming. We have joint ventured our uranium projects in the Great
Divide Basin area of Wyoming, and plan to maintain, explore and if warranted,
develop our projects in the Powder River Basin area of Wyoming. Each of these
projects comprises several federal mineral claims, State mineral leases, or
private fee mineral property. In some cases the projects will comprise a
combination of State leases and private or federal mineral claims. Our projects
located in the Powder River Basin of Wyoming include the Nichols Ranch, Hank,
Doughstick, West North Butte, Collins Draw, Verna Ann, Niles Ranch, Willow
Creek, C-Line, North Rolling Pin, Reno Creek North and Reno Creek South.

Location and Access

Wyoming Mining Claims (federal mineral)

Through a combination of claim staking and purchasing we now
have a total of 473 federal lode mining claims on federal and private surface
lands in the state of Wyoming where the mineral rights are owned by the federal
government. In general, the claim staking is either in the Powder River Basin or
the northern Great Divide Basin. The individual mining claims we have staked
have been recorded with the county and federal governments. It is our objective
to purchase or lease additional mineral claims and fee minerals directly from
current private owners during the next twelve months, although there is no
assurance that any acquisitions will be completed. We have acquired the rights
to other federal mining claims in the Powder River Basin from private
individuals. We plan to continue acquiring additional federal mining claims
through the normal claim staking and filing process, primarily in the Powder
River Basin.

A typical claim will have the dimensions of 1,500 feet by 600
feet and approximately 20 acres in size. The county fee for filing a mineral
claim varies between counties but is typically about $8 per claim. The federal
fee for filing a mineral claim is $170 per claim.

Wyoming State Mineral Leases

We have acquired 17 state mineral leases in Wyoming covering
approximately 14,280 acres of land, and we may continue to apply for additional
state mineral leases as our exploration program identifies areas of good
potential and the associated land is available for leasing. None of our current
state mineral leases have known uranium resources, but they are located in
geologically favorable areas.

The fee for the applications is a flat $25 per application plus
$1 per acre for the first year rental making the total $665 per state section.
The total amount paid for leasing of the seventeen plus sections is $11,530. The
owner of a mineral lease on state land has the right to explore for and extract
any solid mineral lying on or below the surface of the land.

The above mentioned state mineral leases were acquired in the
name of George J. Hartman, our Vice-President, Mining. Legal titles to these
leases were transferred to us in 2006.

Ownership Interest

Wyoming Mining Claims (federal mineral)

The annual maintenance fee is $125 per claim payable to the
federal Bureau of Land Management. There are no minimum annual work
requirements. The owner of the mineral claim must conduct his activities in a
manner that is consistent with all applicable environmental laws and
regulations.

25

---

Wyoming State Mineral Leases

The annual rental fee is $1 per acre for the first five years,
and $2 per acre for years six through ten. If any uranium is produced from these
state leases a mineral royalty will have to be paid to the State of Wyoming.
There are no minimum annual work requirements. The owner of the mineral lease
must conduct his activities in a manner that is consistent with all applicable
environmental laws and regulations.

History of Operations

Wyoming Mining claims (federal mineral)

We completed some exploratory drilling on three of our Wyoming
properties during 2006 and plan to conduct more drilling programs during 2007.
On most of the lands where we are staking claims the property reflects
historical exploration work by others.

Wyoming State Mineral Leases

No exploration work has taken place by us on any of our state
mineral leases.

Present Condition of the Property and Proposed Exploration
Program

Our Wyoming mineral properties are undeveloped and do not
contain any open-pit or underground mines. There is no plant or equipment
located on our Wyoming mineral properties.

Wyoming Private (Fee) Mineral

We have initiated a program to acquire the rights to explore
and mine on certain lands in the Powder River Basin where the mineral is owned
by private parties. To acquire the rights it is necessary to sign an agreement
with the mineral and the surface owner. It is not known with certainty that
uranium exists on any of these properties. We will continue to attempt to
acquire the surface and mineral rights on privately owned mineral on lands that
we think are geologically favorable or we have historical information in our
possession that indicates uranium mineralization might be present.

Geology

Wyoming Mining claims (federal mineral)

We do have some geologic information on most of the mining
claims we have staked or acquired or are currently being staked. In general, we
are staking and acquiring claims on ground located in sandstone basins of
Cretaceous or Tertiary age with known uranium mineralization.

Wyoming State Mineral Leases

We do not have detailed geology on any of our state mineral
leases. In general, we have applied for state leases located in sandstone basins
of Cretaceous or Tertiary age with known uranium mineralization.

Environmental Permitting

Because of the long lead times for environmental permitting of
mining operations in North America, we have started collecting environmental
baseline data on two of our properties in the Powder River Basin area of Wyoming
that we feel have the potential, based on data in our possession, of being
developed into commercial in-situ recovery uranium mines.

26

---

In May of 2006, Uranerz made the decision to initiate
preparation of the environmental permit applications for two of its properties,
the Hank and the Nichols Ranch projects, in the central Powder River Basin of
Wyoming. Historical exploration drill hole information was included with the
acquisition of these projects. Approval of the environmental permit applications
is expected to allow Uranerz to proceed with commercial development of the two
properties leading to production of yellowcake using the in-situ recovery (ISR)
method of uranium mining. It is currently planned that the main production
facility will be located at the Nichols Ranch property, and the Hank property
will have a satellite facility providing uranium-loaded resin or enriched eluate
to the main facility.

The primary regulatory approvals for an ISR uranium mine come
from the Wyoming Department of Environmental Quality (DEQ) at the state level,
and from the U.S. Nuclear Regulatory Agency (NRC) at the federal level. The DEQ
issues a Permit to Mine, and the NRC issues a Source Material License. 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.

Uranerz has engaged TRC Mariah Associates based in Laramie,
Wyoming as the prime contractor for performing the several environmental
baseline studies. Hydro Engineering (George Hoffman) from Casper, Wyoming has
been engaged to perform the necessary aquifer pump tests, and prepare the
hydrology section of the environmental permit applications. Environmental
surveys such as vegetation, soils, wildlife, cultural resources, radiation and
water quality are either on-going or have been completed. For those surveys that
have been completed, reports are being prepared in a format acceptable to the
DEQ and NRC.

The Company has completed installing hydrologic test wells at
the Hank and Nichols Ranch properties. These test wells were installed in order
to perform aquifer pump tests. Core samples of the deposit were also taken while
installing the test wells in connection with the radiation environmental
studies. The pump tests are used to demonstrate that the aquifers are confined,
and to test the permeability of the mineralized sandstone unit for both
feasibility and permitting purposes. The Wyoming DEQ has approved Uranerz
Energy's plans for the hydrologic testing of the uranium-mineralized confined
aquifers. The hydrologic test wells were installed in accordance with our
approved plans. Uranerz Energy is collecting ground water samples at water wells
in the region, and has reached an agreement with Cameco Corporation's
wholly-owned US subsidiary, Power Resources Inc., to sample some of their
monitor wells located on adjacent uranium properties.

Mine planning for both the Hank and Nichols Ranch properties
  is underway. Uranerz Energy's target date for submitting the environmental permit
  applications to the state and federal agencies is the second half of 2007. We
  estimate that we will spend approximately $1.4 million on exploration and permitting
  work related to our Wyoming properties during 2007.

**Great Divide/Red Desert Properties**

On May 18, 2006, the Company entered into an Agreement with
another company (the Optionee) on two of the Companys exploration projects
(the projects) located within the Red Desert area of southwest Wyoming.

The Company and Optionee will form a joint venture to conduct
further exploration and to develop the properties under the following
conditions:

Stage 1

Under the terms of the joint venture the Optionee shall have
the right to earn a 50% equity interest in the joint venture by managing and
meeting the first $750,000 in exploration expenditures on the projects, at no
cost to the Company, including land holding costs such as maintenance fees,
lease costs etc.

The Optionee is obliged to spend at least $100,000 per year on
exploration on the projects and to spend the first $750,000 on exploration
within three (3) years of inception of the joint venture agreement.

Once the Optionee has spent $750,000 on the projects the
Companys equity interest in the joint venture shall reduce to 50% and the
Optionees equity interest shall increase to 50%.

27

---

Stage 2

On completion of the first phase of the exploration program,
should the Company elect not to contribute to the costs of the second phase of
expenditure on a pro-rata basis, then the Optionee shall have the right to earn
a further 1% interest in the joint venture for every $25,000 spent on the
projects to a maximum interest in the joint venture of 70% (by spending
$500,000).

On completion of the first phase of the exploration program,
should the Optionee elect not to contribute to the cost of the second phase of
expenditure on a pro-rata basis, then the Company shall have the right to earn a
further 1% interest in the joint venture for every $25,000 spent on the
Projects, to a maximum interest in the joint venture of 70% (by spending
$500,000).

Stage 3

On completion of the second phase of expenditure, should the
Company elect not to contribute to all further expenditure on a pro-rata basis,
then the Optionee shall have the right to earn a further 1% interest in the
joint venture for every $25,000 spent on the Projects to a maximum interest in
the joint venture of 100% (by spending $750,000). The Company would be awarded a
6% royalty for their contribution up to that point.

On completion of the second phase of expenditure, should the
Optionee elect not to contribute to all further expenditure on a pro-rata basis,
then the Company shall have the right to earn a further 1% interest in the joint
venture for every $25,000 spent on the projects to a maximum interest in the
joint venture of 100% (by spending $750,000). The Optionee would be awarded a 6%
royalty for their contribution up to that point.

Selection of Contractor Factors

Wyoming State Sections and Mineral Claims (federal mineral)

There is currently a shortage of drilling rigs in Wyoming. This
situation will most likely get worse as the demand for the same type of drilling
rigs for the uranium industry grows over the next two to three years. It is
hoped that this situation will improve as drilling contractors recognize the
business potential and begin acquiring additional drilling rigs and training
crews.

Regulations Affecting Mineral Exploration

Exploration by drilling in Wyoming requires compliance with
Wyoming Statute 35-11-404 and Chapter 8 of Land Quality Division non-coal
regulations. These regulations require us to post a $10,000 bond for each
exploration area, reclaim drill sites and properly plug each drill hole, and
file a termination report. After submitting the termination report, a government
inspector will check the exploration area, including the drill hole plugging,
for compliance before releasing the bond.

Government Regulation

Exploration activities are subject to various national, state,
foreign and local laws and regulations in the United States, Canada and
Mongolia, which govern prospecting, development, mining, production, exports,
taxes, labor standards, occupational health, waste disposal, protection of the
environment, mine safety, hazardous substances and other matters. We believe
that we are in compliance in all material respects with applicable mining,
health, safety and environmental statutes and the regulations passed hereunder
in the United States, Canada and Mongolia.

Environmental Regulation

Exploration activities are subject to various federal, state
and local laws and regulations governing protection of the environment. These
laws are continually changing and, as a general matter, are becoming more
restrictive. Our

28

---

policy is to conduct business in a way that safeguards public
health and the environment. We believe that our exploration activities are
conducted in material compliance with applicable laws and regulations.

Changes to current local, state or federal laws and regulations
in the jurisdictions where we operate could require additional capital
expenditures and increased operating and/or reclamation costs. Although we are
unable to predict what additional legislation, if any, might be proposed or
enacted, additional regulatory requirements could render certain exploration
activities uneconomic.

We compete with other mining companies in connection with the
acquisition of mineral properties. There is competition for the limited number
of uranium acquisition opportunities, some of which is with other companies
having substantially greater financial resources than we do. As a result, we may
have difficulty acquiring attractive exploration properties.

**ITEM
3.**                    **LEGAL
PROCEEDINGS**

None.

**ITEM
4.**                    **SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None.

PART II

**ITEM
5.**                    **MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

Public Market for Common Stock

Our common stock began trading on the American Stock Exchange
on August 10, 2006 under the symbol "URZ", and previously, since May 6, 2004, on
the Over the Counter Bulletin Board (OTCBB) operated by the National
Association of Securities Dealers, Inc. under the symbol "URNZ", formerly known
as "CVTU". The American Stock Exchange has launched trading in options
(derivatives: puts and calls) on our common stock. The options are quoted with
position limits of 2,500,000 shares and strike prices of 2 1⁄2 - 5  7 1⁄2 - 10. The
specialist is Jane Street Specialist.

The following table shows the high and low sales price or bid
price for our common shares for the periods indicated, as reported by the
American Stock Exchange, www.amex.com, and Bloomberg for the OTCBB, as
applicable.

For the Period Ending
    High
    LowJanuary 2007  March 15 2007
    $5.69
    $2.9512/31/06
    $4.80
    $1.339/30/06*
    $3.25
    $2.006/30/06
    $3.22
    $1.703/31/06
    $2.69
    $1.1212/31/05
    $1.36
    $0.8409/30/05
    $1.79
    $0.5506/30/05
    $1.05
    $0.5003/31/05
    $1.20
    $0.51


* Our common stock began trading on the American Stock Exchange
on August 10, 2006.

29

---

The above quotations for the OTCBB reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not necessarily represent
actual transactions. As of March 26, 2007, the sales price quotation for our
common stock was $5.40 per share as quoted by AMEX.

Holders of Our Common Stock

As of March 15, 2007 we have 39,039,587 shares issued and outstanding.
  Based on research into the indirect holdings registered in the names of depositories
  and financial institutions, we estimate that we have approximately 4,000 beneficial
  shareholders.

Dividends

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 2006, neither the Company nor any affiliate of the
Company repurchased common shares of the Company registered under Section 12 of
the Securities Exchange Act of 1934, as amended.

Recent Sales of Unregistered Securities

We completed the following sales of securities without
registration pursuant to the Securities Act of 1933 (the Securities Act)
during the year ended December 31, 2006:

On March 3, 2006:

|1. | We completed a private placement with twenty-three (23)
      investors of 2,755,000 Units at a price of $1.00 per Unit for total
      proceeds of $2,745,000 pursuant to Rule 506 of Regulation D of the
      Securities Act. We paid a commission equal to 7 1⁄2 % of a portion of the
      funds raised in connection with the completion of the offering. The sales
      were completed pursuant to Rule 506 of Regulation D of the Securities Act
      on the basis that each investor is an accredited investor as defined
      under Rule 501(a) of Regulation D of the Securities Act of 1933, as
      amended. Each investor represented to us their intent to acquire the
      securities for investment purposes for their own account. No general
      solicitation or general advertising was undertaken in connection with the
      offering. All securities issued were endorsed with a restrictive legend
      confirming that the securities could not be resold without registration
      under the Securities Act or an applicable exemption from the registration
      requirements of the Securities Act.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | We completed a private placement with one hundred and ten
      (110) investors of 4,490,000 Units at a price of $1.00 per Unit for total
      proceeds of $4,490,000 pursuant to Rule 903 of Regulation S of the
      Securities Act. We paid a commission equal to 7 1⁄2 % of a portion of the
      funds raised in connection with the completion of the offering. We
      completed the offering of the Units pursuant to Rule 903 of Regulation S
      of the Securities Act on the basis that the sale of the Units was
      completed in an offshore transaction, as defined in
  Rule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

30

---

902(h) of Regulation S. We did not
engage in any directed selling efforts, as defined in Regulation S, in the
United States in connection with the sale of the Units. The investors
represented to us that the investors were not U.S. persons, as defined in
Regulation S, and were not acquiring the Units for the account or benefit of a
U.S. person. The subscription agreements executed between us and the investors
included statements that the securities had not been registered pursuant to the
Securities Act and that the securities may not be offered or sold in the United
States unless the securities are registered under the Securities Act or pursuant
to an exemption from the Securities Act. The investors agreed by execution of
the subscription agreement for the Units: (i) to resell the securities purchased
only in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an exemption from registration under the
Securities Act; (ii) that we are required to refuse to register any sale of the
securities purchased unless the transfer is in accordance with the provisions of
Regulation S, pursuant to registration under the Securities Act or pursuant to
an exemption from registration under the Securities Act; and (iii) not to engage
in hedging transactions with regards to the securities purchased unless in
compliance with the Securities Act. All securities issued were endorsed with a
restrictive legend confirming that the securities had been issued pursuant to
Regulation S of the Securities Act and could not be resold without registration
under the Securities Act or an applicable exemption from the registration
requirements of the Securities Act.

In aggregate we issued a total of
7,245,000 shares and 3,622,000 warrants, with each warrant entitling the holder
to purchase one additional share of our common stock for a period of two years
at an exercise price of $1.75 per share until March 3, 2007, and at an exercise
price of $2.50 per share until March 3, 2008. In aggregate we have paid total
commissions in cash of $88,660 and 185,750 units.

We filed a resale registration
statement on Form SB-2 to register the shares of common stock issuable or issued
to the investors for resale. The registration statement was declared effective
on January 18, 2007 (SEC No. 333  139537).

On May 19, 2006:

|1. | We completed a private placement with four (4) investors
      of 720,000 Units at a price of $1.75 per Unit for total proceeds of
      $1,260,000 pursuant to Rule 506 of Regulation D of the Securities Act. We
      paid a commission equal to up to 8% on a portion of the funds raised in
      connection with the completion of the offering. The sales were completed
      pursuant to Rule 506 of Regulation D of the Securities Act on the basis
      that each investor is an accredited investor, as defined under Rule
      501(a) of Regulation D of the Securities Act. each investor represented to
      us their intent to acquire the securities for investment purposes of their
      own account. No general solicitation or general advertising was undertaken
      in connection with the offering. All securities issued were endorsed with
      a restrictive legend confirming that the securities could not be resold
      without registration under the Securities Act or an applicable exemption
      from the requirements of the Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | We completed a private placement with thirty-six (36)
      investors of 1,422,200 Units at a price of $1.75 per Unit for total
      proceeds of $2,488,850 pursuant to Rule 903 of Regulation S of the
      Securities Act. We paid a commission equal to up to 8% on some of the
      funds raised in connection with the completion of the offering. We
      completed the offering of the Units pursuant to Rule 903 of Regulation S
      of the Securities Act on the basis that the sale of the Units was
      completed in an offshore transaction, as defined in Rule 902(h) of
      Regulation S. We did not engage in any directed selling efforts, as
      defined in Regulation S, in the United States in connection with the sale
      of the Units. The investors represented to us that the investors were not
      U.S. persons, as defined in Regulation S, and were not acquiring the Units
      for the account or benefit of a U.S. person. The subscription agreements
      executed between us and the investors included statements that the
      securities had not been registered pursuant to the Securities Act and that
      the securities may not be offered or sold in the United States unless the
      securities are registered under the Securities Act or pursuant to an
      exemption from the Securities Act. The investors agreed by execution of
      the subscription agreements for the Units: (i) to resell the securities
      purchased only in accordance with the provisions of Regulation S, pursuant
      to registration under the Securities Act or pursuant to an exemption from
      registration under the Securities Act; (ii) that we are required to refuse
      to register any sale of the securities purchased unless the transfer is
      in

31

---

|   | accordance with the provisions of Regulation S, pursuant
        to registration under the Securities Act or pursuant to an exemption from
        registration under the Securities Act; and (iii) not to engage in hedging
        transactions with regards to the securities purchased unless in compliance
        with the Securities Act. All securities issued were endorsed with a restrictive
        legend confirming that the securities had been issued pursuant to Regulation
        S of the Securities Act and could not be resold without registration under
        the Securities Act or an applicable exemption from the registration requirements
        of the Securities Act.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | We issued a total of 2,142,200 Shares and 1,071,100
        Warrants, with each Warrant entitling the holder to purchase one additional
        share of our common stock for a period of one year at an exercise price
        of $2.25 per Share until May 19, 2007. We paid a portion of commission
        in units in the amount of 52,266 units. In aggregate we issued a total
        of 2,194,466 common shares and 1,097,233 warrants.                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | We filed a resale registration statement on Form SB-2
        to register the shares of common stock issuable or issued to the investors
        for resale. The registration statement was declared effective on January
        18, 2007 (SEC No. 333  139537).                                                                                                                                                                                                                                                                                                                                                                                                                                     

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

PLAN OF OPERATION

Our plan of operation for the next twelve months is to continue
  with exploration of our Wyoming Powder River Basin properties while our joint
  venture partners carry out exploration activities in Saskatchewan, Mongolia
  and the Wyoming Great Divide Basin area under the terms of the joint venture
  agreements. Our planned geological exploration programs are described in Item
  2 of this Annual Report on Form 10-KSB. Our planned cash operating expenditures
  for the year ending December 31, 2007 for corporate expenses, exploration on
  our Wyoming mineral properties and general and administrative expenses are summarized
  as follow:

Category
    Planned Expenditures Over the Next Twelve
      Months (US$)Other Corporate expenses, excluding stock compensation, net
      of interest earned
    $1,034,000Exploration and development expenses in Wyoming
    $1,445,000General and Administrative expenses
    $1,051,000TOTAL
    $3,530,000


32

---

In addition to our planned operating expenditures, we
anticipate spending approximately $4,000,000 for acquisition of identified
properties, including the $3,120,000 acquisition completed in February, 2007. We
may make additional significant investments as opportunities arise. Our
exploration and development plans will be continually evaluated and modified as
exploration and environmental 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 any additional funding will be in the form of equity financing
from the sale of our common stock.

We had cash in the amount of $12,293,890 and a working capital
  in the amount of $11,989,951 as of December 31, 2006. Subsequently, to March
  15, 2007, we received approximately $8,300,000 from the exercise of outstanding
  warrants and options. Accordingly, we believe we have sufficient financing with
  which to pursue our plan of operations over the next twelve months.

RESULTS OF OPERATIONS

Twelve-month period ended December 31, 2006 compared to
twelve-month period ended December 31, 2005

RevenueWe 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 $7,126,992 for the twelve-month
  period ended December 31, 2006, as compared to $4,891,392 for the corresponding
  period in 2005. The increase of operating expenses in the amount of $2,235,600
  (46%) was primarily attributable to increased spending on acquiring and exploring
  mineral properties in Wyoming as described in detail in Item 2 of this Annual
  Report on Form 10-KSB. The impairment loss on mineral properties of $449,952,
  an increase of 43% over 2005 is attributable to our acquisition of mineral properties
  that were initially capitalized and then, in the absence of a bankable feasibility
  report, are recorded as fully impaired. Our general and administrative expenses
  consisted primarily of stock based compensation, payroll, consulting, investor
  relations and general overhead which increased $1,396,886 or 31% over 2005 reflecting
  our growth in corporate affairs and Casper operations.

We had no interest expense for the twelve-month period ended
December 31, 2006. We earned $411,462 of interest income for the twelve-month
period ended December 31, 2006 as compared to none for the corresponding period
in 2005. This income resulted from short term investments. Net loss for the
twelve-month period ended December 31, 2006 was $6,548,901, as compared to
$5,002,225 for the corresponding period in 2005, an increase of $1,546,676
(31%).

We anticipate that our exploration expenses will continue to
  increase throughout the 2007 fiscal year in comparison with 2006 as a result
  of our planned exploration activities and as a result of payments required to
  maintain our interests in our mineral properties. In addition, we anticipate
  continued increased general and administrative expenses as we comply with our
  obligations to many stockholders as a reporting company under the Securities
  Exchange Act of 1934, listed on the American Stock Exchange. We anticipate that
  we will not earn any revenues during the current fiscal year or in the near
  future as we are presently engaged in exploration and the permitting of our
  mineral properties.

33

---

Cash Used in Operating ActivitiesNet cash used in operating activities was $1,701,781 for the twelve-month
  period ended December 31, 2006, compared to $580,559 for the corresponding period
  in 2005. The increase in net cash used in operations reflects the growth of
  our operations, including an increase of $827,950 for mineral related expenditures.

Cash Used in Investing ActivitiesWe invested $578,308 in mineral properties and operating assets the twelve-
  month period ended December 31, 2006, compared to $325,628 for the corresponding
  period in 2005. Proceeds from sale of investment securities were $116,629 in
  2006, none in 2005.

Cash Provided by Financing ActivitiesNet cash provided by financing activities amounted to $12,531,835 for the
  twelve-month period ended December 31, 2006, primarily from private placements
  of common stock, compared to $2,823,738 for the corresponding period in 2005.
  We received an additional $8,296,052 from the exercise of outstanding warrants
  from January 1, 2007 to March 15, 2007.

ASSETS AND LIABILITIES

We had total assets of $12,491,996 at December 31, 2006
compared to $1,978,343 at December 31, 2005, primarily cash accumulated from the
sale of shares. Property and Equipment was $123,236 compared to $9,278 at
December 31, 2005. Our liabilities, all current, were $378,809 compared to
$193,486 at December 31, 2005. Liabilities include accrued bonuses of` $150,000
paid in January 2007.

LIQUIDITY AND CAPITAL RESOURCES

Historically, our operations have been financed by advances
from related parties and proceeds from issuance of common stock and equity. Our
cash position at December 31, 2006 was $12,293,890 compared to $1,925,021 as of
December 31, 2005. We had working capital of $11,989,951 as of December 31,
2006, compared to working capital of $1,775,579 as of December 31, 2005.

Financings

During the year ended December 31, 2006, the Company:

| | 1. | Issued 2,700,000 shares of common stock upon the exercise
      of share purchase warrants for cash proceeds of $1,777,250.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Completed a private placement of 2,142,200 units at a
      price of $1.75 per unit for gross proceeds of $3,748,850 and net proceeds
      of $3,607,397. Each unit is comprised of one share of the Company's common
      stock and one-half of one share purchase warrant. Each whole warrant
      entitles the holder to purchase one additional share of the Company's
      common stock until May 19, 2007, at an exercise price of $2.25 per share.
      A commission was payable, a portion of which was paid in units in the
      amount of 52,266 units. In aggregate the Company issued a total of
      2,194,466 shares of common stock and 1,097,233 warrants.                    
| | 3. | Issued 8,640 common shares upon the exercise of stock
      options for $8,858 offsetting amounts relating to consulting services
      rendered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 4. | Issued 131,000 common shares upon the exercise of stock
      options to settle $121,148 of debt owing to a director. A loss on
      settlement of debt of $100,509 was recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 5. | Issued 100,000 shares of common stock for consulting
      services with a fair value of $91,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 6. | Completed a private placement consisting of 7,245,000
      units at $1.00 per unit for proceeds of $7,147,186 net of issue costs and
      commissions. Each unit consists of one share of common stock and one-half
      share purchase warrant. The Company issued 7,245,000 shares of common
      stock and 3,622,500 warrants. Each full warrant entitles the holder to
      purchase one additional share of common stock for a period of two years at
      an exercise price of $1.75 per share until March 3, 2007, and at an
      exercise price of $2.50 per share until March 3, 2008. The Company issued
      186,232 units for commissions pertaining to this private
  placement.

34

---

During the year ended December 31, 2005, the Company:

| | 1. | Issued 175,000 units at $0.40 per unit for net proceeds
        of $65,800. The Company paid commission expenses of $4,200. Each unit
        consisted of one share of common stock and one half warrant. Each full
        warrant entitles the investor to purchase one additional share at an exercise
        price of $0.60 per share on or before November 17, 2006.           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Issued 200,000 common shares at a fair value of $212,000
        to settle a debt of $80,000 owing to a company for public and investor
        relations services, resulting in a loss on debt settlement of $132,000.                                                                                                                                                               
| | 3. | Issued 5,245,000 units at $0.40 per unit for net proceeds
        of $2,059,124. The Company paid commission expenses of $38,876. Each unit
        consisted of one share of common stock and one half warrant. Each full
        warrant entitles the investor to purchase one additional share at an exercise
        price of $0.60 per share for one year from the date of issue.
| | 4. | Issued 3,775,000 shares of common stock at $0.001 per
        share as compensation to directors, officers and members of the Companys
        Advisory Board. The Company received cash proceeds of $3,775 and the Company
        recorded stock-based compensation of $3,808,975.                                                                                                 
| | 5. | Issued 6,959,500 shares of common stock at $0.10 per
        share for proceeds of $695,039, net of offering costs of $911.                                                                                                                                                                                                                                                           
| | 6. | Completed a private placement financing for gross proceeds
        of $695,950. The private placement financing was comprised of an aggregate
        of 6,959,500 shares at a price of $0.10 per share.                                                                                                                                                                              

Capital Requirements

Our cash position at December 31, 2006, plus subsequent receipts
  of approximately $8,300,000 from the exercise of warrants and options provide
  approximately $20.6 million for future operations. We estimate that our total
  cash expenditures over the next twelve months will be approximately $7,530,000
  as outlined above under the heading “Plan of Operations”. We intend
  to focus most of our exploration efforts in Wyoming.

Future Financings

We may require additional financing to proceed with the
exploration and development of our mineral properties. We plan to complete
additional sales of our common stock in order to raise the funds necessary to
pursue our plan of operations and to fund our working capital. Issuances of
additional shares will result in dilution to our existing shareholders. There is
no assurance that we will be successful in completing any financings.

35

---

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.

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 has been in the exploration stage since its
formation on May 26, 1999, and has not yet realized any revenues from its
planned operations. It is primarily engaged in the acquisition and exploration
of mining properties. Mineral property exploration costs are expensed as
incurred. Mineral property acquisition costs are initially capitalized when
incurred using the guidance in EITF 04-02, Whether Mineral Rights Are
Tangible or Intangible Assets. The Company assesses the carrying costs for
impairment under SFAS 144, Accounting for Impairment or Disposal of Long
Lived Assets at each fiscal quarter end. Payments received for the option
of a mineral property are accounted for as other income. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs incurred to develop such
property, are capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable reserve. If
mineral properties are subsequently abandoned or impaired, any capitalized costs
will be charged to operations During the year ended December 31, 2006, mineral
property acquisition payments totaling $449,952 (2005 - $315,143) were impaired
as there are no proven or probable reserves on these properties.

Stock-based Compensation

Prior to January 1, 2006, the Company accounted for stock-based
awards in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. Effective January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123R Share Based Payments, using the
modified retrospective transition method. The Company had not issued any stock
options or share based payments prior to January 1, 2006. Accordingly, there was
no effect on the Companys reported loss from operations, cash flows or loss per
share as a result of adopting SFAS No 123R.

CONTRACTUAL OBLIGATIONS

As of the fiscal year ended December 31, 2006, we had the
following non-cancelable contractual obligations:

Payments Due by PeriodType of contract
    Total
    Less than 1 year
    2-3 Years
    4-5 years
    5+ yearsOffice and Administrative Services
    $209,200
    $125,500
    $83,700
    nil
    nil


We have no material long-term debt, capital lease, operating
lease or purchase obligations.

36

---

**ITEM
7.**                    **FINANCIAL
STATEMENTS**

Our audited financial statements, as set forth below, are included
  with this Annual Report on Form 10-KSB.

37

---

Uranerz Energy Corporation 
  (An Exploration Stage Company)

December 31, 2006

Index

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

---




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, 2006 and 2005, and the related
  consolidated statements of operations, cash flows and stockholders' equity for
  the years then ended and accumulated from May 26, 1999 (Date of Inception) to
  December 31, 2006. These financial statements are the responsibility of the
  Company's management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes
  examining, on a test basis, evidence supporting the amounts and disclosures
  in the 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, 2006 and 2005, and the results
  of its operations and its cash flows for the years then ended and accumulated
  from May 26, 1999 to December 31, 2006, in conformity with accounting principles
  generally accepted in the United States.

MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 15, 2007

---

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

|                                                                       |  | December 31, |   |  | December 31, |  
|---------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                       |  | 2006         |   |  | 2005         |  
|                                                                       |  | $            |   |  | $            |  
|ASSETS                                                                 |  |              |   |  |              |  
|Current Assets                                                         |  |              |   |  |              |  
|Cash                                                                   |  | 12,293,890   |   |  | 1,925,021    |  
|Prepaid expenses and deposits (Note 6(b))                              |  | 74,870       |   |  | 20,686       |  
|Advances to related party (Note 6(d))                                  |  |             |   |  | 23,358       |  
|Total Current Assets                                                   |  | 12,368,760   |   |  | 1,969,065    |  
|Property and Equipment (Note 3)                                        |  | 123,236      |   |  | 9,278        |  
|Total Assets                                                           |  | 12,491,996   |   |  | 1,978,343    |  
|                                                                       |  |              |   |  |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                   |  |              |   |  |              |  
|Current Liabilities                                                    |  |              |   |  |              |  
|Accounts payable                                                       |  | 169,688      |   |  | 27,699       |  
|Accrued liabilities                                                    |  | 9,074        |   |  | 22,087       |  
|Due to related
      parties (Note 6)                                  |  | 200,047      |   |  | 143,700      |  
|Total Liabilities                                                      |  | 378,809      |   |  | 193,486      |  
|Commitments and Contingencies (Notes 1, 4 and 10)                      |  |              |   |  |              |  
|Subsequent Events (Note 12)                                            |  |              |   |  |              |  
|Stockholders Equity                                                   |  |              |   |  |              |  
|Preferred Stock, 10,000,000 shares authorized,
      $0.001 par value; |  |              |   |  |              |  
|Nil shares issued and outstanding                                      |  |             |   |  |             |  
|Common Stock, 100,000,000 shares authorized,
      $0.001 par value;   |  |              |   |  |              |  
|34,560,338 and 21,995,000 shares issued and outstanding, respectively  |  | 34,560       |   |  | 21,995       |  
|Additional Paid-in Capital                                             |  | 23,777,517   |   |  | 6,913,393    |  
|Accumulated Other Comprehensive Income                                 |  | 542          |   |  |             |  
|Deficit Accumulated During the Exploration Stage                       |  | (11,699,432  | ) |  | (5,150,531   | )
|Total Stockholders
      Equity                                       |  | 12,113,187   |   |  | 1,784,857    |  
|Total Liabilities and Stockholders Equity                             |  | 12,491,996   |   |  | 1,978,343    |  

(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, |  
|                                                |  | 2006                |   |  | 2006         |   |  | 2005       |  
|                                                |  | $                   |   |  | $            |   |  | $          |  
|                                                |  |                     |   |  |              |   |  |            |  
|Revenue                                         |  |                    |   |  |             |   |  |           |  
|                                                |  |                     |   |  |              |   |  |            |  
|Expenses                                        |  |                     |   |  |              |   |  |            |  
|                                                |  |                     |   |  |              |   |  |            |  
|Depreciation                                    |  | 15,605              |   |  | 14,398       |   |  | 1,207      |  
|Foreign exchange loss                           |  | 5,161               |   |  | 1,367        |   |  | 3,794      |  
|General and administrative                      |  | 10,469,671          |   |  | 5,879,019    |   |  | 4,482,133  |  
|Impairment loss on mineral properties           |  | 790,147             |   |  | 449,952      |   |  | 315,143    |  
|Mineral exploration                             |  | 886,106             |   |  | 782,256      |   |  | 89,115     |  
|                                                |  |                     |   |  |              |   |  |            |  
|Total Operating Expenses                        |  | 12,166,690          |   |  | 7,126,992    |   |  | 4,891,392  |  
|                                                |  |                     |   |  |              |   |  |            |  
|Operating Loss                                  |  | (12,166,690         | ) |  | (7,126,992   | ) |  | (4,891,392 | )
|Other Income (Expense)                          |  |                     |   |  |              |   |  |            |  
|                                                |  |                     |   |  |              |   |  |            |  
|Gain on sale of investment securities           |  | 79,129              |   |  | 79,129       |   |  |           |  
|Interest income                                 |  | 411,462             |   |  | 411,462      |   |  |           |  
|Loss on settlement of debt                      |  | (132,000            | ) |  |             |   |  | (132,000   | )
|Mineral property option
      payments received |  | 108,667             |   |  | 87,500       |   |  | 21,167     |  
|Net Loss                                        |  | (11,699,432         | ) |  | (6,548,901   | ) |  | (5,002,225 | )
|                                                |  |                     |   |  |              |   |  |            |  
|Other Comprehensive Income                      |  |                     |   |  |              |   |  |            |  
|                                                |  |                     |   |  |              |   |  |            |  
|Foreign
      currency translation adjustment   |  | 542                 |   |  | 542          |   |  |           |  
|                                                |  |                     |   |  |              |   |  |            |  
|Comprehensive Loss                              |  | (11,168,890         | ) |  | (6,548,359   | ) |  | (5,002,225 | )
|                                                |  |                     |   |  |              |   |  |            |  
|Net Loss Per Share
       Basic and Diluted    |  |                     |   |  | (0.22        | ) |  | (0.38      | )
|                                                |  |                     |   |  |              |   |  |            |  
|Weighted Average Shares
      Outstanding       |  |                     |   |  | 29,738,000   |   |  | 12,995,000 |  

(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) |   |  | Year Ended   |  
|                                                                  |  | to December 31,     |   |  | December 31, |  
|                                                                  |  | 2006                |   |  | 2006         |   |  | 2005       |  
|                                                                  |  | $                   |   |  | $            |   |  | $          |  
|Operating Activities                                              |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Net loss                                                          |  | (11,699,432         | ) |  | (6,548,901   | ) |  | (5,002,225 | )
|                                                                  |  |                     |   |  |              |   |  |            |  
|Adjustments to reconcile
      net loss to cash used in operating |  |                     |   |  |              |   |  |            |  
|activities:                                                       |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Depreciation                                                      |  | 15,605              |   |  | 14,398       |   |  | 1,207      |  
|Gain
      on sale of investment securities                       |  | (79,129             | ) |  | (79,129      | ) |  |           |  
|Impairment loss on
      mineral properties                       |  | 790,147             |   |  | 449,952      |   |  | 315,143    |  
|Loss
      on settlement of debt                                  |  | 132,000             |   |  |             |   |  | 132,000    |  
|Mineral property option
      payment received                    |  | (37,500             | ) |  | (37,500      | ) |  |           |  
|Stock-based
      compensation                                    |  | 8,039,000           |   |  | 4,215,025    |   |  | 3,808,975  |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Changes in operating assets
      and liabilities:                |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Prepaid
      expenses and deposits                               |  | (74,870             | ) |  | (54,184      | ) |  | (20,686    | )
|Accounts payable and
      accrued liabilities                    |  | 307,569             |   |  | 137,657      |   |  | 115,508    |  
|Due to related
      parties                                      |  | 270,420             |   |  | 200,901      |   |  | 69,519     |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Net Cash Used in Operating Activities                             |  | (2,336,190          | ) |  | (1,701,781   | ) |  | (580,559   | )
|                                                                  |  |                     |   |  |              |   |  |            |  
|Investing Activities                                              |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Acquisition of mineral
      properties                           |  | (790,147            | ) |  | (449,952     | ) |  | (315,143   | )
|Acquisition of subsidiary, net cash paid                          |  | (48                 | ) |  | (48          | ) |  |           |  
|Proceeds from sale of investment
      securities                 |  | 116,629             |   |  | 116,629      |   |  |           |  
|Purchase
      of property and equipment                          |  | (138,841            | ) |  | (128,356     | ) |  | (10,485    | )
|                                                                  |  |                     |   |  |              |   |  |            |  
|Net Cash Flows Used
      In Investing Activities                 |  | (812,407            | ) |  | (461,727     | ) |  | (325,628   | )
|                                                                  |  |                     |   |  |              |   |  |            |  
|Financing Activities                                              |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Advances to related party                                         |  | 10,700              |   |  |             |   |  |           |  
|Proceeds from issuance
      of common stock                      |  | 15,714,498          |   |  | 12,771,100   |   |  | 2,867,725  |  
|Share
      issuance costs                                        |  | (283,253            | ) |  | (239,265     | ) |  | (43,987    | )
|                                                                  |  |                     |   |  |              |   |  |            |  
|Net Cash Flows Provided
      By Financing Activities             |  | 15,441,945          |   |  | 12,531,835   |   |  | 2,823,738  |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Effect of Exchange
      Rate Changes on Cash                     |  | 542                 |   |  | 542          |   |  |           |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Increase In Cash                                                  |  | 12,293,890          |   |  | 10,368,869   |   |  | 1,917,551  |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Cash - Beginning of
      Period                                  |  |                    |   |  | 1,925,021    |   |  | 7,470      |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Cash - End of Period                                              |  | 12,293,890          |   |  | 12,293,890   |   |  | 1,925,021  |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Non-cash Investing and Financing Activities                       |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Investment securities received as a mineral
      property option |  |                     |   |  |              |   |  |            |  
|payment                                                           |  | 37,500              |   |  | 37,500       |   |  |           |  
|Common stock issued to settle debt                                |  | 341,830             |   |  | 129,830      |   |  | 212,000    |  
|Common stock issued for mineral property costs                    |  | 15,000              |   |  |             |   |  |           |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Supplemental Disclosures                                          |  |                     |   |  |              |   |  |            |  
|                                                                  |  |                     |   |  |              |   |  |            |  
|Interest paid                                                     |  |                    |   |  |             |   |  |           |  
|Income
      taxes paid                                           |  |                    |   |  |             |   |  |           |  

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

F-4

---

|Uranerz Energy Corporation                                                     
|-------------------------------------------------------------------------------
|(An Exploration Stage Company)                                                 
|Consolidated Statements of Stockholders Equity (Deficit)                      
|For the Period from May 26, 1999 (Date of Inception) to December
      31, 2006
|(Expressed in US dollars)                                                      

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

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

F-5

---

|Uranerz Energy Corporation                                                     
|-------------------------------------------------------------------------------
|(An Exploration Stage Company)                                                 
|Consolidated Statements of Stockholders Equity (Deficit)                      
|For the Period from May 26, 1999 (Date of Inception) to December
      31, 2006
|(Expressed in US dollars)                                                      

|                                    |  |              |  |  |         |  |  |               |   |  |             |  |  | Deficit     |   |  |            |  
|----------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- | - |  | ----------- |  |  | ----------- | - |  | ---------- | -
|                                    |  |              |  |  |         |  |  |               |   |  |             |  |  | Accumulated |   |  |            |  
|                                    |  |              |  |  |         |  |  | Additional    |   |  | Accumulated |  |  | During the  |   |  |            |  
|                                    |  | Common Stock |  |  | Paid-in |  |  | Comprehensive |   |  | Other       |  |  |             |  
|                                    |  | Shares       |  |  | Amount  |  |  | Capital       |   |  | Income      |  |  | Stage       |   |  | 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  |  
|                                    |  |              |  |  |         |  |  |               |   |  |             |  |  |             |   |  |            |  
|Other comprehensive income          |  |             |  |  |        |  |  |              |   |  | 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 |  

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

F-6

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2006 and 2005                    
|(Expressed in US dollars)                     

|1. | Nature of Operations and Continuance of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | 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 acquired mineral property
        interests in Canada, Mongolia and United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On January 9, 2006, the Company acquired 100%
        of the issued and outstanding share capital of Rolling Hills Resources
        LLC, a Mongolian company. See Note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company is an Exploration Stage Company,
        as defined by Statement of Financial Accounting Standard (SFAS)
        No.7 Accounting and Reporting by Development Stage Enterprises.
        The Companys principal business is the acquisition and exploration
        of uranium and mineral resources. The Company has not presently determined
        whether its properties contain mineral reserves that are economically
        recoverable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has not generated any revenue
        since inception and has never paid any dividends and is unlikely to pay
        dividends or generate earnings in the immediate or foreseeable future.
        As at December 31, 2006, the Company has working capital of $11,989,951
        and subsequent to year end, the Company raised an additional $8,296,052
        of cash proceeds from the exercise of warrants and stock options. The
        Company used $3,120,000 of cash subsequent to year end to purchase three
        mineral properties. Refer to Note 12. Although existing cash resources
        are currently expected to provide sufficient funds through the upcoming
        fiscal year, the capital expenditures required to achieve planned principal
        operations may be substantial. The continuation of the Company as a going
        concern for a period longer than the upcoming fiscal year is dependent
        upon the ability of the Company to obtain necessary equity financing to
        continue operations and to determine the existence, discovery and successful
        exploitation of economically recoverable reserves in its resource properties,
        confirmation of the Company’s interests in the underlying properties,
        and the attainment of profitable operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-7

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

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

F-8

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

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

F-9

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|   |                                                               
|   | o)                                                            
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               
|   |                                                               

F-10

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|3. | Property and Equipment
|-- | ----------------------

| |                                |  |         |  |  |              |  |  | December 31, |  |  | December 31, | 
| | ------------------------------ |  | ------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                |  |         |  |  |              |  |  | 2006         |  |  | 2005         | 
| |                                |  |         |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                                |  | Cost    |  |  | Depreciation |  |  | Value        |  |  | Value        | 
| |                                |  | $       |  |  | $            |  |  | $            |  |  | $            | 
| |                                |  |         |  |  |              |  |  |              |  |  |              | 
| | Computers and office equipment |  | 55,822  |  |  | 8,411        |  |  | 47,411       |  |  | 9,278        | 
| | Field equipment                |  | 83,020  |  |  | 7,195        |  |  | 75,825       |  |  |             | 
| |                                |  | 138,842 |  |  | 15,606       |  |  | 123,236      |  |  | 9,278        | 

|4. | Mineral Properties
|-- | ------------------
|   |                   
|   | a)                
|   |                   
|   | b)                
|   |                   
|   |                   
|   |                   
|   | c)                
|   |                   
|   | d)                
|   |                   
|   | e)                
|   |                   
|   | f)                
|   |                   
|   | g)                

F-11

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|4. | Mineral Properties (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|5. | Acquisition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | On January 1, 2006, the Company acquired 100%
        of the outstanding shares of Rolling Hills Resources LLC (Rolling
        Hills), a Mongolian company, in exchange for the forgiveness of
        $13,220 of notes payable to the Company and $900 cash. Rolling Hills was
        incorporated on September 22, 2005, is in the business of mineral exploration,
        and owns title to several mineral licenses. This acquisition has been
        accounted for using the purchase method and the consolidated financial
        statements include the results of operations for this business from the
        date of acquisition. As this acquisition has not had a significant effect
        on net loss or net loss per share no proforma information has been disclosed.
        In accordance with SFAS No. 141 Business Combinations,
        the Company allocated the purchase price to the tangible and intangible
        assets acquired and liabilities assumed based on their fair values at
        the acquisition date.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Allocation of the purchase price was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                          |  | $      |  | 
| | ------------------------ |  | ------ |  | 
| | Cash                     |  | 852    |  | 
| | Mineral properties       |  | 13,268 |  | 
| | Total consideration paid |  | 14,120 |  | 

F-12

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|6. | Related Party Transactions                                      
|-- | ----------------------------------------------------------------
|   |                                                                 
|   | a)                                                              
|   |                                                                 
|   | b)                                                              
|   |                                                                 
|   | c)                                                              
|   |                                                                 
|   | d)                                                              
|   |                                                                 
|   | e)                                                              
|   |                                                                 
|   | f)                                                              
|   |                                                                 
|   | g)                                                              
|   |                                                                 
|   | h)                                                              
|   |                                                                 
|7. | Common Stock                                                    
|   |                                                                 
|   | Stock transactions for the year ended December
        31, 2006:
|   |                                                                 
|   | a)                                                              
|   |                                                                 
|   | b)                                                              
|   |                                                                 
|   | c)                                                              
|   |                                                                 
|   | d)                                                              

F-13

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|7. | Common Stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Stock transactions for the year ended December
        31, 2006:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|8. | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company adopted a Stock Option Plan dated
        November 7, 2005 under which the Company is authorized to grant options
        to acquire up to a total of 10,000,000 shares of common stock. Stock options
        remaining for future grants: 7,315,360 at December 31, 2006.                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On May 23, 2006, the Company granted stock
        options to directors and consultants to acquire 550,000 common shares
        at an exercise price of $1.96 per share exercisable until May 23, 2011.
        The fair value for options granted was estimated at the date of grant
        using the Black-Scholes option-pricing model and the weighted average
        fair value of stock options granted was $2.05. During the year ended December
        31, 2006, the Company recorded stock-based compensation of $1,126,012
        as general and administrative expense.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On January 6, 2006, the Company granted stock
        options to directors to acquire 1,725,000 common shares at an exercise
        price of $0.75 per share exercisable to January 6, 2011. The fair value
        for options granted was estimated at the date of grant using the Black-Scholes
        option-pricing model and the weighted average fair value of stock options
        granted was $1.38. During the year ended December 31, 2006, the Company
        recorded stock- based compensation of $2,383,950 as general and administrative
        expense.          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | On January 6, 2006, the Company granted stock
        options to consultants to acquire 270,000 common shares at an exercise
        price of $0.75 per share exercisable to January 6, 2011. The fair value
        for options granted was estimated at the date of grant using the Black-Scholes
        option-pricing model and the weighted average fair value of stock options
        granted, was $1.38. During the year ended December 31, 2006, the Company
        recorded stock- based compensation of $373,140 as general and administrative
        expense.           

F-14

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|8. | Stock Options (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | During the year ended December 31, 2006, the Company
        granted stock options to a director to acquire 131,000 common shares at
        exercise prices of $0.51 to $2.65 per share exercisable for 5 years to
        settle $121,148 of debt. The fair value for options granted was estimated
        at the date of grant using the Black-Scholes option-pricing model and
        the weighted average fair value of stock options granted was $1.74. The
        exercise price was subsequently offset against amounts owing to the director.
        During the year ended December 31, 2006, the Company recorded stock-based
        compensation of $227,625 as general and administrative expense.                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | During the year ended December 31, 2006, the Company
        granted stock options to a consultant to acquire 8,640 common shares at
        exercise prices ranging from $0.01 to $2.65 per share exercisable for
        5 years to settle $8,682 of debt. The exercise price was subsequently
        offset against amount owing to the consultant. The fair value of options
        granted was estimated at the date of grant using the Black-Scholes option-pricing
        model and the weighted average fair value of stock options granted was
        $1.54. During the year ended December 31, 2006, the Company recorded stock-based
        compensation of $13,298 as general and administrative expense. At December
        31, 2006, all of the Companys outstanding options have fully vested.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The following table summarizes the continuity of the
        Companys stock options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                         |  |           |   |  | Weighted       | 
| | --------------------------------------- |  | --------- | - |  | -------------- | 
| |                                         |  |           |   |  | average        | 
| |                                         |  | Number of |   |  | exercise price | 
| |                                         |  | Shares    |   |  | $              | 
| |                                         |  |           |   |  |                | 
| | Outstanding, December 31, 2004 and 2005 |  |          |   |  |               | 
| | Granted                                 |  | 2,684,640 |   |  | 1.01           | 
| | Exercised                               |  | (139,640  | ) |  | 0.93           | 
| | Outstanding, December
      31, 2006    |  | 2,545,000 |   |  | 1.01           | 

| |                 | Outstanding
      and Exercisable |             
| | --------------- | --------------------------------- | ------------
| |                 |                                   | Weighted    
| |                 |                                   | average     
| |                 |                                   | remaining   
| |                 | Number of                         | contractual 
| | Exercise prices | shares                            | life (years)
| |                 |                                   |             
| | $ 0.75          | 1,995,000                         | 4.02        
| | $ 1.96          | 550,000                           | 4.39        
| |                 |                                   |             
| |                 | 2,545,000                         | 4.10        

The total intrinsic value of stock options exercised
  during 2006 was $383,522.

There are no unvested stock options as at December 31,
  2006.

The fair value for stock options granted during the
  year was estimated at the date of grant using the Black-Scholes option-pricing
  model and the weighted average fair value of stock options granted was $1.54
  per share. The weighted average assumptions used are as follows:

| |                                 | Year Ended   | Year Ended   | 
| | ------------------------------- | ------------ | ------------ | 
| |                                 | December 31, | December 31, | 
| |                                 | 2006         | 2005         | 
| |                                 | $            | $            | 
| |                                 |              |              | 
| | Expected dividend yield         | 0%           |             | 
| | Risk-free interest rate         | 4.4%         |             | 
| | Expected volatility             | 250%         |             | 
| | Expected option life (in years) | 2.5          |             | 

F-15

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|9. | Stock Purchase Warrants
|-- | -----------------------

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

| |                            |  |            |   |  | Weighted |  | 
| | -------------------------- |  | ---------- | - |  | -------- |  | 
| |                            |  |            |   |  | Average  |  | 
| |                            |  |            |   |  | Exercise |  | 
| |                            |  | Number     |   |  | Price    |  | 
| | Balance, December 31, 2004 |  |           |   |  |         |  | 
| | Issued                     |  | 2,710,000  |   |  | 0.60     |  | 
| | Balance, December 31, 2005 |  | 2,710,000  |   |  | 0.60     |  | 
| | Issued                     |  | 4,812,849  |   |  | 1.86     |  | 
| | Exercised                  |  | (2,700,000 | ) |  | 0.66     |  | 
| | Expired                    |  | (125,000   | ) |  | 0.60     |  | 
| | Balance, December 31, 2006 |  | 4,697,849  |   |  | 1.86     |  | 

As at December 31, 2006, the following
  stock purchase warrants were outstanding:

| | Number of | Exercise Price |                        | 
| | --------- | -------------- | ---------------------- | 
| | Warrants  | $              | Expiry Date            | 
| | 3,650,616 | 1.75 / 2.50    | March 3, 2007 and 2008 | 
| | 1,047,233 | 2.25           | May 19, 2007           | 
| |           |                |                        | 
| | 4,697,849 |                |                        | 

|10. | Commitments
|--- | -----------
|    |            
|    | a)         

| | 2007 | $125,500 | 
| | ---- | -------- | 
| | 2008 | 83,700   | 
| |      | $209,200 | 

| | b) | On July 1, 2005, the Company entered into an agreement
        with a company controlled by a director of the Company for consulting
        services to be provided to the Company at $8,600 (Cdn$10,000) per month.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                      
| | c) | On March 1, 2005, the Company entered into an agreement
        with a company controlled by the President of the Company for consulting
        services to be provided to the Company at $8,000 per month.         

F-16

---

|Uranerz Energy Corporation       
|---------------------------------
|(An Exploration Stage Company)   
|Notes to the Financial Statements
|December 31, 2006                
|(Expressed in US dollars)        

|11. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Potential benefits of income tax losses are not recognized
        in the accounts until realization is more likely than not. The Company
        has net operating loss carryforwards of $3,619,000 which commence expiring
        in 2019. Pursuant to SFAS No. 109, the Company is required to compute
        tax asset benefits for net operating losses carried forward. The potential
        benefits of net operating losses have not been recognized in these financial
        statements because the Company cannot be assured it is more likely than
        not it will utilize the net operating losses carried forward in future
        years. As at December 31, 2006 and 2005, the valuation allowance established
        against the deferred tax asset increased by $848,750 and $371,300, respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The components of the net deferred tax asset at December
        31, 2006 and 2005 and the statutory tax rate, the effective tax rate and
        the elected amount of the valuation allowance are scheduled below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                      | December 31, | December 31, | 
| | ------------------------------------ | ------------ | ------------ | 
| |                                      | 2006         | 2005         | 
| |                                      | $            | $            | 
| | Net Operating Losses Carried Forward | 3,619,000    | 1,194,000    | 
| | Statutory Tax Rate                   | 35%          | 35%          | 
| | Effective Tax Rate                   |             |             | 
| | Deferred Tax Asset                   | 1,266,650    | 417,900      | 
| | Valuation Allowance                  | (1,266,650)  | (417,900)    | 
| | Net Deferred
      Tax Asset         |             |             | 

|12. | Subsequent Events
|--- | -----------------
|    |                  
|    | a)               
|    |                  
|    | b)               
|    |                  
|    | c)               
|    |                  
|    | d)               

F-17

---

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

Engagement of Manning Elliott LLP

We engaged Manning Elliott LLP, Chartered Accountants, as our
principal independent accountant effective May 6, 2005. The decision to change
principal independent accountants was approved by our Board of Directors.

The report of our predecessor independent accountant, Morgan
& Company, dated March 18, 2005, on the balance sheets of the Company as at
December 31, 2004 and 2003, and the related statements of operations,
stockholders' deficiency and cash flows for the years ended December 31, 2004,
2003 and 2002, and the period from May 26, 1999 (inception) to December 31,
2004, did not contain an adverse opinion or disclaimer of opinion, nor was it
modified as to uncertainty, audit scope, or accounting principles, other than to
state that there is a substantial doubt that the Company will be able to
continue as a going concern.

We had no material change in 2006 which would be required to be
reported under Item 304(b) of Regulation S-B.

**ITEM
8A.**                  **DISCLOSURE
CONTROLS AND PROCEDURES**

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of
1934, as amended (the Exchange Act), we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as of December 31, 2006. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer, Mr. Glenn
Catchpole and our Chief Financial Officer Mr. Benjamin Leboe. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures were adequately designed
and effective in ensuring that the information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified by the
rules and forms of the Securities and Exchange Commission.

Changes in Internal Controls Over Financial Reporting

During our most recently completed fiscal year ended December
31, 2006, there were no changes in our internal control over financial reporting
(as defined in Rule 13a  15(f)) that occurred during our most recent fiscal
quarter and the period covered by this annual report that have materially
affected, or are reasonably likely to affect, our internal control over
financial reporting.

The term internal control over financial reporting is defined
as a process designed by, or under the supervision of, the registrant's
principal executive and principal financial officers, or persons performing
similar functions, and effected by the registrant's board of directors,
management and other personnel, 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 and includes those policies and procedures that:

|(a) | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the assets of the registrant;                                                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                
|(b) | 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 registrant are being made only in
      accordance with authorizations of management and directors of the
      registrant; and

38

---

|(c) | Provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      registrant's assets that could have a material effect on the financial
      statement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

**ITEM
8B.**             **OTHER
INFORMATION**

None.

PART III

**ITEM
9.**               **DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT**

The following table sets forth certain information with respect
to our current directors, executive officers and key employees. The term for
each director expires at our next annual meeting and until his or her successor
is elected. Vacancies may be filled by the affirmative vote of a majority of
directors then in office.

Director/OfficerName
    Current Office
    Principal Occupation
    Since
    AgeGlenn Catchpole
      President and Chief Executive
      President and Chief
      March 1, 2005
      63Officer; Director
      Executive Officer UranerzEnergy CorporationGeorge Hartman
    Executive Vice-President, Mining
    Executive Vice-President,
    May 9, 2005
    67and Chief Operating Officer;
    Mining Uranerz EnergyDirector
    CorporationDennis Higgs
      Chairman
      Chairman Uranerz Energy
      May 26, 1999
      49CorporationPaul Saxton *
    Director
    President of Lincoln Gold
    October 26,
    60Corporation
    2004Dr. Gerhard Kirchner
      Director
      Chairman, Mindoro
      March 13, 2005
      76Resources LimitedPeter Bell *
    Director
    President of Ezon
    May 10, 2006
    72Healthcare CorporationArnold J. Dyck *
      Director
      Self-Employed, General
      May 23, 2006
      66ContractorRichard Holmes *
    Director
    Secretary, Treasurer
    May 23, 2006
    65PhosMex CorporationBenjamin Leboe
      Chief
      Chief Financial Officer,
      May 23, 2006
      61Financial
      Corporate Secretary ofOfficer and
      Uranerz EnergyCorporate
      CorporationSecretary


* Indicates that the director is independent in accordance
with section 121A of the American Stock Exchange Company Guide.

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

39

---

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. 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 served as the contract operator
for the successful test solution mining of the Christenson Ranch uranium
property now owned by Areva NC. He was on the Uranerz 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 yellow cake to the converter).

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

40

---

Mr. Higgs has been involved in the financial and venture
capital markets for over twenty years, raising several millions of dollars in
the United States, Canada and Europe. He founded his first junior exploration
company in 1983 and took it public through an initial public offering in 1984.
Since then, Mr. Higgs has been involved in the founding, financing and initial
public listing of several companies, including Arizona Star Resource Corp. (TSX:
AZS) and BioSource International Inc. (NASDAQ: BIOI. BioSource was acquired
by Invitrogen Corporation at $12.50/share in October, 2005).

In July 1990, Mr. Higgs established Senate Capital Group Inc.,
a private venture capital company which provides management consulting and
investor relations services.

At present, Mr. Higgs also serves as a director and chairman of
Miranda Gold Corp., a Canadian public gold exploration company, which he founded
in May 1993.

Mr. Paul Saxtonwas appointed to the Board of
Directors on October 26, 2004. Mr. Saxton is a mining engineer who also holds an
MBA from the University of Western Ontario. He has been active in the mining
industry since 1969, holding various positions including mining engineer, mine
superintendent, president and chief executive officer of numerous Canadian
mining companies.

Following 10 years with Cominco, Mr. Saxton became
vice-president and president of Mascot Gold Mines Ltd. (from 1983 to 1986),
initially working on the design and construction of the Nickel Plate mine in
British Columbia, Canada. Subsequently Mr. Saxton became a vice-president of
Corona Corporation (from 1986 to 1987 where he was responsible for western
operations and exploration for the company and was instrumental in the
re-opening of the Nickel Plate Mine. In 1989, Mr. Saxton was appointed senior
vice-president of Viceroy Resource Corporation where he was responsible for
helping to obtain financing and the construction and operations of the Castle
Mountain mine in California. In 1994, Mr. Saxton was appointed as president of
Loki Gold Corporation and Baja Gold Inc. where he was responsible for arranging
over $45 million in mine financing and bringing the Brewery Creek Gold mine into
production. Loki Gold, Baja Gold and Viceroy Resource Corp. were merged in 1996
and Mr. Saxton became President of Viceroy at that time.

Following his departure from Viceroy in 1998, Mr. Saxton became
president of Standard Mining Corp., organizing the company and supervising its
exploration activities until 2001, when Standard Mining Corp. was merged with
Doublestar Resources Ltd. In March 2004, Mr. Saxton was appointed and continues
to serve as a director and president of Lincoln Gold Corporation, a company
engaged in mineral exploration in the State of Nevada.

Mr. Saxton is also Chairman and COO of Pinnacle Mines Ltd., a
TSX Venture company, engaged in exploration and mine development in Canada,
China and Mexico.

Dr. Gerhard F. Kirchnerwas appointed to the
Board March 13, 2005. Dr. Kirchner has 40 years of international mine
development and management experience including 20 years with Uranerz
Exploration and Mining Ltd. (UEM) (from1975 to 2005). At UEM, Dr. Kirchner
spent nine years as General Manager and 11 years as Senior Vice President. He
and his team were responsible for the Key Lake uranium discovery and the
engineering and development of projects such as the Midwest uranium deposit,
Eagle Point North uranium deposit, Star Lake gold deposit and the Crow Butte ISL
uranium deposit.

Previous to his work with UEM, Dr. Kirchner spent six years
developing and managing the Kamoto Mine in Kolwezi, Zaire from (1968 to 1974);
six years consulting on mining and civil engineering projects in several
countries including Surinam, Nigeria, Congo, Saudi Arabia and Austria (from 1962
to 1968); five years as a mine superintendent and exploration manager in
Greenland (from 1957 to 1962) where he discovered the Molybdenum Porphyry
Erzberg.

During the past ten years, Dr. Kirchner has served as director
on the board of Mindoro Resources Limited.

Dr. Kirchner received a multidisciplinary education in mining
engineering and economic geology and a Doctorate in Mining Sciences from the
University of Leoben, Austria.

41

---

Mr. Arnold J. Dyck was appointed to the Board of
Directors on May 10, 2006. Mr. Dyck was employed at Uranerz Exploration and
Mining Limited from 1977 to 1998. Mr. Dyck progressed through various positions
with Uranerz Canada Limited, Uranerz Exploration and Mining Limited, and Uranerz
U.S.A. Inc. to become the Senior Vice-President and Chief Financial Officer for
the Uranerz group of companies. He also served as a member of the board of
directors for Uranerz U.S.A. Inc. and as chairman of the board with a subsidiary
mining company. Uranerz Exploration and Mining Limited, Uranerz Canada Limited,
Uranerz U.S.A. and the original Uranerz group of companies are not connected
with, or a predecessor company to Uranerz Energy Corporation. The original
Uranerz group of companies was acquired by Cameco, the worlds largest primary
uranium producer, in 1998.

During the past five years, Mr. Dyck has been self employed as
a general contractor in designing, constructing and selling new homes and
renovating older homes and offices.

Mr. Dyck is a graduate of the Registered Industrial Accountant
education program and was awarded the designation of Certified Management
Accountant in 1975.

Mr. Dyck has been appointed to the Companys audit committee
and compensation committee.

Mr. Richard W. Holmes was appointed to the Board
of Directors on May 23, 2006 Mr. Holmes was an assistant controller with Duke
Power Company (now Duke Energy) from 1971 to 1981. Duke Energy has operated
nuclear plants for more than thirty years. While at Duke Power Mr. Holmes was
Assistant Controller of the parent company. He was also Treasurer of Eastover
Land Company, a $100 million subsidiary of Dukes with interests in coal
properties in Kentucky and West Virginia. Concurrently, Mr. Holmes was Treasurer
of Western Fuel, Dukes uranium mining project in Wyoming.

Mr. Holmes left Duke in 1981 to become Treasurer and Controller
of Ogle Resources Inc., an oil and gas company with offshore exploration,
drilling and production from 1981 to 1986. At the same time, Mr. Holmes was
Treasurer and Controller for a sister company with an investment in in-situ
recovery uranium mining in Wyoming.

During the past five years, although retired, Mr. Holmes is
active as Secretary, Treasurer for PhosMex Corporation, a California phosphate
mining corporation.

Mr. Holmes received his bachelors degree in accounting from
the University of Wisconsin. He held the position of Senior Auditor at Arthur
Andersen & Co. in Chicago, Illinois, from 1968 to 1971. Mr. Holmes was an
active certified public accountant from 1971 to 2003.

Mr. Holmes has been appointed to the Company's audit committee,
and the nominating and corporate governance committee.

Mr. Peter Bell was appointed to the Board of
Directors on May 10, 2006. Mr. Bell practiced as a licensed pharmacist until
1968. Since that time he has been a self-employed consultant and a director and
member of a number of private and public companies and professional
organizations. Mr. Bell is a director of Current Technology Corporation which
markets an electrostatic hair maintenance and re-growth process, since 1992.
Since 1997, Mr. Bell has been a director and is the President of Ezon Healthcare
Corporation, a private company that is involved in the development of a graphic
labeling system for pharmaceutical products.

Mr. Bell has provided a wide range of consultant services to
businesses and health care companies and organizations. These consultant
services included: sales management and reorganization of sales force; regional
market development and marketing strategy; medical opinion surveys and market
analysis; medical device product market development; business immigration
program presentations; management studies in healthcare organizations;
development and growth of public corporations. Mr. Bell holds a Bachelor of
Science Degree in Pharmacy from the University of Manitoba and a Masters in
Business Administration from the University of Western Ontario.

Mr. Bell has been appointed to the Company's audit committee,
the nominating and corporate governance committee, and the compensation
committee.

42

---

Mr. Benjamin Leboe was appointed as the Companys
Chief Financial Officer on May 23, 2006, and became our Corporate Secretary on
October 12, 2006. Mr. Leboe was a senior consultant, management consulting of
the Business Development Bank of Canada, from January 2005 to February 2006.
Previously, Mr. Leboe was president, secretary, treasurer, principal financial
and accounting officer and a director of Asia Payment Systems Inc., a United
States and Hong Kong based company engaged in payment processing services and
related applications from June 1998 to January 2005. Concurrently, from January
2003 to January 2005, Mr. Leboe was the chief financial officer of C-Chip
Technologies Inc. (now Manaris Corporation), a Montreal based corporation
developing high-tech products and services for security and risk mitigation
activities.

Mr. Leboe has been the principal of Independent Management
Consultants of British Columbia from 1990 to date. Concurrently, Mr. Leboe was
previously vice-president and chief financial officer of VECW Industries Ltd.
from 1990 to 1993, and a partner of KPMG Consulting from 1978 to 1990.

Mr. Leboe received his bachelor of commerce degree from the
University of British Columbia. Mr. Leboe is a chartered accountant and a
certified management consultant in the Province of British Columbia.

Advisory Board

We have an advisory board that consists entirely of
professional geologists.

Dr. Franz J. Dahlkamp has over 45 years
experience as an economic geologist, with specific emphasis in uranium. He
started as an economic geologist with several mining companies in Germany and
abroad. In 1968 he began working with the Uranerz group of companies and by 1974
he became the head of their exploration department. While at Uranerz he
organized and established the Uranerz group of subsidiary companies for uranium
exploration in Australia, Canada, and the USA, and conducted reconnaissance
surveys for uranium worldwide.

Since 1978 Dr. Dahlkamp has been consulting for mining
companies, utilities, national and international institutions (governments of
Germany, Austria, USA, Egypt, Iran, Mongolia; UN/IAEA, OECD/NEA). Also, since
1978 to 2002, Dr. Dahlkamp lectured at the Universities of Leoben and Salzburg,
Austria, and Munich, Germany (on uranium deposits: geology, economics, and
exploration).

Dr. Dahlkamp has published over fifty papers including six
books (e.g. Uranlagerstätten 1979, Uranium Ore Deposits 1993)

Dr. Dahlkamp has a PhD (1958), a Dr. of Science (Habilitation
1979), and is an Honorary Chair (Honorary-Professor) at Mining-University of
Leoben (1990).

Dr. Gerhard Ruhrmann has close to 30 years
experience in uranium exploration, mining and mine waste management. From 1976
to 1981, Dr. Ruhrmann was project geologist and exploration manager for Uranerz
Exploration and Mining (UEM) in Canada, supervising field work in the Otish
Mountains of Quebec, the Athabasca Basin in Saskatchewan, and the Thelon Basin
in Nunavut. In 1982, Dr. Ruhrmann joined Key Lake Mining Corporation, to develop
exploration tools for high grade unconformity-related uranium deposits on the
basis of geological and mineralogical research at the Key Lake open pits and
other mines in the Athabasca Basin. This resulted in a number of papers
published in a variety of scientific periodicals including technical documents
of the International Atomic Energy Agency.

In 1988, Dr. Ruhrmann became engaged in hydro geological and
geotechnical work in Camecos engineering division, assessing above-ground
uranium tailings management facilities and contributing to the in-pit tailings
disposal concept at the Deilmann open pit in Saskatchewan.

In 1993, Uranerzbergbau (UEB) in Germany called Dr. Ruhrmann to
join its consulting branch. Assignments included the assessment of exploration
and mining projects in central Asia and western Africa, managing a subsidiary
exploration company in Guinea, providing technical assistance to regulatory
agencies in Papua New Guinea, monitoring the reclamation work at the former
uranium mines in eastern Germany, designing reclamation concepts for closed-out
uranium mines in central Asia and eastern Europe as well as reviewing the mining
practice

43

---

in Vietnam. On the basis of this experience, Dr. Ruhrmann
co-authored a book on environmental mine management, published in 2001.

Since 2003, Dr. Ruhrmann is practicing as an independent
consultant to the mining industry and international technical assistance
agencies. Assignments include a review of the mining industry in Mongolia,
enhancement of small-scale mining in Papua New Guinea, quality control at
uranium mine rehabilitation projects and the assessment of uranium prospects.

Dr. Ruhrmann has a diploma in geology and holds a doctor degree
in geology from the University of Tuebingen, Germany. Since 2001, Dr. Ruhrmann
is teaching mineral exploration at the University of Leoben, Austria.

Mr. Kenneth Cunningham brings over thirty years
of experience from diversified mineral exploration and mining geology through to
executive management. Eighteen of these years have been focused in Nevada.
Currently Mr. Cunningham is the President and Chief Executive Officer of Miranda
Gold Corp. where he aggressively positioned this company in the Cortez Gold
Trend and successfully negotiated joint ventures with major mining companies
including Newmont, Placer Dome, Newcrest and Barrick. Previously, he was
Exploration Manager with Uranerz U.S.A. Inc. During his tenure with Uranerz Mr.
Cunningham led the exploration and acquisition effort that resulted in two
Nevada gold discoveries; a three-million-ounce discovery in the Battle Mountain
trend and a one-plus-million ounce discovery in the northern Carlin trend. Mr.
Cunningham has also been Vice President of Tenneco Minerals Company and a
Resident Manager with Echo Bay Mining Company.

Mr. Cunningham started his career with Houston Oil and Minerals
as a member of its uranium exploration team. In 1978 he was responsible for the
discovery of the Death Valley uranium deposit on Alaskas Seward Peninsula. This
deposit contains ten-million-pounds of uranium at a grade of .25% U3O8.

Mr. Joe Hebert is currently Vice President of
Exploration for Miranda Gold Corp. Most recently, Mr. Hebert was the senior
exploration geologist for the Cortez Joint Venture (Placer Dome and Kennecott
Minerals) located on the Battle Mountain Trend in North Central Nevada. He was a
member of the exploration team who discovered the 7.5 million ounce Cortez Hills
gold deposit. During his tenure at Cortez he directed all generative and
acquisition efforts within the joint venture area of interest.

From 1992 to 1999 Mr. Hebert consulted for Uranerz USA, Inc.
  where he conducted project evaluations and generative programs primarily in
  north central Nevada. The most significant result of this program was the recognition
  of gold potential and acquisition recommendations of the Nike-Converse property
  in Buffalo Valley where Uranerz USA discovered approximately three million ounces
  of gold resource. He also recommended the REN property for acquisition, where
  development drilling on a high-grade resource is being conducted.

During the period when he was consulting, Mr. Hebert initiated
a countrywide evaluation of Mongolia, identifying essentially unexplored
epithermal systems from regional compilation and focused reconnaissance. He
focused his client in gold-belts of NE Mongolia, acquiring for them two large
concessions with multiple ore-grade showings in large epithermal and
intrusive-related alteration cells. This program required interaction with
high-level government officials, Mongolian junior companies, Mongolian
Geological Survey and supervising native crews in remote camps.

Mr. Hebert is credited with team participation in multiple gold
discoveries in Nevada and Utah over the course of his career. He has also had
staff and contract positions with several US majors over the years including
Superior Oil, Tenneco, and Freeport Minerals.

We are not aware of any litigation, bankruptcy or family
relationship of our directors and advisors which may be relevant to Uranerz.

44

---

COMMITTEES OF THE BOARD OF DIRECTORS

Set forth below are our company's current practices relating to
the functions associated with an audit committee, a compensation committee and a
corporate governance and nominating committee.

Audit Committee

We have a standing audit committee and audit committee charter,
which complies with Rule 10A-3 and the requirements of the American Stock
Exchange. Our audit committee was established in accordance with section 3 (a)
of the Securities Exchange Act of 1934, as amended. Our audit committee is
comprised of three directors all of whom, in the opinion of the Companys Board
of Directors are independent (in accordance with Rule 10A-3 and the requirements
of the American Stock Exchange): Arnold Dyck, Peter Bell and Richard Holmes. Mr.
Arnold Dyck satisfies the requirement of a financial expert as defined under
Item 401(e) of Regulation S-B and is, in the opinion of the Companys Board of
Directors, independent as that term is used in section 121B of the American
Stock Exchange Company Guide and rule 10A-3 (b) (i) of the Securities Exchange
Act of 1934, as amended.

Our audit committee meets with our management and our external
auditors to review matters affecting financial reporting, the system of internal
accounting and financial controls and procedures and the audit procedures and
audit plans. Our audit committee reviews our significant financial risks, is
involved in the appointment of senior financial executives and annually reviews
our insurance coverage and any off-balance sheet transactions.

Our audit committee monitors our audit and the preparation of
financial statements and all financial disclosure contained in our SEC filings.
Our audit committee appoints our external auditors, monitors their
qualifications and independence and determines the appropriate level of their
remuneration. The external auditors report directly to the audit committee. Our
audit committee has the authority to terminate our external auditors engagement
and approve in advance any services to be provided by the external auditors that
are not related to the audit.

Compensation Committee

We have a Compensation Committee comprised of three directors
all of whom, in the opinion of the Companys Board of Directors, are independent
(under section 121A of the American Stock Exchange Company Guide): Peter Bell,
Arnold J. Dyck and Paul Saxton. We have a Compensation Committee charter that
complies with the requirements of the American Stock Exchange. Our Compensation
Committee is responsible for considering and authorizing terms of employment and
compensation of executive officers and providing advice on compensation
structures in the various jurisdictions in which we operate. Our Chief Executive
Officer may not be present during the voting determination or deliberations of
his or her compensation. In addition, our Compensation Committee reviews both
our overall salary objectives and significant modifications made to employee
benefit plans, including those applicable to executive officers, and proposes
awards of stock options.

Corporate Governance and Nominating Committee

We have a Corporate Governance and Nominating Committee
comprised of three directors all of whom, in the opinion of the Companys Board
of Directors, are independent (under section 121A of the American Stock Exchange
Company Guide): Richard Holmes, Peter Bell and Paul Saxton. We have a Nominating
Committee charter that complies with the requirements of the American Stock
Exchange. Our Corporate Governance Committee is responsible for developing our
approach to corporate governance issues.

Code of Ethics

We have adopted a corporate code of ethics administered by our
chief financial officer and corporate secretary, 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:

45

---

- 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 Commission and in other
  public communications made by an issuer;
- Compliance with applicable governmental laws, rules and regulations; and
- 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, 2006, or during the subsequent period
from January 1, 2007, through the date of this report.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT.

Section 16(a) of the Exchange Act requires our executive
officers and directors, and persons who beneficially own more than ten percent
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. Based on our review of the copies
of such forms received by us, we believe that during the fiscal year ended
December 31, 2006 all such filing requirements applicable to our officers and
directors were complied with other than the following reports which were filed
late by the following persons:

Name and Principal Position
    Number of Late Reports
    Transactions Not Timely
      Reported
    Known Failures to File a
      Required FormDennis Higgs
    Three
    Three
      NoneGlenn Catchpole
    Three
    Three
      NonePaul Saxton
    One
    One
      NoneGerhard Kirchner
    Two
    Two
      NoneGeorge Hartman
    Six
    Thirteen
      NonePeter Bell
    One
    One
      NoneArnold Dyck
    One
    One
      NoneRichard Holmes
    One
    One
      NoneBenjamin Leboe
    One
    One
      None


46

---

**ITEM
10.**                         **EXECUTIVE
COMPENSATION**

Summary Compensation Table

A
summary of cash and other compensation paid in accordance with management
consulting contracts for our Principal Executive Officer and other named
executive officers for the last two fiscal years is as follows:

|Name(5)            |      |         |        |        | Option   | Non-Equity     | Nonqualified |           |        
|------------------ | ---- | ------- | ------ | ------ | -------- | -------------- | ------------ | --------- | -------
|and                |      |         |        | Stock  | Awards   | Incentive Plan | Deferred     | All other | Total  
|Principal Position | Year | Salary  | Bonus  | Awards | ($)      | Compensation   | Compensation | Comp.     |        
|                   |      | ($)     | ($)    | $      | (Note 5) | ($)            | Earnings     |           |        
|                   |      |         |        |        |          |                | ($)          |           |        
|(a)                | (b)  | (c)     | (d)    | (e)    | (f)      | (g)            | (h)          | (i)       | (j)    
|Dennis Higgs       |      |         |        |        |          |                |              |           |        
|Chairman and       |      |         |        |        |          |                |              |           |        
|Director (1)       | 2006 | 103,200 | 35,000 |        | 483,700  |                |              | 9,731     | 631,631
|                   | 2005 | 52,282  |        |        |          |                |              |           | 52,282 
|Glenn Catchpole    |      |         |        |        |          |                |              |           |        
|President/PEO      |      |         |        |        |          |                |              |           |        
|and Director (2)   | 2006 | 96,000  | 50,000 |        | 483,700  |                |              | 6,000     | 635,700
|                   | 2005 | 80,000  |        |        |          |                |              |           | 80,000 
|George Hartman     |      |         |        |        |          |                |              |           |        
|Senior Vice        |      |         |        |        |          |                |              |           |        
|President and      |      |         |        |        |          |                |              |           |        
|Director (3)       | 2006 | 174,000 | 25,000 |        | 711,326  |                |              |           | 910,326
|                   | 2005 | 86,000  |        |        |          |                |              |           | 86,000 
|Benjamin Leboe     |      |         |        |        |          |                |              |           |        
|Chief Financial    |      |         |        |        |          |                |              |           |        
|Officer and        |      |         |        |        |          |                |              |           |        
|Corporate          |      |         |        |        |          |                |              |           |        
|Secretary (4)      | 2006 | 31,414  |        |        | 204,729  |                |              |           | 236,143

Notes to Summary of Executive Compensation and Executive
Compensation Agreements

1.      Salary is a management
  fee paid to a private holding company of Mr. Glenn Catchpole. Mr. Catchpole
  was appointed President and CEO on March 1, 2005. In 2005 we entered into a
  consulting agreement with Catchpole Enterprises Inc. Catchpole Enterprises is
  wholly owned by Glenn and Judy Catchpole. The Agreement states that we will
  pay a monthly consulting fee of US $8,000 in consideration of the provision
  of the services of Mr. Catchpole as our President and Chief Executive Officer.
  The monthly fee increases to US $10,000 in 2007.

2.      Salary is a management fee paid
  to a private holding company of Mr. Glenn Catchpole. Mr. Catchpole was appointed
  President and CEO on March 1, 2005. In 2005 we entered into a consulting agreement
  with Catchpole Enterprises Inc. Catchpole Enterprises is wholly owned by Glenn
  and Judy Catchpole. The Agreement states that we will pay a monthly consulting
  fee of US $8,000 in consideration of the provision of the services of Mr. Catchpole
  as our President and Chief Executive Officer. The monthly fee increases to US
  $10,000 in 2007.

3.      Salary is a consulting
fee paid to Mr. George Hartman. Mr. Hartmann was appointed Senior Vice President
-Mining on May 9, 2005. Mr. Hartman is paid for consulting on the basis of
$1,000 per day.

4.      Salary is a consulting
fee paid to an entity owned by Benjamin Leboe. Mr. Leboe was appointed Chief
Financial Officer on May 23, 2006 and Corporate Secretary on October 12, 2006.
In 2006 we entered into a consulting agreement with Independent Management
Consultants of British Columbia. (IMC). IMC is wholly owned by Benjamin Leboe,
our Chief Financial Officer. The Agreement states that we will pay for
consulting services provided, based upon a rate of CDN$10,000 per month.

47

---

5.      Option award compensation
  is the fair value for stock options vested during the period, a notional amount
  estimated at the date of the grant using the Black-Scholes option-pricing model.
  The actual value received by the executives may differ materially and adversely
  from that estimated.

Outstanding Equity Awards to Executives at Fiscal Year-end

|          |               |                   |                 |          |             |            |            |             |                
|--------- | ------------- | ----------------- | --------------- | -------- | ----------- | ---------- | ---------- | ----------- | ---------------
|          | Option Awards | Stock Awards     
|          |               |                   |                 |          |             |            |            |             |                
|          |               |                   |                 |          |             |            |            |             |                
|          |               |                   |                 |          |             |            |            |             |                
|          |               |                   |                 |          |             |            |            |             | Equity         
|          |               |                   |                 |          |             |            |            |             | Incentive      
|          |               |                   |                 |          |             |            |            | Equity      | Plan           
|          |               |                   |                 |          |             |            |            | Incentive   | Awards:        
|          |               |                   |                 |          |             |            |            | Plan        | Market or      
|          |               |                   | Equity          |          |             | Number of  |            | Awards:     | Payout         
|          |               |                   | Incentive       |          |             | Shares or  |            | Number of   | Value of       
|          |               |                   | Plan            |          |             | Units of   | Market     | Unearned    | Unearned       
|          | Number of     | Number of         | Awards:         |          |             | Stock That | Value of   | Shares,     | Shares,        
|          | Securities    | Securities        | Number of       |          |             | Have Not   | Shares or  | Units or    | Units or       
|          | Underlying    | Underlying        | Securities      |          |             | Vested     | Units of   | Other       | Other          
|          | Unexercised   | **Unexercised**   | **Unexercised** | Option   |             | (#)        | Stock That | Rights That | **Rights That**
|          | Options(1)    | Options           | Unearned        | Exercise | Option      |            | Have Not   | Have Not    | Have Not       
|          | (#)           | (#)               | Options         | Price    | Exercise    |            | Vested     | Vested      | Vested         
|Name      | Exercisable   | **Unexercisable** | (#)             | ($)      | Date        |            | ($)        | (#)         | ($)            
|(a)       | (b)           | (c)               | (d)             | (e)      | (f)         | (g)        | (h)        | (i)         | (j)            
|Dennis    |               |                   |                 |          |             |            |            |             |                
|Higgs     | 350,000       | Nil               | Nil             | 0.75     | Jan 6, 2011 | Nil        | Nil        | Nil         | Nil            
|Glenn     |               |                   |                 |          |             |            |            |             |                
|Catchpole | 350,000       | Nil               | Nil             | 0.75     | Jan 6, 2011 | Nil        | Nil        | Nil         | Nil            
|George    |               |                   |                 |          |             |            |            |             |                
|Hartman   | 350,000       | Nil               | Nil             | 0.75     | Jan 6, 2011 | Nil        | Nil        | Nil         | Nil            
|Benjamin  |               |                   |                 |          | May 23,     |            |            |             |                
|Leboe     | 100,000       | Nil               | Nil             | 1.96     | 2011        | Nil        | Nil        | Nil         | Nil            

Retirement, Resignation or Termination Plans

We
sponsor no plan, whether written or verbal, that would provide compensation or
benefits of any type to an executive upon retirement, or any plan that would
provide payment for retirement, resignation, or termination as a result of a
change in control of our Company or as a result of a change in the
responsibilities of an executive following a change in control of our Company.

48

---

Director Compensation

FeesEarned or
    
    
    Non-Equity
    Non-QualifiedPaid in
    Stock
    
    Incentive Plan
    Compensation
    All OtherName
    Cash
    Awards
    Option Awards
    Compensation
    Earnings
    Compensation
    Total($)
    ($)
    ($)
    ($)
    ($)
    ($)
    ($)Note 1(a)
    (b)
    (c)
    (d)
    (e)
    (f)
    (g)
    (h)Gerhard Kirchner
      1,000
      
      380,050
      
      
      
      381,050Aileen Lloyd (2)
    Nil
    
    345,500
    
    
    10,000
    355,500Paul Saxton
      3,073
      
      207,300
      
      
      
      210,373Arnold Dyck (3)
    9,185
    
    307,093
    
    
    
    316,278Peter Bell (3)
      8,985
      
      307,093
      
      
      
      316,078Richard Holmes (4)
    6,690
    
    307,093
    
    
    
    313,783


| | 1. | Option award compensation is the fair value for stock
      options vested during the period, a notional amount estimated at the date
      of the grant using the Black-Scholes option-pricing model. All options
      were priced at the market price of common shares on the date of the grant.
      The actual value received by the directors may differ materially and
      adversely from that estimated.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Resigned May 22, 2006.                                                                                                                                                                                                                                                                                                                                                                                             
| | 3. | Appointed May 10, 2006.                                                                                                                                                                                                                                                                                                                                                                                            
| | 4. | Appointed May 23, 2006.                                                                                                                                                                                                                                                                                                                                                                                            

Director Compensation Agreements and Summary of Director
Compensation Policies

The Company did not compensate directors in 2005. In 2006 the
Company established policies for director compensation as follows:

Non Executive
members:      $1,000 per meeting ($500 per
telephone meeting) plus:

- Audit Committee: Chair: $11,000/year. Members: $8,000/year.
- Nominating & Governance Committee: Chair: $3,000/year. Members:
  $2,000/year.
- Compensation Committee: Chair: $4,500/year. Members: $3,000/year.

|Executives and officers who are also directors are not
      compensated under this plan.                                
|-------------------------------------------------------------------------------------------------------------------------
|                                                                                                                         
|ITEM
      11.                    SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                   
|                                                                                                                         
|The following tables set forth information as of December
      31, 2006, regarding the ownership of our common stock by:

- each person who is known by us to own more than 5% of our shares of common
  stock; and
- each named executive officer, each director and all of our directors and
  executive officers as a group

The number of shares beneficially owned and the percentage of
shares beneficially owned are based on 34,560,338 shares of common stock
outstanding as of December 31, 2006.

Beneficial ownership is determined in accordance with the rules
and regulations of the Securities and Exchange Commission. Shares subject to
options that are exercisable within 60 days following December 31, 2006 are
deemed to be outstanding and beneficially owned by the optionee for the purpose
of computing share and percentage ownership of that optionee but are not deemed
to be outstanding for the purpose of computing the percentage ownership of any
other person. Except as indicated in the footnotes to this table, and as
affected by applicable community property laws, all persons listed have sole
voting and investment power for all shares shown as beneficially owned by
them.

49

---

Title of Class
      Name and Address of Beneficial Owner
      Number of Shares 
        of Common 
        Stock
      Percentage of 
        Common Stock (1)DIRECTORS AND EXECUTIVE OFFICERSCommon Stock
      Dennis Higgs 
        Director, Chairman 
        Suite 1410 - 800 West Pender St. 
        Vancouver, B.C., 
        V6C 2V6
      4,399,001 (2)
      12.73%Common Stock
      Glenn Catchpole 
        Director, President and CEO/PEO 
        222 Carriage Circle 
        Cheyenne, WY., 
        82009
      1,791,000 (3)
      5.18%Common Stock
      George Hartman 
        Director, Senior Vice President 
        1220 Elkhorn Valley Drive 
        Casper, WY., 
        82609
      981,000 (4)
      2.84%Common Stock
      Dr. Gerhard Kirchner 
        330 - 325 Keevil Crescent 
        Saskatoon, Saskatchewan 
        S7N 4R*
      720,000 (5)
      2.08%Common Stock
      Paul Saxton 
        188 Stonegate Drive 
        Furry Creek, BC. 
        V0N 3G4
      250,000 (6)
      **Common Stock
      Peter Bell 
        #105 - 3389 Capilano Road 
        North Vancouver, B.C., 
        V7R 4W7
      150,000 (7)
      **Common Stock
      Arnold J. Dyck 
        504 - 230 Saskatchewan Crescent East 
        Saskatoon, Saskatchewan 
        S7N 0K6
      153,000 (8)
      **Common Stock
      Richard Holmes 
        2611 Tanbridge Road 
        Charlotte, NC., 
        28226
      150,000 (9)
      **Common Stock
      Benjamin Leboe 
        16730 Carrs Landing Road 
        Lake Country, BC 
        V4V 1B2
      100,000 (10)
      **


50

---

Total
      
      8,694,501
      25.16%5% Stockholders
    Nil


**- indicates ownership less than 1%

| | (1)  | The percent of class is based on 34,560,338 shares of
      common stock issued and outstanding as of December 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2)  | Includes 2,098,334 shares in the name of Dennis Higgs,
      375,000 shares held in the name of Senate Equities Corp., which is wholly
      owned by Menace Capital Corp., which is in turn wholly owned by Dennis
      Higgs, and 1,500,000 shares were acquired in the name of Senate Capital
      Group Inc. in exchange for the assignment of the Burner Hills mineral
      claims. Senate Capital is wholly owned by Dennis Higgs. Includes 75,667
      exercisable warrants and 350,000 exercisable Share Purchase Options.
| | (3)  | Includes 5,500 shares in the name of Judith Catchpole,
      wife of Glenn Catchpole, 10,000 exercisable warrants and 350,000
      exercisable Share Purchase Options.                                                                                                                                                                                                                                                                                                                                                               
| | (4)  | Includes Nil exercisable Warrants and 481,000 exercisable
      Share Purchase Options                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (5)  | Includes Nil exercisable Warrants and 275,000 exercisable
      Share Purchase Options.                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (6)  | Includes Nil exercisable Warrants and 150,000 exercisable
      Share Purchase Options                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (7)  | Includes Nil exercisable Warrants and 150,000 exercisable
      Share Purchase Options                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (8)  | Includes 3,000 shares in the name of Arnold Dyck,
      includes Nil exercisable Warrants and 150,000 exercisable Share Purchase
      Options                                                                                                                                                                                                                                                                                                                                                                                        
| | (9)  | Includes Nil exercisable Warrants and 150,000 exercisable
      Share Purchase Options                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (10) | Includes Nil exercisable Warrants and 100,000 exercisable
      Share Purchase Options                                                                                                                                                                                                                                                                                                                                                                                                                                                

It is believed by us that all persons named have full voting
and investment power with respect to the shares indicated, unless otherwise
noted in the table. Under the rules of the Securities and Exchange Commission, a
person (or group of persons) is deemed to be a "beneficial owner" of a security
if he or she, directly or indirectly, has or shares the power to vote or to
direct the voting of such security, or the power to dispose of or to direct the
disposition of such security. Accordingly, more than one person may be deemed to
be a beneficial owner of the same security. A person is also deemed to be a
beneficial owner of any security, which that person has the right to acquire
within 60 days, such as options or warrants to purchase our common stock.

We have no knowledge of any arrangements, including any pledge
by any person of our securities, the operation of which may at a subsequent date
result in a change in our control.

We are not, to the best of our knowledge, directly or
indirectly owned or controlled by another corporation or foreign government.

CHANGE IN CONTROL

We are not aware of any arrangement that might result in a
change in control in the future.

EQUITY COMPENSATION PLAN INFORMATION

As at December 31, 2006, we had one equity compensation plan
under which our common shares have been authorized for issuance to our officers,
directors, employees and consultants, namely our 2005 Stock Option Plan. Our
2005 Stock Option Plan has not been approved by our shareholders.

The following summary information is presented for our 2005
Stock Option Plan as of December 31, 2006.

51

---

Number of Securities to be
      Issued Upon Exercise of Outstanding Options,
      Warrants and Rights
    Weighted Average Exercise Price
      of Outstanding Options, Warrants and Rights
    Number of Securities Remaining
      Available for Future Issuance Under Equity
      Compensation Plans (Excluding Securities Reflected
      in Column (a)Plan Category
    (a)
    (b)
    (c)Equity Compensation Plans Approved By Security
      Holders
    Not Applicable
    Not Applicable
    Not ApplicableEquity Compensation Plans Not Approved By Security
      Holders
    2,545,000
    $1.01
    7,315,360


We have granted 1,770,000 options to purchase shares of our
common stock under our 2005 Stock Option Plan subsequent to December 31, 2006.

**ITEM
12.**                    **CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS**

Reportable transactions with related parties, including named
security holders, during the two years ended December 31, 2006 are as
follows.

Mr. Dennis Higgs, Director and Chairman

During the year ended December 31, 2006, the Company incurred
$242,826 (2005 - $92,826) for consulting services and office expenses (included
in general and administrative expenses) to companies controlled by Dennis Higgs.
Mr. Higgs was awarded a $35,000 bonus in 2006 (2005  nil). Other general and
administrative expenses were reimbursed in the normal course of business. At
December 31, 2006, $58,194 (2005  $76,193) is owing to Mr. Higgs and these
companies, which is unsecured, non-interest bearing, and due on demand. As at
December 31, 2006 the Company had $26,266 (2005 - $19,815) in prepaid expenses
to these companies.

On March 3, 2006, Mr. Higgs purchased 151,334 units of our
common stock in his own name at a price of $1.00 per share for a total price of
$151,334 for these units.

On August 31, 2005, Mr. Higgs, as part of a founders group,
purchased 800,000 shares of our common stock in his own name at a price of
$0.001 per share for a total price of $800 for these shares.

On April 15, 2005, Mr. Higgs, as part of a founders group,
purchased 1,049,500 shares of our common stock in his own name at a price of
$0.10 per share for a total price of $104,950 for these shares.

In April 2005 the Company entered into a mineral property
purchase agreement with Ubex Capital Inc. ("Ubex"), a company owned by Dennis
Higgs, to acquire an undivided 100% right, title and interest in the two mineral
prospecting permits. The agreement is subject to Ubex retaining a 2% royalty.
Total consideration for this acquisition consists of a cash payment in the
amount of CDN $40,756.95, which is Ubex's cost of acquisition of the two
permits. On October 20, 2005 an amendment to this agreement was signed that
allows us the one time right exercisable for 90 days following completion of a
bankable feasibility study to buy up to one half (50.0%) of Ubex's royalty
interest (i.e. an amount equal to 1% Royalty) for $1,000,000 (Canadian
currency), leaving Ubex to retain not less than a 1% Royalty. Ubex will retain
the royalty on the property and will split the royalty with Darcy Higgs, Dennis
Higgs' brother.

52

---

Glenn Catchpole, Director and President

During the year ended December 31, 2006, the Company incurred
$102,000 (2005 - $80,000) for consulting services (included in general and
administrative expenses) to the President and a company controlled by the
President of the Company. Mr. Catchpole was awarded a $50,000 bonus in 2006
(2005  nil). The Company also reimbursed the President of the Company for
general and administrative expenses, acquisition of mineral licenses and
advances to subsidiary Rolling Hills incurred on behalf of the Company. At
December 31, 2005, the President owed the Company $23,358 of advances for costs
to be incurred on behalf of the Company. During the year ended December 31,
2006, the President was advanced a further $15,000, repaid $2,332 and used the
remaining $36,026 for expenses incurred on behalf of the Company. At December
31, 2006, the President is owed $48,000 (2005  $nil) which is unsecured,
non-interest bearing, and due on demand.

In May, 2005 Mr. Catchpole entered into a purchase agreement
for a 100% interest in the Khavtsal project including the historical files of
data on past work on the project, and commissions, for a total purchase price of
$105,945. Although the permit is recorded in the name of Glenn Catchpole, we
paid this acquisition price directly because we had not set up a Mongolian
corporation at the time the transaction was negotiated. He subsequently
transferred ownership of the project to a subsidiary corporation formed by us in
Mongolia for holding all of our Mongolian permits and projects.

On March 3, 2006, Mr. Catchpole purchased 20,000 shares of our
common stock in his own name at a price of $1.00 per share for a total price of
$20,000 for these shares.

On April 15, 2005 Mr. Catchpole, as part of a founders group,
acquired 50,000 shares of our common stock in his own name at a price of $0.10
per share.

On August 31, 2005, Mr. Catchpole, as part of a founders group,
purchased 1,200,000 shares of our common stock in his own name at a price of
$0.001 per share.

On October 17, 2005 Mr. Glenn Catchpole purchased 100,000 units
of common stock in his own name at a price of $0.40 per unit for a total
purchase price of $40,000.

Mr. George Hartman, Director and Senior Vice President

During the year ended December 31, 2006, the Company incurred
$174,000 (2005 - $86,000) for consulting services (included in general and
administrative expenses) to Mr. Hartman. He was also awarded a bonus of $25,000
in 2006 (2005  nil). Other general and administrative expenses were reimbursed
in the normal course of business. During year ended December 31, 2006, the
Company settled $121,148 of debt through the granting and subsequent exercise of
131,000 options. At December 31, 2006, $93,853 (2005  $53,138) is owed to this
director, which is unsecured, non-interest bearing, and due on demand.

On October 30, 2006, Uranerz Energy entered into an agreement
with George Hartman, our Vice President, Mining and Chief Operating Officer and
a Director to use certain geological reports held by Mr. Hartman for the
purposes of staking and acquiring potential areas of interest. Under the terms
of the agreement, the Company agreed to pay Mr. Hartman the sum of $0.40 for
each measured and indicated pound of uranium staked by the Company and a fee of
$750 for each claim registered with the Bureau of Land Management, based on the
use of the geological reports. This fee is payable to Mr. Hartman in shares of
common stock of the Company. In connection with the issuance of the shares, we
granted Mr. Hartman registration rights for the resale of such shares and agreed
to obtain listing approval and other regulatory approval in connection with the
issuance of such shares. The geological reports were owned by Mr. Hartman prior
to his joining Uranerz and fully disclosed to us. Our Board approved this
transaction as a related party transaction after evaluating the transaction.

On August 31, 2005, Mr. George Hartman, as part of a founders
group, purchased 500,000 shares of our common stock in his own name at a price
of $0.001 per share for a total price of $500 for these shares.

53

---

Dr. Gerhard Kirchner, Director

On August 31, 2005, Dr. Kirchner, as part of a founders group,
purchased 400,000 shares of our common stock in his own name at a price of
$0.001 per share for a total price of $400 for these shares.

On October 17, 2005, Dr. Kirchner purchased 50,000 shares of
our common stock in his own name at a price of $0.40 per share for a total price
of $20,000.

Mr. Paul Saxton, Director

On August 31, 2005, Mr. Saxton purchased 100,000 shares of our
common stock in his own name at a price of $0.001 per share for a total price of
$100 for these shares.

Other

As disclosed above under Executive Compensation  Stock Option
Grants, we granted options to purchase shares of our common stock to our
officers and directors under our 2005 Stock Option Plan during 2006. Additional
options were granted to officers and directors on January 26, 2007.

Director Independence

We have eight directors at December 31, 2006, including four
independent directors, as follows:

Dennis Higgs Glenn Catchpole George Hartman Dr.
Gerhard Kirchner Paul Saxton, independent Arnold Dyck, independent
Peter Bell, independent Richard Holmes, independent

An independent director is a director whom the Board of
Directors has determined satisfies the requirements for independence under
section 121A of the American Stock Exchange Company Guide.

54

---

ITEM 13. EXHIBITS

|Exhibit |                                                                                                                                 
|------- | --------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                     
|        |                                                                                                                                 
|3.1     | Articles of Incorporation **(1)**                                                                                               
|        |                                                                                                                                 
|3.2     | Bylaws, as amended **(1)**                                                                                                      
|        |                                                                                                                                 
|3.3     | Articles of Amendment (3)                                                                                                       
|        |                                                                                                                                 
|4.1     | Share Certificate **(1)**                                                                                                       
|        |                                                                                                                                 
|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 (4)                                                                                                      

55

---

|Exhibit |                                                                                                                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                        
|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 Power River Basin (7) (8)
|        |                                                                                                                                                                                                                        
|10.16   | Consulting
        Agreement dated February 1, 2007 between the Company and O & M Partners,
        LLC (7) (8)                                                                                                        
|        |                                                                                                                                                                                                                        
|10.17   | Consent
        of Manning Elliott LLP, independent registered accountants                                                                                                                                             
|        |                                                                                                                                                                                                                        
|31.1    | Certification
        of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
        Act (8)                                                                                                            
|        |                                                                                                                                                                                                                        
|31.2    | Certification
        of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange
        Act (8)                                                                                                            
|        |                                                                                                                                                                                                                        
|32.1    | Certification
        of Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange
        Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002 (8)   
|        |                                                                                                                                                                                                                        
|32.2    | Certification of Chief Financial
        Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002 (8)   

|(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) | Filed as an exhibit to this Annual Report on Form 10-KSB                                                                             

56

---

ITEM
14.                    
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth information regarding the amount
billed to us by our independent auditor, Manning Elliott LLP for our two fiscal
years ended December 31, 2006:

Years Ended December 312006
      2005Audit Fees
      $34,250
      $9,550Audit Related Fees
      Nil
      $1,000Tax Fees
      Nil
      NilAll Other Fees
      Nil
      $400Total
      $34,250
      $10,950


Audit Fees

Audit Fees are the aggregate fees billed by our independent
auditor for the audit of our annual financial statements, reviews of interim
financial statements and attestation services that are provided in connection
with statutory and regulatory filings or engagements.

Policy on Pre-Approval by Audit Committee of Services
Performed by Independent Auditors

Our audit committee approves all services provided by our
independent accountant.

57

---

SIGNATURES

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

URANERZ ENERGY CORPORATION

|By:         /s/
      Glenn Catchpole                          
|---------------------------------------------------------------
|Glenn Catchpole, President and Principal Executive Officer     
|Director                                                       
|Date:
      April 2, 2007                                      
|                                                               
|By:         /s/
      Benjamin Leboe                           
|Benjamin Leboe, Chief Financial Officer and Corporate Secretary
|Principal Financial Officer and Principal Accounting Officer   
|Date:
      April 2, 2007                                      

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: April 2, 2007                                   
|                                                      
|                                                      
|Per:                        /s/
      Dennis Higgs    
|Dennis Higgs,
      Chairman, Director                
|Date: April 2, 2007                                   
|                                                      
|                                                      
|Per:                        /s/
      Gerhard Kirchner
|Dr. Gerhard
      Kirchner, Director                  
|Date: April 2, 2007                                   
|                                                      
|                                                      
|Per:                        /s/
       George Hartman 
|George Hartman,
      Vice President, Director        
|Date: April 2, 2007                                   
|                                                      
|                                                      
|Per:                        /s/
      Peter Bell      
|Peter Bell,
      Director,                           
|Date: April 2, 2007                                   
|                                                      
|                                                      
|Per:                        /s/
      Paul Saxton     
|Paul Saxton,
      Director                           
|Date: April 2, 2007                                   

58

---

|Per:                        /s/
      Arnold Dyck   
|----------------------------------------------------
|Arnold Dyck,
      Director                         
|Date: April 2, 2007                                 
|                                                    
|                                                    
|Per:                        /s/
      Richard Holmes
|Richard Holmes,
      Director                      
|Date: April 2, 2007                                 

59

---