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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the fiscal year ended December 31, 2008

OR

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

For the transition period
from ___________ to ___________

Commission file number: 001-32974



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

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

(604) 689-1659(Registrants Telephone
Number, including Area Code)

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

Title of Each
Class                                                                Name
of Each Exchange on Which Registered

**Common Stock, No Par Value**                                                        
  **NYSE ALTERNEXT US LLC**

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

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

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

Indicate by checkmark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No
[   ]

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

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

1

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

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrants most
recently completed second fiscal quarter: $34,000,000

The number of shares of the Registrants Common Stock
outstanding as of March 5, 2009 was 55,452,387.

2

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TABLE OF CONTENTS

|PART
      1                                                                                                                         | 5 
|------------------------------------------------------------------------------------------------------------------------------------ | --
|                                                                                                                                     |   
|ITEM
      1. DESCRIPTION OF BUSINESS                                                                                                | 5 
|                                                                                                                                     |   
|ITEM
      1A. RISK FACTORS AND UNCERTAINTIES                                                                                        | 5 
|                                                                                                                                     |   
|ITEM
      1B. UNRESOLVED STAFF COMMENTS                                                                                             | 17
|                                                                                                                                     |   
|ITEM
      2. DESCRIPTION OF PROPERTIES                                                                                              | 17
|                                                                                                                                     |   
|ITEM
      3. LEGAL PROCEEDINGS                                                                                                      | 43
|                                                                                                                                     |   
|ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                    | 43
|                                                                                                                                     |   
|PART
      II                                                                                                                        | 44
|                                                                                                                                     |   
|ITEM
      5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 44
|                                                                                                                                     |   
|ITEM
      6. SELECTED FINANCIAL DATA                                                                                                | 50
|                                                                                                                                     |   
|ITEM
      7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS                            | 51
|                                                                                                                                     |   
|ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                            | 60
|                                                                                                                                     |   
|ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                            | 61
|                                                                                                                                     |   
|ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE                             | 62
|                                                                                                                                     |   
|ITEM
      9A. CONTROLS AND PROCEDURES                                                                                               | 62
|                                                                                                                                     |   
|ITEM
      9B. OTHER INFORMATION                                                                                                     | 63
|                                                                                                                                     |   
|PART
      III                                                                                                                       | 63
|                                                                                                                                     |   
|ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                                | 63
|                                                                                                                                     |   
|ITEM
      11. EXECUTIVE COMPENSATION                                                                                                | 72
|                                                                                                                                     |   
|ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS                  | 72
|                                                                                                                                     |   
|ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE                                        | 81
|                                                                                                                                     |   
|ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                | 85
|                                                                                                                                     |   
|PART
      IV                                                                                                                        | 85
|                                                                                                                                     |   
|ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                            | 85
|                                                                                                                                     |   
|GLOSSARY
      OF TECHNICAL TERMS                                                                                                    | 88
|                                                                                                                                     |   
|SIGNATURES                                                                                                                           | 89

3

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

- risks related to our limited operating history;
- risks related to the probability that our properties contain reserves;
- risks related to our past losses and expected losses in the near future;
- risks related to our need for qualified personnel for exploring for,
  starting and operation a mine;
- risks related to our lack of known reserves;
- risks related to the fluctuation of uranium prices;
- risks related to environmental laws and regulations;
- risks related to using our in-situ recovery mining process;
- risks related to exploration and, if warranted, development of our
  properties;
- risks related to some of our officers having other commitments for their
  time and attention;
- risks related to our ability to make property payment obligations;
- risks related to the competitive nature of the mining industry; and
- risks related to our securities.

This list is not exhaustive of the factors that may affect our
forward-looking statements. Some of the important risks and uncertainties that
could affect forward-looking statements are described further under the sections
titled Risk Factors and Uncertainties, Description of the Business and
Managements Discussion and Analysis of this Annual Report. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
believed, estimated or expected. We caution readers not to place undue reliance
on any such forward-looking statements, which speak only as of the date made. We
disclaim any obligation subsequently to revise any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.

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

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PART 1

ITEM 1.DESCRIPTION OF BUSINESS

Corporate Background

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

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

History

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

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 or control interests in properties in Wyoming, USA and
Saskatchewan, Canada. We have entered into an agreement for a partner to conduct
exploration on our uranium properties in the Great Divide Basin area of Wyoming,
and plan to maintain, explore or, if warranted, develop our properties in the
Powder River Basin area of Wyoming.

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

Recent Corporate Developments

The following significant corporate developments occurred
during our fiscal year ended December 31, 2008:

1.          
Throughout the fiscal year, we issued 96,100 shares of our common stock upon the
exercise of outstanding share purchase warrants for gross cash proceeds of
$240,250;

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2.           We
issued 356,300 common shares upon the exercise of stock options for gross cash
proceeds of $305,025;

3.           We
acquired an undivided eighty-one percent (81%) interest in approximately 82,000
acres (33,100 hectares) of mineral properties located in the central Powder
River Basin of Wyoming, USA and entered into a  venture agreement with the
vendor pursuant to which the Company will explore the properties. We paid
$5,757,043 cash and issued 5,750,000 shares of the Companys common stock at a
fair value of $19,090,000 to acquire the 81% interest;

4.           We
completed a private placement of 9,865,000 units, comprised of 9,865,000 common
shares and 4,932,498 common share purchase warrants, at $2.40 per unit, for
gross proceeds of $23,676,000;

5.           We
issued 160,900 common shares to settle debt of $402,250;

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

7.           We
leased an additional 9,628 acres of mineral properties in the Powder River Basin
of Wyoming, USA at a cost of $333,096.

Competition

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

ISR Mining Process

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

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

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Minerals Exploration Regulation

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

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

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

Environmental Regulation

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

Waste Disposal

The Resource Conservation and Recovery Act ("RCRA"), and
comparable state statutes, affect minerals exploration and production activities
by imposing regulations on the generation, transportation, treatment, storage,
disposal and cleanup of "hazardous wastes" and on the disposal of non-hazardous
wastes. Under

7

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the auspices of the EPA, the individual states administer some
or all of the provisions of RCRA, sometimes in conjunction with their own, more
stringent requirements.

CERCLA

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

Air Emissions

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

Clean Water Act

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

Underground Injection Control Permits ("UIC")

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

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Employees

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

Available Information

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

Uranerz Energy Corporation Investor Relations Suite
1410  800 West Pender Street Vancouver, BC, Canada V6C 2V6

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

ITEM 1A. RISK FACTORS AND UNCERTAINTIES

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

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

Risks Related to Our Business

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

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

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

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

The exploration and development of mineral deposits involves
significant financial and other risks over an extended period of time, which
even a combination of careful evaluation, experience and knowledge may not
eliminate. While discovery of a uranium, precious or base metal deposit may
result in substantial rewards, few properties which are explored are ultimately
developed into producing mines. Major 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 is such that
liabilities could exceed policy limits or could be excluded from coverage. There
are also risks against which we cannot insure or against which we may elect not
to insure. The potential costs which could be associated with any liabilities
not covered by insurance, or in excess of insurance coverage, or compliance with
applicable laws and regulations may cause substantial delays and require
significant capital outlays, adversely affecting our future earnings and
competitive position and, potentially our financial viability.

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

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

*           our ability to
locate a profitable mineral
property;          
*           our ability to
generate
revenues;          
*           our ability to
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.

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

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

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
to generate 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 exploration and historical
information in our possession that indicates uranium mineralization might be
present. It is not known with certainty that economically recoverable 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 reserves 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, to $35.25 per
pound in December 2005 and $72.00 per pound in December 2006. During 2007 the
spot price reached a high of $138.00 per pound. The U.S. monthly spot price of
U3O8 was approximately $90.00 per pound in

11

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December 2007. The spot price declined during 2008, reaching a
low of $44.00 per pound in October. The U.S. monthly spot price of
U3O8was approximately $52.00 per pound and the long term
price was approximately $70.00 per pound in December 2008.

Our operations are subject to environmental regulation
and environmental risks.

We are required to comply with applicable environmental
protection laws and regulations and permitting requirements, and we anticipate
that we will be required to continue to do so in the future. The material laws
and regulations within the U.S. that the Company must comply with are the Atomic
Energy Act, Uranium Mill Tailings Radiation Control Act of 1978 (UMTRCA), Clean
Air Act, Clean Water Act, Safe Drinking Water Act, Federal Land Policy
Management Act, National Park System Mining Regulations Act, and the State Mined
Land Reclamation Acts or State Department of Environmental Quality regulations,
as applicable. We also are required to comply with environmental protection laws
in Canada. We are required to comply with the Atomic Energy Act, as amended by
UMTRCA, by applying for and maintaining 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 processing.
The possibility of more stringent regulations exists in the areas of worker
health and safety, the disposition of wastes, the decommissioning and
reclamation of exploration and in-situ sites, and other environmental matters,
each of which could have a material adverse effect on the costs or the viability
of a particular project. We cannot predict what environmental legislation,
regulation or policy will be enacted or adopted in the future or how future laws
and regulations will be administered or interpreted. The recent trend in
environmental legislation and regulation, generally, is toward stricter
standards and this trend is likely to continue in the future. This recent trend
includes, without limitation, laws and regulations relating to air and water
quality, mine reclamation, waste handling and disposal, the protection of
certain species and the preservation of certain lands. These regulations may
require the acquisition of permits or other authorizations for certain
activities. These laws and regulations may also limit or prohibit activities on
certain lands. Compliance with more stringent laws and regulations, as well as
potentially more vigorous enforcement policies or stricter interpretation of
existing laws, may necessitate significant capital outlays, may materially
affect our results of operations and business, or may cause material changes or
delays in our intended activities.

Our operations may require additional analysis in the future
including environmental and social impact and other related studies. Certain
activities require the submission and approval of environmental impact
assessments. Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and directors, officers, and employees.
There can be no assurance that we will be able to obtain or maintain all
necessary permits that may be required to continue 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
recovery mining, which is suitable for extraction of certain types of uranium
deposits. This process requires in-situ recovery mining equipment and trained
personnel. Competition and unforeseen limited sources of supplies in the
industry could result

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in occasional spot shortages of supplies, and certain equipment
such as drilling rigs and other equipment that we might need to conduct
exploration and, if warranted, development. We will attempt to locate additional
products, equipment and materials as needed. If we cannot find the products and
equipment we need, we will have to suspend our exploration and, if warranted,
development plans until we do find the products and equipment we need.

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

Our level of profitability, if any, in future years will depend
to a great degree on uranium prices and whether any of our exploration stage
properties can be brought into production. The exploration for and development
of mineral deposits involves significant risks. It is impossible to ensure that
the current and future exploration programs and/or feasibility studies on our
existing properties will establish reserves. Whether 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;
- water control 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, availability of equipment and labor, labor costs and
possible labor strikes, and government regulations, including without
limitation, regulations relating to taxes, royalties, allowable production,
importing and exporting of minerals, foreign exchange, employment, worker
safety, transportation, and environmental protection. Depending on the price of
uranium, we may determine that it is impractical to commence, or, if commenced,
continue, commercial production. Such a decision would negatively affect our
profits and may affect the value of your investment.

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

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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 and the inability to
obtain suitable or adequate machinery, equipment or labor are other risks
involved in extraction operations and the conduct of exploration programs.
Although we intend to carry liability insurance with respect to our mineral
exploration operations, we may become subject to liability for damage to life
and property, environmental damage or hazards against which we cannot insure or
against which we may elect not to insure. Previous mining operations may have
caused environmental damage at certain of our properties. It may be difficult or
impossible to assess the extent to which such damage was caused by us or by the
activities of previous operators, in which case, any indemnities and exemptions
from liability may be ineffective. If any of our properties is found to have
commercial quantities of ore, we would be subject to additional risks respecting
any development and production activities. Most exploration projects do not
result in the discovery of commercially mineable deposits of ore.

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

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

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 Corporate and Financial Structure

We are dependent upon key management employees.

The success of our operations will depend upon numerous
factors, many of which are beyond our control, including (i) our ability to
enter into strategic alliances through a combination of one or more joint
ventures, mergers or acquisition transactions; and (ii) our ability to attract
and retain additional key personnel in sales, marketing, technical support and
finance. We currently depend upon our management

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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.

Stock market price and volume volatility

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

Dilution through the granting of options

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

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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 may be compromised because we do not intend to pay dividends in the
foreseeable future.

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

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

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

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

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

In 2007 and into 2008, the U.S. credit markets began to
experience serious disruption due to a deterioration in residential property
values, defaults and delinquencies in the residential mortgage market
(particularly, subprime and non-prime mortgages) and a decline in the credit
quality of mortgage backed securities. These problems led to a slow-down in
residential housing market transactions, declining housing prices, delinquencies
in non-mortgage consumer credit and a general decline in consumer confidence.
These conditions continued and worsened in 2008, causing a loss of confidence in
the broader U.S. and global credit and financial markets and resulting in the
collapse of, and government intervention in, major banks, financial institutions
and insurers and creating a climate of greater volatility, less liquidity,
widening of credit spreads, a lack of price transparency, increased credit
losses and tighter credit conditions. Notwithstanding various actions by the
U.S. and foreign governments, concerns about the general condition of the
capital markets, financial instruments, banks, investment banks, insurers and
other financial institutions caused the broader credit markets to further
deteriorate and stock markets to decline substantially. In addition, general
economic indicators have deteriorated, including declining consumer sentiment,
increased unemployment and declining economic growth and uncertainty about
corporate earnings.

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

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

ITEM 2.DESCRIPTION OF PROPERTIES

Overview

We are an exploration stage company engaged in the acquisition,
exploration and, if warranted, development of uranium properties. We are
principally focused on the exploration of our properties in the Powder River
Basin area of Wyoming. We are exploring these properties with the objective of
assessing their viability for a commercial in-situ recovery (ISR) uranium
mining project. We also own interests in properties in the Great Divide Basin
area of Wyoming, in Texas and in Saskatchewan, Canada.

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Our Powder River Basin properties include:

- our 100% owned properties that totaled 33,972 acres as at December 31,
  2008;
- our 81% interest Arkose Mining Venture properties that totaled 90,210 acres
  as of December 31, 2008; and
- additional properties that we have acquired in the Powder River Basin area.

We commenced acquiring uranium prospective mineral properties in 2005 with the objective of assembling properties that would enable us to develop a commercial ISR uranium mining project.  We acquired properties in the Nichols Ranch area in December 2005.  Following this acquisition, we continued staking additional claims in the immediate and surrounding areas.  We acquired our 81% interest in the Arkose Mining Venture properties in January 2008.  We are the operator of the Arkose Mining Venture under a venture agreement entered into with the sellers of the Arkose Mining Venture properties upon completion of this acquisition.

We completed a substantial exploration program on our Powder
River Basin properties in 2008 which included 933 holes drilled, including six
core holes, at an average depth of 687 feet, and for a total of 640,578 feet of
drilling. Uranium trend and delineation holes were drilled utilizing five drill
rigs and two electric log probing units. Our drilling program included:

- 165 holes drilled on our 100% owned properties, and
- 768 holes drilled on our Arkose Mining Venture properties.

The purpose of the 2008 drilling project was to find previously
unknown or little-known uranium mineralization trends and to delineate known
trends, which would provide data for permitting and eventual production
operations in favorably identified areas. During the 2008 drilling program,
approximately 19 miles of uranium roll front trends were investigated.
Approximately 7 miles of the 19 miles of trends had favorable uranium
mineralization. Uranium mineralization ranged from less than 0.01%
eU3O8to 2.65%eU3O8. Approximately 34.5% of the 933 holes
drilled during 2008 met or exceeded our minimum cut-off grade of 0.03%eU3O8.

On our 100% owned properties, we confirmed both previously
known trends and delineated a new trend at east NorthButte. On the
Arkose Mining Venture properties, we believe the mineralization observed at
South Doughstick is favourable and warrants further exploration. As a result, we
have commissioned the preparation of a technical report on this property. The
South Doughstick trend is the western limb extension of our Nichols Ranch
resource area and is only two miles south of our proposed processing plant site
for the Nichols Ranch ISR Project.

Concurrent with our exploration programs, we have commenced the
licensing and permitting process for a commercial ISR project that we refer to
as the Nichols Ranch Uranium ISR Project. The Nichols Ranch Uranium ISR Project
would be located on properties that comprise our Nichols Ranch and Hank property
units. Because of the long lead times for environmental permitting of mining
operations in North America, we filed applications to the State of Wyoming
(WDEQ) and the US Nuclear Regulatory Commission (NRC) for permits to conduct ISR
mining of uranium for the Nichols Ranch Uranium ISR Project in December 2007.
However, we caution investors that we have not at this stage completed any
comprehensive feasibility studies on these properties demonstrating that
development of any of the properties is commercially warranted. Proceeding with
these advanced activities prior to completing

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detailed feasibility analysis adds risk to our plan of
operations and we may incur costs which might not otherwise have been incurred.

Our plan of operations during 2009 is to:

- continue with our exploration of our Powder River Basin Properties as
  detailed below under 2009 Exploration Program; and
- continue with our permitting and mine planning efforts in connection with
  the Nichols Ranch ISR Project, as detailed below under Nichols Ranch ISR
  Project.

We have sufficient financing to continue our exploration and
permitting and planning activities over the next twelve months. However, we will
require additional financing in order to pursue full development of our Nichols
Ranch ISR Project. There is no assurance that we will be able to obtain the
necessary financing to conduct mining activities, if mining is warranted.

We have optioned our uranium properties in the Great Divide
Basin area of Wyoming to Black Range Minerals. Exploration of our Great Divide
Basin properties is undertaken by Black Range Minerals under the option
agreement. We plan to continue to monitor exploration efforts undertaken by
Black Range Minerals on these properties. Our Great Divide Basin properties are
presently not material to our business operations.

In 2008 we also terminated our Saskatchewan joint venture and
sold all of our Mongolian interests. Our Saskatchewan properties are being
assessed for further exploration, joint venture or sale. Our Saskatchewan
properties are presently not material to our business operations.

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

Operations

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

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

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Wyoming Properties

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



We plan to maintain, explore and, if warranted, develop our
properties in the Powder River Basin area of Wyoming. We have optioned our
uranium properties in the Great Divide Basin area of Wyoming to Black Range
Minerals.

Powder River Basin Properties

As of December 31, 2008, our Powder River Basin properties
include both our 100% owned properties and those properties included within the
Arkose Mining Venture. These principal properties comprise in total
approximately 124,181 acres and consist of a combination of federal mining
claims, state mineral leases and private fee mineral leases. We have also
acquired additional properties

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in the Powder River Basin area as discussed below under Other
Powder River Basin Projects.

A map showing the location of our 100% owned Powder River Basin
and Arkose Mining Venture properties is provided below:



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



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Ownership Interests

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

100% Owned Properties

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

|                              | Ownership Interest | Number of Claims/ | Acreage      
|----------------------------- | ------------------ | ----------------- | -------------
|Property Composition          | (1)                | Leases            | (Approximate)
|                              |                    |                   |              
|Unpatented Lode Mining Claims | 100%               | 1,264             | 25,049 acres 
|                              |                    |                   |              
|State Leases                  | 100%               | 11                | 6,480 acres  
|                              |                    |                   |              
|Fee (private) Mineral Leases  | 100%               | 16                | 2,443 acres  
|                              |                    |                   |              
|Total                         |                    |                   | 33,972 acres 

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

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

Property
    No. Claims
    Approximate AcreageDoughstick
    22
    440Collins Draw
    58
    1160State Lease
    NA
    640North Rolling
    65
    1300PinHank
    63
    1260Nichols Ranch
    35
    700C-Line
    40
    800Willow Creek
    11
    220West North-Butte
    145
    2900East Nichols
    116
    2320North Nichols
    143
    2860TOTAL
    698
    14,600


We have been acquiring properties in the Powder River Basin
area since 2005. Our material 100% interest property acquisitions in this area
include the following acquisitions:

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- We acquired a 100% interest in 10 mining claims located in the Powder River
  Basin area pursuant to an option agreement dated November 18, 2005 for total
  consideration of $250,000.
- We entered into an option agreement with Excalibur Industries dated
  December 9, 2005 to acquire a 100% interest in 44 mining claims within six
  mineral properties located in the Powder River Basin area, Wyoming. We were
  granted the right to earn a 100% interest in the properties by incurring
  $750,000 in exploration costs within a three-year period and paying an advance
  royalty of $250,000. We incurred the required $750,000 in exploration costs
  and paid the advance royalty of $250,000 in order to earn a 100% interest in
  these claims. Our 100% ownership interest is subject to a royalty fee of
  between 6% and 8%, as discussed further below.
- Subsequent to our December 2005 agreement with Excalibur Industries we then
  expanded our Powder River Basin properties by staking additional claims in the
  immediate and surrounding areas.
- In February 2007, we acquired the West North-Butte, North Rolling Pin and
  C-line projects for $3,120,000.

During 2007 and 2008 we had technical reports prepared to
independently address the geology and uranium mineralization within our mineral
holdings comprising the Nichols Ranch Uranium Project, the Hank Unit Property,
the Arkose Mining Venture project and the West North-Butte satellite properties.
These technical reports were prepared in accordance with Canadian National
Instrument 43-101 requirements, as described in further detail below under NI
43-101 Technical Reports.

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

Arkose Mining Venture

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

|Property              | Ownership Interest | Number of Claims/ | Acreage      
|--------------------- | ------------------ | ----------------- | -------------
|Composition           | (1)                | Leases            | (Approximate)
|                      |                    |                   |              
|Unpatented Mineral    | 81%                | 4,242             | 69,383 acres 
|Lode Claims           |                    |                   |              
|                      |                    |                   |              
|State Leases          | 81%                | 3                 | 2,080 acres  
|                      |                    |                   |              
|Fee (private) Mineral | 81%                | 67                | 18,747 acres 
|Leases                |                    |                   |              
|                      |                    |                   |              
|Total                 |                    |                   | 90,210 acres 

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

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

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

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

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

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

- South Doughstick
- Cedar Canyon
- East Buck
- South Collins Draw
- Sand Rock
- Little Butte

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Other Powder River Basin Projects

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

***NI 43-101
  Technical Reports***

We have obtained technical reports on the following material
properties:

|Name of Report                   | Authors of Technical Report | Date of Report   
|-------------------------------- | --------------------------- | -----------------
|                                 |                             |                  
|Nichols Ranch Uranium Project,   | Douglas Beahm, PE, PG       | October 26, 2007 
|Campbell and Johnson Counties,   | Andrew Anderson, PE, PG     |                  
|Wyoming, U.S.A.                  |                             |                  
|                                 | BRS Inc.                    |                  
|                                 |                             |                  
|Technical Report on the Arkose   | TREC, Inc., 341 East E    | February 27, 2008
|Mining Venture Project, Campbell | Street, Suite 200, Casper   |                  
|and Johnson Counties, Wyoming,   | Wyoming 82601               |                  
|U.S.A.                           | Don R. Woody, P.G, Woody    |                  
|                                 | Enterprises, 9005 Sypes     |                  
|                                 | Canyon Road, Bozeman,       |                  
|                                 | Montana 58715               |                  
|                                 |                             |                  
|Technical Report  The Hank Unit | TREC, Inc., 341 East E    | May 1, 2008      
|Property, Campbell Country,      | Street, Suite 200, Casper   |                  
|Wyoming, U.S.A.                  | Wyoming 82601               |                  
|                                 | Don R. Woody, P.G, Woody    |                  
|                                 | Enterprises, 9005 Sypes     |                  
|                                 | Canyon Road, Bozeman,       |                  
|                                 | Montana 58715               |                  
|                                 |                             |                  
|Preliminary Assessment  Nichols | TREC, Inc., 341 East E    | July 25, 2008    
|Ranch Uranium In-Situ Recovery   | Street, Suite 200, Casper   |                  
|Project, Powder River Basin,     | Wyoming 82601               |                  
|Wyoming, U.S.A                   |                             |                  
|                                 |                             |                  
|Technical Report - West North-   | Don R. Woody, P.G, Woody    | December 9, 2008 
|Butte Satellite Properties,      | Enterprises, 9005 Sypes     |                  
|Campbell County, Wyoming,        | Canyon Road, Bozeman,       |                  
|U.S.A.                           | Montana 58715               |                  

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Cautionary Note to United States InvestorsAs a company listed on the TSX, we are required by
      Canadian law to provide disclosure in accordance with Canadian Securities
      Administrators National Instrument 43-101  Standards of Disclosure for
      Mineral Projects (NI 43-101). This required disclosure includes the
      preparation and filing of technical reports on our material mineral
      properties with Canadian securities commissions under NI 43-101. These
      technical reports are furnished by us to the U.S. Securities and Exchange
      Commission (the "SEC") on Form 8-K in order to satisfy our public
      disclosure obligations under SEC Regulation FD and are not filed with the
      SEC. U.S. reporting requirements for disclosure of mineral properties,
      including disclosure required in this Annual Report on Form 10-K, are
      governed by the Industry Guide 7 ("SEC Guide 7") of the SEC. The standards
      of disclosure of mineral properties under NI 43-101 and SEC Guide 7 are
      substantially different. All mineral resources disclosed in our NI 43-101
      technical reports referenced herein have been estimated in accordance with
      the definition standards on mineral resources and mineral reserves of the
      Canadian Institute of Mining, Metallurgy and Petroleum referred to in
      National Instrument 43-101, commonly referred to as "NI 43-101". The terms
      "mineral reserve", "proven mineral reserve" and "probable mineral reserve"
      are Canadian mining terms as defined in accordance with NI 43-101. These
      definitions differ from the definitions in SEC Guide 7. Under SEC Guide 7
      standards, a "final" or "bankable" feasibility study is required to report
      reserves, the three-year historical average price is used in any reserve
      or cash flow analysis to designate reserves and the primary environmental
      analysis or report must be filed with the appropriate governmental
      authority. The NI 43-101 technical reports referenced herein use
      the terms "mineral resource," "measured mineral resource," "indicated
      mineral resource" and "inferred mineral resource". We advise investors
      that these terms are defined in and required to be disclosed by NI 43-101;
      however, these terms are not defined terms under SEC Guide 7 and are
      normally not permitted to be used in reports and registration statements
      filed with the SEC. Investors are cautioned not to assume that any part or
      all of mineral deposits in these categories will ever be converted into
      SEC Guide 7 reserves. "Inferred mineral resources" have a great amount of
      uncertainty as to their existence, and great uncertainty as to their
      economic and legal feasibility. It cannot be assumed that all or any part
      of an inferred mineral resource will ever be upgraded to a higher
      category. Under Canadian rules, estimates of inferred mineral resources
      may not form the basis of feasibility or pre-feasibility studies, except
      in rare cases. Investors are cautioned not to assume that all or any part
      of any mineral resource exists or is economically or legally mineable.
      Disclosure of "contained pounds" in a resource is permitted disclosure
      under Canadian regulations; however, the SEC normally only permits issuers
      to report mineralization that does not constitute "reserves" by SEC
      standards as in-place tonnage and grade without reference to unit
      measures.


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

Hank Unit and Nichols Ranch Unit

Within the Nichols Ranch Unit we have 35 unpatented lode mining
claims, two fee surface and mineral leases, and one surface use agreement. There
is an overriding royalty interest in favor of Excalibur Industries on all
federal unpatented lode mining claims that were acquired by us from Excalibur
Industries. Many of the unpatented lode mining claims located at the Hank Unit
and at the Nichols Ranch Unit have an associated gross royalty payable to
Excalibur Industries of 6 percent when the spot price of uranium is less than
$45.00 per pound and of 8 percent if the uranium spot price is $45.00 per pound
or

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higher. In addition, there is a portion of the Nichols Ranch
Unit that includes private (fee) mineral that is subject to the above Excalibur
Industries royalty, plus an additional royalty payable to the fee mineral owner
under the fee leases (equaling a 12 percent or 16 percent royalty depending upon
the spot price of uranium).

Within the Hank Unit, we have 63 unpatented lode mining claims,
two fee surface and mineral leases, and one surface use agreement. The Hank Unit
permit boundary encompasses approximately 2,250 acres. Within the permit
boundary, we have the right to mine approximately 1,200 acres of mineral rights.
Of the 63 unpatented lode mining claims comprising the Hank Unit, 53 of the
claims have a royalty interest burden, payable to Excalibur Industries, of six
or eight percent depending on the selling price of uranium. This royalty
interest is based on uranium produced from these claims.

West North- Butte Satellite Properties

The West North-Butte property covers approximately 2,360 acres
of land and is comprised of 118 unpatented lode mining claims and one surface
use agreement, of which 6 unpatented lode mining claims are subject to a royalty
interest burden, payable to Excalibur Industries, of six or eight percent
depending on the price of uranium.

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

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

Arkose Mining Venture

The Arkose Mining Venture properties consists of unpatented
lode mining claims, fee mineral leases, and state mineral leases. The land
surface consists of private, federal and state lands. There are 4,242 unpatented
lode mining claims included in the Arkose Property which comprise 69,383 acres
and 67 fee mineral leases and 3 state leases included in the Arkose Property
which comprise 20,826 acres. All of the unpatented lode mining claims are owned
by us subject to the beneficial interests of the participants in the Arkose
Mining Venture.

Of the 4,242 unpatented lode mining claims, 1,218 unpatented
lode mining claims have an overriding royalty interest burden of 0.25% . This
overriding royalty interest is based on production of uranium on these
claims.

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

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

Unpatented Lode Mining Claims

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

The unpatented lode claims do not have an expiration date.
However, affidavits must be filed annually with the BLM and respective county
recorders offices in order to maintain the claims validity. All of the
unpatented lode claims have annual filing requirements ($125 per claim) with the
BLM, to be paid on or before September 1 of each year.

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

Mining Leases

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

Surface Rights

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

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

Taxes and Fees

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

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Location and Access; Topography, Elevation and Vegetation;
  Climate

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

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

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

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

The area in which the Powder River Basin properties is located
is a low lying plain, and elevations range from approximately 4390 feet (1440
meters) in the northwest to approximately 5,450 feet (1,790 meters) in the south
east. Historically and currently the land is used for livestock and wildlife
grazing. Vegetation is characteristically sagebrush grassland with some pines on
elevated terrain and some deciduous trees within drainages.

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

Geology

Our Powder River Basin properties encompass approximately
124,182 acres, and potential target mineralized zones are expected to occur
throughout the properties. The potential target mineralization within the Powder
River Basin properties is believed to be alteration-reduction trends hosted in
the Eocene age channel sands that lie at depths of approximately 300 to 1,100
feet from the surface. Roll front deposits of uranium mineralized material are
anticipated to occur within these properties. An alteration reduction trend is a
natural chemical boundary trend line in a sandstone aquifer where reduced
(non-oxidized) sand is in contact with altered (oxidized) sand. Uranium
mineralization may be found along the trend line.

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

Exploration History

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

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

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

As a result of this history of exploration and our own
exploration efforts, there is available to us for our exploration of the Powder
River Basin properties published and unpublished mineral trend projections,
mineral resource summaries and historic and current mineral resource reports
developed by us or other operators from these properties or adjacent mineral
properties, as applicable. In addition, there are

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publicly available drill results from approximately 1,250 coal
bed methane (CBM) exploration/production wells in the region of the Arkose
Mining Venture properties, which are discussed further below.

Nichols Ranch ISR Uranium Project

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

Hank Unit

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

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

West North- Butte Satellite Properties

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

Arkose Mining Venture

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

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

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Local Resources and Properties Infrastructure

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

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

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

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

Exploration Completed by Uranerz

2006 and 2007 Exploration Programs

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

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

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

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

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2008 Exploration Program

In 2008 we were engaged in drilling exploration efforts on both
our 100% owned Powder River Basin properties, and on the Arkose Mining Venture
properties. The purpose of the drilling project was to find previously unknown
or little-known uranium mineralization trends and to delineate known trends,
which would provide data for permitting and eventual production operations in
favorably identified areas. During the 2008 drilling program, approximately 19
miles of uranium roll front trends were investigated. Approximately 7 miles of
the 19 miles of trends had favorable uranium mineralization. Uranium
mineralization ranged from <0.01% eU3O8to 2.65%
eU3O8. A cut-off grade of 0.03% eU3O8wasestablished for the Uranerz and Arkose properties. Approximately 34.5%
of the 933 holes drilled during 2008 met or exceeded the minimum cut-off grade.

From March 6, 2008 to June 30, 2008, we, as operator of the
Arkose Mining Venture, drilled a total of 266 uranium trend exploration and
delineation holes utilizing up to five drill rigs and two electric log probing
units. This drilling, a total of approximately 186,925 feet with an average
depth of 703 feet per hole, was conducted on four previously identified
exploration targets in areas we had identified as East Buck, South Collins Draw,
Sand Rock, and Little Butte. This initial phase of the 2008 Arkose drilling
program was designed, based in part on available historical data, with a primary
objective of identifying and delineating potentially significant trends of
uranium roll front mineralization on the property, and to provide further data
on these potential future development sites for purposes of reporting, and
possible permitting and mining operations in favorably identified areas. To June
30, 2008, approximately 7.5 miles of uranium roll front trends had been
investigated, with approximately 2.5 miles of these trends showing potentially
favorable uranium mineralization.

From July 1, 2008 to September 30, 2008 we drilled 405 uranium
delineation holes utilizing five drill rigs and two electric log probing units.
A total of 141 holes were drilled on our 100% owned properties at East-North
Butte, Willow Creek, Hank, North Rolling Pin and Doughstick. Our drilling on the
Arkose Mining Venture properties totalled 264 holes, including two core holes,
in the Little Butte and South Doughstick target areas. The combined effort for
all properties during this period amounted to approximately 281,000 feet of
drilling with an average depth of 694 feet per hole. Approximately 7.0 miles of
uranium roll front trends were investigated confirming approximately 3.0 miles
of historic trends or areas that showed new potentially favorable uranium
mineralization.

From October 1, 2008 though December 12, 2008 when field
drilling operations ceased, we had drilled 262 exploration holes. On our 100%
owned properties, 24 holes were finished at Willow Creek and North Rolling Pin.
On the Arkose Mining Venture properties, 238 holes were drilled at South
Doughstick, Cedar Canyon, and Little Butte. The footage drilled for this period
was 172,653 feet on the combined properties at an average depth of 659 feet,
including four core holes. Approximately 4.5 miles of uranium rolls fronts were
investigated with 2.5 miles of trends showing potentially favorable uranium
mineralization.

For the 2008 drilling season, March 6, 2008 through December
12, 2008 a total of 933 exploration and delineation holes were completed. The
average depth per hole was 687 feet and a total of 640,578 feet of drilling.
Breakout of the drilling was 165 holes on our 100% owned properties and 768
holes on Arkose Mining Venture properties. During 2008, approximately 19 miles
of uranium roll front trends were investigated. Approximately 7 miles of the 19
miles of trends had favorable uranium mineralization.

We determined based on the results of this drilling program to
complete a NI 43-101 technical report on the South Doughstick property. We
anticipate receiving this technical report in the first half of 2009.

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

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

2009 Exploration Program

We plan to complete delineation drilling for Nichols Ranch, North Nichols Ranch, North Rolling Pin and other unspecified areas in the Nichols Ranch ISR area during 2009.  We also plan on undertaking further exploration drilling in 2009 for the Arkose properties.  The mineralization trends discovered in 2008 will be followed up in areas not drilled previously at South Doughstick, Cedar Canyon, and Little Butte.  New targets may also be investigated in the northwest and northeast parts of the property.

In order to conduct exploratory drilling of the property, we will be required to obtain permits (Drilling Notification) from the State of Wyoming Department of Environmental Quality, Land Quality Division (WDEQ/LQD).

Nichols Ranch ISR Project

Preliminary Assessment

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

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

35

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Location of the Nichols Ranch ISR Project

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



36

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Targeted Mineralization

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

Mining Plan

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

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

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

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

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

37

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

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

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

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

Mine Planning and Permitting

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

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

In April 2008 the NRC deemed our application acceptable to
advance to the detailed technical and environmental stage of review. In August
2008 the Wyoming Department of Environmental Quality deemed our application to
build and operate an in-situ recovery mine complete and ready to move to the
next stage of review. The next stage includes a detailed technical and
environmental review of the application and public discussion. Concurrently, the
NRC review of our application for a Source Material

38

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License is proceeding in a normal manner. Approval of the
permit applications is expected to allow us to proceed with commercial
advancement of the two properties leading to production of yellowcake using the
ISR method of uranium mining.

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

Permits and Licenses for the Nichols Ranch ISR Project

|Permit, License, or Approval Name         | Agency       | Status                                                                                                         
|----------------------------------------- | ------------ | ---------------------------------------------------------------------------------------------------------------
|                                          |              |                                                                                                                
|Source Material License                   | NRC          | Submitted fourth quarter 2007                                                                                  
|                                          |              |                                                                                                                
|Permit to Mine                            | WDEQ-LQD     | Submitted fourth quarter 2007                                                                                  
|                                          |              |                                                                                                                
|Permit to Appropriate Groundwater         | SEO          | Existing wells are approved,
      applications for new well permits will be filed prior to drilling           
|                                          |              |                                                                                                                
|Well field Authorization (UIC Permit)     | NRC/WDEQ-LQD | In preparation                                                                                                 
|                                          |              |                                                                                                                
|Deep Disposal Well Permits                | WDEQ-WQD     | In preparation                                                                                                 
|                                          |              |                                                                                                                
|WYPDES                                    | WDEQ- WQD    | In preparation                                                                                                 
|                                          |              |                                                                                                                
|11(e)2 Byproduct/Waste Disposal Agreement | N/A          | In preparation                                                                                                 
|                                          |              |                                                                                                                
|Permit to Construct Septic Leach Field    | County       | In preparation                                                                                                 
|                                          |              |                                                                                                                
|Air Quality Permit                        | WDEQ-AQD     | Not expected to be required. If
      one is required, then it will be obtained prior to commencing operations.

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

Proceeding with these advanced activities prior to completing
detailed feasibility analysis adds risk to our plan of operations and we may
incur costs which might not otherwise have been incurred.

2009 Plan of Operations for Powder River Basin Properties

During 2009, we plan to:

- continue with our exploration of our Powder River Properties as outline
  above under 2009 Exploration Plan; and

39

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- continue with our permitting and mine planning efforts, including
  proceeding with environmental studies and engineering and design, in
  connection with the Nichols Ranch IS Project, as outlined above under Nichols
  Ranch ISR Project.

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

Our cash expenditures in 2009, excluding equipment and property
acquisitions, are estimated to be $9.5 million, as follows:

|Wyoming                                 |   |           |  |   |           | 
|--------------------------------------- | - | --------- |  | - | --------- | 
|Exploration                             |   |           |  |   |           | 
|Wholly owned properties                | $ | 70,000    |  |   |           | 
|Arkose properties                       | $ | 1,900,000 |  | $ | 1,970,000 | 
|Environmental                           |   |           |  | $ | 1,020,000 | 
|Development                             |   |           |  | $ | 1,930,000 | 
|Land                                    |   |           |  | $ | 510,000   | 
|Production and well planning            |   |           |  | $ | 480,000   | 
|Texas
      exploration                 |   |           |  | $ | 0         | 
|General and Administrative expenditures |   |           |  | $ | 3,600,000 | 
|                                        |   |           |  |   |           | 
|Total                                   |   |           |  | $ | 9,510,000 | 

These estimates are subject to change.

Wyoming - Great Divide/Red Desert Properties

Our Great Divide Basin properties comprise the Cyclone Rim and Eagle projects. The Cyclone Rim project consists of 54 federal mining claims.  The Eagle property consists of 110 federal mining claims and an adjacent 640 acre Wyoming State Lease. Both projects are located in Sweetwater County, Wyoming.

On June 7, 2006, we entered into an option agreement with Black
Range Minerals Limited (Black Range) on two of our exploration properties
located within the Red Desert area of southwest Wyoming. This formal agreement
followed a strategic alliance agreement entered into between us and Black Range
on May 18, 2006.

40

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Under the terms of the option agreement, we and Black Range
proposed to enter into a joint venture to conduct further exploration and to
develop the properties under the following conditions:

Stage 1

Under the terms of the option agreement Black Range would have
the right to earn a 50% equity interest in the proposed joint venture by
managing and meeting the first $750,000 in exploration expenditures on the
properties, at no cost to us, including land holding costs such as maintenance
fees, lease costs etc.

Black Range is obliged to spend at least $100,000 per year on
exploration on the properties and to spend the first $750,000 on exploration
within three (3) years of inception of the option agreement. Once Black Range
has spent $750,000 on the properties, the parties would enter into a joint
venture agreement and our equity interest would reduce to 50% and Black Ranges
equity interest would increase to 50%.

Stage 2

On completion of Stage 1, should we elect not to contribute to
the costs of the second phase of expenditure on a pro-rata basis, then Black
Range shall have the right to earn a further 1% interest in the proposed joint
venture for every $25,000 spent on the properties to a maximum interest in the
proposed joint venture of 70% (by spending $500,000). On completion of Stage 1,
should Black Range elect not to contribute to the cost of the Stage 2 of
expenditure on a pro-rata basis, then we shall have the right to earn a further
1% interest in the proposed joint venture for every $25,000 spent on the
properties, to a maximum interest in the proposed joint venture of 70% (by
spending $500,000).

Stage 3

On completion of Stage 2, should we elect not to contribute to
all further expenditure on a pro-rata basis, then Black Range shall have the
right to earn a further 1% interest in the proposed joint venture for every
$25,000 spent on the properties to a maximum interest in the proposed joint
venture of 100% (by spending $750,000). We would be awarded a 6% royalty for our
contribution up to that point.

On completion of Stage 2, should Black Range elect not to
contribute to all further expenditure on a pro-rata basis, then we shall have
the right to earn a further 1% interest in the proposed joint venture for every
$25,000 spent on the properties to a maximum interest in the proposed joint
venture of 100% (by spending $750,000). Black Range would be awarded a 6%
royalty for their contribution up to that point.

As of December 31, 2008 Black Range has completed drilling at
both properties in the Great Divide Basin area with 32 holes drilled on the
Eagle property in 2006 and 42 holes drilled on the Cyclone Rim property during
2007. Geologic study is continuing on these drill results. Accordingly, they
have met the minimum expenditure requirements and are continuing Stage 1 of the
option agreement. Black Range is continuing to study results from exploring
these properties.

Saskatchewan  Cochrane River Property

The Cochrane River property extends to the northeast of the
northern portion of Wollaston Lake, Saskatchewan. 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.

41

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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).

Cochrane River-Ownership Interest

Our Cochrane River property originally consisted of two Mineral
Prospecting Permits (MPP 1237 and MPP 1238) with a combined total areal extent
of 67,480 hectares (166,747 acres). 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. Title to MPP1237 and MPP 1238 was
sold to us by Ubex. We 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 was Ubexs cost of acquisition of the two permits.

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

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 total of 28,012 hectares. The
new claims have been recorded with the Saskatchewan mine recorder office in la
Ronge. The staked area covered the most interesting area of interest as
interpreted from the exploration programs conducted by Triex, as described
below. A claim holder may subsequently convert his claim into a mineral lease
which allows for commercial extraction of minerals.

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

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 completed detailed helicopter-borne geophysical
surveys, follow-up ground exploration programs including grid-based and
lakeshore prospecting and geological mapping, an extensive lake sediment survey,
ground-based resistively surveys, a lake sediment sample program, a pole-dipole
array D.C. resistively survey, property-scale geological mapping of outcrops,
and systematic geochemical sampling of boulders and glacial till. Total
cumulative expenditures by Triex on the Cochrane River property over
approximately two and one-half years, was Cdn$1.23 million.

42

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

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

Texas

On July 16, 2007 we announced the completion of an initial
leasing program of approximately 8,000 acres in the State of Texas. Based on
geologic reports and more than 90 historic drill holes, these 8,000 acres are
believed to cover a northeast-southwest uranium mineralization trend.

We made the decision to widen our operations into the State of
Texas given the possibility of in-situ recovery mining as evidenced by the
existence of at least two successful uranium mines operating in Texas.

Geologic study has been completed on the historic data we
obtained from third parties. Initial drilling programs have been designed using
this analysis to evaluate the presence of the uranium mineralization and to
select targets within the area. Field work was planned to commence in the second
quarter of 2008 but has been delayed due to an alignment of priorities toward
our Wyoming properties. This is planned to test the presence of the uranium
indicated in historic data. The field work may also include coring and industry
standard extraction testing procedures of the anomalous zones to characterize
the host sand for suitability of in situ recovery.

Our Texas project is presently not considered a material
property and will not be considered a material property until more data and
information on the project can be obtained.

ITEM 3.LEGAL PROCEEDINGS

None

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

No matters were submitted to a vote of our security holders
during the fourth quarter ended December 31, 2008.

43

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PART II

ITEM 5.MARKET FOR THE REGISTRANTS COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

Market Information

Our common stock began trading on the NYSE Alternext US LLC
(NYSE-A) (formerly, 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) under the symbol URNZ, formerly known as CVTU. Our
common stock also trades, since August 2007, on the Toronto Stock Exchange under
the symbol URZ and on the Frankfurt Exchange under the symbol U9E.

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

|Period           | High   | Low   
|---------------- | ------ | ------
|                 |        |       
|2008             |        |       
|                 |        |       
|Fourth Quarter   | $ 1.45 | $ 0.40
|                 |        |       
|Third Quarter    | $ 3.40 | $ 1.10
|                 |        |       
|Second Quarter   | $ 3.70 | $ 1.98
|                 |        |       
|First Quarter    | $ 3.28 | $ 2.11
|                 |        |       
|2007             |        |       
|                 |        |       
|Fourth Quarter   | $ 4.73 | $ 2.53
|                 |        |       
|Third Quarter    | $ 5.14 | $ 2.69
|                 |        |       
|Second Quarter   | $ 7.65 | $ 5.01
|                 |        |       
|First Quarter    | $ 5.69 | $ 2.95
|                 |        |       
|2006             |        |       
|                 |        |       
|Fourth Quarter   | $ 4.80 | $ 1.33
|                 |        |       
|Third Quarter(1) | $ 3.25 | $ 2.00
|                 |        |       
|Second Quarter   | $ 3.22 | $ 1.70
|                 |        |       
|First Quarter    | $ 2.69 | $ 1.12

(1) Our common stock began trading on the NYSE Alternext US LLC
on August 10, 2006.

As of March 5, 2009 the closing bid quotation for our common
stock was $0.54 per share as quoted by the NYSE-A.

As of March 5, 2009, we had 55,452,387 shares of common stock
issued and outstanding, held by approximately 7,250 shareholders. Many shares
are registered through intermediaries, making the precise number of shareholders
difficult to obtain.

44

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Dividend Policy

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

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

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

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

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

Repurchase of Securities

During 2008, neither the Company nor any affiliate of the
Company repurchased common shares of the Company registered under Section 12 of
the Securities Exchange Act of 1934, as amended.

Equity Compensation Plan Information

As at December 31, 2008, we had one equity compensation plan
under which our common shares have been authorized for issuance to our officers,
directors, employees and consultants, namely our 2005 Stock Option Plan. Our
2005 Stock Option Plan has been approved by our shareholders.

The following summary information is presented for our 2005
Stock Option Plan as of December 31, 2008.

|                                                                 |                      |                      | Number of Securities 
|---------------------------------------------------------------- | -------------------- | -------------------- | ---------------------
|                                                                 |                      |                      | Remaining Available  
|                                                                 |                      |                      | for Future Issuance  
|                                                                 |                      |                      | Under Equity         
|                                                                 | Number of Securities |                      | Compensation Plans   
|                                                                 | to be Issued Upon    | Weighted Average     | (Excluding Securities
|                                                                 | Exercise of          | Exercise Price of    | Reflected in Column  
|                                                                 | Outstanding Options  | Outstanding Options, | (a)                  
|Plan Category                                                    | (a)                  | (b)                  | (c)                  
|                                                                 |                      |                      |                      
|Equity Compensation Plans Approved By
      Security Holders     | 4,839,700            | $2.18                | 4,492,360            
|                                                                 |                      |                      |                      
|Equity Compensation Plans Not Approved
      By Security Holders | Not Applicable       | Not Applicable       | Not Applicable       

45

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2005 Stock Option Plan Information

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

Purpose

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

Persons Eligible

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

Administration

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

Shares Available under the Stock Option Plan

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

Terms and Conditions of Stock Options

Stock options may be granted to any person who is performing or
who has been engaged to perform services of special importance to management in
the operation, development and growth of the Company.

46

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As of June 11, 2008 the option price of stock options is set at
the weighted average market price for the five days preceding the grant. All
stock options granted under the Stock Option Plan must be granted within ten
years of the date the plan was adopted and all granted stock options must be
exercised within ten years of the date of grant. The Committee may grant stock
options which vest in installment periods and may modify such periods to
accelerate vesting. Stock options are evidenced by a form stock option
agreement.

Exercise of Stock Options

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

Transfer of Stock Options

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

Adjustments to Stock Options

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

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

47

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that it shall not have been exercised,
without regard to any installment exercise provisions in such nonqualified stock
option.

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

Amendment of the Plan

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

Recent Sales of Unregistered Securities

On January 15, 2008:

The Company completed an acquisition of an undivided 81%
interest in the NAMMCO mineral properties, covering over approximately 82,000
acres (33,000 hectares) in the Pumpkin Buttes uranium mining district of the
central Powder River Basin of Wyoming, U.S.A. (the NAMMCO Properties) pursuant
to a purchase and sale agreement with mining venture previously announced on
September 19, 2007 between the Company and the NAMMCO Group. With this
acquisition, we effectively tripled our property position in the Powder River
Basin and we now control a total of approximately 124,200 acres (50,255
hectares, or approximately 194 square miles) of mineral properties in the area.
Pursuant to the Purchase and Sale Agreement, the total purchase price paid by
the Company to acquire its 81% interest in the NAMMCO Properties was cash in the
amount of U.S. $5,757,000 and 5,750,000 shares of the Company common stock
issued to the NAMMCO Group (the Uranerz Consideration Shares).

In connection with its acquisition of its 81% interest in the NAMMCO Properties, the Company has entered into a venture agreement dated as of January 15, 2008 (the “Venture Agreement”) with United Nuclear, LLC (“United Nuclear”), a limited liability company wholly owned by the NAMMCO Group and their designee under the Purchase and Sale Agreement (as amended). Under the Venture Agreement, the parties agree that United Nuclear will hold (and contribute to) its nineteen percent (19%) working interest in the venture, and the Company will operate and be the manager of the venture under the name “Arkose Mining Venture”. Effective as of January 14, 2008, the Purchase and Sale Agreement was amended to reflect the formation of United Nuclear to serve as a vehicle pursuant to which the NAMMCO Group would enter into the Venture Agreement.

The Uranerz Consideration Shares issued to the NAMMCO Group
were not registered under the Securities Act, or the laws of any state, and are
subject to resale restrictions and may not be offered or sold in the United
States absent registration or an applicable exemption from the registration
requirements. The Uranerz Consideration Shares were placed pursuant to
exemptions from registration requirements of the Securities Act provided by
Section 506 of Regulation D of the Securities Act and/or Section 4(2) of the
Securities Act. Pursuant to the Purchase and Sale Agreement, the Company granted
the NAMMCO Group registration rights relating to the Uranerz Consideration
Shares; and, in connection therewith, the Company is obligated to prepare and
file or cause to be prepared and filed with the United States Securities and
Exchange Commission, no later than one hundred and twenty (120) days after the
issuance of the Uranerz Consideration Shares, a registration statement under the
Securities Act on appropriate form registering the resale, from time to time, of
such shares by the NAMMCO Group.

48

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In connection with the issuance of the Uranerz Consideration
Shares to the NAMMCO Sellers, the NAMMCO Group entered into a voting agreement
with the Company dated as of January 15, 2008 pursuant to which each of such
sellers granted the Companys management or the Companys appointed agent the
right to vote fifty percent (50%) of their outstanding and currently held
Uranerz Consideration Shares, whether held directly or indirectly by such
sellers, for a period of three (3) years following the date of the issuance of
the Uranerz Consideration Shares.

On April 15, 2008:

On April 15, 2008, we entered into an agency agreement (the
Agency Agreement) with Haywood Securities Inc. and Cormark Securities Inc.
(collectively, the Agents), pursuant to which we raised aggregate gross
proceeds of U.S. $9,600,000 via a brokered private placement of 4,000,000 units
of the Company at a price of U.S. $2.40 per unit in a private placement
financing transaction that closed on the same date (the Brokered Private
Placement).

On April 15, 2008, pursuant to the Agency Agreement, the
registrant completed a private placement with investors of 4,000,000 units of
the registrant at a price of U.S. $2.40 per unit for aggregate gross proceeds of
U.S. $9,600,000. Each unit is comprised of one common share and one-half of one
common share purchase warrant, with each whole warrant entitling the holder
thereof to purchase one additional share of the registrants common stock for a
period ending April 15, 2010 at an exercise price of U.S. $3.50 per common
share. In the event that the trading price of the Companys common shares on the
NYSE Alternext US LLC closes above U.S. $4.50 per share for a period of 20
consecutive trading days at any time after August 16, 2008, the Company may
accelerate the expiry time of these warrants by giving notice to the warrant
holders by press release and in such case these warrants will expire on the 30th
day after the date on which notice is given via press release.

As consideration to the Agents pursuant to the Agency
Agreement, the registrant paid the Agents a cash commission of U.S. $576,000, or
6% of the gross proceeds of the Brokered Private Placement, and issued to the
Agents whole common share purchase warrants entitling the Agents to purchase
120,000 common shares of the Company, equal to 3% of the units sold under the
Brokered Private Placement, at price of U.S. $2.60 for a period ending April 15,
2009 (the Agents Warrants).

Certain of the units were placed within the U.S. and to, or for
the account or benefit of, U.S. persons or persons within the U.S. pursuant to
exemptions from the registration requirements of the U.S. Securities Act
provided by Section 4(2) of the Securities Act and/or Rule 506 of Regulation D
on the basis that each holder or beneficial holder is an accredited investor,
as defined under Rule 501(a) of Regulation D of the U.S. Securities Act. Certain
other units were placed outside the U.S. to non-U.S. persons pursuant to the
exclusion from the registration requirements under Rule 903 of Regulation S of
the U.S. 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. In
determining the availability of these exemptions, the Company relied on
representations made by the investors in the subscription agreements

On April 15, 2008, the registrant closed a non-brokered private
placement of 5,865,000 units, including 5,465,000 to Denison Mines Corp.
(Denison), at a price of U.S. $2.40 per unit for aggregate gross proceeds of
U.S. $14,076,000 (the Non-Brokered Private Placement). Each unit is comprised
of one common share and one-half of one common share purchase warrant, with each
whole warrant entitling the holder to purchase one additional share of the
registrants common stock for a period ending April 15, 2010 at an exercise
price of U.S. $3.50 per share. In the event that the trading price of the
Companys common shares on the NYSE Alternext US LLC closes above U.S. $4.50 per
share for a period of 20 consecutive trading days at any time after August 16,
2008, the Company may accelerate the expiry time of these warrants by giving
notice to the warrant holders by press release and in such case these warrants
will expire on the 30th day after the date on which notice is given via press
release.

49

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Upon closing of the Brokered Private Placement and the
Non-Brokered Private Placement, Denison owns approximately 9.9% of the issued
and outstanding common shares of the registrant. In connection with the
strategic investment by Denison, the registrant will pay a cash advisory fee to
Haywood Securities Inc. equal to U.S. $524,640 or 4.0% of the gross proceeds
received from Denison by the registrant.

Certain units, including the units issued to Denison, were
placed outside the U.S. to non-U.S. persons or persons outside of the U.S.
pursuant to the exclusion from the registration requirements under Rule 903 of
Regulation S of the U.S. 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. Certain other units were placed within the U.S. and to, or for the
account or benefit of, U.S. persons or persons within the U.S. pursuant to
exemptions from the registration requirements of the U.S. Securities Act
provided by Section 4(2) of the U.S. Securities Act and/or Rule 506 of
Regulation D on the basis that each investor is an accredited investor, as
defined under Rule 501(a) of Regulation D of the U.S. Securities Act. In
determining the availability of these exemptions, the Company relied on
representations made by the investors in the subscription agreements pursuant to
which the units were purchased.

Warrant Share Issuances

Throughout the fiscal year, we issued 96,100 shares of our
common stock upon the exercise of outstanding share purchase warrants for gross
cash proceeds of $240,250. The shares of our common stock were placed pursuant
to exemptions from registration requirements of the Securities Act provided by
Section 506 of Regulation D of the Securities Act and/or Section 4(2) of the
Securities Act for warrants exercised in the United States or for the account or
benefit of U.S. persons (as defined in the Securities Act) and outside the
United States pursuant to Rule 902 of Regulation S of the Securities Act.

Debt Share Issuances

We issued 160,900 common shares to settle debt of $402,250. The
shares of our common stock were placed pursuant to exemptions from registration
requirements of the Securities Act provided by Section 506 of Regulation D of
the Securities Act and/or Section 4(2) of the Securities Act for warrants
exercised in the United States or for the account or benefit of U.S. persons (as
defined in the Securities Act) and outside the United States pursuant to Rule
902 of Regulation S of the Securities Act

ITEM 6.SELECTED FINANCIAL DATA

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

Dollars and shares in thousands, except per
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004share amountsOperating expensesDepreciation
    $
    129
    
    
    57
    
    
    15
    
    
    1
    
    
    -Foreign exchange
    $
    (4
    )
    
    24
    
    
    1
    
    
    4
    
    
    -General and
      administrative
    $
    6,153
    
    
    7,858
    
    
    5,871
    
    
    4,482
    
    
    18Impairment loss on mineral properties
    $
    -
    
    
    -
    
    
    -
    
    
    315
    
    
    -Mineral property expenditures
    $
    30,505
    
    
    7,008
    
    
    1,218
    
    
    89
    
    
    2Total operating
      expenses
    $
    36,784
    
    
    14,947
    
    
    7,105
    
    
    4,891
    
    
    20Gain on sale on investment
      securities
    $
    -
    
    
    -
    
    
    79
    
    
    -
    
    
    -


50

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Dollars and shares in thousands, except per
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004share amountsInterest income
    $
    610
    
    
    710
    
    
    411
    
    
    -
    
    
    -Loss on settlement of debt
    $
    -
    
    
    -
    
    
    -
    
    
    (132
    )
    
    -Mineral property options received
    $
    -
    
    
    44
    
    
    87
    
    
    21
    
    
    -Gain
      (Loss) on discontinued operations
    $
    977
    
    
    (3
    )
    
    (22
    )Non-controlling interest
    $
    949Net loss for the year
    $
    34,247
    
    
    14,197
    
    
    6,548
    
    
    5,002
    
    
    20Common stock dataWeighted average shares outstanding
    
    52,263
    
    
    38,438
    
    
    29,738
    
    
    12,995
    
    
    5,640Net loss per share  basic and diluted
    $
    0.66
    
    
    0.37
    
    
    0.22
    
    
    0.38
    
    
    -Total shares outstanding at December 31
    
    55,452
    
    
    39,224
    
    
    34,560
    
    
    21,995
    
    
    5,640Balance sheet data at December 31Total assets
    $
    22,866
    
    
    12,216
    
    
    12,492
    
    
    1,978
    
    
    7Property, plant and equipment  net
    $
    643
    
    
    406
    
    
    123
    
    
    9
    
    
    -Working capital
    $
    21,405
    
    
    11,114
    
    
    11,980
    
    
    1,776
    
    
    (58
    )Total debt
    $
    18
    
    
    52
    
    
    -
    
    
    -
    
    
    -Common shareholders equity
    $
    22,278
    
    
    11,518
    
    
    12,113
    
    
    1,785
    
    
    (58
    )Cash flow dataNet cash used for operating activities
    $
    13,164
    
    
    9,259
    
    
    1,692
    
    
    581
    
    
    3Net cash used for investing activities
    $
    20,161
    
    
    281
    
    
    472
    
    
    326
    
    
    -Net cash provided by financing activities
    $
    22,803
    
    
    8,590
    
    
    12,532
    
    
    2,824
    
    
    11


ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

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

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

51

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In support of our goals for 2008, we focused our efforts on the
following six key operating priorities.

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

Results of Operations

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

Revenue

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

Operating Expenses and Other Expenses (Income)

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

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

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

52

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Cash Used in Operating Activities

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

Cash Used in Investing Activities

We invested $633,956 in equipment and reclamation bonds in the
twelve- month period ended December 31, 2008, compared to $281,306 the
corresponding period in 2007. We received $905,092 cash on the sale of our
Mongolian subsidiary, Rolling Hills Resources LLP and, during the twelve-month
period ended December 31, 2008, invested $20,432,035 (2007 - $8,604,778) in
short term securities guaranteed by Canadian banks.

Cash Provided by Financing Activities

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

Twelve-month period ended December 31, 2007 compared to
twelve-month period ended December 31, 2006

Revenue

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

Operating Expenses and Other Expenses (Income)

We incurred total operating expenses of $14,951,402 for the twelve-month period ended December 31, 2007, as compared to $7,126,964 for the corresponding period in 2006. The increase of operating expenses in the amount of $7,824,438 (110%) was primarily attributable to increased spending of $5,776,188 on acquiring and exploring mineral properties in Wyoming as described in detail in Item 2 of this Annual Report on Form 10-K. Our general and administrative expenses consisted primarily of stock based compensation, payroll, consulting, investor relations and general overhead which increased $1,983,747 or 33% over 2006 reflecting our growth in corporate affairs, investor relations (including listing on the Toronto Stock Exchange) and Casper operations.

Our interest expense for the twelve-month period ended December 31, 2007 was imputed on an interest free loan as $3,692 (2006 – nil). We earned $710,226 of interest income for the twelve-month period ended December 31, 2007 as compared to $411,434 for the corresponding period in 2006. This income resulted from short term investments. Net loss for the twelve-month period ended December 31, 2007 was $14,197,366, as compared to $6,548,901 for the corresponding period in 2006, an increase of $7,648,645 (117%).

As we anticipated, our exploration expenses continued 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, as we
anticipated, general and administrative expenses continued to increase as we
complied with our obligations to many stockholders as a reporting company under
the Securities Exchange Act of 1934, listed on the NYSE Alternext US

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LLC. As anticipated, we did not earn any revenues during the
2007 fiscal year as we were engaged in exploration and the permitting of our
mineral properties.

Cash Used in Operating Activities

Net cash used in operating activities was $9,258,752 for the
twelve-month period ended December 31, 2007, compared to $1,691,781 for the
corresponding period in 2006. The increase in net cash used in operations
reflects the growth of our operations, including an increase of $5,776,188 for
mineral related expenditures.

Cash Used in Investing Activities

We invested $281,306 in equipment and reclamation bonds in the
twelve- month period ended December 31, 2007, compared to $471,727 for mineral
properties and operating assets in the corresponding period in 2006.

Cash Provided by Financing Activities

Net cash provided by financing activities amounted to
$8,589,966 for the twelve-month period ended December 31, 2007, primarily from
private placements of common stock, compared to $12,531,835 for the
corresponding period in 2006. We received an additional $202,500 from the
exercise of stock options in January 2008.

Assets and Liabilities

We had total assets of $22,865,737 at December 31, 2008
compared to $12,216,146 at December 31, 2007, primarily cash accumulated from
the sale of shares. Property and Equipment was $642,572 compared to $406,288 at
December 31, 2007. Our liabilities were $517,818 compared to $697,855 at
December 31, 2007. Liabilities include due to related parties of` $50,000 (2007
- $471,115) and long term debt of $18,079 (2007  52,146).

Liquidity and Capital Resources

Our operations are primarily financed by proceeds from
issuances of common stock. Our cash and short term security position at December
31, 2008 was $21,253,277 compared to $11,343,737 as of December 31, 2007. We had
working capital of $21,405,022 as of December 31, 2008, compared to working
capital of $11,114,149 as of December 31, 2007.

Financings

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

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

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

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

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

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5.          
Completed a private placement of 9,865,000 units, comprised of 9,865,000 common
shares and 4,932,498 common share purchase warrants, at $2.40 per unit for gross
proceeds of $23,676,000. Each warrant entitles the holder to purchase one common
share for $3.50 for a two year period ending April 15, 2010. The Company paid
cash commissions of $1,100,640 and 120,000 warrants to purchase 120,000 common
shares at $2.60 per share exercisable for a one year period ending April 15,
2009. The Company incurred share issuance costs in connection with the private
placement of $1,347,098 including agents warrants with a fair value of $68,041.

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

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

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

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 $8,682 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.

Capital Requirements

Our cash position of $821,242 at December 31, 2008, plus
$20,432,035 of bank guaranteed short term securities provide approximately $21.2
million for future operations. We estimate that our cash expenditures for
operations over the next twelve months will be approximately $9,500,000 as
outlined below. Property acquisitions and operations beyond 2009 will be
financed through cash on hand, debt and one or more equity issues. We intend to
focus our exploration efforts in Wyoming.

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Our plan of operation for the next twelve months is to continue
with exploration and permitting of our expanded Wyoming Powder River Basin
properties. Our planned geological exploration programs are described in Item 2
of this Report. Our planned cash operating expenditures for the year ending
December 31, 2008 for corporate expenses, exploration on our Wyoming mineral
properties and general and administrative expenses are summarized as follows:

Category
    Planned Expenditures Over the Next
      Twelve Months (US$)Exploration
    $2,500,000Environmental,
      production and well planning
    $3,400,000General and
      Administrative expenses
    $3,600,000TOTAL
    $9,500,000


In addition to our planned operating expenditures, we may make
additional property acquisitions beyond the above as opportunities arise. Our
exploration and, if warranted, 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 funding to carry out our 2009 plans will be from existing
resources.

Future Financings

We may require additional financing to carry out an expanded
program of exploration, mine planning and property acquisitions during 2009.
This may require debt financing and/or additional sales of our common stock in
order to raise the funds necessary to pursue opportunities and to fund our
working capital. Issuances of additional shares would result in dilution to our
existing shareholders. There is no assurance that we will be successful in
completing any financings. Failure to obtain additional financing on a timely
basis would require a reduced plan of operations and acquisitions beyond 2009.

There has been severe deterioration in global credit and equity
markets. This has resulted in the need for government intervention in major
banks, financial institutions and insurers and has also resulted in greater
volatility, increased credit losses and tighter credit conditions. These
disruptions in the current credit and financial markets have had a significant
material adverse impact on a number of financial institutions and have limited
access to capital and credit for many companies. These disruptions could, among
other things, make it more difficult for us to obtain, or increase our cost of
obtaining, capital and financing for our operations. Our access to additional
capital may not be available on terms acceptable to us or at all.

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

56

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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 is primarily engaged in the acquisition,
exploration and development of mineral properties. Mineral property acquisition
costs are capitalized in accordance with EITF 04-2 Whether Mineral Rights
Are Tangible or Intangible Assetswhen management has determined that
probable future benefits consisting of a contribution to future cash inflows
have been identified and adequate financial resources are available or are
expected to be available as required to meet the terms of property acquisition
and budgeted exploration and development expenditures. Mineral property
acquisition costs are expensed as incurred if the criteria for capitalization
are not met. In the event that a mineral property is acquired through the
issuance of the Companys shares, the mineral property will be recorded at the
fair value of the respective property or the fair value of common shares,
whichever is more readily determinable.

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

During the year ended December 31, 2008, mineral property expenditures totaling $30,505,332 (2007 - $7,008,396; 2006 - $1,218,859) were expensed and the Company received mineral property option payments of $Nil (2007 - $43,810; 2006 - $87,500).

Stock-based Compensation

The Company records stock based compensation in accordance with
SFAS 123(R), Share-Based Payments, which requires the measurement and
recognition of compensation expense, based on estimated fair values, for all
share-based awards, made to employees and directors, including stock
options.

SFAS 123(R) requires companies to estimate the fair value of
share-based awards on the date of grant using an option-pricing model. The
Company uses the Black-Scholes option-pricing model as its method of determining
fair value. This model is affected by the Companys stock price as well as
assumptions regarding a number of subjective variables. These subjective
variables include, but are not limited to, the Companys expected stock price
volatility over the term of the awards, and actual and projected employee

57

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stock option exercise behaviors. The value of the portion of
the award that is ultimately expected to vest is recognized as an expense in the
consolidated statement of operations over the vesting period.

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

Accounting Developments

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

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

In March 2008, the Financial Accounting Standards Board
(FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities  an amendment to FASB Statement No. 133.

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

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

58

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

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

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. The objective of SFAS No. 157 is to increase consistency and
comparability in fair value measurements and to expand disclosures about fair
value measurements. SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS No. 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to have a
material effect on the Companys consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin
(SAB) No. 108, Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements. SAB No. 108
addresses how the effects of prior year uncorrected misstatements should be
considered when quantifying misstatements in current year financial statements.
SAB No. 108 requires companies to quantify misstatements using a balance sheet
and income statement approach and to evaluate whether either approach results in
quantifying an error that is material in light of relevant quantitative and
qualitative factors. SAB No. 108 is effective for fiscal years ending after
November 15, 2006. The adoption this statement did not have a material effect on
the Companys consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans  an
amendment of FASB Statements No. 87, 88, 106, and 132(R). This statement
requires employers to recognize the overfunded or underfunded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. This statement also requires an employer to
measure the funded status of a plan as of the date of its year-end statement of
financial position, with limited exceptions. The provisions of SFAS No. 158 are
effective for employers with publicly traded equity securities as of the end of
the fiscal year ending after December 15, 2006. The adoption of this statement
did not have a material effect on the Companys consolidated financial
statements.

In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statements No. 109 (FIN 48). FIN 48 clarifies the accounting for

59

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uncertainty in income taxes by prescribing a two-step method of
first evaluating whether a tax position has met a more likely than not
recognition threshold and second, measuring that tax position to determine the
amount of benefit to be recognized in the financial statements. FIN 48 provides
guidance on the presentation of such positions within a classified statement of
financial position as well as on derecognition, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of this
statement did not have a material effect on the Companys consolidated financial
statements.

In March 2006, the FASB issued SFAS No. 156, Accounting for
Servicing of Financial Assets, an amendment of FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. This statement requires all separately recognized servicing
assets and servicing liabilities be initially measured at fair value, if
practicable, and permits for subsequent measurement using either fair value
measurement with changes in fair value reflected in earnings or the amortization
and impairment requirements of Statement No. 140. The subsequent measurement of
separately recognized servicing assets and servicing liabilities at fair value
eliminates the necessity for entities that manage the risks inherent in
servicing assets and servicing liabilities with derivatives to qualify for hedge
accounting treatment and eliminates the characterization of declines in fair
value as impairments or direct write-downs. SFAS No. 156 is effective for an
entitys first fiscal year beginning after September 15, 2006. The adoption of
this statement did not have a material effect on the Companys consolidated
financial statements.

In February 2006, the FASB issued SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and
140, to simplify and make more consistent the accounting for certain financial
instruments. SFAS No. 155 amends SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities; to permit fair value re-measurement for any
hybrid financial instrument with an embedded derivative that otherwise would
require bifurcation, provided that the whole instrument is accounted for on a
fair value basis. SFAS No. 155 amends SFAS No. 140, Accounting for the
Impairment or Disposal of Long-Lived Assets, to allow a qualifying
special-purpose entity to hold a derivative financial instrument that pertains
to a beneficial interest other than another derivative financial instrument.
SFAS No. 155 applies to all financial instruments acquired or issued after the
beginning of an entitys first fiscal year that begins after September 15, 2006,
with earlier application allowed. The adoption of this statement did not have a
material effect on the Companys consolidated financial statements.

Contractual Obligations

Our contractual obligations extending beyond the fiscal year
ended December 31, 2008 are described in Note 11 of the audited consolidated
financial statements following in Item 8.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

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

60

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA







61

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Uranerz Energy Corporation 
  (An Exploration Stage
  Company)

December 31, 2008

|                                                               | Index
|-------------------------------------------------------------- | -----
|                                                               |      
|Reports of Independent
      Registered Public Accounting Firm | F1  
|                                                               |      
|Consolidated Balance Sheets                                    | F3  
|                                                               |      
|Consolidated Statements
      of Operations                    | F4  
|                                                               |      
|Consolidated Statements
      of Cash Flows                    | F5  
|                                                               |      
|Consolidated Statements
      of Stockholders Equity          | F6  
|                                                               |      
|Notes to the Consolidated
      Financial Statements           | F8  

---



Report of Independent Registered Public Accounting
  Firm

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

We have audited Uranerz Energy Corporations internal control
  over financial reporting as of December 31, 2008, based on criteria established
  in Internal Control  Integrated Framework issued by the Committee of Sponsoring
  Organizations of the Treadway Commission (the COSO criteria). Uranerz Energy
  Corporations management is responsible for maintaining effective internal
  control over financial reporting, and for its assessment of the effectiveness of
  internal control over financial reporting included in the accompanying
  Managements Report on Internal Control Over Financial Reporting. Our
  responsibility is to express an opinion on the Companys internal control over
  financial reporting based on our audit.

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

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

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

In our opinion, Uranerz Energy Corporation maintained, in all
  material respects, effective internal control over financial reporting as of
  December 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the
  Public Company Accounting Oversight Board (United States), the accompanying
  consolidated balance sheets of Uranerz Energy Corporation as of December 31,
  2008 and 2007, and the related consolidated statements of operations, cash
  flows, and stockholders equity for each of the three years in the period ended
  December 31, 2008 and accumulated from May 26, 1999 (Date of Inception) to
  December 31, 2008 and our report dated March 3, 2009 expressed an unqualified
  opinion thereon.

/s/ MANNING ELLIOTT, LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 3, 2009

F-1

---



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, 2008 and 2007, and the related
  consolidated statements of operations, cash flows and stockholders' equity for
  each of the three years in the period ended December 31, 2008 and accumulated
  from May 26, 1999 (Date of Inception) to December 31, 2008. These consolidated
  financial statements are the responsibility of the Company's management. Our
  responsibility is to express an opinion on these consolidated financial
  statements based on our audits.

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

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Uranerz Energy Corporation as of December 31, 2008 and 2007, and the results of
  its operations and its cash flows for each of the three years in the period
  ended December 31, 2008 and accumulated from May 26, 1999 (Date of Inception) to
  December 31, 2008, in conformity with accounting principles generally accepted
  in the United States.

We also have audited, in accordance with the standards of the
  Public Company Accounting Oversight Board (United States), Uranerz Energy
  Corporations internal control over financial reporting as of December 31, 2008,
  based on criteria established in Internal Control-Integrated Framework issued by
  the Committee of Sponsoring Organizations of the Treadway Commission and our
  report dated March 3, 2009 expressed an unqualified opinion thereon.

/s/ MANNING ELLIOTT, LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

March 3, 2009

F-2

---

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

|                                                                            |  | December 31, |   |  | December 31, |  
|--------------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                            |  | 2008         |   |  | 2007         |  
|                                                                            |  | $            |   |  | $            |  
|ASSETS                                                                      |  |              |   |  |              |  
|Current Assets                                                              |  |              |   |  |              |  
|Cash                                                                        |  | 821,242      |   |  | 11,333,432   |  
|Marketable securities (Note 2(d)                                            |  | 20,432,035   |   |  |             |  
|Amounts receivable                                                          |  | 10,269       |   |  | 92,444       |  
|Prepaid expenses and deposits                                               |  | 641,215      |   |  | 323,677      |  
|Current assets of discontinued operations                                   |  |             |   |  | 10,305       |  
|Total Current Assets                                                        |  | 21,904,761   |   |  | 11,759,858   |  
|Mineral Property Reclamation Bonds (Note
      5(l))                        |  | 318,404      |   |  | 50,000       |  
|Property and
      Equipment (Note 4)                                       |  | 642,572      |   |  | 406,288      |  
|Total Assets                                                                |  | 22,865,737   |   |  | 12,216,146   |  
|                                                                            |  |              |   |  |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                        |  |              |   |  |              |  
|Current Liabilities                                                         |  |              |   |  |              |  
|Accounts payable                                                            |  | 186,872      |   |  | 138,188      |  
|Accrued liabilities                                                         |  | 228,800      |   |  | 4,950        |  
|Due to related parties (Note
      7)                                       |  | 50,000       |   |  | 471,115      |  
|Current portion of loan payable (Note 6)                                    |  | 34,067       |   |  | 31,456       |  
|Total Current Liabilities                                                   |  | 499,739      |   |  | 645,709      |  
|Loan Payable (Note
      6)                                                 |  | 18,079       |   |  | 52,146       |  
|Total Liabilities                                                           |  | 517,818      |   |  | 697,855      |  
|Non-controlling Interest                                                    |  | 69,585       |   |  |             |  
|Commitments and Contingencies (Notes 1, 5,
      and 11)                    |  |              |   |  |              |  
|Subsequent Events (Note 14)                                                 |  |              |   |  |              |  
|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;        |  |              |   |  |              |  
|55,452,387 and 39,224,087 shares issued and
      outstanding, respectively |  | 55,452       |   |  | 39,224       |  
|Additional Paid-in Capital                                                  |  | 82,366,879   |   |  | 37,375,384   |  
|Accumulated Other Comprehensive Income                                      |  |             |   |  | 481          |  
|Deficit
      Accumulated During the Exploration Stage                      |  | (60,143,997  | ) |  | (25,896,798  | )
|Total Stockholders Equity                                                  |  | 22,278,334   |   |  | 11,518,291   |  
|Total Liabilities
      and Stockholders Equity                            |  | 22,865,737   |   |  | 12,216,146   |  

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

F-3

---

|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, |   |  |            |  
|                                                           |  | 2008                |   |  | 2008        |   |  | 2007         |   |  | 2006       |  
|                                                           |  | $                   |   |  | $           |   |  | $            |   |  | $          |  
|                                                           |  |                     |   |  |             |   |  |              |   |  |            |  
|Revenue                                                    |  |                    |   |  |            |   |  |             |   |  |           |  
|Expenses                                                   |  |                     |   |  |             |   |  |              |   |  |            |  
|Depreciation                                               |  | 201,542             |   |  | 129,268     |   |  | 56,669       |   |  | 14,398     |  
|Foreign exchange                                           |  | 24,553              |   |  | (3,949      | ) |  | 23,602       |   |  | 1,106      |  
|General and
      administrative (Note 7)                  |  | 24,473,105          |   |  | 6,153,218   |   |  | 7,858,379    |   |  | 5,870,857  |  
|Mineral property expenditures                              |  | 39,176,632          |   |  | 30,505,332  |   |  | 7,008,396    |   |  | 1,218,859  |  
|Total Operating Expenses                                   |  | 63,875,832          |   |  | 36,783,869  |   |  | 14,947,046   |   |  | 7,105,220  |  
|Operating Loss                                             |  | (63,875,832         | ) |  | (36,783,869 | ) |  | (14,947,046  | ) |  | (7,105,220 | )
|Other Income (Expense)                                     |  |                     |   |  |             |   |  |              |   |  |            |  
|Gain on sale of investment
      securities                |  | 79,129              |   |  |            |   |  |             |   |  | 79,129     |  
|Interest income                                            |  | 1,732,067           |   |  | 610,408     |   |  | 710,226      |   |  | 411,434    |  
|Loss on settlement of debt                                 |  | (132,000            | ) |  |            |   |  |             |   |  |           |  
|Mineral property option
      payments received            |  | 152,477             |   |  |            |   |  | 43,810       |   |  | 87,500     |  
|Total Other Income
      (Expense)                         |  | 1,831,673           |   |  | 610,408     |   |  | 754,036      |   |  | 578,063    |  
|Loss from operations before non-controlling
      interest |  | (62,044,159         | ) |  | (36,173,461 | ) |  | (14,193,010  | ) |  | (6,527,157 | )
|Non-controlling
      Interest                             |  | 949,185             |   |  | 949,185     |   |  |             |   |  |           |  
|Loss from continuing operations                            |  | (61,094,974         | ) |  | (35,224,276 | ) |  | (14,193,010  | ) |  | (6,527,157 | )
|Discontinued operations (Note 3)                           |  |                     |   |  |             |   |  |              |   |  |            |  
|Loss from
      discontinued operations                    |  | (28,732             | ) |  | (2,632      | ) |  | (4,356       | ) |  | (21,744    | )
|Gain on disposal of discontinued operations                |  | 979,709             |   |  | 979,709     |   |  |             |   |  |           |  
|Gain (Loss) on discontinued operations                     |  | 950,977             |   |  | 977,077     |   |  | (4,356       | ) |  | (21,744    | )
|Net Loss                                                   |  | (60,143,997         | ) |  | (34,247,199 | ) |  | (14,197,366  | ) |  | (6,548,901 | )
|Other Comprehensive Income (Loss)                          |  |                     |   |  |             |   |  |              |   |  |            |  
|Foreign currency translation adjustment                    |  |                    |   |  | (481        | ) |  | (61          | ) |  | 542        |  
|Comprehensive Loss                                         |  | (60,143,997         | ) |  | (34,247,680 | ) |  | (14,197,427  | ) |  | (6,548,359 | )
|Net Loss Per Share  Basic and Diluted                     |  |                     |   |  |             |   |  |              |   |  |            |  
|Continuing Operations                                      |  |                     |   |  | (0.68       | ) |  | (0.37        | ) |  | (0.22      | )
|Discontinued
      Operations                              |  |                     |   |  | 0.02        |   |  | (0.00        | ) |  | (0.00      | )
|Net Loss Per Share  Basic and Diluted                     |  |                     |   |  | (0.66       | ) |  | (0.37        | ) |  | (0.22      | )
|Weighted Average
      Shares Outstanding                  |  |                     |   |  | 52,263,000  |   |  | 38,438,000   |   |  | 29,738,000 |  

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

F-4

---

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

|                                                                 |  | Accumulated From      |   |  |             |   |  |              |     |  |            |  
|---------------------------------------------------------------- |  | --------------------- | - |  | ----------- | - |  | ------------ | --- |  | ---------- | -
|                                                                 |  | May 26, 1999 (Date of |   |  |             |   |  |              |     |  |            |  
|                                                                 |  | Inception)            |   |  |             |   |  | Years Ended  |     |  |            |  
|                                                                 |  | to December 31,       |   |  |             |   |  | December 31, |     |  |            |  
|                                                                 |  | 2008                  |   |  | 2008        |   |  | 2007         |     |  | 2006       |  
|                                                                 |  | $                     |   |  | $           |   |  | $            |     |  | $          |  
|Operating Activities                                             |  |                       |   |  |             |   |  |              |     |  |            |  
|Net loss                                                         |  | (60,143,997           | ) |  | (34,247,199 | ) |  | (14,197,366  | )   |  | (6,548,901 | )
|Adjustments to reconcile net loss to
      cash used in          |  |                       |   |  |             |   |  |              |     |  |            |  
|operating activities:                                            |  |                       |   |  |             |   |  |              |     |  |            |  
|Depreciation                                                     |  | 201,541               |   |  | 129,268     |   |  | 56,668       |     |  | 14,398     |  
|Equity loss on investment                                        |  | 74,617                |   |  | 74,617      |   |  |             |     |  |           |  
|Gain on
      disposition of discontinued operations             |  | (979,709              | ) |  | (979,709    | ) |  |             |     |  |           |  
|Gain on sale of investment securities                            |  | (79,129               | ) |  |            |   |  |             |     |  | (79,129    | )
|Loss on settlement
      of debt                                 |  | 132,000               |   |  |            |   |  |             |     |  |           |  
|Mineral property option payment received                         |  | (37,500               | ) |  |            |   |  |             |     |  | (37,500    | )
|Non-controlling
      interest                                   |  | 69,585                |   |  | 69,585      |   |  |             |     |  |           |  
|Shares issued to acquire mineral properties                      |  | 19,090,000            |   |  | 19,090,000  |   |  |             |     |  |           |  
|Stock-based
      compensation                                   |  | 15,711,908            |   |  | 2,681,417   |   |  | 4,991,491    |     |  | 4,215,025  |  
|Changes in operating
      assets and liabilities:               |  |                       |   |  |             |   |  |              |     |  |            |  
|Prepaid expenses
      and deposits                              |  | (634,978              | ) |  | (317,538    | ) |  | (252,570     | )   |  | (44,184    | )
|Amounts receivable                                               |  | (10,244               | ) |  | 82,175      |   |  | (92,419      | )   |  |           |  
|Accounts payable
      and accrued liabilities                   |  | 546,344               |   |  | 272,534     |   |  | (35,624      | )   |  | 137,657    |  
|Due to related
      parties                                     |  | 520,758               |   |  | (18,865     | ) |  | 271,068      |     |  | 200,901    |  
|Net Cash Used in
      Operating Activities                      |  | (25,538,804           | ) |  | (13,163,715 | ) |  | (9,258,752   | )   |  | (2,141,733 | )
|Investing Activities                                             |  |                       |   |  |             |   |  |              |     |  |            |  
|Reclamation bonds                                                |  | (318,404              | ) |  | (268,404    | ) |  | (40,000      | )   |  | (10,000    | )
|Acquisition of
      subsidiary, net cash paid                   |  | (48                   | ) |  |            |   |  |             |     |  | (48        | )
|Proceeds from sale of investment
      securities                |  | 116,629               |   |  |            |   |  |             |     |  | 116,629    |  
|Purchase of property
      and equipment                         |  | (745,699              | ) |  | (365,552    | ) |  | (241,306     | )   |  | (128,356   | )
|Purchase of investment securities                                |  | (20,432,035           | ) |  | (20,432,035 | ) |  |             |     |  |           |  
|Disposition of subsidiary                                        |  | 905,092               |   |  | 905,092     |   |  |             |     |  |           |  
|Net Cash Used In
      Investing Activities                      |  | (20,474,465           | ) |  | (20,160,899 | ) |  | (281,306     | )  |  | (21,775    | )
|Financing Activities                                             |  |                       |   |  |             |   |  |              |     |  |            |  
|Repayment of loan payable                                        |  | (46,268               | ) |  | (31,456     | ) |  | (14,812      | )   |  |           |  
|Advances to related
      party                                  |  | 10,700                |   |  |            |   |  |             |     |  |           |  
|Proceeds from issuance of common stock                           |  | 48,540,551            |   |  | 24,221,275  |   |  | 8,604,778    |     |  | 12,771,100 |  
|Share issuance costs                                             |  | (1,670,472            | ) |  | (1,387,219  | ) |  |             |     |  | (239,265   | )
|Net Cash Provided
      By Financing Activities                  |  | 46,834,511            |   |  | 22,802,600  |   |  | 8,589,966    |     |  | 12,531,835 |  
|Effect of Exchange Rate Changes on Cash                          |  |                      |   |  | (481        | ) |  | (61          | )   |  | 542        |  
|Increase In Cash                                                 |  | 821,242               |   |  | (10,522,495 | ) |  | (950,153     | )   |  | 10,368,869 |  
|Cash - Beginning of Period                                       |  |                      |   |  | 11,343,737  |   |  | 12,293,890   |     |  | 1,925,021  |  
|Cash - End of
      Period                                       |  | 821,242               |   |  | 821,242     |   |  | 11,343,737   |     |  | 12,293,890 |  
|Non-cash Investing and Financing Activities                      |  |                       |   |  |             |   |  |              |     |  |            |  
|Sale of 60% of subsidiary for interest
      in mineral property |  | 774,216               |   |  | 774,216     |   |  |             |     |  |           |  
|Investment securities
      received as a mineral property       |  |                       |   |  |             |   |  |              |     |  |            |  
|option payment                                                   |  | 37,500                |   |  |            |   |  |             |     |  | 37,500     |  
|Purchase of equipment
      with loan payable                    |  | 98,414                |   |  |            |   |  | 98,414       |     |  |           |  
|Common stock issued to settle debt                               |  | 744,080               |   |  | 402,250     |   |  |             |     |  | 129,830    |  
|Common stock issued for mineral
      property costs             |  | 19,105,000            |   |  | 19,090,000  |   |  |             |     |  |           |  
|Supplemental Disclosures                                         |  |                       |   |  |             |   |  |              |     |  |            |  
|Interest paid                                                    |  | 9,243                 |   |  | 5,551       |   |  | 3,692        |     |  |           |  
|Income taxes paid                                                |  |                      |   |  |            |   |  |             |     |  |           |  

(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, 2008
|(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-6

---

|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, 2008
|(Expressed in US dollars)                                                      

|                                    |  |              |  |  |         |  |  |               |   |  |             |   |  | Deficit     |   |  |             |  
|----------------------------------- |  | ------------ |  |  | ------- |  |  | ------------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                    |  |              |  |  |         |  |  |               |   |  | Accumulated |   |  | Accumulated |   |  |             |  
|                                    |  |              |  |  |         |  |  | Additional    |   |  | Other       |   |  | During the  |   |  |             |  
|                                    |  | Common Stock |  |  | Paid-in |  |  | Comprehensive |   |  | Exploration |   |  |             |  
|                                    |  | 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   |  
|Foreign currency translation        |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|adjustments                         |  |             |  |  |        |  |  |              |   |  | 542         |   |  |            |   |  | 542         |  
|Net loss for the year               |  |             |  |  |        |  |  |              |   |  |            |   |  | (6,548,901  | ) |  | (6,548,901  | )
|Balance, December 31, 2006          |  | 34,560,338   |  |  | 34,560  |  |  | 23,777,517    |   |  | 542         |   |  | (11,699,432 | ) |  | 12,113,187  |  
|Shares issued upon the exercise of  |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|warrants                            |  | 4,481,749    |  |  | 4,482   |  |  | 8,312,196     |   |  |            |   |  |            |   |  | 8,316,678   |  
|Shares issued upon the exercise of  |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|options                             |  | 182,000      |  |  | 182     |  |  | 287,918       |   |  |            |   |  |            |   |  | 288,100     |  
|Fair value of stock options granted |  |             |  |  |        |  |  | 4,997,753     |   |  |            |   |  |            |   |  | 4,997,753   |  
|Foreign currency translation        |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|adjustments                         |  |             |  |  |        |  |  |              |   |  | (61         | ) |  |            |   |  | (61         | )
|Net loss for the
      year         |  |             |  |  |        |  |  |              |   |  |            |   |  | (14,197,366 | ) |  | (14,197,366 | )
|Balance, December 31, 2007          |  | 39,224,087   |  |  | 39,224  |  |  | 37,375,384    |   |  | 481         |   |  | (25,896,798 | ) |  | 11,518,291  |  
|Shares issued to acquire mineral    |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|properties                          |  | 5,750,000    |  |  | 5,750   |  |  | 19,084,250    |   |  |            |   |  |            |   |  | 19,090,000  |  
|Shares issued upon the exercise of  |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|warrants                            |  | 96,100       |  |  | 96      |  |  | 240,154       |   |  |            |   |  |            |   |  | 240,250     |  
|Shares issued upon the exercise of  |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|options                             |  | 356,300      |  |  | 356     |  |  | 304,669       |   |  |            |   |  |            |   |  | 305,025     |  
|Shares issued pursuant to private   |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|placement                           |  | 9,865,000    |  |  | 9,865   |  |  | 23,666,135    |   |  |            |   |  |            |   |  | 23,676,000  |  
|Shares issued to settle debt        |  | 160,900      |  |  | 161     |  |  | 402,089       |   |  |            |   |  |            |   |  | 402,250     |  
|Share issuance costs                |  |             |  |  |        |  |  | (1,387,219    | ) |  |            |   |  |            |   |  | (1,387,219  | )
|Fair value of stock options granted |  |             |  |  |        |  |  | 2,681,417     |   |  |            |   |  |            |   |  | 2,681,417   |  
|Foreign currency translation        |  |              |  |  |         |  |  |               |   |  |             |   |  |             |   |  |             |  
|adjustments                         |  |             |  |  |        |  |  |              |   |  | (481        | ) |  |            |   |  | (481        | )
|Net loss for the year               |  |             |  |  |        |  |  |              |   |  |            |   |  | (34,247,199 | ) |  | (34,247,199 | )
|Balance, December
      31, 2008    |  | 55,452,387   |  |  | 55,452  |  |  | 82,366,879    |   |  |            |   |  | (60,143,997 | ) |  | 22,278,334  |  

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

F-7

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|1. | Nature of Operations                                                                                                                                                                                                                                                                                                                                
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | Uranerz Energy Corporation (the Company) was
      incorporated in the State of Nevada, U.S.A. on May 26, 1999. Effective
      July 5, 2005, the Company changed its name from Carleton Ventures Corp. to
      Uranerz Energy Corporation. The Company has acquired mineral property
      interests in Canada, Mongolia, and the United States.
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | 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 exploitation of uranium and
      mineral resources.                                   
|   |                                                                                                                                                                                                                                                                                                                                                     
|2. | Summary of Significant Accounting
      Policies                                                                                                                                                                                                                                                                                                    

| | a) | Basis of Presentation and Principles of
      Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | These consolidated financial statements and related notes
      are presented in accordance with accounting principles generally accepted
      in the United States, and are expressed in US dollars. Rolling Hills
      Resources LLC (Rolling Hills), a Mongolian company previously
      wholly-owned, was consolidated on December 31, 2007. During the year ended
      December 31, 2008, the Company disposed of Rolling Hills.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | These consolidated financial statements include the
      accounts of the Company and the accounts of an unincorporated joint
      venture, Arkose Mining Venture (Arkose) of which the Company holds an
      81% interest in and maintains majority voting interest as of December
      31,2008. All inter-company transactions and balances have been eliminated.
      The Companys fiscal year-end is December 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b) | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The preparation of these consolidated statements in
      accordance with United States generally accepted accounting principles
      requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities at the date of the consolidated
      financial statements and the reported amounts of revenue and expenses in
      the reporting period. The Company regularly evaluates estimates and
      assumptions related to useful life and recoverability of long-lived
      assets, stock-based compensation, deferred income tax asset valuations and
      loss contingencies. The Company bases its estimates and assumptions on
      current facts, historical experience and various other factors that it
      believes to be reasonable under the circumstances, the results of which
      form the basis for making judgments about the carrying values of assets
      and liabilities and the accrual of costs and expenses that are not readily
      apparent from other sources. The actual results experienced by the Company
      may differ materially and adversely from the Companys estimates. To the
      extent there are material differences between the estimates and the actual
      results, future results of operations will be affected.                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | c) | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company considers all highly liquid instruments with
      maturity of three months or less at the time of issuance to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | d) | Marketable Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The Company defines marketable securities as income
      yielding securities that can be readily converted into cash. Examples of
      marketable securities include U.S. Treasury and agency obligations,
      commercial paper, corporate notes and bonds, time deposits, foreign notes
      and certificates of deposit. The Company accounts for its investment in
      debt and equity instruments under Statement of Financial Accounting
      Standards, or SFAS, No. 115, Accounting for Certain Investments in
        Debt and Equity Securities and Financial Accounting Standards Board,
      or FASB, Staff Position, or FSP, SFAS No. 115-1, The Meaning of
        Other-Than- Temporary Impairment and Its Application to Certain
        Investments. The Company follows the guidance provided by EITF No.
      03-1, The Meaning of Other-Than-Temporary Impairment and Its
        Application to Certain Investments, to assess whether our investments
      with unrealized loss positions are other than temporarily impaired.
      Realized gains and losses and declines in value judged to be other than
      temporary are determined based on the specific identification method and
      are reported in other income (expense). Management determines the
      appropriate classification of such securities at the time of purchase and
      re- evaluates such classification as of each balance sheet date. As at
      December 31, 2008, the Companys marketable securities consisted of term
      deposits for periods longer than three months and are classified as
      held-to-maturity.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | e) | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Property and equipment consists of computers and office
      equipment and field equipment. These assets are recorded at cost and are
      depreciated on a straight-line basis over their estimated life of five
      years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-8

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

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

F-9

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

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

F-10

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

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

F-11

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|3. | Investment in Rolling Hills                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Rolling Hills was formerly a wholly owned subsidiary
      incorporated in Mongolia. On June 18, 2008, the Company disposed of 60% of
      its investment pursuant to the option and joint venture agreement referred
      to in Note 5(g). On August 25, 2008, the Company disposed of its remaining
      40% investment. During the twelve month period ended December 31, 2008,
      the Company recognized a gain on the disposal of $979,709.                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | As a result of the Companys disposal of Rolling Hills
      all operations related to the former subsidiary have been classified as
      discontinued operations. The assets and liabilities of Rolling Hills have
      been reclassified as discontinued operations for all periods presented.
      Assets at December 31, 2008 and 2007 consist solely of cash of $nil and
      $10,305, respectively. There were no liabilities at December 31, 2008 and
      2007. Cash flows from discontinued operations were not material and were
      combined with cash flows from continuing operations within the
      consolidated statement of cash flows categories.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4. | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                                |  |         |  |  |              |  |  | December 31, |  |  | December 31, | 
| | ------------------------------ |  | ------- |  |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                |  |         |  |  |              |  |  | 2008         |  |  | 2007         | 
| |                                |  |         |  |  | Accumulated  |  |  | Net Carrying |  |  | Net Carrying | 
| |                                |  | Cost    |  |  | Depreciation |  |  | Value        |  |  | Value        | 
| |                                |  | $       |  |  | $            |  |  | $            |  |  | $            | 
| |                                |  |         |  |  |              |  |  |              |  |  |              | 
| | Computers and office equipment |  | 168,705 |  |  | 59,948       |  |  | 108,757      |  |  | 101,520      | 
| | Field equipment                |  | 675,408 |  |  | 141,593      |  |  | 533,815      |  |  | 304,768      | 
| |                                |  | 844,113 |  |  | 201,541      |  |  | 642,572      |  |  | 406,288      | 

|5. | Mineral Properties
|-- | ------------------
|   |                   
|   | a)                
|   |                   
|   | b)                
|   |                   
|   | c)                
|   |                   
|   | d)                
|   |                   
|   | e)                
|   |                   
|   | f)                

F-12

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|5. | Mineral Properties (continued)
|-- | ------------------------------
|   |                               
|   | g)                            
|   |                               
|   | h)                            
|   |                               
|   |                               
|   |                               
|   |                               
|   |                               
|   | i)                            
|   |                               
|   | j)                            
|   |                               
|   | k)                            
|   |                               
|   | l)                            
|   |                               
|   | m)                            

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


| | n) | On August 20, 2008 the Company leased 891 acres of
      mineral properties near the Companys Nichols Ranch project area in
      Wyoming for an advance royalty payment of $22,275.                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                    
| | o) | On August 20, 2008 the Company, on behalf of the Arkose
      Mining Venture, leased 6,073 acres of mineral properties within Arkoses
      area of interest in Wyoming for an advance royalty payment of
      $151,828.         
| |    |                                                                                                                                                                                                                                    
| | p) | On September 18, 2008 the Company leased 984 acres of
      mineral properties within the Companys North Reno Creek project area in
      Wyoming (see Note 11(d)).                                                               
| |    |                                                                                                                                                                                                                                    
| | q) | On December 3, 2008 the Company, on behalf of the Arkose
      Mining Venture, leased 1,680 acres of mineral properties within Arkoses
      area of interest in Wyoming for a five year advance royalty payment of
      $83,993.

F-13

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|6. | Loan Payable
|-- | ------------

| | `                                                         |   | December 31, |   |   | December 31, |  
| | --------------------------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                                           |   | 2008         |   |   | 2007         |  
| | Loan payable to vendor, interest imputed at 8% per annum, |   |              |   |   |              |  
| | maturing June 2010, and secured by field
      equipment  | $ | 52,146       |   | $ | 83,602       |  
| |                                                           |   |              |   |   |              |  
| | Less current portion:                                     |   | (34,067      | ) |   | (31,456      | )
| |                                                           |   |              |   |   |              |  
| |                                                           | $ | 18,079       |   | $ | 52,146       |  

Principal repayments for the next two
  fiscal years are as follows:

2009
      $
      34,0672010
      
      18,079$
      52,146


|7. | Related Party Transactions / Balances
|-- | -------------------------------------
|   |                                      
|   | a)                                   
|   |                                      
|   | b)                                   
|   |                                      
|   | c)                                   
|   |                                      
|   | d)                                   
|   |                                      
|   | e)                                   
|   |                                      
|   | f)                                   
|   |                                      
|   | g)                                   

F-14

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|7. | Related Party Transactions / Balances
      (continued)       
|-- | --------------------------------------------------------------
|   |                                                               
|   | h)                                                            
|   |                                                               
|   | i)                                                            
|   |                                                               
|   | j)                                                            
|   |                                                               
|8. | Common Stock                                                  
|   |                                                               
|   | Share transactions for the year ended December 31,
      2008:
|   |                                                               
|   | a)                                                            
|   |                                                               
|   | b)                                                            
|   |                                                               
|   | c)                                                            
|   |                                                               
|   | d)                                                            
|   |                                                               
|   | e)                                                            
|   |                                                               
|   | f)                                                            
|   |                                                               
|   | g)                                                            
|   |                                                               
|   | h)                                                            
|   |                                                               
|   | Share transactions for the year ended December 31,
      2007:
|   |                                                               
|   | a)                                                            
|   |                                                               
|   | b)                                                            
|   |                                                               
|   | c)                                                            
|   |                                                               
|   | d)                                                            
|   |                                                               
|   | e)                                                            
|   |                                                               
|   | f)                                                            

F-15

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|8. | Common Stock (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Share transactions for the year ended December 31,
      2006:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | g)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | j)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|9. | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company adopted a Stock Option Plan dated November 7,
      2005 under which the Company is authorized to grant stock options to
      acquire up to a total of 10,000,000 shares of common stock. No options
      shall be issued under the Stock Option Plan at a price per share less than
      the defined Market Price. On June 11, 2008, the Company modified the Stock
      Option Plan to define Market Price as the volume weighted average trading
      price of the Companys common shares on the Toronto Stock Exchange or
      American Stock Exchange, whichever has the greater trading volume for the
      five trading days before the date of grant. At December 31, 2008, the
      Company had 4,492,360 shares of common stock available to be issued under
      the Plan.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | During the year ended December 31, 2008, the Company
      granted stock options to directors, officers, employees and consultants to
      acquire 1,063,000 common shares at exercise prices from $2.13 to $3.22 per
      share exercisable for 5 years and recorded stock-based compensation for
      the vested options of $2,681,417, as general and administrative
      expense.                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | During the year ended December 31, 2007, the Company
      granted stock options with immediate vesting to directors, officers,
      employees and consultants to acquire 1,920,000 common shares at exercise
      prices from $2.71 of $4.73 per share exercisable for 5 years and recorded
      stock-based compensation for the vested options of $4,922,613, as general
      and administrative expense.                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | During the year ended December 31, 2006, the Company
      granted stock options to directors and consultants to acquire 2,545,000
      common shares at exercise prices from $0.75 to $1.96 per share exercisable
      for 5 years and recorded stock-based compensation for the vested options
      of $3,883,102 as general and administrative
      expense.                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-16

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|9. | Stock Based Compensation (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | During the year ended December 31, 2006, the Company
      granted stock options to a director to acquire 139,640 common shares at
      exercise prices of $0.01 to $2.65 per share exercisable for 5 years to
      settle $129,830 of debt. 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 for the vested options
      of $240,923 as general and administrative expense.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The fair value for stock options granted was estimated at
      the date of grant using the Black-Scholes option-pricing model and the
      weighted average fair value of stock options granted during the years
      ended December 31, 2008, 2007 and 2006 were $2.20, $2.97 and $1.54 per
      share, respectively.                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The weighted average assumptions used are as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                 |  |              |  |  | Years Ended  |  |  |              | 
| | ------------------------------- |  | ------------ |  |  | ------------ |  |  | ------------ | 
| |                                 |  | December 31, |  |  | December 31, |  |  | December 31, | 
| |                                 |  | 2008         |  |  | 2007         |  |  | 2006         | 
| |                                 |  |              |  |  |              |  |  |              | 
| | Expected dividend yield         |  | 0%           |  |  | 0%           |  |  | 0%           | 
| | Risk-free interest rate         |  | 2.94%        |  |  | 4.7%         |  |  | 4.4%         | 
| | Expected volatility             |  | 134%         |  |  | 168%         |  |  | 250%         | 
| | Expected option life (in years) |  | 4.14         |  |  | 3.1          |  |  | 2.5          | 

The total intrinsic value of stock
  options exercised during the year ended December 31, 2008 was $641,954 (2007 -
  $592,730, 2006 - $383,522).

The following table summarizes the
  continuity of the Companys stock options:

| |                                |  |           |   |  |          |  |  | Weighted-    |  |  |           | 
| | ------------------------------ |  | --------- | - |  | -------- |  |  | ------------ |  |  | --------- | 
| |                                |  |           |   |  | Weighted |  |  | Average      |  |  |           | 
| |                                |  | Number    |   |  | Average  |  |  | Remaining    |  |  | Aggregate | 
| |                                |  | of        |   |  | Exercise |  |  | Contractual  |  |  | Intrinsic | 
| |                                |  | Options   |   |  | Price    |  |  | Term (years) |  |  | Value     | 
| |                                |  |           |   |  | $        |  |  |              |  |  | $         | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2005 |  | -         |   |  | -        |  |  |              |  |  |           | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Granted                        |  | 2,684,640 |   |  | 1.01     |  |  |              |  |  |           | 
| | Exercised                      |  | (139,640  | ) |  | 0.93     |  |  |              |  |  |           | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2006 |  | 2,545,000 |   |  | 1.01     |  |  |              |  |  |           | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Granted                        |  | 1,920,000 |   |  | 3.26     |  |  |              |  |  |           | 
| | Exercised                      |  | (182,000  | ) |  | 1.58     |  |  |              |  |  |           | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2007 |  | 4,283,000 |   |  | 2.00     |  |  |              |  |  |           | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Granted                        |  | 1,063,000 |   |  | 2.64     |  |  |              |  |  |           | 
| | Cancelled                      |  | (150,000  | ) |  | 3.36     |  |  |              |  |  |           | 
| | Exercised                      |  | (356,300  | ) |  | 0.86     |  |  |              |  |  |           | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Outstanding, December 31, 2008 |  | 4,839,700 |   |  | 2.18     |  |  | 2.92         |  |  | -         | 
| |                                |  |           |   |  |          |  |  |              |  |  |           | 
| | Exercisable, December 31, 2008 |  | 4,681,200 |   |  | 2.14     |  |  | 2.89         |  |  | -         | 

F-17

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|9. | Stock Based Compensation (continued)                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                         
|   | A summary of the status of the Companys non-vested
      shares as of December 31, 2008, and changes during the years ended
      December 31, 2008 and 2007, is presented
      below:

WeightedAverageNumber of
      
      
      Grant DateNon-vested shares
      
      Shares
      
      
      Fair Value$Non-vested at January 1, 2007
      
      -
      
      
      -Granted
      
      1,920,000
      
      
      2.97Vested
      
      (1,595,000
      )
      
      2.95Non-vested at December 31, 2007
      
      325,000
      
      
      3.14Granted
      
      1,063,000
      
      
      2.20Vested
      
      (1,229,500
      )
      
      2.36Non-vested at December 31, 2008
      
      158,500
      
      
      2.86


As at December 31, 2008, there was
  $126,241 of total unrecognized compensation cost related to non-vested stock
  option agreements. That cost is expected to be recognized over a weighted
  average period of 0.53 years.

|10. | Stock Purchase Warrants                                                                           
|--- | --------------------------------------------------------------------------------------------------
|    |                                                                                                   
|    | a)                                                                                                
|    |                                                                                                   
|    | b)                                                                                                
|    |                                                                                                   
|    | c)                                                                                                
|    |                                                                                                   
|    | d)                                                                                                
|    |                                                                                                   
|    | e)                                                                                                
|    |                                                                                                   
|    | f)                                                                                                
|    |                                                                                                   
|    | A summary of the changes in the Companys common share
      purchase warrants is presented below:

Weighted AverageNumber
      
      
      Exercise Price$Balance, December 31, 2006
      
      4,697,849
      
      
      1.86Issued
      
      50,000
      
      
      3.69Expired
      
      (100,000
      )
      
      2.25Exercised
      
      (4,481,749
      )
      
      1.86Balance December 31, 2007
      
      166,100
      
      
      2.86Issued
      
      5,052,498
      
      
      3.48Exercised
      
      (96,100
      )
      
      2.50Expired
      
      (70,000
      )
      
      3.35Balance December 31, 2008
      
      5,052,498
      
      
      3.48


F-18

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|10. | Stock Purchase Warrants (continued)                                                              
|--- | -------------------------------------------------------------------------------------------------
|    |                                                                                                  
|    | As at the December 31, 2008, the following common share
      purchase warrants were outstanding:

Number of Warrants
      
      
      Exercise Price
      
      
      Expiry Date$120,000
      
      
      2.60
      
      
      April 15, 20094,932,498
      
      
      3.50
      
      
      April 15, 20105,052,498


|11. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|12. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company has adopted the provisions of SFAS 109, Accounting for Income Taxes.Pursuant to SFAS 109 the Company is
      required to compute tax asset benefits for net operating losses carried
      forward. The potential benefit of net operating losses have not been
      recognized in the consolidated financial statements because the Company
      cannot be assured that it is more likely than not that it will utilize the
      net operating losses carried forward in future years. The Company has
      approximately $10,572,942 of net operating losses to carry forward which
      are available to offset taxable income in future years which expire
      through fiscal 2028. For the years ended December 31, 2008, 2007 and 2006
      the valuation allowance established against the deferred tax assets
      increased by $11,299,163, $3,442,858, and $503,479 respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The components of the net deferred tax asset at December
      31, 2008, 2007, and 2006, the statutory tax rate, the effective tax rate,
      and the amount of the valuation allowance are indicated
      below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |                                    |   | December 31, |   |   | December 31, |   |   | December 31, |  
| | ---------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
| |                                    |   | 2008         |   |   | 2007         |   |   | 2006         |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Loss before taxes                  | $ | (34,247,199  | ) | $ | (14,197,366  | ) | $ | (6,548,901   | )
| | Statutory rate                     |   | 35%          |   |   | 35%          |   |   | 35%          |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Computed expected tax (recovery)   | $ | (11,986,520  | ) | $ | (4,969,078   | ) | $ | (2,292,115   | )
| | Stock-based compensation           |   | 938,496      |   |   | 1,517,262    |   |   | 1,307,383    |  
| | Joint venture chargeback           |   | (251,140     | ) |   |             |   |   |             |  
| | Mineral property acquisition costs |   |             |   |   |             |   |   | 421,957      |  
| | Miscellaneous                      |   |             |   |   | 8,958        |   |   | 59,296       |  
| | Increase in valuation allowance:   |   |              |   |   |              |   |   |              |  
| | Net operating loss                 |   | 622,297      |   |   | 989,919      |   |   | 503,479      |  
| | Exploration and development        |   | 1,980,401    |   |   |             |   |   |             |  
| | Mineral property acquisition costs |   | 8,696,466    |   |   | 2,452,939    |   |   |             |  
| |                                    |   |              |   |   |              |   |   |              |  
| | Reported income
      taxes        | $ |             |   | $ |             |   | $ |             |  

F-19

---

|Uranerz Energy Corporation                    
|----------------------------------------------
|(An Exploration Stage Company)                
|Notes to the Consolidated Financial Statements
|December 31, 2008                             
|(Expressed in US dollars)                     

|12. | Income Taxes
|--- | ------------

| |                                                 |   |              |   |   |              |   |   | December 31, |  
| | ----------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
| |                                                 |   | December 31, |   |   | December 31, |   |   | 2006         |  
| |                                                 |   | 2008         |   |   | 2007         |   |   | $            |  
| |                                                 |   |              |   |   |              |   |   |              |  
| | Deferred tax asset                              |   |              |   |   |              |   |   |              |  
| | - Net operating losses                          | $ | 3,700,530    |   | $ | 3,078,233    |   | $ | 2,088,314    |  
| | - Mineral property acquisition, exploration and |   |              |   |   |              |   |   |              |  
| | development                                     |   | 13,674,897   |   |   | 2,998,031    |   |   | 545,092      |  
| | - Less valuation
      allowance                |   | (17,375,427  | ) |   | (6,076,264   | ) |   | (2,633,406   | )
| |                                                 |   |              |   |   |              |   |   |              |  
| | Net deferred tax
      asset                    | $ |             |   | $ |             |   | $ |             |  

The Company has incurred operating
  losses of approximately $10,572,942 which, if unutilized, will expire through to
  2028. Future tax benefits, which may arise as a result of these losses, have not
  been recognized in these consolidated financial statements, and have been offset
  by a valuation allowance. The following table lists the fiscal year in which the
  loss was incurred and the expiration date of the loss.

Net
      
      
      ExpirationLoss
      
      
      Date1999
      $
      329
      
      
      20192000
      
      493
      
      
      20202001
      
      18,389
      
      
      20212002
      
      46,564
      
      
      20222003
      
      23,560
      
      
      20232004
      
      18,367
      
      
      20242005
      
      4,420,398
      
      
      20252006
      
      1,438,511
      
      
      20262007
      
      2,828,339
      
      
      20272008
      
      1,777,992
      
      
      2028$
      10,572,942


|13. | Segment Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Company has two operating segments both involving the
      acquisition and exploitation of uranium and mineral resources. These
      operating segments consist of the Arkose Joint Venture (Arkose) and the
      Companys remaining operations                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Factors used to identify the Companys reportable
      segments include the organizational structure of the Company and the
      financial information available for evaluation by the chief operating
      decision-maker in making decisions about how to allocate resources and
      assess performance. The Companys operating segments have been broken out
      based on similar economic and other qualitative criteria. The Company
      operates both reporting segments in one geographical area, the United
      States.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Chief Executive Officer is the Companys Chief
      Operating Decision Maker (CODM) as defined by SFAS 131, Disclosure
        about Segments of an Enterprise and Related Information. The CODM
      allocates resources and assesses the performance of the Company based on
      the results of operations.                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Prior to the year ended December 31, 2008, the Company
      only had one operating segment.                                                                                                                                                                                                                                                                                                                                                                                                                                               

Total
      
      
      Uranerz
      
      
      Arkose$
      
      
      $
      
      
      $Assets
      
      22,865,737
      
      
      21,909,388
      
      
      956,349Net loss
      
      (34,247,199
      )
      
      (31,419,772
      )
      
      (2,827,427
      )Interest expense
      
      (5,551
      )
      
      (5,551
      )
      
      Interest revenue
      
      610,408
      
      
      610,408
      
      
      Depreciation
      
      (129,268
      )
      
      (129,268
      )
      
      Gain on disposal of discontinued operations
      
      979,709
      
      
      979,709
      
      
      Loss from discontinued operations
      
      (2,632
      )
      
      (2,632
      )
      
      


|14. | Subsequent Events                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                            
|    | In January 2009, the Company granted 1,327,500 stock
      options to directors, officers, employees and consultants at an exercise
      price of $0.65 per share expiring from January 5, 2011 to November 7,
      2015.

F-20

---

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

None

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

During the period covered by this Annual Report of Form 10-K
for the fiscal year ended December 31, 2008, an evaluation was carried out under
the supervision of and with the participation of the Companys management,
including the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO), of the effectiveness of the design and operations of the Companys
disclosure controls and procedures (as defined in Rule 13a  15(e) and Rule 15d
 15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO
have concluded that as of the end of the period covered by this report, the
Companys disclosure controls and procedures were adequately designed and
effective in ensuring that: (i) information required to be disclosed by the
Company in reports that it files or submits to the Securities and Exchange
Commission under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in applicable rules and forms and
(ii) material information required to be disclosed in our reports filed under
the Exchange Act is accumulated and communicated to our management, including
our CEO and CFO, as appropriate, to allow for accurate and timely decisions
regarding required disclosure.

Internal Control Over Financial Reporting

Managements Report on Internal Control Over Financial
Reporting

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

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

Management conducted an evaluation of the design and operation
of the Companys internal control over financial reporting as of December 31,
2008, based on the criteria set forth in Internal Control  Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This evaluation included review of the documentation of controls, evaluation of
the design effectiveness of controls, testing of the operating effectiveness of
controls and a conclusion on this evaluation. Based on this evaluation,
management has concluded that the Companys internal control over financial
reporting was effective as of December 31, 2008 and no material weaknesses were
discovered.

62

---

Attestation Report of the Independent Registered Public
Accounting Firm

The Companys independent registered public accounting firm,
Manning Elliott LLP, has issued an attestation report on the Companys internal
control over financial reporting. Their report, dated March 3, 2009, is included
in Item 8 above.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial
reporting identified in connection with the above-referenced evaluation by
management of the effectiveness of our internal control over financial reporting
that occurred during the fourth quarter ended December 31, 2008, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE

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 or until his or her successor
is appointed. The ages of the directors, executive officers and key employees
are shown as of December 31, 2008.

Current Office with
    
    Director/OfficerName
    Company
    Principal Occupation
    Since
    AgeGlenn Catchpole
      President and Chief
      President and Chief Executive
      March 1, 2005
      65Executive Officer;
      Officer, Uranerz EnergyDirector
      CorporationGeorge Hartman
      Executive Vice-
      Executive Vice-President and
      May 9, 2005
      69President and Chief
      Chief Operating Officer, UranerzOperating Officer;
      Energy CorporationDirectorDennis Higgs
      Chairman
      Chairman Uranerz Energy
      May 26, 1999
      51CorporationPaul Saxton*
      Director
      President of Lincoln Gold
      October 26, 2004
      62CorporationDr. Gerhard Kirchner*
      Director
      Director, Mindoro Resources
      March 13, 2005
      78LimitedPeter Bell*
      Director
      President of Ezon Healthcare
      May 10, 2006
      74CorporationArnold J. Dyck*
      Director
      Self-Employed, General
      May 23, 2006
      68ContractorRichard Holmes*
      Director
      Secretary, Treasurer PhosMex
      May 23, 2006
      67CorporationBenjamin Leboe
      Chief Financial Officer
      Chief Financial Officer of
      May 23, 2006
      63Uranerz Energy CorporationKurtis Brown
      Senior Vice-President,
      Senior Vice-President,
      March 8, 2007
      58Exploration
      Exploration of Uranerz EnergyCorporationDouglas Hirschman
      Vice President, Lands
      Vice President, Lands of Uranerz
      December 6, 2007
      56


63

---

Current Office with
      
      Director/OfficerName
      Company
      Principal
        Occupation
      Since
      AgeEnergy CorporationSonya Reiss
      Vice President and
      Vice President and Corporate
      December 6, 2007
      38Corporate Secretary
      Secretary, Uranerz Energy
      Resigned JanuaryCorporation
      2009


* - Indicates that the director is independent in accordance
with the NYSE Alternext US LLC Company Guide.

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

Mr. Glenn Catchpole was appointed to the Board and
became our President on March 1, 2005. Mr. Catchpole is a licensed engineer who
holds an M.S. in civil engineering from Colorado State University. He has been
active in the uranium solution mining industry since 1978, 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 Chemical Engineering (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.

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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.

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 and Arizona Star was
acquired by Barrick Gold Corporation at $18.00 in December 2007.

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

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

Mr. Paul Saxton was 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

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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.

Mr. Saxton has been appointed to the Companys nomination and
governance committee, and compensation committee.

Dr. Gerhard F. Kirchner was 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) (from 1975 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.

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

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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 labelling 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.

Mr. Benjamin Leboe was appointed as the Companys Chief
Financial Officer on May 23, 2006 and acted as our Corporate Secretary from
October, 2006 to December, 2007. 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., (now Card Trend International) 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 Avensys
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

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received his bachelor of commerce degree from the University of
British Columbia. Mr. Leboe is a Chartered Accountant and a Certified Management
Consultant in the Province of British Columbia.

Mr. Kurtis Brown, a thirty-five year veteran of the
mining industry, was appointed Senior Vice-President in March 2007. Mr. Brown
was an independent geological consultant for the five years prior to joining
Uranerz. He has previously assisted with the start up of the Christensen Ranch
ISR commercial uranium mine now owned by AREVA. Mr. Brown is a professional
geologist.

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

Ms. Sonya Reiss joined our Company as Corporate Counsel
in August 2007. She was appointed Vice President of Corporate Affairs and
Corporate Secretary in December 2007. Ms. Reiss has eight years of legal
experience practicing in United States and Canada. She was Corporate Counsel at
Southwestern Resources Corporation from October 2006 to August 2007 and acted as
a transaction lawyer with global law firms such as Shearman & Sterling,
Osler Hoskin & Harcourt LLP and Fasken Martineau DuMoulin LLP from February
1999 to October 2006. Ms. Reiss has a Bachelor of Arts (English Honours), a
Master of Arts (English and Critical Theory) and a Bachelor of Laws, University
of B.C.

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 (Honorar-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

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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 hydrogeological 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 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 discovered approximately
3 M oz of gold resource. He also recommended

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the REN property for acquisition, where currently 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.

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

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

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, established in accordance
with Rule 3(a) (58)(A) of the Securities Exchange Act of 1934, as amended, and
audit committee charter, which complies with Rule 10A-3 and the requirements of
the NYSE Alternext US LLC. 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 NYSE Alternext US
LLC): Arnold Dyck, Peter Bell and Richard Holmes. Mr. Arnold Dyck satisfies the
requirement of a financial expert as defined under Item 407(d)(5) of
Regulation S-K and is, in the opinion of the Companys Board of Directors,
independent as that term is used in the NYSE Alternext US LLC Company Guide
and Rule 10A-3 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.

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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 the NYSE Alternext US LLC Company Guide): Peter Bell, Arnold J. Dyck and
Paul Saxton. We have a Compensation Committee charter that complies with the
requirements of the NYSE Alternext US LLC. 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 propose 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 the NYSE Alternext US LLC Company Guide):
Richard Holmes, Peter Bell and Paul Saxton. We have a Nominating Committee
charter that complies with the requirements of the NYSE Alternext US LLC. 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, Benjamin Leboe. We believe our code of ethics is
reasonably designed to deter wrongdoing and promote honest and ethical conduct,
to provide full, fair, accurate, timely and understandable disclosure in public
reports, to comply with applicable laws, to ensure prompt internal reporting of
code violations, and to provide accountability for adherence to the code. Our
code of ethics provides written standards that are reasonably designed to deter
wrongdoing and to promote:

- Honest and ethical conduct, including the ethical handling of actual or
  apparent conflicts of interest between personal and professional
  relationships;
- Full, fair, accurate, timely and understandable disclosure in reports and
  documents that are filed with, or submitted to, the SEC and in other public
  communications made by an issuer;
- Compliance with applicable governmental laws, rules and regulations; 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, 2008, or during the subsequent period
from January 1, 2009, through the date of this report.

Recommendation to the Board of Directors

There have been no changes in the Companys procedures by which
shareholders of the Company may recommend nominees to the Companys Board of
Directors.

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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, 2008 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 andPrincipal Position
    Number ofLate Reports
    Transactions NotTimely
      Reported
    Known Failures toFile a
      Required FormDennis Higgs
    None
    None
    NoneGlenn Catchpole
    One
    One
    NonePaul Saxton
    Two
    Two
    NoneGerhard Kirchner
    Two
    Two
    NoneGeorge Hartman
    None
    None
    NonePeter Bell
    None
    None
    NoneArnold Dyck
    None
    None
    NoneRichard Holmes
    None
    None
    NoneBenjamin Leboe
    None
    None
    NoneKurtis Brown
    None
    None
    NoneDouglas Hirschman
    None
    None
    NoneSonya Reiss
    None
    None
    None


ITEM 11.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 three fiscal years is as follows:

Name **(5)**and 
        Principal Position
    Year
    Salary ($)
    Bonus ($)
    Stock Awards($)
    Option Awards ($) (Note 1)
    Non-Equity Incentive Plan Compensation
      ($)
    Nonqualified Deferred Compensation
      Earnings ($)
    All other Comp.
    Total(a)
    (b)
    (c)
    (d)
    (e)
    (f)
    (g)
    (h)
    (i)
    (j)Dennis Higgs Chairman and
      Director (2)
    2008 2007
      2006
    175,900 142,736 103,200
    800 2,000 35,000
    
    271,733 710,050 483,700
    
    
    9,731
    448,433 854,786 631,631Glenn Catchpole President/ PEO and
      Director (3)
    2008 2007 2006
    180,000 120,000 96,000
    1,000 10,000 50,000
    
    271,733       710,050 483,700
    
    
    6,000
    452,733 840,050 635,700George Hartman Exec. Vice
      President and Director (4)
    2008
      2007 2006
    198,000 199,000
      174,000
    1,000 2,000 25,000
    
    271,733 710,050
      711,326
    
    
    
    470,733 911,050
      910,326Benjamin Leboe 
      Chief Financial
      Officer (5)
    2008 2007 2006
    126,400 82,017 31,414
    800 2,000
    
    271,733 355,000 204,729
    
    
    
    398,933 439,017 236,143Kurtis Brown 
      VP (6)
    2008 
      2007
    123,600 
      103,750
    1,000 
      17,000
    395,253 
      346,147
    
    
    
    28,200
    548,053 
      466,897


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|1. | Option award compensation is the fair value for stock
      options awarded 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 reported herein.                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | Salary is a management fee paid to a private holding
      company of Mr. Dennis Higgs. Mr. Higgs became Chairman of our Board on
      February 1, 2006. In 2005 we entered into a consulting agreement with Ubex
      Capital Inc., wholly owned by Dennis Higgs. The Agreement currently states
      that we will pay a monthly fee of CDN$15,000 in consideration of the
      provision of the services of Mr. Higgs as executive Chairman.                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3. | 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 currently states that we will pay a
      monthly consulting fee of US $15,000 in consideration of the provision of
      the services of Mr. Catchpole as our President and Chief Executive
      Officer.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4. | Salary is a consulting fee paid to Mr. George Hartman.
      Mr. Hartmann was appointed Senior Vice President -Mining on May 9, 2005
      and subsequently appointed Executive Vice President and Chief Operating
      Officer. Mr. Hartman is paid for consulting on the basis of $1,000 per
      day.                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5. | 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 currently states that we will pay for
      consulting services provided, based upon a rate of CDN$12,000 per
      month.        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|6. | Mr. Brown was appointed Senior Vice President,
      Exploration in August 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Compensation Discussion and Analysis

Oversight of Executive Compensation Program

The Compensation Committee of the Board of Directors oversees
the Companys compensation programs, which are designed specifically for the
Companys most senior executives officers, including the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer and the other
executive officers named in the Summary Compensation Table (collectively, the
senior executive officers). Additionally, the Compensation Committee is
charged with the review and approval of all annual compensation decisions
relating to senior executive officers.

The Compensation Committee is composed entirely of independent,
non-management members of the Board of Directors. Each year, and at such other
times as is necessary, the Company reviews any and all relationships that each
director has with the Company and the Board of Directors subsequently reviews
these findings. The Board of Directors has determined that none of the
Compensation Committee members have any material business relationships with the
Company.

The responsibilities of the Compensation Committee, as stated
in its charter, include the following:

- Review and assess the adequacy of the Compensation Committee charter
  annually and submit any proposed changes to the Board of Directors for
  approval;
- Produce an annual report on senior executive officer compensation for
  inclusion in the Companys annual report and proxy statement relating to its
  annual meeting of stockholders;

73

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- Review and make such recommendations to the Board of Directors as the
  Compensation Committee deems advisable with regard to all incentive-based
  compensation plans and equity- based plans;
- Review and approve the corporate goals and objectives that may be relevant
  to the compensation of the Companys senior executive officers;
- Evaluate senior executive officer performance in light of the goals and
  objectives that were set and determine and recommend senior executive officer
  compensation based on such evaluation; and
- Review and approve the recommendations of the chief executive officer with
  regard to the compensation of all officers of the Company other than the chief
  executive officer.

Overview of Compensation Program

In order to recruit and retain the most qualified and competent
individuals as senior executive officers, the Company strives to maintain a
compensation program that is competitive in the global labor market. The purpose
of the Companys compensation program is to reward exceptional organizational
and individual performance.

The following compensation objectives are considered in setting
the compensation programs for our named executive officers:

- Drive and reward performance which supports the Companys core values;
- Design competitive total compensation and rewards programs to enhance the
  Companys ability to attract and retain knowledgeable and experienced senior
  executive officers; and
- Set compensation and incentive levels that reflect competitive market
  practices.

Compensation Elements and Rationale

To reward both short and long-term performance in the
compensation program and in furtherance of the Companys compensation objectives
noted above, the Companys compensation program is based on the following
objectives:

(i)           Performance
Goals

The Compensation Committee believes that a significant portion
of a senior executive officers compensation should be tied not only to
individual performance, but also to the Companys performance as a whole
measured against both financial and non-financial goals and objectives. During
periods when performance meets or exceeds these established objectives, senior
executive officers should be paid at or more than expected levels. When the
Companys performance does not meet key objectives, incentive award payments, if
any, should be less than such levels.

(ii)         Incentive
Compensation

A large portion of compensation should be paid in the form of
short-term and long-term incentives, which are calculated and paid based
primarily on financial measures of profitability and stockholder value creation.
Senior executive officers have the incentive of increasing Company profitability
and stockholder return in order to earn a major portion of their compensation
package.

74

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(iii)        Competitive Compensation
Program

The Compensation Committee reviews the compensation of
executives at peer companies to ensure that the compensation program is
competitive. The Company believes that a competitive compensation program will
enhance its ability to attract and retain senior executive officers.

Review of Senior Executive Officer Performance

The Compensation Committee reviews, on an annual basis, each
compensation package for the senior executive officers. In each case, the
Compensation Committee takes into account the scope of responsibilities and
experience and balances these against competitive salary levels. The
Compensation Committee has the opportunity to meet with the senior executive
officers at various times during the year, which allows the Compensation
Committee to form its own assessment of each individuals performance.

Components of the Executive Compensation Program

The Compensation Committee believes the total compensation and
benefits program for named executive officers should consist of the following:

- Base salary
- Stock incentive plan
- Bonus.

Many of the Companys senior executive officers provide
services through consulting or management agreements with the Company. Fees are
paid under consulting or management fees pursuant to these agreements. From
the Companys perspective, these services are provided in this manner for
flexibility considerations. The Company has determined that it is in the best
interests of the Company and its shareholders to maintain consulting and
management agreements rather than employment agreements as it decreases the
number of actual employees of the Company and ensures that employment of key
officers can be negotiated on an as-needed basis with individualized termsa
vital concern to the Company given the relative costs of management salaries and
expenses in a development stage company.

Dennis Higgs, Chairman of the Board of Directors (and
former President)

Mr. Higgs is compensated indirectly through the Companys
consulting agreement with Ubex Capital Inc. The Company engaged Ubex in early
2005 to provide business development and strategic planning consulting services
and management to create a viable resource company. The Board of Directors
considered Mr. Higgs continuing involvement to be of vital interest to the
Companys success and increased Ubexs consulting services over time to the
point where Mr. Higgs provides the Company services as a fully involved
Executive Chairman. The Board upon recommendation from the Compensation
Committee has decided to continue the consulting arrangement to minimize
administrative costs and to maintain the certainty and flexibility of
contractual arrangements. Mr. Higgs has over twenty years experience in
establishing and growing public companies and the Board of Directors upon
recommendation from the Compensation Committee has determined that his
compensation shall be similar to full time Executive Chairmen of public
companies with capitalization in the $200  500 million range.

Glenn Catchpole

Mr. Catchpole is compensated indirectly through the Companys
consulting agreement with Catchpole Enterprises LLC. (CE). The Company engaged
CE in early 2005 to provide industry expertise and

75

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strategic planning consulting services and full-time executive
management to create a viable resource company. The Board of Directors and the
Compensation Committee considers Mr. Catchpoles continuing involvement to be of
vital interest to the Companys success as President and Chief Executive
Officer. The Board has chosen the consulting arrangement to minimize
administrative costs and to maintain the certainty and flexibility of
contractual arrangements. Mr. Catchpole has over thirty years in establishing
and growing public companies and the Board of Directors upon recommendation from
the Compensation Committee has determined that his compensation shall be similar
to full time president and CEO of public companies with capitalization in the
$200  500 million range.

George Hartman

The Companys compensation policy for Mr. Hartman is based on
days spent consulting for the Company. The Board of Directors and the
Compensation Committee believes that this provides the Company with greater
flexibility in controlling expenses. Mr. Hartmans services as Executive
Vice-President, Mining entail a varying degree of attention to the Companys
exploration and development activities. Mr. Hartman has extensive expertise in
the area of mining production, including specifically, in-situ recovery of
uranium, which expertise is very valuable to the Company. Mr. Hartmans salary
exceeded that of other officers in 2006 and 2007 because of the value of his
expertise to the Company and the fact that he spent a substantial amount of time
attending to the Companys mineral projects in those years.

Benjamin Leboe

The Companys compensation policy for Mr. Leboe, as Principal
of Independent Management Consultants of British Columbia is based on time spent
consulting for the Company. The Board of Directors and the Compensation
Committee believes that this provides the Company with greater flexibility in
controlling expenses. Mr. Leboes services as Chief Financial Officer entail a
high and specialized degree of attention to the Companys financial management
and reporting activities. Mr. Leboe has extensive expertise in the area of
financial management, accounting, business valuation and management consulting,
which expertise is very valuable to the Company. Mr. Leboes consulting rate is
based on the Board of Directors determination upon recommendation by the
Compensation Committee of the value of his expertise to the Company and is
comparable to a full time Chief Financial Officer of public companies with
capitalization in the $200  500 million range.

Grants of Plan-Based Awards - 2008

All OtherStockEstimated
    
    
    
    
    
      
    
    
    
    
    
    Awards:Non-Equity
    
    
    Future
    
    
      
    
    
    Under
    
    
    Number of
    
    
    
    
    
    Award(1)
    
    
    Incentive
    
    
      Payouts Plan
    
    
    Awards
    
    
    Shares of
    
    
    
    
    
    DateFair ValueofStock or
    
    
    
    
    
    Stock andThreshold
    
    
    Target
    
    
      Maximum
    
    
    
    
    
    Units (2)
      
    
    
    
    
    OptionName
    
    $
    
    
    $
    
    
      $
    
    
    
    
    
    (#)
    
    
    Award
      Date
    
    
    Awards (1)Dennis Higgs
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    125,000
    
    
    01/07/08
    
    $
    271,733Glenn Catchpole
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    125,000
    
    
    01/07/08
    
    $
    271,733George Hartman
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    125,000
    
    
    01/07/08
    
    $
    271,733Benjamin Leboe
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    125,000
    
    
    01/07/08
    
    $
    271,733Kurtis Brown
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    25,000
    
    
    01/07/08
    
    $
    54,250


|1. | Option award compensation is the fair value for stock
      options granted 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 executives may differ materially and
      adversely from that reported herein.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

76

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Grants of Plan-Based Awards - 2007

All OtherStockEstimated
    
    
    
    
    
      
    
    
    
    
    
    Awards:Non-Equity
    
    
    Future
    
    
      
    
    
    Under
    
    
    Number of
    
    
    
    
    
    Award(1)
    
    
    Incentive
    
    
      Payouts Plan
    
    
    Awards
    
    
    Shares of
    
    
    
    
    
    DateFair ValueofStock or
    
    
    
    
    
    Stock andThreshold
    
    
    Target
    
    
      Maximum
    
    
    
    
    
    Units (2)
    
    
    
    
    
    OptionName
    
    
    
    
    
    
    
      
    
    
    
    
    
    (#)
    
    
    Award
      Date
    
    
    Awards (1)Dennis Higgs
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    250,000
    
    
    01/26/07
    
    $
    710,050Glenn Catchpole
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    250,000
    
    
    01/26/07
    
    $
    710,050George Hartman
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    250,000
    
    
    01/26/07
    
    $
    710,050Benjamin Leboe
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    125,000
    
    
    01/26/07
    
    $
    355,000Kurtis Brown
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    15,000
    
    
    01/26/07
    
    $
    42,600Kurtis Brown
    
    --
    
    
    --
    
    
      
    
    
    --
    
    
    250,000
    
    
    02/09/07
    
    $
    303,547


|1. | Option award compensation is the fair value for stock
      options granted 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 executives may differ materially and
      adversely from that reported herein.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Disclosure Relating to Grants of Plan-Based Awards

In 2008 the Company granted Mr. Higgs, Mr. Catchpole, Mr.
Hartman, Mr. Leboe and Mr. Brown stock options under the Companys 2005
Nonqualified Stock Option Plan. Mr. Higgs Mr. Catchpole, Mr. Hartman and Mr.
Leboe each received 125,000 options, exercisable at $2.64 per share of common
stock acquirable, expiring January 7, 2013. Mr. Brown received 25,000 options,
exercisable at $2.64 per share of common stock acquirable, expiring January 7,
2013. For a discussion of the terms and conditions of the 2005 Nonqualified
Stock Option Plan please see the disclosure under the section heading Market
for Common Equity - 2005 Stock Option Plan

In 2007 the Company granted Mr. Higgs, Mr. Catchpole, Mr.
Hartman, Mr. Leboe and Mr. Brown stock options under the Companys 2005
Nonqualified Stock Option Plan. Mr. Higgs received 250,000 options, exercisable
at $3.20 per share of common stock acquirable, expiring January 26, 2012. Mr.
Catchpole received 250,000 options, exercisable at $3.20 per share of common
stock acquirable, expiring January 26, 2012. Mr. Hartmann received 250,000
options, exercisable at $3.20 per share of common stock acquirable, expiring
January 26, 2012. Mr Leboe received 125,000 options, exercisable at $3.20 per
share of common stock acquirable, expiring January 26, 2012 and Mr. Brown
received 15,000 options, exercisable at $3.20 per share of common stock
acquirable, expiring January 26, 2012 and 250,000 exercisable at $3.45 per share
of common stock acquirable, expiring February 9 , 2012. For a discussion of the
terms and conditions of the 2005 Nonqualified Stock Option Plan please see the
disclosure under the section heading Market for Common Equity - 2005 Stock
Option Plan

77

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Outstanding Equity Awards to Executives at Fiscal Year-end

Option
        Awards
      
      Stock
        AwardsName (a)
      Number
        of Securities Underlying Unexercised
        Options (#) Exercisable (b)
      Number
        of Securities Underlying Unexercised
        Options (#) Unexercisab le
        (c)
      Equity
        Incentive Plan Awards: Number of Securities **Unexercised**Unearned
        Options (#) (d)
      Option
        Exercise Price ($) (e)
      Option Expiry Date (f)
      Number of
        Shares or Units of Stock That
        Have NotVested (#) (g)
      Market
        Value of **Shares or** Units ofStock That Have Not Vested
        ($) (h)
      Equity Incentive
        Plan Awards: Number of Unearned
        Shares, Units or **Other Rights**
        That Have Not Vested (#)
        (i)
      Equity Incentive Plan
        Awards: Market or Payout Value
        of Unearned Shares, Units or Other Rights That Have Not Vested
        ($) (j)Dennis 
        Higgs
      350,000 
        250,000 
        125,000
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      0.75 
        3.20 
        2.64
      Jan 6, 2011 
        Jan 26, 2012 
        Jan 7, 2013
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilGlenn 
        Catchpole
      350,000 
        250,000 
        125,000
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      0.75 
        3.20 
        2.64
      Jan 6, 2011 
        Jan 26, 2012 
        Jan 7, 2013
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilGeorge 
        Hartman
      350,000 
        250,000 
        125,000
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      0.75 
        3.20 
        2.64
      Jan 6, 2011 
        Jan 26, 2012 
        Jan 7, 2013
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilBenjamin 
        Leboe
      100,000 
        125,000 
        125,000
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      1.96 
        3.20 
        2.64
      May 23, 2011 
        Jan 26, 2012 
        Jan 7, 2013
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        NilKurtis 
        Brown
      15,000 
        187,500 
        Nil 
        25,000
      Nil 
        Nil 
        62,500 
        Nil
      Nil 
        Nil 
        Nil 
        Nil
      3.20 
        3.45 
        3.45 
        2.64
      Jan 26, 2012 
        Feb 9, 2012 
        Feb 9, 2012 
        Jan 7, 2013
      Nil 
        Nil 
        62,500 
        Nil
      Nil 
        Nil 
        31,875 
        Nil
      Nil 
        Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil 
        Nil


Option Exercises and Stock Vested in 2008

Option
        Grants
      Stock
        AwardsNumber of
      
      Number of
      ValueShares
      Value Realized
      Shares
      Realized onAcquired
      on Exercise
      Acquired on
      VestingName
      on Exercise
      ($)
      Vesting
      ($)Dennis Higgs
      Nil
      Nil
      Nil
      NilGlenn Catchpole
      Nil
      Nil
      Nil
      NilGeorge Hartman
      36,300
      50,917
      Nil
      NilBenjamin Leboe
      Nil
      Nil
      Nil
      NilKurtis Brown
      Nil
      Nil
      Nil
      Nil


78

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Option Exercises and Stock Vested in 2007

Option
        Grants
      Stock
        AwardsNumber of
      
      Number of
      ValueShares
      Value Realized
      Shares
      Realized onAcquired
      on Exercise
      Acquired on
      VestingName
      on Exercise
      ($)
      Vesting
      ($)Dennis Higgs
      Nil
      Nil
      Nil
      NilGlenn Catchpole
      Nil
      Nil
      Nil
      NilGeorge Hartman
      Nil
      Nil
      Nil
      NilBenjamin Leboe
      Nil
      Nil
      Nil
      NilKurtis Brown
      Nil
      Nil
      Nil
      Nil


Compensation Committee Interlocks and Insider Participation

No person who served as a member of the Compensation Committee
during fiscal 2008 or 2007 was a current or former officer or employee of the
Corporation or engaged in certain transactions with the Company required to be
disclosed by regulations of the SEC. Additionally, there were no compensation
committee interlocks during 2007 and 2008, which generally means that no
executive officer of the Corporation served as a director or member of the
compensation committee of another entity, which had an executive officer serving
as a director or member of the Companys Compensation Committee.

Compensation Committee Report

The Uranerz Energy Corporation Compensation Committee oversees
the Companys compensation reporting process on behalf of the Board of
Directors. The Committee has three members, each of whom is independent as
defined in the NYSE Alternext US LLC Company Guide. The Committee operates under
a written charter, revised and adopted by the Board.

The Committee assists the Board of Directors by overseeing the
(1) annual review of director and executive officer compensation policies and
goals, (2) determining the compensation of directors and executive officers, (3)
and providing accurate public disclosure of the Companys compensation.

In the course of providing its oversight responsibilities
regarding the Companys compensation of directors and executive officers in
2008, the Committee reviewed and discussed with management the Compensation
Discussion and Analysis included in this Annual Report.

Based on the Committees review of the Compensation Discussion
and Analysis and discussions with the Board of Directors and the Companys
management, the Committee recommended that the Compensation Discussion and
Analysis be included in this Annual Report.

Submitted by the following members of the Compensation
Committee of the Board of Directors:

|/s/ Peter Bell | /s/ Arnold J. Dyck | /s/ Paul Saxton
|-------------- | ------------------ | ---------------

79

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Pension Benefits

None

Non-Qualified Deferred Compensation

None

Retirement, Resignation or Termination Plans

Officers with contracts for services have notice requirements
which permit pay in lieu of notice. In December 2007 we approved a policy
whereby officers will receive a termination payment of a multiple of their
annual compensation following a change in control of our Company. The multiple
used for a change of control payment is five times for officers Higgs, Catchpole
and Hartman and three times for all other officers.

Director Compensation - 2008

FeesEarned or
    
    
    Non-Equity
    Non- QualifiedName
    Paid in
    Stock
    Option
    Incentive Plan
    Compensation
    All OtherCash
    Awards
    Awards
    Compensation
    Earnings
    Compensation
    Total($)
    ($)
    ($)
    ($)
    ($)
    ($)
    ($)Note
      (1)(a)
    (b)
    (c)
    (d)
    (e)
    (f)
    (g)
    (h)Gerhard Kirchner
    4,000
    
    76,085
    
    
    
    80,085Paul Saxton
    8,500
    
    76,085
    
    
    
    84,585Arnold Dyck
    20,500
    
    76,085
    
    
    6,000
    102,585Peter Bell
    21,000
    
    76,085
    
    
    
    97,085Richard Holmes
    17,500
    
    76,085
    
    
    
    93,585


|1. | Option award compensation is the fair value for stock
      options granted 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 reported herein.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Director Compensation - 2007

|Name             | Fees Earned or Paid in Cash
      ($) | Stock Awards ($) | Option Awards ($) Note
      (1) | Non-Equity Incentive Plan
      Compensation ($) | Non- Qualified Compensation
      Earnings ($) | All Other Compensation ($) | Total ($)
|---------------- | ------------------------------------- | ---------------- | -------------------------------- | ------------------------------------------------ | ---------------------------------------------- | -------------------------- | ---------
|(a)              | (b)                                   | (c)              | (d)                              | (e)                                              | (f)                                            | (g)                        | (h)      
|Gerhard Kirchner | 7,000                                 |                  | 170,400                          |                                                  |                                                |                            | 177,400  
|Paul Saxton      | 11,000                                |                  | 127,800                          |                                                  |                                                |                            | 138,800  
|Arnold Dyck      | 22,000                                |                  | 127,800                          |                                                  |                                                |                            | 149,800  
|Peter Bell       | 22,500                                |                  | 127,800                          |                                                  |                                                |                            | 150,300  
|Richard Holmes   | 19,000                                |                  | 127,800                          |                                                  |                                                |                            | 146,800  

|1. | Option award compensation is the fair value for stock
      options granted 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 reported herein.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The following tables set forth information as of December 31,
2008 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 55,452,387 shares of common stock
outstanding as of December 31, 2008.

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, 2008 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.

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
      4,596,240(2)
      7.73%Common Stock
      Glenn Catchpole 
        Director, President and CEO/PEO 
        222 Carriage Circle 
        Cheyenne, WY., 82009
      2,177,600 (3)
      3.66%


81

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Title of Class
    Name and Address of BeneficialOwner
    Number of Sharesof Common Stock
    Percentage ofCommon Stock (1)Common Stock
    George Hartman Director, Senior Vice
      President, 1220 Elkhorn Valley Drive Casper, WY., 82609
    1,480,600 (4)
    2.49%Common Stock
    Dr. Gerhard Kirchner P.O.Box 196,
      Mont Nebo, SK S0J 1X0
    654,622 (5)
    1.10%Common Stock
    Paul Saxton 188 Stonegate Drive
      Furry Creek, BC., V0N 3G4
    185,000 (6)
    **Common Stock
    Peter Bell #105  3389 Capilano Road
      North Vancouver, B.C., V7R 4W7
    250,000 (7)
    **Common Stock
    Arnold J. Dyck 504  230
      Saskatchewan Crescent East Saskatoon, Saskatchewan S7N 0K6
    233,000 (8)
    **Common Stock
    Richard Holmes 2611 Tanbridge Road
      Charlotte, NC., 28226
    210,000 (9)
    **Common Stock
    Benjamin Leboe, CFO/PFO 16730 Carrs
      Landing Road Lake Country, BC V4V 1B2
    362,000 (10)
    **Common Stock
    Kurtis Brown 3707 Brisbane Avenue
      Bakersfield, CA 93313
    294,000 (11)
    **Total
    
    10,443,062
    17.55%


** - indicates ownership less than 1%

82

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(1)      The
percent of class is based on 59,494,587 shares comprised of 55,452,387 shares of
common stock issued and outstanding as of December 31, 2007 plus 43,500 warrants
and 3,998,700 options vesting within 60 days of December 31, 2007.

(2)    
 Includes 3,830,240 shares, 41,000 exercisable Share Purchase Warrants and
725,000 exercisable Share Purchase Options.

(3)    
 Includes 1,480,100 shares, 2,500 exercisable Share Purchase Warrants and
725,000 exercisable Share Purchase Options.

(4)    
 Includes 791,900 shares and 688,700 exercisable Share Purchase Options

(5)      Includes 284,622 shares and
370,000 exercisable Share Purchase Options.

(6)     
Includes 5,000 shares and 180,000 exercisable Share Purchase Options

(7)      Includes 20,000 shares and
230,000 exercisable Share Purchase Options

(8)     
Includes 3,000 shares and 230,000 exercisable Share Purchase Options

(9)     
Includes nil shares and 210,000 exercisable Share Purchase Options

(10)     Includes
12,000 shares and 350,000 exercisable Share Purchase Options

(11)     Includes
4,000 shares and 290,000 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.

As of December 31, 2008 we had approximately 260 registered
shareholders of record of our common stock.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE

Reportable transactions with related parties since January 1,
2008, including named security holders, are as follows.

Mr. Dennis Higgs, Director and Chairman

During the year ended December 31, 2008, the Company incurred
$375,200 (2007 - $318,997, 2006 - $242,826) for consulting services and office
expenses (included in general and administrative expenses) to companies
controlled by Mr. Higgs who is Chairman of the Company. Other general and
administrative expenses were reimbursed in the normal course of business. At
December 31, 2008, $Nil (2007 - $18,000) is owing to the director and these
companies.

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Mr. Glenn Catchpole, Director, President and Chief Executive
Officer

During the year ended December 31, 2008, the Company incurred
$180,000 (2007 - $120,000, 2006 - $102,000) for consulting services (included in
general and administrative expenses) to a company controlled by Mr. Catchpole,
President and Chief Executive Officer of the Company. Other general and
administrative expenses were reimbursed in the normal course of business.

Mr. George Hartman, Director, Executive Vice-President and
Chief Operating Officer

During the year ended December 31, 2008, the Company incurred
$198,000 (2007 - $199,000, 2006 - $174,000) for consulting services (included in
general and administrative expenses) to Mr. Hartman, a director who is also
Executive Vice President and Chief Operating Officer. Other general and
administrative expenses were reimbursed in the normal course of business. In
2007, the Company acquired property assets from this director, valued at
$402,250 (see Note 7(a)). During the year ended December 31, 2006, the Company
settled $121,148 of debt through the granting of 131,000 stock options. At
December 31, 2008, consulting services and expenditures incurred on behalf of
the Company of $50,000 (2007 - $50,865) is owed to this director, and the
amounts are unsecured, non-interest bearing, and due on demand.

Mr. Benjamin Leboe, Director, Chief Financial Officer

During the year ended December 31, 2008, the Company incurred
consulting fees of $126,400 (2007 - $82,017, 2006 - $31,414) to an entity
controlled by Mr. Leboe, the Chief Financial Officer of the Company. The amounts
have been recorded as general and administrative expense.

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, 2007 and
2008.

Director Independence

We had eight directors at December 31, 2008, including five
independent directors, as follows:

Dennis Higgs Glenn Catchpole George Hartman Dr.
Gerhard Kirchner, independent 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 the
NYSE Alternext US LLC Company Guide.

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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 three
fiscal years ended December 31, 2008:

|Years Ended December 31
|-----------------------
|                       
|Audit Fees             
|Audit Related Fees     
|Tax Fees               
|All Other Fees         
|Total                  

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.

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES

Documents Filed as Part of This Report.

(1) Financial Statements

| | • | Consolidated Balance Sheets as of
      December 31, 2008 and 2007                                               
| | - | -----------------------------------------------------------------------------------------------------------------
| | • | Statements of Consolidated
      Operations for the years ended December 31, 2008, 2007, and 2006                
| | • | Statements of Consolidated Common
      Shareholders Equity for the years ended December 31, 2008, 2007 and 2006
| | • | Statements of Consolidated Cash
      Flows for the years ended December 31, 2008, 2007, and 2006                
| | • | Notes to Consolidated Financial
      Statements                                                                 
| | • | Reports of Independent Registered
      Public Accounting Firm                                                   

(2) Financial Statement Schedules

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

85

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(3) Exhibits

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

|Exhibit |                                                                                                                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                                                                                                            
|3.1     | Articles of
        Incorporation (1)                                                                                                                                                                                  
|3.2     | Bylaws, as amended (1)                                                                                                                                                                                                 
|3.3     | Articles of
        Amendment filed July 5, 2005 (3)                                                                                                                                                                   
|3.4     | Articles of Amendment file August
        8, 2008(16)                                                                                                                                                                  
|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)                                                                                                                                                                                             
|10.12   | Mr. George Hartman
        letter agreement. (3)                                                                                                                                                                       
|10.13   | Black Range Minerals Agreement
        dated June 7, 2006 (5)                                                                                                                                                          
|10.14   | Amendment to
        Joint Venture Agreement dated September 12, 2006 between the Company and
        Bluerock Resources Ltd. (6)                                                                                      
|10.15   | Agreement dated February 1,
        2007 between the Company and Robert C. Shook to acquire three projects
        separate uranium projects located in northeast Wyoming, in central Powder
        River Basin (7)(8)
|10.16   | Consulting Agreement
        dated February 1, 2007 between the Company and O & M Partners, LLC
        (7)(8)                                                                                                         
|10.17   | Christensen Ranch Agreement
        dated October 30, 2006 between the Company and George Hartman (9)(10)                                                                                                              
|10.18   | Amendment Agreement
        dated January 1, 2007 between the Company and Ubex Capital Inc. (10)                                                                                                                       
|10.19   | Amendment Agreement dated January
        1, 2007 between the Company and Catchpole Enterprises Inc. (10)                                                                                                              
|10.20   | Amendment Agreement
        dated January 1, 2007 between the Company and Senate Capital Group Inc.
        (10)                                                                                                       
|10.21   | Purchase and Sale Agreement
        with NAMMCO dated September 19, 2007, as amended (11)(12)                                                                                                                          
|10.22   | Venture
        Agreement with United Nuclear LLC dated January 15, 2008 (13)                                                                                                                                          
|10.23   | Amendment
        Agreement dated January 1, 2008 between the Company and Independent Management
        Consultants of British Columbia                                                                               

86

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|Number | Description                                                                                                                                                                                                        
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.24  | Amendment
        Agreement dated January 1, 2008 between the Company and Ubex Capital Inc.                                                                                                                        
|10.25  | Amendment
        Agreement dated January 1, 2008 between the Company and Catchpole Enterprises
        Inc.                                                                                                       
|10.26  | Amendment
        Agreement # 2 dated January 1, 2008 between the Company and Senate Capital
        Inc.                                                                                                          
|10.27  | Amendment
        Agreement # 3 dated September 30, 2008 between the Company and Senate
        Capital Inc.                                                                                                       
|10.28  | Agency Agreement
        with Haywood Securities and Cormark Securities Inc. dated April 15, 2008(14)                                                                                                              
|10.29  | Amendment to Joint Venture Agreement
        dated March 20, 2008 between the Company and Bluerock Resources Ltd. (15)                                                                                             
|23.1   | Consent
        of Manning Elliott LLP, independent registered accountants                                                                                                                                         
|31.1   | Certification
        of Chief Executive Officer pursuant to Rule 13a-15(f) of the Exchange
        Act                                                                                                            
|31.2   | Certification
        of Chief Financial Officer pursuant to Rule 13a-15(f) of the Exchange
        Act                                                                                                            
|32.1   | Certification
        of Chief Executive Officer pursuant to Rule 13a or 15(d) of the Exchange
        Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002
|32.2   | Certification
        of Chief Financial Officer pursuant to Rule 13a or 15(d) of the Exchange
        Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002

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

87

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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.

FASB: Financial Accounting Standards Board

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

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

SEC: Securities and Exchange Commission

SFAS: Statement of Financial Accounting Standards

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

Uranium concentrate (yellowcake): a yellowish to
yellow-brownish powder obtained from the chemical processing of uranium ore.
Yellowcake typically contains 70 to 90% U3O8 by weight.

88

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SIGNATURES

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

URANERZ ENERGY CORPORATION

|By: | /s/
      Glenn Catchpole                                          | 
|--- | ------------------------------------------------------------------ | 
|    | Glenn Catchpole, President and Principal                           | 
|    | Executive Officer                                                  | 
|    | Director                                                           | 
|    | Date: March 11, 2009                                               | 
|    |                                                                    | 
|By: | /s/
      Benjamin Leboe                                           | 
|    | Benjamin Leboe, Chief Financial Officer                            | 
|    | Principal Financial Officer and Principal
      Accounting Officer | 
|    | Date: March 11, 2009                                               | 

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

|Per: | /s/
      Glenn Catchpole                | 
|---- | ---------------------------------------- | 
|     | Glenn Catchpole, President, Director     | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      Dennis Higgs                   | 
|     | Dennis Higgs, Chairman, Director         | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      Gerhard Kirchner               | 
|     | Dr. Gerhard Kirchner, Director           | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      George Hartman                 | 
|     | George Hartman, Vice President, Director | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      Peter Bell                     | 
|     | Peter Bell, Director,                    | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      Paul Saxton                    | 
|     | Paul Saxton, Director                    | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      Arnold Dyck                    | 
|     | Arnold Dyck, Director                    | 
|     | Date: March 11, 2009                     | 
|     |                                          | 
|Per: | /s/
      Richard Holmes                 | 
|     | Richard Holmes, Director                 | 
|     | Date: March 11, 2009                     | 

89

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