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Option and Purchase Agreement

|BETWEEN: | Excalibur Industries               
|-------- | -----------------------------------
|         | 1800 Lake View Drive               
|         | Post Office Box 3551               
|         | Duluth, Minnesota 55803            
|         | USA                                
|         |                                    
|         | Fax: (218) 724-5609                
|         |                                    
|         | (hereafter the Seller)           
|         |                                    
|         |                                    
|AND:     | Uranerz Energy Corporation         
|         | Suite 1410  800 West Pender Street
|         | Vancouver, BC V6C 2V6              
|         | CANADA                             
|         |                                    
|         | Fax: 604-689-1722                  
|         |                                    
|         | (hereafter the Buyer)            

WHEREAS the Seller attests, affirms and warrants that it is the
owner of forty-five (45) federal unpatented lode mining claims located in the
Power River Basin of Wyoming, USA, more particularly described in Exhibit A
attached to and by this reference incorporated into this Option and Purchase
Agreement (the Agreement); and

WHEREAS the Seller further attests and affirms that its
ownership of the aforementioned forty-five mining claims is free and clear of
any liens or other encumbrances; and

WHEREAS these forty-five mining claims are distributed among
six (6) locations also identified in Exhibit A by location name (collectively
referred to as the Properties or individually, a Property); and

WHEREAS the Buyer is desirous of exploiting and extracting the
uranium and other valuable solid mineral contained within the unpatented lode
mining claims identified in Exhibit A, and selling the extracted uranium or
other valuable solid mineral in the market place for its own account; and

WHEREAS it is for the mutual benefit of the Seller and Buyer
(the Parties) that this Agreement be executed.

NOW THEREFORE, for and in consideration of the sum of Ten
dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Seller, and in further
consideration of the terms and conditions hereinafter contained to be faithfully
kept, observed, and performed by the Seller and Buyer, the Parties hereto agree
as follows:

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|1.  | Definitions                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                          
|1.1 | Dollars  All mention of dollars or currency or price in
      this agreement shall be in United States Dollars.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                          
|1.2 | Extensions - An "Extension" shall be any uranium bearing
      geochemical roll front, cell, or envelope that is clearly identifiable and
      traceable from drill hole cuttings, electric logs, or chemical assay, and
      extends to an adjacent property that is identifiable by the same means and
      methods.
|    |                                                                                                                                                                                                                                                                                                                          
|1.3 | Effective Date  The date stated on the signature page of
      this Agreement shall be the Effective Date.                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                          
|1.4 | Minimum Expenditure  The requirement for Buyer to spend
      $750,000 within three years or less from the Effective Date on field
      activities as further defined in Article 2.2.                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                          
|1.5 | Option Period  That period of time starting with the
      Effective Date and lasting three (3) years or less during which time the
      Buyer must meet the Minimum Expenditure requirement, and as further
      defined in Article 2.2.                                                                             
|    |                                                                                                                                                                                                                                                                                                                          
|2.  | Specific Terms and Conditions                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                          
|2.1 | Review of Information                                                                                                                                                                                                                                                                                                    

The Seller hereby grants the Buyer a thirty (30) day period
(the Review Period) in which to visit the facility in Moab, Utah where the
Seller has its geologic and other technical files placed in storage, and Seller
allows the Buyers staff to examine said files and make copies of any
information that pertains to the Properties. The cost of staff time, travel
expenses, copy work, etc. is all at the cost of the Buyer. The thirty day period
starts on December 15, 2005 and ends at 11.59 p.m. on January 15, 2006.

|2.2 | Option Period
|--- | -------------

Seller hereby grants Buyer an Option Period up to three (3)
years in length from the date of signing of this Agreement on condition that the
Buyer makes minimum field expenditures on the Properties of Seven Hundred and
Fifty Thousand Dollars and No Cents ($750,000.00) by the end of the three-year
Option Period. Field expenditures may include the following:

| | a) | all drilling, logging, coring, and analysis conducted on
      the Properties;                                                                   
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                  
| | b) | all surveying and mapping conducted within the area
      containing the Properties;                                                             
| |    |                                                                                                                                                  
| | c) | all payments to owners of the surface within the area
      containing the Properties;                                                           
| |    |                                                                                                                                                  
| | d) | any permitting related costs on the Properties such as
      baseline studies, hydrologic testing, prorated environmental staff time,
      etc.;
| |    |                                                                                                                                                  
| | e) | travel expenses of staff in connection with their work on
      the Properties;                                                                  
| |    |                                                                                                                                                  
| | f) | prorated cost of any purchased field equipment related to
      Buyers Wyoming activities;                                                      

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| | g) | costs related to commercial development of the Properties
      including feasibility study, project design, construction (wellfields and
      plant), and purchase of commercial mining equipment;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                     
| | h) | any government fees for permit and license applications
      and the processing of same related to the Properties;                                                                                 
| |    |                                                                                                                                                                                                     
| | i) | the prorated cost of the Buyers Casper office expenses
      including rent, insurance, utilities, office supplies and office equipment
      (limited to no more than 50% of these costs);        
| |    |                                                                                                                                                                                                     
| | j) | project geologist (or prorated cost if not 100%
      assigned); and                                                                                                                                
| |    |                                                                                                                                                                                                     
| | k) | the prorated cost of senior management time (limited to
      no more than 25% of managements time in any
month).                                                                                  

At any time prior to the Buyer satisfying the $750,000 minimum
field expenditure requirement and by giving sixty (60) days written notice, the
Buyer may terminate its involvement with the Properties and may terminate this
Agreement subject to the fulfillment of the requirements of Article 2.13. The
Buyer, at its sole discretion, may at any time during the Option Period place an
amount of money in an escrow account equal to the difference between $750,000
and dollar amount of field expenditures actually made to that point in time, and
thereby complete all requirements of the Option Period. The money placed in
escrow can subsequently be withdrawn by the Buyer under the provision that the
money withdrawn may only be spent on the development of the Properties.

|2.3 | Ownership Transfer
|--- | ------------------

Seller grants to Buyer the exclusive right to acquire the
Properties, subject to Buyer meeting the $750,000 Minimum Expenditure
requirement and paying the $250,000 Advanced Royalty to the Seller, and subject
to the Royalty on production requirement. Upon the Buyer meeting the
requirements of the Option Period, the Seller shall Quitclaim Deed the ownership
of the Properties (45 mining claims) to the Buyer. Once the Buyer obtains
ownership of the Properties, it may, at its sole discretion, exchange any one or
more of the six Properties for other uranium mineral properties owned by a third
party (or parties).

|2.4 | Extensions (mineral)
|--- | --------------------

The Terms and Conditions of this Agreement shall also apply to
all Extensions for a straight-line distance of one (1) statute mile from the
external boundary, as of the Effective Date, of any of the six Properties
provided that the Buyer either owns, or at some point in the future owns, the
uranium mineral on the lands covered by any Extension.

|2.5 | Advanced Royalty
|--- | ----------------

An advanced royalty in the amount of two-hundred and fifty
thousand dollars and no cents ($250,000.00) (the Advanced Royalty) shall be
payable to the Seller by the Buyer upon the execution of this Agreement and
after the Review Period. The Advanced Royalty payment of $250,000 will be
deducted during the first production until the sum of the Advanced Royalty is
exhausted.

|2.6 | Royalty
|--- | -------

The Buyer will pay the Seller a royalty on uranium yellowcake
(U3O8) production based on the spot selling price of
yellowcake (U3O8)Royalty will be paid on a calendar
quarter basis with

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payment made no later than the last day of the month following
the end of the calendar quarter. For example, the royalty payment for the first
calendar quarter of any year will be received by the Seller by no later than
April 30th. The spot price for any calendar quarter, for the purpose
of calculating the royalty payment, will be the average of the spot price
reported by Ux (or other mutually agreeable reporting service) during that
calendar quarter. Calendar quarter yellowcake production quantity will be based
on accepted engineering procedures. Buyer shall keep true and accurate written
records of all of its operations and activities under this Agreement, and during
March of each year the Buyer will determine actual production from the
Properties for the previous calendar year based on yellowcake
(U3O8) quantities received by the conversion facility.
Written accounting documentation of the quantity of yellowcake
(U3O8) accepted by the conversion facility will be
provided to the Seller. The April royalty check will be adjusted for any over or
under royalty payment made during the previous calendar year.

The royalty rate shall be as follows:

If the average spot price of uranium for any calendar quarter
is $45.00 or less the royalty rate shall be six percent (6%), and if the average
spot price of uranium for any calendar quarter is $45.01 or higher the royalty
rate shall be eight percent (8%). Royalty payments are limited to production
from the Properties and their Extensions.

|2.7 | Term of the Royalty
|--- | -------------------

The term of the Royalty hereby created shall be perpetual, it
being the intent of the Parties hereto that, to the extent allowed by law, the
Royalty constitutes a vested interest in and a covenant running with the land
and affecting the Properties and all successions thereof whether created
privately or through governmental action. In the event a court of competent
jurisdiction determines that the term of this Agreement violates the Rule
Against Perpetuities, then the term of this Agreement shall automatically be
revised and reformed to coincide with the maximum term permitted by the Rule
Against Perpetuities, and this Agreement shall not be terminated solely as
result of a violation of the Rule Against Perpetuities.

|2.8 | Commingling
|--- | -----------

Uranium, in any form, and at any stage of processing, that
originates from a location other than the Properties may be commingled, mixed,
or blended with the uranium from any of Properties after the quantities have
been first determined by accepted engineering practices. Royalties will be
allocated by the Buyer to the respective originating source(s) and reflected in
royalty settlements.

|2.9 | Information, Data and Reports
|--- | -----------------------------

The Buyer will provide the Seller with copies of all data
obtained by the Buyer during the Option Period related to the Properties and
their Extensions including e-logs, lithologic logs, geologic/reserve maps &
reports, hydrologic reports, water quality data, environmental data &
reports, and permit applications. Such data will be forwarded by the Buyer to
the Seller during the Option Period on a periodic basis.

|2.10 | Maintenance of Mining Claims
  (Properties)
|---- | -------------------------------------------

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The Seller will maintain the Properties (45 mining claims) in
accordance with county, state and federal requirements including timely filings
during the Option Period, and will be responsible for making any and all
required payments including Bureau of Land Management Maintenance Fees. Seller
will provide Buyer with copies of all documents related to the maintenance of
the mining claims at the same time that the documents are submitted to the
government agencies, and the documents with payment shall be submitted to the
Bureau of Land Management Wyoming State Office at least thirty (30) days before
the due date. Sellers failure to legally maintain the Properties resulting in
the forfeiture of any or all of the 45 mining claims will, at the option of the
Buyer, result in the termination of this Agreement and the refund of the
$250,000 Advanced Royalty payment.

|2.11 | Surface Use and Other Agreements
|---- | --------------------------------

The Buyer shall be responsible for obtaining and maintaining
any required agreements with the surface land owners relative to the use of the
land by the Buyer in connection with its activities on the Properties. The Buyer
shall also be responsible for obtaining any required permits or licenses
required for exploration and development activities such as state DEQ License to
Explore, State Engineer water well permits, etc. The cost of acquiring and
maintaining these agreements and permits will be the responsibility of the
Buyer, and will accrue to the Minimum Expenditure account.

|2.12 | Indemnification
|---- | ---------------

Seller shall not be liable to Buyer and Buyer waives all claims
against Seller for any injury to or death of any person or damage to or
destruction of any personal property or equipment or theft of property occurring
on or about the Properties or arising from or relating to the Buyers business
conducted on the Properties. The Buyer shall defend, indemnify and hold harmless
the Seller and its members, officers, directors, agents and employees from and
against any and all claims, judgments, damage, demands, losses, expenses, costs
or liability arising in connection with injury to person or property from any
activity, work, or things done, permitted or suffered by the Buyer or Buyers
agents, partners, servants, employees, invitees or contractors on or about the
Properties, or from any breach or default by Buyer in the performance of any
obligation on the part of Buyer to be performed under the terms of this
Agreement (all of the foregoing collectively referred to as General Indemnity
Claims). The Buyer agrees to defend all General Indemnity Claims on behalf of
Seller.

|2.13 | Environment
|---- | -----------

The Buyer is responsible for the clean-up or reclamation of any
disturbances caused by its activities on the Properties that are in violation of
any county, state or federal laws or regulations. This responsibility extents to
final reclamation and decommission of the Properties at the conclusion of all
mining activities. The Buyer shall promptly reimburse, defend, indemnify and
hold harmless the Seller, its employees, directors, assigns,
successors-in-interest, agents and representatives from any and all claims,
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys fees, consultants fees and other experts fees
and costs), and damages, relating to contamination, breach of any obligation or
any non-compliance with applicable environmental laws resulting from the Buyers
use of the Properties. The Buyer shall not be liable for any disturbances,
property damage, or surface or subsurface contamination that occurred or exists
on the Properties prior to the Effective Date of this Agreement.

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|2.14 | Termination by Seller
|---- | ---------------------

During the Option Period, any failure by the Buyer to perform
any of its covenants, liabilities, obligations or responsibilities under this
Agreement shall be a default. The Seller must give the Buyer written notice of a
default. If the default is not remedied within thirty (30) days after receipt of
the notice, provided the default can reasonably be cured within that time, or,
if not, if the Buyer has not within that time commenced action to cure the same
or does not after such commencement diligently prosecute such action to
completion, the Seller may terminate this Agreement by delivering notice to
Buyer of the Sellers termination of this Agreement.

|2.15 | Termination by Buyer
|---- | --------------------

During the Option Period, the Buyer may at any time terminate
this Agreement by giving written thirty (30) days advance notice to Seller. If
the Buyer terminates this Agreement, the Buyer shall perform all obligations
including any required reclamation or decommissioning to the satisfaction the
government agencies having jurisdiction as specified in Article 2.13. Upon the
Buyers termination of this Agreement, within ten (10) days after termination,
the Buyer shall execute and deliver to Seller a release and termination of this
Agreement in a form acceptable for recording. The Advanced Royalty payable to
the Seller by the Buyer is not refundable in the case of a Termination covered
by this Article.

|2.16 | Abandonment or Surrender
|---- | ------------------------

Should Buyer at any time after acquiring ownership of the
Properties desire to surrender or abandon any of the 45 mining claims comprising
the Properties, it shall give written notice to the Seller at least sixty (60)
days prior to the contemplated date of surrender or abandonment of such mining
claim or claims. Unless Seller shall within forty-five (45) days after receipt
of such written notice, notify Buyer of their consent to such surrender or
abandonment, Buyer shall immediately, upon termination of said forty-five (45)
days, assign and transfer to Seller all of Buyers interest in and to the mining
claim or claims concerned and all appurtenances thereto, free and clear of all
clouds or encumbrances caused, suffered or created by, through or under Buyer
including completion of all governmental environmental reclamation requirements
as specified in Article 2.13. Thereupon, Buyer shall be relieved from all
obligations thereafter accruing under this Agreement or otherwise with respect
to the claim or claims covered by such assignment.

|3.  | General Terms              
|--- | ---------------------------
|    |                            
|3.1 | Relationship of the Parties

This Agreement is not a partnership. Nothing contained in this
Agreement shall be deemed to constitute one party being a partner of the other
party. It is not the intention of the Parties to create nor shall this Agreement
be construed to create any mining, commercial or other partnership.

|3.2 | Assignments
|--- | -----------

Neither the Seller nor Buyer may assign or transfer this
Agreement or any rights hereunder or in the Properties without the prior written
consent of the other, such consent not to be unreasonably withheld.

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|3.3 | Inspection
|--- | ----------

The Seller or Sellers duly authorized representatives shall be
permitted to enter on the Properties and the Buyers workings at all reasonable
times during normal business hours for the purpose of inspection, but they shall
enter on the Properties at their own risk and in such a manner which does not
unreasonably hinder, delay or interfere with Buyers operations. The Seller
shall have access at all reasonable times during normal business hours to the
Buyers yellowcake production records upon at least ten (10) days prior written
notice.

|3.4 | Memorandum Agreement
|--- | --------------------

The parties shall execute and deliver a memorandum of this
Agreement suitable for recording. The execution of the memorandum shall not
limit, increase or in any manner affect any of the terms of this Agreement or
any rights, interests or obligations of the Parties. The memorandum of this
Agreement shall not contain the salient particulars of this document.

|3.5 | Force Majeure
|--- | -------------

The Option Period will be suspended to the extent and for the
period that activities on the Properties by the Buyer are prevented or delayed
for any cause, whether foreseeable or unforeseeable, beyond its reasonable
control, including, without limitation, labor disputes, acts of God, delays in
obtaining any required government approvals, shortage of contractors or
materials, interruption of energy supplies, actions of citizens groups or NGOs,
including native rights groups. Immediately upon the cessation of Force Majeure
the Buyer will notify the Seller in writing and shall take steps to recommence
or continue activities as soon as reasonably practical.

|3.6 | Confidentiality
|--- | ---------------

All matters concerning the execution and contents of this
Agreement, and the Properties shall be treated as and kept confidential by the
Parties and there shall be no public release of any information concerning the
Properties without the prior written consent of the other party, such consent
not to be unreasonably withheld; except as required by applicable securities
laws, the rules of any stock exchange on which a partys shares are listed or
other applicable laws or regulations.Notwithstanding the foregoing the
Parties are entitled to disclose confidential information to prospective
investors or lenders, who shall be required to keep all such confidential
information confidential.

|3.7 | Governing Law and Forum Selection
|--- | ---------------------------------

This Agreement shall be construed and enforced in accordance
with the laws of the State of Wyoming.

|3.8 | Dispute Resolution
|--- | ------------------

In the event of disputes, controversies or claims arising from
an alleged breach of this Agreement, or disputes arising out of or related to
this Agreement over substantial factual issues concerning technical mining or
metallurgical matters, the Parties agree to be bound by binding arbitration to
be conducted in Casper, Wyoming in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. All disputes arising out of or
related to

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this Agreement over issues concerning technical mining or
matters shall be resolved by arbitrators who are experts in the relevant fields.
The applicable substantive law shall be the law of the State of Wyoming and
discover shall be conducted pursuant to the Wyoming Rules of Civil Procedure,
and the Wyoming Rules of Evidence shall apply.

|3.9 | Notices
|--- | -------

Any notices required or authorized to be given by this
Agreement shall be in writing and shall be sent either by commercial courier,
facsimile, or by certified U.S. mail, addressed to the proper party at the
address stated below or such address as the party shall have designated to the
other parties in accordance with this Section. Such notice shall be effective on
the date of receipt by the addressee party, except that any facsimiles received
after 5:00 p.m. of the addressees local time shall be deemed delivered the next
day.

| | If to Seller:   | Excalibur Industries               
| | --------------- | -----------------------------------
| |                 | 1800 Lake View Drive               
| |                 | Post Office Box 3551               
| |                 | Duluth, Minnesota 55803            
| |                 | USA                                
| |                 |                                    
| |                 | Fax: (218) 724-5609                
| |                 | E-mail: mhubert@msn.com            
| |                 |                                    
| |                 |                                    
| |                 |                                    
| | If to Buyer:    | Uranerz Energy Corporation         
| |                 | Suite 1410  800 West Pender Street
| |                 | Vancouver, BC V6C 2V6              
| |                 | CANADA                             
| |                 |                                    
| |                 |                                    
| |                 | Fax: 604-689-1722                  
| |                 | E-mail: dennis@senategroup.com     
| |                 |                                    
| |                 |                                    
| | With a copy to: | Glenn Catchpole                    
| |                 | Uranerz Energy Corporation         
| |                 | 222 Carriage Circle                
| |                 | Cheyenne, WY 82009                 
| |                 | USA                                
| |                 |                                    
| |                 | Fax: 307-778-0540                  
| |                 | E-mail: gjcwyo@aol.com             

|3.10 | Binding Effect of Obligations
|---- | -----------------------------

This Agreement shall be binding upon and inure to the benefit
of the respective parties and their successors in interest, legal
representatives and/or assigns of the respective parties hereto. These covenants
run with the land.

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|3.11 | Entire Agreement
|---- | ----------------

The parties agree that the entire agreement between them is
written in this Agreement. There are no terms or conditions, express or implied,
other than expressly stated in this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the parties with the same
formality as this Agreement.

|3.12 | Amendments
|---- | ----------

No amendment, supplement or restatement of any term of this
Agreement is binding unless it is in writing and signed by both Parties.

|3.13 | Multiple Counterparts
|---- | ---------------------

This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute the same Agreement.

|3.14 | Recovery of Costs
|---- | -----------------

In any action to construe or enforce the provisions of this
Agreement, the prevailing party shall be entitled to recover such partys
reasonable attorney's fees (including, expressly, costs of services of
paralegals) and all court costs and other expenses incurred in connection to
such construction or enforcement action.

|3.15 | Time of the Essence
|---- | -------------------

Time is of the essence in the performance of the Parties
obligations under this Agreement.

The Parties have executed this Agreement effective the _____day
of December 2005.

| |    | Excalibur Industries            
| | -- | --------------------------------
| |    |                                 
| |    |  Joseph P. Hubert             
| | By |                                 
| |    | Joseph P. Hubert, President     
| |    |                                 
| |    |                                 
| |    | Uranerz Energy Corporation      
| |    |                                 
| |    | Glenn Catchpole               
| | By |                                 
| |    | Glenn Catchpole, President & CEO

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|ACKNOWLEDGEMENT                  |  
|-------------------------------- | -
|                                 |  
|STATE OF WYOMING                 | )
|                                 | )
|COUNTY OF ______________________ | )

On this _______________ day of December A.D. 2005 before me
personally appeared Glenn J. Catchpole to me known to be the person described in
and who execute the foregoing instrument, and acknowledged that he executed the
same as his free act and deed.

My commission expires ____________________

______________________________NOTARY PUBLIC





|ACKNOWLEDGEMENT                  |  
|-------------------------------- | -
|                                 |  
|STATE OF Minnesota               | )
|                                 | )
|COUNTY OF ______________________ | )

On this _______________ day of December A.D. 2005 before me
personally appeared Joseph P. Hubert to me known to be the person described in
and who execute the foregoing instrument, and acknowledged that he executed the
same as his free act and deed.

My commission expires ____________________

___________________________NOTARY PUBLIC

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