URANERZ ENERGY CORPORATION. Price (C$) Associate: Michael Wichterle, MBA

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1 October 11, 2012 Initiating Coverage URANERZ ENERGY CORPORATION Production imminent: The newest uranium producer Equity Research INVESTMENT THESIS Uranerz Energy Corporation will be beginning initial ISR uranium production early next year at its Nichols Ranch In-Situ Recovery ( ISR ) facility in the Powder River Basin, Wyoming. We expect an upward re-rating of the stock as it trades in line with its net asset value as opposed to a preproduction/development discount. VALUATION We are initiating coverage on Uranerz Energy Corporation with a BUY recommendation and a $2.05 per share target price. Our target price reflects a 1.0x multiple to our 10% NAV. FOCUS POINTS On the verge of production Uranerz broke ground on mine construction in August of 2011 and is on track for initial production by the first quarter of Off-takes signed Long-term off-take agreements have already been signed with two major utilities. Domestic U.S. security of supply The U.S. consumes over 51M lbs of U 3O 8 annually, but only produces 4.3M lbs U 3O 8 on an annual basis. Domestic security of supply is important for American utilities. Consolidation likely as supply tightens Post-Fukushima, uranium miners have seen their share prices plunge. However, the fundamentals of supply and demand have remained largely unchanged. As the spot uranium price ultimately resumes its upward trajectory, we can see a scenario where either consolidation takes place in the Powder River Basin, or due to tightness of supply, utilities themselves take active ownership in producing uranium mines. Recommendation: BUY Symbol/Exchange: URZ/TSX; URZ/AMEX; U9E/FRANKFURT Sector: Metals and Mining All dollar values in C$ unless otherwise noted. Current price One year target: $1.53 $2.05 Return target 34% Cash on hand $19.3M Company Summary Shares O/S (M) week range Market cap ($M) $120.4 Avg. weekly vol. (000) Market float ($M) $106.0 Fiscal year-end 31-Dec 2011A 2012E 2013E 2014E Uranium Production (000s lbs) Operating Cost ($M) Revenue ($M) Cash Cost (US$/lb) N/A N/A $30.64 $30.64 EBITDA ($M) EPS, diluted -$0.20 -$0.22 -$0.13 -$0.05 CFPS -$0.12 -$0.22 -$0.04 $0.09 Price/Revenue N/A N/A Price/CFPS N/A N/A N/A 17.8 EV/Lbs $4.54 $6.10 $6.54 $6.81 Source: Company Reports and Cantor Fitzgerald Estimates Price (C$) $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Nov/11 Jan/12 Mar/12 May/12 Jul/12 Sep/12 Company profile: Uranerz Energy Corporation is a uranium company with a global resource of 18M lbs of uranium located in Wyoming s Powder River Basin. In-Situ Recovery uranium production is scheduled to begin in H1/ Volume (M) Rob Chang, MBA Associate: Michael Wichterle, MBA RChang@cantor.com MWichterle@cantor.com (416) (514) Cantor Fitzgerald Canada Corporation Sales/Trading Toronto: (416) , (866) ; Montreal: (514) , (800) See disclosure and a description of our recommendation structure at the end of this report.

2 SUMMARY AND RECOMMENDATION We are initiating coverage of Uranerz Energy Corporation with a BUY recommendation and a $2.05 target price. In Uranerz we see a compelling combination of near-term production, valuation, and solid uranium fundamentals on the supply and demand side. On the verge of production Uranerz began construction on its Nichols Ranch processing facility in August of 2011 and the company expects initial ISR production to begin in the first quarter of As per company guidance, 2013 production is expected at 300,000 lbs, with total production ramping to around 1.2M lbs annually after The Nichols Ranch processing facility is designed with a 2M lb/year production capacity ensuring plenty of space to ramp upwards as other satellite ISR mines (Hank, Jane Dough, Reno Creek, and West North Butte) come on-stream in the future. Exhibit 1. Uranerz targeted production profile Source: Uranerz Energy Corporation Off-takes signed Uranerz has signed two off-take agreements with large U.S. utilities that account for 40% of its initial production. These contracts were negotiated in , when the uranium pricing environment was higher than it currently is today. Domestic U.S. security of supply At 51M lbs of U 3O 8 annually, the U.S. is the world s largest consumer of yellowcake. However, the country only produces about 4.3M lbs U 3O 8 annually. With nuclear power accounting for 19.2% of the U.S. energy mix, sourcing U 3O 8 from a domestic source is of great importance for U.S. energy security. Consolidation likely as supply will tighten Despite the tragic events at Fukushima in March 2011 and large economies such as Japan and Germany pledging to move away from nuclear power, uranium supply and demand fundamentals have remained largely unchanged. Globally, there are 65 nuclear reactors currently under construction (largely in China and India) with an additional 160 planned and 323 proposed. In order to meet the growing demand we envision an increase in both the spot and term uranium price as numerous mines are uneconomic at the current US$45.75/lb spot U 3O 8 price. Rob Chang MBA, (416) of 19

3 Additionally we note the global ramp in uranium production has been bumpy with delays to Cameco s (CCO:TSX) Cigar Lake mine and declining grades at Energy Resources of Australia s (ERA:ASX) massive Ranger mine. As the price per lb resumes its pre-fukushima rise, we expect consolidation in various uranium jurisdictions. Cameco and Uranium One (UUU:TSX) have adjacent properties to Uranerz in the Powder River Basin and may look to acquire the company as it transitions into a producer. We even envision a possible scenario in which more utilities take ownership in uranium production and/or exploration companies in order to secure future supply. This scenario has happened most recently with an unnamed utility financing Paladin Energy (PDN/TSX) while using the company s Michelin project as collateral, Mitsubishi acquiring a stake in CanAlaska Uranium (CVV:TSXV) and Kintyre, while Korea Electric Power Co. took a stake in Imouararen and Strathmore Minerals (STM:TSX). COMPANY HISTORY Uranerz Energy Corporation was incorporated under the laws of the State of Nevada on May 26, The company began exploration in 2005 and filed uranium mining applications for a project in Wyoming in Uranerz became a pure play in uranium exploration in 2008 when assets in Mongolia and Saskatchewan were sold. Regulatory approval for the first mine development was received in Shares of Uranerz trade on the TSX and NYSE Amex under the ticker URZ, and on the Frankfurt Stock Exchange under the ticker U9E. The name Uranerz is in fact homage to a German state-owned entity by the same name that was acquired by Cameco in While there are no official links between the current company and its namesake, several members of the management team were former senior members or employees of the original Uranerz. PROJECT PROFILE Powder River Basin The Powder River Basin ( PRB ) is a geological formation covering southeast Montana and extending into northeast Wyoming. It stretches 190km east to west and 320km north to south. The PRB is more known for coal production than for uranium as the region supplies about 40% of the coal in the U.S, thus making it the largest coal mining region in the country. Notable companies that have conducted historic drilling in the PRB include: Kerr Mcgee, Conoco, Texaco, American Nuclear, and the Tennessee Valley Authority. Additionally, there are publicly available drill results from approximately 1,250 coal bed methane exploration/production wells, many of which sit on Uranerz property. Uranium was first discovered in the PRB in 1951 near Pumpkin Buttes and production commenced two years later. More recently, ISR production began in 2006 at Smith Ranch, a mine owned by Power Resource, a subsidiary of Cameco. Moore Ranch was the next ISR mine to reach production, originally owned by Energy Metals, in 2007 it became a subsidiary of Uranium One. Along with Uranerz, Strathmore Minerals is another notable uranium company in the PRB, as it works to advance the Gas Hills project. Rob Chang MBA, (416) of 19

4 Exhibit 2. Uranerz Powder River Basin acreage Uranerz 100%-owned properties in the PRB total 25,261 acres in area. An additional 62,153 acres in the area is 81%-owned by URZ with the balance owned by the Arkose Mining Venture. Source: Uranerz Energy Corporation Uranerz is currently advancing five projects at various stages of development. Central to Uranerz low cost ISR development strategy, as seen from Exhibit 2, is the close proximity of all of the projects to the Nichols Ranch processing Rob Chang MBA, (416) of 19

5 Exhibit 3. NI compliant resource calculation Source: Uranerz Energy Corporation facility (within 30km). This short distance can ensure that additional feedstock can be piped and accepted by the Nichols Ranch processing facility, which is designed with a process capacity of 2M lbs per year. Stage Measured & Indicated Inferred Total %U3O8 Lbs %U3O8 Lbs Wgt Avg %U3O8 Lbs Nichols Ranch In Development 0.114% 2,287, % % 2,287,250 Hank Permitted 0.123% 2,236, % 246, % 2,482,803 Jane Dough Near Term Permitted 0.108% 3,255, % 277, % 3,532,419 Reno Creek Exploration 0.056% 4,292, % 142, % 4,435,115 West North Butte Exploration 0.153% 2,837, % 2,681, % 5,518,943 North Rolling Pin Exploration 0.058% 664, % 32, % 697, % 15,572, % 3,380, % 18,953,573 Nichols Ranch & Hank The Eocene age Wasatch Formation hosts uranium mineralization within the Nichols Ranch property. The Wasatch is comprised of interbedded fine to medium-grained sandstone, siltstone, claystone, and coal layers. The sandstones compose roughly one-half of the sequence and tend to be lenticular and laterally discontinuous. The finer claystone siltstone layers are more laterally continuous. The mineralized zones at the Nichols Ranch property are typical Powder River Basin roll-front deposits. Uranium mineralization, where present, is found at the interface of naturally occurring chemical boundaries between reduced and oxidized sandstone facies. The lower portion of the Wasatch formation is where the mineral-bearing host sands are found at Nichols Ranch. The host sand unit at Nichols Ranch is labelled the A sand. The A sand is 60 feet to 110 feet in thickness. Mineralization at Nichols Ranch ranges from 400 to 700 feet from the surface and averages approximately 550 feet deep. Initial production at Uranerz is expected to come from Nichols Ranch s Production Area 1 and later Production Area 2. The Hank property is forecast to commence production in Nichols Ranch will be the site of the ion exchange uranium concentrating facility while the Hank property will house a second ion exchange concentrating facility. While the Nichols Ranch facility has the capacity and approval to contain a full mill to process uranium-loaded resin, an agreement to mill the resin at Cameco s Smith Ranch Highland mill will help URZ avoid US$9.6M in capital costs. Initial production is guided to be 300,000 lbs in 2013 with a targeted ramp up of between 600, M lbs of U 3 O 8 per year. Initial capital expenditure costs for Nichols Ranch is expected to total US$38M for construction and operating costs are forecast to be US$35.00/lb U 3 O 8 (including taxes and royalties). The LOM from both Nichols Ranch and Hank is expected at around five to seven years. Rob Chang MBA, (416) of 19

6 Exhibit 4. Nichols Ranch Source: Uranerz Energy Corporation Jane Dough The life and economics of the Jane Dough property mirror that of Nichols Ranch. The one notable difference is that development has yet to commence as the property is still in the permitting phase. Jane Dough is located 5km from the Nichols Ranch processing facility and will serve as the next satellite property offering feedstock to the plant. A typical satellite facility would require capex of $13.5M and have an all-in operating cost of $32/lb. Additional Sites Reno Creek and West North Butte are currently still in the exploration phase as two rigs are active in proving up reserves and resources. The initial resource of nearly 10M lbs of U 3 O 8 (from the two projects combined) suggests future feedstock replacement once older wells expire. The advantage of the Uranerz production model is the close proximity of its assets to the centrally built processing facility, which allows for multiple feedstock sources and the potential development of lower grade, low capex satellite facilities. Additionally, as illustrated on Exhibit 2, industry heavyweights Cameco and Uranium One are active in the Powder River Basin. Cameco is active with its 21.2M lbs U 3 O 8 Crow Butte and 4.2M lbs U 3 O 8 Ruth ISR test mine, while Uranium One is active with its 5.8M lbs U 3 O 8 Moore Ranch mine. Uranerz however is the dominant landowner in the PRB, with a controlling interest of over 87,000 acres, ensuring additional exploration upside as additional mineralization is expected to be encountered throughout the property. OFF-TAKE AGREEMENTS IN PLACE Uranerz has off-take agreements with two major U.S. nuclear utilities. Exelon, which has the largest fleet of nuclear reactors in the U.S. (third-largest worldwide) is one of the parties while the other utility is not disclosed. Rob Chang MBA, (416) of 19

7 Contracts for both parties are long-term in nature with deliveries over a fiveyear period that account for about 40% of Uranerz initial forecast production (we have assumed 200,000 lbs). These contracts have flexible (undisclosed) start dates for deliveries. From a pricing perspective, one contract has a fixed set price with built in price escalation levers. The other uses a combination of spot and long-term prices with a predetermined floor and ceiling. It has been noted by management that these contracts were negotiated in a period of higher uranium prices and that the contracts are quite favourable when compared to the current uranium price environment of US$45.75/lb spot and US$60.00/lb term. BACK TO THE FUTURE: URZ SHOULD MIRROR UEC We compare Uranerz to Uranium Energy Corp (UEC:AMEX) as the company s steady growth from exploration to permitting, construction and ultimately production closely follows UEC s growth profile. UEC began production from its Texas-based Palangana ISR mine in late 2010 and has seen rapid appreciation in its share price. In exhibit 5, we re-base Uranerz to UEC. Exhibit 5. URZ & URE Re-Based to UEC: January 2, Present Source: Cantor Fitzgerald Canada Corporation As can be seen from Exhibit 5 above, Uranerz has tracked UEC s developments closely. Note that on the development front, Uranerz is about 1-2 yrs behind that of UEC. As can be seen from the graph, post announcement of UEC s receipt of the final draft permit for first production, post announcement of initial construction, and post announcement of initial production has yielded a large upward move in the share price. The share prices have yet to recover post Fukushima and are still substantially below their respective peaks prior to the tsunami. Uranerz announced the start of construction for the Nichols Ranch facility in August of 2011 and due to its occurrence in the post-fukushima Rob Chang MBA, (416) of 19

8 world, its share price is actually lower at present than at time of announcement. We do acknowledge the realities of living in a current environment that is heavily influenced by overseas macro issues rather than company or industry specifics; however, we hold the view that these issues are transient and the valuations based on valuations will return eventually. TIME TABLE & NEAR TERM DRIVERS 2H/12: Receipt of Deep Disposal Well permit from the Wyoming Department of Environmental Quality, Water Quality Division. Q1/13: Initial ISR production to begin 2H/12-FY/13: We expect a gradual re-start of additional Japanese reactors following the two at Ohi, which may serve as a catalyst to increase the spot uranium price. FINANCIALS AND OWNERSHIP STRUCTURE As of September 2012, Uranerz Energy Corporation had 77.2 million shares outstanding, along with 2.0M warrants (priced at $3.00 expiring in June 2014) and 7.7M options (average strike price of $2.54). The company is currently funded with $19.3 M in its treasury and no debt. Institutional ownership includes: Haywood Securities Asset Management (6.7%) Deans Knight Capital Management (5.7%), Global X Management (5.5%), BlackRock Inc. (4.5%), and Vanguard Group (0.5%). Management owns approximately 8.5% of the company. Notable members include: Chairman Dennis Higgs (5.0%), President Glenn Catchpole (1.9%), and former Chief Operating Officer George Hartman (1.0%). VALUATION For our valuation model, we assume a similar ramp in production from to what the company guided. The most notable deviation is that we assume more modest production of about 230,000 lbs of U 3O 8 in 2013 as opposed to the forecasted 300,000 lbs. Rob Chang MBA, (416) of 19

9 Exhibit 6. Cantor Production Estimates (lbs of U 3 O 8 ) 1,400,000 1,200,000 1,000, , , , , Source: Cantor Fitzgerald Canada Corporation Nichols Ranch Hank Jane Dough - South Doughstick Reno Creek Relative to the 2008 PEA, we have assumed higher initial capital expenditures with a $38M initial capex assumption for Nichols Ranch and satellite capex assumptions of $17M each (versus 2008 PEA estimates of about $35M and $16M, respectively). We have factored in higher operating costs as well with our average cash cost per pound at Nichols Ranch coming in at US$28.42/lb, which is 18.4% higher than the PEA estimate of US$24.00/lb. Our uranium price forecast is displayed in exhibit 7 and it assumes a long term price of US$70/lb. Exhibit 7. Uranium Price Estimates (in USD) 2009A 2010A 2011A 2012E 2013E 2014E 2015E LT Uranium Price $46.66 $46.46 $57.01 $52.50 $65.00 $75.00 $70.00 $70.00 USD/CAD $1.14 $1.01 $1.02 $1.00 $1.00 $1.00 $1.00 $1.00 Source: Cantor Fitzgerald Canada Corporation We have also assumed development and production of the Hank, Jane Dough, and Reno Creek satellite projects in our model. Cash costs for each of these projects are expected to average US$26.17/lb, US$17.47/lb, and US$30.58/lb, respectively. As a result our 10% net asset valuation for Uranerz Energy is $2.05 per share. Exhibit 8. Net Asset Valuation Uranerz Energy Projects NAV Per Share Comment Nichols Ranch, Hank, Jane Dough and Reno Creek $ % Discount Rate Working Capital 16.9 $0.22 Q2/12 Financials Total $2.05 Source: Cantor Fitzgerald Canada Corporation Rob Chang MBA, (416) of 19

10 We are initiating coverage of Uranerz Energy with a BUY rating and a $2.05 per share target price. Our target price reflects a 1.0x multiple to our 10% NAV. Exhibit 9. Sensitivity Analysis Long term uranium price (Base US$70/lb) Long-Term Price Sensitivity $56.00 $1.61 $63.00 $1.83 $70.00 $2.05 $77.00 $2.26 $84.00 $2.48 Source: Cantor Fitzgerald Canada Corporation Exhibit 10. Key DCF Assumptions Assumptions/Estimates Discount Rate 10% Total Royalties 8.0% Tax Rate 35% Uranium Recovery 73% Start Up - Nichols Ranch 2013 Start Up - Hank 2015 Start Up - Jane Dough 2017 Start Up - Reno Creek 2018 Initial Capital - Nichols Ranch $38 Million Initial Capital - Hank $17 Million Initial Capital - Jane Dough $17 Million Initial Capital - Reno Creek $17 Million Estimated Avg Cash Cost per lb of U308 (net of byproduct credits) - Nichols Ranch US$28.24/lb Estimated Avg Cash Cost per lb of U308 (net of byproduct credits) - Hank US$26.17/lb Estimated Avg Cash Cost per lb of U308 (net of byproduct credits) - Jane Dough Estimated Avg Cash Cost per lb of U308 (net of byproduct credits) - Reno Creek Nichols Ranch Processing Facility Capacity Source: Cantor Fitzgerald Canada Corporation US$17.47/lb US$30.58/lb 2M lbs per year Once it commences production, Uranerz will enter the rarefied air of publiclytraded, uranium-focused producers and become the seventh such company (see exhibit 11). Unlike exploration companies, which often trade at in-situ valuation metrics of either market capitalization or enterprise value per pound of uranium in the ground, producers trade at net asset values and on forward cash flow metrics. Since Uranerz is just about to begin production and will take at least a year to ramp up production (as well as bring other assets into production) a net asset valuation approach is most appropriate. Rob Chang MBA, (416) of 19

11 Exhibit 11. Comparables Company Name Stage Stock Price ($C) Market Cap ($M) Enterprise Value ($M) MKT / LB EV / LB Resources (M lbs) Producers Avg Grade P&P M&I Inferred Total Cameco Corp. (TSX:CCO) Production $ , ,938.0 $7.56 $ % Energy Fuels Inc. (TSX:EFR) Production $ $1.60 $ % Energy Resources of Australia Ltd. (ASX:ERA) Production $ $1.09 $ % Paladin Energy Ltd (ASX:PDN) Production $1.25 1, ,598.2 $2.14 $ % Uranium Energy Corp. (AMEX:UEC) Production $ $3.25 $ % Uranium One Inc. (TSX:UUU) Production $2.22 2, ,442.3 $6.36 $ % Average Production 1, ,067.1 $3.67 $3.86 Developers Avg Grade P&P M&I Inferred Total Alliance Resources Ltd. (ASX:AGS) Development $ $3.80 $ % UR-Energy Inc. (TSX:URE) Development $ $4.32 $ % Average Development $4.06 $2.65 Uranerz Energy Corp. (AMEX:URZ) Development $ $6.19 $ % Source: Cantor Fitzgerald Canada Corporation INVESTMENT RISKS Investing in mining and exploration companies is inherently risky. Commodity, geological, operational, regulatory, or financing risks on projects could result in delays in development or production, impact economics or disrupt shipment schedules. Commodity Risk The Company is in the development stage. There is a risk that uranium prices could decline in the interim as a result of an imbalance between additional mine supply entering the market and market demand. Should the price of uranium decline significantly, the Company could choose to delay or cancel further production, development, or exploration. Any delay or termination could have an adverse impact on the future financial position and profitability of the Company. Geologic Risk Future drilling may result in a lack of future exploration success. This may serve to impact the upside potential of the company. Regulatory Risk In accordance with applicable national and regional laws and regulations, Uranerz Energy Corporation is required to obtain the proper permits and licenses in order to conduct exploration, development, and production activities. We believe that Uranerz Energy Corporation has been and will continue to be diligent in its preparation of the applications for the required permits and licenses for its projects; however, the regulatory review period could take longer than expected. With considerable mineral development taking place, the regulatory agencies may be stretched to the limit, prompting further delays. Political Risk We believe that the Wyoming State government will continue its favourable view towards mining and mineral exploration. However, any prolonged local opposition could impede exploration efforts as a result of additional public review/comment periods or debate and possibly even potential litigation. Rob Chang MBA, (416) of 19

12 APPENDIX A: SENIOR MANAGEMENT Dennis Higgs Executive Chairman Mr. Higgs serves as the Executive Chairman of Uranerz Energy and has been involved in the financial and venture capital markets for over twenty-five years. He also serves as and President of Senate Capital. Previously, Mr. Higgs was CFO of Miranda Gold Corp. and President and CEO of Carlton Ventures. Glenn Catchpole President & CEO 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. Mr. Catchpole has extensive experience in ISR uranium mining as his career responsibilities included the monitoring and oversight of the environmental and regulatory aspects of two large uranium mines in Canada; the operational aspects of one uranium solution mine in the United States; serving as the general manager and managing director of the Inkai uranium solution mining project located in the Republic of Kazakhstan. Benjamin Leboe Senior VP & CFO Mr. Benjamin D. Leboe has been Chief Financial Officer of Uranerz Energy Corporation since May 23, 2006 and also serves as its Ethics Officer, Principal Accounting Officer and Senior Vice President of Finance. Prior to joining Uranerz, Leboe was a Senior Consultant for the Business Development Bank of Canada. His work experience also includes serving as Director, Chief Financial Officer, Principal Accounting Officer and Treasurer of numerous public companies in Canada and USA. Kurtis Brown Senior VP & Geology & Development Mr. Brown is a 35-year veteran in the mineral extraction industry and he started his uranium geology career with the OPI-Western Joint Venture in Wyoming in He managed the exploration program in the Great Divide Basin for the Joint Venture delineating over 20 million pounds of uranium resources. Prior to joining Uranerz, Mr. Brown was a consultant, providing geology services including the acquisition evaluations of Great Divide and Powder River Basin projects. Sandra Mackay Senior VP & Legal & Corporate Secretary Ms. MacKay has over 25 years of experience working within law firms as counsel within business organizations in a variety of industries including petrochemical, engineering, biotechnology and mining. Ms. MacKay's legal experience includes acting for both public and private companies on a wide variety of corporate-commercial transactions. APPENDIX B: URANIUM INDUSTRY The uranium industry has seen a renaissance of sorts since the early 2000s. The spot uranium price increased from a low of US$6.40/lb in January of 2001 to a Rob Chang MBA, (416) of 19

13 high of US$135/lb in June of 2007 (marking six and a half years of consecutive increases in price). This run in price has been spurred by increases in the oil price, increases in global energy demand, increases in climate change awareness and by an increasing number of countries trying to achieve energy independence by lessening its reliance on imported energy. Since the June 2007 peak, the uranium price hit a low of US$40/lb at the height of the financial crisis. In 2010, the spot price was gaining traction again and hit a high of US$70/lb until in March of 2011 the Fukushima disaster struck and derailed the price yet again. We currently sit at depressed pricing of US$45.75/lb for the spot and US$60.00/lb for the long term price as post disaster, countries such as Japan, Germany and Switzerland have decided to phase out of nuclear power. However, the Japanese have recently decided to restart two nuclear reactors at Ohi to avoid power shortages. In a post-fukushima world, once cutting through the political rhetoric, we note that the supply and demand fundamentals have not changed all that much. The U.S. has not changed its stance on nuclear power and if anything, 2012 was a milestone year as it approved licences for four new nuclear power plants to begin construction (the first new approvals in 34 years). The U.K also announced a build of eight new nuclear reactors, while Saudi Arabia announced it will build 16 reactors, and Brazil will build nine (one is currently under construction). China, India and Russia have all re-affirmed their support for nuclear power, combined those three countries represent approximately 50% of new reactor construction. According to the World Nuclear Association, there are currently 433 operational reactors worldwide (eight have been removed from Germany and all but two in Japan are shut down indefinitely for maintenance), with the U.S. leading the way with 104 reactors. Exhibit 12. Nuclear Reactor Build Under Construction Ordered or Planned Proposed (Sept) Source: World Nuclear Association We note that the total new reactor builds (under construction, planned, and proposed) has increased by 57% from 349 in 2007, to the current 548 as of September As a general rule of thumb, a new reactor requires an initial Rob Chang MBA, (416) of 19

14 load of 1.2 M lbs of U 3O 8 and reloads of approximately 900,000 lbs of U 3O 8 every 18 months. In an environment of rising oil prices, despite the long lead time for plant construction (averaging 10 years from permitting to financing to construction) and despite high capital costs per plant (approximately $10B for a 1,000MW reactor) nuclear power is in fact cost effective. The average plant can last up to 40 years and its life can be further extended with the proper upgrades and refurbishments. As the nuclear industry migrates away from small national programs to global cooperative schemes, the mass production of new plants will drive down production costs, as is currently the case in China. Uranium as a fuel source itself is extremely cheap, as one barrel of uranium oxide on a BTU ( British thermal unit ) equivalent basis is approximately equal to 36,000 barrels of oil. Exhibit 13. Summary of Generating Costs per MWh 5% Discount Rate 10% Discount Rate Nuclear $21-$31 $30-$50 Coal $25-$50 $35-$60 Natural Gas $37-$60 $40-$63 Source: IEA & OECD-NEA It should be noted that like solar, wind, and hydro power, nuclear power has a low carbon emission footprint, however, the big distinction between nuclear and the other alternative energy sources is that nuclear energy is energy creation, whereas hydro, solar, and wind are simply energy capture and storage. Moreover, unlike hydro, solar, and wind, nuclear power is the only power source that can produce on a constant and uninterrupted basis, which makes it eligible for baseload capacity. Supply & Demand In order to keep all 104 domestic nuclear reactors operating, the United States consumes over 51M lbs of U 3 O 8 per year. Of this total, the Highly Enriched Uranium ( HEU ) agreement with Russia supplies about 24M lbs of U 3 O 8. On the other hand, domestic U.S.-based production is a mere 4M lbs per year. On a global scale, we can see how the market is already in deficit, with mine supply totalling approximately 140M lbs and secondary sources (namely via HEU) supplying 26M lbs, compared to global demand of 177M lbs. As can be seen below, the supply from secondary sources will be almost halved post 2013 HEU expiration. This scenario will affect the U.S. market the most as HEU supply accounts for approximately 45% of U.S. utility needs. Rob Chang MBA, (416) of 19

15 Exhibit 14. Uranium Global Supply & Demand (in M lbs) a 2008a 2009a 2010a 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e Existing Supply Secondary Sources Likely Additions Possible Additions Global Demand Source: Ux Consulting, World Nuclear Association With the spot price currently at US$45.75/lb (long-term at US$60.00), there is little incentive for new mine production from higher cost mines like those in Africa and Australia since it does not adequately cover operating and capital costs. We believe a spot price of at least US$70/lb will spur new mining production. In a low spot price environment as we currently have, we prefer ISR mines over conventional open pit uranium mines simply because the average production cost for a typical ISR mine is US$15-$40 per lb of U 3 O 8, whereas an open pit mine cost can average $30-$70 per lb. For these reasons, we prefer domestic, U.S. based ISR uranium producers. APPENDIX C: IN-SITU RECOVERY ( ISR ) ISR uranium mining is a technique practiced by 41% of current uranium miners worldwide (and nearly all of U.S.-based uranium mining). It is a comparable technique to that of SAGD (Steam Assisted Gravity Drainage) mining techniques used for extracting bitumen in Canada s oil sands region. In essence, ISR is process that uses a leaching solution to extract uranium from sandstone uranium deposits. This leaching agent contains an oxidant such as oxygen and together with sodium bicarbonate, is added to the native groundwater and injected through wells into the ore body in a confined aquifer to dissolve the uranium. The solution is then pumped to the surface via recovery wells running in parallel to the injector wells. Rob Chang MBA, (416) of 19

16 Exhibit 15. The In-Situ Recovery (ISR) Technique Source: Uranerz Energy Corporation The ISR technique has numerous advantages over conventional underground or open pit mining. Visually, there is minimal surface disturbance as all one can see are the tops of the recovery and injection wells. As such, ISR has much less of an environmental footprint as very little earth is moved in the process. Heavy machinery and tailings ponds are generally not required in the process either. Moreover, the required workforce needed to run operations is much smaller than for conventional mining since no physical mining actually takes place. For these reasons, ISR mining is much less capital intensive for mine development and the time between construction and first production is much shorter. The wells reach a depth of 300-1,000 feet below surface. Additionally, despite the higher grades encountered at Nichols Ranch, ISR mining is profitable at much lower grades as well. Exhibit 16. Minimal surface disturbance Cameco s Crow Butte ISR mine in Nebraska Source: Uranerz Energy Corporation Rob Chang MBA, (416) of 19

17 APPENDIX D: FINANCIAL STATEMENT ANALYSIS Exhibit 17. Cash Flow Analysis 2010A 2011A 2012E 2013E 2014E 2015E Cash Flows from Operations Net Income Adjustments Cash Flows from Investments Investment in Property and Equipment Other Cash Flows from Financings Issuance of Common Stock Other Net Change in Cash *In millions Source: Uranerz Energy, Cantor Fitzgerald Estimates Exhibit 18. Balance Sheet Analysis 2010A 2011A 2012E 2013E 2014E 2015E Current Assets Cash & Equivalents Other Fixed Assets Mineral Property Reclamation Surety Deposits Property and Equipment Other Total Assets Current Liabilities Accounts Payable Other Non-Current Liabilities Asset Retirement Obligation Other Shareholders' Equity Shareholders' Equity Non-Controlling Interest Total Liabilities and Equity *In millions Source: Uranerz Energy, Cantor Fitzgerald Estimates Rob Chang MBA, (416) of 19

18 Exhibit 19. Profit and Loss Analysis 2010A 2011A 2012E 2013E 2014E 2015E Revenue Operating Expenses Gross Operating Profit Depreciation EBIT Interest EBT Tax (35%) Net Income EPS *In millions Source: Uranerz Energy, Cantor Fitzgerald Estimates Rob Chang MBA, (416) of 19

19 DISCLAIMERS AND DISCLOSURES Disclaimers The opinions, estimates and projections contained in this report are those of Cantor Fitzgerald Canada Corporation ( Cantor ) as of the date hereof and are subject to change without notice. Cantor makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and that contain information and opinions that are accurate and complete; however, Cantor makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this report or its contents. Information may be available to Cantor that is not herein. This report is provided, for informational purposes only, to institutional investor clients of Cantor Fitzgerald Canada Corporation, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. This report is issued and approved for distribution in Canada, Cantor Fitzgerald Canada Corporation, a member of the Investment Industry Regulatory Organization of Canada ("IIROC"), the Toronto Stock Exchange and the CIPF. This report has not been reviewed or approved by Cantor Fitzgerald & Co., a member of FINRA. This report is intended for distribution in the United States only to Major Institutional Investors (as such term is defined in SEC 15a-6 and Section 15 of the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major institutional investor. Major Institutional Investors receiving this report should effect transactions in securities discussed in the report through Cantor Fitzgerald & Co. Potential conflicts of interest The author of this report is compensated based in part on the overall revenues of Cantor, a portion of which are generated by investment banking activities. Cantor may have had, or seek to have, an investment banking relationship with companies mentioned in this report. Cantor and/or its officers, directors and employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. Although Cantor makes every effort possible to avoid conflicts of interest, readers should assume that a conflict might exist, and therefore not rely solely on this report when evaluating whether or not to buy or sell the securities of subject companies. Disclosures as of October 11, 2012 Cantor has not provided investment banking services or received investment banking related compensation from Uranerz Energy within the past 12 months. The analysts responsible for this research report do not have, either directly or indirectly, a long or short position in the shares or options of Uranerz Energy The analyst responsible for this report has visited the material operations of Uranerz Energy. No payment or reimbursement was received for the related travel costs. Analyst certification The research analyst whose name appears on this report hereby certifies that the opinions and recommendations expressed herein accurately reflect his personal views about the securities, issuers or industries discussed herein. Definitions of recommendations BUY: The stock is attractively priced relative to the company s fundamentals and we expect it to appreciate significantly from the current price over the next 6 to 12 months. BUY (Speculative): The stock is attractively priced relative to the company s fundamentals, however investment in the security carries a higher degree of risk. HOLD: The stock is fairly valued, lacks a near term catalyst, or its execution risk is such that we expect it to trade within a narrow range of the current price in the next 6 to 12 months. The longer term fundamental value of the company may be materially higher, but certain milestones/catalysts have yet to be fully realized. SELL: The stock is overpriced relative to the company s fundamentals, and we expect it to decline from the current price over the next 6 to 12 months. TENDER: We believe the offer price by the acquirer is fair and thus recommend investors tender their shares to the offer. UNDER REVIEW: We are temporarily placing our recommendation under review until further information is disclosed. Member-Canadian Investor Protection Fund. Customers' accounts are protected by the Canadian Investor Protection Fund within specified limits. A brochure describing the nature and limits of coverage is available upon request. Rob Chang MBA, (416) of 19