Forward-Looking Statements

This quarterly report contains "forward-looking-statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern our anticipated results and developments in our 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:

º risks related to our limited operating history;

º risks related to the probability that our properties contain reserves;

º risks related to our past losses and expected losses in the near future;

º risks related to our need for qualified personnel for exploring for, starting and operating a mine;

º risks related to our lack of known reserves;

º risks related to the fluctuation of uranium prices;

º risks related to environmental laws and regulations and environmental risks;

º risks related to using our in-situ recovery mining process;

º risks related to exploration and, if warranted, development of our properties;

º risks related to our ability to acquire necessary mining licenses or permits;

º risks related to our ability to make property payment obligations;

º risks related to the competitive nature of the mining industry;

º risks related to our dependence on key personnel;

º risks related to requirements for new personnel;

º risks related to securities regulations;

º risks related to stock price and volume volatility;

º risks related to dilution;

º risks related to our lack of dividends;

º risks related to our ability to access capital markets;

º risks related to recent market events;

º risks related to our issuance of additional shares of common stock;

º risks related to acquisition and integration issues; and

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" contained in our annual report on Form 10-K for the year ended December 31, 2008 and filed with the Securities and Exchange Commission on March 12, 2009. 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.

General

Uranerz Energy Corporation was incorporated under the laws of the State of Nevada on May 26, 1999. On July 5, 2005, we changed our name from Carleton Ventures Corp. to Uranerz Energy Corporation. Our executive offices are located at 1701 East "E" Street, PO Box 50850, Casper, Wyoming 82605-0850, USA and our phone number there is 307-265-8900.

Our principal business office and our operations office is located at 1701 East "E" Street, PO Box 50850, Casper, Wyoming 82605-0850 and our phone number there is 307-265-8900. We also maintain an administrative office located at Suite 1410 - 800 West Pender Street, Vancouver, British Columbia, Canada V6C 2V6, and our telephone number there is 604-689-1659.

We are an exploration stage company engaged in the acquisition and exploration of uranium properties. "Uranium" used in this context refers to U3O8. "U3O8", also called yellowcake, is triuranium octoxide produced from uranium ore and is the most actively traded uranium-related commodity.

We are principally focused on the exploration of our properties in the Powder River Basin area of Wyoming. We are exploring these properties with the objective of assessing their viability for commercial in-situ recovery (which we refer to as "ISR") uranium mining projects. ISR is a low cost mining process that uses a "leaching solution" to extract uranium from underground ore bodies. We also own interests in properties in the Great Divide Basin area of Wyoming, in Texas and in Saskatchewan, Canada.

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. These permits, if received, should allow us to produce uranium yellowcake concentrate, which can be sold directly to utilities for fuel used in nuclear electrical generating facilities.

Our Powder River Basin properties include:

º our 100% owned properties that totaled 30,945 acres as of September 30, 2009; and
º our 81% interest Arkose Mining Venture properties that totaled 88,128 acres as of September 30, 2009.

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

                                               Number of Claims/    Acreage
   Property Composition Ownership Interest (1)      Leases       (Approximate)
Unpatented Lode                  100%                1,096       21,920 acres
Mining Claims
State Leases                     100%                  7          6,480 acres
Fee (private) Mineral            100%                 23          2,545 acres
Leases
Total                                                            30,945 acres

(1) Subject to various royalties.

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

Property          No. Claims    Acreage
                             (Approximate)
Doughstick            22          440
Collins Draw          38          760
North Rolling Pin     65         1,300
Hank                  66         1,320
Nichols Ranch         36          720
C-Line                40          800
Willow Creek          11          220

West North-Butte 145 2,900

East Nichols     44   880
North Nichols    107 2,140
TOTAL            574 11,480

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

                                             Number of Claims/    Acreage
Property Composition  Ownership Interest (1)      Leases       (Approximate)
Unpatented Lode                81%                 4,104       67,141 acres
Mining Claims
State Leases                   81%                   3          2,080 acres
Fee (private) Mineral          81%                  68         18,907 acres
Leases
Total                                                          88,128 acres

Through a combination of claim staking, purchasing, and leasing we have also 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. These projects are located in sandstone basins of Tertiary age with known uranium mineralization. However, due to our focus on other projects, we have not yet initiated exploration work on these projects.

Our plan of operations is to continue exploration of our Wyoming Powder River Basin properties. Our Saskatchewan, Wyoming Great Divide Basin and Texas properties are under strategic review. The information regarding the location and access for our Saskatchewan and Wyoming properties, together with the history of operations, present condition and geology of each of our properties, is presented in Item 2 of our Annual Report on Form 10-K for the year ended December 31, 2008 under the heading "Description of Properties", previously filed with the SEC on March 12, 2009.

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 plan to use the low cost mining process of ISR. 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 into finished yellowcake product ready for sale to utilities requiring nuclear fuel for operations - resulting in a cost-efficient and, relative to other common mining methods, a more 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.

Applications for a Permit to Mine and a Source Material License for the Nichols Ranch ISR Uranium Project were submitted to the Wyoming Department of Environmental Quality - Land Quality Division (which we refer to as "WDEQ") and the United States Nuclear Regulatory Commission (which we refer to as "NRC") in December of 2007. Both the NRC and WDEQ applications were deemed complete for further technical and environmental review in April 2008 and August 2008, respectively. In the fall of 2008, we received Requests for Additional Information (which we refer to as "RAI") for the technical review from the NRC. We submitted the response to this RAI, consisting of answers with supporting data, to the NRC during March 2009. This return of information and data will allow the NRC to progress with the review, which should ultimately lead to the issuance of the required Source Materials License that allows us to receive, possess, use, transfer, and deliver radioactive materials. We also received RAIs from the NRC for the environmental portion of the application review on March 12, 2009. We submitted responses to the environmental RAIs in May 2009. The WDEQ is currently conducting their detailed review of the Permit to Mine application, and both the NRC and WDEQ applications are progressing through the regulatory review process. Approval of the permit applications should allow us to proceed with development of the commercial mining facilities and related infrastructure.

The mine plan for the Nichols Ranch ISR Uranium Project includes a central processing facility at our Nichols Ranch property and a satellite ion exchange uranium concentrating facility at our Hank property. The ultimate production level from these two properties is planned to be in the range of 600,000 to 800,000 pounds per year (as U3 08 ). The central processing facility is planned for a licensed capacity of two million pounds per year of uranium (as U3 08) and it is intended that it will process uranium-bearing well-field solutions from Nichols Ranch, as well as uranium-loaded resin transported from the Hank satellite facility, plus uranium-loaded resin from any additional satellite deposits that may be developed on our other Powder River Basin properties. We believe this centralized design enhances the economics of our potential additional satellite projects by maximizing production capacity while minimizing further capital expenditures on processing facilities. The project is progressing through detailed engineering and design.

In anticipation of receiving all the approvals necessary to begin construction in 2010, we have commenced a marketing program for conditional sales of uranium from our Nichols Ranch ISR Uranium Project. On July 23, 2009, we announced that we

During the winter of 2008/09, leach amenability studies were performed on sample cores obtained from the Doughstick and South Doughstick properties. Standard ISR leach "bottle roll" tests were conducted on the samples by Energy Laboratories in Casper, Wyoming. The leach amenability studies intend to demonstrate that the uranium mineralization is capable of being leached using conventional ISR chemistry. The leach solution was prepared using sodium bicarbonate as the source of the carbonate complexing agent. Hydrogen peroxide was added as the uranium oxidizing agent. The study is an indication of the ore's reaction rate and the potential uranium recovery. The test results showed the uranium recovery percentage for South Doughstick as 87.8%, and the uranium recovery percentage for Doughstick as 77.1% . The 88% and 77% results are greater than the 73% that Uranerz used in its Preliminary (Economic) Assessment of the Nichols Ranch Uranium ISR Project. Doughstick and South Doughstick properties are located approximately two miles south of Nichols Ranch.

Between July 4, 2009 and September 30, 2009, on the Arkose Mining Venture property ("Arkose"), a joint venture between the Company (81%) and United Nuclear, LLC (19%), a total of 289 uranium trend and delineation holes were drilled utilizing up to three drill rigs and two electric log probing units. Drilling on the Arkose property was conducted at North Jane, Little Butte, Beecher Draw, Lone Bull and the South Doughstick extension.

At the North Jane property, located southeast of the Uranerz Doughstick area, 20 additional holes were drilled with excellent results in the 100 Sand. The North Jane area is part of Arkose and is adjacent to the trend located at the Company's 100%-owned Doughstick property. A combined National Instrument 43-101 technical report is currently in progress for both the Uranerz Doughstick and North Jane properties.

At Little Butte and Beecher Draw (northwest targets), 185 exploration holes were drilled but only minor mineralization was found in the 90 sand at these locations. Drilling was also conducted in an area identified as Lone Bull which is located 5 miles southwest of South Doughstick. Wide space drilling at this location has found a trend in the 100 sand with uranium mineralization present. Additional drilling at Lone Bull is planned in this area before the end of the 2009 drilling season.

Drilling was also conducted along the South Doughstick extension located one mile south of the primary South Doughstick trend. A total of 61 holes were drilled with good results along 5,000 feet of mineralized trend. A National Instrument 43-101 technical report was prepared for the South Doughstick property dated August 11, 2009 which was amended and restated on October 13, 2009 (please see below under "Recent Developments").

The combined effort for drilling on the Arkose properties from July 4 through September 30 represents approximately 206,655 feet of drilling with an average depth of 715 feet per hole.

The objective of the 2009 Arkose drilling project is to find previously unknown or little known uranium mineralization trends and to delineate known trends, thus providing data for permitting and eventual production operations in favorably identified areas. During this update period, uranium mineralization found ranged from <0.01% eU3O8 to 1.18% eU3O8. A cut-off grade of 0.03% eU3O8 was established for Arkose projects. Approximately 29.4 % of the 289 holes drilled during this period met or exceeded the minimum cutoff grade. Some of the delineation drilling was conducted in rows or fences of drill holes, with each end of the fence being drilled until barren sand was found. This drilling technique typically results in two or more barren holes per fence.

Recent Developments

During August 2009, we decided to forfeit our interests in certain mining claims which we determined, based on the review, analysis and recommendations of our geological staff, did not merit further exploration and accordingly were no longer of strategic interest or value to the Company. The claims, which were forfeited, effective September 1, 2009, when the annual renewal fee would have become due, were comprised of: 285 claims in which we had held a 100% interest in the Streeter, Collins Draw, East Nichols, North Nichols, Eagle and Cyclone Rim project areas and 132 claims in the Little Butte and South Collins project areas, in which we held an 81% interest through the Arkose Mining Venture.

On October 13, 2009, we filed an amended and restated technical report entitled "Technical Report, South Doughstick Property, Campbell and Johnson Counties, Wyoming, U.S.A." prepared by Douglass H. Graves, PE of TREC, Inc. and dated October 12, 2009. The technical report was amended after we discovered that the Arkose Mining Venture does not control 100 percent of the fee mineral interests on the west one half of Section 29 in the South Doughstick project area. We recently discovered that the Arkose Mining Venture's interest is subject to a 50 percent interest for the minerals on the west one half of
Section 29. This has resulted in 50% decrease in the mineralized material for that section (a decrease of approximately 18% of the mineralized material for the total South Doughstick project) as reported in the previous technical report, dated August 11, 2009.

On October 23, 2009, we received notification that the Wyoming Department of Environmental Quality (which we refer to as the "WDEQ") - Air Quality Division has approved and issued the air quality permit for our Nichols Ranch ISR Uranium Project. The

Financial Position

The Company's overall financial position is disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on March 12, 2009 and the unaudited Financial Statements at September 30, 2009 as provided herein under the section heading "Financial Statements" above.

Liquidity and Capital Resources

We are carrying out an exploration, environmental and mine design program with a budget of approximately $5,900,000 in 2009. This plan, plus general and administrative expenses of approximately $3,600,000 amounts to cash requirements of approximately $9,500,000 for the year ending December 31, 2009 as reported in Item 2 of our Annual Report on Form 10-K for the year ended December 31, 2008 under the heading "Description of Properties", previously filed with the SEC on March 12, 2009. Mineral property acquisitions, dependent upon opportunities that may arise, and equipment acquisitions of approximately $1,500,000 are expected to be additional expenditures. During the nine months ended September 30, 2009, mineral property expenditures incurred were $3,498,878, including minor acquisitions.

At September 30, 2009, we had cash and short term securities of $15,722,477 and working capital of $15,983,711, as compared to the ending near cash balance of $21,253,277 and working capital of $21,405,022 as at December 31, 2008. Our working capital at September 30, 2009 includes $13,978,466 of short term marketable securities compared to $20,432,035 as at December 31, 2008, which are equivalent to cash for operational purposes.

Net cash used in operating activities was $5,598,119 for the nine months ended September 30, 2009, compared to $9,097,266 for the corresponding period in 2008. The decrease in net cash used in operations of $3,499,147 resulted primarily from a decrease in mineral property cash expenditures of $3,487,645 from 2008 when substantial properties were acquired. Net cash from investing activities was $6,380,057 for the nine months ended September 30, 2009, compared to $24,301,124 used in the corresponding period in 2008; the variance derived primarily from the investment in short term marketable securities.

Net cash provided by financing activities amounted to $140,831 for the nine months ended September 30, 2009, compared to $22,810,701 provided in the corresponding period in 2008 when common shares were issued for proceeds of $24,221,275.

During the twelve-month period following the date of this quarterly report, we anticipate that we will not generate any revenue. We anticipate that any additional funding may be in the form of equity financing from the sale of our common stock and the exercise of share purchase warrants. Our exploration plans will be continually evaluated and modified as exploration and environmental results become available. General and administrative expenses, planning and environmental expenses are incurred throughout the year; most of our exploration expenditures are incurred during the nine-month period of March through November. 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 exploration programs that we undertake will be dependent upon the amount of financing available to us. We believe we have sufficient cash to continue our exploration and planning and to meet on-going operating expenses for the next twelve months, and beyond as we scale our operations to the resources we have available.

To date, our primary source of funds has been equity investments, and this trend is expected to continue together with production related financing when our mine development permitting is complete. On July 10, 2009, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission and a preliminary prospectus in Canada under which, when effective, we may issue up to $50 million in common stock, debt securities, warrants, subscription receipts or other such securities. On October 27, 2009 we issued 8,500,000 Units, comprised of one share of common stock and one-half of one share purchase warrant, for gross proceeds of $17,000,000.

Our current short term investments have not been devalued by the current stock market disruptions as these investments are primarily in low risk bearer deposit notes issued and guaranteed by Canadian Chartered banks. Rates of return, however, are at historic lows. At the end of the investment period of these securities we plan on reinvesting the securities in similar short term instruments. Management and the board of directors periodically meet to review the status of these investments and determine investment strategies, taking into account current market conditions and the short and long term capital needs of the Company.

Three-month period ended September 30, 2009 compared to three-month period ended September 30, 2008

Revenue and Operating Expenses

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 quarterly report.

We incurred total operating expenses of approximately $2,879,027 for the three-month period ended September 30, 2009, as compared to $2,721,321 for the corresponding period in 2008. The increase of operating expenses in the amount of $157,706 was primarily attributable to a $201,736 increase in mineral property expenses.

We had no significant financing expense for the three-month periods ended September 30, 2009 and 2008. We earned $17,985 of interest income for the three-month period ended September 30, 2009 as compared to $133,054 for the corresponding period in 2008. This income resulted from short term investments which are realizing low returns.

Net loss for the three-month period ended September 30, 2009 was approximately $2,861,042, as compared to approximately $2,588,267 for the corresponding period in 2008, primarily due to the reduction of interest income and an increase in mineral property expenditures.

Nine-month period ended September 30, 2009 compared to nine-month period ended September 30, 2008

We incurred total operating expenses of approximately $7,136,450 for the nine-month period ended September 30, 2009, as compared to $33,451,066 for the corresponding period in 2008. The decrease of operating expenses in the amount of $26,314,616 was primarily attributable to a $22,577,645 decrease in mineral property expenditures and a $1,807,372 decrease in general and administrative expenses. Our $24,617,796 acquisition of NAMMCO properties is included in the mineral property expenditures for nine-month period ended September 30, 2008.

We had no significant financing expense for the nine-month periods ended September 30, 2009 and 2008. We earned $131,979 of interest income for the nine month period ended September 30, 2009 as compared to $340,169 for the corresponding period in 2008. This income resulted from short term investments. A gain on disposal of discontinued operations in Mongolia of approximately $977,077 was realized during the nine month period ended September 30, 2008.

Net loss for the nine-month period ended September 30, 2009 was approximately $6,423,504, as compared to approximately $32,133,820 for the corresponding period in 2008, a decrease of $25,710,316. The net loss was abnormally affected by the acquisition of properties in the 2008 period and results of operations can be more expected to reflect historical levels for the remainder of 2009, unless other significant acquisitions are identified and concluded.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are . . .