The following management's discussion and analysis of the Company's financial condition and results of operations contain forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements, you should consider various factors including the risks, uncertainties and assumptions set forth in reports and other documents we have filed with or furnished to the SEC, including, without limitation, this Form 10-Q filing for the three months ended October 31, 2012 and the Company's Form 10-K filing for the fiscal year ended July 31, 2012 including the consolidated financial statements and related notes contained therein. These factors, or any one of them, may cause our actual results to differ materially from any forward-looking statement made in this document. Refer to "Item 1A. Risk Factors under Part II - Other Information".

Results of Operations for the Three Months Ended October 31, 2012 and 2011

General

For the three months ended October 31, 2012, the Company recorded a net loss of $7,297,623 or $0.09 per share (three months ended October 31, 2011: $5,558,311 or $0.07 per share). The Company currently operates in a single reportable segment and is focused on uranium mining and related activities, including exploration, development, extraction and processing of uranium concentrates.

Revenues and Cost of Sales

In October 2012, the Company completed one sale of uranium concentrates under the terms of an existing offtake agreement, fulfilling 50% of the Company's delivery commitments for the second year.

For the three months ended October 31, 2012, sales of uranium concentrates totaled 50,000 pounds at $43 per pound, generating revenues of $2,153,250 (three months ended October 31, 2011: sales of 60,000 pounds sold at $52 per pound generating revenues of $3,120,000).

For the three months ended October 31, 2012, cost of sales was $1,863,109 (three months ended October 31, 2011: $1,420,086). This increase in cost of sales is due to recompletion activities conducted on existing production wells and the increased costs of operating a greater number of production wells in general. Cost of sales for uranium concentrates is determined using the average cost per pound in inventory at the end of the month prior to the month in which the sale occurs, plus royalty obligations and other direct selling costs.

For the three months ended October 31, 2012 and 2011, the Company generated a gross profit of $290,141 and $1,699,914, respectively.

Expenses

For the three months ended October 31, 2012 and 2011, total expenses incurred by the Company were $7,598,569 and $6,920,860, respectively.

Mineral property expenditures during the three months ended October 31, 2012 and 2011 were $4,377,285 and $2,732,600, respectively. These amounts include expenditures relating to property maintenance, exploration and development activities including permitting and all other non-production related activities on the Company's uranium projects. As disclosed under Risk Factors, the Company has not established proven and probable reserves through the completion of feasibility studies for any of its mineral properties in accordance with SEC Industry Guide 7. Accordingly, all expenditures relating to exploration and development activities are expensed as incurred.

                                         Three Months Ended October 31,
                                                 2012                 2011
Mineral Property Expenditures
 Palangana Mine                      $      1,823,863    $       1,835,709
 Goliad Project                               104,002               96,938
 Burke Hollow Project                       1,102,932                    -
 Channen Project                              691,262                    -
 Salvo Project                                 17,861              104,577
 Nichols Project                               13,635              150,000
 Land work - Texas                             61,342               96,477
 Anderson Project                              74,722              119,458
 Workman Creek Project                         30,936                    -
 Slick Rock Project                            55,010               12,571
 Yuty Project                                  91,270                    -
 Coronel Oviedo Project                       199,801              263,218
 Other Mineral Property Expenditures          110,649               53,652
                                     $      4,377,285    $       2,732,600

General and administrative expenses during the three months ended October 31, 2012 and 2011 were $2,724,937 and $3,889,681, respectively.

For the three months ended October 31, 2012 and 2011, general and administrative expenses were comprised, respectively, of salaries, management and consulting fees of $714,968 and $712,928; office, investor relations, communications and travel of $1,241,465 and $1,131,277; stock-based compensation of $413,279 and $1,506,319; and professional fees of $355,225 and $539,157. General and administrative expenses have decreased overall, primarily from a decrease in stock-based compensation as a result of a reduced number of stock options granted.

Depreciation, amortization and accretion during the three months ended October 31, 2012 and 2011 were $496,347 and $298,579, respectively. Depreciation, amortization and accretion include depreciation and amortization of long-term assets acquired in the normal course of operations and accretion of asset retirement obligations. The increase was due primarily to an allocation increase of the depreciation and amortization relating to the Palangana Mine and the Hobson Facility as calculated on a normal production capacity basis.

Production and Inventories

During the three months ended October 31, 2012, the Palangana Mine produced 29,000 pounds of uranium concentrates while the Hobson Facility processed 31,000 pounds of uranium concentrates. During the three months ended October 31, 2011, the Palangana Mine produced 67,000 pounds of uranium concentrates while the Hobson Facility processed 69,000 pounds of uranium concentrates.

At October 31, 2012, the total value of inventories was $1,597,626, of which $1,255,080 (79%) represents the value of finished goods-uranium concentrates, $273,336 (17%) represents the value of work-in-progress and $69,210 (4%) represents the value of supplies. The cash component of the total value of inventories was $1,404,828, and the non-cash component of the total value of inventory was $192,798.

At July 31, 2012, the total value of inventories were $1,876,100, of which $1,592,660 (85%) represents the value of finished goods-uranium concentrates, $250,951 (13%) represents the value of work-in-progress and $32,489 (2%) represents the value of supplies. The cash component of the total value of inventories was $1,557,076, and the non-cash component of the total value of inventory was $319,024.

At October 31, 2012, the Company had available for sale a total of 34,000 pounds of uranium concentrates (July 31, 2012: 53,000 pounds).

During three months ended October 31, 2012, the Company had transactions with certain officers and directors of the Company as follows:

º incurred $48,433 (three months ended October 31, 2011: $34,693) in general and administrative costs paid to a company controlled by a direct family member of a current officer; and
º incurred $9,000 (three months ended October 31, 2011: $Nil) in consulting fees paid to a company controlled by a current director of the Company.

During the three months ended October 31, 2011, the Company incurred $112,829 in consulting fees provided by a company controlled by a former director of the Company.

At October 31, 2012, amounts owed to related parties totaled $13,997 (July 31, 2012: $47,443). These amounts are unsecured, non-interest bearing and due on demand.

Liquidity and Capital Resources

                            October 31, 2012     July 31, 2012
Cash and cash equivalents $       17,187,118   $    25,015,284
Working capital                   16,235,613        22,472,302
Total assets                      76,682,464        85,143,395
Total liabilities                  7,586,696         9,222,914
Shareholders' equity              69,095,768        75,920,481

At October 31, 2012, the Company had $17,187,118 in cash and cash equivalents and working capital of $16,235,613. Net cash decreased by $7,828,166 during the three months ended October 31, 2012 compared to $7,018,739 during the three months ended October 31, 2011.

Operating Activities

Net cash used in operating activities during the three months ended October 31, 2012 was $7,721,834 (three months ended October 2011: $4,763,397). Significant operating expenditures include production costs, mineral property expenditures and general and administrative expenses. During the three months ended October 31, 2012, the Company incurred expenditures totaling $44,713 (three months ended October 31, 2011: $371,790) for cash settlement of asset retirement obligations and made a cash payment of $149,194 to settle certain obligations relating to liquidated damages assumed as part of the acquisition of Concentric Energy Corp. (three months ended October 31, 2011: $Nil).

Financing Activities

Net cash provided by financing activities during the three months ended October 31, 2012 was $6,302 (three months ended October 31, 2011: $990,102 net cash used) resulting from common shares issued for cash of $39,748 from the exercise of stock options (three months ended October 31, 2011: $Nil), offset by a decrease in due to related parties of $33,446 (three months ended October 31, 2011: $61,752 increase). During the three months ended October 31, 2011, cash paid for settlement of convertible debentures totaled $1,051,854.

Investing Activities

Net cash used in investing activities during the three months ended October 31, 2012 and 2011 was $112,634 and $1,265,240, respectively, resulting from the acquisition of mineral rights and properties of $7,396 (three months ended October 31, 2011: $685,044), purchase of property, plant and equipment of $103,190 (three months ended October 31, 2011: $340,543) and an increase in reclamation deposits of $2,048 (three month ended October 31, 2011: $239,653).

At October 31, 2012, the Company had stock options outstanding to purchase 9,347,521 shares and share purchase warrants outstanding to purchase 1,558,812 shares. The outstanding stock options have a weighted average exercise price of $1.99 per share and the outstanding warrants have a weighted average exercise price of $4.95 per share. At October 31, 2012, outstanding stock options and warrants totaled 10,906,333 shares issuable for gross proceeds of approximately $26,290,000 should these options and warrants be exercised in full. At October 31, 2012, outstanding in-the-money stock options and warrants totaled 3,768,250 shares issuable for gross proceeds of approximately $2,126,000 should these options and warrants be exercised in full. The exercise of these stock options and warrants is at the discretion of the respective holders and there is no assurance that any of these stock options or warrants will be exercised in the future.

Plan of Operations

Our primary plan of operations for the next twelve months is to expand production at the Palangana Mine, continue development of the Goliad Project towards production and continue with the exploration of our mineral projects. Subsequent to October 31, 2012, the Company received final authorization for initiating production at the Goliad Project.

At October 31, 2012, the Company had $17.2 million in cash and cash equivalents and working capital of $16.2 million. The Company realized revenue from uranium sales during the three months ended October 31, 2012, however, it has a history of operating losses and significant negative cash flow since inception. Planned principal operations have commenced and existing cash resources along with forecasted sales for the upcoming fiscal year are expected to provide sufficient funds to carry out our plan of operations for the next twelve months. The Company's continuation as a going concern for a period longer than twelve months will be dependent upon the Company's ability to obtain adequate financing, as future capital expenditures of the Company are expected to be substantial. It is anticipated that additional financing will be in the form of equity financing from the sale of the Company's common stock, for example, through the S-3 "Shelf" Registration Statement that became effective on September 2, 2011 or other appropriate methods. We cannot provide any assurance that we will be able to generate sufficient financing from the sale of our common stock to fund our plan of operations and intended growth. In the absence of such financing, we may not be able to continue exploration or development of our mineral rights, possibly leading to their abandonment. Other options would include entering into joint venture arrangements to continue advancing the Company's mineral projects, which would depend entirely on finding a suitable third party willing to enter into such an arrangement, typically involving an assignment of a percentage interest in the mineral project.

The continued operations of the Company, including the recoverability of the carrying values of its assets, are dependent ultimately on the Company's ability to achieve and maintain profitability and positive cash flow from its operations.

Material Commitments

Material commitments of the Company since the filing of the Form 10-K for the fiscal year ended July 31, 2012 changed by the following:

º Fixed contract commitments for office space have decreased by $44,000 during the three months ended October 31, 2012; and
º Commitments for consulting agreements have decreased by $139,000 as a result of terminating, entering into and renewing existing consulting agreements.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

The Company's critical accounting policies are disclosed in Note 2: Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in our Annual Report filed on Form 10-K for the fiscal year ended July 31, 2012.