management’s discussion and analysis - annual reportresources limited (“mantra”)....

MANAGEMENT’S DISCUSSION AND ANALYSIS 1

management’s discussion and analysis

Management’s Discussion and Analysis Set out below is a review of the activities, results of operations and financial condition of Uranium One Inc. (“Uranium One”) and its subsidiaries (collectively, the “Corporation”) for the year ended December 31, 2010, together with certain trends and factors that are expected to impact its 2011 financial year. Information herein is presented as of March 7, 2011 and should be read in conjunction with the annual consolidated financial statements of the Corporation for the year ended December 31, 2010 and the notes thereto, on file with the Canadian provincial securities regulatory authorities (referred to herein as the “consolidated financial statements”). The Corporation’s consolidated financial statements and the financial data set out below have been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). All amounts are in US dollars and tabular amounts are in thousands, except where otherwise indicated. Canadian dollars are referred to herein as C$. Australian dollars are referred to herein as A$. All references herein to pounds are pounds of U3O8. The common shares of Uranium One are listed on the Toronto and Johannesburg stock exchanges (“TSX“ and “JSE”, respectively). Uranium One’s convertible unsecured subordinated debentures due December 31, 2011 and March 13, 2015 are also listed on the TSX. Additional information about the Corporation and its business and operations can be found in its continuous disclosure documents. These documents, including the Corporation’s annual information form, are filed with Canadian securities regulatory authorities and are available under the Corporation’s profile at www.sedar.com. This Management’s Discussion and Analysis includes certain forward-looking statements. Please refer to “Forward-Looking Statements and Other Information”.


HIGHLIGHTS

Operational Total attributable production during 2010 was a record 7.4 million pounds, 106% higher than total attributable production of

3.6 million pounds during 2009.

The average total cash cost per pound sold was $13 per pound during 2010, compared to the average cash cost per pound sold of $16 per pound during 2009.

The Akdala Uranium Mine achieved attributable production during 2010 of 1.9 million pounds; total cash costs for 2010 were $12 per pound sold.

The South Inkai Uranium Mine achieved attributable production during 2010 of 3.1 million pounds; total cash costs for 2010 were $19 per pound sold.

The Karatau Uranium Mine achieved attributable production during 2010 of 2.2 million pounds; total cash costs for 2010 were

$9 per pound sold, which was lower than expected due to deferred operational expenditure.

At the Kharasan Uranium Project, production during the commissioning process was 0.2 million pounds attributable to the Corporation during 2010.

Commissioning of the Willow Creek ISR Project in Wyoming began in December 2010 and production has commenced.

Financial Attributable sales volumes for 2010 increased by 116% to a record 6.9 million pounds, compared to 3.2 million pounds sold

during 2009.

Revenue increased by 115% to a record $327 million in 2010, compared to $152 million in 2009. The average realized sales price during 2009 and 2010 was $48 per pound. The average spot price in 2010 was $47 per pound.

Earnings from mine operations were $137 million during 2010, a 149% increase from earnings from mine operations of $55 million in 2009, due to increased sales volumes and decreased operating expenses.

Attributable inventory was 3.0 million pounds in December 31, 2010, compared to 2.1 million pounds at December 31, 2009.

The carrying value of the Honeymoon Uranium Project was written down by $113.5 million primarily due to the strengthening of the Australian dollar and increased capital expenditure.

Corporate On December 27, 2010 the Corporation completed its transaction with ARMZ, comprising the issuance of 356 million new

common shares of Uranium One to ARMZ in return for ARMZ’s 50% interest in the Akbastau Uranium Mine and 49.67% interest in the Zarechnoye Uranium Mine, as well as $610 million in cash. ARMZ currently holds 492 million common shares representing 51.4% of the outstanding common shares.

In connection with the ARMZ transaction, on December 20, 2010 the Corporation paid a special dividend of $1.06 per share to all shareholders other than ARMZ.

Following closing of the ARMZ transaction, Mr. Vadim Zhivov, Director General of ARMZ and a director of Uranium One, was appointed President of the Corporation. Mr. Chris Sattler was appointed as the Chief Executive Officer and a director of Uranium One on February 1, 2011. Uranium One also appointed Mr. Peter Bowie, former Chief Executive Officer of Deloitte China and former Chairman of Deloitte Canada, to the board of directors on closing of the ARMZ transaction.

On December 15, 2010, the Corporation and ARMZ jointly announced that ARMZ signed an agreement to acquire Mantra Resources Limited (“Mantra”). Mantra's core asset is the Mkuju River Project in Tanzania which is nearing the completion of a definitive feasibility study. Uranium One has a call option to acquire Mantra from ARMZ, exercisable at any point within 12 months of closing (subject to extension) of the acquisition of Mantra by ARMZ. The agreement also provides ARMZ with a put option to sell Mantra to Uranium One at the end of the term.


OUTLOOK

The total attributable production guidance for 2011 is 10.5 million pounds, consisting of 1.8 million pounds from Akdala; 3.4

million pounds from South Inkai; 2.4 million pounds from Karatau; 1.2 million pounds from Akbastau; 1.0 million pounds from Zarechnoye; 0.3 million pounds from the Powder River Basin; 0.2 million pounds from Honeymoon; and 0.2 million pounds from Kharasan.

During 2011, the average cash cost per pound sold is expected to be approximately $18 per pound, based on $14 per pound at Akdala, $19 per pound at South Inkai, $12 per pound at Karatau, $18 per pound at Akbastau, $21 per pound at Zarechnoye, $25 per pound at the Powder River Basin and $35 per pound at Honeymoon.

The Corporation expects attributable sales to be approximately 9.5 million and 12.0 million pounds in 2011 and 2012 respectively.

Excluding optional quantities under off-take agreements negotiated with ARMZ and the Japanese Consortium, the Corporation

currently has contracts for the sale of an aggregate of 25 million attributable pounds to customers, including 5 million pounds which will be sold at an average fixed price of $66 per pound (subject to escalation) and 12 million pounds which has been contracted with weighted average floor prices of approximately $48 per pound. The remainder of contracted attributable sales are not subject to floors and such sales are related to the market price of U3O8 at the time of delivery.

The Corporation expects to incur attributable capital expenditures in 2011 of $78 million for wellfield development, $21 million

for resource definition drilling and $144 million for plant and equipment, totalling $243 million.

In 2011, general and administrative expenses, excluding non-cash items, are expected to be approximately $37 million, restructuring and other non-recurring costs are expected to be $7 million, and exploration expenses are expected to be $7 million.


KEY STATISTICS TOTAL ATTRIBUTABLE PRODUCTION Q4 2010 Q4 2009 FY 2010 FY 2009

Attributable commercial production (lbs)

Akdala 453,200 531,100 1,880,300 1,889,900

South Inkai 782,700 547,000 3,094,400 1,511,800

Karatau (1) 769,500 73,100 2,222,500 73,100

Akbastau (2) 16,700 - 16,700 -

Zarechnoye (2) 16,300 - 16,300 -

Subtotal 2,038,400 1,151,200 7,230,200 3,474,800

Attributable production during commissioning (lbs)

Kharasan 68,400 28,200 200,600 81,700

Subtotal 68,400 28,200 200,600 81,700

Total attributable production 2,106,800 1,179,400 7,430,800 3,556,500

Notes: (1) Karatau was acquired on December 21, 2009. Karatau’s 2009 production therefore represents the period from acquisition to December 31,

2009. (2) Akbastau and Zarechnoye were acquired on December 27, 2010. Production therefore represents the period from acquisition to December

31, 2010

FINANCIAL Q4 2010 Q4 2009 FY 2010 FY 2009

Attributable production (lbs) (1) 2,038,400 1,151,200 7,230,200 3,474,800

Attributable sales (lbs) (1) 2,878,400 1,498,900 6,861,600 3,187,700

Average realized sales price ($ per lb) (2) 53 46 48 48

Average cash cost of production sold ($ per lb)(2) 12 15 13 16

Revenues ($ millions) 152.3 69.1 326.9 152.0

Earnings from mine operations ($ millions) 76.3 22.7 137.4 54.6

Net loss from continuing operations ($ millions) (148.2) 179.6 (189.7) (38.1)

Loss per share from continuing operations – basic and diluted ($ per share) (0.24) 0.38 (0.31) (0.08)

Earnings from discontinued operations ($ millions) - - - 2.0

Earnings per share from discontinued operations – basic and diluted ($ per share)

- - - 0.00

Net loss ($ millions) (148.2) 179.6 (189.7) (36.1)

Net loss per share – basic and diluted ($ per share) (0.24) 0.38 (0.31) (0.08)

Adjusted net earnings / loss ($ millions)(2) 8.0 (15.8) (11.9) (36.5)

Adjusted net earnings / (loss) per share – basic ($ per share)(2) 0.01 (0.03) (0.02) (0.08)

Notes: (1) Attributable production and sales are from assets in commercial production during the year (For 2010: Akbastau and Zarechnoye only from

acquisition on December 27, 2010. For 2009: Karatau only from acquisition on December 21, 2009). (2) The Corporation has included non-GAAP performance measures: average realized sales price per pound, cash cost per pound sold,

adjusted net earnings and adjusted net earnings per share. In the uranium mining industry, these are common performance measures but do not have any standardized meaning, and are non-GAAP measures. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, the Corporation and certain investors use this information to evaluate the Corporation’s performance and ability to generate cash flow. The additional information provided herein should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. See “Non-GAAP Measures”.


OVERVIEW Uranium One is a Canadian corporation engaged through subsidiaries and joint ventures in the mining and production of uranium, and in the acquisition, exploration and development of properties for the production of uranium in Kazakhstan, the United States, Australia and Canada. Through the Betpak Dala joint venture, Uranium One owns a 70% interest in the Akdala and South Inkai Uranium Mines in Kazakhstan. The Corporation holds a 50% interest in the Karatau joint venture, which owns the Karatau uranium mine in Kazakhstan, a 50% interest in the Akbastau joint venture, which owns the Akbastau uranium mine in Kazakhstan, a 49.67% interest in the Zarechnoye joint venture, which owns the Zarechnoye uranium mine in Kazakhstan and a 30% interest in the Kyzylkum joint venture, which owns the Kharasan Project in Kazakhstan. In the United States, the Corporation owns projects in the Powder River and Great Divide Basins in Wyoming. The Corporation owns a 51% interest in the Honeymoon Uranium Project in Australia. The Corporation owns, either directly or through joint ventures, a large portfolio of uranium exploration properties in the western United States, South Australia, South Africa and Canada. The Corporation owns a 19% interest in the SKZ-U joint venture, which is constructing a sulphuric acid plant in Kazakhstan. The following are the Corporation’s principal mineral properties and operations (discussed in more detail below):

Operating mines

Entity Mine Location Status Ownership Betpak Dala LLP Akdala Uranium Mine Kazakhstan Producing 70% J.V. interest Betpak Dala LLP South Inkai Uranium Mine Kazakhstan Producing 70% J.V. interest Karatau LLP(1) Karatau Uranium Mine Kazakhstan Producing 50% J.V. interest Akbastau LLP(2) Akbastau Uranium Mine Kazakhstan Producing 50% J.V. interest Zarechnoye LLP(2) Zarechnoye Uranium Mine Kazakhstan Producing 49.67% J.V. interest

Advanced development projects

Entity Project Location Status Ownership Kyzylkum LLP Kharasan Uranium Project Kazakhstan Commissioning(3) 30% J.V. interest Uranium One Americas, Inc.

Willow Creek Project USA Commissioning(4) 100% interest

The Corporation is also developing the following mineral properties:

Entity Project Location Status Ownership

Uranium One Americas, Inc.

Powder River Basin, Wyoming (Moore Ranch, Ludeman, Allemand-Ross, and Barge)

USA Development 100% interest


Great Divide Basin, Wyoming (JAB and Antelope)

USA Development 100% interest

Uranium One Australia (Proprietary) Ltd.

Honeymoon Uranium Project Australia Development 51% J.V. interest

Notes: (1) The Karatau Uranium Mine was acquired on December 21, 2009. (2) The Akbastau and Zarechnoye Uranium Mines were acquired on December 27, 2010. (3) The Kharasan Uranium Project has commenced production but is in the commissioning stage. Commissioning will be

completed when a pre-defined operating level, based on the design of the plant, is maintained and the Kazakhstan Government has issued an operating license.

(4) Commissioning at the Willow Creek Project commenced on December 20, 2010 with operation of the initial well field at Christensen Ranch.


REVIEW OF OPERATIONS AKDALA URANIUM MINE Akdala is an operating acid in situ recovery (“ISR”) uranium mine located in the Chu Sary Su basin in the Suzak region of South Kazakhstan, owned indirectly as to 70% by the Corporation through the Betpak Dala joint venture, a Kazakhstan registered limited liability partnership (“Betpak Dala”). The other 30% interest is owned by JSC NAC Kazatomprom (“Kazatomprom”), a Kazakhstan state-owned company responsible for the mining and exporting of uranium in Kazakhstan. Pursuant to the terms of its subsoil use contract, the permitted production rate at the Akdala Mine is 2,600,000 pounds (1,000 tonnes uranium (“U”)) per year. Production: Akdala produced 2,686,100 pounds (1,033 tonnes U) during 2010, of which 1,880,300 pounds (723 tonnes U) was

attributable to the Corporation. Akdala produced approximately 379,000 pounds (145 tonnes U) in January and February 2011, of which 265,000 pounds (102 tonnes U) was attributable to the Corporation. The concentration of uranium in solution was 63 mg/l on average in January and February 2011. Operations: The following is a summary of the operational statistics (100%) for Akdala over the last four quarters: Total wells completed

(including production wells)

Average no. of production wells in

operation

Average flow rate (m3/hour)

Concentration in solution (mg U/l)

Production (lbs)

Q1 2010 54 219 1,828 76 699,800 Q2 2010 81 215 1,745 70 698,800 Q3 2010 65 210 1,691 67 640,000 Q4 2010 65 209 1,677 65 647,500

A total of 265 wells were installed during 2010, compared to the budget of 270. The program for 2011 provides for the installation of 277 wells to achieve the production target for the year. Acidification of two new production blocks was completed during the year and these blocks, together with a production block acidified in 2009, were put into production during 2010. Production at Akdala is contractually limited to 2.6 million pounds per year, and due to the high production and flow rates achieved early in 2010, production was managed in the second half of 2010 by reducing the flow rate to ensure that the maximum licensed production level was not exceeded. Akdala contracted an engineering company in Kazakhstan to design a satellite plant to facilitate treatment of solutions from production blocks located approximately 11 kilometres to the east of the current central processing facilities in an area known as Letniy. Construction of the satellite plant is scheduled to commence in 2011 and new production blocks from the Letniy area are expected to commence operation during the second half of 2011. Capital expenditure incurred during 2010 was $5 million, compared to the budget of $24 million. The difference was due to the postponement of the construction of the satellite plant at Letniy. Capital expenditure incurred by Betpak Dala at Akdala in 2011 is expected to be approximately $35 million on a 100% basis, of which $28 million is planned to be spent on the construction of satellite plant and fixed asset purchases, with the balance expected to be spent on well-field development.


AKDALA URANIUM MINE - continued Financial information: The following table shows the attributable production, sales and production cost trends for Akdala over the prior eight quarters: (All figures are the Corporation’s attributable share)

3 months ended Dec 31,

2010 Sep 30,

2010 Jun 30,

2010 Mar 31,

2010 Dec 31,

2009 Sep 30,

2009 Jun 30,

2009 Mar 31,

2009 Production in lbs 453,200 448,000 489,200 489,900 531,100 464,200 438,800 455,800

Sales in lbs 870,800 214,000 611,700 212,500 710,400 259,000 210,100 355,600

Inventory in lbs 626,300 1,047,700 808,000 936,000 666,600 849,300 655,100 430,400

Revenues ($000’s) 47,885 11,265 25,958 8,763 32,754 12,936 9,985 18,410

Operating expenses ($000’s) 10,910 2,651 7,279 2,823 8,621 3,047 2,731 4,714

Operating expenses ($/lb

sold) 13 12 12 13 12 12 13 13

Depreciation and depletion ($000’s)

8,990 2,320 6,180 2,191 7,193 2,863 2,498 4,145

Depreciation and depletion ($/lb sold)

10 11 10 10 10 11 12 12

Uranium revenues are recorded upon delivery of product to utilities and intermediaries and do not occur evenly throughout the year. Timing of deliveries is usually at the contracted discretion of customers within a quarter or similar time period. Annual sales of product from a mine, which is normally achieved from opening inventory plus a percentage of forecast production for the year, does not always occur evenly throughout the year and can vary significantly from quarter to quarter as illustrated in the table above. Changes in revenues, net earnings / loss and cash flow are therefore affected primarily by fluctuations in contracted deliveries of product from quarter to quarter, as well as by changes in the price of uranium. Operating expenses are directly related to the quantity of U3O8 sold and are lower in periods when the quantity of U3O8 sold is lower. There is a corresponding build-up of inventory in periods when the quantity of U3O8 sold is lower than production. The cash cost of production for 2010 at $12 per pound of U3O8 sold was lower than the Corporation’s guidance of $14 per pound sold in 2010.


SOUTH INKAI URANIUM MINE South Inkai is an operating ISR uranium mine located in the Chu Sary Su basin in the Suzak region of South Kazakhstan, owned indirectly as to 70% by the Corporation through the Betpak Dala joint venture. The other 30% interest is held by Kazatomprom. The design capacity of the South Inkai mine is 5,200,000 pounds (2,000 tonnes U) per year. It is expected that the annualized rate of production will reach this level in 2011. Production: Production from South Inkai was 4,420,500 pounds (1,700 tonnes U) in 2010, of which 3,094,400 pounds (1,190 tonnes U) was attributable to the Corporation. South Inkai produced approximately 655,000 pounds (252 tonnes U) in January and February 2011, of which 459,000 pounds (176 tonnes U) was attributable to the Corporation. The concentration of uranium in solution was 72 mg/l on average in January and February 2011. Operations: The following is a summary of the operational statistics (100%) for South Inkai over the last four quarters: Total wells

completed (including

production wells)

Average no. of production wells

in operation



Production (lbs)

Q1 2010 71 228 2,059 104 1,102,400 Q2 2010 106 229 2,215 87 1,099,600 Q3 2010 80 255 2,339 83 1,100,400 Q4 2010 59 280 2,568 73 1,118,100 A total of 316 wells were installed during 2010, in line with the budget of 315 wells. The program for 2011 provides for the installation of 457 wells to achieve the production target for the year. Acidification of six production blocks were completed during the year and these blocks, together with a production block acidified in 2009 were placed into production during 2010. Two yellowcake dryers were installed and commissioned in 2010. The State acceptance commission inspected the facility in July 2010 and a license was issued for the drying facility, allowing for the finished product to be treated at the facility and shipped directly to conversion facilities for sale. The installation of these dryers is expected to reduce South Inkai’s operating costs as the operation will reduce its reliance on third-party external processing facilities. Capital expenditure incurred during 2010 was $28 million, compared to the budget of $32 million. The difference was mainly due to the postponement of construction of a pump station and the automation of processes. Wellfield development expenditure was in line with the budget. Capital expenditure incurred by Betpak Dala at South Inkai in 2011 is expected to be approximately $49 million on a 100% basis, of which $17 million is related to well-field development, $2 million is related to resource definition drilling and $30 million is related to construction activities and fixed asset purchases. Financial information: The following table shows the attributable production, sales and production cost trends for South Inkai over the prior eight quarters: (All figures are the Corporation’s attributable share)

3 months ended Dec 31,

2010 Sep 30,

2010 Jun 30,

2010 Mar 31,

2010 Dec 31,

2009 Sep 30,

2009 Jun 30,

2009 Mar 31,

2009 Production in lbs 782,700 770,300 769,700 771,700 547,000 343,000 376,700 245,100

Sales in lbs 965,300 436,400 645,800 420,100 535,700 164,100 175,000 525,000

Inventory in lbs 1,500,200 1,684,900 1,360,200 1,230,100 903,900 897,700 729,500 532,500

Revenues ($000’s) 50,840 20,625 28,623 21,175 25,669 8,397 8,572 24,559

Operating expenses ($000’s) 15,168 8,086 13,103 9,715 11,203 3,284 3,994 10,297

Operating expenses ($/lb

sold) 16 19 20 23 21 20 23 20

Depreciation and depletion ($000’s)

10,924 5,528 7,646 6,259 8,779 2,713 2,753 7,886

Depreciation and depletion ($/lb sold)

11 13 12 15 16 17 16 15

The cash cost of production at South Inkai for 2010 was $19 per pound sold. During the ramp-up to design capacity of 2,000 tonnes U per year, unit costs of production at South Inkai are expected to be higher than the costs during a steady state of operation. This is primarily due to the fact that sulphuric acid used to acidify production blocks is expensed in the period of acidification.


KARATAU URANIUM MINE Karatau is an operating ISR uranium mine located in the Chu Sary Su basin in the Suzak region, Shymkent Oblast, owned indirectly as to 50% by the Corporation through the Karatau joint venture. The other 50% interest is held by Kazatomprom. The design capacity of the Karatau mine is 5,200,000 pounds (2,000 tonnes U) per year. It is expected that the annualized rate of production will reach this level in 2011. Production: Production from Karatau was 4,445,000 pounds (1,710 tonnes U) in 2010, of which 2,222,500 pounds (855 tonnes U) was attributable to the Corporation. Karatau produced approximately 846,000 pounds (325 tonnes U) in January and February 2011, of which 422,800 pounds (162 tonnes U) was attributable to the Corporation. The concentration of uranium in solution was 175 mg/l on average in January and February 2011. Operations: The following is a summary of the operational statistics (100%) for Karatau over the last four quarters: Total wells


production wells)


in operation



Production (lbs)

Q1 2010 - 90 865 205 917,300 Q2 2010 72 108 1,061 170 1,042,100 Q3 2010 85 111 963 173 946,700 Q4 2010 73 135 1,448 182 1,538,900 A total of 230 wells were installed during 2010 in line with the budget. The program for 2011 provides for the installation of 300 wells to achieve the production target for the year. Three production blocks were acidified during 2010, however delivery of the production solution to the processing plant was slightly delayed due to delays in the construction of a new pump station. Construction of the pump station has now been completed and production from the newly acidified blocks commenced in Q4 2010. The production rate was increased in order produce 4.4 million pounds during 2010. The increased flow rate during Q4 2010 was due to the utilization of the new pump station and the increased head grades were the result of selective acidification and pumping from wells with high-grade ore. New wellfields placed into production during Q4 also contributed to the increased production. Karatau received approval of its refining facility from the Ministry of Industry and New Technologies (“MINT”) during 2010, and can therefore ship product treated at its refining facility to customers. Capital expenditure incurred during 2010 was $47 million, compared to the budget of $67 million. The difference was caused by delays in construction projects that will be completed during the first half of 2011. Well field development expenditure was in line with the budget. Capital expenditure incurred by Karatau in 2011 is expected to be approximately $45 million on a 100% basis, of which $15 million is related to well-field development, $9 million is related to resource definition drilling and $21 million is related to construction activities and fixed asset purchases. Financial information: The following table shows the attributable production, sales and production costs for Karatau since acquisition on December 21, 2009:

(All figures are the Corporation’s attributable share)

3 months ended

Period ended

Dec 31, 2010

Sep 30, 2010

Jun 30, 2010

Mar 31, 2010

Dec 31, 2009 (1)

Production in lbs 769,500 473,300 521,100 458,600 73,100

Sales in lbs 899,000 1,050,900 260,000 131,800 252,800

Inventory in lbs 402,600 533,800 1,111,300 866,900 540,000

Revenues ($000’s) 47,283 41,164 11,392 5,591 10,710

Operating expenses ($000’s) 7,535 9,002 1,771 1,632 3,130

Operating expenses ($/lb sold) 8 9 7 12 12

Depreciation and depletion ($000’s) 16,168 17,607 5,617 4,015 7,553

Depreciation and depletion ($/lb sold) 18 17 22 30 30 Note: (1) Attributable values since the acquisition date of December 21, 2009

Depreciation and depletion up to Q3 2010 includes fair value adjustments recognized against finished product on hand on the acquisition date. The fair value adjustment is recognised as non-cash depreciation and depletion with the subsequent sale of the inventory. The depreciation and depletion per pound sold decreased, as the revalued finished product on hand on the acquisition date was sold during Q1 2010 and Q2 2010. The depreciation and depletion per pound is expected to stabilize at approximately the current levels. The cash cost of production for 2010 at $9 per pound sold was below the Corporation’s guidance of $14 per pound sold for 2010. The low cash cost was attributable to decreased expenditure in 2010, associated with the delay in piping and acidification of new blocks.


AKBASTAU URANIUM MINE Akbastau is an operating ISR uranium mine located in the Chu Sary Su basin in the Suzak region, South Kazakhstan Oblast, owned indirectly as to 50% by the Corporation through the Akbastau joint venture. The other 50% interest is held by Kazatomprom. Akbastau is licensed to mine 4,992,000 pounds (1,920 tonnes U) per year from sections 1 and 3 of the Budenovskoye deposit. Akbastau is also planning on commencing production from section 4 of the Budenovskoye deposit following receipt of required regulatory approvals. Akbastau is adjacent to the Karatau mine, which is licensed to mine section 2 within the southern subfield of the Budenovskoye deposit. Akbastau entered into a toll processing agreement with Karatau, under which solutions mined at Akbastau are currently processed at Karatau. Production: Production from Akbastau was 33,400 pounds (13 tonnes U) since the acquisition date of December 27, 2010, of which 16,700 pounds (7 tonnes U) was attributable to the Corporation. Akbastau produced approximately 438,000 pounds (168 tonnes U) in January and February 2011, of which 219,000 pounds (84 tonnes U) was attributable to the Corporation. The concentration of uranium in solution was 259 mg/l on average in January and February 2011. Operations: The following is a summary of the operational statistics (100%) for Akbatau since acquisition: Total wells


production wells)


in operation



Production (lbs)

Q4 20101) 7 47 387 288 33,400 Note: (1) Since the acquisition date of December 27, 2010.

As with Karatau, Akbastau is expected to be a low cost mining operation. The current levels of concentration in solution are expected to reduce as production is ramped up at the mine. The depth of the deposit is approximately 670 metres to 700 metres, in line with Karatau. The average thickness of the Akbastau ore zone varies between 5.8 and 21 metres, compared to 10 and 17 metres at Karatau. Akbastau has to date been successful in drilling and well development at the depths required. The natural internal pressure of the well fields reduces pumping costs. High levels of automation of the well fields enable Akbastau to achieve optimum production conditions and operate at lower costs than comparable operations which have less automation of the production process. Capital expenditure incurred by Akbastau in 2011 is expected to be $116 million on a 100% basis, of which $29 million is for well field development and the remainder for the construction of processing facilities and infrastructure. Financial information: The following table shows the attributable production, sales and production costs for Akbastau since acquisition on December 27, 2010:


Period ended

Dec 31, 2010 (1)

Production in lbs 16,700

Sales in lbs -

Inventory in lbs 360,500

Revenues ($000’s) -

Operating expenses ($000’s) -

Operating expenses ($/lb sold) -

Depreciation and depletion ($000’s) -

Depreciation and depletion ($/lb sold) - Note: (1) Attributable values since the acquisition date of December 27, 2010

Depreciation and depletion recognized in future periods will include fair value adjustments processed against finished product on hand on the acquisition date. The fair value adjustment is recognised as non-cash depreciation and depletion with the subsequent sale of the inventory. The Corporation expects depreciation and depletion per pound sold to decrease to approximately $18 per pound sold after the revalued finished product on hand at acquisition date has been sold.


ZARECHNOYE URANIUM MINE Zarechnoye is an operating ISR uranium mine located in the Syrdarya basin in the Otrar region, South Kazakhstan Oblast. The Corporation has a 49.67% indirect interest in the Zarechnoye uranium mine through its 49.67% interest in the Zarechnoye joint venture. Kazatomprom owns a 49.67% share of the Zarechnoye joint venture and the remaining shareholding is held by a Kyrgyz company. The design capacity of the Zarechnoye mine is 2,522,000 pounds (970 tonnes U) per year. It is expected that the annualized rate of production will reach this level in 2012. In addition, potential production from a satellite deposit known as South Zarechnoye could be 1,600,000 pounds (615 tonnes U) per year following additional resource definition drilling and receipt of applicable permits. Production: Production from Zarechnoye was 32,600 pounds (13 tonnes U) since the acquisition date of December 27, 2010, of which 16,300 pounds (6 tonnes U) was attributable to the Corporation. Zarechnoye produced approximately 313,000 pounds (120 tonnes U) in January and February 2011, of which 155,000 pounds (60 tonnes U) was attributable to the Corporation. The concentration of uranium in solution was 43 mg/l on average in January and February 2011. Operations: The following is a summary of the operational statistics (100%) for Zarechnoye since acquisition: Total wells


production wells)


in operation



Production (lbs)

Q4 2010(1) 1 153 2,293 48 32,600 Note: (2) Since the acquisition date of December 27, 2010.

Zarechnoye is located approximately 50 kilometres from the Koksarai village, on the left bank of the Syrdarya river. The depth of the deposit is approximately 400 metres to 770 metres and the average thickness of the Zarechnoye ore zone varies between 0.5 and 16 metres. Zarechnoye has to date been successful in drilling and well development at the depths required. Capital expenditure incurred by Zarechnoye in 2011 is expected to be $17 million on a 100% basis, of which $14 million is for well field development. Financial information: The following table shows the attributable production, sales and production costs for Zarechnoye since acquisition on December 27, 2010:


Period ended

Dec 31, 2010 (1)

Production in lbs 16,300

Sales in lbs 143,300

Inventory in lbs 103,600

Revenues ($000’s) 6,287

Operating expenses ($000’s) 2,345

Operating expenses ($/lb sold) 16

Depreciation and depletion ($000’s) 3,940

Depreciation and depletion ($/lb sold) 27 Note: (1) Attributable values since the acquisition date of December 27, 2010

Depreciation and depletion includes fair value adjustments processed against finished product on hand on the acquisition date. The fair value adjustment is recognized as non-cash depreciation and depletion with the subsequent sale of the inventory. The Corporation expects depreciation and depletion per pound sold to decrease to approximately $13 per pound sold after the revalued finished product on hand at acquisition date has been sold.


REVIEW OF DEVELOPMENT PROJECTS - KAZAKHSTAN

KHARASAN URANIUM PROJECT Kharasan is an ISR uranium development project located in the Syrdarya basin in the Suzak region of South Kazakhstan. The Corporation has an indirect 30% interest in the Kharasan Uranium Project through its 30% interest in the Kyzylkum joint venture (“Kyzylkum”), a Kazakhstan registered limited liability partnership. Kazatomprom has a 30% interest in Kyzylkum and Energy Asia (BVI) Ltd., which is owned by a consortium of Japanese utilities and a trading company, has the remaining 40% interest in Kyzylkum. The design capacity of Kharasan is 5,200,000 pounds (2,000 tonnes U) per year, with a current installed capacity of 2,600,000 pounds (1,000 tonnes U) per year. Production in commissioning: Production in commissioning from Kharasan was 668,600 pounds (257 tonnes U) during 2010, of which 200,600 pounds (77 tonnes U) was attributable to the Corporation. Production in commissioning from Kharasan was approximately 160,000 pounds (61 tonnes U) in January and February 2011, of which 48,000 pounds (18 tonnes U) was attributable to the Corporation. The concentration of uranium in solution was 82 mg/l on average in January and February 2011. Operations: The following is a summary of the operational statistics for Kharasan (on a 100% basis) over the last four quarters: Drill rigs on

site(1) Total wells completed (including

production wells)

Average no. of production

wells in operation


Concentration in solution

(mg U/l)

Production (lbs)

Q1 2010 4 30 70 424 51 111,800 Q2 2010 1 5 73 485 52 145,300 Q3 2010 - - 73 558 58 183,600 Q4 2010 - - 75 556 69 227,900 Note: (1) As at end of quarter for well field development

Acidification of an additional production block in the initial test mining area commenced during 2010 to maintain the current level of production. The initial production blocks at Kharasan continued to perform in line with production levels experienced in 2009. A total of 30 new wells have been prepared for test mining in two new blocks in the Campan and the Santon ore horizons, including six production wells. The new test well fields started acidification in April 2010 and flow of solution was initiated to the plant during July 2010. Results to date from the new test well fields have been positive. The concentration of uranium in solution from the test block in the Santon horizon peaked at 293 mg U/litre in early September 2010 and the daily average is currently stabilizing at approximately 220 – 230 mg U/litre. The concentration of uranium in solution from the test block in the Campon horizon peaked in early September 2010 at 134 mg U/litre and has been stabilized at around 77 mg U/l. The main factors contributing to the better performance of the new test mining areas are more precise screen interval placement in the ore zone, use of better quality screens and a lower initial acidification rate which avoids fouling of the screens and gas locking of the formation, which caused lower flow rates in the initial test mining blocks. Initial indications are that the new test blocks have lower carbonate levels than the original blocks, leading to decreased consumption of sulphuric acid. Also, the distance between production and injection wells is shorter than in the original test area mining blocks. Kharasan is also preparing to do a test of adding ferric iron to the mining solution that is expected to increase oxidation of the ore body and therefore potentially increase the uranium concentration in solution. Capital expenditure incurred during 2010 was $8 million, compared to the budget of $21 million. The work plan for 2010 was amended with the decision to prepare the 30 new test wells and the capital spent decreased as a result. Capital expenditure incurred by Kharasan in 2011 is expected to be approximately $36 million on a 100% basis, of which $33 million is related to well-field development.


SULPHURIC ACID SUPPLY IN KAZAKHSTAN In Kazakhstan, ISR uranium operations are highly dependent on sulphuric acid for the extraction of uranium from the host ore body. The supply of sulphuric acid is therefore of critical importance to the Corporation’s operations in Kazakhstan. Sulphuric acid supply to Betpak Dala and Kyzylkum was more than sufficient for operations to achieve production targets in 2010. Although the supply of sulphuric acid is not a cause of immediate concern to the Corporation, the Corporation has identified logistical and transport issues which influence the availability of sulphuric acid to its mines. With the ongoing increase in uranium production in Kazakhstan, the ability to handle supplies, in particular sulphuric acid, is limited by storage capacity at transhipment locations. In addressing this storage problem, Kazatomprom is proposing to build additional storage of 1,260 m³ at Suzak and 1,260 m³ at the Shieli freight handling centres. An additional two storage tanks of 600 m³ capacity each are currently under construction at South Inkai. Both are expected to be completed in Q1 2011, supporting the ramp up to full production in 2011. A further 2,400 m³ storage capacity is now approved and operational at the Zhanakorgan Transhipment base near Kharasan with an approval to construct tanks for a further 7,200 m³ of acid storage. An independent contractor is constructing a transhipment base at Shieli with 3,000 t of acid storage capacity, scheduled for completion during the first half of 2011. Negotiations are in progress to secure storage at this location as well. Existing sulphuric acid producers in Kazakhstan are projected to increase acid production by 350,000 tonnes in 2011. With nearly all the acid supply coming from within Kazakhstan in 2011, transportation demands for acid rolling stock has been reduced. SULPHURIC ACID PLANT

The Corporation’s SKZ-U joint venture with Kazatomprom and its other joint venture partners continue to advance the development of a sulphuric acid plant near Kharasan at Zhanakorgan. The Corporation’s ownership percentage in SKZ-U is 19%. The total construction cost of the plant is expected to be approximately $217 million, of which approximately 45% has been funded by the joint venture partners to date, with the balance funded by the partners through debt financing. Mechanical completion of the plant is scheduled by the end of 2011 and production of sulphuric acid is expected to commence in 2012. The Corporation has funded $18 million of its debt obligation to date towards the construction of the sulphuric acid plant. The balance of approximately $13 million will be funded in 2011. Desmet Ballestra and Soyuzcomplect have completed the designs for the engineering work for the plant. Equipment orders have been placed and materials and equipment are arriving on site. The turbine has been manufactured and is ready to be shipped from Europe. In 2010, the general contractor continued work on the foundation for the cooling towers, storage and the laboratory building. The foundations for the converter, acid storage, water and diesel storage are complete. The power generation complex contractor has completed the foundation for the power generation turbine. Construction of infrastructure facilities such as the access road, enclosed warehouse storage, rail spur, temporary camps, power and water supply are complete. The construction of a water pond is also complete with the piping to be installed during the plant construction stage. Capital expenditure incurred during 2010 was $50 million, compared to the budget of $60 million. The difference was due to delays in the finalization of the construction contract, delaying the start of construction for the project. Capital expenditure incurred by SKZ-U in 2011 is expected to be approximately $111 million on a 100% basis. EXTERNAL PROCESSING FACILITIES Betpak Dala has installed and commissioned a drying circuit at South Inkai with a drying capacity of approximately 2,000 tonnes per year, which was approved by the State Commission in July 2010. Production from the South Inkai and Akdala mines were processed at the South Inkai processing facility and other processing facilities in Kazakhstan (including Karatau) during the second half of 2010. Betpak Dala plans to increase the capacity of its drying circuit during 2011, after which Akdala and South Inkai should no longer need to make use of external processing facilities. The Karatau mine has its own processing facility, which was licensed in Q2 2010 and Karatau now processes all material produced on site. KAZAKHSTAN TAX RATE Effective January 1, 2011, the Corporate income tax rate in Kazakhstan will be fixed at 20%. The new legislation was signed by the President of the Republic of Kazakhstan on November 26, 2010, eliminating the planned reduction of the rate to 17.5% in 2013 and 15% in 2014. The Corporation has therefore applied a rate of 20% to all its Kazakh future income tax liabilities, instead of the calculated average rates applied previously, which ranged between 15% and 17%. The change in the future income tax rate resulted in a $39.0 million increase in the future income tax expense in 2010.


REVIEW OF DEVELOPMENT PROJECTS – UNITED STATES

POWDER RIVER BASIN, WYOMING The Powder River Basin in Wyoming hosts several of the Corporation’s uranium projects. On January 25, 2010, the Corporation completed the acquisition of 100% of the MALCO Joint Venture (“MALCO”) from wholly-owned subsidiaries of AREVA and Électricité de France (“EDF”). The assets of MALCO are located in Johnson and Campbell Counties in the Powder River Basin and include the licensed and permitted Irigaray ISR central processing plant, the Christensen Ranch satellite ISR facility and associated uranium ore bodies, collectively referred to as the Willow Creek Project. The Willow Creek central processing plant currently has the capacity to process 1.3 million pounds of dried U3O8 per year. The Corporation plans to expand the processing capacity at the Willow Creek central plant in line with the U.S. Nuclear Regulatory Commission (“NRC”) licensed capacity of 2.5 million pounds per year, by incorporating a vacuum dryer that was purchased for use at the Corporation’s Moore Ranch project. The Corporation commenced installation of Mine Unit 7, the first production area at the Willow Creek Project for the Corporation, in April 2010. A total of 350 delineation holes were drilled, 323 cased wells were installed, and 309 wells were completed. Installation of additional wells and associated surface facilities is ongoing. The Wyoming Department of Environmental Quality (“WDEQ”) approved the baseline wellfield data package for Mine Unit 7 and the unit was approved through an internal Safety and Environmental Review Panel review under the NRC performance based license. Pre-operational inspections where conducted by the NRC in late October and again in early December. Approval to begin operations was given by the NRC on December 17, 2010. Commissioning commenced at the project on December 20, 2010. Production during commissioning from the Willow Creek Project was approximately 5,800 pounds (2.2 tonnes U) during the first two months of 2011. The average concentration of uranium in solution during February 2010 was 38 mg/l. The concentration of uranium in solution was over 60 mg/l by the end of February 2011. The Moore Ranch satellite deposit, also located in Campbell County, 25 miles east of Edgerton, Wyoming, is expected to become a satellite ISR facility with uranium laden resin transported to Willow Creek for final processing. On September 30, 2010 the NRC issued the operating license for the Moore Ranch in-situ uranium satellite deposit. The WDEQ issued Permit to Mine No. 777 for Moore Ranch operations on December 22, 2010. Installation of the monitor well ring for the first planned wellfield commenced in December 2010. Approximately 45% of the monitor ring (26 wells) was installed, with the remainder to be completed during the first half of 2011. Wellfield installation (injection and recovery wells) will begin by mid-year 2011 once hydrologic testing of the monitor ring is completed. Production is planned to commence at Moore Ranch in 2012. License and permit applications for the Ludeman satellite deposit in Converse County were submitted to the NRC and the WDEQ in early 2010. The Corporation withdrew the application to make the application consistent with the recently acquired Willow Creek license, and to enhance the hydrologic data base with existing information. The Corporation resubmitted the application in February 2011 and has requested NRC to resume its review. The Ludeman satellite deposit is expected to be licensed as a satellite operation that can feed a central processing plant such as Willow Creek. At the Allemand-Ross satellite deposit, the Corporation continued its resource delineation drilling program. Installation of hydrologic test wells for permitting purposes was completed during 2010. Eight cased monitor wells were installed for use in collecting baseline hydrology data and aquifer characterization, bringing the total number of monitor wells at Allemand-Ross to 32. Capital expenditure incurred by the Corporation on its Powder River Basin projects during 2010 was $27 million, compared to the budget of $34 million. The difference was largely due to under expenditure on Moore Ranch due to delays in receipt of the WDEQ Permit. Capital expenditure of approximately $46 million is expected to be incurred by the Corporation’s Powder River Basin properties during 2011, of which $24 million is related to wellfield development, $12 million for the development of the Moore Ranch satellite facilities and disposal well and 10 million for other construction activities and fixed asset purchases.

REVIEW OF DEVELOPMENT PROJECTS – AUSTRALIA

HONEYMOON URANIUM PROJECT The Honeymoon Uranium Project is located in the state of South Australia, approximately 75 kilometres northwest of the city of Broken Hill. The Corporation owns 51% of the Honeymoon Uranium Project Joint Venture, which owns the Honeymoon Uranium Project. The remaining 49% of the joint venture is owned by Mitsui & Co., Ltd. The project has a design capacity of 880,000 pounds per year, with an expected mine life (including production ramp-up) of six years. The current capital expenditure estimate for the Honeymoon project, including contingencies, is A$146 million (on a 100% basis). The approved budget was A$137 million. The difference of A$9 million is due to cost overruns on the structural, mechanical and piping works, as well as the electrical and instrumentation works. As at December 31, 2010, a total of A$138 million has been spent (on a 100% basis). Capital expenditure incurred during 2010 was $52 million. Current capital expenditure of approximately $20 million is planned in 2011. This includes $8 million to complete the plant construction, $6 million for wellfield drilling, $4 million for wellfield development and $2 million for plant and equipment. Commissioning activities in the wellfields, water treatment plant and uranium treatment plant commenced during 2010 and are continuing. Production is expected to commence by mid-2011 once full operational permits are received.


CORPORATE

ACQUISITION OF AKBASTAU URANIUM MINE AND ZARECHNOYE URANIUM MINE The Corporation announced on June 8, 2010, the signing of a definitive purchase and subscription agreement to acquire a 50% joint venture interest in Akbastau and a 49.67% joint venture interest in Zarechnoye from ARMZ (the “ARMZ Transaction”). Kazatomprom owns 50% and 49.67% joint venture interests in Akbastau and Zarechnoye, respectively. The remainder of the interest in Zarechnoye is held by a Kyrgyz company.

Pursuant to the transaction, ARMZ agreed to contribute its interests in the Akbastau and Zarechnoye joint ventures and a cash investment of $610 million in return for 356 million common shares of the Corporation. Following closing, the Corporation paid a special cash dividend of $1.06 per share to shareholders other than ARMZ. On July 30, 2010, Japan Uranium Management Inc. (“JUMI”) undertook to exercise its right to have Uranium One repurchase its convertible debenture, which was triggered by the transaction with ARMZ. On July 15, 2010 the Independent Committee and the Board of Directors of Uranium One recommended the transaction to shareholders, who approved the transaction on August 31, 2010. On November 26, 2010 Uranium One completed the initial closing of the ARMZ Transaction, comprising the issuance of 178 million new common shares of Uranium One to ARMZ in return for $610 million in cash. The Board of Directors declared a special dividend of $1.06 per share payable on December 20, 2010, to all shareholders of record (other than ARMZ) at the close of business on December 10, 2010. On December 27, 2010 Uranium One completed the final closing of its transaction with ARMZ, comprising the issuance of a further 178 million new common shares of Uranium One to ARMZ in return for ARMZ’s 50% interest in Akbastau and 49.67% interest in Zarechnoye. The JUMI debenture was redeemed after the closing of the transaction for $275.8 million, including 101% of the outstanding principal amount and $4.0 million of accrued interest. ARMZ currently holds 492 million common shares representing 51.4% of the outstanding common shares of Uranium One. ARMZ has agreed to a standstill of 18 months from closing during which it may not, without prior consent, dispose of or acquire any additional Uranium One shares, except pursuant to agreed anti-dilution rights, which will permit ARMZ to maintain not less than a 51% interest in Uranium One and to certain other exceptions. THE AKBASTAU URANIUM MINE Akbastau is owned 50% by the Corporation and 50% by Kazatomprom and operates fields 1, 3 and 4 of the Budenovskoye deposit in southern Kazakhstan. Karatau, in which Uranium One owns a 50% interest, operates field 2 of the Budenovskoye deposit. Production from Akbastau commenced in 2009 and was 2.0 million pounds in 2010. Pregnant solutions from the well fields at site 1 at Akbastau are currently being treated at the Karatau processing facilities. Under the terms of its subsoil use agreements, Akbastau has the exclusive right to carry on exploration, extraction, mining and sales of uranium from fields 3 and 4 of the Budenovskoye deposit until 2037 and from field 1 until 2036. Steady state production from Akbastau is expected to be 7.8 million pounds per year. According to an Independent Technical Report dated July 12, 2010 prepared by Scott Wilson Roscoe Postle Associates Inc. for Uranium One, as at April 30, 2010 Akbastau had Indicated Resources totalling 12.0 million tonnes, at a grade of 0.090% uranium, containing 10,737 tonnes of uranium (27.9 million pounds U3O8), and Inferred Resources totalling 26.5 million tonnes, at a grade of 0.093% uranium containing 24,547 tonnes of uranium (63.8 million pounds U3O8). The resource estimates were prepared in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101 - Standards of Disclosure for Mineral Projects. The resource estimate is based on parameters (e.g. cut-off grade, grade-thickness, internal waste, mineralization to waste ratio, block size, permeability and density) used for the South Inkai and Karatau deposits and originally approved by the Ministry of Geology and the Ministry of Atomic Energy and Industry of the USSR. The methodology applied considered similar structural and tectonic characteristics, lithological and facies types and hydrogeological and geotechnical features. The 2010 resource estimate is based on information from approximately 260,800 metres of drilling. The indicated resources have been drilled on fences 200 metres apart, with holes spaced at 50 metres. The inferred resources have been drilled on fences 400 metres apart, with holes spaced at 50 to 200 metres apart. Gamma ray logging is used in conjunction with the geological interpretations to determine the uranium content. The mineral resource estimate for the Akbastau uranium mine is updated each year and certified by JSC Volkovgeologia on behalf of the Kazakhstan State Committee on Reserves.


THE ZARECHNOYE URANIUM MINE Uranium One has a 49.67% interest in Zarechnoye. Kazatomprom owns a 49.67% interest in the joint venture, and an affiliate of the Kyrgyz government owns the remaining 0.66%. Zarechnoye owns both the Zarechnoye and South Zarechnoye deposits, located in southern Kazakhstan. Production from Zarechnoye in 2010 was approximately 2.1 million pounds. Zarechnoye is expected to ramp up to full production of approximately 2.5 million pounds per year by 2012. Full production from South Zarechnoye, a satellite deposit, is expected to be approximately 1.6 million pounds. Under its subsoil use agreement, the Zarechnoye joint venture has the exclusive right to carry on exploration, extraction, mining and sales of uranium from the Zarechnoye deposit until 2027. It also has the exclusive right to carry on exploration, extraction, mining and sales of uranium from South Zarechnoye until 2037. According to an Independent Technical Report dated July 6, 2010 prepared by Scott Wilson Roscoe Postle Associates Inc. for Uranium One, as at April 30, 2010 Zarechnoye had Indicated Resources totalling 19.2 million tonnes, at a grade of 0.078% uranium, containing 12,618 tonnes of uranium (32.9 million pounds U3O8), and Inferred Resources totalling 7.7 million tonnes, at a grade of 0.051% uranium containing 3,934 tonnes of uranium (10.2 million pounds U3O8). The resource estimates were prepared in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101 - Standards of Disclosure for Mineral Projects. The resource estimate is based on parameters (e.g. cut-off grade, grade-thickness, internal waste, mineralization to waste ratio, block size, permeability and density) used for other South Kazakhstan uranium deposits and originally approved by the Ministry of Geology and the Ministry of Atomic Energy and Industry of the USSR. The modelling methodology applied considered similar structural and tectonic characteristics, lithological and facies types and hydrogeological and geotechnical features. The 2010 resource estimate is based on information from approximately 368,700 metres of drilling. The indicated resources have been drilled on fences 200 metres apart, with holes spaced at 50 metres. The inferred resources have been drilled on fences 400 metres apart, with holes spaced at 50 to 200 metres apart. Gamma ray logging is used in conjunction with the geological interpretations to determine the uranium content. The mineral resource estimate for the Zarechnoye uranium mine is updated each year and certified by JSC Volkovgeologia on behalf of the Kazakhstan State Committee on Reserves. OPTION AGREEMENT TO ACQUIRE MANTRA RESOURCES LIMITED

Following the announcement on December 15, 2010 that ARMZ had entered into a definitive agreement to acquire all of the issued shares of Mantra Resources Limited (“Mantra”), Uranium One and ARMZ jointly announced that they had entered into an option agreement to allow Uranium One to acquire Mantra from ARMZ. Mantra's core asset is the Mkuju River Project in Tanzania which is nearing the completion of a definitive feasibility study. Pursuant to the agreement with ARMZ, Uranium One has a call option to acquire Mantra from ARMZ, exercisable at any point within 12 months of closing (subject to extension) of the acquisition of Mantra by ARMZ. The agreement also provides ARMZ with a put option to sell Mantra to Uranium One at the end of the term. Uranium One will become the operator of the Mkuju River Project once ARMZ completes the acquisition of Mantra. As operator of the project, Uranium One will be responsible to arrange funding for the project. The purchase price to be paid will be equal to ARMZ’s acquisition cost of Mantra (approximately A$1.2 billion), including any additional expenditures contributed by ARMZ to Mantra or its properties and interest thereon at a rate of 2.65% per annum. The exercise of the put or call option will constitute a related party transaction under applicable Canadian securities legislation. Accordingly, the exercise of the put and call options is subject to Uranium One minority shareholder approval, as well as to required regulatory approvals. C$260 MILLION BOUGHT DEAL FINANCING OF CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES The Corporation issued an aggregate principal amount of C$260,000,000 of convertible unsecured debentures (the “2010 Debentures”) which closed on March 12, 2010. The 2010 Debentures mature on March 13, 2015, with interest payable at a rate of 5.0% per annum, payable semi-annually from the date of receipt of all necessary Kazakh approvals for the conversion of the 2010 Debentures, or at a rate of 7.5% per annum, payable semi-annually before the receipt of the necessary Kazakh approvals. On October 12, 2010 the Corporation received all necessary Kazakh approvals for the conversion of the 2010 Debentures and the interest rate on the Debentures was consequently reset to 5%. The 2010 Debentures were initially convertible into common shares of the Corporation at a rate of 250 common shares per C$1,000 principal amount with a conversion price of C$4.00 per common share. On December 13, 2010 the conversion price was adjusted to C$3.15 per common share in accordance with the provisions of the trust indenture to take into account the $1.06 special dividend that was paid to all common shareholders (other than ARMZ) as a result of the ARMZ transaction which was announced by the Corporation on June 8, 2010. The Corporation intends to use the net proceeds for potential acquisitions, to finance its operations and development projects and for working capital.


ISSUANCE OF CONVERTIBLE DEBENTURES TO JAPANESE CONSORTIUM On January 14, 2010, the Corporation issued to Japan Uranium Management Inc. (“JUMI”) a C$269.1 million ($258.1 million ) aggregate principal amount 3% convertible unsecured subordinated debenture maturing ten years from the date of issue (the “JUMI Debentures”). Pursuant to the terms of the JUMI Debentures, the Corporation was required to offer to re-purchase the JUMI Debentures for 101% of the outstanding principal amount plus accrued interest upon a “change of control”. The transaction with ARMZ constituted a “change of control” and on July 30, 2010, the Corporation made such a re-purchase offer to JUMI, which JUMI accepted. The JUMI Debentures were redeemed on December 29, 2010. ACQUISITION OF CHRISTENSEN RANCH AND IRIGARAY IN WYOMING On August 7, 2009, the Corporation entered into a definitive agreement to acquire 100% of MALCO from wholly-owned subsidiaries of AREVA and EDF for $35 million in cash. The assets of MALCO include the licensed and permitted Irigaray ISR central processing plant, the Christensen Ranch satellite ISR facility and associated U3O8 resources located in the Powder River Basin of Wyoming. The Committee on Foreign Investment in the United States approved the transaction early in November 2009. Closing of the transaction occurred during January 2010 after the Corporation received all regulatory approvals including NRC, WDEQ and Texas Commission on Environmental Quality. SALE OF URANIUM ONE AFRICA In May 2009, the Corporation committed to a plan to sell Uranium One Africa Limited, (“Uranium One Africa”), a wholly owned subsidiary of the Corporation. Uranium One Africa owns the Dominion Uranium Project, which the Corporation has placed on care and maintenance during the third quarter of 2008. The sale of Uranium One Africa was completed in April 2010 and the Corporation received cash proceeds of $37.3 million. The net carrying value of the investment of $38.5 million as at December 31, 2009 was written down to the proceeds of $37.3 million, resulting in an impairment of $1.2 million in Q1 2010.


SUMMARY OF QUARTERLY RESULTS (US dollars in thousands except per share and per lb amounts)

3 months ended

Dec 31, 2010

Sep 30, 2010

Jun 30, 2010

Mar 31, 2010

Dec 31, 2009

Sep 30, 2009

Jun 30, 2009

Mar 31, 2009

$ $ $ $ $ $ $ $ Revenues 152,294 73,054 65,973 35,529 69,133 21,333 18,557 42,969

Net (loss) / earnings from continuing operations

(148,232) (10,223) (9,741) (21,506) 179,601 (15,309) (265,726) 63,356

Basic and diluted (loss) / earnings per share from continuing operations(1)

(0.24) (0.02) (0.02) (0.04) 0.38 (0.03) (0.57) 0.13

Earnings / (loss) from discontinued operations(2)

- - - - - 3,408 806 (2,223)

Basic and diluted earnings per share from discontinued operations(1) (2)

- - - - - 0.01 0.00 (0.00)

Net (loss) / earnings (148,232) (10,223) (9,741) (21,506) 179,601 (11,901) (264,920) 61,133

Basic and diluted (loss) / earnings per share(1)

(0.24) (0.02) (0.02) (0.04) 0.38 (0.03) (0.56) 0.13

Total assets 3,369,057 2,468,506 2,457,499 2,556,870 2,149,107 1,625,528 1,609,845 1,613,991 Notes: (1) The basic and diluted earnings / loss per share are computed separately for each quarter presented and therefore may not add up to the

basic and diluted earnings / loss per share for the year ended December 31, 2010 and December 31, 2009. (2) Gold One International Ltd (“Gold One”) (formerly Aflease Gold) was classified as a discontinued operation in Q1 2008.

THREE MONTHS ENDED DECEMBER 31, 2010 AKBASTAU AND ZARECHNOYRE ACQUISITION On November 26, 2010 Uranium One completed the initial closing of its transaction with ARMZ, comprising the issuance of 178 million new common shares of Uranium One to ARMZ in return for $610 million in cash. The Board of Directors declared a special dividend of $1.06 per share payable on December 20, 2010, to all shareholders of record (other than ARMZ) at the close of business on December 10, 2010. On December 27, 2010, the Corporation acquired a 50% joint venture interest in the Akbastau Uranium Mine and a 49.67% Joint Venture interest in the Zarechnoye Uranium Mine. The purchase price was paid by way of the issuance of 178 million common shares of Uranium One.

REDEMPTION OF THE JUMI DEBENTURES Pursuant to the terms of the JUMI Debentures, the Corporation redeemed the JUMI Debentures for 101% of the outstanding principal amount plus accrued interest subsequent to the “change of control” triggered by the transaction with ARMZ. URANIUM SALES, INVENTORY AND OPERATING COSTS The Corporation had attributable sales of 2,878,400 pounds during Q4 2010, compared to 1,498,900 pounds in Q4 2009. The Corporation’s attributable share of revenue from sales in Q4 2010 was $152.3 million, compared to $69.1 million in Q4 2009. The increase in revenue is due to a 92% higher sales volume and a 15% increase in the average realized uranium price per pound compared to Q4 2009. The average realized price per pound sold in Q4 2010 was $53. Earnings from mining operations were $76.3 million in Q4 2010 after the deduction of operating expenses of $36.0 million ($12 per pound sold) and depreciation and depletion charges of $40.0 million ($14 per pound sold). During Q4 2010, attributable inventory for Akdala, South Inkai and Karatau decreased by 737,300 pounds as more U3O8 was delivered into sales contracts than the production for the quarter. 342,600 attributable inventory pounds from Akbastau and 230,600 attributable inventory pounds from Zarechnoye were on hand on the acquisition date of December 27, 2010, of which 360,000 and 103,600 were on hand on December 31, 2010 after production and sales for Akbastau and Zarechnoye respectively since the acquisition date.


NON-GAAP MEASURES ADJUSTED NET EARNINGS / LOSS The Corporation has included the following non-GAAP performance measures throughout this document: adjusted net earnings / loss and adjusted net earnings / loss per share. Adjusted net earnings / loss and adjusted net earnings / loss per share do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures reported by other companies. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Corporation’s performance and ability to generate cash flow. This is provided as additional information and should not be considered in isolation of, or as a substitute for, measures of performance prepared in accordance with GAAP. Adjusted net earnings / loss is calculated by adjusting the net profit / loss from continuing operations with unrealized foreign exchange gains / losses on future income tax liabilities, restructuring costs, impairments, cost of suspension of operations, gains / losses from the sale of assets and the effect of the tax rate adjustment on future income tax liabilities. These items are added back due to their inherent volatility and / or infrequent occurrence. The following table provides a reconciliation of adjusted net earnings / loss to the financial statements: 3 months ended Year ended Dec 31, 2010

$(000’s) Dec 31, 2009

$(000’s) Dec 31, 2010

$(000’s) Dec 31, 2009

$(000’s)

Net (loss) / earnings from continuing operations (148,232) 179,601 (189,702) (38,078)

Unrealized foreign exchange loss / (gain) on future income tax liabilities

71 4,678 823 (63,771)

Impairment of mineral interests, plant and equipment and closure costs

111,067 3,913

112,955

269,540

Loss / (gain) on sale of available for sale securities 155 (67) 10,603 (193)

Corporate development expenditure 422 - 8,906 -

Restructuring costs 5,520 - 5,520 -

Effect of rate adjustment on future income tax liabilities(1) 39,000 (203,961) 39,000 (203,961)

Adjusted net earnings / (loss) 8,003 (15,836) (11,895) (36,463)

Adjusted net earnings / (loss) per share – basic ($) 0.01 (0.03) (0.02) (0.08) Weighted average number of shares (thousands) – basic 682,872 475,083 611,562 475,583 Note: (1) The rate adjustment relates to the change in the effective tax rate used to calculate future income tax, resulting from the change in the tax

regulations for Kazakhstan. (Refer to Kazakhstan tax rate).

AVERAGE REALIZED SALES PRICE PER POUND AND CASH COST PER POUND SOLD The Corporation has included the following non-GAAP performance measures throughout this document: average realized sales price per pound and cash cost per pound sold. The Corporation reports total cash costs on a sales basis. In the uranium mining industry, these are common performance measures but do not have any standardized meaning, and are non-GAAP measures. The Corporation believes that, in addition to conventional measures prepared in accordance with GAAP, the Corporation and certain investors use this information to evaluate the Corporation’s performance and ability to generate cash flow. This is provided as additional information and should not be considered in isolation of, or as a substitute for, measures of performance prepared in accordance with GAAP. As in previous periods, sales per pound and cash cost per pound sold are calculated by dividing the revenues and operating expenses found in the statement of operations in the consolidated financial statements by the pounds sold in the period.


RESULTS OF OPERATIONS AND DISCUSSION OF FINANCIAL POSITION SELECTED FINANCIAL INFORMATION The Corporation’s consolidated financial statements and the financial data set out below have been prepared in accordance with GAAP. Uranium One and its operating subsidiaries use the United States dollar, the Australian dollar and the Canadian dollar as measurement currencies.

(US dollars in thousands except per share and per lb amounts)

Year ended

Dec 31, 2010 $’000

Dec 31, 2009 $’000

Dec 31, 2008 $’000

Revenue 326,850 151,992 149,776 Loss from continuing operations (189,702) (38,078) (2,333,587) Earnings / (loss) from discontinued operations - 1,991 (122,260) Net loss (189,702) (36,087) (2,455,847) Adjusted net (loss) / earnings (11,895) (36,463) 22,323 Cash flows from operating activities 46,389 6,081 36,126 Loss per share from continuing operations (0.31) (0.08) (4.98) Earnings / (loss) per share from discontinued operations - 0.00 (0.26) Loss per share (0.31) (0.08) (5.24) Adjusted net (loss) / earnings per share (0.02) (0.08) 0.05 Product inventory carrying value(1)(2)(3)(4) 81,383 65,926 7,985 Total assets 3,369,057 2,149,107 1,627,133 Long term financial liabilities 710,886 400,044 616,533 Special cash dividend per share (5) $1.06 - - Average realized uranium price per lb 48 48 68 Average spot price per lb 47 46 62 Lbs Lbs Lbs Attributable sales volume 6,861,600 3,187,700 2,210,900 Attributable production volume 7,230,200 3,474,800 1,873,600 Attributable inventory(1) 2,992,700 2,110,500 345,000 Notes: (1) Inventory as at December 31, 2008 is attributable to the Akdala Uranium Mine. Inventory as at December 31, 2009 is attributable to the

Akdala, South Inkai and Karatau Uranium Mines. Inventory as at December 31, 2010 is attributable to the Akdala, South Inkai, Karatau, Akbastau and Zarechnoye Uranium Mines. Revenue from production during commissioning of the Corporation’s development projects is credited against capital expenditures.

(2) For 2009, the Karatau inventory balance includes fair value adjustments of $8.9 million recorded as part of the business combination on December 21, 2009.

(3) For 2010, the Akbastau inventory balance includes fair value adjustments of $5.5 million recorded as part of the business combination on December 27, 2010.

(4) For 2010, the Zarechnoye inventory balance includes fair value adjustments of $4.2 million recorded as part of the business combination on December 27, 2010.

(5) On December 20, 2010, the Corporation paid a special dividend of $1.06 for each common share to shareholders other than ARMZ.

AKBASTAU AND ZARECHNOYE ACQUISITION On November 26, 2010 Uranium One completed the initial closing of its transaction with ARMZ, comprising the issuance of 178 million new common shares of Uranium One to ARMZ in return for $610 million in cash. The Board of Directors declared a special dividend of $1.06 per share payable on December 20, 2010, to all shareholders of record (other than ARMZ) at the close of business on December 10, 2010. On December 27, 2010, the Corporation acquired a 50% joint venture interest in the Akbastau Uranium Mine and a 49.67% Joint Venture interest in the Zarechnoye Uranium Mine. The purchase price was paid by way of the issuance of 178 million common shares of Uranium One. REDEMPTION OF JUMI DEBENTURES Pursuant to the terms of the JUMI Debentures, the Corporation was obliged to offer to re-purchase the JUMI Debentures for 101% of the outstanding principal amount plus accrued interest upon a “change of control”. The transaction with ARMZ constituted a “change of control” and on July 30, 2010, the Corporation made such a re-purchase offer to JUMI, which JUMI accepted, after which the debentures were redeemed on December 29, 2010.


RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2010 URANIUM SALES, INVENTORY AND OPERATING COSTS The Corporation’s uranium sales, costs of uranium sales and earnings from mine operations were as follows:

2010 2009

Akdala South Inkai

Karatau Zarechnoye

(3) Total /

Average Akdala South Inkai

Karatau (1)

Total / Average

Revenues ($000's) 93,870 121,264 105,430 6,287 326,850 74,085 67,197 10,710 151,992

Attributable sales volumes (lb)

1,909,000 2,467,600 2,341,700 143,300 6,861,600 1,535,100 1,399,800 252,800 3,187,700

Average realized price ($/lb sold)

48 48

Average spot price ($/lb)

47 46

Closing spot price ($/lb)

63 45

Operating expenses ($000's)

23,663 46,072 19,940 2,345 92,020 19,113 28,778 3,130 51,021

Operating expenses ($/lb sold)

12 19 9 16 13 12 21 12 16

Depreciation and depletion ($000's)

19,681 30,356 43,405 3,940 97,381 16,699 22,131 7,553 46,383

Depreciation and depletion ($/lb sold) (2)

10 12 19 27 14 11 16 30 15

Earnings from mine operations ($000's)

50,526 44,835 42,084 3 137,448 38,273 16,288 27 54,588

Notes: (1) Karatau was acquired on December 21, 2009. Karatau’s uranium sales, costs and earnings from mine operations therefore represents the

period from acquisition to December 31, 2009. (2) Includes fair value adjustments recognized in inventory on acquisition of Karatau and Zarechnoye and expensed as non-cash depreciation

and depletion with the sale of the revalued inventory. (3) Akbastau and Zarechnoye were acquired on December 27, 2010. Zarechnoye’s uranium sales, costs and earnings from mine operations

therefore represents the period from acquisition to December 31, 2010. Akbastau did not have any sales or related costs since acquisition.

The average realized uranium price per pound sold relative to the average spot price per pound, and the relationship between volumes sold and inventory, over the last eight quarters are as follows:

40

60

$/lb of U3 O

8

‐

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

Lbs of U3 O

8

Sales(lb) Inventory (lb) Realized price ($/lb) Average price ($/lb)


The Corporation’s sales volumes are determined by the terms of long term sales contracts with customers and the delivery schedules which customers select each given year. Sales volumes can therefore vary significantly from quarter to quarter. There is generally an inventory build-up prior to quarters with high contracted sales volumes. The average realized sales price per pound sold by the Corporation is related to the spot price and has been increasing in line with the spot price since Q3 2010. Pricing in the Corporation’s sales contracts normally reference average market prices up to 6 weeks before the delivery date and the realized sales prices will therefore be below average market prices in a rising market price environment as experienced at the moment. The Corporation’s sales volumes are determined by the terms of long term sales contracts with customers and the delivery schedules which customers are allowed to select each given year. The Corporation forecasts the amount of U3O8 to be produced from its mines over the medium to long term and enters into long term sales contracts (i.e., contracts for delivery more than 12 months from the date of execution) with customers for specific yearly quantities. The Corporation commits a relatively high degree of its projected production for delivery into contracts in the immediate future, with progressively lower percentages being committed to contracts with delivery dates more than four to five years in the future. The Corporation also maintains a ‘cushion’ between projected production and committed sales to ensure that it can meet all delivery commitments even in the event of lower than projected production. Sales contracts normally provide for delivery of a fixed quantity of uranium concentrates per year. Delivery schedules are generally fixed, with minor allowances for customers to select the exact month of delivery depending on their refuelling schedules. Customers normally schedule deliveries to ensure the U3O8 is delivered in time to correspond to their schedules for conversion, enrichment, and fabrication, which in turn depend on their schedule for reloading of fuel at their nuclear power plants. The exact timing of sales is therefore not entirely at the Corporation’s discretion and sales are often uneven from quarter to quarter depending on the exact dates that customers choose for delivery of their uranium. Customers take delivery of U3O8 at conversion facilities and the Corporation ships the U3O8 produced at its mines to converters in time for scheduled deliveries to customers. In situations where deliveries are scheduled shortly after a quarter end, the Corporation often has low sales in that quarter, with higher inventory levels in anticipation of the delivery. Where deliveries are scheduled shortly before a quarter end, sales for the quarter could be higher, with relatively low inventory balances at the end of the quarter. Depending on the location of the conversion facility, shipping times from Kazakhstan can be up to four months and the lead time between production of U3O8 and sales therefore has a significant impact on inventory levels at any given time. Revenue of $326.9 million in 2010 increased by 115% compared to the $152.0 million in 2009, due to volume sold increasing by 3,673,900 pounds (115% higher than in 2009). The sales mix for 2010 was 28% for Akdala, 36% for South Inkai, 34% for Karatau and 2% for Zarechnoye, compared to 2009 where Akdala contributed 48%, South Inkai 44% and Karatau 8% of the sales. The sales mix is expected to align with the production ratio of each mine over time, considering the effect of long term contracts on inventory build-up. Operating expenses per pound sold decreased by 19% from $16 per pound in 2009 to $13 per pound in 2010, mainly due to changes in the sales mix compared to 2009, the lower cash cost of production at Karatau of $9 per pound and the decrease of the cash cost per pound of South Inkai from $21 per pound to $19 per pound. Akdala’s operating expenses per pound sold increased by 8% from $12 per pound to $13 per pound. There is possible volatility in operating expenses due to the timing of the acidification of new wellfields. Sulphuric acid use is higher during the initial acidification process, and the sulphuric acid cost per pound is higher during these periods. The Corporation carries inventory at the weighted average cost of production, calculated at various stages of the production process. As a result, the weighted average cost increases during periods with higher levels of acidification. Attributable inventory increased from 2,110,500 pounds at December 31, 2009 to 2,992,700 pounds at December 31, 2010, including 464,100 pounds on hand at Akbastau and Zarechnoye on December 31, 2010.


GENERAL AND ADMINISTRATIVE EXPENSES The main drivers of the cash component of general and administrative expenses are salaries, directors’ fees, consulting and advisor fees, travel expenses and office rent. Non-cash stock option and restricted share expenses are normally a significant contributor to general and administrative expenditure, as a significant contributing factor to Uranium One’s future success is its ability to attract and retain qualified and competent personnel. To accomplish this, Uranium One adopted a stock option plan and a restricted share plan to advance its interests by encouraging directors, officers and employees to have equity participation in Uranium One. General and administrative expenses, including stock option and restricted share expenses of $13.9 million, amounted to $53.0 million in 2010, compared to $37.9 million in 2009, including stock option and restricted share expenses of $7.5 million. The expense in 2010 includes restructuring costs of $5.5 million. Restructuring costs include an accrual for the cost of moving the Corporation’s head office from Vancouver to Toronto and associated severance payments to staff. The increase in the share option and restricted share expense results from the accelerated vesting caused by the change of control that occurred with the ARMZ transaction. The general and administrative expense for 2010 includes salaries and directors’ fees of $27.1 million, consulting and advisor fees of $7 million, travel expenses of $2.7 million and office rent of $3.0 million. EXPLORATION The Corporation has a significant resource base and does not rely on exploration success for current and future production activities. Exploration expenditure is therefore purely discretionary. The Corporation determines its discretionary exploration expenditure each year during its planning cycle. Exploration expenditure relates to exploration programs undertaken on the Corporation’s tenures in the United States, Canada and Australia and was $5.4 million during 2010, compared to $8.8 million during 2009. IMPAIRMENT OF MINERAL INTERESTS, PLANT AND EQUIPMENT The Corporation’s carrying value for Honeymoon was impaired by $113.5 million primarily due to strengthening of the Australian dollar and increased capital expenditure. The impairment was offset by future income tax recoveries of $3.7 million.

The Corporation’s carrying value for Dominion was impaired by $1.2 million to the agreed upon sale value of $37.3 million and together with impairments of other corporate assets of $1.9 million, resulted in the $3.1 million impairment during 2010. CARE AND MAINTENANCE The Corporation incurred care and maintenance costs of $1.2 million on Dominion during 2010 compared to care and maintenance costs of $11.7 million during 2009. The sale of Dominion was finalized during April 2010. The Shootaring Canyon mill in Utah was placed on care and maintenance in 2008 as the Corporation concluded that it could not be operated economically with the currently available resource base and care and maintenance costs of $1.7 million were incurred during 2010, compared to $2.0 million in 2009. Total care and maintenance costs for 2010 was $2.9 million, compared to care and maintenance costs of $15.4 million in 2009, which included care and maintenance cost of $1.7 million for Hobson and La Palangana which were sold in December 2009. INTEREST AND OTHER Interest income amounted to $6.1 million in 2010, compared to $4.9 million in 2009. In addition to the interest earned on loans to joint ventures, interest is earned on funds held on deposit by the Corporation. The increase in interest earned is due to the Corporation’s increased cash balance mainly resulting from the issuance of the JUMI Debentures, the 2010 Debentures and the ARMZ transaction. Interest accrued on the Corporation’s 2006 Debentures, 2010 Debentures and JUMI Debentures was $9.9 million, $18.3 million and $14.5 million in 2010, respectively. Interest accrued on the 2006 Debentures was $8.7 million in 2009. The redemption of the JUMI debentures resulted in a $1.2 million gain recognised in the statement of operations. The interest expense on the $65 million drawn down in October 2008 under the Corporation’s credit facility was $0.8 million in 2010 compared to $1.1 million in 2009. Other charges related to the credit facility, including amortization of upfront costs and the availability fee, were $1.9 million in 2010 and $3.7 million in 2009. LOSS ON SALE OF AVAILABLE FOR SALE SECURITIES The Corporation incurred losses in 2010 of $10.6 million, compared to gains of $0.2 million in 2009. The losses were incurred on the sale of investments. FOREIGN EXCHANGE GAIN / LOSS Unrealized foreign exchange losses during 2010 were $9.7 million, including an unrealized loss of $0.8 million on future income tax liabilities, compared to unrealized foreign exchange gains of $56.0 million which included an unrealized gain on future income tax liabilities of $63.8 million in 2009. The Corporation realized foreign exchange losses on cash and other items of $3.4 in 2010, compared to a gain of $3.1 million in 2009.


CORPORATE DEVELOPMENT EXPENSES The Corporation incurred $8.9 million in transaction costs during 2010, which relates to the acquisition of Akbastau and Zarechnoye and other corporate development projects. The costs mainly consist of advisory and consultation fees. INCOME TAXES The current income tax expense for 2010 of $49.3 million mainly consists of income tax paid and payable in Kazakhstan on profits from the Corporation’s Akdala, South Inkai and Karatau mines. For 2009 a $20.9 million income tax expense was recorded. The future income tax expense in 2010 of $24.5 million consists of the following: Recovery of future income tax liabilities of Akdala, Karatau and South Inkai mines of $7.0 million. The recovery represents the

depletion of the future income tax liabilities that was created on the acquisition of the Akdala and South Inkai mines, and was based on the excess purchase price paid on acquisition;

A recovery of $3.7 million recognized with the impairment of Honeymoon; An increase of $4.2 million in future income tax assets due to temporary differences and tax loss carry forwards, which is set off

against the future income tax liability; and Expense of $39.0 million due to the change in the Corporate tax rate in Kazakhstan. NET EARNINGS / LOSS The net loss for 2010 was $189.7 million or $0.31 per share, compared to a net loss of $36.1 million or $0.08 per share for 2009.


FINANCIAL CONDITION CASH AND CASH EQUIVALENTS On December 31, 2010, the Corporation had cash and cash equivalents of $315.8 million, compared to $148.5 million at December 31, 2009. Cash and cash equivalents on December 31, 2010 include $63.4 million held by the Corporation’s joint ventures. Joint ventures held $4.6 million in cash on December 31, 2009. Cash held by the joint ventures is used to fund joint venture operations. LOANS TO JOINT VENTURES Kyzylkum has repaid $17.5 million of the $35.0 million outstanding at December 31, 2009 due to the Corporation as a result of the restructuring of its debt. During 2010, the unpaid and accrued interest as of July 31, 2010 in the amount of $3.1 million was capitalized and added to the principal amount of the loan of which $1.6 million was paid during the year. The remaining principal loan amount is expected to be repaid in 2011. In 2011 Uranium One will also make a capital contribution of $24.0 million to Kyzylkum’s charter capital. The capital contribution will be matched by the joint venture partners, with the contributions having no effect on the percentage ownership. The Corporation extended additional loans of $18.0 million to SKZ-U during 2010. SKZ-U has repaid a loan of $4.3 million that was outstanding at December 2009. The outstanding amount of the loan bears interest at LIBOR plus 6% per annum, with interest payable on a semi-annual basis, commencing within three years of initial funding. BORROWED URANIUM CONCENTRATES AND URANIUM CONCENTRATES LOANS The Corporation borrowed 200,000 pounds of U3O8 pursuant to a uranium loan agreement to provide the Corporation with flexibility to meet its long term contractual obligations in terms of future uranium sales contracts and mitigate the risk of delivery delays. A current asset and current liability of $12.5 million is accounted for in respect of the borrowed uranium concentrates of 200,000 pounds on hand as at December 31, 2010. Pursuant to the loan agreement, this material is to be returned in Q3 2011 and the loan is therefore classified as a current liability as at December 31, 2010. INVENTORIES AND PURCHASED URANIUM CONCENTRATES The value of inventories increased to $81.4 million from $65.9 million held at December 31, 2009. Finished uranium concentrates and solutions and concentrates in process increased by $15.4 million in line with the increased quantity of product inventory from 2,110,500 pounds to 2,993,200 pounds. The increase in product inventory is due to:

The acquisition of Akbastau and Zarechnoye on December 27, 2010. The newly acquired joint ventures held attributable inventory of 464,100 pounds as at December 31, 2010. The acquired inventory is carried at fair value determined on acquisition. The fair value adjustment will be recognized in the statement of operations on the sale of the inventory, and is not re-measured in future periods. The fair value adjustment included in inventory as at December 31, 2010 was $9.7 million.

Inventory levels at South Inkai increased from 903,900 pounds to 1,500,200 pounds, due to production exceeding sales during the year.

Materials and supplies increased by $3.9 million in the year ended December 31, 2010, mainly due to the inclusion of materials and supplies acquired with Akbastau and Zarechnoye and the increase in the level of inventory as development projects is nearing completion. As at December 31, 2010 the Corporation had attributable inventory of 2,993,200 pounds, of which approximately 824,000 pounds was held at conversion facilities. Sales of product are normally completed at conversion facilities when material is transferred to customers by way of a book transfer. The product on hand at conversion facilities as at December 31, 2010 is committed for delivery under existing sales contracts subsequent to quarter end. Shipping times for finished product can be up to four months, depending on the distance between the mine site and conversion facility, where sales are completed through transfer of legal title and ownership. A summary of the Corporation’s attributable inventory carried at December 31, 2010 is as follows:

Category Location Lbs

(000’s) In process Mine site and external processing facilities 1,294 In process External processing facilities 485 Finished product In transit In transit 384 Finished product at conversion facility Conversion facilities 830 Total inventory 2,993 Production during commissioning of the Corporation’s development projects is not accounted for as inventory. Attributable material produced and on hand from the Corporation’s development projects at December 31, 2010 amounted to 0.1 million pounds at Kharasan.


OTHER ASSETS The Corporation contributed $24.3 million to its asset retirement fund up to December 31, 2010, mostly as a result of the additional asset retirement obligations acquired as part of the acquisition of Christensen Ranch and Irigaray and additional contributions made in line with mine development. In August 2009, the Corporation paid a deposit of $8.8 million to AREVA and EDF pursuant to the acquisition of Christensen Ranch and Irigaray. The deposit was applied against the purchase price on closing of the transaction on January 25, 2010. The Corporation acquired $40 million in receivables as part of the ARMZ Transaction and the amount is now owed to the Corporation by ARMZ. The Corporation still has $40 million in contingent payments owing to ARMZ, depending on tax related adjustments related to the purchase of Karatau and has agreed with ARMZ to offset the contingent payments as they become due against the $40 million in receivables. The Corporation has therefore offset the $20 million contingent payment which became due during January 2011, and if it becomes payable, the Corporation will offset the remaining $20 million contingent payment against the remaining receivables. MINERAL INTERESTS, PLANT AND EQUIPMENT AND ASSETS HELD FOR SALE The reporting values of mineral interests, plant and equipment increased by $981.6 million during the year ended December 31, 2010. The significant movement for 2010 consists of:

The acquisition of Akbastau and Zarechnoye increasing the value by $984.3 million; The acquisition of Christensen Ranch and Irigaray increasing the value by $56.4 million; The impairment of Honeymoon decreasing the value by $113.5 million; The capitalization of the Karatau contingent payment of $25 million (including future income tax adjustments of $5 million); Depreciation and depletion decreasing the net value by $100.7 million; and Capital additions of $108.4 million.

CURRENT LIABILITIES The outstanding amount on the Corporation’s 2006 Debentures increased mainly due to the interest accrued and the strengthening of the Canadian dollar against the US dollar since the issuance of the debentures, partially offset by the coupon interest payments. The 2006 Debentures are denominated in Canadian dollars and mature on December 31, 2011. CURRENT LIABILITIES RELATED TO THE ACQUISITION OF KARATAU In December 31, 2009, the Corporation issued a promissory note of $90 million to ARMZ as part of the consideration for the acquisition of Karatau. The promissory note was due no later than 12 months from closing of the transaction and was repaid on January 18, 2010 from the proceeds of the JUMI Debentures. Interest was payable on the promissory note at a rate of 4.75% per year. The Corporation determined that the first instalment of the post-closing tax related adjustments was due and payable on January 4, 2010 and accordingly raised a provision of $20 million at December 31, 2009. The $20 million was set off and settled against withholding tax payments made on behalf of ARMZ in January 2010. The Corporation raised a provision for the second contingent payment of $20 million on December 31, 2010, which was offset against the receivable acquired with the ARMZ Transaction on December 27, 2010. In 2006, Karatau entered into a fixed price contract for the sale of uranium. The sales price under this contract was below the current market price for uranium on the day of acquisition. The Corporation accounted for this contract as an unfavourable contract and recognized a liability of $18.9 million pursuant to this contract on acquisition of Karatau. On sale of uranium into the unfavourable contract, the liability is reduced, with a corresponding credit against revenue. The full liability was settled on September 30, 2010, after accounting for sales into this contract subsequent to acquisition. CURRENT LIABILITIES RELATED TO THE ACQUISITION OF AKBASTAU AND ZARECHNOYE Prior to acquisition, Zarechnoye entered into a discounted sales price contract for the sale of uranium. The discount on the sales price under this contract was higher than the current industry practice uranium sales contracts in Kazakhstan. The Corporation accounted for this contract as an unfavourable contract and recognized a liability of $11.6 million pursuant to this contract on acquisition of Zarechnoye. The Corporation received $11.6 million in cash on acquisition to compensate for the unfavourable contract. On sale of uranium into the unfavourable contract, the liability is reduced, with a corresponding credit against revenue. $0.3 million was recognized in the statement of operations in 2010 related to sales into this contract since acquisition. CURRENT AND LONG TERM PORTION OF JOINT VENTURE DEBT Karatau had a short term facility of $10 million outstanding on acquisition. An additional net drawdown of $27.5 million was made against the facility and new facilities from UniCredit and Halyk Bank during 2010. As at December 31, 2010, the Corporations share of these facilities was $18.8 million. The facilities are classified as current and are repayable between during 2011, with the last repayment scheduled for May 2011. Akbastau has facilities of $29.4 million outstanding from Alpha bank, GRK and Effective Energy outstanding on December 31, 2010. The Corporation’s share of these facilities was $14.7 million on December 31, 2010. The facilities are classified as current and are repayable during 2011, with the last repayment scheduled for August 2011. Kyzylkum received secured loans from Kazatomprom in the amount of $42.2 million during 2010. The Corporation’s proportionate share of the loan was $12.4 million on December 31, 2010. The facility is classified as long term and is repayable between 2014 and 2018. Kyzylkum repaid $17.5 million of the outstanding loan from the Corporation from the proceeds of the Kazatomprom loan.


Kyzylkum made scheduled payments of $22.4 million against its facilities with JBIC and Citibank. The outstanding balance of the facilities was $137.6 million at December 31, 2010. $53.3 of the facilities is classified as short term, with the remaining balance currently being scheduled for repayment during 2012 and 2013. Zarechnoye has facilities of $89.4 million outstanding from Eurasia Development Bank, Effective Energy and Citibank on December 31, 2010. The Corporation’s share of these facilities was $44.4 million. $21.4 million of the amount owing is classified as current and $68.0 million as long term with repayment scheduled to start in 2011 and the last repayment scheduled for December 2013. SKZ-U drew down unsecured loans from its JBIC facility to the value of $77.2 million in 2010. The Corporation’s proportionate share of these loans is $14.7 million. NON-CURRENT LIABILITIES The Corporation issued the JUMI Debentures on January 14, 2010. The JUMI debentures were denominated Canadian dollars. The value of the liability recognized on initial recognition amounted to $130.3 million, net of transaction costs of $1.1 million. Other movement in the debentures is resultant from the accrual of interest, the coupon payment and the strengthening of the Canadian dollar against the US dollar since the issuance of the debentures. The Corporation redeemed the JUMI debentures at 101% of its face value after closing of the ARMZ transaction on December 29, 2010. $140.7 million of the redemption value was allocated to the carrying value of the liability of $141.9 million on December 29, 2010, which resulted in a gain of $1.2 million being recognized in the statement of operations. The JUMI Debentures were denominated in Canadian dollars. The Corporation issued the 2010 Debentures on March 12, 2010. The value of the liability recognized on initial recognition was $196.8 million, net of transaction costs of $10.4 million. Other movement in the debentures is resultant from the accrual of interest, the coupon payment and the strengthening of the Canadian dollar against the US since the issuance of the debentures. The 2010 Debentures are denominated in Canadian dollars. Future income tax liabilities increased by $196.7 million from December 31, 2009, mainly due to the acquisition of Akbastau, Zarechnoye, Christensen Ranch and Irigaray, which contributed $170.4 million of the increase. The tax rate change in Kazakhstan increased the liability with $39.0 million. Recovery of future income tax liabilities of the Akdala, South Inkai and Karatau mines resulting from the fair value adjustment on acquisition was $7.0 million. The future income tax recovery on impairment of Honeymoon reduced the future income tax liability by $3.7 million. An increase in future income tax assets due to temporary differences and tax loss carry forwards of $3.7 million, decreasing the future income tax liability, accounted for the majority of the remaining movement. EQUITY Changes in shareholders’ equity consist mainly of the net loss for the year of $189.7 million, payment of the special dividend of $492.9 million, a loss of $3.0 million recognized in equity on redemption of the JUMI debenture and gain of $13.6 million recognized on translation of self-sustaining foreign operations. The value of the equity component of the 2010 debentures recognized on initial recognition was $44.0 million.

LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL AND CASH GENERATED FROM OPERATIONS At December 31, 2010 the Corporation had working capital of $199.0 million. Included in this amount is cash and cash equivalents of $315.8 million, which includes the Corporation’s proportionate share of cash and cash equivalents at its joint venture operations in Kazakhstan and Australia. Cash held by the Corporation’s joint venture operations is applied to the business of the joint ventures and cash flows between the Corporation and the joint ventures normally only occur through loans to the joint ventures and dividends paid by the joint ventures. The Corporation expects that Betpak Dala will fund its capital requirements from cash flow from its operations, without the need for finance from the Corporation or third parties. Karatau is expected to fund its capital requirements through short term loans and cash flow from its operations. The interest earned on the Corporation’s cash balances will be applied to existing commitments in respect of the Corporation’s development projects and other current commitments. The Corporation earns revenue from the sale of uranium from its mines in Kazakhstan. Additional sales revenue will be earned from uranium sales when the Corporation’s development projects are commissioned. Uranium is sold under forward long-term delivery contracts. Contracted deliveries are planned to be filled from the Corporation’s mining operations. The ability to deliver contracted product is therefore dependent upon the continued operation of the mining operations as planned. The Corporation has entered into market-related sales contracts with price mechanisms that reference the market price in effect at or near the time of delivery. In addition, the Corporation has negotiated floor price protection in most of its sales contracts. For 2011, committed sales under contract represent approximately 66% of expected production, without taking any available inventory into account. At December 31, 2010, there were outstanding sales commitments for 2.2 million pounds in respect of sales contracts for the Dominion project, which were not included in the sale of Uranium One Africa. The Corporation plans to meet these commitments from the production of other group entities and, if required, additional purchases from third parties. The Corporation has floor price protection in all of the Dominion contracts and does not expect to incur material losses in satisfying its delivery commitments thereunder.


CURRENT AND FUTURE SOURCES OF FUNDING The Corporation has two convertible debentures outstanding as at December 31, 2010. In addition, the Corporation’s joint ventures in Kazakhstan have amounts outstanding on several debt facilities. Uranium One’s 2006 Debentures have a face value of C$155 million and mature on December 31, 2011 with fixed interest at a rate of 4.25% payable semi-annually in arrears. The Corporation plans to redeem the 2006 Debentures from internal cash resources. The 2010 Debentures have a face value of C$260 million and mature on March 13, 2015, with interest payable at a rate of 5.0% per annum, payable semi-annually in arrears. The interest rate was reset from 7.5% to 5% on October 13, 2010, the date of receipt of all necessary Kazakh approvals for the conversion of the 2010 Debentures. The cash flows resulting from the ARMZ transaction were as follows:

received $602.7 million in cash from ARMZ, net after transaction costs; redeemed the JUMI Debentures for $269.4 million, representing 101% of its face value; and paid a special dividend of $1.06 per share to shareholders other than ARMZ, totalling $492.9 million.

The Corporation consequently used $159.6 million of the proceeds from the 2010 Debentures to fund the negative cash flow associated with the ARMZ Transaction in December 2010. The remainder of the proceeds from 2010 Debentures, together with working capital on hand, is planned to fund the Corporation’s operational and capital expenditures, as required. Capital and operational expenditures by the Betpak Dala and Karatau joint ventures in 2011 are expected to be funded through the joint ventures’ operating cash flow. Karatau owed $37.5 million to financial institutions on December 31, 2010 and the Corporation’s proportionate share of the amount owing is $18.8 million. The full amount owing is due in 2011 and it is expected that the loans will be repaid from Karatau’s operating cash flow. Kyzylkum drew down on a secured loan of $41.5 million from Kazatomprom during 2010. The Corporation’s proportionate share of the loan was $12.4 million. Kyzylkum used the proceeds of the Kazatomprom loan to repay $22.4 million of its outstanding facilities held with financial institutions and $17.5 million of the loan from the Corporation. The Corporation and its joint venture partners in Kyzylkum agreed to contribute approximately $80 million in capital contributions to the joint venture in 2011, with further capital contributions in 2012 and 2013. The Corporation’s share of the capital contribution in 2011 is expected to be approximately $24 million, with the other joint venture partners contributing proportionally to their ownership interests. The proceeds received by Kyzylkum are expected to be used to repay the outstanding loan from the Corporation, service its debt repayments and to fund capital and operational expenditure in 2011. On December 31, 2010, Akbastau and Zarechnoye had outstanding facilities of $29.4 million and $89.4 million, respectively. The Corporation’s share of these facilities was $14.7 million and $44.4 million, respectively. Pursuant to the terms of the ARMZ Transaction, ARMZ agreed to fund, or arrange funding for, the Corporation’s proportionate share of the funding required by Akbastau and Zarechnoye for a period of 18 months after closing of the transaction. The Corporation utilized the proceeds from the Mitsui transaction received in December 2008 for the development of Honeymoon and for general corporate purposes in Australia. In addition to the funds provided by Mitsui, the Corporation contributed $32 million towards the funding of Honeymoon in 2010. SKZ-U concluded loan agreements with JBIC in the amount of $133 million, and Uranium One in the amount of $31 million to finance the construction of a sulphuric acid plant in Kazakhstan and drew down $95.5 million under these facilities in 2010. The Corporation repaid the outstanding amount of $65 million of its credit facility during 2010. The facility expired in November 2010 and was not renewed. In addition to the factors described under “Risks and Uncertainties” below, Uranium One’s ability to raise capital is highly dependent on the commercial viability of its projects and the underlying price of uranium. Other risk factors, including the Corporation’s ability to develop its projects into commercially viable mines, international uranium industry competition, public acceptance of nuclear power and governmental regulation, can also adversely affect Uranium One’s ability to raise additional funding. There is no assurance that additional sources of funding, if required, will be forthcoming. Please refer to “Risks and Uncertainties”.

CONTRACTUAL OBLIGATIONS

Less than 1 to 3 4 to 5 After 5 1 year years years years Total Lease obligations 1,533 2,547 1,348 1,124 6,552 Joint venture debt 60,131 59,056 18,834 8,260 146,281 Kyzylkum financing 24,000 12,000 9,000 - 45,000 Capital commitments 16,128 900 - - 17,028 Asset retirement obligations - 927 6,360 18,942 26,229 Convertible debentures 155,168 - 259,934 - 415,102 Other 463 925 925 1,284 3,597 257,423 76,355 296,401 29,610 659,789


COMMITMENTS AND CONTINGENCIES Due to the size, complexity and nature of the Corporation’s operations, various legal and tax matters arise in the ordinary course of business. The Corporation accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Corporation. ACQUISITION OF THE SHOOTARING MILL Further payments due under the purchase agreement for the Shootaring Mill and related uranium exploration properties are: $27.5 million depending on the achievement of certain production targets; and the payment of a royalty to U.S. Energy of 5% of the gross proceeds from the sale of commodities produced at the Mill, to a

maximum amount of $12.5 million. ACQUISITION OF INTEREST IN BETPAK DALA A bonus payment is payable in cash based on uranium reserves discovered on the South Inkai property in excess of 74,000 tonnes. The payment is based on the Corporation’s share of pounds of U3O8 in excess of 74,000 tonnes times the average spot price of U3O8 times 6.25%. Initially, this payment should be calculated at the end of 2011 and each year thereafter, and paid 60 days after the end of the year in which a payment is due. As security for the bonus payments, the Corporation pledged its participatory interest in Betpak Dala (including the shares of a subsidiary) and its share of uranium products produced by Betpak Dala.

ACQUISITION OF INTEREST IN KYZYLKUM A bonus payment is due upon commencement of commercial production. The seller elected, under the terms of the arrangement, to receive 6,964,200 shares of Uranium One upon commencement of commercial production. An additional bonus payment of 30% of 12.5% (being an effective 3.75%) of the weighted average spot price of U3O8 will be paid on incremental reserves in excess of 55,000 tonnes of U3O8 discovered during each fiscal year end, with payments beginning within 60 days of the end of the 2008 calendar year. No bonus payments have been made to date. ACQUISITION OF URANIUM ONE AMERICAS, INC. The Corporation has assumed all of the obligations of Uranium One Americas, Inc. (formerly Energy Metals Corporation) and its subsidiaries arising under certain option and joint venture agreements with third parties. Uranium One has reserved a total of 57,200 common shares of Uranium One for issuance pursuant to the assumed obligations under the contingent share rights agreements. ACQUISITION OF KARATAU The purchase agreement of a 50% joint venture interest in the Karatau Uranium Mine provides for a contingent payment to ARMZ of up to $60 million, payable in three equal tranches over the period between 2010 and 2012 subject to certain post-closing tax related adjustments. The first payment of $20 million was made during January 2010. The Corporation acquired a receivable as part of the ARMZ transaction on December 27, 2010, which will be used to offset the remaining $40 contingents payments when it becomes due. CONSTRUCTION OF A SULPHURIC ACID PLANT AT ZHANAKORGAN To ensure long term supply continuity of sulphuric acid in Kazakhstan, the Corporation has established a joint venture with Kazatomprom and other affected parties to build a sulphuric acid plant near Kharasan at Zhanakorgan. The Corporation’s ownership percentage in this joint venture is 19%. On January 19, 2009, the Corporation provided a guarantee to Desmet Ballestra in respect of 19% of the value of orders placed by Desmet Ballestra for certain long lead items, limited to a maximum amount of $7.6 million (€ 5.5 million).


OFF-BALANCE SHEET ARRANGEMENTS The Corporation has no off-balance sheet arrangements.

RELATED PARTIES The following significant related party transactions and balances are included in the Corporation’s results as at December 31, 2010: The Akbastau mine and Zarechnoye mine have outstanding loans with Effective Energy, an affiliate of the Corporation; The Corporation acquired certain receivables in the ARMZ transaction, which will be offset against the Karatau contingent

payments, payable to ARMZ, as it becomes due; The Corporation entered into an option agreement to acquire Mantra from ARMZ; The Corporation has sales contracts and off-take agreements with related parties. These transactions have market related terms

and pricing, except for a Zarechnoye contract acquired as part of the ARMZ transaction. The Corporation received $11.6 million in cash on acquisition to compensate for the unfavourable contract.

OUTSTANDING SHARE DATA As of March 7, 2011, there were 957,189,036 common shares issued and outstanding. A warrant was issued in connection with the acquisition of the Corporation’s interest in Kyzylkum entitling the holder to acquire 6,964,200 shares in Uranium One for no additional consideration upon completion of commissioning of the Kharasan Uranium Project. Uranium One has reserved a total of 57,200 common shares for issuance to third parties under certain property option and joint venture agreements. As of March 7, 2011, there were 11,650,536 stock options outstanding under Uranium One’s stock option plan and the security based compensation plans assumed by the Corporation pursuant to its acquisitions, at exercise prices ranging from C$0.78 to C$16.59. There were no restricted shares outstanding as of March 7, 2011. Uranium One has the following convertible debentures outstanding: The 2006 Debentures, with 155,250 convertible debentures outstanding, each convertible to 63.45 common shares of Uranium One,

representing 9,850,888.33 common shares. Fractional shares will be settled with cash; and The 2010 Debentures, with 259,985 convertible debentures outstanding, each convertible to 317.46 common shares of Uranium

One, representing 82,534,838 common shares of Uranium One. Fractional shares will be settled with cash.

DIVIDENDS The Corporation paid a special dividend of $1.06 per share to shareholders other than ARMZ, as part of the ARMZ Transaction which resulted in ARMZ acquiring a 51% interest in Uranium One. Holders of common shares are entitled to receive dividends if, and when declared by the Board of Directors. There are no restrictions on Uranium One’s ability to pay dividends except as set out under its governing statute.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES Note 2 to the Corporation’s consolidated financial statements for the year ended December 31, 2010 describes all of the Corporation’s significant accounting policies. The preparation of financial statements in conformity with GAAP requires the Corporation’s management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. Actual results may differ from those estimates. MINERAL INTERESTS, PLANT AND EQUIPMENT Depreciation and depletion of mineral interests, plant and equipment is primarily calculated using the unit of production method. This method allocates the cost of an asset to each period based on the current period’s production as a portion of the total expected production of the life of the mine, or a portion of the estimated recoverable ore reserves. Estimates of the production over the life of the mine and amounts of recoverable reserves are subject to judgment and significant change over time. If actual mineral reserves prove to be significantly different than the estimates, there could be a material impact on the amounts of depreciation and depletion charged to the consolidated statement of operations. ASSET RETIREMENT OBLIGATIONS Significant decommissioning and reclamation activities are often not undertaken until substantial completion of the useful lives of the productive assets. Regulatory requirements and alternatives with respect to these activities are subject to change over time. A significant change to either the estimated costs or recoverable reserves may result in a material change in the amount charged to earnings.


IMPAIRMENT OF LONG-LIVED ASSETS The Corporation assesses the carrying value of mineral interests, plant and equipment annually or more frequently if warranted by a change in circumstances. If it is determined that carrying values of the mineral interests, plant and equipment cannot be recovered, the unrecoverable amounts are written off. Recoverability is dependent upon assumptions and judgments regarding future prices, costs of production, sustaining capital requirements and economically recoverable reserves. A material change in assumptions may significantly impact the potential impairment of these assets. TAXES The Corporation operates in a number of tax jurisdictions and is therefore required to estimate its income taxes in each of these tax jurisdictions in preparing its consolidated financial statements. In calculating income taxes, consideration is given to factors such as tax rates in the different jurisdictions, non-deductible expenses, valuation allowances, changes in tax laws and management’s expectations of future results. The Corporation estimates future income taxes based on temporary differences between the income and losses reported in its financial statements and its taxable income and losses as determined under the applicable tax laws. The tax effect of these temporary differences is recorded as future tax assets or liabilities in the consolidated financial statements. The calculation of income taxes requires the use of judgment and estimates. If these judgments and estimates prove to be inaccurate, future earnings may be materially impacted. The determination of the ability of the Corporation to utilize tax loss carry-forwards to offset future income tax payable requires management to exercise judgment and make certain assumptions about the future performance of the Corporation. Management is required to assess whether the Corporation is “more likely than not” to benefit from these prior losses and other future tax assets. Changes in economic conditions, metal prices and other factors could result in revisions to the estimates of the benefits to be realized or the timing of utilizing the losses. In the event that it is determined that certain of the losses are not likely to be utilized, a valuation allowance would have to be recorded against the recognized future tax assets through a charge to the consolidated statement of operations. Conversely, where amounts that are considered not likely to be utilized to reduce future tax payable are determined to be likely to be utilized in the future, the valuation allowances against these losses would be removed by recording a future income tax recovery in the consolidated statement of operations. STOCK BASED COMPENSATION The Corporation grants stock options and restricted share rights to employees of the Corporation under its stock option and restricted share rights plans. The Corporation uses the fair value method of accounting for all stock based compensation awards (“Awards”). Under this method, the Corporation determines the fair value of the compensation expense for all Awards on the date of grant using the Black-Scholes pricing model. The fair value of the Awards is expensed over the vesting period of the Awards. In estimating fair value, management is required to make certain assumptions and estimates regarding such items as the life of options and forfeiture rates. Changes in the assumptions used to estimate fair value could result in materially different results. NEW / CHANGES IN ACCOUNTING POLICIES The Corporation’s accounting policies have been consistently followed except that the Corporation adopted CICA Section 1582 – “Business Combinations”, CICA Section 1601 – “Consolidated Financial Statements” and Section 1602 – “Non-controlling Interests” on January 1, 2010. CICA Section 1582 – “Business Combinations”, which replaces CICA Section 1581 – “Business Combinations”, establishes standards for the accounting for a business combination. It is the Canadian GAAP equivalent to International Financial Reporting Standard (“IFRS”) 3, “Business Combinations”. This standard is effective for the Corporation’s business combinations with acquisition dates on or after January 1, 2011. Early adoption is permitted and the Corporation adopted this standard effective January 1, 2010. CICA Section 1601 – “Consolidated Financial Statements” and Section 1602 – “Non-controlling Interests” replaces CICA Handbook Section 1600 - “Consolidated Financial Statements”. Sections 1601 and 1602 establish standards for preparation of consolidated financial statements and the accounting for non-controlling interests in financial statements that are equivalent to the standards under IFRS. These standards are effective for the Corporation for interim and annual financial statements beginning on January 1, 2011. Early adoption is permitted and the Corporation adopted this standard effective January 1, 2010. INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) Conversion plan The Canadian Accounting Standards Board has mandated the adoption of IFRS for interim and annual financial statements for fiscal years beginning on or after January 1, 2011. Companies will be required to provide IFRS comparative information for the fiscal year immediately preceding the year in which they first adopt IFRS. While IFRS uses a conceptual framework similar to Canadian GAAP, there are significant differences in accounting standards which should be addressed. The Corporation has a multi-year transition plan comprising three major phases; a scoping, planning and assessment phase, a design and build phase and an implement and review phase culminating in the reporting of financial information in accordance with IFRS for Q1 2011. The Corporation has completed the three major phases of the project which resulted in the selection of IFRS accounting policies, transitional exemptions decisions, and the estimation of the impact of these items on the financial statements (discussed in the “Impact of adoption of IFRS” section below).


The International Accounting Standards Board continues to amend and add to current IFRS standards. The Corporation’s conversion process includes monitoring actual and anticipated changes to IFRS standards and related rules and regulations and assessing the impacts of these changes on the Corporation and its reporting, including expected dates of when such impacts would be effective. The Corporation has implemented the necessary changes to its systems and reporting processes including the implementation of new accounting and consolidation systems in various parts of its business in 2009, to support preparation of the IFRS opening balance sheet as at January 1, 2010 and the preparation of its financial statements under IFRS. The impact of the transition to IFRS on internal controls over financial reporting and disclosure controls and procedures have been determined and the adjusted controls will be implemented concurrently with the processing of the quantified differences on the opening balance sheet. Impact of adoption of IFRS IFRS 1, First time Adoption of International Financial Reporting Standards (“IFRS 1”) provides guidance for an entity’s initial adoption of IFRS. As a general principle, IFRS 1 requires an entity to apply all International Financial Reporting Standards retrospectively as of the transition date for an entity. IFRS 1 also provides certain mandatory exceptions and limited optional exemptions to assist with difficulties associated with reformulating historical accounting information. Any adjustments arising on the conversion of IFRS from Canadian GAAP will be recognized in the retained earnings balance of the opening balance sheet. IFRS 1: First-time Adoption of International Financial Reporting Standards In connection with the application of IFRS 1, the Corporation has made the following significant elections. The preliminary opening balance sheet is presented below the discussion on the elections and significant policy changes. Fair value as deemed cost IFRS 1 allows an entity to measure an item of property, plant and equipment and investment property upon transition to IFRS at fair value as deemed cost (or under certain circumstances using a previous GAAP revaluation) as opposed to full retroactive application of the cost model under IFRS. The Corporation has elected to use the fair value as deemed cost for selected properties, as this will limit the IFRS requirement to reverse impairments previously recognized on certain long lived assets. Business combinations IFRS 1 generally provides for the business combinations standard to be applied either retrospectively or prospectively from the date of transition to IFRS (or to restate all business combinations after a selected date). Retrospective application would require an entity to restate all prior transactions that meet the definition of a business under IFRS. Prospective application would not require an entity to restate prior transactions but would require the recognition of certain assets and liabilities (as defined by IFRS 1) that were acquired or assumed in past business combinations that would not necessarily have been recognized under Canadian GAAP. The Corporation has elected to apply the business combination standard prospectively, and as such, will have to recognize contingent liabilities and payments from previous business combinations set out in note 26 of the 2010 annual financial statements. Cash contingent payments will be recognized as liabilities and equity payments will be recognized in equity as part of the contributed surplus. Cumulative translation losses An entity may elect to deem the cumulative differences that result from the translation of its foreign operations to the reporting currency to be zero at the transition date. This will result in the exclusion of translation differences that arose prior to the transition date from gains or losses on a subsequent disposal of a foreign operation. Borrowing costs Prior to January 1, 2009, the capitalization of borrowing costs was optional under IFRS. At adoption, an entity may designate any date on or before January 1, 2010 to commence capitalization of borrowing costs relating to all qualifying development projects. The Corporation has elected to commence capitalization of borrowing costs on January 1, 2010 for all qualifying assets. IFRS accounting policy changes and IFRS opening balance sheet The following discussion outlines the significant accounting policies, which are required, or are currently expected to be applied by the Corporation, on its adoption of IFRS that will be significantly different than its Canadian GAAP accounting policies. Some of the IFRS policies will only effect future transactions and have not been included in the discussion. This discussion has been prepared using the standards and interpretations currently issued and expected to be effective for the Corporation’s first annual reporting period under IFRS for the year ended December 31, 2011. Certain accounting policies currently expected to be adopted under IFRS and the application of such policies to certain transactions or circumstances may be modified and, as a result, the impact may be different than the Corporation’s current expectations. The following table provides a reconciliation between the Corporation’s Canadian GAAP balance sheet and its balance sheet under IFRS as at January 1, 2010. The opening balance sheet adjustments are based on the Corporation’s current views, assumptions and expectations. However, circumstances may arise, such as changes in IFRS standards or interpretations of existing IFRS standards, which could alter the information presented below.


Balance sheet reconciliation – January 1, 2010

Canadian

GAAP IFRS

adjustment Classification

adjustments IFRS

Notes $’000 $’000 $’000 $’000 ASSETS Current assets Cash and cash equivalents 148,465 - - 148,465 Trade and other receivables (Accounts and other receivables)1 42,405 - - 42,405 Inventories c 71,634 (2,755) - 68,879 Other assets 24,472 - - 24,472 286,976 (2,755) 284,221 Non-current assets Mineral interests, property, plant and equipment a 1,748,284 (312,079)

- 1,304,979

c (133,028) d 1,802 Loans to joint ventures 29,250 - - 29,250 Other assets 33,137 - - 33,137 Assets held for sale 51,460 - - 51,460 1,862,131 (443,305) - 1,418,826

Total assets 2,149,107 (446,060) - 1,703,047 LIABILITIES Current liabilities Trade and other payables (Accounts and other payables)1 g 65,908 - (20,204) 45,704 Provisions - - 20,266 20,266 Current tax payable (Income tax payable)1 1,633 - - 1,633 Current portion of joint venture debt 5,000 - (5,000) - Interest bearing liabilities (Current portion of long term debt)1 63,579 - 5,000 68,579 Other liabilities g 132,043 - (62) 131,981 268,163 - - 268,163 Non-current liabilities

Interest bearing liabilities (Long term debt)1 g - -

47,574

47,574 Joint venture debt 47,574 - (47,574) - Convertible debentures 140,862 - - 140,862 Asset retirement obligations 16,100 - (16,100) - Provisions d,f - 56,738 17,797 74,535 Deferred tax liabilities (Future income tax)1 a 180,687 (42,302) - 138,385 Other financial liabilities g 1,877 - (1,697) 180 Liabilities held for sale 12,944 - - 12,944 400,044 14,436 - 414,480 Shareholders’ equity 1,480,900 (460,496) - 1,020,404 Total shareholders’ equity and liabilities 2,149,107 (446,060) - 1,703,047

Note: 1 – Terms used in brackets represent Canadian GAAP terminology


The following differences between Canadian GAAP and IFRS give rise to the adjustment in the reconciliation above:

(a) IAS 36 - Impairment of assets

Under Canadian GAAP, impairment is recognized for non-financial assets based on estimated fair value when the undiscounted future cash flows from an asset, or group of assets, is less than the carrying value.

Under IFRS, an entity is required to recognize an impairment charge if the recoverable amount, determined as the higher of the estimated fair value less costs to sell or value-in-use, is less than its carrying value. Value in use is the discounted present value of estimated future cash flows expected to arise from the planned use of an asset and from its disposal at the end of its useful life.

IFRS also requires the reversal of an impairment loss when the recoverable amount is higher than the carrying value (by no more than what the depreciated amount of the asset would have been had the impairment not occurred) unlike Canadian GAAP, which does not permit reversals.

The Corporation performed its analysis of impairment of its properties on the conversion date. The assessment indicated IFRS impairments on the Honeymoon Project, the Kharasan project, the Corporation’s properties in the Powder River and Great Divide Basins in Wyoming and its conventional mining projects in the United States.

(b) IFRS 2 - Share based payments

Under Canadian GAAP, the Corporation elected to accrue compensation cost as if all instruments granted were expected to vest and recognize the effect of actual forfeitures as they occur. Under IFRS, an entity is required to estimate the number of equity-settled instruments that are expected to vest and then make adjustments to the actual number that vest unless forfeitures are due to market-based conditions.

The application of a forfeiture rate on the options resulted in a larger portion of the options being expensed on transition date.

(c) IAS 21- The effects of changes in foreign exchange rates

Under Canadian GAAP, there are various indicators to be considered in determining the appropriate functional currency of a foreign operation and such indicators are similar to those under IFRS.

When the assessment of functional currency under IFRS provides mixed indicators and the functional currency is not obvious, priority should be given to certain indicators.

As the Corporation has interests in entities that prepare stand alone IFRS financial statements, the functional currency used in such financial statements needs to be consistent with the functional currency used in the group financial statements. The Corporation has identified certain entities where the functional currency will change to the local currency on transition to IFRS and this will result in non-monetary assets and liabilities being translated to the reporting currency using the closing rate on balance sheet date, compared to the historical rate.

(d) IAS 37 – Provisions, contingent liabilities and contingent assets

Under Canadian GAAP, the discount rate used in determining the asset retirement obligation would be the Corporation’s credit adjusted risk free rate and is adjusted only for new obligations incurred. The standard also requires the use of external costs in the determination of the asset retirement obligation.

Under IFRS, the discount rate used in determining the asset retirement obligation reflects current market assessments of the time value of money adjusted for specific risks not reflected in the underlying cash flows associated with the liability and is adjusted periodically. There is no requirement to use external costs to determine an asset retirement obligation if the Corporation will use its own resources to perform the related work.

(e) IAS 39 – Financial instruments

Under Canadian GAAP, embedded derivative accounting is not required for a cash conversion option included as a feature of a convertible debenture, as the cash conversion feature is regarded as a settlement feature of the instrument.

Under IFRS, a cash conversion option included as a feature of a convertible debenture meets the definition of an embedded derivative and is required to be separated and accounted for as a derivative instrument.

The Corporation recognized the conversion option of the 2010 Convertible Debentures as a liability carried at fair value through profit and loss. The adjustment had no effect on the opening balance sheet as the convertible debentures were issued during Q1 2010. The comparative Q1 2010 position has been adjusted.


(f) IFRS 1 – Business combinations election

The Corporation has elected to apply the business combination standard prospectively with adjustments as necessary, and have to recognize contingent liabilities and payments not previously recognized that arose from past business combinations. Contingent payments of a cash nature are recognized as liabilities that are equity in nature is recognized in equity as part of reserves.

(g) Reclassifications

The Corporation has reclassified certain balances on its balance sheet to conform with its adjusted note disclosures resulting from the transition

RISKS AND UNCERTAINTIES The Corporation’s operations and results are subject to various risks and uncertainties. These include, but are not limited to, the following: exploration and mining involves operational risks and hazards; mineral resources and mineral reserves are estimates only; there is no certainty that further exploration will result in new economically viable mining operations or yield new reserves to replace and expand current reserves; Uranium One cannot give any assurance that any of its development projects will become operating mines; or that any of its operations on care and maintenance will become operational; mineral rights and tenures may not be granted or renewed on satisfactory terms and may be revoked, altered or challenged by third parties; limited supply of desirable mineral lands for acquisition; risks and problems associated with integrating acquisitions; competition in marketing uranium; competition from other sources of energy and public acceptance of nuclear energy; volatility and sensitivity to uranium prices; the capital requirements to complete the Corporation’s current projects and expand its operations are substantial; the integration of acquisitions; currency fluctuations; potential conflicts of interest; the Corporation’s operations and activities are subject to environmental risks; government regulation may adversely affect the Corporation; the risks of obtaining and maintaining necessary licences and permits; risks associated with foreign operations including, in relation to Kazakhstan, the risk of future sulphuric acid constraints and in relation to Kyrgyzstan, the risk of continued disruption of shipments to and from external processing facilities affecting deliveries to customers and the Corporation is dependent on key personnel. In November 2007, Kazakhstan enacted legislation giving the government the right in certain circumstances to re-negotiate previously concluded subsoil use contracts. Together with its joint venture partner, Kazatomprom, the Corporation has been reviewing the potential impact and application of this legislation. Based on these discussions, the Corporation understands that the legislation is not directed at the uranium mining industry in Kazakhstan. Uranium One’s risk factors are discussed in detail in its Annual Information Form for the year ended December 31, 2010, which is to be filed on SEDAR at www.sedar.com on or before March 31, 2011, and should be reviewed in conjunction with this document. STOCK OPTION AND RESTRICTED SHARE PLANS Under the Corporation’s stock option plan, options granted are non-assignable and may be granted for a term not exceeding ten years. The aggregate maximum number of common shares available for issuance under the stock option plan may not exceed 7.2% of the common shares outstanding from time to time on a non-diluted basis and the aggregate maximum number of common shares available for issuance to non-employee directors under the plan may not exceed 1.0% of the total number of common shares outstanding on a non-diluted basis. Under the Corporation’s restricted share plan, restricted share rights exercisable for common shares of Uranium One at the end of a restricted period, for no additional consideration, are granted by the Board of Directors in its discretion to eligible directors, officers and employees. The aggregate maximum number of common shares available for issuance under the restricted share plan is capped at three million. The number of shares available for issuance to non-employee directors may not exceed 0.5% of the total number of common shares outstanding on a non-diluted basis. During 2010 stock options and restricted share rights activity was as follows: 10,526,100 options were granted during the year. 13,073,222 options were exercised. 2,335,962 options lapsed. 429,159 restricted shares were exercised during the year and 22,000 expired.

DISCLOSURE CONTROLS AND PROCEDURES Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported on a timely basis to senior management, including Uranium One’s Chief Executive Officer and Chief Financial Officer, so that appropriate decisions can be made regarding public disclosure. As at the end of the period covered by this management’s discussion and analysis, management evaluated the effectiveness of the Corporation’s disclosure controls and procedures as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this management’s discussion and analysis, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in Uranium One’s annual filings and interim filings (as such terms are defined under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) and other reports filed or submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those laws, and that material information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer as


appropriate to allow timely decisions regarding required disclosure.

INTERNAL CONTROLS AND PROCEDURES The Corporation’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, are responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the Chief Financial Officer, the Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. As at the end of the period covered by this management’s discussion and analysis, management evaluated the effectiveness of the Corporation’s internal control over financial reporting as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this management’s discussion and analysis, the internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. There have been no material changes in the Corporation’s internal control over financial reporting during the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

OUTLOOK During 2011, the Corporation is focused on maintaining production from Akdala at current levels, ramping up production at Akbastau, Zarechnoye, Karatau and South Inkai towards design capacity, successfully commissioning its development projects, controlling costs at its operations and remaining a reliable supplier of U3O8 to the nuclear fuel industry. The Corporation’s attributable production estimate for 2011 is 10.5 million pounds and is made up as follows:

Operation Status

Total estimated 2011 production (millions

of lbs)

Ownership %

Estimated attributable 2011 production (millions of lbs)

Akdala Producing 2.6 70% 1.8 South Inkai Producing 5.0 70% 3.4 Karatau Producing 4.6 50% 2.4 Akbastau Producing 2.4 50% 1.2 Zarechnoye Producing 2.0 49.67% 1.0 Powder River Basin Commissioning / Producing 0.3 100% 0.3 Honeymoon Commissioning / Producing 0.4 51% 0.2 Kharasan Commissioning 0.7 30% 0.2 Totals: 18.0 10.5 Attributable production for 2012 is estimated to be 12.5 million pounds. During 2011, the average cash cost per pound sold, including Kazakh mineral extraction tax where applicable, is expected to be as follows:

Mine

2011 - Estimated average cash

cost ($/lb) Akdala 14 South Inkai 19 Karatau 12 Akbastau 18 Zarechnoye 21 Powder River Basin 25 Honeymoon 35 Weighted average 18


During the ramp-up to design capacity of 2,000 tonnes U per year, unit costs of production at Akbastau, South Inkai, and Zarechnoye are expected to be higher than the costs during a steady state of operation. This is primarily due to the fact that sulphuric acid used to acidify production blocks is expensed in the period of acidification. During periods of production ramp-up, unit costs of production will therefore be higher and will only stabilize when the operation reaches steady state production. During steady state, production costs at South Inkai are expected to be higher than Akdala and Karatau mainly due to higher sulphuric acid consumption rates at South Inkai. Excluding optional quantities under offtake agreements negotiated with ARMZ and the Japanese Consortium, the Corporation currently has contracts for the sale of an aggregate of 25 million attributable pounds, including 5 million pounds which will be sold at an average fixed price of $66 per pound (subject to escalation) and 12 million pounds which has been contracted with weighted average floor prices of approximately $48 per pound. The remainder of contracted attributable sales are not subject to floors and such sales are related to the market price of U3O8 at the time of delivery. For 2011, the Corporation expects to sell approximately 9.5 million attributable pounds, excluding sales during commissioning. Excluding optional quantities under the offtake agreement negotiated with ARMZ and the Japanese Consortium, contracts have been concluded for the sale of 6.6 million attributable pounds in 2011, of which 3.6 million pounds have weighted average floor prices of approximately $48 per pound. For 2012, the Corporation expects to sell approximately 12.0 million attributable pounds, excluding sales during commissioning. Excluding optional quantities under the offtake agreement negotiated with ARMZ, the contracts have been concluded for the sale of 5.3 million attributable pounds in 2012, of which 3.2 million pounds have weighted average floor prices of approximately $48 per pound. The Corporation’s estimated capital expenditure and funding per project for 2011 are expected to be as follows:

Mine / project

2011 - Estimated capital expenditure in $’millions Wellfield

developmentResource definition

drilling

Plant and equipment and other

Total Ownership %

Total

100% AttributableKazakhstan

Akdala 5 2 28 35 70% 25South Inkai 17 2 30 49 70% 34Karatau 15 9 21 45 50% 23Akbastau 29 15 72 116 50% 58Zarechnoye 11 7 12 30 49.67% 15Kharasan (1) 21 9 - 30 30% 9SKZ-U - - 111 111 19% 21

Subtotal - Kazakhstan 98 44 274 416 185Australia and United States

Honeymoon(2) 10 - 10 20 51% 10Powder River Basin 24 - 22 46 100% 46Great Divide Basin - - 1 1 100% 1Other - - 2 2 2

Subtotal – Australia and United States 34 - 35 69 59Totals: 132 44 309 485 244Notes: (1) – Sales during commissioning are offset against the estimated capital expenditure

(2) – Expenditure has been updated from previous guidance

Capital expenditure in 2011 makes provision for the following: Akdala: wellfield development, resource definition drilling, construction of a satellite processing plant, refurbishment and relocation of

the camp facilities; South Inkai: wellfield development, resource definition drilling, expansion of the drying facility to process Akdala material as well as

upgrading of the plant and camp; Karatau: wellfield development, resource definition drilling, completion of the plant expansion to accommodate the processing of

Akbastau material and expansion of the camp; Akbastau: wellfield development, resource definition drilling, completion of ponds, piping and infrastructure development, construction

of the satellite plants and a new camp; and Zarechnoye: wellfield development, resource definition drilling, and sustaining capital. Other estimated expenditures by the Corporation in 2011 are expected to be as follows:

Item 2011 – Estimated

in $’millions General and administrative (excluding stock based compensation) 37 Restructuring and other non-recurring costs 7 Exploration 7


FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements. Forward-looking statements include but are not limited to those with respect to the price of uranium, the estimation of mineral resources and reserves, the realization of mineral reserve estimates, the timing and amount of estimated future production, the timing of uranium processing facilities being fully operational, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, market conditions, corporate plans, objectives and goals, requirements for additional capital, government regulation of mining operations, the estimation of mineral resources and reserves, the realization of resource and reserve estimates, environmental risks, unanticipated reclamation expenses, the timing and potential effects of proposed acquisitions and divestitures, title disputes or claims and limitations on insurance coverage and the timing and possible outcome of pending litigation. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes” or variations of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, possible variations in grade and ore densities or recovery rates, failure of plant, equipment or processes to operate as anticipated, possible shortages of sulphuric acid in Kazakhstan, possible changes to the tax code in Kazakhstan, accidents, labour disputes or other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities, risks relating to the completion and integration of acquisitions , to international operations, to prices of uranium as well as those factors referred to in the section entitled “Risk factors” in Uranium One’s Annual Information Form for the year ended December 31, 2010 which is to be filed on SEDAR at www.sedar.com on or before March 31, 2011, and which should be reviewed in conjunction with this document. Although Uranium One has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Except as required under applicable securities laws, Uranium One undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events, or otherwise. Readers are advised to refer to independent technical reports for detailed information on the Corporation's material properties. Those technical reports, which are available at www.sedar.com under Uranium One’s profile, and also under the profiles of UrAsia Energy and Energy Metals Corp., provide the date of each resource or reserve estimate, details of the key assumptions, methods and parameters used in the estimates, details of quality and grade or quality of each resource or reserve and a general discussion of the extent to which the estimate may be materially affected by any known environmental, permitting, legal, taxation, socio-political, marketing, or other relevant issues. The technical reports also provide information with respect to data verification in the estimation. This document and the Corporation’s other publicly filed documents use the terms “measured”, "indicated" and "inferred" resources as defined in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects. United States investors are advised that while these terms are recognized and required by Canadian regulations, the SEC does not recognize them. Investors are cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence and economic and legal feasibility and it cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Investors are cautioned not to assume that all or any part of an inferred resource exists or is economically or legally mineable. Mineral resources are not mineral reserves and do not have demonstrated economic viability. Scientific and technical information contained herein has been reviewed on behalf of the Corporation by Mr. M.H.G. Heyns, Pr.Sci.Nat. (SACNASP), MSAIMM, MGSSA, Senior Vice President Technical Services of the Corporation, Mr. Wayne Valliant, P.Geo. of Scott Wilson Roscoe Postle Associates Inc. (for Akbastau resources only), Mr. Hrayr Agnerian, P.Geo. of Scott Wilson Roscoe Postle Associates Inc. (for Akbastau and Zarechnoye resources only), Mr. Gerd Wiatzka, P.Eng. of SENES Consultants Limited (for Akbastau and Zarechnoye environmental considerations only), Mr. Dennis Bergen, P. Eng. of Scott Wilson Roscoe Postle Associates Inc. (for the Akbastau preliminary assessment and Zarechnoye reserves, mining and processing and modelling only), all qualified persons for the purposes of NI 43-101.

annual financial

statements

Annual Consolidated Financial Statements for the year ended December 31, 2010

______________________________________________________________________________________________________

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS 1

management’s responsibility for financial reporting Management’s Responsibility for Financial Reporting The consolidated financial statements have been prepared by management, in accordance with Canadian generally accepted accounting principles, who, when necessary, have made informed judgments and estimates of the outcome of events and transactions. Management acknowledges its responsibility for the fairness, integrity and objectivity of all information in the consolidated financial statements. As a means of fulfilling its responsibility, management relies on the company’s system of internal control. This system has been established to ensure, within reasonable limits, that the assets are safeguarded, transactions are properly recorded and are executed in accordance with management’s authorization and that the accounting records provide a solid foundation from which to prepare the consolidated financial statements. Any system of internal control has inherent limitations, therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The Board of Directors carries out its responsibility for the consolidated financial statements principally through its Audit Committee, consisting solely of non-management independent directors. This committee meets periodically, reviews the scope of the external audit, the adequacy of the system of internal control and the appropriateness of the financial reporting and then makes its recommendations to the Board of Directors. Based on those recommendations, the Board of Directors approves the consolidated financial statements. The consolidated financial statements have been audited by the Company’s independent auditors, Deloitte & Touche LLP. The Independent Auditor’s Report to the Shareholders of Uranium One Inc., outlines the scope of their examination and opinion on the consolidated financial statements. “Chris Sattler" “Graham du Preez” Chris Sattler Graham du Preez Chief Executive Officer Chief Financial Officer March 7, 2011

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independent auditor’s report Independent Auditor’s Report To the Shareholders of Uranium One Inc. We have audited the accompanying consolidated financial statements of Uranium One Inc., which comprise the consolidated balance sheets as at December 31, 2010 and 2009, and the consolidated statements of operations, changes in equity, comprehensive income (loss), accumulated other comprehensive income (loss) and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating

______________________________________________________________________________________________________


Independent auditor’s report - continued the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Uranium One Inc. as at December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. “Deloitte & Touche LLP” Chartered Accountants March 7, 2011 Vancouver, Canada

Uranium One Inc. Consolidated Balance Sheets As at December 31, 2010 and 2009 (in United States dollars)

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Dec 31, 2010 Dec 31, 2009 Notes $’000 $’000 ASSETS Current assets Cash and cash equivalents 4 315,766 148,465 Restricted cash 15 8,577 - Accounts and other receivables 5 103,444 42,405 Inventories 6 91,000 71,634 Other assets 9 13,625 24,472 532,412 286,976 Non-current assets Mineral interests, plant and equipment 8 2,729,919 1,748,284 Loans to joint ventures 7.2 28,722 29,250 Other assets 9 78,004 33,137 Assets held for sale - 51,460 2,836,645 1,862,131

Total assets 3,369,057 2,149,107 LIABILITIES Current liabilities Accounts payable and accrued liabilities 10 82,838 65,908 Income taxes payable 13,814 1,633 Current portion of convertible debentures 12 151,402 - Current portion of long term debt 11 - 63,579 Current portion of joint venture debt 7.1 60,131 5,000 Other liabilities 15 25,275 132,043 333,460 268,163 Non-current liabilities Convertible debentures 12 206,298 140,862 Asset retirement obligations 13 26,229 16,100 Future income tax liabilities 14 377,264 180,687 Joint venture debt 7.1 86,150 47,574 Other liabilities 15 3,165 1,877 Assets held for sale - 12,944 699,106 400,044 SHAREHOLDERS' EQUITY Share capital 16 5,325,426 3,823,297 Contributed surplus 17 114,861 133,478 Equity component of convertible debentures 90,491 46,480 Accumulated other comprehensive income 29,988 16,392 Deficit (3,224,275) (2,538,747) 2,336,491 1,480,900

Total shareholders' equity and liabilities 3,369,057 2,149,107

Basis of presentation and principles of consolidation (note 2.1) & contingencies (note 27) The accompanying notes form an integral part of these Annual Consolidated Financial Statements Approved on behalf of the board of directors “Ian Telfer” “Andrew Adams” Ian Telfer Andrew Adams Chairman of the board Chairman of the audit committee

Uranium One Inc. Consolidated Statements of Operations For the years ended December 31, 2010 and 2009 (in United States dollars)

______________________________________________________________________________________________________


Year ended

Dec 31, 2010 Dec 31, 2009 Notes $’000 $’000 Revenues 326,850 151,992 Operating expenses (92,019) (51,021)Depreciation and depletion (97,383) (46,383)

Earnings from mine operations 137,448 54,588

General and administrative 18 (53,010) (37,903)Exploration expense (5,449) (8,830)Impairment of mineral interests, plant and equipment 8.1 (116,667) (265,456)Care and maintenance (2,905) (15,386)

Operating loss (40,583) (272,987)

Interest and other 19 (41,957) (9,145)(Loss) / gain on available for sale securities 9 (10,603) 193 Foreign exchange (loss) / gain 20 (13,131) 59,027 Corporate development expenses (8,906) - Other (690) (630)

Loss from continuing operations before income taxes (115,870) (223,542)

Current income tax expense 14 (49,298) (20,915)Future income tax (expense) / recovery 14 (24,534) 206,379

Loss from continuing operations (189,702) (38,078)

Earnings from discontinued operations - 1,991

Net loss (189,702) (36,087)

Loss per share from continuing operations

Basic and diluted $(0.31) $(0.08)

Earnings per share from discontinued operations

Basic and diluted - $0.00

Net loss per share

Basic and diluted $(0.31) $(0.08)

Weighted average number of shares (in thousands)

Basic and diluted 22 611,562 475,583

The accompanying notes form an integral part of these Annual Consolidated Financial Statements

Uranium One Inc. Consolidated Statements of Changes in Equity For the years ended December 31, 2010 and 2009 (in United States dollars)

______________________________________________________________________________________________________


Share capital

$’000

Contributed surplus

$’000

Equity component

of convertible debentures

$’000

Accumulated other

comprehensive income /

(loss) $’000

Deficit $’000

Total $’000

Balance as at January 1, 2009 3,522,824 131,602 46,480 (247,708) (2,502,660) 950,538

Net loss for the year - - - - (36,087) (36,087) Stock options and restricted shares vested

- 7,502 - - - 7,502

Exercise of stock options and restricted shares

6,856 (5,626) - - - 1,230

Issuance of contingent shares 388 - - - - 388 Unrealized gain recognized on translation of self-sustaining foreign operations

- - - 16,391 - 16,391

Realized loss on sale of Gold One(1) - - - 13,074 - 13,074

Realized loss on sale of Uranium One Africa

- - - 234,533 - 234,533

Acquisition of Karatau (note 3.4) 293,229 - - - - 293,229

Fair value adjustments on available for sale securities

- - - 102 - 102

Balance as at December 31, 2009 3,823,297 133,478 46,480 16,392 (2,538,747) 1,480,900

Net loss for the year - - - - (189,702) (189,702)

Special cash dividend - - - - (492,864) (492,864)

Stock options and restricted shares vested

- 13,902 - - - 13,902

Exercise of stock options and restricted shares

67,829 (32,519) - - - 35,310

Unrealized gain recognized on translation of self-sustaining foreign operations

- - - 13,713 - 13,713

Unrealized fair value adjustments on available for sale securities - - - (10,720) - (10,720)

Realized fair value adjustments on available for sale securities

- - - 10,603 - 10,603

JUMI Debentures issued (note 12) - - 125,692 - - 125,692

JUMI Debentures redeemed (note 12)

- - (125,692) - (2,962) (128,654)

2010 Debentures (note 12) - - 44,014 - - 44,014

ARMZ private placement 602,708 - - - - 602,708

Acquisition of Akbastau and Zarechnoye

831,578 - - - - 831,578

Conversion of 2010 Debentures (note 12)

14 - (3) - - 11

Balance as at December 31, 2010 5,325,426 114,861 90,491 29,988 (3,224,275) 2,336,491


(1)

Gold One International Limited (formerly Aflease Gold)

Uranium One Inc. Consolidated Statements of Comprehensive Income / (Loss) For the years ended December 31, 2010 and 2009 (in United States dollars)

______________________________________________________________________________________________________


Dec 31, 2010 Dec 31, 2009 $’000 $’000

Unrealized gain recognized on translation of self-sustaining foreign operations 13,713 16,391

Realized foreign exchange loss on sale of Gold One - 13,074

Realized foreign exchange loss on sale of Uranium One Africa - 234,533

Unrealized fair value adjustments on available for sale securities (10,720) (91)

Realized fair value adjustments on available for sale securities 10,603 193

Other comprehensive income for the year 13,596 264,100

Net loss (189,702) (36,087)

Comprehensive (loss) / income (176,106) 228,013

Consolidated Statements of Accumulated Other Comprehensive Income / (Loss) As at December 31, 2010 and 2009 (in United States dollars)

Dec 31, 2010 Dec 31, 2009 $’000 $’000

Accumulated other comprehensive income / (loss) at January 1 16,392 (247,708)

Other comprehensive income for the year 13,596 264,100

29,988 16,392

Deficit (3,224,275) (2,538,747)

Accumulated other comprehensive income and deficit (3,194,287) (2,522,355)

Components of accumulated other comprehensive income / (loss) at the end of the year:

Unrealized foreign exchange adjustment - continuing operations 30,003 16,290

Available for sale marketable securities and investments (15) 102

29,988 16,392


Uranium One Inc.

Consolidated Statements of Cash Flows For the years ended December 31, 2010 and 2009 (in United States dollars)

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Year ended

Dec 31, 2010 Dec 31, 2009

Notes $’000 $’000 Net loss from continuing operations (189,702) (38,078) Items not affecting cash: - Fair value adjustment included in revenue 15 (10,611) (7,227)- Loss on sale of fixed assets 3,835 - - Depreciation and depletion 97,383 46,383 - Impairment of mineral interest plant and equipment 8.1 116,667 265,456 - Loss / (gain) on sale of available for sale securities 10,603 (193)- Stock option and restricted share expense 18 13,902 7,502 - Interest accrued on loans and debentures 15,911 3,728 - Gain on redemption of debenture 12 (1,160) -- Unrealized foreign exchange loss / (gain) 20 9,748 (55,950)- Future income tax expense / (recovery) 14 24,534 (206,379)- Revaluation of financial instruments 1,445 - - Other (197) 497 Movement in non-cash working capital 21 (45,969) (9,658)Cash flows from operating activities 46,389 6,081 Acquisition of mineral interests, plant and equipment 25 (108,421) (65,621)Advance cash payments for other assets (45,412) (3,629)Acquisition of Karatau, net of acquisition costs - (8,228)Acquisition of Akbastau and Zarechnoye 18,705 - Acquisition of Christensen Ranch and Irigaray (28,869) (8,750)Cash received in acquisition of SKZ-U LLP - 1,290 Cash advance for sulphuric acid plant investment - (5,385)Proceeds on sale of Uranium One Africa Ltd 3.5 37,300 - Proceeds on sale of Gold One Ltd - 20,972 (Acquisition) / disposal of available for sale securities (1,259) 487 Karatau promissory note and contingent payment (111,773) - Cash proceeds from joint ventures 1,226 8,167 Proceeds on sale of mineral interests, plant and equipment 3,600 7,304 Restricted cash (8,577) -Other (979) 1,093 Cash flows used in investing activities (244,459) (52,300) Common shares issued, net of issue costs 35,310 1,230 ARMZ private placement net of issue costs 602,708 - Loans received by joint ventures 34,146 12,000 Advances received 11,155 - Debentures issued, net of issue costs 498,626 - Debentures redeemed (269,394) - Special dividend on common shares (492,864) - Repayment of credit facility 11 (65,000) - Cash flows from financing activities 354,687 13,230

Effects of exchange rate changes on cash and cash equivalents 10,684 5,229

Net increase / (decrease) in cash and cash equivalents 167,301 (27,760)

Cash and cash equivalents at the beginning of the year 148,465 176,225

Cash and cash equivalents at the end of the year 315,766 148,465

Supplemental cash flow information (note 21)


Uranium One Inc. Notes to the Consolidated Financial Statements as at December 31, 2010 and 2009 (in United States dollars)

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1 NATURE OF OPERATIONS

Uranium One Inc. (“Uranium One”), its subsidiaries and joint ventures (collectively, the “Corporation”) is a Canadian Corporation engaged through subsidiaries and joint ventures in the mining and production of uranium, and in the acquisition, exploration and development of properties for the production of uranium in Kazakhstan, the United States, Australia and Canada. The Corporation holds a 70% interest in the Betpak Dala joint venture, which owns the Akdala and South Inkai uranium mines in Kazakhstan, a 50% interest in the Karatau joint venture, which owns the Karatau uranium mine in Kazakhstan, a 50% interest in the Akbastau joint venture, which owns the Akbastau uranium mine in Kazakhstan, a 49.67% interest in the Zarechnoye joint venture, which owns the Zarechnoye uranium mine in Kazakhstan, and a 30% interest in the Kyzylkum joint venture, which owns the Kharasan Project in Kazakhstan. In the United States, the Corporation owns projects in the Powder River and Great Divide basins in Wyoming. The Corporation owns a 51% interest in the Honeymoon Uranium Project in Australia. The Corporation owns, either directly or through joint ventures, a large portfolio of uranium exploration properties in the western United States, South Australia, and Canada. On April 14, 2010, the Corporation sold its South African development and exploration assets.

2 SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of presentation and principles of consolidation

The consolidated financial statements of the Corporation have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). The consolidated financial statements include the accounts of Uranium One, its subsidiaries and the proportionate share of its interests in joint ventures. All intercompany balances and transactions have been eliminated.

The following are the Corporation’s principal mineral properties as at December 31, 2010:

Operating mine:

Advanced development projects:

Entity Mineral property/Operation Location Ownership Status

Kyzylkum LLP Kharasan Uranium Project Kazakhstan 30% Proportionately consolidated


United States development projects

United States 100% Consolidated

The Corporation is also developing the following mineral properties:

Entity Mineral property/Operation Location Ownership Status Honeymoon Uranium Project Joint Venture

Honeymoon Project Australia 51% Proportionately consolidated

The Corporation owns a 19% interest in the SKZ-U joint venture, which is constructing a sulphuric acid plant in Kazakhstan (note 7.1).

(1)

The joint venture interest in the Karatau Uranium Mine was acquired on December 21, 2009. Refer to note 3.4 (2)

The joint venture interests in the Akbastau and Zarechnoye Uranium Mines were acquired on December 27, 2010. Refer to note 3.1

Entity Mineral property/Operation Location Ownership Status

Betpak Dala LLP Akdala Uranium Mine Kazakhstan 70% Proportionately consolidated

Betpak Dala LLP South Inkai Uranium Mine Kazakhstan 70% Proportionately consolidated

Karatau LLP Karatau Uranium Mine(1) Kazakhstan 50% Proportionately consolidated

Akbastau LLP Akbastau Uranium Mine(2) Kazakhstan 50% Proportionately consolidated

Zarechnoye LLP Zarechnoye Uranium Mine(2) Kazakhstan 49.67% Proportionately consolidated


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2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Adoption of new standards

Financial instruments – recognition and measurement During 2009, the Corporation adopted the amendments made by the CICA to Handbook Section 3855 – “Financial Instruments – Recognition and Measurement” (“Section 3855”). Section 3855 was amended to provide additional guidance concerning the assessment of embedded derivatives upon reclassification of a financial asset out of the held-for-trading category, amend the definition of loans and receivables, amend the categories of financial assets into which debt instruments are required or permitted to be classified, amend the impairment guidance for held-to-maturity debt instruments and require reversal of impairment losses on available-for-sale debt instruments when conditions have changed. The additional guidance on assessment of embedded derivatives is applicable for reclassifications made on or after July 1, 2009. All other amendments are applicable as of January 1, 2009. The adoption of these amendments did not result in a material impact on the Corporation’s consolidated financial statements. Business combinations CICA Section 1582 – “Business Combinations”, which replaces CICA Section 1581 – “Business Combinations”, establishes standards for the accounting for a business combination. It is the Canadian GAAP equivalent to International Financial Reporting Standard (“IFRS”) 3, “Business Combinations”. This standard is effective for the Corporation’s business combinations with acquisition dates on or after January 1, 2011. Early adoption is permitted and the Corporation adopted this standard effective January 1, 2010. The adoption of this standard required the Corporation to use the closing share price on the close of the transaction to calculate the value of consideration, compared to the share price on announcement date. Transaction costs are now expensed as incurred. The acquisition of the Akbastau Uranium Mine, Zarechnoye Uranium Mine and Christensen Ranch and Irigaray were accounted under the rules of the new standard (refer note 3). Consolidated financial statements and non-controlling interests CICA Section 1601 – “Consolidated Financial Statements” (“Section 1601”) and Section 1602 – “Non-controlling Interests” (“Section 1602”) replaces CICA Handbook Section 1600 - “Consolidated Financial Statements”. Sections 1601 and 1602 establish standards for preparation of consolidated financial statements and the accounting for non-controlling interests in financial statements that are equivalent to the standards under IFRS. These standards are effective for the Corporation for interim and annual financial statements beginning on January 1, 2011. Early adoption is permitted and the Corporation adopted these standards effective January 1, 2010. The adoption of these standards did not result in a material impact on the Corporation’s consolidated financial statements.

2.3 Measurement and reporting currency

Items included in the financial statements of each entity in the Corporation are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (the “functional currency”). The Corporation’s reporting currency is the United States dollar. Uranium One, its subsidiaries and joint ventures operate in Kazakhstan, the United States, Australia, and Canada. The financial statements of the entities that are determined to be integrated foreign operations have been translated into United States dollars by translating foreign currency denominated monetary assets and liabilities, which includes future income tax, at rates of exchange in effect at the balance sheet date. Non-monetary items are translated at historical exchange rates and revenues and expenses at average rates of exchange during the period. Exchange gains and losses arising on translation are included in the consolidated statements of operations.

The financial statements of the entities that are determined to be self-sustaining foreign operations have been translated into United States dollars by translating all assets and liabilities, which includes future income tax, at rates of exchange in effect at the balance sheet date. Revenues and expenses are translated at average exchange rates for the period. All resulting exchange differences are included in accumulated other comprehensive income / (loss) on the consolidated balance sheet.

2.4 Inventories

Inventories of solutions and uranium concentrates are valued at the lower of average production cost or net realizable value. Production costs include the cost of raw materials, direct labour, mine-site related overhead expenses and depreciation and depletion of mineral interests.

Materials and supplies are valued on the weighted average basis and recorded at the lower of average cost or replacement cost.


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2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.5 Mineral interests, plant and equipment

Mineral interests, plant and equipment are recorded at cost less accumulated depreciation and depletion. Mineral interests, plant and equipment includes capitalized expenditures related to the development of mineral properties and related plant and equipment. Capitalized costs and plant and equipment are depreciated and depleted using either a unit-of-production method, over the estimated economic life of the mine to which they relate, or using the straight-line method over their estimated useful lives. The costs associated with mineral interests are separately allocated to reserves, resources and exploration potential, and include acquired interests in production, development and exploration stage properties representing the fair value at the time they were acquired. The value allocated to reserves is depreciated on a unit-of-production method over the estimated recoverable proven and probable reserves at the mine. The reserve value is noted as depletable mineral properties for operations in commercial production. The resource value represents the property interests that are believed to potentially contain economic mineralized material such as inferred material; measured, indicated, and inferred resources with insufficient drill spacing to qualify as proven and probable reserves; and inferred resources in close proximity to proven and probable reserves.

Resource value and exploration potential value are classified as non-depletable mineral interests. At least annually or when otherwise appropriate, value from the non-depletable category for operating mines will be transferred to the depletable category as a result of an analysis of the conversion of resources or exploration potential into reserves. Costs related to property acquisitions are capitalized until the viability of the mineral property is determined. When it is determined that a property is not economically viable the capitalized costs are written down. Exploration expenditures on properties not advanced enough to identify their development potential are charged to operations as incurred.

Mining expenditures incurred either to develop new ore bodies or to develop mine areas in advance of current production are capitalized. Commercial production is deemed to have commenced when management determines that the completion of operational commissioning of major mine and plant components is completed, operating results are being achieved consistently for a period of time and that there are indicators that these operating results will be continued. Mine development costs incurred to sustain current production are capitalized. Upon sale or abandonment of any mineral interest, plant and equipment, the cost and related accumulated depreciation or accumulated depletion, are written off and any gains or losses thereon are included in the consolidated statement of operations.

2.6 Impairment of long-lived assets

The Corporation reviews the carrying values of its mineral interests, plant and equipment when changes in circumstances indicate that those carrying values may not be recoverable. Estimated future net cash flows are calculated using estimated recoverable reserves, estimated future commodity prices and the expected future operating and capital costs. An impairment loss is recognized when the carrying value of an asset held for use exceeds the sum of undiscounted future net cash flows. An impairment loss is measured as the amount by which the asset’s carrying amount exceeds its fair value.

2.7 Asset retirement obligations

The Corporation recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of mineral property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, the net present value of the liability for an asset retirement obligation is recognized in the period incurred. The net present value of the liability is added to the carrying amount of the associated asset and amortized over the asset’s useful life. The liability is accreted over time through periodic charges to earnings and is reduced by actual costs of reclamation. Subsequent to the initial measurement, the asset retirement obligation is adjusted at the end of each year to reflect changes in the estimated future cash flows underlying the obligation.


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2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.8 Revenue recognition

Revenue from uranium sales is recognized when: (i) persuasive evidence of an arrangement exists; (ii) the risks and rewards of ownership pass to the purchaser, including delivery of the product; (iii) the selling price is fixed or determinable, and (iv) collectability is reasonably assured.

In a uranium supply arrangement, the Corporation is contractually obligated to provide uranium concentrates to its customers. Uranium that was produced by the Corporation is delivered to conversion facilities (“Converters”) where the Converter will credit the Corporation’s account for the volume of accepted uranium. Based on delivery terms in a sales contract with its customer, the Corporation instructs the Converter to transfer title of a contractually specified quantity of uranium to the customer’s account at the Converter. At this point, the Corporation invoices the customer and recognizes revenue for the uranium supply. The Corporation does not recognize revenue in circumstances where it delivers borrowed material into contracts.

Interest income is recognized on a time proportion basis, taking account of the principal outstanding and the effective interest rate over the period to maturity, when it is determined that such income will accrue to the Corporation.

2.9 Future income and mining taxes

The Corporation uses the liability method of accounting for income and mining taxes. Under the liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax losses and other deductions carried forward. For business acquisitions, the liability method results in a gross up of mining interests to reflect the recognition of the future tax liabilities for the tax effect of such differences.

Future tax assets and liabilities are measured using substantively enacted tax rates expected to apply when the asset is realized or the liability settled. A reduction in respect of the benefit of a future tax asset (a valuation allowance) is recorded against any future tax asset if it is not more likely than not to be realized. The effect on future tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period in which the change is substantively enacted.

2.10 Stock based compensation

The Corporation uses the fair value method of accounting for all stock based compensation awards (“Awards”). Under this method, the Corporation determines the fair value of the compensation expense for all Awards on the date of grant using an option pricing model. The fair value of the Awards is expensed over the vesting period of the Awards.

Upon exercise of the Awards, the related amount of stock based compensation previously expensed is transferred from contributed surplus and together with consideration received, is recorded as share capital. The Corporation’s stock based compensation plans consist of the following:

Options Under Uranium One's Stock Option Plan, options granted are non-assignable and may be granted for a term not exceeding ten years. The plan is administered by the Board of Directors, which determines individual eligibility under the plan, the number of shares reserved underlying the options granted to each individual (not exceeding 5% of issued and outstanding shares to any insider and not exceeding 1% of the issued and outstanding shares to any non-employee director on a non-diluted basis) and any vesting period which, pursuant to the stock option plan is one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the remainder on the third anniversary of the grant date. The maximum number of shares of Uranium One that are issuable pursuant to the plan is limited to 7.2% of issued and outstanding shares.

Restricted shares Under the Uranium One Restricted Share Plan, restricted share rights are granted to eligible employees, contractors and directors. Each restricted share right is exercisable for one common share of Uranium One at the end of the restricted period for no additional consideration. The vesting period for restricted shares that are currently issued is either two-thirds on the first anniversary of the grant date and the remainder on the second anniversary of the grant date, or total vesting on the third anniversary of the grant date. The aggregate maximum number of shares available for issuance under the restricted share plan is capped at three million. The number of shares for issuance to non-employee directors may not exceed 0.5% of the total number of common shares outstanding on a non-diluted basis.


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2.11 Earnings / loss per share

Earnings / loss per share calculations are based on the weighted average number of common shares and common share equivalents issued and outstanding during the year. The calculation of diluted earnings per share assumes that outstanding options and warrants that are dilutive to earnings per share are exercised and the proceeds are used to repurchase shares of Uranium One at the average market price of the shares for the period. The effect is to increase the number of shares used to calculate diluted earnings per share. Dilution from convertible securities is calculated based on the number of shares to be issued after taking into account the reduction of the related after tax interest expense. The impact of outstanding share options, warrants and convertible debentures are excluded from the diluted share calculation for loss per share amounts, because it is anti-dilutive.

2.12 Financial instruments

The Corporation's financial instruments primarily consist of cash, short-term money market investments, marketable securities, accounts receivable, accounts payable, loans to joint ventures, draw downs against credit facilities, long term debt and convertible debentures. The fair value of the financial instruments approximates their carrying values, except for the fair values of marketable securities that have been estimated by reference to quoted market prices for actual or similar instruments where available and disclosed accordingly.

Comprehensive income comprises the Corporation’s net income and other comprehensive income. Comprehensive income represents changes in shareholders’ equity during a period arising from non-owner sources and, for the Corporation, other comprehensive income includes currency translation adjustments on its net investment in self-sustaining foreign operations, and unrealized gains and losses on available-for-sale securities. Financial assets and financial liabilities are recognized on the balance sheet when the Corporation has become party to the contractual provisions of the instruments. Financial instruments are initially measured at fair value, which includes transaction costs, except for financial instruments classified as held for sale, where the transaction cost is expensed through the statement of operations. Subsequent to initial recognition these instruments are measured as set out below: Investments

Purchases and sales of marketable investments are recognized on the trade date at fair value, which is the date that the Corporation commits to purchase or sell the asset. After initial recognition, the investments are classified as available for sale investments carried at fair value, with the fair value adjustments accounted for in other comprehensive income. When available for sale investments are sold, the cumulative market rate adjustment previously recorded in other comprehensive income is recognized in the consolidated statement of operations. Cash and cash equivalents Cash and cash equivalents consist of cash on hand, bank balances, deposits held at call and certificates of deposits, money market instruments, including cashable guaranteed investment certificates, bearer deposit notes and commercial paper with a remaining maturity of three months or less at date of purchase, and are carried at fair value. Financial assets Financial assets that are classified as available for sale securities are recognized at fair value on the trade date, which is the date that the Corporation commits to purchase or sell the asset. After initial recognition, the assets are carried at fair value, with the fair value adjustments accounted for in other comprehensive income. Accounts receivable

Accounts receivable are carried at amortized cost unless a provision has been recorded for uncollectability of these receivables. A provision for impairment of accounts receivable is established when there is objective evidence that the Corporation will not be able to collect all amounts due according to the original terms of receivables.


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Impairment and uncollectability of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of the asset is determined and an impairment loss is recognized for the difference between the recoverable amount and the carrying amount as follows: the carrying amount of the asset is reduced to its discounted estimated recoverable amount, either directly or through the use of an allowance account and the resulting loss is recognized in the consolidated statement of operations. For investments included under financial instruments, if there is an other than temporary decline in the value of the investment, such reduction is included in the consolidated statement of operations. Financial liabilities

After initial recognition, financial liabilities, other than held for trading liabilities, are subsequently measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any transaction costs and any discount or premium on settlement. Financial liabilities that are classified as held for trading are recognized at fair value on the trade date, which is the date that the Corporation commits to the contract. After initial recognition, the liabilities are carried at fair market value, with the fair value adjustments accounted for in the consolidated statement of operations. Accounts payable

Liabilities for trade and other payables which are normally settled on 30 to 90 day terms are carried at fair value. Debt

Debt payable is recognized initially at the proceeds received, net of transaction costs incurred. Debt payable is subsequently measured at amortized cost using the effective interest rate method. Any difference between proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of operations, as interest expense, over the period of the loan. Offset

Where a legally enforceable right of offset exists for recognized financial assets and financial liabilities, and there is an intention to settle the liability and realize the asset simultaneously, or settle on a net basis, all related financial effects are offset. Compound instruments The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual agreement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the face value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. Embedded derivatives Derivatives may be embedded in other financial instruments (the “host instrument”). Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not clearly and closely related to those of the host instrument, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not held for trading or designated at fair value. These embedded derivatives are measured at fair value with subsequent changes recognized in gains or losses on derivatives within interest and other in the consolidated statement of operations.


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2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.13 Equity instruments

Equity instruments issued by Uranium One are recorded at the proceeds received, net of direct issue costs.

2.14 Use of estimates

The preparation of financial statements in conformity with Canadian GAAP requires the Corporation’s management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Actual results may differ from those estimates.

Significant estimates used in the preparation of these consolidated financial statements include, but are not limited to, the recoverability of accounts receivable and investments, the proven and probable reserves, resources and exploration potential of mineral interests and the related depletion and depreciation, the estimated net realizable value of inventories, impairment of mineral interests, plant and equipment, determination of fair values of financial instruments, the fair value for stock-based compensation, the valuation of investments, the provision for income taxes and composition of income tax assets and liabilities, the expected economic lives of and the estimated future operating results and net cash flows from mining interests, the anticipated costs of reclamation and closure cost obligations, and the fair value of assets and liabilities acquired in business combinations and asset acquisitions.

2.15 Variable interest entities

Variable interest entities (“VIE’s”) as defined by the Accounting Standards Board in Accounting Guideline (“AcG”) 15, “Consolidation of Variable Interest Entities” are entities in which equity investors do not have characteristics of a “controlling financial interest” or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIE’s are subject to consolidation by the primary beneficiary who will absorb the majority of the entity’s expected losses and/or expected residual returns. The Corporation has determined that none of its equity investments, contracts or other holdings qualify as VIE’s.

2.16 Reclassification of prior year comparative figures

Joint venture debt has been reclassified from other liabilities and is now presented separately on the consolidated balance sheet and notes. Other minor prior year comparatives have been reclassified for consistency with current year presentation. These reclassifications had no effect on the reported consolidated statements of operations.

2.17 International Financial Reporting Standards (IFRS) In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt IFRS for fiscal years beginning on or after January 1, 2011. Accordingly, the conversion to IFRS will be applicable to the Corporation’s reporting in the first quarter of 2011, with restatement of comparative information presented.


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3 ACQUISITIONS AND DISPOSALS 3.1 Acquisition of the Akbastau Uranium Mine and Zarechnoye Uranium Mine The Corporation announced on June 8, 2010, the signing of a definitive purchase and subscription agreement to

acquire a 50% joint venture interest in the Akbastau Uranium Mine (“Akbastau”) and a 49.67% joint venture interest in the Zarechnoye Uranium Mine (“Zarechnoye”) in Kazakhstan from JSC Atomredmetzoloto (“ARMZ”), the Russian state-owned uranium mining company. JSC NAC Kazatomprom (“Kazatomprom”), the Kazakh-state owned uranium mining company, owns 50% and 49.67% joint venture interests in Akbastau and Zarechnoye, respectively. The remainder of the interest in Zarechnoye is held by a Kyrgyz company.

Pursuant to the transaction, ARMZ agreed to contribute its interests in the Akbastau and Zarechnoye joint ventures

and a cash investment of $610 million in return for 356 million common shares of the Corporation. Following closing, the Corporation undertook to pay a special cash dividend of $1.06 per share to shareholders other than ARMZ. On July 30, 2010, Japan Uranium Management Inc. (“JUMI”) undertook to exercise, under the terms of its convertible debenture, its right to repurchase which was triggered by the transaction with ARMZ.

On July 15, 2010 the Independent Committee and the Board of Directors of Uranium One recommended the

transaction to shareholders, who approved the transaction on August 31, 2010, and announced the completion of legal due diligence reviews by both parties.

On November 26, 2010 Uranium One completed the initial closing of its transaction with ARMZ, comprising the issuance of 178 million new common shares of Uranium One to ARMZ in return for $610 million in cash. The Board of Directors declared a special dividend of $1.06 per share payable on December 20, 2010, to all shareholders of record (other than ARMZ) at the close of business on December 10, 2010. On December 27, 2010 Uranium One completed the final closing of its transaction with ARMZ, comprising the issuance of a further 178 million new common shares of Uranium One to ARMZ in return for ARMZ’s 50% interest in Akbastau and 49.67% interest in Zarechnoye, $40 million in receivables from ARMZ and $11.6 million in cash on acquisition to compensate for an unfavorable contract entered into by Zarechnoye prior to the acquisition. The JUMI debenture was redeemed after the closing of the transaction for C$275.8 million, including 101% of the outstanding principal amount and C$4.0 million of accrued interest. ARMZ currently holds 492 million common shares representing 51.4% of the outstanding common shares of Uranium One. ARMZ has agreed to a standstill of 18 months from closing during which it may not, without prior consent, dispose of or acquire any additional Uranium One shares, except pursuant to agreed anti-dilution rights, which will permit ARMZ to maintain not less than a 51% interest in Uranium One and to certain other exceptions. The value of Uranium One shares issued was calculated using the closing share price as at December 27, 2010. The acquisition is accounted for as a business combination and the aggregate fair values of assets acquired and liabilities assumed were as follows on acquisition date:

Akbastau Zarechnoye Total $’000 $’000 $’000

Purchase price: 178 million shares issued for acquisition of the

interest in the joint ventures

645,983

185,595

831,578 Acquired receivables (40,000) (11,600) (51,600) 605,983 173,995 779,978 Net assets acquired: Cash and cash equivalents 4,796 2,309 7,105 Inventory 11,676 10,514 22,190 Other current assets 2,814 2,186 5,000 Mineral interests, plant and equipment 731,005 251,162 982,167 Other non-current assets 11,845 5,921 17,766 Accounts payable and accrued liabilities (20,352) (3,157) (23,509)Current portion of joint venture debt (14,769) (10,658) (25,427)Other current liabilities (552) (13,967) (14,519)Future income tax liabilities (117,330) (35,468) (152,798)Joint venture debt - (33,835) (33,835)Other non-current liabilities (3,150) (1,012) (4,162)

605,983 173,995 779,978

Had this business combination been effected on January 1, 2010, the Corporation’s revenue would increase by $74.3 million and the net loss would decrease by $25.6 million (unaudited).


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3 ACQUISITIONS AND DISPOSALS (CONTINUED) 3.2 Option agreement to acquire Mantra Resources Ltd

The Corporation and ARMZ jointly announced on December 15, 2010 the signing of a definitive agreement to acquire all of the issued shares of Mantra Resources Limited (“Mantra”) pursuant to an Australian Scheme of Arrangement. Mantra's core asset is the Mkuju River Project in Tanzania which is nearing the completion of a definitive feasibility study.

Pursuant to the agreement with ARMZ, Uranium One has a call option to acquire Mantra from ARMZ, exercisable at any point within 12 months of closing (subject to extension) of the acquisition of Mantra by ARMZ. The agreement also provides ARMZ with a put option to sell Mantra to Uranium One at the end of the term. The purchase price to be paid will be equal to ARMZ’s acquisition cost of Mantra, including any additional expenditures contributed by ARMZ to Mantra or its properties and interest thereon at a rate of 2.65% per annum. The exercise of the put or call option will constitute a related party transaction under applicable Canadian securities legislation. Accordingly, the exercise of the put and call options is subject to Uranium One minority shareholder approval, as well as to required regulatory approvals.

3.3 Acquisition of Christensen Ranch and Irigaray

The Corporation entered into a definitive agreement on August 7, 2009 to acquire 100% of the MALCO Joint Venture (“MALCO”) from wholly-owned subsidiaries of AREVA and Électricité de France for $35.3 million in cash. The assets of MALCO include the licensed and permitted Irigaray In-situ Recovery (“ISR”) central processing plant, the Christensen Ranch satellite ISR facility and associated U3O8 resources located in the Powder River Basin of Wyoming. The Corporation also assumed MALCO’s reclamation liabilities in respect of uranium properties in Texas.

Pursuant to the acquisition agreement, the Corporation placed a deposit of $8.8 million in escrow to be applied against the purchase price. The acquisition closed on January 25, 2010. The Corporation accounted for the acquisition as a business combination. The Corporation agreed to pay a portion of operating costs and all of the Texas reclamation costs incurred from the execution date of August 7, 2009 to the closing date of January 25, 2010 which amounted to $2.6 million. Transaction costs incurred in connection with the acquisition were $0.5 million, which were expensed as incurred.

The aggregate fair values of assets acquired and liabilities assumed were as follows on acquisition date:

$’000

Purchase price: Cash 35,315 Operating and remediation costs 2,619

37,934 Net assets acquired: Cash and cash equivalents 315 Accounts and other receivables 2,005 Mineral interests, plant and equipment 56,364 Accounts payable and accrued liabilities (34) Asset retirement obligations (7,320) Future income tax liabilities (13,396)

37,934 Had this business combination been effected on January 1, 2010, the Corporation’s net loss would not be affected (unaudited).


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3 ACQUISITIONS AND DISPOSALS (CONTINUED)

3.4 Acquisition of the Karatau Uranium Mine Uranium One acquired on December 21, 2009, a 50% joint venture interest in the Karatau Uranium Mine (“Karatau”)

in Kazakhstan from ARMZ. The other 50% joint venture interest in Karatau is held by Kazatomprom. The purchase price was paid by way of the issuance of 117 million common shares of Uranium One and a promissory

note of $90 million. The promissory note was repaid on January 18, 2010. The purchase agreement also provides for contingent payments to ARMZ of up to $60 million, payable in three equal tranches over the period between 2010 and 2012 subject to certain, post-closing tax related adjustments. The first payment of $20 million was made during January 2010 and the second during January 2011. Due to uncertainty regarding the payment of the remaining $20 million, it was not recognized as a liability on acquisition.

The value of the Uranium One shares issued was calculated using the weighted average share price of Uranium One

shares two days before, the day of, and two days after the date of the announcement of the arrangement. The purchase price allocation was finalized during the year. The aggregate fair values of assets acquired and liabilities assumed were as follows on acquisition date:

$’000

Purchase price: Promissory note 90,000 Common shares 293,229 Contingent payment 20,000 Acquisition costs 8,751

411,980 Net assets acquired: Cash and cash equivalents 523 Inventory 26,761 Other current assets 3,102 Mineral interests, plant and equipment 536,032 Other non-current assets 2,218 Accounts payable and accrued liabilities (28,889) Other current liabilities (45,051) Future income tax liabilities (79,850) Other non-current liabilities (2,866)

411,980 3.5 Disposal of Uranium One Africa Ltd

The Corporation completed the sale of Uranium One Africa during April 2010, and received cash proceeds of $37.3 million. The net carrying value of the investment of $38.5 million as at December 31, 2009 was further impaired to the proceeds of $37.3 million, resulting in an impairment of $1.2 million in the three months ended March 31, 2010.


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4 CASH AND CASH EQUIVALENTS

Dec 31, 2010 Dec 31, 2009 $’000 $’000 Cash 255,629 44,362 Money market instruments, including cashable guaranteed investment certificates, bearer deposit notes and commercial paper

60,137 104,103

315,766 148,465

Cash and cash equivalents do not include any asset backed commercial paper.

5 ACCOUNTS AND OTHER RECEIVABLES

Dec 31, 2010 Dec 31, 2009 $'000 $'000 Trade receivables 80,258 25,825 Value added tax and general sales tax 8,248 9,004 Prepayments and advances 6,715 4,747 Other receivables 8,223 2,829 103,444 42,405

6 INVENTORIES Dec 31, 2010 Dec 31, 2009 $'000 $'000 Finished uranium concentrates 62,842 41,055 Solutions and concentrates in process 18,541 24,871 Product inventory 81,383 65,926 Materials and supplies 9,617 5,708 91,000 71,634

All operating expenses and depreciation and depletion are processed to inventory and expensed when the product is sold. The Corporation expensed $189.4 million of inventory as cost of sales during 2010 (2009: $97.4 million). Finished uranium concentrates includes a fair value adjustment of $9.7 million (2009: $8.9 million) that was processed on acquisition of Akbastau and Zarechnoye during 2010 and the acquisition of Karatau during 2009, to increase the carrying value to fair market value. $9.2 million was released to the consolidated statement of operations as non-cash depreciation and depletion for sales made up to December 31, 2010.


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7 JOINT VENTURES

7.1 Proportionate interests in joint ventures

The Corporation owns the following interests in joint ventures:

Akbastau 50%Betpak Dala 70%Karatau 50%Zarechnoye 49.67%Kyzylkum 30%SKZ-U LLP 19%Honeymoon 51%Australia Exploration 50% The Corporation acquired a 19% joint control interest in SKZ-U LLP (“SKZ-U”) during 2009 to ensure long term sulphuric acid supply to Kyzylkum and other projects in the region. The SKZ-U joint venture was established to construct a sulphuric acid plant near Kharasan at Zhanakorgan. The Corporation acquired a 50% joint control interest in Akbastau and a 49.67% joint interest in Zarechnoye during 2010 (note 3.1). The Corporation’s proportionate share of the assets and liabilities of the joint ventures are as follows:

As at December 31, 2010

Akbastau Betpak Dala

Karatau

Zarechnoye

Kyzylkum

& SKZ-U

Honeymoon & Australia exploration

Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000Cash 4,788 37,164 1,267 2,305 7,998 9,923 63,445 Other current assets 14,080 101,273 45,494 13,341 943 641 175,772 Mineral interests, plant and equipment

734,804

626,177

518,828

250,562

218,109

12,625

2,361,105

Other assets 1,105 3,080 4,021 5,931 9,171 43 23,351 Current liabilities (20,867) (9,050) (8,860) (3,392) (5,409) (6,839) (54,417)Current portion of joint venture debt (14,742)

- (18,750) (10,639)

(16,000)

- (60,131)

Other liabilities (1) (2)

(3) (4) (5) (54) (1,487) (24,282) (12,538) (495) (35) (38,891)

Joint venture debt - - - (33,776) (52,374) - (86,150)Future income tax liabilities (116,581) (69,012) (94,734) (35,392)

(15,941)

- (331,660)

Asset retirement obligation (2,535) (8,406) (3,006) (2,190)

(1,133) (1,732) (19,002)

Net assets 599,998 679,739 419,978 174,212 144,869 14,626 2,033,422

(1) In addition to the $19.1 million loan (note 7.2) from the Corporation, Kyzylkum negotiated unsecured bank loan facilities totaling $160 million in prior periods.

One facility, in the amount of $70 million, was obtained from the Japan Bank for International Cooperation (“JBIC”) and the other facility, in the amount of $90 million, was obtained from Citibank. $60.2 million was outstanding on the JBIC facility and $77.4 million was outstanding on the Citibank facility as at December 31, 2010. During the period, Kyzylkum also negotiated a secured loan totaling $42.2 million from Kazatomprom of which $41.5 million was outstanding as at December 31, 2010. The proceeds were used to repay $17.5 million to the Corporation, $4.0 million to JBIC and $6.3 million to Citibank. The Corporation’s share of these facilities is $53.7 million.

(2) Karatau negotiated and drew down on a secured short term bank loan totaling $10 million with Citibank during 2009. During the year ended December 31, 2010, Karatau negotiated additional secured bank loans from Citibank in the amount of $6.5 million, Halyk Bank in the amount of $11 million and UniCredit Bank in the amount of $40 million. The Halyk Bank and Citibank facilities were drawn down in full and $10 million was outstanding against the UniCredit Bank facility as at December 31, 2010. The Corporation issued a guarantee to UniCredit Bank to secure the $40 million facility. At December 31, 2010, the Corporation’s share of these loans is $18.8 million.

(3) In addition to the $18 million loan (note 7.2) from the Corporation, SKZ-U received unsecured loans from Sumitomo Mitsui Banking Corporation, Mizuho

Corporate Bank and JBIC in the amounts of $17.4 million, $15 million and $44.9 million respectively. At December 31, 2010, the Corporation’s share of these loans is $14.7 million.

(4) At December 31, 2010, Akbastau had loans outstanding of $10 million, $3.4 million and $16 million from Alpha Bank, GRK and Effective Energy, respectively.

Uranium One acquired (note 3.1) a proportionate share of Akbastau’s loans outstanding totaling $14.7 million. (5) At December 31, 2010, Zarechnoye had loans outstanding of $28 million, $60 million and $1.4 million from Eurasia Development Bank, Effective Energy and

Citibank, respectively. Uranium One acquired (note 3.1) a proportionate share of Zarechnoye’s loans outstanding totaling $44.4 million


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7 JOINT VENTURES

7.1 Proportionate interests in joint ventures (continued)


Betpak

Dala

Karatau Kyzylkum

& SKZ-U


Total

$'000 $'000 $'000 $'000 $'000Cash 3,062 160 1,283 5,163 9,668 Other current assets 77,871 18,930 279 1,388 98,468 Mineral interests, plant and equipment

658,509 510,494 208,830 78,039 1,455,872

Other assets 1,479 1,924 7,407 - 10,810 Current liabilities (8,494) (27,020) (4,072) (2,575) (42,161)Current portion of joint venture debt

- (5,000) - - (5,000)

Other liabilities (1) (1,479) (11,687) (1,207) (34) (14,407)Joint venture debt - - (47,574) - (47,574)Future income tax liabilities

(55,844) (74,637) (12,223) (4,074) (146,778)

Asset retirement obligation

(8,170) (2,847) (1,356) (705) (13,078)

Net assets 666,934 410,317 151,367 77,202 1,305,820

(1) In addition to the $35 million loan (note 7.2) from the Corporation, Kyzylkum negotiated unsecured bank loan facilities totaling $160 million in prior periods. One facility, in the amount of $70 million, was obtained from the Japan Bank for International Cooperation (“JBIC”) and the other facility, in the amount of $90 million, was obtained from Citibank. These facilities were fully drawn down as at December 31, 2009, and the Corporation’s share of these facilities is $48 million.

(2) Karatau negotiated a secured short term bank loan totaling $10 million with Citibank and the Corporation’s share of this loan is $5 million

The Corporation's proportionate share of revenue, expenses, net earnings / (loss) and cash flows for the years ended December 31, 2010 and 2009 are as follows:

Year ended December 31, 2010

Akbastau Betpak

Dala

Karatau

Zarechnoye

Kyzylkum

& SKZ-U


Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000 Revenue - 205,613 105,430 6,287 - - 317,330 Expenses and other income

- (118,932) (65,842) (6,285) (789) (115,228) (307,076)

Foreign exchange (loss) / gain

(1,107) (4,325) (423) (319) 195 - (5,979)

(Loss) / earnings before income taxes

(1,107) 82,356 39,165 (317) (594) (115,228) 4,275

Current income tax expense

- (21,812) (15,696) - - - (37,508)

Future income tax (expense) / recovery

- (12,667) (14,610) 534 (3,532) 4,398 (25,877)

(Loss) / earnings (1,107) 47,877 8,859 217 (4,126) (110,830) (59,110)

Cash flows from operating activities

- 60,338 9,047 - - - 69,385

Cash flows used in investing activities

- (26,236) (21,690) - (19,700) (27,430) (95,056)

Cash flows from financing activities

- - 13,750 - 26,415 32,190 72,355

Net increase in cash

- 34,102 1,107 - 6,715 4,760 46,684


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7 JOINT VENTURES

7.1 Proportionate interests in joint ventures (continued)

Year ended December 31, 2009

Betpak Dala

Karatau

Kyzylkum & SKZ-U

Honeymoon & Australia

exploration Total

$'000 $'000 $'000 $’000 $'000 Revenue 138,473 10,710 - - 149,183 Expenses and other income

(86,394) (10,684) (450) (769) (98,297)

Foreign exchange gain / (loss)

59,153 (358) 11,553 - 70,348

Earnings / (loss) before income taxes

111,232 (332) 11,103 (769) 121,234

Current income tax expense

(16,567) (1,228) (1) - (17,796)

Future income tax recovery / (expense)

164,561 (103) 46,403 (36) 210,825

Earnings / (loss) 259,226 (1,663) 57,505 (805) 314,263

Cash flows from operating activities

21,487 499 - - 21,986

Cash flows used in investing activities

(19,150) (339) (16,194) (24,281) (59,964)

Cash flows from financing activities

- - 17,385 29,444 46,829

Net increase in cash

2,337 160 1,191 5,163 8,851

7.2 Loans to joint ventures

Dec 31, 2010 Dec 31, 2009 $'000 $'000 Long term portion Kyzylkum 13,873 25,698 SKZ-U 14,849 3,552 Total 28,722 29,250


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7 JOINT VENTURES (CONTINUED)

7.2 Loans to joint ventures (continued) Kyzylkum loan The Corporation made loans to Kyzylkum pursuant to its obligation to provide project financing for construction and commissioning of the Kharasan Project in the amount of $80 million. The loans bear interest at LIBOR plus 1.5% per annum, with interest payable on a semi-annual basis, commencing within two years of initial funding. Dec 31, 2010 Dec 31, 2009 $'000 $'000 Balance at January 1 35,000 46,666

Interest capitalized 3,132 -

Repaid during the year (19,066) (11,666) 19,066 35,000 Interest accrued 753 1,711 Balance at December 31 19,819 36,711 Less: elimination of proportionate share – 30% (5,946) (11,013) 13,873 25,698 Less: current portion - - Long term portion 13,873 25,698

The loans to Kyzylkum are unsecured. Kyzylkum repaid 50% of the outstanding loan during 2010. SKZ-U loan The Corporation made loans to SKZ-U pursuant to its obligation to provide project financing for construction of a sulphuric acid plant in the amount of $31 million. The loans bear interest at LIBOR plus 6.0% per annum, with interest payable on a semi-annual basis, commencing in 2013. Dec 31, 2010 Dec 31, 2009 $'000 $'000 Balance at January 1 4,291 -

Repaid during the period (4,291) -

Additions during the period 17,995 4,291

17,995 4,291 Interest accrued 337 94 Balance at the end of the period 18,332 4,385 Less: elimination of proportionate share – 19% (3,483) (833) 14,849 3,552 Less: current portion - - Long term portion 14,849 3,552 The loans to SKZ-U are unsecured.


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8 MINERAL INTERESTS, PLANT AND EQUIPMENT December 31, 2010 Accumulated Net carrying Cost amortization Amount $'000 $'000 $'000 Mineral interests 2,435,769 (145,406) 2,290,363 Plant and equipment 539,053 (99,497) 439,556 2,974,822 (244,903) 2,729,919

December 31, 2009 Accumulated Net carrying Cost amortization Amount $'000 $'000 $'000 Mineral interests 1,485,968 (82,852) 1,403,116 Plant and equipment 385,621 (40,453) 345,168 1,871,589 (123,305) 1,748,284

A summary by property of the net book value is as follows: December 31, 2010 Mineral interests Non-

depletable Plant and

equipment Total Depletable Total Country $'000 $'000 $'000 $'000 $'000 Akbastau Mine Kazakhstan 110,758 585,216 695,974 38,830 734,804 Akdala Mine Kazakhstan 62,876 74,358 137,234 25,337 162,571 South Inkai Mine Kazakhstan 90,820 269,817 360,637 102,586 463,223 Karatau Mine Kazakhstan 55,229 390,567 445,796 73,032 518,828 Zarechnoye Mine Kazakhstan 52,004 159,567 211,571 38,991 250,562 Kharasan Project Kazakhstan - 140,078 140,078 78,031 218,109 United States development projects

United States - 139,174 139,174 64,126 203,300

United States exploration projects

United States - 116,327 116,327 489 116,816

United States conventional mining projects

United States - 39,107 39,107 826 39,933

Honeymoon Project Australia - 2,916 2,916 9,709 12,625 Corporate and other - 1,549 1,549 7,599 9,148 Total 371,687 1,918,676 2,290,363 439,556 2,729,919

December 31, 2009 Mineral interests

Non- Plant and equipment Total Depletable depletable Total

Country $'000 $'000 $'000 $'000 $'000 Akdala Mine Kazakhstan 77,199 74,358 151,557 28,149 179,706 South Inkai Mine Kazakhstan 194,753 181,068 375,821 102,598 478,419 Karatau Mine Kazakhstan 141,052 312,575 453,627 56,867 510,494 Kharasan Project Kazakhstan - 140,078 140,078 68,752 208,830 United States development projects

United States - 94,653 94,653 26,873 121,526


United States - 114,905 114,905 493 115,398


United States - 38,896 38,896 1,014 39,910

Honeymoon Project Australia - 31,830 31,830 46,209 78,039

Corporate and other - 1,749 1,749 14,213 15,962 Total 413,004 990,112 1,403,116 345,168 1,748,284


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8 MINERAL INTERESTS, PLANT AND EQUIPMENT (CONTINUED)

8.1 Impairment of mineral interests, plant and equipment

December 31, 2010 Impairment Future income

tax adjustment Net impairment

$'000 $'000 $'000 Honeymoon project 113,538 3,712 109,826 Dominion Project (note 3.5) 1,216 - 1,216 Corporate assets 1,913 - 1,913 Total 116,667 3,712 112,955

December 31, 2009 Impairment and

closure costs Future income

tax adjustment Net impairment

$'000 $'000 $'000 United States exploration projects 789 268 521 Corporate and other 136 - 136 Mineral interests, plant and equipment 925 268 657 Dominion Project 246,525 - 246,525 Assets held for sale 246,525 - 246,525 Texas assets 14,767 (5,422) 20,189 Other assets 3,239 1,070 2,169 Disposals during the year 18,006 (4,352) 22,358 Total 265,456 (4,084) 269,540


______________________________________________________________________________________________________


9 OTHER ASSETS

Dec 31, 2010 Dec 31, 2009 $'000 $'000 Current Borrowed uranium concentrates 12,500 8,900 Future income tax assets 820 1,070 Deposit for acquisition of Christensen Ranch and Irigaray (note 3.3) - 8,750 Deferred business development expenditure - 5,174 Other 305 578 13,625 24,472 Non-current Asset retirement fund 37,809 13,500 Acquired receivable, net of Karatau contingent payment (notes 3.1 and 3.4) 20,000 - Advances for plant and equipment 16,030 7,487 Long term inventory 1,482 1,244 Future income tax assets 515 - Available for sale securities 319 9,287 Other 1,849 1,619

78,004 33,137 Asset retirement fund

The Corporation contributed $18.3 million to its asset retirement fund as part security for the additional asset retirement obligations acquired as part of the acquisition of Christensen Ranch and Irigaray (note 3.3). The Corporation also contributed $4.0 million to the asset retirement funds required as part of continued development of its US development assets. Additionally, the joint ventures made contributions to their asset retirement funds during the year and the proportionate share of these contributions was $2.0 million during 2010. Uranium concentrates loans

The Corporation entered into a uranium concentrates borrowing agreement to mitigate the risk of delivery delays, enabling the Corporation to meet its contractual obligations in terms of current uranium sales contracts. The asset represents the borrowed uranium concentrates, which are held at a conversion facility in the Corporation’s account. The asset is recorded at its fair value. The corresponding financial liability of $12.5 million, which was classified as held for trading, is also carried at fair value and is included in uranium concentrates loans in current liabilities (note 15).

Available for sale securities

The Corporation holds available for sale securities with a cost of $0.3 million and a fair value of $0.3 million. Unrealized losses of fifteen thousand dollars are included in accumulated other comprehensive income. A loss of $10.6 million was recognized during the year relating to the sale of available for sale securities.


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10 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Dec 31, 2010 Dec 31, 2009 $'000 $'000 Trade payables 30,643 22,325 Accruals 22,541 18,661 Advances received 20,505 19,938 Commodity and other taxes payable 7,932 4,378 Other 1,217 606 82,838 65,908

11 LONG TERM DEBT

Dec 31, 2010 Dec 31, 2009 $’000 $’000 Opening balance 63,579 61,275 Amortized financing fees 1,507 2,371 Interest paid (806) (1,210)Interest accrued 720 1,143 Repaid (65,000) - Closing balance - 63,579

Current portion - 63,579 Long term portion - - - 63,579

On June 27, 2008, the Corporation established a $100 million bank debt senior secured revolving credit facility (the “facility”). Under the terms of the facility, the Corporation had the ability to borrow up to $100 million from the lead lenders, Bank of Montreal and The Bank of Nova Scotia (the “Banks”). The Corporation repaid the outstanding amount of $65 million in June 2010. Financing fees relate to upfront costs and other costs incurred associated with establishing the credit facility, and are expensed over the term of the facility.


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12 CONVERTIBLE DEBENTURES 2006 Debentures The Corporation has outstanding convertible unsecured subordinated debentures maturing December 31, 2011 (the “2006 Debentures”) with a face value of C$155.3 million ($152.4 million). The 2006 Debentures were originally issued at C$1,000 per debenture and bear interest at an annual rate of 4.25%, payable semi-annually in arrears on June 30 and December 31 of each year. The conversion price was initially C$20 per share, which was equivalent to 50 common shares for each C$1,000 principal amount of debentures. On December 13, 2010, after the record date for a special cash dividend (note 3.1), the Corporation adjusted the conversion price for the 2006 Debentures from C$20.00 to C$15.76 per common share in accordance with section 6.1.4 of the trust indenture that governs the 2006 Debentures. 2010 Debentures On March 12, 2010 the Corporation issued convertible unsecured subordinated debentures for gross proceeds of C$260 million ($253.3 million), including C$10 million taken up under an underwriters’ over-allotment option. The 2010 Debentures have a March 13, 2015 maturity date, with interest payable at a rate of 5.0% per annum, payable semi-annually from the date of receipt of all necessary Kazakh approvals for the conversion of the 2010 Debentures, or at a rate of 7.5% per annum, payable semi-annually before the receipt of the necessary Kazakh approvals. The 2010 Debentures were initially convertible into common shares of the Corporation at a rate of 250 common shares per C$1,000 principal and had a conversion price of C$4.00 per common share. On October 12, 2010 the Corporation delivered a legal opinion to the indenture trustee, certifying that all necessary Kazakh approvals have been obtained for the conversion of the 2010 Debentures and the interest rate on the Debentures was consequently reset from 7.5% to 5%. On December 13, 2010, due to the payment of a special cash dividend (note 3.1), the Corporation adjusted the conversion price for the 2010 Debentures from C$4.00 to C$3.15 per common share in accordance with section 6.1.6 of the trust indenture that governs the 2010 Debentures. JUMI Debentures On January 14, 2010, the Corporation issued to Japan Uranium Management Inc. (“JUMI”) a C$269.1 million ($258.1 million ) aggregate principal amount 3% convertible unsecured subordinated debenture maturing ten years from the date of issue (the “JUMI Debentures”). Pursuant to the terms of the JUMI Debentures, the Corporation must offer to re-purchase the JUMI Debentures for 101% of the outstanding principal amount plus accrued interest upon a “change of control”. The transaction with ARMZ (note 3.1) constituted a “change of control” and on July 30, 2010, the Corporation made such a re-purchase offer to JUMI, which JUMI accepted, after which the debentures were redeemed on December 29, 2010. The debentures contain both a liability component and an equity component, being the holders’ conversion right, which is presented separately on the consolidated balance sheet as illustrated in the table below. The Corporation has allocated the fair value of the debentures to the individual liability and equity components by establishing the liability component and then allocating the balance remaining, after subtracting the fair value of the liability from the issue price, to the equity component. The fair value of the liability component was determined by discounting the stream of future payments of interest and principal amounts at the estimated prevailing market rate for a debt instrument of comparable maturity and credit quality but excluding any conversion privilege by the holder. A rate of 10.38% was used for the 2010 Debentures and 11.33% for the JUMI Debentures.


______________________________________________________________________________________________________


12 CONVERTIBLE DEBENTURES (CONTINUED) The table below provides a breakdown of the equity and liability allocation on initial recognition of the JUMI Debentures and 2010 Debentures:

JUMI Debentures 2010 Debentures $’000 $’000 Liability 131,378 207,203 Transaction costs (1,050) (10,357)Net liability 130,328 196,846 Equity 126,727 46,068 Transaction costs (1,035) (2,054)Net equity 125,692 44,014 Net proceeds 256,020 240,860 The table below indicates the movement in the liability: December 31, 2010 JUMI Debentures 2010 Debentures 2006 Debentures Total $’000 $’000 $’000 $’000 Opening balance as at Jan 1, 2010 - - 140,862 140,862 Issued 131,378 207,203 - 338,581 Interest accrued 14,539 18,272 9,918 42,729 Coupon payment (7,551) (13,981) (6,443) (27,975)Transaction costs (1,050) (10,357) - (11,407)Conversion - (11) - (11)Redemption (141,900) - - (141,900)Foreign exchange movement 4,584 5,172 7,065 16,821 Liability as at the end of the period - 206,298 151,402 357,700 Current portion - - 151,402 151,402 Long term portion - 206,298 - 206,298 - 206,298 151,402 357,700 December 31, 2009 2006 Debentures Total $’000 $’000 Opening balance as at Jan 1, 2009 118,042 118,042 Interest incurred 8,739 8,739 Coupon payment (6,049) (6,049)Foreign exchange movement 20,130 20,130 Liability as at the end of the period 140,862 140,862 The payment on redemption of the JUMI debentures was allocated as follows:

JUMI Debentures $’000 Liability carrying value on redemption 141,900 Payment allocated to liability (140,740)Gain on redemption recognized in profit and loss 1,160 Equity carrying value on redemption 125,692 Payment allocated to equity (128,654)Loss on redemption recognized in equity (2,962)


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13 ASSET RETIREMENT OBLIGATIONS

Dec 31, 2010 Dec 31, 2009 $’000 $’000 Opening balance 16,100 12,999 Accretion expense 957 1,291 Settled (3,587) (959)Incurred 461 6,555 Acquired through business combinations 12,091 2,841 Reallocated to assets held for sale - (7,211)Foreign exchange movement 207 584 Closing balance 26,229 16,100

Dec 31, 2010 Dec 31, 2009 Undiscounted and uninflated amount of estimated cash flows ($’000) 36,192 23,801 Payable in years 2 - 43 8 - 44 Inflation rate 2.69% - 5% 2.69% - 7.00% Discount rate 6% - 11% 8.40% - 12.52% Security of $37.8 million (2009: $13.5 million) for reclamation obligations has been provided in the form required by the relevant country’s authorities (note 9).

14 INCOME TAXES Dec 31, 2010 Dec 31, 2009 $’000 $’000 Current income tax expense 49,298 20,915 Future income tax expense / (recovery) 24,534 (206,379) 73,832 (185,464)

Reconciliation between the average effective tax rate and the applicable statutory tax rate. Dec 31, 2010 Dec 31, 2009 $’000 $’000 Loss before income taxes (115,870) (223,542)Canadian federal and provincial income tax rates 28.50% 30.00%Expected income tax recovery (33,023) (67,063)Permanent differences, including share based compensation and foreign exchange 9,323 (9,606)Effect of tax rate changes 39,052 (202,201)Disposal of assets 143,967 - Change in valuation allowance (149,997) 92,798 Differences in tax rates in foreign jurisdictions (10,759) (478)Expiration and restriction of losses 57,134 - Withholding taxes 11,553 - Other 6,582 1,086 73,832 (185,464)


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14 INCOME TAXES (CONTINUED)

Future income tax The significant components of the Corporation’s future income tax assets and liabilities are as follows:

Dec 31, 2010

Dec 31, 2009 $’000 $’000 Future income tax assets Mineral interests, plant & equipment 26,901 137,003 Other 43,005 85,642 Tax losses 77,904 90,090 Future income tax assets before valuation allowance 147,810 312,735 Valuation allowance (107,844) (256,403)Future income tax assets, net of valuation allowance 39,966 56,332 Future income tax liabilities Mineral interests, plant & equipment 415,895 235,949 Future income tax liabilities 415,895 235,949 Net current portion of future income tax assets 820 1,070 Net non current portion of future income tax assets 515 - Net non current portion of future income tax liabilities (377,264) (180,687)Net future income tax liability (375,929) (179,617)

Tax loss carry-forwards Canada and provincial tax jurisdictions At December 31, 2010, the Corporation had Canadian federal and provincial net operating loss carry-forwards totaling $129.5 million with a tax value of $32.7 million that expire from 2011 through 2030. A valuation allowance of $32.7 million has been applied against the future tax asset representing these losses. United States federal and state tax jurisdictions At December 31, 2010, the Corporation had United States federal and state net operating loss carry-forwards totaling $77.8 million with a tax value of $27.6 million that expire from 2021 through 2030. A valuation allowance of $7.5 million has been applied against the future tax asset representing these losses.

Kazakhstan tax jurisdictions At December 31, 2010, the Corporation had Kazakhstan net operating loss carry-forwards totaling $29.3 million with a tax value of $5.8 million that expire from 2011 through 2013. A valuation allowance of $5.8 million has been applied against the future tax asset representing these losses. Australia tax jurisdictions At December 31, 2010, the Corporation had Australian net operating loss carry-forwards totaling $33.1 million with a tax value of $9.9 million with no expiry. A valuation allowance of $9.9 million has been applied against the future tax asset representing these losses.


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15 OTHER LIABILITIES

Dec 31, 2010 Dec 31, 2009 $'000 $'000 Current Promissory note - 90,211 Contingent payment (note 3.4) - 20,000 Unfavorable contracts 11,354 11,655 Uranium concentrates loan 12,500 8,900 Other 1,421 1,277 25,275 132,043 Non-current Due to the Republic of Kazakhstan 2,734 1,696 Other 431 181 3,165 1,877

Uranium concentrates loan On September 22, 2008, the Corporation entered into a loan agreement to borrow 200,000 pounds of U3O8 to be repaid on September 30, 2010. In July 2010, the maturity of the loan was extended to September 30, 2011. Under the loan agreement, loan fees of 3.5% per annum are payable based on the value of the borrowed U3O8. The loan was classified as a financial liability held for trading and is recorded at fair value. The Corporation deposited $8.6 million as cash collateral for the letter of credit that was issued as a guarantee for the loan during the period and this is presented as restricted cash on the consolidated balance sheets. Unfavourable contract The Corporation acquired an unfavorable contract as part of the Zarechnoye acquisition during 2010, which is carried at fair value on acquisition date (note 3.1). The Corporation also acquired an unfavorable contract as part of the Karatau acquisition during 2009, which is carried at fair value (note 3.4).

The Corporation realized $10.6 million of the fair value in revenue during 2010 for deliveries into the unfavorable contracts. A fair value adjustment of $1.3 million was recorded in the statement of operations for the change in the uranium price during 2010.

Promissory note During 2009, the Corporation issued a $90 million promissory note as part of the consideration for the purchase of Karatau (note 3.4). The promissory note was due not later than 12 months from closing and was repaid on January 18, 2010.


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16 SHARE CAPITAL

Number of Value of Issued and outstanding common shares shares shares $'000 Common shares on January 1, 2009 469,612,956 3,522,824 Exercise of stock options 600,184 6,599 Exercise of restricted shares 44,836 257 Contingent shares issued 165,600 388 Karatau acquisition share issued 117,000,000 293,229 Common shares on December 31, 2009 587,423,576 3,823,297 Exercise of stock options 13,073,222 65,494 Exercise of restricted shares 429,159 2,335 ARMZ private placement (note 3.1) 178,127,165 602,708 Acquisition of Akbastau and Zarechnoye (note 3.1) Conversion of 2010 Debenture

178,127,164 3,750

831,578

14

Issued and outstanding common shares at December 31, 2010 957,184,036 5,325,426

17 CONTRIBUTED SURPLUS The following table details the movement of contributed surplus during the year: Restricted Warrants shares Options Total $'000 $'000 $'000 $'000 As at January 1, 2009 13,912 1,606 116,084 131,602 Stock options issued and vested - - 7,027 7,027 Stock options exercised - - (5,369) (5,369)Restricted shares issued and vested - 475 - 475 Restricted shares exercised - (257) - (257)

As at December 31, 2009 13,912 1,824 117,742 133,478 Stock options issued and vested - - 13,391 13,391 Stock options exercised - - (30,184) (30,184)Restricted shares issued and vested - 511 - 511 Restricted shares exercised - (2,335) - (2,335)

As at December 31, 2010 13,912 - 100,949 114,861


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17 CONTRIBUTED SURPLUS (CONTINUED) Assumptions The fair value of stock options and restricted shares used to calculate the compensation expense was estimated using the Black-Scholes option pricing model with the following assumptions:

December 31, 2010 December 31, 2009 Risk free interest rate 2.06% - 2.79% 1.7% - 2.82% Expected dividend yield 0% 0% Expected volatility of the Uranium One's share price 70% - 94% 98% - 115% Expected life 5 years 5 years Warrants The Corporation has no outstanding warrants at December 31, 2010 (2009: nil). Stock options The following is a summary of options granted under the stock-based compensation plan: Weighted Number of average options exercise price Cdn $ Outstanding options as at January 1, 2009 15,858,517 7.82 Granted options 6,292,351 2.23 Exercised options (600,184) 2.25 Forfeitures of stock options (2,986,524) 6.89 Outstanding options as at December 31, 2009 18,564,160 6.26 Granted options 10,526,100 3.89 Exercised options (13,073,222) 2.73 Forfeitures of stock options (2,335,962) 8.18 Outstanding options as at December 31, 2010 13,681,076 7.49 The stock option compensation expense for the year ended December 31, 2010 was $13.4 million, which includes the expense recognized for the accelerated vesting of options due to the change of control triggered by the ARMZ transaction (note 3.1). The stock option compensation expense for the year ended December 31, 2009 was $7.0 million. As at December 31, 2010, the aggregate unexpensed fair value of unvested stock options granted was $16.5 million. The fair value of options granted during the year was $25.8 million ($2.45 per option) (2009: $8.2 million, $1.31 per option). The following table summarizes stock options outstanding at December 31, 2010: Options outstanding Options exercisable

Range of exercise prices

Number outstanding

as at December

31, 2010

Weighted average

remaining life

Weighted average exercise

price

Number exercisable

as at December

31, 2010

Weighted average

remaining life

Weighted average

exercise price Cdn $ (years) Cdn $ (years) Cdn $ 0.78 to 2.74 6,166 3.21 2.22 6,166 3.21 2.22 2.75 to 4.76 6,496,632 4.97 4.66 469,032 4.74 3.95 4.77 to 7.79 1,563,455 1.98 7.28 1,563,455 1.98 7.28 7.80 to 9.90 3,012,950 4.71 8.43 3,012,950 4.71 8.43 9.91 to 12.93 1,448,908 1.60 12.12 1,448,908 1.60 12.12 12.94 to 15.63 441,715 1.47 13.93 441,715 1.47 13.93 15.64 to 16.59 711,250 1.33 16.51 711,250 1.33 16.51

13,681,076 3.91 7.49 7,653,476 3.06 9.68


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17 CONTRIBUTED SURPLUS (CONTINUED) Restricted share rights The following is a summary of Uranium One's restricted shares issued under the Restricted Share Plan:

Number of

restricted shares Balance at January 1, 2009 623,495 Exercised during the year (44,836)Expired (127,500)Balance at December 31, 2009 451,159 Exercised during the year (429,159)Expired (22,000)Balance at December 31, 2010 - The restricted share rights expense for the year ended December 31, 2010 was $0.5 million which includes the expense recognized for the accelerated vesting of restricted share rights due to the change of control, triggered by the ARMZ transaction (note 3.1). The restricted share rights expense for the year ended December 31, 2009 was $0.5 million. As at December 31, 2010 the aggregate unexpensed fair value of unvested restricted share rights granted amounted to $Nil (2009: $0.6 million). No restricted shares were granted during 2010 or 2009. Contingently issuable shares Under the terms of the acquisition agreement for the Kyzylkum JV interest, Uranium One is obligated to issue 6,964,200 common shares of Uranium One upon commencement of commercial production from Kyzylkum. The Corporation assumed all of the obligations of Uranium One Americas, Inc. and its subsidiaries arising under certain option and joint venture agreements with third parties. At December 31, 2010 Uranium One has reserved a total of 57,200 common shares for issuance pursuant to the assumed obligations under contingent share rights agreements. No contingent shares were issued during the period and no contingent share rights have lapsed during the period.


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18 GENERAL AND ADMINISTRATIVE

Year ended Dec 31, 2010 Dec 31, 2009 $'000 $'000General and administrative 33,588 30,401 Restructuring cost 5,520 -Stock option and restricted share expense 13,902 7,502

53,010 37,903

19 INTEREST AND OTHER

Year ended Dec 31, 2010 Dec 31, 2009 $'000 $'000Interest income 6,096 4,885 Interest paid (3,806) (1,155)Convertible debenture interest (note 12) (42,729) (8,739)Gain on redemption of debenture (note 12) 1,160 - Credit facility charges (1,924) (3,720)Interest and costs incurred on uranium concentrates loan (306) (351)Costs incurred in relation to letters of credit (448) (65)

(41,957) (9,145)

20 FOREIGN EXCHANGE (LOSS) / GAIN

A summary of the foreign exchange (loss) / gain by item is as follows: Year ended Dec 31, 2010 Dec 31, 2009 $'000 $'000Unrealized foreign exchange (loss) / gain on future income tax liabilities (823) 63,771 Unrealized foreign exchange loss on other items (8,925) (7,821)Realized foreign exchange (loss) / gain on cash and other items (3,383) 3,077

(13,131) 59,027

The National bank of Kazakhstan announced on February 4, 2009 that it has ceased to maintain the Kazakhstan tenge (“tenge”) within the previous range of 117-123 tenge to the US dollar and suggested the rate be set within a range of 145-155 tenge to the US dollar. The tenge closed at 148.36 tenge to the US dollar on December 31, 2009. The resulting devaluation affected the translated values of monetary assets and liabilities, resulting in a $63.8 million gain on future income tax liabilities in 2009.


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21 CASH FLOW INFORMATION

Year ended Dec 31, 2010 Dec 31, 2009 $'000 $'000

Changes in non-cash working capital excluding business combinations:

(Increase) / decrease accounts and other receivables (47,773) 6,613

Decrease in prepaid expenses and other 2,086 10,379

Increase in inventories (2,538) (9,486)

Decrease in accounts payable and accrued liabilities (9,369) (7,949)

Increase / (decrease) in income taxes payable 11,625 (9,215)

(45,969) (9,658)

Supplemental cash flow information

Cash interest paid 32,816 8,399 Cash tax paid 37,114 30,310

22 BASIC AND DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING

Year ended

Dec 31, 2010 Dec 31, 2009 Basic weighted-average number of shares outstanding ('000) 611,562 475,583 Effect of dilutive securities: -convertible debentures - - -restricted shares - - -stock options - - -warrants - -

Diluted weighted-average number of shares outstanding 611,562 475,583

For the years ended December 31, 2010 and 2009, all convertible debentures, stock options, warrants and restricted shares were not included in the dilutive weighted average number of shares outstanding as they were anti-dilutive.


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23 CAPITAL DISCLOSURES The Corporation’s objectives when managing capital are to: (i) Maintain a flexible capital structure which optimizes the cost of capital at acceptable risk; (ii) Continue the development and exploration of its mineral properties; and (iii) Support any expansion plans. In the management of capital, the Corporation includes shareholders’ equity, long term debt, joint venture debt, convertible debentures, cash and the current portion of loans to joint ventures. The Corporation manages its capital structure and makes adjustments to it when the economic and risk conditions of the underlying assets require change. In order to maintain or adjust the capital structure, the Corporation may issue new shares, issue new debt, and/or issue new debt to replace existing debt with different characteristics. The Corporation has in place a planning and budgeting process to help determine the funds required to ensure the Corporation has the appropriate liquidity to meet its operating and growth objectives. The Corporation monitors the following ratios in this respect: total debt to total capitalization and net debt to total capitalization. For years ended Dec 31, 2010 Dec 31, 2009 $'000 $'000 Total liabilities (excluding future income tax liabilities) 655,302 487,520 Net liabilities (total liabilities less cash, restricted cash and receivables) 227,515 296,650 Total capitalization (total shareholders' equity) 2,336,491 1,480,900 Total liabilities as a percentage of shareholders’ equity 28% 33% Net liabilities as a percentage of shareholders’ equity 10% 20%

24 FINANCIAL INSTRUMENTS

As at December 31, 2010: (in $’000) Convertible debentures 2010 Debenture 2006 Debenture Liability component 206,298 151,402 Equity component 44,014 46,480 250,312 197,882 Fair value of convertible debentures 439,312 153,279

As at December 31, 2009: (in $’000) Convertible debentures 2006 Debenture Liability component 140,862 Equity component 46,480 187,342 Fair value of convertible debentures 131,668 The Corporation’s activities expose it to a variety of financial risks, including the effects of changes in debt and prices of equity instruments held, foreign currency exchange rates, interest rates, and commodity prices. The Corporation continuously monitors its exposure to risk. The risk management carried out by the Corporation is approved by the Board of Directors. The following section describes the type of significant risks that the Corporation is exposed to and its objectives and policies for managing those risk exposures.


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24 FINANCIAL INSTRUMENTS (CONTINUED) (i) Designation and valuation of financial instruments

The following table summarizes the designation and fair value hierarchy under which the Corporation’s financial instruments are valued, other than trade and other receivables and payables. Level 1 of the fair value hierarchy includes unadjusted quoted prices in active markets for identical assets or

liabilities; Level 2 of the hierarchy includes inputs that are observable for the asset or liability, either directly or indirectly; and Level 3 includes inputs for the asset or liability that are not based on observable market data. The Corporation

does not have any financial instruments included in Level 3.


Cash and cash

equivalents Loans and

receivables

Available for sale

securities Total Designation of financial assets Notes $’000 $’000 $’000 $’000 Cash and cash equivalents 4 315,766 - - 315,766 Restricted cash 15 - 8,577 - 8,577 Loans to joint ventures 7.2 - 28,722 - 28,722 Available for sale securities 9 - - 319 319 Asset retirement fund 9 - 37,809 - 37,809 Acquired receivables 9 - 20,000 - 20,000 Total 315,766 95,108 319 411,193


Cash and cash

equivalents Loans and

receivables

Available for sale

securities Total Designation of financial assets Notes $’000 $’000 $’000 $’000 Cash and cash equivalents 4 148,465 - - 148,465 Loans to joint ventures 7.2 - 29,250 - 29,250 Available for sale securities 9 - - 9,287 9,287 Asset retirement fund 9 - 13,500 - 13,500 Total 148,465 42,750 9,287 200,502


Held at fair value through

profit and loss

Financial liabilities at

amortized cost

Total Designation of financial liabilities Notes $’000 $’000 $’000 Joint venture debt 7.1 - 146,281 146,281 Convertible debenture 12 - 357,700 357,700 Uranium concentrates loan 15 12,500 - 12,500 Unfavorable contracts 15 - 11,354 11,354 Due to the Republic of Kazakhstan 15 - 2,734 2,734 Other 15 - 1,852 1,852 Total 12,500 519,921 532,421


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24 FINANCIAL INSTRUMENTS (CONTINUED)


Held at fair value through

profit and loss

Financial liabilities at

amortized cost

Total Designation of financial liabilities Notes $’000 $’000 $’000 Long term debt 11 - 63,579 63,579 Joint venture debt 7.1 - 52,574 52,574 Convertible debenture 12 - 140,862 140,862 Uranium concentrates loan 15 8,900 - 8,900 Promissory note 15 - 90,211 90,211 Contingent payment 15 - 20,000 20,000 Unfavorable contracts 15 - 11,655 11,655 Due to the Republic of Kazakhstan 15 - 1,696 1,696 Other 15 - 1,458 1,458 Total 8,900 382,035 390,935

As at December 31, 2010 Fair value hierarchy of financial assets and liabilities measured at fair value

Total Level 1 Level 2 Level 3 $’000 $’000 $’000 $’000

Available for sale securities 319 319 - - Uranium concentrates loan (12,500) - (12,500) - Total (12,181) 319 (12,500) -

As at December 31, 2009 Fair value hierarchy of financial assets and liabilities measured at fair value

Total Level 1 Level 2 Level 3 $’000 $’000 $’000 $’000

Available for sale securities – UEC shares 8,740 - 8,740 - Available for sale securities - other 547 547 - - Uranium concentrates loan (8,900) - (8,900) - Total 387 547 (160) -

(ii) Foreign exchange risk

The foreign exchange risk relates to the risk that the value of financial commitments, recognized assets or liabilities will fluctuate due to changes in foreign currency rates. The Corporation is primarily exposed to foreign currency risk through the following assets and liabilities denominated in currencies other than US dollars:

Financial assets and liabilities Non-financial assets

and liabilities

Cash andcash

equivalentsAccounts

receivable

Accounts payable and

accrued liabilities

Convertible debentures

Mineral interests

plant and equipment

(1)

Future income tax

liabilities

December 31, 2010 $'000 $'000 $'000 $'000 $'000 $'000Canadian dollar 5,015 2,281 13,938 357,700 - -Australian dollar 16,637 1,633 9,054 - 12,625 -Kazakhstan tenge

29,708 74,462 21,771 - - 331,660

Euro 1,124 - 216 - - - 52,484 78,376 44,979 357,700 12,625 331,660 (1) Only includes mineral interests, plant and equipment of self-sustaining operations.


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24 FINANCIAL INSTRUMENTS (CONTINUED)

Financial assets and liabilities Non-financial assets and

liabilities December 31, 2009

Cash andcash

equivalentsAccounts

receivable

Accounts payable and

accrued liabilities

$'000

Convertible debentures

Mineral interest

plant and equipment

(1)

Future income tax

liabilities

$'000 $'000 $'000 $'000 $'000Canadian dollar 170 2,539 6,186 140,862 - -Australian dollar 22,071 1,571 4,369 - 78,039 4,074Kazakhstan tenge

3,496 28,981 37,761 - - 142,704

Euro 41 - 9 - - -South African rand

674 - - - - -

26,452 33,091 48,325 140,862 78,039 146,778 (1) Only includes mineral interests, plant and equipment of self-sustaining operations.

The following table shows the effect on earnings and other comprehensive income after tax as at December 31, 2010 of a 10% appreciation or depreciation in the foreign currencies against the US dollar on the above-mentioned financial and non-financial assets and liabilities of the Corporation.

Other comprehensive Net income Earnings A 10% appreciation in all foreign currencies against the US dollar, with all other variables held constant.

(1,431) (17,095)

A 10% depreciation in exchange rates would have the exact opposite effect on other comprehensive income and net earnings.

(iii) Credit risk

Credit risk is primarily associated with trade receivables, and to a lesser extent, cash equivalents, restricted cash, loans to joint ventures, available for sales securities and asset retirement funds. The Corporation closely monitors its financial assets and does not have any significant concentration of credit risk. The Corporation sells its products exclusively to organizations with strong credit ratings. Cash and cash equivalents are held through large international financial institutions. Cash and cash equivalents are comprised of financial instruments issued by international financial institutions and companies with high investment-grade ratings. These investments mature at various dates. The Corporation's maximum exposure to credit risk at the balance sheet date is as follows:

Dec 31, 2010 Dec 31, 2009 Notes $'000 $'000 Accounts receivable 5 103,444 42,405 Cash and cash equivalents 4 315,766 148,465 Restricted cash 15 8,577 - Loans to joint ventures 7.2 28,722 29,250 Available for sale securities 9 319 9,287 Asset retirement fund 9 37,809 13,500 Acquired receivables 9 20,000 -

514,637 242,907


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24 FINANCIAL INSTRUMENTS (CONTINUED) (iv) Liquidity risk

The Corporation has a cash forecast and budgeting process in place to assist with the determination of funds required to support the Corporation's operating requirements on an ongoing basis and its expansion plans. The Corporation manages liquidity risk through the management of its capital structure and financial leverage as outlined in note 23. The following table summarizes the contractual maturities of the Corporation's significant financial liabilities and capital commitments, including contractual obligations: Less than 1 to 3 4 to 5 After 5 1 year years Years years Total Lease obligations 1,533 2,547 1,348 1,124 6,552 Joint venture debt 60,131 59,056 18,834 8,260 146,281 Kyzylkum funding 24,000 12,000 9,000 - 45,000 Capital commitments 16,128 900 - - 17,028 Asset retirement obligations - 927 6,360 18,942 26,229 Accounts payable and accrued liabilities 82,838 - - - 82,838 Uranium concentrates loan (note 15) 12,500 - - - 12,500 Convertible debentures 155,168 - 259,934 - 415,102 Other 463 925 925 1,284 3,597 352,761 76,355 296,401 29,610 755,127 The convertible debentures are redeemable in cash or shares, and may not result in a cash outflow. The uranium concentrates loan requires settlement with uranium concentrates, and may not result in a cash outflow.

The Corporation has interests in joint ventures, and is responsible for partial funding of these joint ventures pursuant to the terms of the joint venture agreements. The Corporation does not bear direct liquidity risk for liquidity of these joint ventures, except for the risk relating to the repayment to loans made to the joint ventures. The Corporation can only utilize cash generated by the joint ventures when the joint ventures pay dividends. On January 19, 2009, in connection with the construction of a sulphuric acid plant by SKZ-U, in which the Corporation subsequently acquired a 19% joint venture interest, the Corporation provided a guarantee to a third party in respect of 19% of the construction cost of the plant, limited to a maximum amount of $7.6 million (Euro 5.5 million). The Corporation is exposed to liquidity risk from fluctuating commodity prices when the 200,000 pounds of uranium concentrates received as part of a uranium loan transaction are utilized against contracts. As the market value of the liability to deliver the uranium concentrates fluctuates based on commodity prices, so will the market value of the uranium concentrates held by the Corporation. The effect that market fluctuations in the uranium price have on the asset and liability will offset, except in circumstances where the borrowed uranium has been utilized to make a delivery into a contract. In these circumstances, the Corporation will recognize a net fair market value adjustment. A 10% change in commodity prices, should the Corporation be exposed, would impact the Corporation's liquidity risk due to the uranium concentrates loan (note 15), as follows: Dec 31, 2010 Dec 31, 2009 $'000 $'000 A 10% appreciation in commodity prices, with all other variables held constant:

- current - - - maximum exposure 1,250 890 A 10% depreciation in the commodity price would have the exact opposite effect on net earnings.


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24 FINANCIAL INSTRUMENTS (CONTINUED) (v) Interest rate risk

The Corporation is exposed to interest rate risk on its outstanding borrowings and short-term investments. The outstanding interest-bearing borrowings as at December 31, 2010 are the loan facilities obtained by Akbastau, Karatau, Kyzylkum, SKZ-U and Zarechnoye (note 7.1) which bear interest at floating rates, and the convertible debentures, with fixed interest rates.

A 100 basis point change in the interest rate would impact the Corporation's net earnings as follows: Dec 31, 2010 Dec 31, 2009 $'000 $'000 A 100 basis point appreciation in interest rates, with all other variables held constant 1,336 1,659 A 100 basis point depreciation in the interest rate would have the exact opposite effect on net earnings.

(vi) Commodity price risk

The Corporation is exposed to price risk with respect to commodity prices. The Corporation does not hedge its exposure to price risk, other than having market related pricing structures in the long-term sales contracts which the Corporation has entered into. Increases in uranium prices would have a positive impact on profitability given that the majority of the Corporation's sales contracts are priced based on market values for uranium.


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25 SEGMENTED INFORMATION The Corporation's reportable operating segments are summarized in the table below:

For the year ended December 31, 2010: (in $'000)

Country Revenues Operating expenses

Depreciation and

depletion Exploration

expense

Net earnings/ (loss) from continuing operations

Capital expenditure

$’000 $’000 $’000 $’000 $’000 $’000

Akbastau Mine Kazakhstan - - - - (1,107) - Akdala Mine Kazakhstan 93,870 (23,663) (19,682) - 33,853 2,875 South Inkai Mine Kazakhstan 121,263 (46,072) (30,356) - 17,586 20,543Karatau Mine Kazakhstan 105,430 (19,939) (43,405) - 8,859 14,505Zarechnoye Mine Kazakhstan 6,287 (2,345) (3,940) - 217 -Kharasan Project Kazakhstan - - - - (4,126) 9,042United States development projects

United States - - - - 294 26,941


United States - - - (3,931) (2,687) -


United States - - - - (1,221) 18

Honeymoon Project Australia - - - (1,312) (110,830) 33,673Corporate and other - - - (206) (130,540) 824

Total 326,850 (92,019) (97,383) (5,449) (189,702) 108,421

For the year ended December 31, 2009: (in $'000)

Country Revenues Operating expenses

Depreciation and

depletion Exploration

expense

Net earnings/

(loss) from continuing operations

Capital expenditure

$’000 $’000 $’000 $’000 $’000 $’000

Akdala Mine Kazakhstan 74,085 (19,113) (16,699) - 47,228 2,345 South Inkai Mine Kazakhstan 67,197 (28,778) (22,131) - 183,440 17,165Karatau Mine Kazakhstan 10,710 (3,130) (7,553) - (1,663) -Kharasan Project Kazakhstan - - - - 55,960 8,158United States development projects

United States

- - - - (8,651) 11,780


United States

- - - (6,749) (23,205) -


United States

- - - - (923) 84

Honeymoon Project Australia - - - (880) (798) 25,447Corporate and other - - - (1,201) (289,466) 642

Total 151,992 (51,021) (46,383) (8,830) (38,078) 65,621l


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25 SEGMENTED INFORMATION (CONTINUED) As at December 31, 2010: (in $'000)

Mineral interest Future plant and Total income tax Total Country equipment assets liabilities liabilities $’000 $’000 $’000 $’000

Akbastau Mine Kazakhstan 734,804 754,777 116,581 154,779 Akdala Mine Kazakhstan 162,571 209,093 20,001 26,559 South Inkai Mine Kazakhstan 463,223 530,477 49,011 60,324 Karatau Mine Kazakhstan 518,828 569,610 94,734 149,632 Zarechnoye Mine Kazakhstan 250,562 272,139 35,392 97,927 Kharasan Project Kazakhstan 218,109 236,221 15,941 91,352 United States development projects United States 203,300 225,261 - 4,201 United States exploration projects United States 116,816 117,761 35,415 35,449 United States conventional mining projects

United States 39,933 48,164 10,189 13,547

Honeymoon Project Australia 12,625 23,232 - 8,606 Corporate and other 9,148 382,322 - 390,190

Total 2,729,919 3,369,057 377,264 1,032,566 As at December 31, 2009: (in $'000)

Mineral interest Future plant and Total income tax Total Country Equipment assets liabilities Liabilities $’000 $’000 $’000 $’000

Akdala Mine Kazakhstan 179,706 214,121 18,231 24,004 South Inkai Mine Kazakhstan 478,419 522,574 37,613 49,017 Karatau Mine Kazakhstan 510,494 531,508 74,637 141,192 Kharasan Project Kazakhstan 208,830 217,800 12,223 66,433 United States development projects United States 121,526 122,040 - 154 United States exploration projects United States 115,398 116,148 28,711 28,742 United States conventional mining projects

United States 39,910 47,324 5,198 8,226

Honeymoon Project Australia 78,039 85,380 4,074 7,389 Corporate and other 15,962 240,752 - 330,106

Total (1) 1,748,284 2,097,647 180,687 655,263

(1) Excludes assets held for sale and discontinued operations


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26 RELATED PARTY TRANSACTIONS

Transactions with related parties

Party Relationship

Dec 31, 2010 $'000 Joint venture loans Effective Energy Subsidiary of parent company 37,802

Other assets ARMZ Parent company 20,000

The Corporation has sales contracts and off-take agreements with related parties. These transactions have market related terms and pricing, except for a Zarechnoye contract acquired as part of the ARMZ transaction. The Corporation received $11.6 million in cash on acquisition to compensate for the unfavourable contract.

27 CONTINGENCIES

Due to the size, complexity and nature of the Corporation’s operations, various legal and tax matters arise in the ordinary course of business. The Corporation accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, these matters will not have a material effect on the consolidated financial statements of the Corporation. Betpak Dala acquisition

As part of the original acquisition of the interest in Betpak Dala on November 7, 2005, it was agreed that the Corporation is liable for a bonus payment payable in cash based on uranium reserves discovered on the South Inkai property in excess of 74,000 tonnes. The payment is based on the Corporation’s share of U3O8 in excess of 74,000 tonnes times the average spot price of U3O8 times 6.25%. This payment is to be calculated at the end of 2011 and each year thereafter, and paid 60 days after the end of the year in which a payment is due. No payment was due at December 31, 2010 (December 31, 2009 - $Nil). As security for the bonus payment, the Corporation has pledged its participatory interest in Betpak Dala (including the shares of a subsidiary) and its share of uranium products produced by Betpak Dala.

Kyzylkum acquisition

As part of the original acquisition of the interest in Kyzylkum on November 7, 2005, it was agreed that the Corporation is liable for a bonus payment, which is due upon commencement of commercial production. The seller initially had an option, exercisable until October 31, 2006, to elect to receive this bonus payment as a cash payment of $24 million or receive 15,476,000 shares of UrAsia Energy. The seller elected under the terms of the arrangement, to receive 15,476,000 shares of UrAsia Energy upon commencement of commercial production. The 15,476,000-bonus payment shares of UrAsia Energy have been converted to 6,964,200 Uranium One shares as part of the UrAsia Energy acquisition. The fair value of the contingently issuable shares has not been included as part of the purchase price for Kyzylkum as commencement of commercial production could not be reasonably determined.

An additional bonus payment of 30% of 12.5% (being an effective 3.75%) of the weighted average spot price of U3O8 will be paid on incremental reserves in excess of 55,000 tonnes of U3O8 discovered during each fiscal year with payment beginning within 60 days of the end of the 2008 calendar year. No payment was due at December 31, 2010 (December 31, 2009 - $nil). Karatau acquisition Contingencies relating to the Karatau acquisition are described in note 3.4.

Uranium One Americas, Inc. (previously Energy Metals Corporation) acquisition

Contingencies relates to the Uranium One Americas, Inc (previously Energy Metals Corporation) are described in note 17.

management’s discussion and analysis - annual reportresources limited (“mantra”)....

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