Second Long Term Uranium Sales Contract Signed

Conclusion: We re-iterate our BUY rating for Ur Energy and are increasing our 12-month share price target to C$2.65 from C$2.40 based on a stronger US$ assumption and moving our 10% DCF model forward by one year. The estimated sales prices of this contract of just over US$60/lb coming in just below of our near term assumptions.

Ur Energy has entered into another long term uranium sales contract with a North American based utility. We view this as positive news for three reasons: 1) another stamp of approval from an end user; 2) a statement of confidence that Ur Energy expects to be in production next year; and, 3) contract pricing is helping to de-risk this project. Ur Energy continues to execute its plan of placing a portion of its scheduled uranium production into long term contracts with the help of Jim Cornell and NuCore Energy LLC., a nuclear fuels marketing expert with over 24years experience. As we move towards mid-2012 we believe that investors will be eagerly awaiting the BLM permit, which along with the beginning of construction, could be the major milestones of the year for Ur Energy.

Long term contract signed. As typical for uranium sales contracts, and particularly for those made with junior companies, most of the details are kept confidential. What is known is that this sales agreement deal is for 200,000 lbs per year beginning in 2013. The duration of this deal is unknown. The average delivery price is consistent with the Trade Tech long term price of $61.00/lb U3O8 (versus a spot price of US$52.50/lb). This is slightly below our near term price estimates of US$65 to US$75/lb U3O8 over the next three years.

Another stamp of approval. This is the second North American based utility to sign a contract with Ur Energy and we assume that this end user has completed its share of due diligence on the company and the project. Another contract was signed in March 2011, and other than the three year duration for that contract, its details are also unknown.

Ur Energy signals its conviction. Setting up delivery dates is a statement of confidence for Ur Energy – that it could fulfill sales due beginning next year as it expects to be producing by Q2-13. We forecast URE to produce just over 600,000|bs of U3O8 in2013 at US$25/lb U3O8.

De-risking Lost Creek. We believe that the financial implications of this agreement are positive. The commodity price risk decreases and future revenue streams for Ur Energy are more easily predicted which could help guide the company’s decision making. Assuming costs in the $20-$25/lb range, sales of under half of its production could cover all costs and help protect this company should uranium prices turn south.

lnvestment highlights – potential near term production

Potential near term production. Ur Energy has two ISR amenable projects in Lost Creek & Lost Soldier and is proposing a plant capable of 2MM lbs of annual production. We expect production at 1 MM lbs annually to begin in 2013 followinS -6-9 months of construction. Lost Soldier production may follow in perhaps two years.

Permitting nearing completion. The single remaining outstanding of the four main ISR permits required includes just the completion of the US Bureau of Land Management (BLM) Environmental Impact Statement (EIS). Final approval from the BLM is expected to be received in the summer ol 2012. This Permit to Mine approval from Wyoming DEQ follows on the heels of the issuance of its final NRC Radioactive Materials License in August. The water disposal well permit, also known as the Underground Injection Control Permit was received in the early stages of permitting.

Capital and operating costs expected to be low. ISR mines are inherently cheap to build and operate. An updated PA for Lost Creek project issued earlier this year estimated remaining capital costs of US$35 MM, operating costs of around US$25/lb U308.

Two sales agreements in hand. URE entered into its first long-term sales agreement in March 2011 with one of the largest producers and transporters of energy in the US, and has now followed this up with another sales agreement. We assume production and sales in 2013.

Management and technical teams are experienced. The URE team has extensive depth and plenty of recent ISR operations experience in Wyoming. Many have permitted, constructed, and operated ISR mines.

Considerable upside potential. Another 193km of roll front potential is located immediately adjacent to Lost Creek at Lost Creek South. This has been interpreted from past drilling but further exploration is required to adequately evaluate. We see tremendous potential to increase resources in the immediate mine area.

This is an excerpt from a PA from Dundee Capital Markets on Jan 23, 2012.