Ur-Energy Inc.

(an Exploration Stage Company)

Headquartered in Littleton, Colorado

Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

Ur-Energy Inc.

(an Exploration Stage Company)

Unaudited Interim Consolidated Balance Sheets

(expressed in Canadian dollars)

	June 30, 2012			December 31, 2011
	$			$
Assets
Current assets
Cash and cash equivalents (note 3)		26,863,121			16,169,479
Short-term investments (note 3)		8,858,627			6,927,523
Marketable securities		7,125			13,125
Amounts receivable		10,811			16,018
Restricted cash (note 4)		287,500			801,836
Prepaid expenses		324,057			107,481
		36,351,241			24,035,462
Restricted cash (note 4)		1,781,232			3,518,347
Mineral properties (note 5)		33,331,471			32,107,341
Capital assets (note 6)		4,214,396			3,534,309
Equity investment (note 7)		2,624,576			2,654,673
		41,951,675			41,814,670
		78,302,916			65,850,132
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities (note 8)		792,448			1,045,236
Asset retirement obligation (note 9)		564,830			561,964
		1,357,278			1,607,200
Shareholders' equity (note 10)
Share Capital
Class A preferred shares, without par value, unlimited shares authorized. No shares issued and outstanding		-			-
Common shares, without par value, unlimited shares authorized. Shares issued and outstanding: 121,075,431 at June 30, 2012 and 103,675,444 at December 31, 2011		177,063,521			160,432,843
Warrants		44,271			44,271
Contributed surplus		14,097,979			13,091,172
Deficit		(114,260,133	)		(109,325,354	)
		76,945,638			64,242,932
		78,302,916			65,850,132

The accompanying notes are an integral part of these interim consolidated financial statements

Approved by the Board of Directors

(signed)  /s/ Jeffery T. Klenda, Director (signed)   /s/ Thomas Parker, Director

Page 1

Ur-Energy Inc.

(an Exploration Stage Company)

Unaudited Interim Consolidated Statements of Operations, Comprehensive Loss and Deficit

(expressed in Canadian dollars except for share data)

	Three Months			Three Months			Six Months			Six Months			March 22, 2004
	Ended			Ended			Ended			Ended			Through
	June 30,			June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011			2012
	$			$			$			$			$
Expenses
Exploration and evaluation		838,468			1,130,659			1,651,846			2,291,986			56,162,944
Development		672,452			700,935			1,039,108			1,455,387			25,809,641
General and administrative		1,487,515			2,862,777			3,324,324			4,768,905			43,060,025
Write-off of mineral properties		-			-			-			-			803,336
		(2,998,435	)		(4,694,371	)		(6,015,278	)		(8,516,278	)		(125,835,946	)
Interest income		91,637			65,597			155,160			136,803			9,733,261
Loss on equity investment (note 7)		(2,327	)		(6,629	)		(34,151	)		(26,725	)		(392,379	)
Foreign exchange gain (loss)		380,428			98,947			(4,830	)		(685,250	)		683,117
Other income (loss) (note 5)		(11,625	)		(9,913	)		964,320			(61,293	)		1,847,354
Loss before income taxes		(2,540,322	)		(4,546,369	)		(4,934,779	)		(9,152,743	)		(113,964,593	)
Recovery of future income taxes		-			-			-			-			(295,540	)
Net loss and comprehensive loss for the period		(2,540,322	)		(4,546,369	)		(4,934,779	)		(9,152,743	)		(114,260,133	)
Deficit - Beginning of period		(111,719,811	)		(97,674,852	)		(109,325,354	)		(93,068,478	)		-
Deficit - End of period		(114,260,133	)		(102,221,221	)		(114,260,133	)		(102,221,221	)		(114,260,133	)
Loss per common share:
Basic and diluted		(0.02	)		(0.05	)		(0.04	)		(0.09	)
Weighted average number of common shares outstanding:
Basic and diluted		121,073,896			103,533,807			115,911,195			103,269,924

The accompanying notes are an integral part of these interim consolidated financial statements

Page 2

Ur-Energy Inc.

(an Exploration Stage Company)

Unaudited Interim Consolidated Statements of Shareholders’ Equity

(expressed in Canadian dollars except for share data)

	Capital Stock						Contributed						Shareholders'
	Shares		Amount		Warrants		Surplus			Deficit			Equity
	#		$		$		$			$			$
Balance, December 31, 2011		103,675,444		160,432,843		44,271		13,091,172			(109,325,354	)		64,242,932
Exercise of stock options		29,628		40,705		-		(14,245	)		-			26,460
Common shares issued for cash, net of issue costs		17,250,000		16,244,543		-		-			-			16,244,543
Redemption of vested RSUs		120,359		345,430		-		(364,299	)		-			(18,869	)
Non-cash stock compensation		-		-		-		1,385,351			-			1,385,351
Net loss and comprehensive loss		-		-		-		-			(4,934,779	)		(4,934,779	)
Balance, June 30, 2012		121,075,431		177,063,521		44,271		14,097,979			(114,260,133	)		76,945,638

The accompanying notes are an integral part of these interim consolidated financial statements

Page 3

Ur-Energy Inc.

(an Exploration Stage Company)

Unaudited Interim Consolidated Statements of Cash Flow

(expressed in Canadian dollars)

	Three Months			Three Months			Six Months			Six Months			March 22, 2004
	Ended			Ended			Ended			Ended			Through
	June 30,			June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011			2012
	$			$			$			$			$
Cash provided by (used in)
Operating activities
Net loss for the period		(2,540,322	)		(4,546,369	)		(4,934,779	)		(9,152,743	)		(114,260,133	)
Items not affecting cash:
Stock based compensation		673,654			618,438			1,385,351			1,255,676			20,251,918
Depreciation of capital assets		106,146			116,588			214,068			237,998			2,368,319
Provision for reclamation		-			-			-			-			589,632
Write-off of mineral properties		-			-			-			-			803,336
Loss on equity investment		-			-			31,831			-			342,772
Foreign exchange loss (gain)		(380,547	)		(98,947	)		4,573			685,250			(686,507	)
Gain on sale of assets		-			-			(970,320	)		-			(2,037,404	)
Non-cash exploration costs		-			-			-			-			2,726,280
Other loss (income)		11,625			15,750			6,000			67,125			23,873
Change in non-cash working capital items:
Amounts receivable		14,075			937			5,196			(6,846	)		115
Prepaid expenses		(252,619	)		(71,774	)		(223,354	)		(115,320	)		(339,814	)
Accounts payable and accrued liabilities		(32,975	)		1,092,967			(302,405	)		1,363,397			517,834
		(2,400,963	)		(2,872,410	)		(4,783,839	)		(5,665,463	)		(89,699,779	)
Investing activities
Mineral property costs		(8,960	)		(43,304	)		(253,810	)		(152,166	)		(14,139,723	)
Purchase of short-term investments		(6,784,967	)		(3,552,840	)		(8,322,706	)		(5,771,814	)		(199,036,796	)
Sale of short-term investments		3,836,118			4,243,469			6,422,379			4,551,940			191,755,979
Decrease (increase) in restricted cash		1,730,209			(452	)		2,244,413			1,193,007			(2,292,287	)
Funding of equity investment		-			-			(1,734	)		-			(30,889	)
Payments from venture partner		-			-			-			-			146,806
Proceeds from sale of property and equipment		-			-			-			-			1,127,218
Purchase of capital assets		(416,064	)		(103,944	)		(864,589	)		(530,234	)		(6,524,480	)
		(1,643,664	)		542,929			(776,047	)		(709,267	)		(28,994,172	)
Financing activities
Issuance of common shares and warrants for cash		-			-			17,250,000			-			144,306,538
Share issue costs		(54,282	)		-			(980,458	)		-			(3,829,332	)
Proceeds from exercise of warrants and stock options		10,950			136,590			26,460			3,292,956			25,472,347
RSUs redeemed for cash in lieu of shares		-			-			(18,868	)		-			(18,868	)
Payment of New Frontiers obligation		-			-			-			-			(17,565,125	)
		(43,332	)		136,590			16,277,134			3,292,956			148,365,560
Effects of foreign exchange rate changes on cash		265,042			92,543			(23,606	)		(617,393	)		(2,808,488	)
Net change in cash and cash equivalents		(3,822,917	)		(2,100,348	)		10,693,642			(3,699,167	)		26,863,121
Beginning cash and cash equivalents		30,686,038			27,119,996			16,169,479			28,718,815			-
Ending cash and cash equivalents		26,863,121			25,019,648			26,863,121			25,019,648			26,863,121
Non-cash financing and investing activities:
Common shares issued for properties		-			-			-			-			1,164,750
Mineral property acquired in asset exchange		-			-			970,320			-			970,320

The accompanying notes are an integral part of these interim consolidated financial statements

Page 4

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

1. Nature of operations

Ur-Energy Inc. (the "Company") is an exploration stage junior mining company headquartered in Littleton, Colorado, engaged in the identification, acquisition, exploration, evaluation and development of uranium mineral properties located primarily in the United States with additional exploration interests in Canada. Due to the nature of the uranium mining methods to be used by the Company on the Lost Creek property, and the definition of “mineral reserves” under National Instrument 43-101 (“NI 43-101”), which uses the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards, the Company has not determined whether the properties contain mineral reserves. However, the Company’s April 30, 2012 NI 43-101 Technical Report on Lost Creek, “Preliminary Economic Assessment of the Lost Creek Property, Sweetwater County, Wyoming,” outlines the potential economic viability of the Lost Creek Property, which is currently in the permitting process with federal and state regulators. The recoverability of amounts recorded for mineral properties is dependent upon the discovery of economically recoverable resources, the ability of the Company to obtain the necessary financing to develop the properties and upon attaining future profitable production from the properties or sufficient proceeds from disposition of the properties.

2. Summary of Significant Accounting Policies

Basis of presentation

Ur-Energy Inc. was incorporated on March 22, 2004 under the laws of the Province of Ontario. The Company continued under the Canada Business Corporations Act on August 8, 2006. These financial statements have been prepared by management in accordance with United States generally accepted accounting principles (“US GAAP”) and include all of the assets, liabilities and expenses of the Company and its wholly-owned subsidiaries Ur-Energy USA Inc., NFU Wyoming, LLC, Lost Creek ISR, LLC, NFUR Bootheel, LLC, Hauber Project LLC, NFUR Hauber, LLC, ISL Resources Corporation, ISL Wyoming, Inc. and CBM-Energy Inc. All inter-company balances and transactions have been eliminated upon consolidation. Ur-Energy Inc. and its wholly-owned subsidiaries are collectively referred to herein as the “Company.”

These unaudited interim consolidated financial statements do not conform in all respects to the requirements of generally accepted accounting principles for annual financial statements. The unaudited interim financial statements reflect all normal adjustments which in the opinion of management are necessary for a fair statement of the results for the periods presented. These unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2011.

3. Cash and cash equivalents and short-term investments

The Company’s cash and cash equivalents consist of the following: 

	As of		As of
	June 30, 2012		December 31, 2011
	$		$
Cash on deposit at banks		1,552,817		595,982
Money market funds		25,310,304		15,573,497
		26,863,121		16,169,479

The Company’s short-term investments consist of the following:

	As of		As of
	June 30, 2012		December 31, 2011
	$		$
Guaranteed investment certificates		4,794,982		4,925,267
Certificates of deposit		4,063,645		2,002,256
		8,858,627		6,927,523

Page 5

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

Cash and cash equivalents and short-term investments bear interest at annual rates ranging from 0.25% to 1.40% and mature at various dates up to June 28, 2013. The instruments with initial maturity over ninety days have been classified as short-term investments.

4. Restricted cash

The Company’s current restricted cash consists of the following:

	As of		As of
	June 30, 2012		December 31, 2011
	$		$
Guaranteed investment certificate (a)		287,500		287,500
Certificates of deposit (b)		-		514,336
		287,500		801,836

The Company’s non-current restricted cash consists of the following:

	As of		As of
	June 30, 2012		December 31,2011
	$		$
Money market account (c)		1,781,232		189,809
Certificates of deposit (c)		-		3,328,538
		1,781,232		3,518,347

(a) A guaranteed investment certificate is security for the Company’s credit cards. If the credit card account is cancelled, which can be done at any time, the certificate can either be cashed or will no longer be encumbered.

(b) In conjunction with a trust, the Company established an account in accordance with a severance agreement which was subsequently closed when the severance was paid.

(c) The bonding requirements for reclamation obligations on various properties have been agreed to by the Wyoming Department of Environmental Quality and United States Department of the Interior.  The restricted certificates of deposits and money market accounts are pledged as collateral against performance surety bonds, letters of credit and/or promissory notes underlying letters of credit which are used to secure potential costs of reclamation related to those properties. Surety bonds providing $3,509,891 of coverage towards specific reclamation obligations are secured by $1,754,945 of the reserved cash at June 30, 2012.

Page 6

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

5. Mineral properties

The Company’s mineral properties consist of the following:

	USA				Canada		Total
	Lost Creek		Other US		Canadian
	Property		Properties		Properties
	$		$		$		$
Balance, December 31, 2011		14,194,086		17,389,588		523,667		32,107,341
Acquisition costs		252,386		1,424		-		253,810
Property acquired in asset exchange		970,320		-		-		970,320
Balance, June 30, 2012		15,416,792		17,391,012		523,667		33,331,471

United States

Lost Creek Property

The Company acquired certain Wyoming properties when Ur-Energy USA Inc. entered into the Membership Interest Purchase Agreement (“MIPA”) with New Frontiers Uranium, LLC in 2005.  Under the terms of the MIPA, the Company purchased 100% of NFU Wyoming, LLC.  Assets acquired in this transaction include the Lost Creek Project, other Wyoming properties and development databases.  NFU Wyoming was acquired for aggregate consideration of $24,515,832 (US$20,000,000) plus interest. Since 2005, the Company has increased its holdings adjacent to the initial Lost Creek acquisition through staking additional claims and additional property purchases and leases.

A royalty on future production of 1.67% is in place with respect to 20 mining claims at the Lost Creek Project. There is a royalty on the State of Wyoming section under lease at the project, as required by law; however, no production from the state lease is currently proposed.  Other royalties exist on certain mining claims on the LC South and EN Projects, and the State of Wyoming leases at the LC West and EN Projects. There are no royalties on the mining claims in the LC North, LC East or LC West Projects.

In February 2012, the Company acquired additional land and claims through an asset exchange for a drilling database on an area not currently being evaluated by the Company. The fair value of the data base was approximately $1 million and the gain is recognized in other income in the current year.

Page 7

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

6. Capital assets

The Company’s capital assets consist of the following:

	As of June 30, 2012						As of December 31, 2011
			Accumulated		Net Book				Accumulated		Net Book
	Cost		Amortization		Value		Cost		Amortization		Value
	$		$		$		$		$		$
Rolling stock		1,940,103		1,610,880		329,223		1,922,483		1,465,362		457,121
Machinery and equipment		296,233		291,805		4,428		296,233		265,578		30,655
Furniture, fixtures and leasehold improvements		76,942		50,026		26,916		74,992		45,880		29,112
Information Technology		678,328		468,549		209,779		566,457		430,372		136,085
Pre-construction costs		3,644,050		-		3,644,050		2,881,336		-		2,881,336
		6,635,656		2,421,260		4,214,396		5,741,501		2,207,192		3,534,309

7. Equity investment

Following its earn-in to the Bootheel Project, in 2009, Crosshair Energy Corporation (“Crosshair”) was required to fund 75% of the Project’s expenditures and the Company the remaining 25%. The Project is now accounted for using the equity accounting method with the Company’s proportionate share of the Project’s loss included in the Statement of Operations from the date of earn-in and the Company’s net investment reflected on the Balance Sheet.

The Company elected to not participate financially in the exploration and operating expenses for the fiscal year ending March 31, 2012 as allowed for in the Project operating agreement. Under the terms of the agreement, if the Company elects not to participate financially, the Company’s interest will be reduced proportionately based on cumulative contribution by each of the parties to the Project. As of March 31, 2012, the Company’s ownership percentage was reduced to 19.1%

8. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities consist of the following:

	As of		As of
	June 30, 2012		December 31,2011
	$		$
Accounts payable		581,473		307,364
Vacation pay payable		163,235		143,074
Payroll and other taxes		47,740		50,871
Severance payable		-		543,927
		792,448		1,045,236

9. Asset retirement obligation

The Company has recorded $564,830 for asset retirement obligations (December 31, 2011 – $561,964) which represents an estimate of costs that would be incurred to remediate the Company’s exploration and development properties. The retirement obligations recorded relate entirely to exploration and development drill holes, related monitor wells and site disturbance on the Company's U.S. properties. The non-current restricted cash as discussed in note 4 is related to surety bonds and letters of credit which provide security to the related governmental agencies on these obligations.

Page 8

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

10. Shareholders’ equity and capital stock

Authorized

The Company is authorized to issue an unlimited number of no-par common shares and an unlimited number of Class A preference shares with the rights, privileges and restrictions as determined by the Board of Directors at the time of issuance.

Issuances

On February 23, 2012, the Company completed a private placement of 17,250,000 common shares at $1.00 per share raising gross proceeds of $17,250,000. Total direct share issue costs, including the placement agents’ commission, were $1,005,457.

During the six months ended June 30, 2012, 29,628 common shares were issued pursuant to the exercise of stock options. In addition, the Company exchanged 120,359 common shares for vested RSUs.

Stock options

In 2005, the Company’s Board of Directors approved the adoption of the Company's stock option plan (the “Option Plan”). Eligible participants under the Option Plan include directors, officers, employees and consultants of the Company. Under the terms of the Option Plan, stock options generally vest with Option Plan participants as follows: 10% at the date of grant; 22% four and one-half months after grant; 22% nine months after grant; 22% thirteen and one-half months after grant; and, the balance of 24% eighteen months after the date of grant.

Activity during the six month period with respect to stock options is summarized as follows:

				Weighted-
				average
	Options			exercise price
	#			$
Outstanding, December 31, 2011		6,413,902			1.79
Granted		1,495,625			0.99
Exercised		(29,628	)		0.89
Forfeited		(81,574	)		2.09
Expired		(15,000	)		4.75
Outstanding, June 30, 2012		7,783,325			1.63

The weighted average grant date fair value was $0.52 for the six months ended June 30, 2012. The exercise price of a new grant is set at the closing price for the stock on the Toronto Stock Exchange (TSX) on the trading day immediately preceding the grant date so there is no intrinsic value as of the date of grant. The total fair value of options vested during the three and six months ended June 30, 2012 was $0.4 million and $1.0 million, respectively.

Page 9

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

As of June 30, 2012, outstanding stock options are as follows:

		Options outstanding						Options exercisable
				Weighted-						Weighted-
				average		Aggregate				average		Aggregate
Exercise				remaining		Intrinsic				remaining		Intrinsic
price		Number		contractual		Value		Number		contractual		Value
$		of options		life (years)		$		of options		life (years)		$		Expiry
	3.67		200,000		0.0		-		200,000		0.0		-	July 15, 2012
	3.00		437,500		0.1		-		437,500		0.1		-	August 9, 2012
	3.16		50,000		0.2		-		50,000		0.2		-	September 17, 2012
	2.98		50,000		0.3		-		50,000		0.3		-	October 5, 2012
	4.07		30,000		0.4		-		30,000		0.4		-	November 7, 2012
	1.65		695,000		0.9		-		695,000		0.9		-	May 8, 2013
	1.72		25,000		1.1		-		25,000		1.1		-	August 6, 2013
	0.71		452,447		1.6		22,622		452,447		1.6		22,622	February 9, 2014
	0.90		817,037		2.2		-		817,037		2.2		-	September 2, 2014
	0.81		570,349		2.7		-		570,349		2.7		-	March 5, 2015
	2.87		1,341,878		3.6		-		1,084,692		3.6		-	January 28, 2016
	1.57		645,000		4.0		-		348,300		4.0		-	July 7, 2016
	1.17		799,862		4.2		-		436,759		4.2		-	September 9, 2016
	1.16		200,000		4.3		-		64,000		4.3		-	October 24, 2016
	0.91		1,169,252		4.5		-		381,563		4.5		-	January 12, 2017
	1.39		200,000		4.6		-		64,000		4.6		-	February 1, 2017
	1.18		100,000		4.7		-		10,000		4.7		-	March 1, 2017
	1.63		7,783,325		3.2		22,622		5,716,647		2.5		22,622

The aggregate intrinsic value of the options in the preceding table represents the total pre-tax intrinsic value for stock options with an exercise price less than the Company’s TSX closing stock price of $0.76 as of the last trading day in the period ended June 30, 2012, that would have been received by the option holders had they exercised their options as of that date. The total number of in-the-money stock options outstanding as of June 30, 2012 was 452,447. The total number of in-the-money stock options exercisable as of June 30, 2012 was 452,447.

Restricted Share Units (“RSUs”)

On June 24, 2010, the Company’s shareholders approved the adoption of the Company’s restricted share unit plan (the “RSU Plan”). Eligible participants under the RSU Plan include directors and employees of the Company. Under the terms of the RSU Plan, RSUs vest with participants as follows: 50% on the first anniversary of the date of the grant and 50% on the second anniversary of the date of the grant.

Page 10

Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

Activity during the six month period with respect to RSUs is summarized as follows:

				Weighted
				Average Grant
	RSUs			Date Fair Value
	#			$
Unvested, December 31, 2011		276,365			2.87
Granted		298,912			0.91
Vested		(136,789	)		2.87
Forfeited		(14,947	)		1.65
Unvested, June 30, 2012		423,541			1.53

As of June 30, 2012, outstanding RSUs are as follows:

			Weighted-
			average
	Number of		remaining
	unvested		amortization		Aggregate
Grant Date	options		life (years)		Value
January 28, 2011		133,943		0.58		101,797
January 12, 2012		289,598		1.54		220,094
		423,541		1.23		321,891

Upon vesting, the holder of an RSU will receive one common share, for no additional consideration, for each RSU held.

Share-Based Compensation Expense

Stock-based compensation expense was $0.7 million and $0.6 million for the three months ended June 30, 2012 and 2011, respectively, and $1.4 million and $1.3 million for the six months ended June 30, 2012 and 2011, respectively.

As of June 30, 2012, there was approximately $1.0 million of total unrecognized compensation expense (net of estimated pre-vesting forfeitures) related to unvested share-based compensation arrangements granted under the Option Plan and $0.4 million under the RSU Plan. The expenses are expected to be recognized over a weighted-average period of 0.8 years and 1.0 years, respectively.

Cash received from stock options exercised during the six months ended June 30, 2012 and 2011 was less than $0.1 million and $3.3 million, respectively.

Fair Value Calculations

The fair value of options granted during the six months ended June 30, 2012 and 2011 was determined using the Black-Scholes option pricing model with the following assumptions:

	2012			2011
Expected option life (years)		3.29-3.30			3.24 - 3.26
Expected volatility		73-78	%		79-81	%
Risk-free interest rate		1.0-1.3	%		1.4-1.9	%
Forfeiture rate		4.7-4.8	%		4.4-5.1	%
Expected dividend rate		0	%		0	%

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Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

(expressed in Canadian dollars)

The Company estimates expected volatility using daily historical trading data of the Company’s common shares, because this method is recognized as a valid method used to predict future volatility. The risk-free interest rates are determined by reference to Canadian Treasury Note constant maturities that approximate the expected option term. The Company has never paid dividends and currently has no plans to do so.

Share-based compensation expense is recognized net of estimated pre-vesting forfeitures, which results in recognition of expense on options that are ultimately expected to vest over the expected option term. Forfeitures were estimated using actual historical forfeiture experience.

Although the estimated fair values of stock options are determined as outlined above, these estimates are based on assumptions regarding a number of complex and subjective variables, including the Company’s stock price volatility over the expected terms of the awards, estimates of the expected option terms, including actual and expected option exercise behaviors and estimates of pre-vesting forfeitures. Changes in any of these assumptions could materially affect the estimated value of stock options and, therefore the valuation methods used may not provide the same measure of fair value observed in a willing buyer/willing seller market transaction.

The fair value used for the RSUs issued in January 2012 and 2011 was $0.91 and $2.87, respectively, per unit which was the closing price of the stock on the TSX as of the trading day immediately preceding the grant date.

11. Financial instruments

The Company’s financial instruments consist of cash and cash equivalents, short-term investments, marketable securities, amounts receivable, restricted cash and accounts payable and accrued liabilities. The Company is exposed to risks related to changes in foreign currency exchange rates, interest rates and management of cash and cash equivalents and short-term investments. See the table in note 3 for the composition of the Company’s cash and cash equivalents.

Credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, short-term investments and restricted cash. These assets consist of Canadian dollar and U.S. dollar denominated guaranteed investment certificates, certificates of deposits, money market accounts and demand deposits. They bear interest at annual rates ranging from 0.25% to 1.4% and mature at various dates up to June 28, 2013. These instruments are maintained at financial institutions in Canada and the United States. Of the amount held on deposit, approximately $0.9 million is covered by the Canada Deposit Insurance Corporation, the Securities Investor Protection Corporation or the United States Federal Deposit Insurance Corporation. Another $3.6 million is guaranteed by a Canadian provincial government leaving approximately $33.3 million at risk at June 30, 2012 should the financial institutions with which these amounts are invested be rendered insolvent. The Company does not consider any of its financial assets to be impaired as of June 30, 2012.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due.

The Company manages liquidity risk through regular cash flow forecasting of cash requirements to fund its exploration and development projects and operating costs.

As at June 30, 2012, the Company’s financial liabilities consisted of trade accounts payable and accrued trade and payroll liabilities of $0.8 million all of which are due within normal trade terms of generally 30 to 60 days.

Market risk

Market risk is the risk to the Company of adverse financial impact due to changes in the fair value or future cash flows of financial instruments as a result of fluctuations in interest rates and foreign currency exchange rates. Market risk arises as a result of the Company incurring a significant portion of its expenditures and a significant portion of its cash equivalents and short-term investments in U.S. dollars, and holding cash equivalents and short-term investments which earn interest.

Interest rate risk

Financial instruments that expose the Company to interest rate risk are its cash equivalents, short-term investments and restricted cash. The Company’s objectives for managing its cash and cash equivalents are to maintain sufficient funds on hand at all times to meet day to day requirements and to place any amounts which are considered in excess of day to day requirements on short-term deposit with the Company's financial institutions so that they earn interest. When placing amounts of cash and cash equivalents on short-term deposit, the Company only uses financial institutions chosen by the Company for financial stability (measured by independent rating services and reviews of the entity’s financial statements, where appropriate) and approved by the Treasury and Investment Committee of the Board of Directors.

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Ur-Energy Inc.

(an Exploration Stage Company)

Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2012

Currency risk 

The Company incurs expenses and expenditures in Canada and the United States and is exposed to risk from changes in foreign currency rates. In addition, the Company holds financial assets and liabilities in Canadian and U.S. dollars. The Company does not utilize any financial instruments or cash management policies to mitigate the risks arising from changes in foreign currency rates.

At June 30, 2012, the Company had cash and cash equivalents, short-term investments and restricted cash of approximately US$13.4 million (US$18.9 million as at December 31, 2011) and had accounts payable and accrued liabilities of US$0.5 million (US$0.9 million as at December 31, 2011) which were denominated in U.S. dollars.

Sensitivity analysis

The Company has completed a sensitivity analysis to estimate the impact that a change in foreign exchange rates would have on the net loss of the Company, based on the Company’s net US dollar denominated assets and liabilities at period end. This sensitivity analysis assumes that changes in market interest rates do not cause a change in foreign exchange rates. This sensitivity analysis shows that a change of +/- 10% in US dollar foreign exchange rate would have a +/- $1.3 million impact on net loss for the six months ended June 30, 2012. This impact is primarily as a result of the Company having cash and investment balances denominated in US dollars and US dollar denominated trade payables. The financial position of the Company may vary at the time that a change in exchange rates occurs causing the impact on the Company’s results to differ from that shown above.

The Company has also completed a sensitivity analysis to estimate the impact that a change in interest rates would have on the net loss of the Company. This sensitivity analysis assumes that changes in market foreign exchange rates do not cause a change in interest rates. This sensitivity analysis shows that a change of +/- 100 basis points in interest rate would have a +/- $0.2 million impact on net loss for the six months ended June 30, 2012. The Company’s average interest rate for the period was 0.98% which is less than 100 basis points. This impact is primarily as a result of the Company having cash and short-term investments invested in interest bearing accounts. The financial position of the Company may vary at the time that a change in interest rates occurs causing the impact on the Company’s results to differ from that shown above.

12. Commitments

Rent expense under lease agreements totaled $0.1 million and $0.1 million for the three months ended June 30, 2012 and 2011 respectively, and $0.2 million and $0.2 million for the six months ended June 30, 2012 and 2012 respectively.

Purchase orders totaling US$4.0 million have been issued for ion exchange columns and other process equipment. Payments of US$1.8 million have been made to date on these purchase orders. These payments are reflected in pre-construction costs which are included in capital assets (note 6).

13. Subsequent Events

Subsequent to quarter end, the Company has announced the execution of a Share Purchase Agreement (“SPA”) to acquire Pathfinder Mines Corporation (“Pathfinder”). The transaction calls for the purchase of all issued and outstanding shares of Pathfinder from its sole shareholder, COGEMA Resources, Inc., an AREVA Mining affiliate, for US$13,250,000. The initial payment of US$1,325,000 was made upon execution of the SPA and will be held in escrow pending the approval by the Nuclear Regulatory Commission (“NRC”) for the change of control of an NRC License for the Shirley Basin mine site owned by Pathfinder. Subject to that and other regulatory and governmental approvals, together with customary closing conditions, closing of the transaction is anticipated in 6 – 12 months.

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