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2009 Mid Year Letter To Shareholders

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2009 Mid Year Letter To Shareholders

CEO's 2009 Mid Year Letter To Shareholders

August 24, 2009

Dear Shareholder,

Given the difficulties that investors endured in the last months of 2008 and early in 2009, Uranium Energy Corp is pleased to report that we have turned several key corners in the last eight months. The stock is rebounding, and the Company is targeting additional milestones that we believe will make 2009 a strong year. Your confidence in the Company is truly valued. We greatly appreciate your support. Thank you!

In light of the difficult economic environment, I would like to first state that Uranium Energy Corp is well financed to execute on its business plan. The Company has no debt and approximately $24 million in cash today. You can be sure we are husbanding these funds carefully with a close eye on the Company´s key objectives.

The following milestones were achieved in the first half of 2009:

  • Financing - The Company completed a $22 million equity financing in June.
     
  • Goliad permitting advances - A final draft production permit for the Company´s Production Area-1 at Goliad was granted by the Texas Commission on Environmental Quality (TCEQ). The Company now has both the draft mine permit and draft production permit for its Goliad ISR Uranium Project in South Texas - both firsts, in more than a decade, for any U.S. public company.
     
  • Resource increase - In January the Company announced an NI 43-101-qualified inferred resource of 1.3 million pounds uranium at its Nichols Project in Karnes County in South Texas. This resource makes the first prospective satellite source for the Company´s nearby Goliad ISR project. This is in addition to Goliad´s 6.9 million pounds of in-situ uranium in all categories of resource under NI 43-101.*
     
  • Market Recognition - The Company was added to both the Russell 2000 and Russell 3000 Indexes at the end of June, effective for the next 12 months, based on market capitalization relative to all other US public companies.
     
  • Analyst coverage - Two new analysts, with CIBC World Markets and Versant Partners, initiated coverage of Uranium Energy Corp during this first six months of the year. Six analysts now track the developments of the Company.
     
  • New joint venture - Uran Limited, an Australian uranium explorer, can earn 65% of the Company´s Grants Ridge Project in New Mexico by completing a feasibility study on this prospective area with several prior-producing mines. The Company is pleased to monetize this asset and have a partner advance the project without spending our own funds. The Company´s portfolio of properties holds plenty of exciting potential: excluding Texas, another 18 projects in New Mexico, Wyoming, Utah, Colorado and Arizona, all with prior exploration by majors.

Production Targeted Near-Term
The Company´s key near-term objective is to achieve initial ISR uranium production at Goliad in 2010, and most factors are in place. Remember that in-situ recovery facilities require a much lower capital expenditure than conventional mining operations, typically $20 million to $25 million instead of $100 million to more than $1 billion. To start construction, additional permits and one remaining hearing are needed for Goliad - in particular, a Radioactive Material License and a Waste Disposal Well Permit, both of which are anticipated to be received this year.

A Texas-sized opportunity - Texas has been the energy capital of the country for 100 years, and fully means to keep that title and expand on it, including in the area of uranium production. In Texas the permitting process is streamlined : Uranium producers and near-term producers deal with one agency, the Texas Commission on Environmental Quality, for all required and related permits and licenses.

Historically, Texas has been a prolific uranium producing state, mostly through in-situ recovery methods. We believe that significant uranium resources remain to be developed. The Company is actively working to expand its asset base in Texas.

An Environment of Growing Acceptance for Nuclear Power

The Federal government is making a new commitment to nuclear power and the uranium industry. Energy Secretary Stephen Chu made the following statement on July 8th before the Senate´s environment and public works committee: "…nuclear power is going to be a very important factor in getting us to a low carbon future. Quite frankly, we want to recapture the lead on industrial nuclear power. We have lost that lead as we have lost the lead in many energy technologies and we want to get it back."

These are more than just words from Energy Secretary Chu, because this statement follows a front-page Wall Street Journal article dated June 18th which stated: "Four power companies are expected to split $18.5 billion in federal financing to build the next generation of nuclear reactors [7 are planned in the first stage] - the biggest step in three decades to revive the U.S. nuclear industry…" This indicates near-term real action . Note also that two of the planned reactors are scheduled for Matagorda County in Texas, which is within 70 miles of the Company´s Goliad project.

Regarding the price of uranium, demand is anticipated to far exceed supply on both a global as well as a local-U.S. basis according to most industry associations and analysts. The situation is particularly acute in the U.S. where, in 2008, 55 million pounds of this strategic metal were used to generate 20% of the country´s electricity, and only 4 million pounds were produced.
The spot price of uranium bottomed in March this year at $40/lb, and is in the $50 range today. The term or long-term contract price is stable at $65/lb. While this is certainly a workable level, and we would welcome higher prices, the Company´s focus is to control our own future by producing at a very low cost using in-situ recovery methods.

We welcome your participation in the Company´s momentum and vigorous continuing growth. Thank you again for your confidence. For more information, please call us at 1-866-748-1030, email us at info@uraniumenergy.com or visit our website at www.uraniumenergy.com .
 
Yours sincerely,

Amir Adnani
President and CEO
Uranium Energy Corp  
 

* Estimates for measured, indicated and inferred mineral resources have been determined in accordance with the definitional standards on mineral resources of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in Canadian National Instrument 43-101. Measured, indicated and inferred mineral resources, while recognized and required by Canadian regulations, are not defined terms under Industry Guide 7 of the U.S. Securities and Exchange Commission (the "SEC") and are normally not permitted to be used in reports and registration statements filed with the SEC.