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Acquiring Prospecting Licences in Tanzania with Uranium Potential

18 July 2005

Introduction

Uranium Resources plc, the AIM listed Australian and African focussed uranium development company is acquiring four uranium prospecting licences in Tanzania, which is considered to be one of the more exciting regions in the world to prospect for deposits of this mineral. The Company is acquiring the licences covering an area of approximately 2,500 km2 through the purchase of Deep Yellow Tanzania Ltd for £350,000. The consideration is £50,000 cash and 6,000,000 new ordinary shares to be issued at an agreed value of 5p per share, valued at £300,000. The acquisition marks the first stage in the Company's strategy of building a portfolio of uranium deposits and licences with a focus on known but underdeveloped resources.

Details of the licences

The licences represent one of the largest uranium exploration land packages in Tanzania. The area was identified as highly prospective for uranium by the German company Uranerzbergbau GmbH ('Uranerz') during reconnaissance exploration between 1978 and 1982. Three of the licences are located in the Mkuju River area in southern Tanzania recognised by Uranerz as one of the two most important uranium targets in Tanzania. The licences will make the Company the largest land holder in the Mkuju River area. The fourth licence, the Makutapora Prospect, targets uranium in calcrete.

The recognition by Uranerz of suitable lithologies in the Tanzanian Karroo formation together with the discovery of uranium mineralization, makes this parcel of land very prospective and the size of it may be an ideal joint venture proposition once better defined for a major company seeking land for exploration.

Uranium Resources plans to establish an African based exploration team to carry out field work and a geophysical data review, aimed at commencing detailed exploration activities in the second half of the year. The team, led by South African based director and uranium specialist Dr Leon Pretorius, will also review further acquisition opportunities in Africa as and when identified.

Uranium Resources Chairman, David Steinepreis, said: 'The acquisition is part of our strategy of building a substantial uranium focussed portfolio of exploration and production assets. We have a strong management team with both financial and uranium experience who I believe have the ability to achieve our corporate objectives. This is a great deal for us as we believe that Tanzania is one of the most exciting locations for successful uranium exploration in the world. The area has favourable geology and notably low exploration costs which combine to make the licences extremely attractive.

'While the gold mining sector has boomed and investment in nickel, platinum and coal exploration has been extremely strong, uranium exploration in Tanzania is at an early stage. Yet, as well as promising geology, the average historical expenditure on uranium exploration in the country has been US$4 per km2 compared to US$16 per km2 in the western part of Africa and US$224 per km2 in the United States.

'We are currently evaluating a number of other known deposits that we believe are suitable for our investment criteria and will update the market if and when we have agreed the terms of further investments.'

Geology of the Mkuju River Area, Southern Tanzania

The Mkuju River licences cover over 2,000km2 of Karroo sediments within the Luwegu and Ruhuhu Basins. Uranerz identified outcropping uranium in the Mkuju River area. Uranium Resources' tenements cover the prospective Karroo sediments along strike to the south from these outcrops as well as analogous positions to the west.

Uranium deposits of the sandstone-type targeted in the Luwegu Basin comprise more than 30% of currently known uranium deposits in Africa. In Africa, these types of deposits host in excess of 300,000 tonnes of U3O8 and are principally hosted by geology analogous to that of the Luwegu and Ruhuhu Basins.

Geologically the area consists of Permian age Karroo sedimentary rock. The Karroo Formations occur throughout southern Africa and drew much attention from uranium explorers during the 1970s and early 1980s. A number of discoveries were made and a few taken to full feasibility. The one drawing the most attention at present is the Kayelekera deposit 200km to the west in Malawi where Paladin Resources of Australia is undertaking a bankable feasibility study to verify the previous results of the CEGB.

The mineralisation is associated with remobilised uranium within sandstone beds, known as 'roll-fronts'. Lithologically the prospective Karroo sandstones are part of a thick succession of fluvio-lacustrine sedimentary rocks deposited mostly in shallow water. The sandstones are interbedded and separated by extensive mudstone beds. Low levels of uranium occur throughout these formations, but not at economic concentrations. However, where folding or erosion has exposed permeable sandstone beds to the surface influx of oxygenated waters, the uranium is mobilised and precipitated at the reduction/oxidation front - hence naming this style of mineralisation 'roll-fronts'. The roll-fronts are not static and continue moving down dip over time as the influx of surface water penetrates deeper.

Although narrow the roll-fronts are typically high-grade and have extensive longitudinal continuity. The mineralisation is mainly restricted to sandstones bounded by mudstones, but the roll-fronts are typically stacked which makes mining them more economic.

Geology of Makutapora, Central Tanzania

The Makutapora licence covers a palaeo-channel that contains sediments and calcrete. Previous explorers reviewed samples from water bores in the Makutapora area and identified a 500ppm U3O8 assay in calcrete associated with a groundwater uranium anomaly. Additional assays up to 285 ppm U3O8 have been reported from shallow trenches within calcrete layers in the Mbuga muds at Makutapora and in adjacent areas. None of these anomalies were followed-up by drilling. The Company considers that the area contains significant potential for calcrete-style uranium mineralization.

Terms of the Transaction

Uranium Resources has entered into a conditional agreement to acquire Deep Yellow Tanzania Ltd, the 100% owners of the four licences, in consideration for £350,000 comprising the payment of £50,000 in cash, representing repayment of past costs, and the issue of 6,000,000 ordinary shares at an agreed value of 5p per share. The acquisition is subject to due diligence and the approval of the shareholders of Deep Yellow Ltd, the vendor, which is quoted on the Australian Stock Exchange.

Application will be made for the new shares to trade on AIM and it is expected that dealings in these shares will commence within 14 days of the agreement becoming unconditional. The new ordinary shares will rank pari passu in all respects with the existing shares in issue.