WESTERN Comment

KHAN Clarification

“The Khan Offer does not reflect the underlying value of Western’s assets” and that “Khan is attempting to gain control of Western without paying an appropriate change of control premium” (Western Directors’ Circular)

KHAN'S OFFER PROVIDES A GENEROUS PREMIUM AND IS ACCRETIVE TO WESTERN PROSPECTOR SHAREHOLDERS BECAUSE:

· Khan’s offer represents a premium of 34% based on the 20 day volume weighted average trading prices of Khan and Western prior to announcement of Khan’s' Offer

· Khan’s offer represents an approximate $43 million NPV premium to Western shareholders

· Western shareholders would have access to a mining licensed project

· Western shareholders would receive 40% of the combined entity’s stock in exchange for providing only 32% of its U₃O₈ assets

· Western shareholders would have access to a management and board of directors who have collectively built and operated over 30 producing mines in their careers

“The share exchange ratio under the Khan Offer does not reflect the relative merits of Western’s assets as compared to Khan’s assets” (Western Directors’ Circular)

KHAN'S OFFER PROVIDES FULL AND FAIR VALUE FOR WESTERN SHARES BECAUSE:

· The underlying value of both companies is measured in pounds of U₃O₈

· Western’s Gurvanbulag has an estimated 22M lbs of U₃O₈ and
Khan’s share of the Dornod is estimated  to be 46M lbs of U₃O₈

· Western shareholders would contribute 32% of the NI 43-101 compliant assets to the combined entity and would receive approximately 40% of the combined entity’s stock

· Western U₃O₈ resource is 13.6M lbs indicated and 8.6M lbs inferred while Khan U₃O₈ resource is 44.4M lbs indicated of which 39M lbs is a probable reserve and also has 1.7M lbs of inferred resource.  The Khan asset is of a more advanced category.

“Khan’s offer of US$10M represents a 95% discount to the Gurvanbulag deposit completely on its own” which is based on a $241M Net Present Value (NPV) assuming a long term Uranium price of $84/lb. (The Northern Miner May 27, 2008 in interview with CEO of Western)

KHAN'S OFFER IS NOT A DISCOUNT AND PROVIDES WESTERN SHAREHOLDERS WITH AN ACCRETIVE SHARE OF THE COMBINED NPV BECAUSE:

· Western’s Gurvanbulag has an NPV of $241M at a long-term uranium price of $84/lb of U₃O₈

· Khan’s share of Dornod has an NPV of $469M at a long-term uranium price of $84/lb of U₃O₈

· Khan’s offer would create a combined company with an NPV of $710M of which Western shareholders would receive 40% or $284M

· Khan’s offer fully values the Gurvanbulag deposit and is accretive to Western shareholders by $43M of NPV

· Khan’s offer has no cash component and therefore the $10M number is not accurate

“In a nutshell we’re on a fast track to production… Khan has a long way to go both from a dewatering and feasibility perspective as well as from an infrastructure perspective” (The Northern Miner May 27, 2008 in interview with CEO of Western)

KHAN IS BEST POSITIONED TO BRING DORNOD AND THE SADDLE HILLS REGION INTO PRODUCTION AT THE EARLIEST POSSIBLE DATE BECAUSE:

· There are three key steps that must be completed before either the Dornod or Gurvanbulag project can be brought into production

1.  Investment Agreement with the Government of Mongolia - No production will occur without it.  While neither Khan or Western currently has an Investment Agreement, Khan believes that a combined entity will be more likely to successfully negotiate that agreement

2.  Conversion of Exploration Licenses into Mining Licenses - No mine development can proceed until the exploration licenses at both projects are converted into mining licenses. Khan already has one mining license. All of Western’s licenses are exploration licenses.  The timing on the conversion process is unknown.

3.  Lead Time for Equipment - No production can occur without large production equipment such as a SAG mill and other large key equipment.  Neither company has made an order as of yet and the lead-time to receive it is a minimum of between 18 months and three years.

· The lead time for equipment provides Khan with ample opportunity to dewater and build infrastructure without delaying its production schedule.  In fact, Khan has quite deliberately delayed its previously scheduled dewatering efforts to avoid risking capital before an Investment Agreement is completed

“The challenges for Khan are that it will have to spend millions of dollars to dewater the mine” (The Northern Miner May 27, 2008 in interview with CEO of Western)

THE STATUS  OF DEWATERING IS NOT A CONCERN BECAUSE:

When Western partially de-watered the Gurvanbulag deposit there were many challenges.  This resulted in delays and cost overruns.  The reason Khan can reasonably expect to not have these same difficulties is that the majority of the development at Dornod will be done in competent basaltic formations that are in ‘waste’ rock.  This has been confirmed by extensive core drilling and studies completed by Golder Associates.  Also all the shafts in Khan’s Dornod deposit are concrete-lined which will reduce the need for extensive remediation

“The Khan Offer is timed opportunistically to disadvantage Western Shareholders and only gives the illusion of an offer premium” (Western Directors’ Circular)

TIMING OF THE OFFER BENEFITS BOTH KHAN AND WESTERN SHAREHOLDERS BECAUSE:

· There is a general election in Mongolia in late June 2008 and Khan believes there is a potential window for negotiations with the government just after the election

· Khan believes a unified Saddle Hills uranium interest will have greater success negotiating during the window

· It is better to unify the two companies now before large and potentially duplicative production expenses are incurred and synergies are lost

· The premium includes a 34% premium to the stock price as described in the offer, a $43M NPV premium as described above and 40% of a 68M lbs U₃O₈ resource that is more advanced

“The synergies of the combined entity cited by Khan are overstated and would primarily accrue to the Khan Shareholders at the expense of the Western Shareholders” (Western Directors’ Circular)

PROPOSED TRANSACTION WITH KHAN RESULTS IN SIGNIFICANT SYNERGIES BECAUSE:

· The synergies and their financial benefit have been conservatively estimated based on Khan’s Pre-Feasibility study and Western’s Preliminary Economic Assessment

· By building one processing plant instead of two, even with the increased cost to handle additional capacity, is a large and obvious capital synergy

· Obvious infrastructure cost savings of building and maintaining a combined camp, tailings management, and administrative facilities

“The complexity of Khan’s ownership structure could be detrimental to the value realized by Western Shareholders” (Western Directors’ Circular)

KHAN'S JOINT VENTURE RELATIONSHIP WITH THE GOVERNMENT OF MONGOLIA IS A POSITIVE FEATURE OF ITS OWNERSHIP STRUCTURE BECAUSE:

· Khan’s ownership interest in the Dornod property includes the Government of Mongolia as a joint-venture partner

· Khan continues to believe that having the government of the country where the project is located as a partner will be beneficial to building and maintaining a good relationship with that same government

· This belief has only been strengthened by the Government of Mongolia's stated intention to own a portion of all uranium deposits in Mongolia

"Khan has established a soliciting dealer group and… has agreed to pay brokers for Western Shares tendered to the Khan Offer." (Western Directors Circular)

Khan has NOT established a soliciting dealer group and has NOT agreed to pay brokers for Western Shares tendered to the Khan Offer.  Khan believes that its offer stands on its own and warrants recommendation on its merits.

“A superior proposal may emerge as a result of the Board’s pursuit of other value-maximizing alternatives” (Western Directors’ Circular)

KHAN'S OFFER PROVIDES THE BEST STRATEGIC ALTERNATIVE BECAUSE:

· A superior proposal has not emerged to date

· Khan believes that the offer and resulting combined company which would unify the Dornod and Gurvanbulag Projects is and will prove to be the most attractive alternative for Western shareholders

Khan financial advisor

Haywood Securities engaged July 9, 2008