Those two facts tell a great deal about the potential problems facing Cameco in the next few quarters.

The Canadian company charged off $105 million to restructure its gold business in the Kyrgyz Republic, pending the eventual forcible transfer of its interests to this dictatorial regime. (In October, the president of this country dismissed parliament in a peremptorily and rescheduled "elections.")

The second big charge for Cameco is related to environmental remediation charges due to a rock fall at its Cigar Lake mines. Declining productivity at its older Rabbit Lake mines led to the company decreasing its prognosis for 2007 uranium production to 19.8 million to 20.1 million pounds from its second-quarter estimate of 20.6 million pounds. In other words, Cameco is relying, to a large extent, on continued uranium price appreciation, not volume increases, to keep to its earnings forecast.

However, as the following graph shows, anticipating continued uramium price increases is a very risky proposition. The graph following that contrasts the trends in gold prices, but gold production constitutes only 15% of Cameco's revenue, with that expected to decline over 2007.

At the very least, gold revenue can be expected to be extremely unstable due to the meddling of the Kyrgyz government. The third graph shows the evolution of Cameco's stock prices over the last year, which increased in value by 33%.

Source: Yahoo Finance