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Higher uranium prices helped Cameco Corp. post a higher fourth-quarter profit despite a slip in its revenues.

The Saskatoon-based company said Wednesday that it made $61 million, or 18 cents a share, in the October-December quarter. That was up from $40 million, or 11 cents a share in the same quarter of 2006. Cameco 3-month TSX chart

Cameco said its overall revenue for the quarter was $494 million, down from $512 million.

The company’s revenue from its uranium business decreased by $23 million to $219 million comparedwith the same period in 2006 due to a 39 per cent drop in sales volume. However, that was made up for by a 49 per cent increase in the average realized price for uranium.

Cameco said earnings before taxes from its uranium business increased to $63 million, from $49 million.

The company’s fuel services business posted a loss before taxes of $36 million on rising costs stemming from a shutdown of Cameco’s Port Hope, Ont., uranium hexafluoride plant. The company booked $14 million in expenses to clean up contaminated soil at the plant. In the fourth quarter of 2006, the fuel business had earnings before tax of $11 million.

Shares of Cameco slipped 13 cents to close at $32.19on the TSX. The stock is near its 52-week low of $32, which was reached on Jan. 22.

This column was originally published on RealMoney on Jan. 16 at 1:51 p.m. ET. It’s being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

The major indices are hugging the unchanged line at midday. Could this be a precursor to rampant pinning action for this week’s option expiration? I don’t play that game, so I won’t even venture a guess on pin candidates until midday Friday.

Despite the tight range, the VIX is up some 6% to 10.80. However, some of this lift is simply due to the “Monday effect” (though, in this case, Tuesday) in which the theta markdown that occurs on Friday afternoon basically prices in today’s decay, providing an underpinning for options during the morning hours. Also, with earnings and expiration on tap this week, traders were more likely to come in this morning as net buyers of option premium, as positions get closed or rolled ahead of the expiration.

The impact of expiration-related activity should also be taken into consideration when looking at the put/call ratios. The all-exchange ratio popped above 1.10 this morning, the highest reading in six weeks, but the equity-only ratio is still a subdued 0.62, in line with the 20-day moving average. The put/call on index products has jumped to 2.80, its highest level in two months, and that is lifting the overall reading. Much of the volume is coming in the form of rolling of out-of-the money puts from January into February and, as such, does not represent large directional or bearish bets.

The notable exception is coming on the Diamonds Trust (DIA) , which has seen heavy put activity in the March series. The $125 strike has traded 34,000 contracts against prior open interest of just 3,000, and the $120 strike has traded 20,000 contracts against prior open interest of 10,000 contracts. There is no corresponding volume in January or February expirations. However, the trade could represent a ratio spread in which someone is buying the $125 puts and selling the $120 puts for a net debit of $1.30 for the 2×3 spread.

I bring this up because some recent articles in The Wall Street Journal have been citing options strategists who recommend ratio spreads as a way of establishing downside protection at a minimal cost. In addition, some services such as OptionMonster.com are reporting an increase in frequency in this type of trade.

This is not a strategy I would suggest implementing if I was worried about a selloff. The risk/reward is not attractive, and the position’s price behavior will be exactly the inverse if the sharp selloff occurs.

With the Diamonds trading right around $125, a 2×3 spread would provide about 5% of downside protection, covering a move from $123.80 to around $118, yielding maximum a profit of $3.70 if shares are at $120 on the March 16 expiration.

But the position would start losing money if shares fell below $111.50, or slid 10.5%. Of greater concern is that the position would also be hurt by an increase in implied volatility, which would likely accompany a decline of 5% or greater. Lastly, even if the underlying price is at the max profit point, it is very difficult to pull off a ratio spread for a profit until you get to about two weeks before expiration. This means for the ratio spread to pay off, it needs to be just right in terms of the magnitude, velocity and timing of the price move. Basically, it’s a bet that the Diamonds will calmly drift 5% lower over the next three months. That doesn’t strike me as a high-probability scenario.

With options prices sitting near 13-year lows, I don’t see the sense in using a ratio — which gives only a narrow price range of protection, is exposed to unlimited losses and handcuffs the position to a three-month holding period — just to reduce the initial cost. I believe you’d be better off just making an outright purchase of the March $123 puts at $1.20 per contract. This has the same initial cost, but provides unlimited downside protection and, more importantly, the flexibility to trade around a near-term selloff and increase in implied volatility.

Oil stalled under the landmark $100 a barrel mark on Thursday, ending lower after remarks by U.S. Federal Reserve Chairman Ben Bernanke fanned worries about economic growth.

Gold ended higher but a slightly steadier dollar depleted its momentum without the expected $850-an-ounce test in futures trade at the Comex division of the New York Mercantile Exchange.

Nymex December crude settled down 91 cents, or 0.9%, at $95.46 a barrel, missing Wednesday’s $98.62 record high.

Crude prices have soared since August on the decline in the dollar, robust demand and tight supplies with trade becoming increasingly volatile approaching $100 a barrel.

It is now nearing the inflation-adjusted peak of $101.70 set in 1980 in the aftermath of the Iranian revolution.

December gold rose $4.00 to $837.50 an ounce, topping 20 cents below Wednesday’s 28-year record at $848. Futures hit a record high of $875 on Jan. 21, 1980.

Spot bullion’s late price in New York was $832.10/$832.85, off from $833.00/$833.80 on Wednesday, when it hit a 28-year high of $845.40, just below its all-time high of $850 set in 1980.

Gold is up more than 30% on the year, with troubles in the U.S. credit market and worries over global geopolitics and banking sending investors into safe havens, keen to hedge against a falling dollar.

Bernanke told U.S. lawmakers that the Fed predicted U.S. economic growth will “slow noticeably” in the fourth quarter of 2007 and the first half of 2008 because of credit market turmoil and the likelihood of an intensifying downturn in the housing market.

The dollar was last trading at $1.4676 per euro, down from $1.4643 late on Wednesday. It touched a record low of $1.4730 on Wednesday.

The Reuters/Jefferies CRB Index of 19 commodity futures fell 0.16%.

Comex copper for December delivery finished down 5.50 cents, or about 1.7%, at $3.2040. Earlier, it hit its lowest level since Aug. 22 at $3.1825 a pound.

At the Chicago Board of Trade, December wheat fell 25 3/4 cents to $7.62 per bushel.

It plumbed two-month lows on long liquidation and a low number for wheat in USDA’s weekly export sales report.

But corn and soybean futures rose, as did the ICE December arabica contract in New York, which settled up 1.45 cents at $1.2190 per pound.

Two native bands are threatening to tie up the Ontario government’s long-range power plans using lengthy court delays.

In a submission to the Ontario Energy Board, people from the Saugeen Ojibway Nation Territories argued the province has not lived up to its legal requirement to consult with them on the plan’s impact.

The lawyer for the two communities, near Wiarton on the Bruce Peninsula, spoke earlier this week at board hearings into the Ontario Power Authority’sproposal for new energy sources.

Arthur Pape reminded board members of the Supreme Court of Canada ruling that Queen’s Park has a legal duty to consult with First Nations on the impact the power plan will have on their lives.

“There’s no way the Saugeen Ojibway could participate meaningfully with government to ensure that this part of the plan could be implemented in a way that protects their rights,” Pape told the board.

Pape says there’s still time to negotiate compensation that may be owed to First Nations for the impact of new wind farms, hydro dams and transmission lines on their hunting and fishing rights and way of life.

But he warned that if the government fails to negotiate, it could mean lengthy delays in getting the plan approved.

“If the government won’t work with them to find a way to accommodate those things, they may find themselves applying to the courts, and asking for the courts to not let this plan be implemented,” he told CBC News.

Neither the government, nor the Ontario Power Authority, which drew up the plan, would comment on Pape’s submissions.

TheOPA’s new plan, which calls for the provincial government to spend $26.5 billion on nuclear power plants, still requires regulatory approval.

The plan also proposes doubling the amount of renewable energy on the grid by 2025 and phasing out coal-fired generation by the end of 2014.

Several energy providers are considering building more wind farms on the Bruce Peninsula to bring power to the south of the province.

Much of that energy will require new transmission lines to be built.

Yukon Premier Dennis Fentie says he’s confident his government’s $36.5-million investment in the global credit market remains secure, even though that money is frozen in what one economist called a “bet that turned out poorly.”

The territorial government, along with hundreds of other investors who poured billions of dollars into the global credit market, have been in limbo since the market was frozen in mid-August.

Canadian corporate lenders say it will take at least another month for the problem to be fixed. While opposition politicians decried what they said was a risky use of taxpayers’ money, Fentie said there’s no reason to panic.

“The unforeseen circumstance that developed has put many in this position, many governments including ourself,” Fentie said Tuesday.

“I got to tell you, I’m not all that concerned about it because we are working closely with the institutions related to this matter. So this is not a loss of money. This is merely an extension of the maturity date.”

What is ABCP?

ABCP asset-backed commercial paper is short-term corporate debt that is made up of a bundle of loans like credit card receivables and car loans. This debt is then resold to other investors, taking the original loans off the books of the company that first issued them. That can lead to lower lending standards because the originator of the loans doesn’t have to worry about collecting.

ABCP tends to yield more than Treasury bills, making it a popular place for money market funds and pension funds to park money. In Canada, about two-thirds of the $120-billion ABCP market is sponsored by the big banks. The rest is known as third-party, or non-bank ABCP.

In 2007, holders of some non-bank Canadian ABCP ran into trouble refinancing the debt when the credit crunch made investors shy away from any investment perceived to be risky.

In the notes to the Yukon’s public accounts documents, which were tabled in the legislative assembly this week, finance officials said they don’t know the status of the $36.5 million invested this summer on a 30-day note known as an asset-backed commercial paper. Such investments pay higher interest than safer government bonds or other investments. ‘Your government took a bet,’ economist says

In August, just before the Yukon’s investment was due to be cashed in, the government and other investors were told that their money was not going to be repaid on time. Finance officials say they expect to learn by mid-December what options they have to recoup the investment.

But David Andolfatto, an economics professor at Simon Fraser University, told CBC News that it could take years before the Yukon government finds out how much it will be able to recoup and there’s no guarantee on how much it will get back.

“Your government took a bet, and the bet turned out poorly,” Andolfatto said Tuesday in an interview.

He said that if the government or any other investors want their money back, they will have to find someone willing to buy their securities.

“Holders of the securities, like your government, don’t want to sell these assets for a low price, and there’s a bunch of buyers [that] don’t want to pay a high price for these securities,” he said.

“So I think that it’s going to take quite a long time before the mess is all sorted out.”

Andolfatto said that while other investors, such as mining companies and stock brokers, are all caught up in the credit market freeze-up, most governments kept their money in safer places.

“This is the first example I have ever heard of a government getting involved,” he said.

“They kind of got suckered in a little bit by the high yield without taking into account that, you know, this is a risky investment.” Past investments paid off big

“The finance minister took a risk with taxpayers’ money and now we may be out $36 million,” Liberal Opposition Leader Arthur Mitchell said during question period Tuesday.

Fentie insisted that not only is the current investment safe, but his government’s other investments over the years have been paying big dividends.

Nearly $7 million was earned by investing last year, and almost $4 million was gainedtwo years ago, he said. That has contributed to the territory’s healthy bank account, which boasts a $269-million surplus.

“So instead of a few hundred thousand dollars of earnings, we’re now in the millions,” Fentie said.

“Year to date, approximately $5 million more in investment earnings. And the Yukon government today also has approximately $200 million of cash.”

Andolfatto suggested the Yukon government could have used its surplus to give Yukoners a tax cut, rather than pour the money into high-risk investments.

“They’re basically using taxpayer money to invest,” he said. “Aren’t Yukon taxpayers capable of rolling their own dice?”