If there was any doubt that junior uranium exploration companies are facing an uphill battle to regain lost value, Cameco's (TSX:CCO, NYSE:CCJ) awful quarter should remove it. And this week just compounded pain upon misery.

Flooding was once again the culprit at the company's flagship Cigar Lake mine. The inflow rate of water began to exceed that at which the existing de-watering equipment was able to remove it, forcing the abandonment of the operation for now.

Cameco plans to make observations from instruments in place to help it determine what next steps are appropriate to get the mine re-started.

The bottleneck is the maximum allowable discharge of treated water the company is permitted to pump out of the shaft, presently limited to 550 cubic metres per hour. There is a 74,000 cubic metre storage pond at surface that could accommodate a higher flow rate.

That was Monday.

Today Cameco released its second quarter earnings, and the news was not good by all accounts.

Revenue was down 16% over the same quarter last year to $620 million, with net earnings of $150 million down from $205 million. Earnings per share fell to $0.44 per share down 41% from $0.54 last year.

Most notable, the company's realized sale price for uranium was only $51.12 per pound, quite a difference from the US$64.50 (CA$67.59) quoted as the official spot price of uranium.

More worryingly, Cameco said its costs of production will rise 10 - 15% now instead of the 5-10% it had stipulated in earlier warnings.

This should be the writing on the wall for investors in junior uranium explorers that sporadic intercepts below 1% uranium will not a uranium mine make. If Cameco, with grades consistently over 15% across the board is seeing diminished sales and higher costs, it will be a long long road before any of these juniors ever see production.

Add to that the diminished financing availability in the soft market, and many of these junior explorers are just going to disappear.

According to Management's Discussion and Analysis,

"Earnings from operations decreased to $283 million in the first six months of 2008 from $304 million in the same period in 2007. In the first half of 2008, the aggregate gross profit margin was 37% unchanged compared to the first half of 2007. Compared to the first six months of 2007, exploration expenditures were $2 million higher, at $32 million, with uranium exploration expenditures up $3 million to $22 million (focused in Saskatchewan, Australia and Nunavut). Gold exploration expenditures at Centerra were $10 million, down $1 million compared to 2007. Interest and other charges were $44 million higher than in the first six months of 2007 due primarily to the recognition of $29 million in mark-to-market losses on hedge contracts that do not qualify for hedge accounting compared to gains of $11 million in the prior year. In addition, investment income in the first half of 2008 was $8 million lower due to reduced cash balances. In the first six months of 2008, foreign exchange losses were $1 million lower than in the same period in 2007. In the first six months of 2008, we recorded an income tax expense of $26 million, based on adjusted net earnings, compared to $22 million in the first half of 2007. The effective income tax rate for the first six months was 8%, compared to 7% in the same period in 2007. In the first six months of 2008, administration costs were $17 million higher due to an increase in the workforce as well as higher charges for recruiting and retention programs and systems enhancements. Stock compensation expense was $4 million higher due to an increase in our share price during the year."

So all is not rosy in the land of the nuclear sun. Investors in juniors should stick to higher quality companies with higher grade projects that look like they could become mines or takeover targets.

Hathor Exploration(TSX.V:HAT has uranium property interests that cover a total 313,010 hectares (773,465 acres) in the Athabasca Basin region of mining-friendly Saskatchewan and Alberta. This part of Canada has the most prospective geology in the world to explore for high-grade, unconformity-style uranium deposits.

Today, in the eastern Athabasca Basin of Saskatchewan, three mine/mill complexes account for about 25% of the world's annual mine production of uranium. Here, Hathor has interests in twelve properties covering a total of 198,716 hectares (491,038 acres) of the same geological terrane that is intimately associated with all currently producing Canadian uranium mines.

In the western Athabasca Basin, Hathor holds interests in two projects that cover about 114,294 hectares (282,427 acres) located near AREVA Resources Canada Inc.'s (formerly COGEMA) past-producing Cluff Lake mine from which over 62 million pounds of U3O8 were produced during that mine's 22-year operating life.

Hathor is expected to be the target of takeover offers from senior mining companies who will want to expand their holdings in the Athabasca if the anticipated global nuclear power build-out materializes.