FINANCIAL POSITION AND OPERATING RESULTS

2.12.1 FINANCIAL STATEMENT

  2.12.1.1 Audit for report of consolidation financial statements of
  year 2008

  1. Mrs. Kesree Narongdej

Certified Public Accountant (Thailand) Registration No.76 and/or

2. Mrs. Natsarak Sarochanunjeen

  Certified Public Accountant (Thailand) Registration No. 4563

A.M.T. & ASSOCIATES

2.  Summary of independent auditor’s report : Unqualified report with
    attention regarding various matters as follows:

a) As described in note No. 28.16 to the financial statements, On May 8,
2008, the Company and a subsidiary company (Sky Cliff Limited) has been
sued on the grounds of a breach of the joint venture agreement, for
amount of Baht 349.40 million. At present, the case is in the process of
the Court’s conciliation. The management, however, believe that the
Company and the subsidiary did not breach the joint venture agreement.
Therefore, there have no liability to repay any compensation regarding
the claim.

b) As described in note No. 11 to the financial statements, the related
company has applied to renew the andesite mining right since year 2005
prior to its expiration date on January 21, 2007. On March 27, 2008, the
Mineral Act Committee has approved the renewal mining right and passed
to the Ministry of Industry for authorized sign by the Minister.

3.  Summary of significant accounting policies

  1. Cash and cash equivalents

  Cash and cash equivalents consist of cash on hand and deposit at banks
  on saving accounts current accounts and fixed deposits terms to be
  matured within 3 months which are not pledged.

  2. Revenue recognition

  Revenue from sale of goods are recognized as revenue when goods are
  delivered and
  the risk and reward of goods ownership are transferred to customer.

  3. Allowance for doubtful accounts

  The company provides the allowance for doubtful accounts by reviewing
  the current status of the existing receivables, and provision were
  estimated on the amounts anticipated uncollectible.

  4. Inventories

  Inventories are stated at the lower of cost (average method) or net
  realisable value.

  5. Investments in subsidiary companies

  Investments in subsidiary companies in the separate financial
  statements are recorded under the cost method.

  Allowance for impairment of investments have provided by taking the
  net book value and other relevant factors into consideration.

  6. Deferred exploration and development expenditure of andesite mining

  Deferred expenditure and development expenditure of andesite mining
  project consists of andesite mining licenses, application expense,
  project consultant fee and exploration and development expenditures.

  Deferred exploration and development expenditure of andesite mining
  are amortized by the straight line method over the period of 25 years.

  7. Deferred exploration and development expenditure of gold mining

  The subsidiary recorded the related expenses of exploration and
  development expenditure of gold mining which expected to have the
  future economic benefits such as acquisition of rights to explore,
  exploratory drilling expenses and other direct related expenses to
  “Deferred exploration and development expenditure of gold mining ”.

  If any indication exists that the above expenditure shall not
  recoverable future benefit, the subsidiary company shall write - off
  all deferred expenditure to expenses.

  Deferred exploration and development expenditure of gold mining are
  amortized when the subsidiary company derive income from operation by
  portion of the production units to the total of gold ore reserve
  estimated by the professional.

  8. Property, plant and equipment

  Property, plant and equipment are stated at cost. Except for land of a
  subsidiary is stated at the appraisal value by an independent valuer
  on November 4, 2005. The appraisal value on land is eliminated from
  the consolidated financial statements due to the excess of the
  investment in a subsidiary over the book value at purchase date.

  Depreciation is calculated on the straight - line method based on the
  estimated useful lives of the assets as follows:

  ------------------------------------------------------ --- ------------
                                                             YEARS

  Land improvement                                           10

  Building, temporary building and dry dock                  10 - 20

  Furniture and office equipment                             3 - 10

  Machinery and equipment                                    5 - 10

  Vehicles                                                   5

  Other                                                      5 - 10
  ------------------------------------------------------ --- ------------

  Tailing ponds are amortized by portion of the production units to the
  total capacity of the tailing ponds.

  9. Intangible assets

  Computer software is stated at cost net of accumulated amortization.
  Amortization is calculated on the straight - line method based on the
  estimated useful lives of 5 years.

  ------------------------------------------------------ --- ------------
                                                             

                                                             

                                                             

                                                             

                                                             

                                                             

                                                             
  ------------------------------------------------------ --- ------------

  10. Deferred environmental restoration expenditures

Deferred environmental restoration expenditures consisted of:

  - Expenditure for rehabilitation of the concession area are amortized
  on the straight - line method over the remaining life of mining
  licenses.

  - Expenditure for forest restoration are amortized on the straight -
  line method over the remaining life of the permit for mining operation
  in the concession forest area.

  11. Deferred arranging fee

  Deferred arranging fee is amortized over the period of 4 years on the
  straight - line method.

  12. Provision for environmental restoration

  Future expenses relating to environmental liabilities have arisen as a
  result of past events, the Company establishes a provision when the
  obligation is incurred and charge to the statement of income over the
  remains of useful life of mining right and permission. These
  provisions are made on the best estimation of expenses which pay to
  current obligation on balance sheet date.

  13. Financial lease agreements

  The Company and subsidiaries record vehicles under lease agreements,
  as assets and liabilities in the balance sheets at amounts equal to
  fair value of the leased property at the inception of the lease or ,if
  lower, at the present value of the minimum lease payments.
  In calculating the present value of the minimum lease payments, the
  discount factor used is the interest rate implicit in the lease. The
  interest charge is recorded to periods during the lease term based on
  the remaining balance of the liability for each period.

  14. Financial instruments

  Financial instruments carried in the balance sheets include cash and
  cash equivalents, investments, trade accounts receivable and payable,
  bank overdrafts, loans, account payable for purchase of assets,
  accrued expenses, and finance lease obligations. The particular
  recognition methods adopted are disclosed in the individual policy
  statements associated with each item.

  15. Foreign currency transaction

  Transactions in foreign currency are converted at the exchange rate of
  the transaction date. Assets and liabilities in foreign currencies at
  the end of years are converted at average bank buying and selling rate
  at that date respectively.

  Gain or loss from translation are included in determining earnings.

  16. Impairment of assets

  The Company and subsidiaries review impairment of assets when there is
  an indication that the carrying amount of the assets may exceed the
  recoverable amount. Should the carrying amount of an asset be higher
  than the recoverable amount, the Company recognize the impairment loss
  in the statement of income. The reversal of impairment losses is
  recorded when there is an indication that impairment losses no longer
  exist or have decreased by crediting to “Other income”.

  17. Basic earnings (loss) per share

  Basic earnings (loss) per share was determined by dividing the net
  profit (loss) by the weighted average number of shares outstanding.

  18. Accounting judgments and estimates

  The preparation of financial statements in conformity with generally
  accepted accounting principles at times requires management to make
  subjective judgments and estimates regarding matters that are
  inherently uncertain. These judgments and estimates affect the
  reported amounts and disclosures and actual results could differ.

  19. Employee benefits

  Salaries, wages, bonuses, contributions to the social security fund
  and other benefits are recognized as expenses when incurred.

  The Company and its subsidiaries do not recognize liabilities in
  respect of employee benefit potentially payable under the Thai Labour
  Law.

4.  Summary of financial statement

Comparative financial statements and consolidated financial statements
for the past two consecutive years (Audited Account).

  --------------------------------------------------- -------------- --------------- -- -- -- ------- --- -------------- --------- ----------- --------- ------------ --------- ----------- --------- ----
  TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS                                                                                                                                                      
  SUBSIDIARIES                                                                                                                                                                                        

  BALANCE SHEETS                                                                                                                                                                                      

  AS OF DECEMBER 31, 2008 AND 2007                                                                                                                                                                    

  ASSETS                                                                                                                                                                                              

                                                                                                                                                                                                      

                                                                                                          Thousand Baht                                                                               

                                                                                                          Consolidated                                   Separate                                     
                                                                                                          financial                                      financial                                    
                                                                                                          statements                                     statements                                   

                                                                                              Note        2008                     2007                  2008                   2007                  

                                                                                                                                                                                                      

  CURRENT ASSETS                                                                                                                                                                                      

                                                      Cash and cash                           5           356,387        15.02%    5,475       0.29%     421          0.04%     83          0.01%     
                                                      equivalents                                                                                                                                     

                                                      Trade accounts                          6           147,748        6.23%     3,742       0.20%     252          0.02%     2,007       0.19%     
                                                      receivable,                                                                                                                                     
                                                      net                                                                                                                                             

                                                      Short - term                            4           10             0.00%     257         0.01%     -            0.00%     -           0.00%     
                                                      loans to                                                                                                                                        
                                                      related party                                                                                                                                   

                                                      Inventories,                            7           103,353        4.36%     62,252      3.28%     9,483        0.82%     10,279      0.96%     
                                                      net                                                                                                                                             

                                                      Other current                                                                                                                                   
                                                      assets                                                                                                                                          

                                                                     - Deposit over                   8                  3,058     0.13%       3,444     0.18%        -         0.00%       0.00%     
                                                                     estimate gold                                                                                                                    
                                                                     royalty fee -                                                                                                                    
                                                                     DPIM                                                                                                                             

                                                                     - General                            2,582          0.11%     2,643       0.14%     36           0.00%     82          0.01%     
                                                                     advance                                                                                                                          

                                                                     - Input tax                          5,084          0.21%     11,263      0.59%     2,890        0.25%     2,585       0.24%     
                                                                     refundable                                                                                                                       

                                                                     - Other                              16,876         0.71%     14,485      0.76%     609          0.05%     1,974       0.18%     

  TOTAL CURRENT ASSETS                                                                                    635,098        26.77%    103,561     5.45%     13,691       1.19%     17,010      1.58%     

  NON - CURRENT ASSETS                                                                                                                                                                                

                                                      Long - term                                                                                                                                     
                                                      investments                                                                                                                                     

                                                                     - Deposits at            9, 19       180,815        7.62%     209,469     11.03%    500          0.04%     -           0.00%     
                                                                     banks                    and 20                                                                                                  

                                                                     - Investments            10, 19      -              0.00%     -           0.00%     738,181      63.90%    658,590     61.21%    
                                                                     in                       and 20                                                                                                  
                                                                     subsidiaries,                                                                                                                    
                                                                     net                                                                                                                              

                                                      Deferred                                                                                                                                        
                                                      expenditures                                                                                                                                    
                                                      of other                                                                                                                                        
                                                      projects, net                                                                                                                                   

                                                                     - Andesite               11          11,829         0.50%     12,822      0.68%     11,829       1.02%     12,822      1.19%     
                                                                     mining                                                                                                                           

                                                                     - Gold mining            12          269,510        11.36%    334,481     17.62%    -            0.00%     -           0.00%     

                                                                     - Phuket                 13          -              0.00%     -           0.00%     -            0.00%     -           0.00%     
                                                                     project                                                                                                                          

                                                      Long - term                             4           1,708          0.07%     2,212       0.12%     245,735      21.27%    250,842     23.31%    
                                                      loans to                                                                                                                                        
                                                      related                                                                                                                                         
                                                      parties, net                                                                                                                                    

                                                      Advance to                              14          22,621         0.95%     -           0.00%     22,621       1.96%     -           0.00%     
                                                      other company                                                                                                                                   

                                                      Property,                               15, 19      1,195,570      50.40%    1,198,570   63.13%    102,889      8.91%     118,044     10.97%    
                                                      plant and                               and 20                                                                                                  
                                                      equipment, net                                                                                                                                  

                                                      Intangibla                              16          1,673          0.07%     1,957       0.10%     663          0.06%     617         0.06%     
                                                      assets, net                                                                                                                                     

                                                      Advance                                                                                                                                         
                                                      payment for                                                                                                                                     
                                                      purchase of                                                                                                                                     
                                                      land                                                                                                                                            

                                                                     - andesite               17 and      17,687         0.75%     17,687      0.93%     17,687       1.53%     17,687      1.64%     
                                                                     mining project           19                                                                                                      

                                                      Advance                                             24,660         1.04%     -           0.00%     -            0.00%     -           0.00%     
                                                      payment for                                                                                                                                     
                                                      machinery                                                                                                                                       

                                                      Goodwill                                            594            0.03%     594         0.03%     -            0.00%     -           0.00%     

                                                      Other non -                             18          10,615         0.45%     17,245      0.91%     1,436        0.12%     425         0.04%     
                                                      current assets                                                                                                                                  

  TOTAL NON - CURRENT ASSETS                                                                              1,737,282      73.23%    1,795,037   94.55%    1,141,541    98.81%    1,059,027   98.42%    

  TOTAL ASSETS                                                                                            2,372,380      100.00%   1,898,598   100.00%   1,155,232    100.00%   1,076,037   100.00%   

                                                                                                                                                                                                      

  The accompanying notes to financial statements are                                                                                                                                                  
  an integral part of these statements.                                                                                                                                                               

                                                                                                                                                                                                      

  _________________________________________                                                                                                                                                           
  DIRECTOR_________________________________________                                                                                                                                                   
  DIRECTOR                                                                                                                                                                                            
  --------------------------------------------------- -------------- --------------- -- -- -- ------- --- -------------- --------- ----------- --------- ------------ --------- ----------- --------- ----

  --------------------------------------------------- --------------- ---------------- ------------- -- --------- -- ------ -- --------- -------------- --------- ----------- --------- ------------ --------- ----------- ---------
  TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS                                                                                                                                                                           
  SUBSIDIARIES                                                                                                                                                                                                             

  BALANCE SHEETS (Continued)                                                                                                                                                                                               

  AS OF DECEMBER 31, 2008 AND 2007                                                                                                                                                                                         

  LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                     

                                                                                                                                                                                                                           

                                                                                                                                         Thousand Baht                                                                     

                                                                                                                                         Consolidated                                   Separate                            
                                                                                                                                         financial                                      financial                          
                                                                                                                                         statements                                     statements                         

                                                                                                                     Note                2008                     2007                  2008                   2007         

                                                                                                                                                                                                                           

  CURRENT LIABILITIES                                                                                                                                                                                                      

                                                      Bank overdrafts                                                15, 17              15,697         0.66%     26,493      1.40%     15,697       1.36%     4,511       0.42%
                                                                                                                     and 19                                                                                                

                                                      Trade accounts                                    - related    4                   -              0.00%     -           0.00%     470          0.04%     14,942      1.39%
                                                      payable                                           party                                                                                                              

                                                                                                        - other                42,642                   1.80%     47,870      2.52%     8            0.00%     94          0.01%
                                                                                                        parties                                                                                                            

                                                      Current portion                                                20                  320,366        13.50%    223,195     11.76%    6,864        0.59%     11,414      1.06%
                                                      of long - term                                                                                                                                                       
                                                      loans                                                                                                                                                                

                                                      Short - term                                                   4                   -              0.00%     1,388       0.07%     -            0.00%     -           0.00%
                                                      loans from                                                                                                                                                           
                                                      related parties                                                                                                                                                      

                                                      Current portion                                                21                  11,716         0.49%     12,129      0.64%     2,637        0.23%     900         0.08%
                                                      of finance                                                                                                                                                           
                                                      lease                                                                                                                                                                
                                                      obligations                                                                                                                                                          

                                                      Other current                                                                                                                                                        
                                                      liabilities                                                                                                                                                          

                                                                      - Accrued                                                          17,192         0.72%     17,360      0.91%     3,137        0.27%     3,064       0.28%
                                                                      expenses                                                                                                                                             

                                                                      - Accrued the                                  8                   72,471         3.05%     20,890      1.10%     -            0.00%     -           0.00%
                                                                      land usage fee -                                                                                                                                     
                                                                      ALRO                                                                                                                                                 

                                                                      - Account                                                          3,832          0.16%     -           0.00%     -            0.00%     -           0.00%
                                                                      payable on                                                                                                                                           
                                                                      decrease capital                                                                                                                                     

                                                                      - Other                                                            5,195          0.22%     16,817      0.89%     1,134        0.10%     1,145       0.11%

  TOTAL CURRENT LIABILITIES                                                                                                              489,111        20.62%    366,142     19.28%    29,947       2.59%     36,070      3.35%

  NON - CURRENT LIABILITIES                                                                                                                                                                                                

                                                      Long - term                                                    4                   -              0.00%     101         0.01%     34,841       3.02%     43,947      4.08%
                                                      loans from                                                                                                                                                           
                                                      related parties                                                                                                                                                      

                                                      Long - term                                                    9, 10,              699,648        29.49%    447,063     23.55%    7,960        0.69%     22,718      2.11%
                                                      loans                                                          15 and                                                                                                
                                                                                                                     20                                                                                                    

                                                      Finance lease                                                  21                  11,198         0.47%     18,685      0.98%     -            0.00%     2,637       0.25%
                                                      obligations                                                                                                                                                          

                                                      Provision for                                                                      7,048          0.30%     7,048       0.37%     250          0.02%     250         0.02%
                                                      environmental                                                                                                                                                        
                                                      restoration                                                                                                                                                          
                                                      expenses                                                                                                                                                             

  TOTAL NON - CURRENT LIABILITIES                                                                                                        717,894        30.26%    472,897     24.91%    43,051       3.73%     69,552      6.46%

  TOTAL LIABILITIES                                                                                                                      1,207,005      50.88%    839,039     44.19%    72,998       6.32%     105,622     9.82%

  SHAREHOLDERS' EQUITY                                                                                                                                                                                                     

                                                      Share capital                                                                                                                                                        

                                                                      Authorized share                                                                                                                                     
                                                                      capital                                                                                                                                              

                                                                                       756,939,463                             756,940                  31.91%    756,940     39.87%    756,940      65.52%    756,940     70.35%
                                                                                       ordinary                                                                                                                            
                                                                                       shares of                                                                                                                           
                                                                                       Baht 1 each                                                                                                                         

                                                                      Issued and fully                                                   756,940        31.91%    756,940     39.87%    756,940      65.52%    756,940     70.35%
                                                                      paid - up share                                                                                                                                      
                                                                      capital                                                                                                                                              

                                                      Premium on                                                                         358,607        15.12%    358,607     18.89%    358,607      31.04%    358,607     33.33%
                                                      common stocks,                                                                                                                                                       
                                                      net                                                                                                                                                                  

                                                      Dificit from                                                   10                  (4,450)        -0.19%    (5,197)     -0.27%    -            0.00%     -           0.00%
                                                      change in                                                                                                                                                            
                                                      equity interest                                                                                                                                                      
                                                      of subsidiary                                                                                                                                                        

                                                      Retained                                                                                                                                                             
                                                      earnings                                                                                                                                                             
                                                      (deficit)                                                                                                                                                            

                                                                      Unappropriated                                                     (34,060)       -1.44%    (145,879)   -7.68%    (33,313)     -2.88%    (145,132)   -13.49%

                                                      Shareholders'                                                                      1,077,037      45.40%    964,471     50.80%    1,082,234    93.68%    970,415     90.18%
                                                      Equity of the                                                                                                                                                        
                                                      Company                                                                                                                                                              

                                                      Minority                                                                           88,338         3.72%     95,088      5.01%     -            0.00%     -           0.00%
                                                      Interest                                                                                                                                                             

  TOTAL SHAREHOLDERS' EQUITY                                                                                                             1,165,375      49.12%    1,059,559   55.81%    1,082,234    93.68%    970,415     90.18%

  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                             2,372,380      100.00%   1,898,598   100.00%   1,155,232    100.00%   1,076,037   100.00%

                                                                                                                                                                                                                           

  The accompanying notes to financial statements are                                                                                                                                                                       
  an integral part of these statements.                                                                                                                                                                                    

                                                                                                                                                                                                                           

  _________________________________________                                                                                                                                                                                
  DIRECTOR_________________________________________                                                                                                                                                                        
  DIRECTOR                                                                                                                                                                                                                 
  --------------------------------------------------- --------------- ---------------- ------------- -- --------- -- ------ -- --------- -------------- --------- ----------- --------- ------------ --------- ----------- ---------

  --------------------------------------------------- ---------------- -------------- -- -- -- -- -- ---- ------ -- -- -------------- --------- ----------- --------- ------------ --------- ----------- ----------
  TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS                                                                                                                                                         
  SUBSIDIARIES                                                                                                                                                                                           

  STATEMENTS OF INCOME                                                                                                                                                                                   

  FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007                                                                                                                                                         

                                                                                                                                                                                                         

                                                                                                                       Thousand Baht                                                                     

                                                                                                                       Consolidated                                   Separate                           
                                                                                                                       financial                                      financial                          
                                                                                                                       statements                                     statements                         

                                                                                                          Note         2008                     2007                  2008                   2007        

                                                                                                                                                                                                         

  REVENUES                                                                                                                                                                                               

                                                      Revenue from the                                                                                                                                   
                                                      sale of                                                                                                                                            

                                                                       - Andesite                                      4,633          0.47%     8,980       1.89%     4,633        2.63%     8,980       34.78%
                                                                       sales                                                                                                                             

                                                                       - Gold sales                                    881,418        89.90%    419,118     88.27%    -            0.00%     -           0.00%

                                                      Gain on exchange                                    24           -              0.00%     26,922      5.67%     547          0.31%     -           0.00%
                                                      rate                                                                                                                                               

                                                      Adjustment for                                                                                                                                     
                                                      decrease in                                                                                                                                        
                                                      impairment on                                                                                                                                      
                                                      investment                                                                                                                                         

                                                                       in                                              -              0.00%     -           0.00%     79,597       45.12%    -           0.00%
                                                                       subsidiaries                                                                                                                      

                                                      Other income                                                                                                                                       

                                                                       - Gain from                   25                7,116          0.73%     -           0.00%     -            0.00%     -           0.00%
                                                                       sales of                                                                                                                          
                                                                       purchase gold,                                                                                                                    
                                                                       net                                                                                                                               

                                                                       - Gain on                                       77,901         7.95%     -           0.00%     77,901       44.15%    -           0.00%
                                                                       sales of fixed                                                                                                                    
                                                                       assets                                                                                                                            

                                                                       - Interest                         4            7,310          0.75%     16,554      3.49%     10,751       6.09%     13,987      54.17%
                                                                       income                                                                                                                            

                                                                       - Other                            4            2,031          0.21%     3,236       0.68%     3,000        1.70%     2,853       11.05%

  TOTAL REVENUES                                                                                          22           980,409        100.00%   474,810     100.00%   176,429      100.00%   25,820      100.00%

  EXPENSES                                                                                                                                                                                               

                                                      Cost of the                                                                                                                                        
                                                      sales of                                                                                                                                           

                                                                       - Cost of                          4            3,858          0.39%     8,125       1.71%     3,758        2.13%     7,822       30.29%
                                                                       andesite sales                                                                                                                    

                                                                       - Cost of gold                                  410,960        41.92%    312,722     65.86%    -            0.00%     -           0.00%
                                                                       sales                                                                                                                             

                                                      Selling expenses                                                 752            0.08%     574         0.12%     -            0.00%     -           0.00%

                                                      Administrative                                      4            233,549        23.82%    145,314     30.60%    38,715       21.94%    28,090      108.79%
                                                      expenses                                                                                                                                           

                                                      Management                                                       34,292         3.50%     27,258      5.74%     10,700       6.06%     9,370       36.29%
                                                      benefit expenses                                                                                                                                   

                                                      Doubtful debts                                                   37             0.00%     244         0.05%     7,852        4.45%     18,785      72.75%

                                                      Adjustment for                                                                                                                                     
                                                      increase in                                                                                                                                        
                                                      impairment on                                                                                                                                      

                                                                       investment in                                   -              0.00%     -           0.00%     -            0.00%     105,438     408.36%
                                                                       subsidiary                                                                                                                        
                                                                       companies                                                                                                                         

                                                      Amortization on                                                                                                                                    
                                                      exploration                                                                                                                                        
                                                      expenditures                                                                                                                                       

                                                                       of gold mining                     12           62,229         6.35%     53,801      11.33%    -            0.00%     -           0.00%
                                                                       project                                                                                                                           

                                                      Loss on exchange                                    24           41,765         4.26%     -           0.00%     -            0.00%     -           0.00%
                                                      rate                                                                                                                                               

                                                      Loss from sales                                     25           -              0.00%     4,569       0.96%     -            0.00%     -           0.00%
                                                      of purchased                                                                                                                                       
                                                      gold, net                                                                                                                                          

  TOTAL EXPENSES                                                                                          23           787,442        80.32%    552,607     116.38%   61,025       34.59%    169,505     656.49%

  PROFIT (LOSS) BEFORE FINANCE COSTS                                                                                   192,967        19.68%    (77,797)    -16.38%   115,404      65.41%    (143,685)   -556.49%

  FINANCE COSTS                                                                                           4            83,324         8.50%     75,378      15.88%    3,585        2.03%     4,265       16.52%

  NET PROFIT (LOSS)                                                                                                    109,643        11.18%    (153,175)   -32.26%   111,819      63.38%    (147,950)   -573.01%

                                                                                                                                                                                                         

  NET PROFIT (LOSS) ATTRIBUTABLE TO :                                                                                                                                                                    

                                                      EQUITY HOLDERS                                                   111,819        11.40%    (147,950)   -31.16%   111,819      63.38%    (147,950)   -573.0%
                                                      OF THE PARENT                                                                                                                                      

                                                      MINORITY                                                         (2,176)        -2.46%    (5,225)     -5.49%    -            0.00%     -           0.00%
                                                      INTERESTS                                                                                                                                          

                                                                                                                       109,643        9.41%     (153,175)   -14.46%   111,819      10.33%    (147,950)   -15.25%

  BASIC EARNINGS (LOSS) PER SHARE (BAHT PER SHARE)                                                                                                                                                       

                                                      NET PROFIT                                                                                                                                         
                                                      (LOSS)                                                                                                                                             
                                                      ATTRIBUTABLE TO                                                                                                                                    
                                                      EQUITY HOLDERS                                                                                                                                     

                                                                       OF THE PARENT                                   0.15                     (0.20)                0.15                   (0.20)      

                                                                                                                                                                                                         

  THE WEIGHTED AVERAGE NUMBER                                                                                                                                                                            

                                                      OF ORDINARY                                                      756,940                  756,940               756,940                756,940     
                                                      SHARES (THOUSAND                                                                                                                                   
                                                      SHARES)                                                                                                                                            

                                                                                                                                                                                                         

                                                                                                                                                                                                         

                                                                                                                                                                                                         

  The accompanying notes to financial statements are                                                                                                                                                     
  an integral part of these statements.                                                                                                                                                                  

                                                                                                                                                                                                         

  _________________________________________                                                                                                                                                              
  DIRECTOR_________________________________________                                                                                                                                                      
  DIRECTOR                                                                                                                                                                                               
  --------------------------------------------------- ---------------- -------------- -- -- -- -- -- ---- ------ -- -- -------------- --------- ----------- --------- ------------ --------- ----------- ----------

  --------------------------------------------------- --------------- -------------- -------------- ------------ --------- -- -- -------------- -- ----------- -- -- ------------ -- ----------- ---------
  TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS                                                                                                                                                 
  SUBSIDIARIES                                                                                                                                                                                   

  STATEMENTS OF CASH FLOW                                                                                                                                                                        

  FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007                                                                                                                                                 

                                                                                                                                                                                                 

                                                                                                                                 Thousand Baht                                                   

                                                                                                                                 Consolidated                        Separate                    
                                                                                                                                 financial                           financial                   
                                                                                                                                 statements                          statements                  

                                                                                                                                 2008              2007              2008            2007        

                                                                                                                                                                                                 

  CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                           

                                                      Net profit                                                                 109,643           (153,175)         111,819         (147,950)   
                                                      (loss)                                                                                                                                     

                                                      Adjustment to                                                                                                                              
                                                      reconcile net                                                                                                                              
                                                      loss to net                                                                                                                                
                                                      cash inflow                                                                                                                                
                                                      (outflow)                                                                                                                                  

                                                      from operating                                                                                                                             
                                                      activities :-                                                                                                                              

                                                                      Depreciation                                               112,598           85,561            5,489           6,216       
                                                                      and                                                                                                                        
                                                                      amortization                                                                                                               

                                                                      Doubtful debts                                             37                244               7,852           18,785      

                                                                      Loss from                                                  -                 307               -               307         
                                                                      decline in                                                                                                                 
                                                                      value of                                                                                                                   
                                                                      inventories                                                                                                                

                                                                      Amortization                                               993               992               993             992         
                                                                      on                                                                                                                         
                                                                      expenditures                                                                                                               
                                                                      of andesite                                                                                                                
                                                                      mining project                                                                                                             

                                                                      Amortization                                               64,971            53,801            -               -           
                                                                      on exploration                                                                                                             
                                                                      expenditures                                                                                                               
                                                                      of gold mining                                                                                                             
                                                                      project                                                                                                                    

                                                                      Impairment                                                 -                 -                 -               -           
                                                                      loss on Phuket                                                                                                             
                                                                      project                                                                                                                    

                                                                      Adjustment for                                                                                                             
                                                                      increase                                                                                                                   
                                                                      (decrease) in                                                                                                              
                                                                      impairment on                                                                                                              

                                                                                     investment in                               -                 -                 (79,597)        105,438     
                                                                                     subsidiary                                                                                                  
                                                                                     companies                                                                                                   

                                                                      Loss (gain) on                                             (77,393)          (658)             (77,393)        -           
                                                                      sale fixed                                                                                                                 
                                                                      assets                                                                                                                     

                                                                      Unrealised                                                 44,343            (49,878)          (547)           -           
                                                                      loss (gain) on                                                                                                             
                                                                      exchange rate                                                                                                              

                                                                      Disposal of                                                3,209             (579)             -               -           
                                                                      fixed assets                                                                                                               

                                                                      Interest                                                   (7,310)           (16,554)          (10,751)        (13,987)    
                                                                      income                                                                                                                     

                                                                      Interest                                                   62,283            68,932            3,585           4,265       
                                                                      expenses                                                                                                                   

                                                                      Goodwill                                                   -                 78                -               -           
                                                                      amortization                                                                                                               

                                                                                                                                 313,374           (10,929)          (38,550)        (25,934)    

                                                      Decrease                                                                                                                                   
                                                      (increase) in                                                                                                                              
                                                      operating                                                                                                                                  
                                                      assets :-                                                                                                                                  

                                                                      Trade accounts                                             (144,632)         5,392             1,792           4,498       
                                                                      receivable,                                                                                                                
                                                                      net                                                                                                                        

                                                                      Short - term                                               247               (257)             -               -           
                                                                      advances to                                                                                                                
                                                                      related party                                                                                                              

                                                                      Inventories,                                               (41,101)          (17,365)          796             3,344       
                                                                      net                                                                                                                        

                                                                      Other current                                              5,738             21,826            2,124           250         
                                                                      assets                                                                                                                     

                                                                      Advance to                                                 (22,074)          -                 (6,568)         -           
                                                                      other company                                                                                                              

                                                                      Other                                                      -                 333               -               (2,800)     
                                                                      receivable -                                                                                                               
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                                      Other non -                                                (24,743)          (3,254)           (1,115)         149         
                                                                      current assets                                                                                                             

                                                      Increase                                                                                                                                   
                                                      (decrease) in                                                                                                                              
                                                      operating                                                                                                                                  
                                                      liabilities :-                                                                                                                             

                                                                      Trade account                                              -                 -                 (1,097)         (3,289)     
                                                                      payables -                                                                                                                 
                                                                      related party                                                                                                              

                                                                      Trade account                                              (5,228)           34,481            (86)            (780)       
                                                                      payables -                                                                                                                 
                                                                      other party                                                                                                                

                                                                      Short - term                                               (1,388)           413               -               -           
                                                                      advances from                                                                                                              
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                                      Accrued                                                                                                                    
                                                                      expense on                                                                                                                 
                                                                      payment of the                                                                                                             
                                                                      extra benefit                                                                                                              
                                                                      to DPIM                                                                                                                    

                                                                                     under the                                                                                                   
                                                                                     agreement                                                                                                   
                                                                                     dated March                                                                                                 
                                                                                     30, 2007                                                                                                    
                                                                                     (recorded the                                                                                               

                                                                                     adjustment on                               -                 (4,074)           -               -           
                                                                                     July 9, 2007)                                                                                               

                                                                      Other current                                              10,484            16,360            (839)           (6,214)     
                                                                      liabilities                                                                                                                

                                                                      Income tax                                                 (1,502)           -                 (1,018)         -           
                                                                      paid                                                                                                                       

                                                                      Interest paid                                              (960)             (710)             (960)           (1,066)     
                                                                      for short -                                                                                                                
                                                                      term loans                                                                                                                 

                                                                                                    Net cash                     88,215            42,216            (45,521)        (31,842)    
                                                                                                    inflow                                                                                       
                                                                                                    (outflow)                                                                                    
                                                                                                    from                                                                                         
                                                                                                    operating                                                                                    
                                                                                                    activities                                                                                   

                                                                                                                                                                                                 

                                                                                                                                                                                                 

                                                                                                                                                                                                 

                                                                                                                                                                                                 

  The accompanying notes to financial statements are                                                                                                                                             
  an integral part of these statements.                                                                                                                                                          

                                                                                                                                                                                                 

  _________________________________________                                                                                                                                                      
  DIRECTOR_________________________________________                                                                                                                                              
  DIRECTOR                                                                                                                                                                                       

  - 2 -                                                                                                                                                                                          

  TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS                                                                                                                                                 
  SUBSIDIARIES                                                                                                                                                                                   

  STATEMENTS OF CASH FLOW (Continued)                                                                                                                                                            

  FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007                                                                                                                                                 

                                                                                                                                                                                                 

                                                                                                                                 Thousand Baht                                                   

                                                                                                                                 Consolidated                        Separate                    
                                                                                                                                 financial                           financial                   
                                                                                                                                 statements                          statements                  

                                                                                                                                 2008              2007              2008            2007        

                                                                                                                                                                                                 

  CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                                           

                                                                      Decrease                                                   -                 -                 -               (45,198)    
                                                                      (increase) in                                                                                                              
                                                                      investments in                                                                                                             
                                                                      subsidiary                                                                                                                 
                                                                      companies                                                                                                                  

                                                                      Decrease                                                   36,300            (133,969)         (500)           -           
                                                                      (increase) in                                                                                                              
                                                                      long - term                                                                                                                
                                                                      investment in                                                                                                              
                                                                      deposits at                                                                                                                
                                                                      banks                                                                                                                      

                                                                      Decrease                                                                                                                   
                                                                      (increase) in                                                                                                              
                                                                      deferred                                                                                                                   
                                                                      exploration                                                                                                                
                                                                      expenditures                                                                                                               
                                                                      of                                                                                                                         

                                                                                     gold mining                                 -                 (229)             -               -           
                                                                                     project                                                                                                     

                                                                      Decrease                                                   504               -                 (38,828)        58,497      
                                                                      (increase) in                                                                                                              
                                                                      long - term                                                                                                                
                                                                      loans to                                                                                                                   
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                                      Payment for                                                (96,487)          (189,545)         (929)           (1,756)     
                                                                      purchases                                                                                                                  
                                                                      property,                                                                                                                  
                                                                      plant and                                                                                                                  
                                                                      equipment                                                                                                                  

                                                                      Proceeds from                                              88,050            10,141            88,050          -           
                                                                      sales fixed                                                                                                                
                                                                      assets                                                                                                                     

                                                                      Interest                                                   7,310             16,554            10,751          13,987      
                                                                      received                                                                                                                   

                                                                                                    Net cash                     35,677            (297,048)         58,544          25,530      
                                                                                                    inflow                                                                                       
                                                                                                    (outflow)                                                                                    
                                                                                                    from                                                                                         
                                                                                                    investing                                                                                    
                                                                                                    activities                                                                                   

                                                                                                                                                                                                 

  CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                                           

                                                                      Increase                                                                                                                   
                                                                      (decrease) in                                                                                                              
                                                                      bank                                                                                                                       
                                                                      overdrafts and                                                                                                             
                                                                      short - term                                                                                                               
                                                                      loans                                                                                                                      

                                                                                     from financial                              (10,796)          (29,538)          11,186          (1,520)     
                                                                                     institutions                                                                                                

                                                                      Increase                                                   -                 -                 -               (972)       
                                                                      (decrease) in                                                                                                              
                                                                      short - term                                                                                                               
                                                                      loans from                                                                                                                 
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                                      Increase                                                   (101)             (852)             (1,941)         34,604      
                                                                      (decrease) in                                                                                                              
                                                                      long - term                                                                                                                
                                                                      loans from                                                                                                                 
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                                      Increase                                                   287,082           303,158           (19,308)        (20,525)    
                                                                      (decrease) in                                                                                                              
                                                                      long - term                                                                                                                
                                                                      loans                                                                                                                      

                                                                      Increase                                                   (7,900)           (6,571)           (900)           (1,488)     
                                                                      (decrease) in                                                                                                              
                                                                      finance lease                                                                                                              
                                                                      obligations                                                                                                                

                                                                      Interest paid                                              (53,053)          (60,857)          (1,722)         (3,849)     
                                                                      for long -                                                                                                                 
                                                                      term loans                                                                                                                 

                                                                      Decrease                                                   (16,608)          (22,487)          -               -           
                                                                      (increase) in                                                                                                              
                                                                      deferred                                                                                                                   
                                                                      arranging fee                                                                                                              

                                                                                                    Net cash                     198,624           182,853           (12,685)        6,250       
                                                                                                    inflow                                                                                       
                                                                                                    (outflow)                                                                                    
                                                                                                    from                                                                                         
                                                                                                    financing                                                                                    
                                                                                                    activities                                                                                   

                                                                                                                                                                                                 

  EFFECT OF EXCHANGE RATE CHANGE ON CASH                                                                                                                                                         

                                                      AND CASH                                                                   28,396            -                 -               -           
                                                      EQUIVALENT                                                                                                                                 

                                                                                                                                                                                                 

  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS,                                                                              350,912           (71,979)          338             (62)        
  NET                                                                                                                                                                                            

                                                                                                                                                                                                 

  CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                                                 5,475             77,454            83              145         

                                                                                                                                                                                                 

  CASH AND CASH EQUIVALENTS AT END OF YEAR                                                                                       356,387           5,475             421             83          

                                                                                                                                                                                     …/3         

  The accompanying notes to financial statements are                                                                                                                                             
  an integral part of these statements.                                                                                                                                                          

                                                                                                                                                                                                 

  _________________________________________                                                                                                                                                      
  DIRECTOR_________________________________________                                                                                                                                              
  DIRECTOR                                                                                                                                                                                       

  - 3 -                                                                                                                                                                                          

  TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS                                                                                                                                                 
  SUBSIDIARIES                                                                                                                                                                                   

  STATEMENTS OF CASH FLOW (Continued)                                                                                                                                                            

  FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007                                                                                                                                                 

                                                                                                                                                                                                 

                                                                                                                                 Thousand Baht                                                   

                                                                                                                                 Consolidated                        Separate                    
                                                                                                                                 financial                           financial                   
                                                                                                                                 statements                          statements                  

                                                                                                                                 2008              2007              2008            2007        

                                                                                                                                                                                                 

  ACTIVITIES                                                                                                                                                                                     

                                                      NOT AFFECT CASH                                                                                                                            

                                                      Write - off                                                                1,784             -                 1,784           -           
                                                      inventories and                                                                                                                            
                                                      allowance for                                                                                                                              
                                                      declining value                                                                                                                            
                                                      of inventories                                                                                                                             

                                                      Transfer                                                                   388               -                 388             -           
                                                      inventory to                                                                                                                               
                                                      property, plant                                                                                                                            
                                                      and equipment                                                                                                                              

                                                      Increase                                                                                                                       -           
                                                      (decrease) in                                                                                                                              
                                                      provision for                                                                                                                              
                                                      environmental                                                                                                                              

                                                                      restoration                                                -                 1,797             -               -           
                                                                      expenses                                                                                                                   

                                                      Increase in                                                                                                                                
                                                      dificit from                                                                                                                               
                                                      change in                                                                                                                                  
                                                      equity interest                                                                                                                            

                                                                      of subsidiary                                              747               (5,197)           -               -           

                                                      Transfer other                                                             4,968             -                 -               -           
                                                      non - current                                                                                                                              
                                                      assets to                                                                                                                                  
                                                      property, plant                                                                                                                            
                                                      and equipment                                                                                                                              

                                                      Transfer                                                                   3,827             -                 -               -           
                                                      minority                                                                                                                                   
                                                      interst to                                                                                                                                 
                                                      account payable                                                                                                                            
                                                      on decrease                                                                                                                                
                                                      capital                                                                                                                                    

                                                      Transfer loans                                                                                                                             
                                                      to related                                                                                                                                 
                                                      parties to                                                                                                                                 
                                                      off - set                                                                                                                                  
                                                      agains trade                                                                                                                               
                                                      account                                                                                                                                    
                                                      payables,                                                                                                                                  

                                                                      advance and                                                -                 -                 36,046          -           
                                                                      loans from                                                                                                                 
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                      Transfer from                                                                                                                              
                                                      other                                                                                                                                      
                                                      receivable -                                                                                                                               
                                                      related parties                                                                                                                            
                                                      to                                                                                                                                         

                                                                      long - term                                                -                 -                 -               2,974       
                                                                      loans to                                                                                                                   
                                                                      related                                                                                                                    
                                                                      parties                                                                                                                    

                                                                                                                                                                                                 

  The accompanying notes to financial statements are                                                                                                                                             
  an integral part of these statements.                                                                                                                                                          

                                                                                                                                                                                                 

  _________________________________________                                                                                                                                                      
  DIRECTOR_________________________________________                                                                                                                                              
  DIRECTOR                                                                                                                                                                                       
  --------------------------------------------------- --------------- -------------- -------------- ------------ --------- -- -- -------------- -- ----------- -- -- ------------ -- ----------- ---------

[TABLE]

  -- -- -- -- -- -- -- -- -- ------ -- ---- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---- -- -- -- ----- -- -- -- ------ -- -- -- ------- --
                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           

                                                                                                                                           
  -- -- -- -- -- -- -- -- -- ------ -- ---- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---- -- -- -- ----- -- -- -- ------ -- -- -- ------- --

3.  Table of important financial ratios of the fiscal year 2008 and 2007
    (Audited)

  --- ------------------- --- ------- -------- --- --- ----- ---------- -------
                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        

                                                                        
  --- ------------------- --- ------- -------- --- --- ----- ---------- -------

  --------------------- -------------- ---------- -------- --------- ------------- --------
                        Audited                                                    

                        Consolidated                       Company                 

                        2008           2007       2006     2008      2007          2006

  LIQUIDITY RATIO                                                                   

  Current Ratio (Times) 1.3            0.28       0.53     0.46      0.47          0.45

  Quick Ratio (Times)   1.03           0.03       0.25     0.02      0.06          0.12

  Quick Ratio (Cash     0.73           0.01       0.22     -1.17     Nil           Nil
  Basis) (Times)                                                                   

  Receivable Turnover   11.7           65.26      37.20    4.1       2.05          3.25
  (Times)                                                                          

  Collection Period     30.77          5.59       9.81     87.77     178.05        112.31
  (Days)                                                                           

  Inventory Turnover    5.01           6.14       5.07     0.38      0.65          1.33
  (Times)                                                                          

  Inventory Turnover    71.86          59.45      71.99    946.56    561.54        274.44
  (Days)                                                                           

  Accounts Payable      9.17           11.32      17.81    0.48      0.24          1.09
  Turnover (Times)                                                                 

  Payment Period (Days) 39.28          32.24      20.49    743.09    1520.83       334.86

  Cash Cycle (Days)     63.36          32.80      61.31    291.24    (781.24)      51.89

  PROFITABLE RATIO                                                                  

  Gross Profit Margin   53.18          22.99%     51.42%   18.89%    12.90%        24.63%
  (%)                                                                              

  Net Profit Margin (%) 11.18          (34.56%)   0.71%    63.38%    (1,647.55%)   9.82%

  Return on Equity (%)  9.86           (13.96%)   0.17%    10.90%    (15.25%)      0.19%

  EFFICIENCY RATIO                                                                  

  Return on Total       5.13%          (7.79%)    0.12%    10.02%    (13.75%)      0.16%
  Assets (%)                                                                       

  Return on Fixed       16.73%         (12.32%)   0.19%    106.14%   (124.68%)     1.47%
  Assets (%)                                                                       

  Asset Turnover        0.46           0.23       0.16     0.16      0.01          0.02
  (Times)                                                                          

  FINANCIAL POLICY                                                                  
  RATIO                                                                            

  Debt to Equity Ratio  1.04           0.79       0.48     0.07      0.11          0.15
  (Times)                                                                          

  Interest Coverage     3.1            0.81       3.22     32.19     (32.00)       3.50
  (Times)                                                                          

  Pay Out Ratio (%)     0.00%          0.00%      0.00%    0.00%     0.00%         0.00%
  --------------------- -------------- ---------- -------- --------- ------------- --------

2.12.6 Management Discussion and Analysis

Summary

Despite a challenging environment arising from high fuel prices,
slowdown of the Thai economy, political uncertainties and airport
closures, Tongkah Harbour (THL) has successfully mitigated these risks
and managed to register record revenues of THB 980.41 million. This was
substantially higher than the revenue of THB 474.81 million recorded for
the financial year 2007. The company benefited from higher gold sales as
a result of higher gold prices as well as higher gold production during
the year.

GOLD BUSINESS

Record gold production and rising gold prices have enabled THL to report
a record profit of THB 109.64 million for the year 2008 compared to a
loss of THB 153.17 million previously. THL’s consolidated earnings were
largely driven by gold sales which increased by 110% to THB 881.42
million arising from increased gold production as well as the prevailing
high gold prices.

TIN ORE BUSINESS

In 2008, THL’s subsidiary Sea Minerals Limited (SML) did not produce tin
ore and received no income from tin mining operations. During the year,
efforts were focused on furthering approval of its application for the
mining license for its subsidiary Sea Minerals Limited (SML) in the
Andaman Sea. Estimated tin production is expected to be about 2,000
tones per year with mine life of at least 20 years, pending tin prices
and cutoff grade established. SML also entered into a purchase agreement
with T.M Mining Co .Ltd to purchase mineral concentrate.

ANDESITE BUSINESS

Andesite sales for the year ended 2008 decreased from Baht 8.98 million
to Baht 4.34 million and the cost of sales declined from Baht 8.13
million to Baht 3.86 million. The decrease in sales was due mainly to
the postponement of SRT’s double track project which did not start in
2008 and therefore, prevented THL’s subsidiary, Cholsin from reaching
its aggregate sales targets.

  ---------------------------- -------------------- ----------------------
                               In THB ‘000          In THB ‘000

                               12/2008              12/2007

  Total Revenues               980,409              474,810

  % change                     106.5%               49.7%

  Total Sales                  886,051              428,098

  % change                     106.9%               47.3%

  Gross Profit                 471,233              107,251

  % of Total Sales             53.2%                25.0%

  Net Income                   109,643              (153,175)
  ---------------------------- -------------------- ----------------------

PROFITABILITY ANALYSIS

THL’s total revenues more than doubled to THB 980.41 million on the back
of higher gold sales which rose by over 2 times to THB 881.42 million
arising from higher gold production in 2008 and the increase in gold
prices. Total revenues also increased due to gains made through the
sales of fixed assets amounting to THB 77.90 million, gains made through
the net sales of purchased gold of THB 7.12 million and interest income
of THB 7.31 million.

GROSS PROFITS

Overall, THL’s gross profit increased by 4.4 times to THB 471.23 million
mainly due to improved performance from its gold subsidiary, Tungkum
Limited (TKL).

1. Increased gold production

For 2008, gold production was 33,083 oz compared to year 2007’s
production of 17,485 oz, an increase of 15,598 oz. This is attributed to
the opening of the T-1-8 mine in February of 2008 as well as the second
ball mill coming into operations along with improvements in the
leach-adsorption detox tanks and thickener which helped to improve
production.

2008 2007 Increase

Gold production (oz) 33,083 17,485 15,598

2. Higher gold price

TKL managed to sell gold at an average price of USD 839.44/ oz in 2008
compared to an average selling price of USD 689.18/ oz in year 2007 an
increase of almost 22% or USD150.26/ oz, even though the sale price in
2008 was limited to USD 862/ oz as per revised bank-loan agreement.

2008 2007 Increase (%)

Selling price (USD/oz) 839.44 689.18 150.26 21.8

3. Lower production costs

Additionally, TKL benefitted from lower production costs as the
concentration of oxide ore at the T-1-8 mine is easier to process and is
at a lower cost than the T-1 mine’s sulfide ore. As such, there were
costs savings from reagents and other consumable costs. Production costs
in 2008 were THB 13,481/ ton (USD 385/ ton) compared to THB 17,431/ ton
(USD 498/ton) in year 2007.

Overall, THL’s Cost Of Goods Sold (COGS) were well contained at THB
414.82 million compared to THB 320.85 million in year 2007. As a
percentage of total sales, COGS declined from 74.9% in 2007 to 46.8% in
2008.

4. Selling and Administrative Expenses

THL’s selling and administrative expenses increased by THB 88.4 million
to THB 234.3 million. Expense increase was mainly due to TKL’s expenses
as follows:

Increase in 2008 (THL) Amount (Million) Details

1. Commission 2.40 upon transferring land in Phuket

2. Legal fee and annual admin.fee 2.65 Deutsche Bank,NY reimbursements

3. Registration Fee 0.77 upon transferring land in Phuket

4. Consultant Fee 1.86

5. Premises Tax and sign tax 0.69

Subsidiary company (TKL)

6. Mgmt & Agency Fee, Legal Fee 17.90 Obtain loan (refinance) in April
2008

7. Gold Royalty fee (DPIM) 40.22 paid to DPIM

8. Land Usage Fee (Sor Por Kor)* 43.49

9. Profit Sharing (Ministry of Finance) 9.56 rate 1.5%

Decreased in 2008

10. Bank Charge (11.20) Subsidiary (TKL)

* On September 12, 2008, TKL filed a case to the Khonkhan Administrative
Court (Black Case no.371/2551) objecting to the land usage fee based on
the gold royalty fee. TKL argued that the basis for the fee collection
should be the same as that charged by the Forestry Department. The said
court has accepted the case for consideration.

4.1 Royalty Rate Increases

Rate increases to the DPIM and ALRO in 2008 from 2.5% of sale price to a
progressive rate of between 2.5% to 20% of the gold-market price
resulted in royalty payments of THB 112.3 million when compared to THB
28.6 million in 2007.

Despite the increase in royalty rates, selling and administration
expenses were generally well under control in year 2008 As a percentage
over total sales, selling and administration expenses declined from
34.1% in 2007 to 26.4% in 2008.

5. Foreign Exchange Rate

THL reported a loss on exchange rate of THB 41.76 million. This was due
to THL’s subsidiary Tungkum Ltd. incurring unrealized losses when the
refinanced loan was drawdown in April 2008, when the exchange rate was
USD/THB 31.47. Generally Tungkum Ltd. benefitted from the stronger USD
as gold sales were in USD which was on an uptrend for most of the year.

6. Amortization of Deferred Exploration

The total amortization expenditures amounted to THB 63.22 million based
on stockpiled ore processed in 2008 compared with THB 54.79 million in
2007. Depreciation amounted to THB 115.34 million when compared to THB
85.65 million in 2007.

THL’s EBITDA grew to THB 371.53 million compared to THB 62.55 million in
2007 despite foreign exchange losses as overheads were largely
contained. Overall net position increased to THB 109.64 million compared
to a loss of THB 153.18 million in year 2007.

LIQUIDITY ANALYSIS

  ---------------------------- -------------------- ----------------------
                               12/2008              12/2007

  Current Ratio                1.30                 0.28

  Quick Ratio                  1.03                 0.03
  ---------------------------- -------------------- ----------------------

As predicted, the liquidity position of the THL improved during the year
following the increase in production capacity and output in the gold
mining operation as well as the drawdown of additional bank borrowings.
The company’s current ratio and quick ratio has improved and is at
acceptable levels at 1.30 and 1.03 respectively as at balance sheet
date.

BALANCE SHEET ANALYSIS

THL’s overall balance sheet size expanded by 25% to THB 2,372.38
million. Current assets grew to THB 635.10 million from THB 103.56
million due to 1) an increase in cash and cash equivalents of THB 350.91
million. 2) an increase in net trade receivables of THB 144.00 million
and 3) a 66% increase in net inventories amounting to THB 41.10 million.
The Company’s non-currents reduced marginally by 3.2% to THB 1,737.28
million. This was due to lower net deferred expenditures in gold mining
of THB 269.5 million (previously THB 334.48 million) arising from
amortization expenditure of THB 62.23 million.

Increase in total assets was supported by bank borrowings which grew by
48.6% to Baht 1,035.71 million following the refinancing of the USD 25
million loan facility with a USD 35 million loan facility. Current
liabilities grew due by 33.6% to THB 489.11 million as a result of the
increase in the current portion of long term debt amounting to THB 97.17
million and the increase in the accrual of royalty fees payable to ALRO
for land usage of THB 51.58 million. Management of the THL and TKL are
not agreeable to this royalty fee and has begun the process appeal as
the fee charge is unfair and unreasonably high.

Total shareholders’ equity increased by 10% to THB 1,165.37 million
following a reduction in retained losses from THB 145.88 million to THB
34.06 million as a result of the retention of the THL’s profits. THL’s
capital structure is deemed to be strong as evidenced by debt to equity
ratio of 1.04X.

CASH FLOW ANALYSIS

As of 31.12.2008, THL recorded a positive net cash flow of THB 350.9
million versus a negative net cash flow of THB 71.9 million in year
2007.

-   Cash flow from operation activities:

An increase of gold production together with favorable gold prices
during the year had doubled the group’s revenue. THL benefited from
lower production costs due to easier to treat oxide ore following the
opening of the T-1-8 mine which brought down its cost of goods sold,
thus improving its gross trading profit. With better cost controls in
place, selling and administration expenses had been well contained,
hence further improving the THL’s operating profit. As of 31.12.08, the
company had positive net cash in flow from operating activities of THB
88.2 million.

-   Cash flow from investment activities

During the year, the company’s subsidiary Tungkum Ltd increased its
investments amounting to THB 96.4 million in fixed assets (machines/
equipment) in line with plant expansion in order to build a 700,000 ton
per annum floatation plant. During the year THL sold 2 plots of land and
earned THB 88.1 million.

-   Cash flow from financing activities

In April 2008, Tungkum Ltd obtained an additional USD 10 million from a
foreign bank to finance future capital expenditure in line with
Tungkum’s plant expansion plans.

Force Majeure Event (FM Event).

As a result of anti-government protesters blocking access to the Bangkok
Suvarnabhumi airport via the main motorway and the main entrance,
shortly after 21.00 hrs Bangkok local time on 25 November 2008 the
Acting Airports of Thailand (AoT) president and Acting Suvarnabhumi
Airport Director Serirat Prasutanont announced the cancellation of all
flights departing from the Suvarnabhumi airport. In total, TKL’s gold
shipment of value USD 4.35 million was held in the airport for 10 days.

Consequently, the closure prevented TKL, on 26 November 2008, from
transporting gold to its refiner, Heraeus in Hong Kong and subsequently
to the Off-taker/ DB London as all flights remained canceled and the
airport remained shut and TKL was not able to sell gold on 27 November
2008 at the London PM fix price of USD 814/ ounce to Deutsche Bank
London as originally planned.

The gold shipment was later moved by Brinks (TKL’s forwarder) and stored
at Brinks’ vault in Silom, Bangkok, for safekeeping while, at the same
time, other shipping possibilities were explored with Brinks and the
airlines including shipment via U-Tapao airport.

Despite the FM event which prevented TKL from selling its gold, TKL had
sufficient cash reserves and made payment for debt service, i.e.
principal & interest to the agent, i.e. DB Amsterdam amounting to USD
882,936.36 on 28 November 2008.

On re-opening of Suvarnabhumi airport on 5 December 2008, the gold
shipment was sent to the refiner on the first Cathay Pacific flight (CX
2708) to Hong Kong on 5 December 2008.

The gold was subsequently delivered to Deutsche Bank London on 9
December 2008 and swapped at USD767.75/ ounce.

  ---------------------------- -------------------- ----------------------
                                                    

                                                    

                                                    
  ---------------------------- -------------------- ----------------------