2. RISK FACTORS

Mining is a high risk industry. By purchasing the mining stock,
investors assume operational risks associated with production of the
commodity, and thus returns may diverge from the underlying performance
of the mined commodity. As such, key risks in mining include exploration
risk, production risk, capital project risk, product price risk,
exchange rate risk, environmental and socio-economic risk, and
regulatory risk.

Our firm is over a century old, and to adapt to the cyclical nature of
commodities, the strategy of the firm since the collapse of the tin
industry in the mid eighties, has long been to diversify the project
portfolio of the firm. Bringing a mining project online, from
exploration into production, before cash flow can be generated requires
a long gestation period. The transition between exploration and mining
licenses took over one decade, and totaled 16 years before production
commenced. Under a Diversification strategy to minimize the inherent
risks in mining, implemented since the early nineties, TongkahHarbour
PLC entered the property development market with the hallmark
development of True Tower (then known as Tongkah Tower). Numerous
parcels of land have been collected to bolster the asset base of the
firm.

At the operational level, management continually monitors, analyzes and
controls all key business risks. The Board of Directors, with the
assistance of the Audit Committee, closely monitors the Company's risk
management. The Audit Committee has full access to the Company's
management and auditors, both external and internal, to obtain all
information regarding risk events and risk responses.

2.1 Gold and Copper Mining 

2.1.1 Price Risk

Mining projects are inherently sensitive to commodity prices. Depending
on the prevailing gold and copper price, the blending strategy of the
process plant may be altered to increase the product ratio of copper
that can be extracted and sold. Furthermore, gold prices affect the
cut-off grade of the mine, determining what can be economically
extracted from the ground. Price risk has been considered since the
exploration stage, and proved ore reserves and the feasibility of the
Company's gold mine at Phu Tap Fah was established based on an assumed
gold price of USD350 per oz.

To protect the financial feasibility of the gold mining operations and
the loan extended by Deutsche Bank in April 2008, the Company was
entered into a zero cost reverse collar with a schedule as described
below:-

+----------------+----------------+----------------+-----------------+
| Delivery       | Notional       | Floor          | Cap             |
| Period         | Amount per     |                |                 |
|                | Month          | (USD/oz.)      | (USD/oz.)       |
|                |                |                |                 |
|                | (oz.)          |                |                 |
+----------------+----------------+----------------+-----------------+
| Apr 08 – Feb   | 2,083.33       | 500            | 862             |
| 09             |                |                |                 |
+----------------+----------------+----------------+-----------------+
| Mar 09 – Feb   | 2,500.00       | 500            | 825             |
| 10             |                |                |                 |
+----------------+----------------+----------------+-----------------+
| Mar 10 – Feb   | 2,083.33       | 500            | 815             |
| 11             |                |                |                 |
+----------------+----------------+----------------+-----------------+
| Mar 11 – Mar   | 2,500.00       | 500            | 805             |
| 12             |                |                |                 |
+----------------+----------------+----------------+-----------------+

As of December 2010, the nature of the Export Contract is now subjected
to legal dispute. The termination was in the context of a gold market at
~$1400/oz. Aside from the agreements with Deutsche Bank, gold revenues
are unhedged, and revenues of the firm fluctuate depending on gold spot
price. Copper revenues have never been hedged, and reflect the
fundamental physical nature of supply and demand for the commodity. This
however means, the Company is subjected to highly volatile gold and
copper prices.

2.1.2 Exchange Rate Risk

Revenues for gold and associated metals are fixed in USD while the
prices of Andesite are fixed in THB. The Company's exchange rate risk is
however dampened by its cost structure. Over 80% of the Company's debts
are denominated in USD. Around 20% of its expenditures on raw materials,
consumables, equipment and spare parts are in USD. Also statutory fees
are on ad valorem basis, in effect linked to USD. The Company sees no
further need to hedge against USD beyond the existing natural hedge.

2.1.3 Production, capital Project, Industry specific inflation risks

Since the completion of a flotation circuit in 2009, there have only
been incremental modifications to the existing plant set up in Loei. As
such, capital project risks that arise when a plant is expanded were not
at play in 2010. The plant is now capable of handling both oxide and
Sulphide ore, and no major capital expenditures are required to bring
the other two neighboring prospects, T1-S and T-3 online.

Production was severely hampered during May- June 2010 when Emergency
Rule over our supply routes hampered the delivery of cyanide, explosives
etc that are essential to mine and processing operations. This
translated to much higher unit cost of production during those two
months, as fixed costs like employee wages are not spread over greater
production units.

Operational control is maintained over the unit cost of gold by
maximizing capacity utilization, recovery rate etc. Modern maintenance
practices, such as Root Cause Analysis, have been adopted. Ore feed
grade is diligently controlled. However, as the Company mines to greater
depths, the nature of an ore body translates into increasing strip ratio
and ultimately higher mining costs. A booming gold mining industry
escalates costs of raw materials such as cyanide, contributing to
industry specific inflation risk and even higher mining costs.

2.1.4 Environmental and Socio- Economic Risks

Environmental and socio- economic risks have long been discussed in the
international mining community. In response, industry experts have long
promoted a model of “sustainable development”, in practice to ensure
future generations benefit from the current activities of mining firms,
which deplete a non- renewal resource. Specifically, the
BruntlandDefinition from the 1992 Rio Summit involving the major leading
mining firms is: “current generations meeting their needs without
compromising the ability of future generations to meet their needs”.

Under the umbrella of the Concession Area, the Company has a long
standing socio- economic contract with the Cabinet of the Royal Thai
Government to develop the North Eastern region, which had been
delineated to be a mineralized area. The Company has stood by the
agreement, and despite the lengthy permitting process, brought the site
into full scale production by mid 2006. Over THB 350 million has been
invested in the exploration of Loei, generating local employment and
growing local mining industry (including iron, limestone and neighboring
copper deposit).

Prior to the commencement of any mining operations, potential
environmental, health and social impacts have to be assessed. In 2009,
the Company conducted an additional environmental study on an area
adjacent to the current mining operations. The study was submitted to
the Office of Natural Resources and the Environment Policy and Planning
(ONEP) in January 2010.

Our “social license” to mine must be obtained from the neighboring
communities. The Company has long been a proponent of Corporate Social
Responsibility endeavors alongside the local communities. To provide the
surrounding communities with complete comfort against any contamination
resulting from mining and ore processing operations, the Company adheres
to a zero discharge policy. Ongoing environmental monitoring both inside
the Company's site and in the surrounding area is conducted by KhonKaen
University. Monthly reports are being submitted to the ONEP for its
approval. There is always the risk of ever increasing environmental
regulations, even more stringent that levels imposed in the internal
mining arena.

In recent years there has however, been an increasingly vocal local NGO
group against mining activity. To ensure all voices are equally heard,
the mine conducted a background survey in early 2011.

2.1.5 Exploration and Regulatory Risks

The accuracy of the estimation of gold resources and reserves has been a
major concern for the mining community for several decades. The Company
strictly follows the Australian JORC Code in the estimation of its gold
resources and reserves to mitigate exploration risks for the investor.
Resources and reserves circulated in the public domain are based on a
formal statement of Ore Resources and Reserves by a “competent person”
as defined in the JORC Code.As detailed in the next section, the Company
has a large number of Mining License Applications (MLAs) filed with the
Department of Primary Industries and Mining (DPIM). The Company is in
the process of expediting the approval of some of these MLAs. The
environmental approval process has become increasingly time consuming.
The Administrative Court's decision concerning environmental approval of
projects in Map Ta Phut in September of 2009 has resulted further
uncertainties in the environmental approval process. The Company's
management has been actively involved resolving the uncertainties with
regard to environmental approval of mining projects.

Another major aspect of regulatory risk lays in statutory fees. The
Company won a tender for special prospecting licenses when the royalty
rate for gold mining was 2.5%. The Government changed the rate to an
escalating scale in 2007.

+-----------------------------------+----------------------------------+
| Gold Price                        | Royalty Rate                     |
|                                   |                                  |
| (THB/gram)                        | (%)                              |
+-----------------------------------+----------------------------------+
| Below 400                         | 2.5                              |
+-----------------------------------+----------------------------------+
| 401 – 600                         | 5.0                              |
+-----------------------------------+----------------------------------+
| 601 – 1,000                       | 10.0                             |
+-----------------------------------+----------------------------------+
| 1,001 – 1,500                     | 15.0                             |
+-----------------------------------+----------------------------------+
| Above 1,500                       | 20.0                             |
+-----------------------------------+----------------------------------+

  The risk is further complicated by the Agricultural Land Reform Office
(ALRO). The ALRO contentiously claims jurisdiction over the land where
the Company's gold mine is located. The claim is against the opinion
issued by the Juridical Council on the matter. The ALRO insists on usage
feeequivalent to royalty payment to the DPIM. This results in more than
quadrupling of statutory fees since the term that the Company tendered
for the right to prospect and mine the area. The Company has filed a
petition with the Administrative Court since 2009 to decide on the
ALRO's jurisdiction vis-à-vis the Company's Phu Tap Fah mine.

2.2 Andesite Quarrying

Prices for andesite aggregates which the Company has been operating in
Saraburi since 1997 remain the same over recent years. This is in spite
of the fact that prices of several commodities and raw materials that
contribute to production cost have risen rather drastically, e.g.,
gasoline oil. The main constraint being competition with limestone
aggregates produced from the vicinity has dampened the product price of
the quarry. The high strength railway ballast however, means it is
durable enough as firm construction.

Possible difficulties in the operations center on marketing,
maintenance, and production management. The marketing section has to
constantly update on new prospects and market opportunities while
maintaining contact with existing customers and addressing any problems
arising. Production must be coordinated with current delivery schedules
to avoid excessive stockpiling, and with maintenance requirements as
parts inventory has to be planned in advance to meet expected hours of
operation.

Environmental and socio-economic risks are apparently lower for Saraburi
quarry since it is located on the lee side of an extensive mountain
chains which help prevent any disturbances resulted from operation. Its
location is also at some distance from villages or temples. Coupled with
natural advantage, the quarry has also been active in keeping all
activities in compliance with regulations set forth by government
agencies.

2.3 Risks Relating to Property Development

In addition to the mining business, the Company is also involved in
property development business. The Company holds 75% interest in Sky
Cliff Limited. The subsidiary owns a plot of land near the intersection
between Rama 9 Road and Ratchadapisek Road.

2.4 Tin Mining 

Another prospect of the Company -offshore tin deposit lies some 20
kilometres westward from Takuapa District, in which mining license
applications was lodged. Environmental impact study for mining,
including mitigation measures, was also approved by ONEP since 1995.

The Company also has some risks relating to litigation. This is
discussed in detail in Section 6 of this Form 56-1.