11. FINANCIAL POSITION AND OPERATING RESULTS

11.1 FINANCIAL STATEMENT

11.1.1Audit for report of consolidation financial statements of year
2010

  Mrs. Natsarak Sarochanunjeen

  Certified Public Accountant (Thailand) Registration No. 4563

  A.M.T. & ASSOCIATES

2.  Summary of independent auditor’s report : Previously, I had the
    opinion that the consolidated and the Company financial statements
    do not present fairly, in all material respects, the financial
    position as of December 31, 2010, the results of their operations
    and cash flows for the year then ended in conformity with generally
    accepted accounting principles due to the Company and the subsidiary
    (Tungkum Limited) did not record the expense and liability which a
    foreign bank sent the notificatin of early termination of Export
    Contract and claim for early termination amount of USD 27,601,366
    (approximately Baht 836.22 million) due to the subsidiary has
    defaulted the said contract as described in note No. 18 to the
    financial statements. Which the management opined that expense
    charges is inappropriate. However, the Company and the subsidiary
    had amended and recorded the estimated claims in the financial
    statements for the year 2010 in accordance with the Securities and
    Exchange Commission(SEC) order. So my opinion has been changed as
    described in paragraph 3, this has resulted the total liabilities in
    the consolidate financial statement and separate financial statement
    will increase amounting to Baht 836.22 million and Baht 409.22
    million respectively, total assets in separate financial statement
    will decrease amounting to Baht 417.87 mill. And net loss for the
    year 2010 in the consolidated financial statement and separated
    financial statement will increase amounting to Baht 836.22 million
    and Baht 827.09 million respectively and ion.

  (1) I have audited the consolidated balance sheets of Tongkah Harbour
  Public Company Limited and its subsidiaries as of December 31, 2010
  and 2009, the related consolidated statements of changes in
  shareholders' equity, income and cash flows for the years then ended.
  I have also audited the Company’s financial statements for the same
  periods of Tongkah Harbour Public Company Limited. These financial
  statements are the responsibility of the Company’s management as to
  their correctness and completeness of the presentation. My
  responsibility is to express an opinion on these financial statements
  based on my audit.

  (2) I conducted my audits in accordance with generally accepted
  auditing standards. Those Standards require that I plan and perform
  the audits to obtain reasonable assurance about whether the financial
  statements are free of material misstatement. An audit includes
  examining, on a test basis, evidence supporting the amounts and
  disclosures in the financial statements. An audit also includes
  assessing the accounting principles used and significant estimates
  made by management, as well as evaluating the overall financial
  statement presentation. I believe that my audits provide a reasonable
  basis for my opinion.

  (3) In my opinion, the financial statements referred to above present
  fairly, in all material respects, the financial position of Tongkah
  Harbour Public Company Limited and its subsidiaries and of Tongkah
  Harbour Public Company Limited as of December 31, 2010 and 2009, the
  results of their operations and cash flows for the years then ended in
  conformity with generally accepted accounting principles.

  Without qualifying my opinion, I draw attention regarding various
  matters as follows:

  (4) As described in note No. 1.7 to the financial statements, As of
  December 31, 2010, the consolidated financial statements and separate
  financial statements have presented total current liabilities in
  exceed of total current assets amounting to Baht 1,435.05 million and
  Baht 563.92 million, respectively, a capital deficiency of Baht 53.52
  million and Baht 119.92 million, respectively and net operating loss
  for the nine - month period then ended was reported of Baht 860.13
  million and Baht 849.80 million, respectively. In addition, the
  Company’s financial statement presented negative valuation on
  shareholders’ equity, the Company might be de-listed from the stock
  exchange. However, these financial statements have been prepared on
  the basis that the Company and its subsidiaries is a going concern
  basis and that the conversion of the assets and the payment of
  liabilities are under the normal operations.

  (5) As described in note No. 12 to the financial statements, in year
  2008 the Company and a subsidiary (Tungkum Limited) had advanced cash
  totaling Baht 19.73 million (USD 580,000 and GBP 50,000) to Coral
  Resources Limited (CRL). In April 2009, the Company and a subsidiary
  had filed a civil court case in Philippines against CRL and its two
  Philippines subsidiaries as well as against three key directors of the
  Coral group, to recover the advances by attach the properties of the
  defendants and to annul any sale or disposition of their properties to
  secure judgment. Also in September 2009, CRL has been under
  liquidation and the Company has been given first refusal to acquire
  the shares of the CRL subsidiaries. However, the company and the
  appointed liquidator were unable to agree on the term of the share
  acquisition offer. On December 23, 2009, the Philippines Court
  resolved to dismiss the cases. Therefore, on January 11, 2010, the
  Company filed the Motion of Reconsideration for the Court
  reconsideration. The management, however, had fully provided allowance
  for doubtful on the advances.

  (6) As described in note No. 29.4 to the financial statements, On
  December 19, 2007, Loei Province ALRO gave notice to a subsidiary
  (Tungkum Limited - Tungkhum) to pay land usage fees for the period of
  January to November 2007 amounting to Baht 14.6 million. Tungkum is of
  the opinion that the charges are unreasonably high and unfair. On
  September 12, 2008, Tungkum submitted a plaint to the Administrative
  Court to cancel the demand for payment and defer implementation of the
  ALRO order while the case is being considered. On September 25, 2008,
  the Court accepted the plaint but discarded the request to stay the
  order but instead to proceed immediately with court investigation.
  ALRO responded by presenting arguments to the Court why Tungkum must
  pay the outstanding fees with interest. On May 27, 2009, Tungkum
  Limited submitted a counter statement against the response of
  Agricultural Land Reform Committee and ALRO. On September 9, 2009, the
  Company and Tungkum submitted additional information to the Court by
  testifying that Tungkum does not have any outstanding payments due to
  ALRO instead it was presenting its right to obtain repayment of fees
  already paid, including interest. On January 13, 2010, Tungkum found
  that ALRO requested the Administrative Court for a Mandatory
  Injunction to order Tungkum to stop mining in ALRO’s area. Later, the
  Court’s dismissed the ALRO’s request because it does not seem that
  ALRO has suffered any serious damages. On March 3, 2011, Khonkan
  Administrative Court transferred the case to Udon Thani Administrative
  Court for further consideration. The Udon Thani Administrative Court
  reissued the case number as a black case no. 251/2554. The transfer
  resulted as a request from Loei ALRO’s officer on the ground of the
  specification of jurisdiction upon the establishment of Khonkan
  Administrative Court. The case is now under the Udon Thani
  Administrative Court’s consideration. Later the ALRO’s officer, issued
  the letter to terminate the letter of consent for the land use and
  request Tungkum to remove the staff and building from ALRO land within
  60 days commencing from the receiving date (which is May 9, 2011).
  Management is now consulting with external legal counsel for
  consideration of filing a complaint against ALRO. The management
  opines that the ALRO’s order does not effect the Tungkhum’s current
  operation and shall object to ALRO’s order and file an injunction with
  Udon Thani Administrative Court. And on May 30, 2554, Tungkum received
  the letter from DPIM informing Tungkum to cease the mining in ALRO
  areas under the letter dated May 25, 2554. However, Tungkum shall
  appeal the order.

  (7) As described in note No. 29.12 to the financial statements, On May
  8, 2008, the Company, a subsidiary (Sky Cliff Limited) and a related
  company (Sintana Holdings Limited) were sued for breach of the joint
  venture agreement to develop the Sky Cliff real estate project. On
  November 17, 2009, the Civil Court ruled that the company and the
  related company shall jointly return the share purchase price paid by
  the Plaintiff of Baht 36.5 with interest and dismissed the claim
  against Sky Cliff Limited. However, the Company disagreed with the
  judgment because the company did not receive any payment from the
  Plaintiff and the related company acted only as an agent for the
  transaction. Thus, on January 13, 2010, the Company submitted an
  appeal and petition requesting that the Court issue a stay of
  execution of the court order pending the results of the Court appeal.
  On February 1, 2011, the Court ordered the Company and the related
  company to deposit the security equal to the payment given by the
  first court judgment within 30 days after receiving the order. On
  April 28, 2011, the Civil Court considered the security of the Company
  which was the share certificate of Tungkum Limited in the amount of
  Baht 53 million for request of the stay from execution during the
  appeal. The Court opined that share certificate, a security, may not
  be reliable and ordered the Company to find a new security with in
  June 3, 2011. The Company therefore put down two title deeds of the
  Company’s office 7^(th) flour at Muang - ThaiPhatraOfficeTower
  estimated price of Baht 55.46 million as a security.

  (8) As described in note No. 10 to the financial statements, on March
  27, 2008, the related company obtained approval from the Mineral Act
  Committee for the renewal of its expired andesite mining right. This
  renewal process is now at the Ministry of Industry and still awaiting
  the authorized signature of the Minister. However, in January 2011,
  the renewal mining right has been authorized by the Ministry of
  Industry.

  (9) Previously, I had the opinion that the consolidated and the
  Company financial statements do not present fairly, in all material
  respects, the financial position as of December 31, 2010, the results
  of their operations and cash flows for the year then ended in
  conformity with generally accepted accounting principles due to the
  Company and the subsidiary (Tungkum Limited) did not record the
  expense and liability which a foreign bank sent the notificatin of
  early termination of Export Contract and claim for early termination
  amount of USD 27,601,366 (approximately Baht 836.22 million) due to
  the subsidiary has defaulted the said contract as described in note
  No. 18 to the financial statements. Which the management opined that
  expense charges is inappropriate. However, the Company and the
  subsidiary had amended and recorded the estimated claims in the
  financial statements for the year 2010 in accordance with the
  Securities and Exchange Commission(SEC) order. So my opinion has been
  changed as described in paragraph 3, this has resulted the total
  liabilities in the consolidate financial statement and separate
  financial statement will increase amounting to Baht 836.22 million and
  Baht 409.22 million respectively, total assets in separate financial
  statement will decrease amounting to Baht 417.87 mill. And net loss
  for the year 2010 in the consolidated financial statement and
  separated financial statement will increase amounting to Baht 836.22
  million and Baht 827.09 million respectively and ion.

  11.1.3Summary of financial statement

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

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

  BALANCE SHEETS                                                   (Unit :                                                                   
                                                                   Thousand Baht)                                                            

  AS OFDECEMBER                                                    Consolidated                                                              
  31,                                                              Financial                                                                 
                                                                   Statements                                                                

                                                                   %              2010           %       2009            %       2008        

  CURRENT ASSETS                                                                                                                             

                 Cash and cash                                     3.37           58,698         1.98    38,453          15.02   356,387     
                 equivalents                                                                                                                 

                 Trade account                                     1.52           26,370         0.99    19,231          6.23    147,748     
                 receivable -net                                                                                                             

                 Short term loan                                   0.04           697                                    0.00    10          
                 to related                                                                                                                  
                 party                                                                                                                       

                 Inventories –                                     8.64           150,459        6.86    132,925         4.36    103,353     
                 net                                                                                                                         

                 Other current                                                                                                               
                 assets                                                                                                                      

                                 - Deposit over estimate                                         0.35    6,754           0.13    3,058       
                                 gold royalty fee -DPIM.                                                                                     

                                 - General advance                 0.18           3,213          0.20    3,874           0.11    2,582       

                                 -Advance payment                  0.66           11,466                 -                       -           

                                 - Input tax refundable            0.56           9,712          0.49    9,520           0.21    5,084       

                                 - Other                           0.62           10,832         0.88    16,969          0.71    16,876      

  TOTAL CURRENT                                                    15.60          271,447        11.75   227,726         26.77   635,098     
  ASSETS                                                                                                                                     

  NON-CURRENT                                                                                                                                
  ASSETS                                                                                                                                     

                 Long term                                                                                                                   
                 investments                                                                                                                 

                                 - Bank deposits pledged           0.22           3,852          8.90    172,514         7.62    180,815     
                                 as collateral                                                                                               

                 Deferred                                                                                                                    
                 expenditures of                                                                                                             
                 other                                                                                                                       
                 projects - net                                                                                                              

                                 - Andesite mining                 0.57           9,844          0.56    10,836          0.50    11,829      

                                 - Gold mining                     12.68          220,676        12.26   237,638         11.36   269,510     

                                 - Phuket Project                  -              -              -       -               -       -           

                 Long – term                                       0.09           1,543          0.08    1,543           0.07    1,708       
                 loans to                                                                                                                    
                 related                                                                                                                     
                 parties– net                                                                                                                

                 Advance to                                        -              -              -       -               0.95    22,621      
                 other company-                                                                                                              
                 net                                                                                                                         

                 Property, Plant                                   69.37          1,207,289      65.05   1,260,857       50.40   1,195,570   
                 and                                                                                                                         
                 equipment–net                                                                                                               

                 Intangible                                        0.06           1,112          0.07    1,312           0.07    1,673       
                 assets - net                                                                                                                

                 Advance payment                                   1.02           17,687         0.91    17,687          0.75    17,687      
                 for purchase of                                                                                                             
                 land – andesite                                                                                                             
                 mining                                                                                                                      

                 Advance payment                                   -              -                                      1.04    24,660      
                 for machinery                                                                                                               

                 Goodwill                                          0.03           594            0.03    594             0.03    594         

                 Other                                             0.37           6,394          0.40    7,715           0.45    10,615      
                 non-current                                                                                                                 
                 assets                                                                                                                      

  TOTAL                                                            84.40          1,468,991      88.25   1,710,696       94.55   1,737,282   
  NON-CURRENT                                                                                                                                
  ASSETS                                                                                                                                     

  TOTAL ASSETS                                                     100            1,740,438      100     1,938,422       100     2,372,380   
  -------------- --------------- ------------------------ -- -- -- -------------- ----------- -- ------- ----------- --- ------- ----------- --

TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES (Unit :
Thousand Baht)

[TABLE]

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

  BALANCE SHEETS                                                    (Unit :                                                             
                                                                    Thousand                                                            
                                                                    Baht)                                                               

  AS OFDECEMBER                                                     Separated                                                           
  31,                                                               Financial                                                           
                                                                    Statements                                                          

                                                                    %            2010         %       2009          %       2008        

  CURRENT ASSETS                                                                                                                        

                 Cash and cash                                      0.37         3,736        0.12    1,197         0.04    421         
                 equivalents                                                                                                            

                 Trade account                                      0.05         545          0.19    1,772         0.02    252         
                 receivable -net                                                                                                        

                 Short term loan                                                                                                        
                 to related party                                                                                                       

                 Inventories –                                      1.06         10,602       1.37    13,119        0.82    9,483       
                 net                                                                                                                    

                 Other current                                                                                                          
                 assets                                                                                                                 

                                  - General advance                 0.05         549          0.06    573           0.00    36          

                                  - Input tax refundable            0.23         2,341        0.30    2,910         0.25    2,890       

                                  - Other                           0.07         745          0.15    1,437         0.05    609         

  TOTAL CURRENT                                                     2.19         18,518       2.19    21,008        1.19    13,691      
  ASSETS                                                                                                                                

  NON-CURRENT                                                                                                                           
  ASSETS                                                                                                                                

                 Investment in                                      64.25        257,030      48.05   460,174       63.90   738,171     
                 subsidiaries -                                                                                                         
                 net                                                                                                                    

                 Long term                                                                                                              
                 investments                                                                                                            

                                  - Bank deposits pledged           0.20         1,959        0.54    5,207         0.04    500         
                                  as collateral                                                                                         

                 Deferred                                                                                                               
                 expenditures of                                                                                                        
                 other projects -                                                                                                       
                 net                                                                                                                    

                                  - Andesite mining                 0.98         9,844        1.13    10,836        1.02    11,829      

                                  - Gold mining                                                                                         

                                  - Phuket Project                  -            -            -       -             -       -           

                 Long – term                                        21.46        185,140      35.87   343,543       23.31   245,735     
                 loans to related                                                                                                       
                 parties– net                                                                                                           

                 Advance to other                                   -            -            -       -             1.96    22,621      
                 company- net                                                                                                           

                 Property, Plant                                    9.41         94,433       10.26   98,238        8.91    102,889     
                 and equipment –                                                                                                        
                 net                                                                                                                    

                 Intangible                                         0.05         534          0.06    556           0.06    663         
                 assets - net                                                                                                           

                 Advance payment                                    1.76         17,687       1.85    17,687        1.53    17,687      
                 for purchase of                                                                                                        
                 land – andesite                                                                                                        
                 mining                                                                                                                 

                 Advance payment                                                                                                        
                 for machinery                                                                                                          

                 Goodwill                                                                                                               

                 Other                                              0.04         424          0.05    438           0.12    1,436       
                 non-current                                                                                                            
                 assets                                                                                                                 

  TOTAL                                                             98.15        567,051      97.81   936,679       98.81   1,141,541   
  NON-CURRENT                                                                                                                           
  ASSETS                                                                                                                                

  TOTAL ASSETS                                                      100          585,569      100     957,687       100     1,155,232   
  -------------- ---------------- ------------------------ -- -- -- ------------ --------- -- ------- --------- --- ------- ----------- --

TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES (Unit :
Thousand Baht)

[TABLE]

TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

STATEMENT OF INCOME

FOR THE YEARS ENDED DECEMBER 31 (Unit: Thousand Baht)

  -------------- --------------------------- -- -- -- -- -------------- ----------- -- -------- ---------- -- ------- ---------
                                                         Consolidated                                                 
                                                         Financial                                                    
                                                         Statements                                                   

                                                         %              2010           %        2009          %       2008

  REVENUES                                                                                                            

                 RRevenue from the sale of                                                                            

                 Andesite sales                          0.56           5,608          1.69     8,044         0.47    4,633

                 Gold sales                              83.03          837,182        83.76    398,952       89.90   881,418

                 Copper sales                            10.86          109,489        4.51     21,494        -       -

                 Gain on exchange rate                   5.01           50,495         9.52     45,356        -       -

                 Other income                                                                                         

                 Gain from sales of purchase             -              -              -        -             0.73    7,116
                 gold –net                                                                                            

                 Gain on sale of fixed                   -              -              0.00     1             7.95    77,901
                 assets                                                                                               

                 Interest income                         0.02           177            0.18     862           0.75    7,310

                 Other                                   0.53           5,301          0.33     1,579         0.21    2,031

  TOTAL REVENUES                                         100            1,008,252      100      476,288       100     980,409

  EXPENSES                                                                                                            

                 Cost of the sales of                                                                                 

                 Cost of andesite sales                  0.52           5,288          1.01     4,803         0.39    3,858

                 Cost of gold and copper                 46.35          467,281        90.06    428,923       41.92   410,960
                 sales                                                                                                

                 Selling expenses                        20.89          210,668        0.52     2,476         0.08    752

                 Administrative expenses                 9.71           97,858         39.04    185,927       23.82   233,549

                 Management benefit expenses             1.72           17,351         6.67     31,790        3.50    34,292

                 Doubtful debts                          -              -              4.65     22,154        0.00    37

                 Loss on decline in value of             1.53           15,461         -        -             -       -
                 inventory                                                                                            

                 Amortization on exploration             2.57           25,930         6.69     31,872        6.35    62,229
                 expenditures of gold mining                                                                          
                 project                                                                                              

                 Loss on exchange rate                   -              -              -        -             4.26    41,765

                 Compensation for price                  13.34          134,491        12.80    60,945        -       -
                 difference                                                                                           

                 Loss from sale of purchase              -              -              6.05     28,825        -       -
                 gold -net                                                                                            

                 Estimated claims from                   82.94          836,219                 -                     -
                 breach of the contract                                                                               

  TOTAL EXPENSES                                         179.57         1,810,547      167.49   797,715       80.32   787,442

  PROFIT(LOSS)                                           -79.57         -802,295       -67.49   -321,427      19.68   192,967
  BEFORE FINANCE                                                                                                      
  COSTS                                                                                                               

  FINANCE COSTS                                          5.74           57,839         7.84     37,336        8.50    83,324

  NET PROFIT                                             -85.31         -860,134       -75.32   -358,763      11.18   109,643
  (LOSS)                                                                                                              

  NET PROFIT                                                                                                          
  ATTRIBUTABLE                                                                                                        
  TO:                                                                                                                 

                 EQUITY HOLDER OF THE PARENT                            -849,804                -352,352              111,819

                 MINORITY INTERESTS                                     -10,330                 -6,411                -2,176

                                                                        -860,134                -358,763              109,643

  BASIC EARNING                                                                                                       
  (LOSS) PER                                                                                                          
  SHARE (BAHT                                                                                                         
  PER SHARE)                                                                                                          

                 NET PROFIT (LOSS)                                      -1.12                   -0.47                 0.15
                 ATTRIBUTABLE TO EQUITY                                                                               
                 HOLDER OF THE PARENT                                                                                 

  THE WEIGHTED                                                          756,940                 756,940               756,940
  AVERAGE NUMBER                                                                                                      
  OF ORDINARY                                                                                                         
  SHARES                                                                                                              
  (THOUSAND                                                                                                           
  SHARES)                                                                                                             
  -------------- --------------------------- -- -- -- -- -------------- ----------- -- -------- ---------- -- ------- ---------

TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

STATEMENT OF INCOME

FOR THE YEARS ENDED DECEMBER 31 (Unit: Thousand Baht)

[TABLE]

  11.1.5 Table of important financial ratios of the fiscal year 2010,
  2009 and 2008 (Audited)

+------------------+-------+--------+-------+--------+-------+--------+
|                  |   Au  |        |       |        |       |        |
|                  | dited |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|                  |   Co  |        |       |   C    |       |        |
|                  | nsoli |        |       | ompany |       |        |
|                  | dated |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|                  |       |   2009 |       |   2010 |       |   2008 |
|                  |  2010 |        |  2008 |        |  2009 |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   LIQUIDITY      |       |        |       |        |       |        |
|   RATIO          |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Current Ratio  |       |   0.35 |       |   0.11 |       |   0.46 |
|   (Times)        |  0.31 |        |  1.30 |        |  0.46 |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Quick Ratio    |       |   0.09 |       |   0.02 |       |   0.02 |
|   (Times)        |  0.10 |        |  1.03 |        |  0.02 |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Quick Ratio    |       |        |       |        |       |        |
|   (Cash Basis)   |  0.22 | (0.14) |  0.73 |  -0.38 | -1.17 |  -1.17 |
|   (Times)        |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Receivable     |       |   5.13 |       |   4.84 |   4.1 |   4.1  |
|   Turnover       | 41.77 |        |  11.7 |        |       |        |
|   (Times)        |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Collection     |       |        |       |        |       |        |
|   Period (Days)  |  8.62 |  70.14 | 30.77 |  74.37 | 87.77 |  87.77 |
+------------------+-------+--------+-------+--------+-------+--------+
|   Inventory      |       |   3.67 |       |   0.40 |       |   0.38 |
|   Turnover       |  3.34 |        |  5.01 |        |  0.38 |        |
|   (Times)        |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Inventory      |   1   |        |       |        |   9   |        |
|   Turnover       | 07.94 |  98.06 | 71.86 | 899.66 | 46.56 | 946.56 |
|   (Days)         |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Accounts       |       |   6.88 |       |   1.21 |       |   0.48 |
|   Payable        |  7.41 |        |  9.17 |        |  0.48 |        |
|   Turnover       |       |        |       |        |       |        |
|   (Times)        |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Payment Period |       |        |       |        |   7   |        |
|   (Days)         | 48.55 |  52.32 | 39.28 | 298.37 | 43.09 | 743.09 |
+------------------+-------+--------+-------+--------+-------+--------+
|   Cash Cycle     |       |        |       |        |   2   |        |
|   (Days)         | 68.01 | 115.88 | 63.36 | 675.66 | 91.24 | 291.24 |
+------------------+-------+--------+-------+--------+-------+--------+
|   PROFITABLE     |       |        |       |        |       |        |
|   RATIO          |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Gross Profit   |   5   |   (    |       |        |   1   |        |
|   Margin (%)     | 0.37% | 1.22%) | 53.18 | 15.37% | 8.89% | 18.89% |
+------------------+-------+--------+-------+--------+-------+--------+
|   Net Profit     |   -   |   (7   |       |   -    |   6   |        |
|   Margin (%)     | 2.37% | 5.32%) | 11.18 | 35.67% | 3.38% | 63.38% |
+------------------+-------+--------+-------+--------+-------+--------+
|   Return on      |   -   |   (3   |       |        |   1   |        |
|   Equity (%)     | 3.01% | 6.39%) |  9.86 | -3.16% | 0.90% | 10.90% |
+------------------+-------+--------+-------+--------+-------+--------+
|   EFFICIENCY     |       |        |       |        |       |        |
|   RATIO          |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Return on      |   -   |   (1   |       |        |   1   |        |
|   Total Assets   | 1.30% | 6.64%) | 5.13% | -2.32% | 0.02% | 10.02% |
|   (%)            |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Return on      |       |   (2   |   1   |   -    |   10  |   1    |
|   Fixed Assets   | 5.77% | 1.38%) | 6.73% | 19.33% | 6.14% | 06.14% |
|   (%)            |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Asset Turnover |       |   0.22 |       |   0.06 |       |   0.16 |
|   (Times)        |  0.55 |        |  0.46 |        |  0.16 |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   FINANCIAL      |       |        |       |        |       |        |
|   POLICY RATIO   |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Debt to Equity |       |   1.40 |       |   0.42 |       |   0.07 |
|   Ratio(Times)   |  1.22 |        |  1.04 |        |  0.07 |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Interest       |       |        |   3.1 |        |       |        |
|   Coverage       |  0.59 | (8.61) |       |  -0.14 | 32.19 |  32.19 |
|   (Times)        |       |        |       |        |       |        |
+------------------+-------+--------+-------+--------+-------+--------+
|   Pay Out Ratio  |       |        |       |        |       |        |
|   (%)            | 0.00% |  0.00% | 0.00% |  0.00% | 0.00% |  0.00% |
+------------------+-------+--------+-------+--------+-------+--------+

  11.1.5 Table of important financial ratios of the fiscal year 2010,
  2009 and 2008 (Restated with provision for potential claims due under
  the Export Contract)

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

                         Consolidated                       Company             

                         2010           2009       2008     2010      2009      2008

  LIQUIDITY RATIO                                                                

  Current Ratio (Times)  0.16           0.35       1.30     0.11      0.46      0.46

  Quick Ratio (Times)    0.05           0.09       1.03     0.02      0.02      0.02

  Quick Ratio (Cash      0.14           (0.14)     0.73     -0.38     -1.17     -1.17
  Basis) (Times)                                                                

  Receivable Turnover    41.77          5.13       11.7     4.84      4.1       4.1
  (Times)                                                                       

  Collection Period      8.62           70.14      30.77    74.37     87.77     87.77
  (Days)                                                                        

  Inventory Turnover     3.34           3.67       5.01     0.40      0.38      0.38
  (Times)                                                                       

  Inventory Turnover     107.94         98.06      71.86    899.66    946.56    946.56
  (Days)                                                                        

  Accounts Payable       7.41           6.88       9.17     1.21      0.48      0.48
  Turnover (Times)                                                              

  Payment Period (Days)  48.55          52.32      39.28    298.37    743.09    743.09

  Cash Cycle (Days)      68.01          115.88     63.36    675.66    291.24    291.24

  PROFITABLE RATIO                                                              

  Gross Profit Margin    50.37%         (1.22%)    53.18    15.37%    18.89%    18.89%
  (%)                                                                           

  Net Profit Margin (%)  -85.31%        (75.32%)   11.18    -35.67%   63.38%    63.38%

  Return on Equity (%)   -228.0%        (36.39%)   9.86     -3.16%    10.90%    10.90%

  EFFICIENCY RATIO                                                              

  Return on Total Assets -46.76%        (16.64%)   5.13%    -2.32%    10.02%    10.02%
  (%)                                                                           

  Return on Fixed Assets -61.99%        (21.38%)   16.73%   -19.33%   106.14%   106.14%
  (%)                                                                           

  Asset Turnover (Times) 0.55           0.22       0.46     0.06      0.16      0.16

  FINANCIAL POLICY RATIO                                                        

  Debt to Equity         -34.39         1.40       1.04     0.42      0.07      0.07
  Ratio(Times)                                                                  

  Interest Coverage      0.59           (8.61)     3.1      -0.14     32.19     32.19
  (Times)                                                                       

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

11.2Management Discussion and Analysis

11. 21Termination of the Export Contract

  The precise financial state of the firmis dependenton the outcome of
  the legal proceedings with Deutsche Bank AG. The claims of the Export
  Contract are under legal dispute, and fundamentally uncertain as to
  the amount and timing of the claim. This is therefore, deemed to be a
  Contingent Liability. According to Clause 32 of the Accounting
  Framework (as amended in 2009) states that “the information may
  involve the decision, but the record of such information may cause
  misunderstanding to the person who uses the financial statement
  because of unreliable information. For instance, the estimation of
  damages claimed in a lawsuit, which is still in the legal proceeding,
  may be unreliable because the damages and the outcome of the case are
  uncertain. Therefore, it may be inappropriate for the business to
  recognize the amount of such damages in the balance sheet. However,
  the business must disclose the amount of claimed damages and the
  events in relation to such lawsuit”. As such, the claims made by DB AG
  are fully disclosed in the Notes to the Financial Statement (see note
  18). Depending on treatment of the provision of Deutsche Bank’s Export
  Contract, thereare two possible versions of the Financial Statement.

  []

  At the time the Annual Report goes to print, our analysis is based on
  Category B, where there has been no provision of the Export
  Contract.The first version released by the Management and the Audit
  Committee, was not certified to be a true presentation of the firm’s
  financial position by the external auditing party (AMT), and contained
  no provision for the claims madeunder the Export Contract.

  The Export Contract was developed by Deutsche Bank London as the
  repayment mechanism for the $35 million dollar loan, as summarized by
  the terms below:

+----------------+----------------+----------------+-----------------+
| Delivery       | Notional       | Lower Price    | Upper Price     |
| Period         | amount per     |                |                 |
|                | month (ozs)    | (USD/oz)       | (USD/oz)        |
+----------------+----------------+----------------+-----------------+
| Apr 08-Feb 09  | 2,083.33       | 500            | 862             |
+----------------+----------------+----------------+-----------------+
| Mar 09- Feb 10 | 2,500          | 500            | 825             |
+----------------+----------------+----------------+-----------------+
| Mar 10- Feb 11 | 2,083.33       | 500            | 815             |
+----------------+----------------+----------------+-----------------+
| Mar 11- Mar 12 | 2,500          | 500            | 805             |
+----------------+----------------+----------------+-----------------+

  Legal documentation on there-profiling negotiationssurrounding the
  delivery amounts of 47,081ozs were inconclusive, leadingDeutsche
  BankAGto terminate the Export Contract and claim damages arising from
  itstermination in the delivery amount of 47,081ozs of gold in December
  2010 (monetized to $27,601,366). This is part of the legal dispute
  lodged in the English system.

+-------------------------+--------------------------------------------+
| Price of Gold           | Approx value of the Export Contract        |
|                         |                                            |
|                         | (according tomethod of calculations by DB  |
|                         | London)                                    |
+-------------------------+--------------------------------------------+
| ~$1405                  | $27,601,366                                |
+-------------------------+--------------------------------------------+
| ~ $1500 `               | $ 32,250,485                               |
+-------------------------+--------------------------------------------+
| ~$1600                  | $ 36,958,585                               |
+-------------------------+--------------------------------------------+
| ~$1700                  | $ 41,666,685                               |
+-------------------------+--------------------------------------------+
| ~$1800                  | $ 46,374,785                               |
+-------------------------+--------------------------------------------+
| ~$1900                  | $ 51,082,885                               |
+-------------------------+--------------------------------------------+
| ~$2000                  | $ 55,790,985                               |
+-------------------------+--------------------------------------------+

  For example, at gold prices of $2000/oz, the $27,601,366 damages
  calculatedin December 2010 by Deutsche Bank, London is equivalentto
  23,292ozs of gold dore. Subsequent to the events of 2010, our English
  lawyers have contested the claims put forward by Deutsche Bank AG.

  The impasse over the classification of the Export Contract means our
  external auditors, AMT, has not certified the Financial Statements are
  not presented “in conformity with generally accepted accounting
  principles”.To overcome the current impasse, Management and the Audit
  Committee have since provided clarification on this matter to the
  Securities Exchange Commission in mid-2011 (subsequent to reporting
  event).

  As we go to print, shares of Tongkah Harbour PLC remain suspended,
  pending the outcome of whether to make a provision for the Export
  Contract. In a statement by the Stock Exchange of Thailand, it is said
  the “THL FS 2010 does not comply with the Accounting standard,
  therefore, SET is continue showing the SP mark to stop THL share
  trading until the Company will send the amended one or until can
  finalize the solution that no need to amend it”. The shares are
  suspended because of a delay in the presentation of a “fair statement,
  accepted by accounting principles.”

  The Financial Statement for the Year Ended December 31, 2010 (“FS”),
  in which the Auditor opined that the said FS does not present fairly,
  in all material respects according to generally accepted accounting
  principles specifically, due to the lack of a financial provision of
  damages claimed by the Overseas Bank, resulted in the trading
  suspension (“SP”) of the Company’s shares. Following a decision by the
  SEC on 27^(th) October 2011, the Company accordingly restated Q3 and
  Financial Statement year ended 2010 (FY 2010) by 26^(th) Nov 2011
  according to generally accepted accounting principles. The legal
  dispute is however, ongoing.

  Event Subsequent (2011):

  Due to the provision for DB’s claims due under the Export Contract,
  the shareholder’s equity position is less than zero. As announced on
  9^(th) Dec 2011, Company has been placed on “NC-Stage 1” status,
  awaiting the decision by the Board of Directors on the rehabilitation
  options presented by the SET by 6^(th) Jan 2012.

Revenue

Gold Sales 

1.  Due to the fact that the first shipment of gold bearing copper
    concentrate was sold and recorded on 4th October, 2009, 2010is the
    first full year of consistent shipment of copper concentrates. The
    Group has achieved record revenues totaling over a billion baht, and
    the majority of this was derived from selling 4,151ozs of gold dore
    and 17,450ozs of gold contained in the copper concentrate (any
    difference between the amount produced and gold sold, leaves the
    remainder as on-site stock). Gold was sold directly into the spot
    market in the latter part of the year, achieving an average price of
    THB 33,076.46 per ounce.

    Revenue for gold has more than doubled from Baht 398.95 million to
    Baht 837.95 million, whereas copper revenue has increased more than
    fivefold to Baht 109.49 million, reflecting the increased production
    of copper in concentrate. As a consequence of the on-site processing
    strategy, shareholders gain exposure to both Precious and Base metal
    prices.

    For the first 6 months of 2010, Tungkum received prices stipulated
    in the Export Contract, which was $825/oz for January and February.
    Prices for the next 4 months were set at $815/oz, until access to
    spot prices was regained in July 2010.

    As indicated in the 2009 Annual Report, Deutsche Bank AG temporarily
    restructured the prices of the Export Contract during December 2007
    and February 2008, at the behest of the Management team. During the
    re-profiling period, when negotiations were ongoing, Tungkum
    received spot access. Due to the high intra-day volatility of gold
    prices in conjunction with TKL’s periodic sales of dore and
    concentrate, revenues do not directly replicate the underlying spot
    prices.

    Due to the deficit of copper concentrate supplies in the market,
    prices have risen from an average $7000/ton in the first half of the
    year, to surpass the $9000/ton.

Andesite Sales

In 2010 andesite aggregate sales decreased from Baht 8.04 million in the
previous year to Baht 5.96 million.

Tin Ore

The Company had no tin ore production and received no income from tin
mining operations. The Company focused on furthering approval of its
application for the mining license for its subsidiary- Sea Minerals
Limited (SML), which has offshore lease holdings in the AndamanSea.
Production is expected to be in excess of 2,000 tones per year (per
dredge) with mine life of at least 10 years, depending on tin prices and
cut-off grades established.

Income Statement 

Selling and Administrative Expenses

8.  The selling and administrative expenses for 2010 totaled Baht 308.53
    million. The presentation of this portion of the Financial Statement
    was revised by the Ministry of Commerce; accordingly the selling and
    administrative expense for 2009 is changed from Baht 188.4 to Baht
    191.05 million. This large increase is due to the step up nature of
    the gold royalty fee, which is linked to Thai gold prices. The
    Department of Primary Industries and Mines collected Baht 82.863*
    million (includes small amounts of selling costs, so royalties
    approx. Baht 79 million) in 2010, more than twice the amount in 2009
    at Baht 31.895 million.

    To entice investment in the development of Thailand’s gold mining
    industry, the original Concession Agreement set the royalty at a
    flat rate of 2.5%. In return for the Block 4 Concession, the firm
    made an agreement with the Royal Thai Government to pay a production
    share of 1.5% to the Ministry of Finance. The royalty rate was
    amended to a progressive rate system by the Government in 2007,
    stepping up from 2% to 20% depending on the prevailing Thai gold
    price.

+----------------+---------------+--------------------------+---------+
|   Ministerial  |   Year        |   Gold Royalty Fees Rate |         |
|   Regulation   |               |                          |         |
|   No.          |               |                          |         |
+----------------+---------------+--------------------------+---------+
|                |               |   Gold Price / Gram      |   %     |
+----------------+---------------+--------------------------+---------+
|   23           |   1980        |                          |   10%   |
+----------------+---------------+--------------------------+---------+
|   47           |   1993        |                          |   2.5%  |
+----------------+---------------+--------------------------+---------+
|    Current     |   2007        |   ≤ 400 Baht             |   2.50% |
+----------------+---------------+--------------------------+---------+
|                |               |   401 ≤ 600 Baht         |   5%    |
+----------------+---------------+--------------------------+---------+
|                |               |   601 ≤ 1000 Baht        |   10%   |
+----------------+---------------+--------------------------+---------+
|                |               |   1001 ≤ 1500 Baht       |   15%   |
+----------------+---------------+--------------------------+---------+
|                |               |   ≥ 1501 Baht            |   20%   |
+----------------+---------------+--------------------------+---------+

Additionally, the Agriculture Land Reform Organization (ALRO) imposed a
second round of royalty payment, equaling the progressive rate system
utilized by DPIM. During the year, Baht 82.396 million has been accrued
(but not paid) to accountfor this. In protest of the charges imposed by
ALRO, the case has been filed with the Administrative Court since late
2008. Tungkum has stopped payment of this second royalty since November
2009. In total, THB 114 million has been accrued in our Financial
Statements, in the event that a settlement or legal resolution can be
achieved with the government agency.

Interest Expenses, Hedge Settlement & Foreign Exchange gain

Financing costs increased from THB 37.34 million in 2009 to THB 57.84
million in 2010; however, this is below the THB 83.32 million expenses
incurred in 2008. The Export Contract arrangements, entered into to
secure the loan from Deutsche Bank AG, is reflected in the settlement
amount of Baht 135 million which was incurred from a difference between
the market price and the Export Contract price of Deutsche Bank London.
In 2010, there were no losses incurred from the purchase of gold, as
there was no plant slowdown due to expansionary exercises, and
therefore, no corresponding need to purchase gold to meet delivery
obligations to Deutsche Bank. The cost of purchasing gold for Deutsche
Bank’s Export Contract totaled Baht 28.825 million in 2009. These
arrangements with Deutsche Bank are currently in dispute and are
discussed in more detail in Section 10.1 of the annual report. The
Company recorded a gain of foreign exchange rate THB 50.495 million, up
from THB 45.36 million in 2009. The gain was attributed to the
strengthening of the Thai Baht against the American Dollar, however,
Baht 48.901 million of this foreign exchange amount was unrealized.

10. Revenues have more than doubled and cost of sales have remained
    constant (THB 437.5 million in 2009 to THB 467.28 million in 2010),
    significantly increasing Gross Profit from THB -13.84 to THB 479.71
    million. As production levels have normalized, Tungkum’s site
    operations have provedfinancially viable and technically efficient.

    Gross Profits, before finance costs

    Exogenous factors, including the revised royalty regime (collected
    by both DPIM & contested by ALRO) affects the profits before finance
    costs of our Group. As discussed, the selling and admin expenses, as
    well as the losses claimed by Deutsche Bank AG, have contributed to
    a much narrower profit margin, of Baht 33.924 million. However, the
    solid performance of the Tungkum site for 2010 has reversed the
    earlier losses at Baht 312.427 million during the plant expansion of
    2009.

    Net Profit (loss)- without provision for the Export Contract

    Depending on the interpretation and valuation of the claims made
    under the Export Contract, finance costs vary immensely,
    demonstrating the uncertainties that have yet to be resolved in the
    proper legal and regulatory forums. By fully providing for the
    amounts owing due the Facility Agreement, but interpreting the
    potential claims due under the Export Contract as a contingent
    liability, the Net Profit of the Group for 2010 stands at – THB
    23.915 million.

Net Profit (loss) - with provision for the Export Contract

As there is no resolution to the legal dispute with DB AG, the SEC
decided on the 27^(th) October 2011 the Company should provide for the
claims arising from the terminated Export Contract in the Financial
Statement Year Ended 2010. Depending on the legal outcome or settlement
of the dispute with DB AG, the Financial Statement includes a
non-recurring provision of USD 27,601,366 due to the termination of the
Export Contract.

Cash Flow

Operating Activities

15. The cash position of the Group has improved significantly, reversing
    the deficits incurred in 2009, to record a net cash inflow from
    operating activities of Baht 167.664 million. The additional
    generation of cash has allowed a large portion of trade account debt
    to be settled, decreasing the operational liabilities by THB 39.3
    million. Cash deficiencies at Tungkum had restricted the performance
    of Tungkum’s mine site; the resulting correction of those
    deficiencies has led to the stabilization of the Company.

Investing Activities

16. Management has focused on extracting the best possible performance
    from its recently expanded operating subsidiaries, there have been
    no significant investment made in 2010. Only a minimal amount of
    Baht 24.32 million was invested in a new cone crusher and leasing
    new excavators in order to maximize the performance of our existing
    facilities.

Financing Activities

17. Local banks were repaid THB 29.95 million and Baht 5 million,
    decreasing bank overdraft and short term loans. Further, a portion
    of the loan amounting to THB86.37 million from related parties was
    rolled over into a longer term loan (discussed separately under
    related party transactions). After re-classifying a portion of the
    long term loan, the net cash outflow from financing activities
    amounted to Baht 285.16 million.

Liquidity and Capital Structure

Liquidity position of the company improved greatly from 2009 as the
company was able to obtain permission from the authorities to export the
copper concentrate coupled with the stabilization of its production.
This is reflected in the much improved liquidity ratios of the Financial
Statement. There is an improvement in the capital structure of the
company from 1.40 in 2009 to 1.22 in 2010, indicating a less leveraged
capital structure. With no further plant expansion, the return on fixed
assets has returned into positive territory to the benefit of our
shareholders. Gross profits are extremely healthy (over 50%) and the net
profit margin has drastically improved. The second round of claims by
ALRO are contested, otherwise the Group would have recorded a positive
net profit for 2010. There is no further plant CAPEX required, and so
gold production should directly translate into healthy gross profits in
the income statement, which would ultimately improve the equity position
of the Group. As gold operations continue and no further plant
expansion, the capital structure will only improve with time. 

11.3 Auditor

THL has appointed Mrs. Natsarak Sarochanunjeen of A.M.T. & Associates
Office as the external auditor of the Company and its subsidiaries and
the appointment has been approved by the Office of Securities and
Exchange Commission. There are no relationships or conflicts of interest
among the independent auditor, the Company and its subsidiaries, the
executives, the shareholders, or others related to those parties.  It
was also approved by the Annual General Shareholders’ meeting with the
audit fee of Baht 0.605 million which is the same as the fee for the
year 2009.

In addition, the A.M.T. & Associates Office has serves as the
independent auditor for Company subsidiaries of 4 companies with an
audit fee for the year 2010 amounting to Baht 1.25 million. There was no
non-audit services fee for the previous year because no other services
were received from the independent auditor.