12. FINANCIAL POSITION AND OPERATING RESULTS

2.12.1 FINANCIAL STATEMENT

  2.12.1.1 Audit for report of consolidation financial statements of
  year 2007

MRS. KEREE NARONGDEJ

CERIFIED PUBLIC ACCOUNTANT (THAILAND), NO. 76

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 3 to the financial statements that in year
  2007, the Company had changed its accounting policy for its
  investments in subsidiaries in the separate financial statements from
  the equity method to the cost method in accordance with the Accounting
  Standard No.44 “Consolidated and Separate Financial Statements”
  (revised 2007), the change had been applied retrospectively for the
  separate financial statements for the year ended December 31, 2006. In
  my audits, the adjustments made to the separate financial statements
  are appropriate and have been properly applied.

  b) As described in note 26.9 to the financial statements that on June
  28, 2007, the Department of Primary Industries and Mines (DPIM) had
  notified the Company to acknowledge its complaints against Tungkum
  Limited (a subsidiary) for exporting gold dores weighting 105.5153 kgs
  out of its mine/metallurgical area without filling the request for
  transportation permit. This is deemed to violate with Section 108 of
  Minerals Act B.E 2510 by the DPIM which shall be fined at 1-5 times of
  gold value (the gold value at the delivery date amounted to Baht 52.83
  million) and the Minister of the Ministry of Industry has the power to
  cancel the mining right under Section 148 and the Director General of
  DPIM has the power to fine the subsidiary under Section 153.
  Subsequently, on July 26, 2007, the subsidiary has met with the
  inquiry officers of the Wangsaphung District Police Office, Loei
  province denying all the allegations and stated that the subsidiary
  has complied with all official regulations. At present, this matter is
  being under the process of the inquiry officers to preparing the case
  for the prosecutor to consider whether or not there are sufficient
  grounds for the indictment. However, the subsidiary’s legal counselor
  has given the opinion on the above case that the case had been lapsed
  prescription in law.

c) As described in note 12 to the financial statements that the related
company has submitted to renew the andesite mining right since year 2005
prior to its expiration date on January 21, 2007. The Mineral Act
Committee has accepted the renewal mining right submission on February
8, 2008 and the matter is at the final stage of the consideration.

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 and current accounts.

  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
  according to the units of production compare with the volume 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      |
+------------------------------------------------------+---+-----------+
|   Buildings, temporary buildings and dry dock        |   |   10 - 20 |
+------------------------------------------------------+---+-----------+
|   Furniture and office equipment                     |   |   3 - 10  |
+------------------------------------------------------+---+-----------+
|   Machinery and equipment                            |   |   5 - 10  |
+------------------------------------------------------+---+-----------+
|   Vehicles                                           |   |   5       |
+------------------------------------------------------+---+-----------+
|   Other                                              |   |   5 - 10  |
+------------------------------------------------------+---+-----------+

  Residue ponds are amortized on units of production basis using the
  capacity volume of the residue ponds.

  9. 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.

  10 Deferred arranging fee

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

  11. 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.

  12. Capitalization of borrowing cost

  The subsidiary has capitalized the borrowing costs that are directly
  attributable to the acquisition of building factory and machinery. The
  capitalization of interest will be discontinued when the assets are
  completed and the commercial operation start. The interest capitalized
  for the year 2006 amounted to Baht 5.09 million.

  The subsidiary has capitalized the borrowing costs from the parent
  company that are directly attributable to the acquisition of deferred
  exploration and development expenditure for gold mining. The
  capitalization of borrowing cost will be discontinued when the mining
  are completed and the commercial operation starts. The interest
  capitalized for the years 2006 amounted to Baht 0.90 million.

  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 account receivables and payables,
  bank overdrafts, loans, account payable for purchase of assets,
  accrued expenses, and hire – purchase 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 year 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. Use of accounting estimates

  The preparation of financial statements in conformity with generally
  accepted accounting principles requires management to make estimates
  and assumptions that affect the reported amounts of revenues,
  expenses, assets and liabilities and disclosure of contingent assets
  and liabilities. Subsequent actual results may differ from these
  estimates.

4.  Summary of financial statement

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

[TABLE]

[TABLE]

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

  STATEMENTS OF CASH FLOW                                                                                                                                                                                                                                                                                                                                

  FOR THE YEARS ENDED DECEMBER 31, 2007 A ND 2006                                                                                                                                                                                                                                                                                                        

                                                                                                                                                                                                                                                                                                                                                         

                                                                                                                                                                                                                                        Thousand Baht                                                                                                    

                                                                                                                                                                                                                                        Consolidated                                                   The Company                                       
                                                                                                                                                                                                                                                                                                       Only                                              

                                                                                                                                                                                                                                        2007                                              2006         2007                                   2006       

                                                                                                                                                                                                                                                       (Restated)                                                             (Restated)                 

  CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                                                                                                                                                                                   

                                                      Net profit                                                                                                                                                                        (147,950)                         2,071                        (147,950)                              2,818      
                                                      (loss)                                                                                                                                                                                                                                                                                             

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

                                                      from                                                                                                                                                                                                                                                                                               
                                                      operating                                                                                                                                                                                                                                                                                          
                                                      activities :-                                                                                                                                                                                                                                                                                      

                                                                                                                   Depreciation                                                                                                         85,561                            45,459                       6,216                                  7,803      
                                                                                                                   and                                                                                                                                                                                                                                   
                                                                                                                   amortization                                                                                                                                                                                                                          

                                                                                                                   Doubtful debts                                                                                                       244                               694                          18,785                                 10,479     

                                                                                                                   Loss from                                                                                                            307                               -                            307                                    -          
                                                                                                                   decline in                                                                                                                                                                                                                            
                                                                                                                   value of                                                                                                                                                                                                                              
                                                                                                                   inventories                                                                                                                                                                                                                           

                                                                                                                   Amortization                                                                                                         992                               863                          992                                    863        
                                                                                                                   on                                                                                                                                                                                                                                    
                                                                                                                   expenditures                                                                                                                                                                                                                          
                                                                                                                   of andesite                                                                                                                                                                                                                           
                                                                                                                   mining project                                                                                                                                                                                                                        

                                                                                                                   Amortization                                                                                                         53,801                            19,302                       -                                      -          
                                                                                                                   on exploration                                                                                                                                                                                                                        
                                                                                                                   expenditures                                                                                                                                                                                                                          
                                                                                                                   of gold mining                                                                                                                                                                                                                        
                                                                                                                   project                                                                                                                                                                                                                               

                                                                                                                   Impairment                                                                                                           -                                 7,000                        -                                      7,000      
                                                                                                                   loss on Phukit                                                                                                                                                                                                                        
                                                                                                                   Project                                                                                                                                                                                                                               

                                                                                                                   Adjustment for                                                                                                                                                                                                                        
                                                                                                                   increase                                                                                                                                                                                                                              
                                                                                                                   (decrease) in                                                                                                                                                                                                                         
                                                                                                                   impairment                                                                                                                                                                                                                            

                                                                                                                                                                          On                                                            -                                 -                            105,438                                (39,202)   
                                                                                                                                                                          investment                                                                                                                                                                     
                                                                                                                                                                          in                                                                                                                                                                             
                                                                                                                                                                          subsidiary                                                                                                                                                                     
                                                                                                                                                                          company                                                                                                                                                                        

                                                                                                                   Loss (gain) on                                                                                                       (658)                             (262)                        -                                      (262)      
                                                                                                                   sale fixed                                                                                                                                                                                                                            
                                                                                                                   assets                                                                                                                                                                                                                                

                                                                                                                   Fixed asset                                                                                                          (579)                             1,062                        -                                      -          
                                                                                                                   written - off                                                                                                                                                                                                                         

                                                                                                                   Loss (profit)                                                                                                        (5,225)                           (3,077)                      -                                      -          
                                                                                                                   of minority                                                                                                                                                                                                                           
                                                                                                                   interest                                                                                                                                                                                                                              

                                                                                                                   Adjusted                                                                                                                                                                                                                              
                                                                                                                   minority                                                                                                                                                                                                                              
                                                                                                                   interest from                                                                                                                                                                                                                         
                                                                                                                   excess loss on                                                                                                                                                                                                                        

                                                                                                                   Investment in                                                                                                        -                                 (236)                        -                                      -          
                                                                                                                   subsidiary                                                                                                                                                                                                                            
                                                                                                                   company                                                                                                                                                                                                                               

                                                                                                                   Goodwill                                                                                                             78                                1,871                        -                                      -          
                                                                                                                   amortization                                                                                                                                                                                                                          

                                                                                                                   Loss (gain) on                                                                                                       (49,878)                          (22,397)                     -                                      -          
                                                                                                                   exchange rate                                                                                                                                                                                                                         

                                                                                                                                                                                                                                        (63,307)                          52,350                       (16,212)                               (10,501)   

                                                      Decrease                                                                                                                                                                                                                                                                                           
                                                      (increase) in                                                                                                                                                                                                                                                                                      
                                                      operating                                                                                                                                                                                                                                                                                          
                                                      assets :-                                                                                                                                                                                                                                                                                          

                                                                                                   Trade accounts                                                                                                                       5,392                             (3,780)                      4,498                                  (1,151)    
                                                                                                   receivable                                                                                                                                                                                                                                            

                                                                                                   Short - term                                                                                                                         (257)                             2,407                        -                                      1,034      
                                                                                                   advances to                                                                                                                                                                                                                                           
                                                                                                   related parties                                                                                                                                                                                                                                       

                                                                                                   Inventories,                                                                                                                         (17,365)                          (34,710)                     3,344                                  (4,050)    
                                                                                                   net                                                                                                                                                                                                                                                   

                                                                                                   Other current                                                                                                                        21,826                            (31,910)                     250                                    1,162      
                                                                                                   assets                                                                                                                                                                                                                                                

                                                                                                   Other                                                                                                                                333                               (1,483)                      (2,800)                                (14,044)   
                                                                                                   receivable -                                                                                                                                                                                                                                          
                                                                                                   related parties                                                                                                                                                                                                                                       

                                                                                                   Other non -                                                                                                                          (3,254)                           (11,055)                     149                                    151        
                                                                                                   current assets                                                                                                                                                                                                                                        

                                                      Increase                                                                                                                                                                                                                                                                                           
                                                      (decrease) in                                                                                                                                                                                                                                                                                      
                                                      operating                                                                                                                                                                                                                                                                                          
                                                      liabilities                                                                                                                                                                                                                                                                                        
                                                      :-                                                                                                                                                                                                                                                                                                 

                                                                                                   Trade accounts                                                                                                                       -                                 -                            (3,289)                                1,253      
                                                                                                   payable -                                                                                                                                                                                                                                             
                                                                                                   related party                                                                                                                                                                                                                                         

                                                                                                   Trade accounts                                                                                                                       34,481                            7,026                        (780)                                  390        
                                                                                                   payable - other                                                                                                                                                                                                                                       
                                                                                                   parties                                                                                                                                                                                                                                               

                                                                                                   Short - term                                                                                                                         413                               (4,085)                      -                                      -          
                                                                                                   advances from                                                                                                                                                                                                                                         
                                                                                                   related parties                                                                                                                                                                                                                                       

                                                                                                   Accrued                                                                                                                                                                                                                                               
                                                                                                   expenses on                                                                                                                                                                                                                                           
                                                                                                   payment of the                                                                                                                                                                                                                                        
                                                                                                   extra benefit                                                                                                                                                                                                                                         
                                                                                                   to                                                                                                                                                                                                                                                    

                                                                                                                                                             DPIM under                                                                                                                                                                                  
                                                                                                                                                             the                                                                                                                                                                                         
                                                                                                                                                             agreement                                                                                                                                                                                   
                                                                                                                                                             dated March                                                                                                                                                                                 
                                                                                                                                                             30, 2007                                                                                                                                                                                    

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

                                                                                                   Other current                                                                                                                        23,725                            7,437                        (6,864)                                2,246      
                                                                                                   liabilities                                                                                                                                                                                                                                           

                                                                                                   Provision for                                                                                                                        -                                 (5,309)                      -                                      -          
                                                                                                   environmental                                                                                                                                                                                                                                         
                                                                                                   restoration                                                                                                                                                                                                                                           
                                                                                                   expenses                                                                                                                                                                                                                                              

                                                                                                                                                             Net cash                                                                   (2,087)                           (19,038)                     (21,704)                               (23,510)   
                                                                                                                                                             inflow                                                                                                                                                                                      
                                                                                                                                                             (outflow)                                                                                                                                                                                   
                                                                                                                                                             from                                                                                                                                                                                        
                                                                                                                                                             operating                                                                                                                                                                                   
                                                                                                                                                             activities                                                                                                                                                                                  

                                                                                                                                                                                                                                                                                                                                                         

  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 (Continued)                                                                                                                                                                                                                                                                                                                    

  FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006                                                                                                                                                                                                                                                                                                         

                                                                                                                                                                                                                                                                                                                                                         

                                                                                                                                                                                                                         Thousand Baht                                                                                                                   

                                                                                                                                                                                                                         Consolidated                                                                              The                                   
                                                                                                                                                                                                                                                                                                                   Company                               
                                                                                                                                                                                                                                                                                                                   Only                                  

                                                                                                                                                                                                                         2007                                             2006                                     2007                                  2006

                                                                                                                                                                                                                                                                          (Restated)                                                                     (Restated)

  CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                                                                                                                                                                                                   

                                                                                     Decrease                                                                                                                                                                                                                                                            
                                                                                     (increase) in                                                                                                                                                                                                                                                       
                                                                                     investments                                                                                                                                                                                                                                                         
                                                                                     in subsidiary                                                                                                                                                                                                                                                       

                                                                                                                                               companies                                                                 -                                                -                                        (45,198)                              - -

                                                                                     Decrease                                                                                                                                                                                                                                                            
                                                                                     (increase) in                                                                                                                                                                                                                                                       
                                                                                     deferred                                                                                                                                                                                                                                                            
                                                                                     exploration                                                                                                                                                                                                                                                         

                                                                                                                                               expenditure                                                               (229)                                            (3,413)                                  -                                     -
                                                                                                                                               of gold                                                                                                                                                                                                   
                                                                                                                                               mining                                                                                                                                                                                                    
                                                                                                                                               project                                                                                                                                                                                                   

                                                                                     Decrease                                                                                                                            -                                                -                                        58,497                                44,489
                                                                                     (increase) in                                                                                                                                                                                                                                                       
                                                                                     long - term                                                                                                                                                                                                                                                         
                                                                                     loans to                                                                                                                                                                                                                                                            
                                                                                     related                                                                                                                                                                                                                                                             
                                                                                     parties                                                                                                                                                                                                                                                             

                                                                                     Payment for                                                                                                                         (189,545)                                        (286,499)                                (1,756)                               (326)
                                                                                     purchases                                                                                                                                                                                                                                                           
                                                                                     property,                                                                                                                                                                                                                                                           
                                                                                     plant and                                                                                                                                                                                                                                                           
                                                                                     equipment                                                                                                                                                                                                                                                           

                                                                                     Proceeds from                                                                                                                       10,141                                           262                                      -                                     262
                                                                                     sales fixed                                                                                                                                                                                                                                                         
                                                                                     assets                                                                                                                                                                                                                                                              

                                                                                                                                  Net cash                                                                               (179,633)                                        (289,650)                                11,543                                44,425
                                                                                                                                  inflow                                                                                                                                                                                                                 
                                                                                                                                  (outflow)                                                                                                                                                                                                              
                                                                                                                                  from                                                                                                                                                                                                                   
                                                                                                                                  investing                                                                                                                                                                                                              
                                                                                                                                  activities                                                                                                                                                                                                             

                                                                                                                                                                                                                                                                                                                                                         

  CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                                                                                                                                                                                                   

                                                                    Increase                                                                                                                                             (29,538)                                         52,838                                   (1,520)                               2,838
                                                                    (decrease) in                                                                                                                                                                                                                                                                        
                                                                    bank                                                                                                                                                                                                                                                                                 
                                                                    overdrafts                                                                                                                                                                                                                                                                           
                                                                    and short                                                                                                                                                                                                                                                                            
                                                                    term - loan                                                                                                                                                                                                                                                                          
                                                                    from                                                                                                                                                                                                                                                                                 
                                                                    financial                                                                                                                                                                                                                                                                            
                                                                    institution                                                                                                                                                                                                                                                                          

                                                                    Increase                                                                                                                                             -                                                -                                        (972)                                 (3,258)
                                                                    (decrease) in                                                                                                                                                                                                                                                                        
                                                                    short - term                                                                                                                                                                                                                                                                         
                                                                    loans from                                                                                                                                                                                                                                                                           
                                                                    related                                                                                                                                                                                                                                                                              
                                                                    parties                                                                                                                                                                                                                                                                              

                                                                    Increase                                                                                                                                             (852)                                            (1,445)                                  34,604                                (1,762)
                                                                    (decrease) in                                                                                                                                                                                                                                                                        
                                                                    long - term                                                                                                                                                                                                                                                                          
                                                                    loans from                                                                                                                                                                                                                                                                           
                                                                    related                                                                                                                                                                                                                                                                              
                                                                    parties                                                                                                                                                                                                                                                                              

                                                                    Increase                                                                                                                                             303,158                                          379,146                                  (20,525)                              (18,460)
                                                                    (decrease) in                                                                                                                                                                                                                                                                        
                                                                    long - term                                                                                                                                                                                                                                                                          
                                                                    loans                                                                                                                                                                                                                                                                                

                                                                    Increase                                                                                                                                             (6,571)                                          (1,335)                                  (1,488)                               (351)
                                                                    (decrease) in                                                                                                                                                                                                                                                                        
                                                                    hire -                                                                                                                                                                                                                                                                               
                                                                    purchase and                                                                                                                                                                                                                                                                         
                                                                    finance lease                                                                                                                                                                                                                                                                        
                                                                    obligations                                                                                                                                                                                                                                                                          

                                                                    Decrease                                                                                                                                             (22,487)                                                                                                                        
                                                                    (increase) in                                                                                                                                                                                                                                                                        
                                                                    deferred                                                                                                                                                                                                                                                                             
                                                                    arranging fee                                                                                                                                                                                                                                                                        

                                                                                                                                  Net cash                                                                               243,710                                          429,204                                  10,099                                (20,993)
                                                                                                                                  inflow                                                                                                                                                                                                                 
                                                                                                                                  (outflow)                                                                                                                                                                                                              
                                                                                                                                  from                                                                                                                                                                                                                   
                                                                                                                                  financing                                                                                                                                                                                                              
                                                                                                                                  activities                                                                                                                                                                                                             

                                                                                                                                                                                                                                                                                                                                                         

  INCREASE (DECREASE) IN CASH AND CASH                                                                                                                                                                                   61,990                                           120,516                                  (62)                                  (78)
  EQUIVALENTS, NET                                                                                                                                                                                                                                                                                                                                       

                                                                                                                                                                                                                                                                                                                                                         

  CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                                                                                                                                         77,454                                           31,837                                   145                                   223

                                                                                                                                                                                                                                                                                                                                                         

  CASH AT BANK PLEDGED AS COLLATERAL AT BEGINNING                                                                                                                                                                        75,500                                           601                                      -                                     -
  OF YEAR                                                                                                                                                                                                                                                                                                                                                

                                                                                                                                                                                                                                                                                                                                                         

  CASH AT BANK PLEDGED AS COLLATERAL AT END OF                                                                                                                                                                           (209,469)                                        (75,500)                                 -                                     -
  YEAR                                                                                                                                                                                                                                                                                                                                                   

                                                                                                                                                                                                                                                                                                                                                         

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

                                                                                                                                                                                                                                                                                                                                                         

                                                                                                                                                                                                                                                                                                                                                         

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

  ____________________________________                                                                                                                                                                                                                                                                                                                   
  DIRECTOR______________________________________                                                                                                                                                                                                                                                                                                         
  DIRECTOR                                                                                                                                                                                                                                                                                                                                               
  ------------------------------------------------ -- ------------- ------------- -- ------------- --------------- -------------- ------------ ------------- ------------ ------------ -- -- -- --- --- -- -- ---- -- -- -------------- -------------- ------------ -- -- ------------ -- ------ -- -- ----------- ---------- ------------ -- ---------- ------------

3.  Table of important financial ratios of the fiscal year 2007 and 2006
    (Audited)

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

                             Consolidated              Company       

                             2007           2006       2007          2006

  LIQUIDITY RATIO                                                    

  Current Ratio (Times)      0.28           0.53       0.47          0.45

  Quick Ratio (Times)        0.03           0.25       0.06          0.12

  Quick Ratio (Cash Basis)   0.01           0.22       Nil           Nil
  (Times)                                                            

  Receivable Turnover        65.26          37.20      2.05          3.25
  (Times)                                                            

  Collection Period (Days)   5.59           9.81       178.05        112.31

  Inventory Turnover (Times) 6.14           5.07       0.65          1.33

  Inventory Turnover (Days)  59.45          71.99      561.54        274.44

  Accounts Payable Turnover  11.32          17.81      0.24          1.09
  (Times)                                                            

  Payment Period (Days)      32.24          20.49      1,520.83      334.86

  Cash Cycle (Days)          32.80          61.31      (781.24)      51.89

  PROFITABLE RATIO                                                   

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

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

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

  EFFICIENCY RATIO                                                   

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

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

  Asset Turnover (Times)     0.23           0.16       0.01          0.02

  FINANCIAL POLICY RATIO                                             

  Debt to Equity Ratio       0.79           0.48       0.11          0.15
  (Times)                                                            

  Interest Coverage (Times)  0.81           3.22       (32.00)       3.50

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

2.12.2 SUMMARY OF FINANCIAL POSITION AND OPERATING RESULTS

REVIEW OF FINANCIAL RESULTS

The Group's (THL and its subsidiaries) operating losses of Baht 147.95
million compared with net profit of Baht 2.071 million in year 2006.
During Financial Year 2007, The Group main activity is the gold mining
business which began in Year 2006 and continues to bring in revenue for
the Company. However, due to several factors from internal and external
environments, the Company’s operating results are not as encouraging as
compared to Financial Year 2006.

TIN PERFORMANCE

In 2007, 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), so that SML’s substantial offshore leases in the
Andaman Sea can be put into production as soon as possible. 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.

QUARRY PERFORMANCE

Andesite sales for the year ended 2007 decreased from Baht 21.08 million
to Baht 8.98 million and the cost of sales was reduced to Baht 8.13
million from Baht 17.41 million in Year 2006. The decrease in sales was
due mainly to the postponement of SRT’s double track project which did
not start in 2007 as expected and, therefore, prevented the Company
reaching its aggregate sales targets.

GOLD PERFORMANCE

In year ended 2007, the Company's produced 17,485 ounces of gold which
was all sold within the year. Revenue of Baht 419.12 million and a net
gross margin of 23.27%, or approximately Baht 97.55 million, were
realized. A shortfall in production output resulted in Tungkum (a
Company subsidiary) reporting a net loss of Baht 93.09 million.

OVERALL PERFORMANCE

Total Company revenue for year 2007 was Baht 474.81 million, a
substantial increase of 49.70% from Baht 317.18 million in 2006. The
increase was mainly due to the production and sales of gold bullions.

General and administrative expenses increased from Baht 121.67 million
in 2006 to Baht 175.55 million in 2007. The increase was in line with
the Company’s gold productions and sales, sizes of normal business
operations, and gold related operations (royalty fees and payments, both
included in the selling and administrative expenses) Royalty rate
increases to the DPIM and ALRO in 2007 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 Baht 28.6 million in 2007.

LIQUIDITY ANALYSIS

The liquidity position of the Company was affected during year 2007 as
the Company invested a substantial amount in expanding production
capacity in the gold mining operation hence an increase in the outflow
of cash as part of the financing came through internal funding.

The Company expects the liquidity position to improve in Year 2008 with
the increase in production capacity and output in the gold mining
operation.

CASH FLOW FOR OPERATING ACTIVITIES

The net cash flow utilized for operations approximately Baht 2.09
million, used mostly in the sourcing and purchasing of raw materials and
supplies for gold processing.

CASH FLOW FOR INVESTING ACTIVITIES

The net cash flow utilized for investment purposes amounted to Baht
179.63 million. The funds were used mainly for purchasing for property,
plant improvements, and equipment, were the main cash outflow items for
the Company as it expanded the gold ore processing plant through
installations including the second ball mill, leach-absorption, detox
tank, and thickener, in order to support processing of the transitional
and sulfide ores.

CASH FLOW FOR FINANCING ACTIVITIES

The net cash flow from financing activities amounted to Baht 243.71
million as a result of Long-term loan. During the year the Group
refinanced it’s financing with a foreign bank which resulted in a new
financial arrangement of USD 25 millions to fund the Capital expenditure
and a Baht 30M bank overdraft to support the Company’s working capital.

PROFITABILITY ANALYSIS

The Gross profit margin of the Company was reduced by 28.43% as compared
to Year 2006, but costs increased by 19.39%. This was mainly due to
higher production cost in the Gold Mining operation as the Company is
focusing in various efforts to improve the gold production. The
reduction in the Gross profit margin together with the increase in
operating costs has also resulted in a loss position for the Company in
Financial Year 2007.