11. FINANCIAL POSITION AND OPERATING RESULTS

11.1 FINANCIAL STATEMENT

11.1.1 Audit for report of consolidation financial statements of year
2009

  Mrs. Natsarak Sarochanunjeen

  Certified Public Accountant (Thailand) Registration No. 4563

  A.M.T. & ASSOCIATES

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

(1) As described in note No. 1.7 to the financial statements, As of
    December 31, 2009, the consolidated financial statements and
    separate financial statements have presented total current
    liabilities in exceed of total current assets amounting to Baht
    417.12 million and Baht 71.23 million, respectively, and net
    operating loss of Baht 358.76 million and Baht 352.35 million,
    respectively. These were caused by number of reasons, foremost of
    which were: delay in the construction of the flotation plant, delay
    in government approval for export of copper concentrates that bear a
    substantial amount of the projected gold production, substantial
    delay in obtaining government approval and renewal of mining
    licenses, and substantial government fees and royalties that
    exceeded the original concession agreements.

(2) As described in note No. 13 to the financial statements, in year
    2008 the Company and a subsidiary (Tungkum Limited) had advanced
    cash totaling Baht 21.99 million (USD 580,000 and GBP 50,000) to
    Coral Resources Limited (CRL). In April 2009, the Company and a
    subsidiary had filed a civil court case in Philippines against CRL
    and its two Philippines subsidiaries as well as against three key
    directors of the Coral group, to recover the advances by attach the
    properties of the defendants and to annul any sale or disposition of
    their properties to secure judgment. Also in September 2009, CRL has
    been under liquidation and the Company has been given first refusal
    to acquire the shares of the CRL subsidiaries. However, the company
    and the appointed liquidator were unable to agree on the term of the
    share acquisition offer. On December 23, 2009, the Philippines Court
    resolved to dismiss the cases. Therefore, on January 11, 2010, the
    Company filed the Motion of Reconsideration for the Court
    reconsideration. The management, however, had fully provided
    allowance for doubtful on the advances.

(3) As described in note No. 29.11 to the financial statements, On May
    8, 2008, the Company, a subsidiary (Sky Cliff Limited) and a related
    company (Sintana Holdings Limited) were sued for breach of the joint
    venture agreement to develop the Sky Cliff real estate project. On
    November 17, 2009, the Civil Court ruled that the company and a
    related company shall jointly return the share purchase price paid
    by the Plaintiff of Baht 36.5 with interest and dismissed the claim
    against Sky Cliff Limited. However, the Company disagreed with the
    judgment because the company did not receive any payment from the
    Plaintiff and a related company acted only as an agent for the
    transaction. Thus, on January 13, 2010, the Company submitted an
    appeal and petition requesting that the Court issue a stay of
    execution of the court order pending the results of the Court
    appeal. The petition is now under the Court’s consideration.

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

    2.  Summary of significant accounting policies

  In May 2009, the Federation of Accounting Professions (FAP) has issued
  Notifications No. 12/2552 to re-number of Thai Accounting Standards
  with the same code numbers used for the International Accounting
  Standards. Therefore the numbers of Thai Accounting Standards as used
  in these financial statements are corresponding to those according to
  this notification.

  The Federation of Accounting Professions (FAP) has issued
  Notifications No. 86/2551 and 16/2552 regarding Accounting Standards,
  Financial Reporting Standards and Accounting Practice Guidances which
  have been published in the Royal Gazette as follows :

  1) The accounting standards, financial reporting standard and
  accounting practice guidances which are effective for the year 2009 as
  follows :

  Framework for the Preparation and Presentation of Financial Statements
  (revised 2007)

  Accounting Standard No. 36 Impairment of Assets (revised 2007)

  Financial Reporting Standard No. 5 Non - Current Assets Held for Sale
  and Discontinued Operations (revised 2007)

  Accounting Practice Guidance for Leasehold Right

  Accounting Practice Guidance for Business Combinations under Common
  Control

  These accounting standards, financial reporting standard and
  accounting practice guidances become effective for financial
  statements for the fiscal year beginning on or after January 1, 2009.

  However, in compliance with these accounting standards, financial
  reporting standard and accounting practice guidances does not have any
  significant impact on the financial statements for the current period.

2) Accounting standards which are not effective for the current year as
follows :

  The management of the Company will evaluate the effect of these
  accounting standards and disclose any significant effect to the
  financial statements for the year in which they are initially applied.

(1) Cash and cash equivalents

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

(2) Revenue recognition

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

(3) Allowance for doubtful accounts

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

(4) Inventories

  Inventories are stated at the lower of cost (average method) or net
  realizable 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 exploration 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 over the period of 25 years on straight line method.

(7) Deferred exploration and development expenditure of gold mining

  The subsidiary recorded the related expenditures of exploration and
  development of gold mining which are expected to have 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 there is any indication that the above expenditure shall not be
  recovered by its’ future benefit, the subsidiary shall write-off all
  deferred expenditure to expenses in the periods.

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

(8) Property, plant and equipment

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

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

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

  Land improvement                                           10

  Building, temporary building and dry dock                  10 - 20

  Furniture and office equipment                             3 - 10

  Machinery and equipment                                    5 - 10

  Vehicles                                                   5

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

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

(9) Borrowing cost

  The Company and its subsidiaries capitalized the borrowing costs that
  are directly attributable to the acquisition of property and equipment
  which are under construction or completion and necessarily take a
  substantial period of time to get ready for their intended use.

  The interest capitalized during the year ended December 31, 2009
  amounted to Baht 1.38 million.

(10) Intangible assets

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

(11) Deferred environmental restoration expenditures

  Deferred environmental restoration expenditures consisted of:

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

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

(12) Deferred loan arranging fee

  Deferred loan arranging fee is amortized over the loan agreement
  period of 2 - 4 years on the straight line method.

(13) Provision for environmental restoration

  Where future expenses relating to environmental liabilities have
  arisen as a result of past events, the Company establishes a provision
  over the period in which the obligation is incurred and covers the
  remains of useful life of mining right and permission. The provision
  is made at the best estimation for expenses which will be paid
  according to the current incurred obligation on balance sheet date.

(14) Financial lease agreements

  The Company and subsidiaries record vehicles under financial lease
  agreements as assets and liabilities in the balance sheet at the lower
  amount of fair value of the leased asset at the inception date of the
  lease agreement or the present value of the minimum lease payments.
  The discount factor used for calculation of the present value of the
  minimum lease payments, 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.

(15) Financial instruments

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

(16) Foreign currency transactions

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

  Gain or loss from translation are included in determining earnings.

(17) 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 and subsidiaries recognize
  the impairment loss in the statement of income. The reversal of
  impairment loss is accounted for “Other Income”, when there is an
  indication that impairment losses is no longer exist or decrease.

(18) Basic earnings (loss) per share

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

(19) Accounting judgments and estimates

  The preparation of financial statements in conformity with generally
  accepted accounting principles may require the management to make
  subjective judgments and estimates for impact of future uncertainty
  that might have financial effect to the presentation and notes to the
  financial statements. Thus the actual results may differ from the
  estimates.

(20) Employee benefits

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

  The Company and its subsidiaries do not account for liabilities under
  the Thai Labour Law regarding employee benefits that might be payable
  in the future.

  11.1.4 Summary of financial statement

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

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

  BALANCE SHEETS                                                  (Unit :                                                                   
                                                                  Thousand Baht)                                                            

  AS OF DECEMBER                                                  Consolidated                                                              
  31,                                                             Financial                                                                 
                                                                  Statements                                                                

                                                                  %              2009           %       2008            %       2007        

  CURRENT ASSETS                                                                                                                            

                 Cash and cash                                    1.98           38,453         15.02   356,387         0.29    5,475       
                 equivalents                                                                                                                

                 Trade account                                    0.99           19,231         6.23    147,748         0.2     3,742       
                 receivable                                                                                                                 
                 -net                                                                                                                       

                 Short term                                       -              -              0       10              0.01    257         
                 loan to                                                                                                                    
                 related party                                                                                                              

                 Inventories –                                    6.86           132,925        4.36    103,353         3.28    62,252      
                 net                                                                                                                        

                 Other current                                                                                                              
                 assets                                                                                                                     

                                - Deposit over estimate           0.35           6,754          0.13    3,058           0.18    3,444       
                                gold royalty fee -DPIM.                                                                                     

                                - General advance                 0.2            3,874          0.11    2,582           0.14    2,643       

                                - Input tax refundable            0.49           9,520          0.21    5,084           0.59    11,263      

                                - Other                           0.88           16,969         0.71    16,876          0.76    14,485      

  TOTAL CURRENT                                                   11.75          227,726        26.77   635,098         5.45    103,561     
  ASSETS                                                                                                                                    

  NON-CURRENT                                                                                                                               
  ASSETS                                                                                                                                    

                 Long term                                                                                                                  
                 investments                                                                                                                

                                - Bank deposits pledged           8.9            172,514        7.62    180,815         11.03   209,469     
                                as collateral                                                                                               

                 Deferred                                                                                                                   
                 expenditures                                                                                                               
                 of other                                                                                                                   
                 projects - net                                                                                                             

                                - Andesite mining                 0.56           10,836         0.5     11,829          0.68    12,822      

                                - Gold mining                     12.26          237,638        11.36   269,510         17.62   334,481     

                                - Phuket Project                  -              -              -       -               -       -           

                 Long – term                                      0.08           1,543          0.07    1,708           0.12    2,212       
                 loans to                                                                                                                   
                 related                                                                                                                    
                 parties – net                                                                                                              

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

                 Property,                                        65.05          1,260,857      50.4    1,195,570       63.13   1,198,570   
                 Plant and                                                                                                                  
                 equipment –                                                                                                                
                 net                                                                                                                        

                 Intangible                                       0.07           1,312          0.07    1,673           0.1     1,957       
                 assets - net                                                                                                               

                 Advance                                          0.91           17,687         0.75    17,687          0.93    17,687      
                 payment for                                                                                                                
                 purchase of                                                                                                                
                 land –                                                                                                                     
                 andesite                                                                                                                   
                 mining                                                                                                                     

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

                 Goodwill                                         0.03           594            0.03    594             0.03    594         

                 Other                                            0.4            7,715          0.45    10,615          0.91    17,245      
                 non-current                                                                                                                
                 assets                                                                                                                     

  TOTAL                                                           88.25          1,710,696      73.23   1,737,282       94.55   1,795,037   
  NON-CURRENT                                                                                                                               
  ASSETS                                                                                                                                    

  TOTAL ASSETS                                                    100            1,938,422      100     2,372,380       100     1,898,598   
  -------------- -------------- ------------------------ -- -- -- -------------- ----------- -- ------- ----------- --- ------- ----------- --

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

[TABLE]

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

  BALANCE SHEETS                                                    (Unit :                                                               
                                                                    Thousand                                                              
                                                                    Baht)                                                                 

  AS OF DECEMBER                                                    Separated                                                             
  31,                                                               Financial                                                             
                                                                    Statements                                                            

                                                                    %            2009         %       2008            %       2007        

  CURRENT ASSETS                                                                                                                          

                 Cash and cash                                      0.12         1,197        0.04    421             0.01    83          
                 equivalents                                                                                                              

                 Trade account                                      0.19         1,772        0.02    252             0.19    2,007       
                 receivable -net                                                                                                          

                 Short term loan                                                                                                          
                 to related party                                                                                                         

                 Inventories –                                      1.37         13,119       0.82    9,483           0.96    10,279      
                 net                                                                                                                      

                 Other current                                                                                                            
                 assets                                                                                                                   

                                  - General advance                 0.06         573          0.00    36              0.00    82          

                                  - Input tax refundable            0.30         2,910        0.25    2,890           0.24    2,585       

                                  - Other                           0.15         1,437        0.05    609             0.18    1,974       

  TOTAL CURRENT                                                     2.19         21,008       1.19    13,691          1.58    17,010      
  ASSETS                                                                                                                                  

  NON-CURRENT                                                                                                                             
  ASSETS                                                                                                                                  

                 Investment in                                      48.05        460,174      63.90   738,171         61.21   658,590     
                 subsidiaries -                                                                                                           
                 net                                                                                                                      

                 Long term                                                                                                                
                 investments                                                                                                              

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

                 Deferred                                                                                                                 
                 expenditures of                                                                                                          
                 other projects -                                                                                                         
                 net                                                                                                                      

                                  - Andesite mining                 1.13         10,836       1.02    11,829          1.19    12,822      

                                  - Gold mining                                                                                           

                                  - Phuket Project                  -            -            -       -               -       -           

                 Long – term                                        35.87        343,543      21.27   245,735         23.31   250,842     
                 loans to related                                                                                                         
                 parties – net                                                                                                            

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

                 Property, Plant                                    10.26        98,238       8.91    102,889         10.97   118,044     
                 and equipment –                                                                                                          
                 net                                                                                                                      

                 Intangible                                         0.06         556          0.06    663             0.06    617         
                 assets - net                                                                                                             

                 Advance payment                                    1.85         17,687       1.53    17,687          1.64    17,687      
                 for purchase of                                                                                                          
                 land – andesite                                                                                                          
                 mining                                                                                                                   

                 Advance payment                                                                                                          
                 for machinery                                                                                                            

                 Goodwill                                                                                                                 

                 Other                                              0.05         438          0.12    1,436           0.04    425         
                 non-current                                                                                                              
                 assets                                                                                                                   

  TOTAL                                                             97.81        936,679      98.81   1,141,541       98.42   1,059,027   
  NON-CURRENT                                                                                                                             
  ASSETS                                                                                                                                  

  TOTAL ASSETS                                                      100          957,687      100     1,155,232       100     1,076,037   
  -------------- ---------------- ------------------------ -- -- -- ------------ --------- -- ------- ----------- --- ------- ----------- --

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

[TABLE]

TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

STATEMENT OF INCOME

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

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

                                                         %              2009          %       2008         %        2007

  REVENUES                                                                                                          

                 RRevenue from the sale of                                                                          

                 Andesite sales                          1.69           8,044         0.47    4,633        1.89     8,980

                 Gold sales                              83.76          398,952       89.9    881,418      88.27    419,118

                 Copper sales                            4.51           21,494        -       -            -        -

                 Gain on exchange rate                   9.52           45,356        -       -            5.67     26,922

                 Other income                                                                                       

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

                 Gain on sale of fixed                   0              1             7.95    77,901       -        -
                 assets                                                                                             

                 Interest income                         0.18           862           0.75    7,310        3.49     16,554

                 Other                                   0.33           1,579         0.21    2,031        0.68     3,236

  TOTAL REVENUES                                         100            476,288       100     980,409      100      474,810

  EXPENSES                                                                                                          

                 Cost of the sales of                                                                               

                 Cost of andesite sales                  1.01           4,803         0.39    3,858        1.71     8,125

                 Cost of gold and copper                 90.06          428,923       41.92   410,960      65.86    312,722
                 sales                                                                                              

                 Selling expenses                        0.52           2,476         0.08    752          0.12     574

                 Administrative expenses                 39.04          185,927       23.82   233,549      30.6     145,314

                 Management benefit expenses             6.67           31,790        3.5     34,292       5.74     27,258

                 Doubtful debts                          4.65           22,154        0       37           0.05     244

                 Adjustment for increase in              -              -             -       -            -        -
                 impairment on investment in                                                                        
                 subsidiaries                                                                                       

                 Amortization on exploration             6.69           31,872        6.35    62,229       11.33    53,801
                 expenditures of gold mining                                                                        
                 project                                                                                            

                 Loss on exchange rate                   -              -             4.26    41,765                

                 Compensation for price                  12.8           60,945                                      
                 difference                                                                                         

                 Loss from sale of purchase              6.05           28,825                             0.96     4,569
                 gold -net                                                                                          

  TOTAL EXPENSES                                         167.49         797,715       80.32   787,442      116.38   552,607

  PROFIT (LOSS)                                          -67.49         -321,427      19.68   192,967      -16.38   -77,797
  BEFORE FINANCE                                                                                                    
  COSTS                                                                                                             

  FINANCE COSTS                                          7.84           37,336        8.50    83,324       15.88    75,378

  NET PROFIT                                             -75.32         -358,763      11.18   109,643      -32.26   -153,175
  (LOSS)                                                                                                            

  NET PROFIT                                                                                                        
  ATTRIBUTABLE                                                                                                      
  TO:                                                                                                               

                 EQUITY HOLDER OF THE PARENT                            -352,352              111,819               -147,950

                 MINORITY INTERESTS                                     -6,411                -2,176                -5,225

                                                                        -358,763              109,643               -153,175

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

                 NET PROFIT (LOSS)                                      -0.47                 0.15                  -0.20
                 ATTRIBUTABLE TO EQUITY                                                                             
                 HOLDER OF THE PARENT                                                                               

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

TONGKAH HARBOUR PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES

STATEMENT OF INCOME

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

[TABLE]

  11.1.5 Table of important financial ratios of the fiscal year 2009,
  2008 and 2007 (Audited)

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

                         Consolidated                       Company             

                         2009           2008     2007       2009      2008      2007

  LIQUIDITY RATIO                                                                

  Current Ratio (Times)  0.35           1.30     0.28       0.46      0.46      0.47

  Quick Ratio (Times)    0.09           1.03     0.03       0.02      0.02      0.06

  Quick Ratio (Cash      (0.14)         0.73     0.01       -1.17     -1.17     Nil
  Basis) (Times)                                                                

  Receivable Turnover    5.13           11.7     65.26      4.1       4.1       2.05
  (Times)                                                                       

  Collection Period      70.14          30.77    5.59       87.77     87.77     178.05
  (Days)                                                                        

  Inventory Turnover     3.67           5.01     6.14       0.38      0.38      0.65
  (Times)                                                                       

  Inventory Turnover     98.06          71.86    59.45      946.56    946.56    561.54
  (Days)                                                                        

  Accounts Payable       6.88           9.17     11.32      0.48      0.48      0.24
  Turnover (Times)                                                              

  Payment Period (Days)  52.32          39.28    32.24      743.09    743.09    1520.83

  Cash Cycle (Days)      115.88         63.36    32.80      291.24    291.24    (781.24)

  PROFITABLE RATIO                                                              

  Gross Profit Margin    (1.22%)        53.18    22.99%     18.89%    18.89%    12.90%
  (%)                                                                           

  Net Profit Margin (%)  (75.32%)       11.18    (34.56%)   63.38%    63.38%    (1,647.55%)

  Return on Equity (%)   (36.39%)       9.86     (13.96%)   10.90%    10.90%    (15.25%)

  EFFICIENCY RATIO                                                              

  Return on Total Assets (16.64%)       5.13%    (7.79%)    10.02%    10.02%    (13.75%)
  (%)                                                                           

  Return on Fixed Assets (21.38%)       16.73%   (12.32%)   106.14%   106.14%   (124.68%)
  (%)                                                                           

  Asset Turnover (Times) 0.22           0.46     0.23       0.16      0.16      0.01

  FINANCIAL POLICY RATIO                                                        

  Debt to Equity         1.40           1.04     0.79       0.07      0.07      0.11
  Ratio(Times)                                                                  

  Interest Coverage      (8.61)         3.1      0.81       32.19     32.19     (32.00)
  (Times)                                                                       

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

11.2 Management Discussion and Analysis

The Company reported a net loss for the year ended 31 December 2009 of
THB358.76 million compared with a net gain of THB109.64 million for the
previous year, 2008. Nevertheless the Company's capital structure still
remained strong with a debt to equity ratio of 1.40.

Revenue

Gold Sales 

During quarter (qtr) 4 of the year 2009, the Company had revenue of
THB63.85 million from gold sales and THB91.65 million from Copper
Concentrate (with gold content) sales totalling THB155.5 million, a
decrease of THB725.92 million compared with qtr 4 of year 2008. The
reduced revenue was due to reduced gold production from 7,799.38 ounces
in qtr 4, 2008 to 2,342.16 ounces in qtr 4, 2009, due to the following:

1.  Changes in the Production Process: In 2009, changes in the
    production process entailed construction and commissioning of
    flotation facilities, made necessary because oxide ore was becoming
    exhausted and the copper-bearing transition and primary sulfide ores
    became the main ore minerals for gold and copper production. The
    sulfide ores are too reactive to be efficiently processed by the
    same methods used for the oxide ore.

-   Because of the slowdown in production during the construction phase
    of the flotation facilities, and several months of delay in getting
    the construction started and final commissioning, gold (doré)
    production had fallen by almost 50%.

-   With the flotation facilities fully operational, the gold-copper
    concentrates provide the main sources of revenue with about 50% of
    gold produced, in addition to the copper extracted. On 7 September
    2009, the Company was granted a temporary permit to export 700 tons
    of copper concentrates, then a full export permit was granted on 4
    November 2009.

2.  Delays in Flotation Activation: Installation and commissioning of
    the flotation facilities was delayed by some four months, plus time
    lost because foreign expertise needed to supervise construction and
    commissioning could get insurance during the political turmoil in
    Thailand at the time- during April 2009.

Andesite Sales

Sales of Andesite for the year 2009 increased from THB4.63 million to
THB8.04 million.

Tin Ore

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

Other P&L Items

Selling and Administrative Expenses

The Company’s selling and administrative expenses for year end of year
2009 were THB242.34 million, a decrease of THB26.62 million compared to
said expenses of THB268.96 million for year end 2008.

Additionally, TKL faced an increase in royalty fee rates from the
original Concession Agreement figure of 2.5% to about 15% due to
introduction of the progressive rate announced by the Department of
Minerals Resources. Also, the Agriculture Land Reform Organization
(ALRO) imposed and additional fee equalling the progressive rate of 15%.
In addition, TKL has an agreement with the Royal Thai Government to pay
a production share 1.5%.

To protest the charges imposed by the ALRO, TKL filed a case with the
Administrative Court in late 2008. The ALRO filed an injunction to stop
TKL’s mining operation, but was turned down by the Court. TKL has since
November 2009 stopped payment of the second round of royalty fees to
ALRO.

Interest Expenses

The Company's interest expenses for the year 2009 were THB37.34 million,
a decrease of THB45.92 million compared to THB83.32 million for the year
2008.

Hedge Settlement

On settlement at the end of 2009 THB60.94 million was recorded as a loss
in settling TKL’s collar hedge due to shortfall in the delivery of gold
dore; and as the export of 1,575.39 tons of copper concentrate, which
contained 3,159 ounces of gold, was delayed pending obtaining of the
export permits. The concentrate sales were subsequently made in January
2010.

Foreign Exchange Gain

The Company recorded a gain on foreign exchange rate of THB45.36 million
in the year 2009 against a loss of THB41.77 million in the year 2008.
The gain was attributable to the strengthening of THB against USD.
THB31.41 million of the gain was unrealized.

Cash Flow

Operating Activities

THB82.55 million of cash was used in operating activities for the year
2009 compared to a net cash inflow from operating activities of THB88.22
million in the year 2008. EBITDA was negative THB184.88 million against
positive THB371.53 million in the year 2008. The negative cash flow from
operating activities was the result of the change in production process
and the related delay in gold delivery discussed above.

Investing Activities

THB137.26 million of cash was used in investing activities for the year
2009. This was almost entirely for the construction of the flotation
facilities. In the year 2008, there was a net cash outflow from
investing activities due to the sale of two plots of land and the
withdrawal of long-tern deposits with banks.

Financing Activities

USD6.69 million was repaid to a foreign bank and THB6.86 million was
repaid to a local bank in the year 2009. A THB140.59 million long-term
loan, THB15.00 million overdraft facilities and THB10.00 short-term loan
(promissory note) were obtained from a local bank in the year 2009. The
Company's operating and investing activities were further funded by
loans from related parties amounting to THB86.37 million. On the
balance, the net cash outflow from financing activities was THB94.42
million in the year 2009. The net cash inflow from financing activities
was THB198.62million in the year 2008 as additional USD10 million was
obtained from a foreign bank to finance the construction of the
flotation facilities.

Liquidity and Capital Structure

At 31 December 2009, the Company's working capital deficiency was
THB417.24 million, including cash and cash equivalents of THB38.45
million, compared with working capital of THB145.99 million at 31
December 2008. The Company's capital structure nevertheless remained
strong with a debt to equity ratio of 1.40 at 31 December 2009, a very
slight deterioration when compared to 1.04 at 31 December 2008. However
the capital structure of Tungkum, a subsidiary, deteriorated
considerably. The subsidiary's debt to equity was at 5.26 at 31 December
2009, compared to 2.84 a year earlier. Subsequent to the close of the
year 2009, the Company's Board of Director has resolved for the Company
to inject additional THB150.00 million equity into the subsidiary. The
Company is able to do so without raising its own equity.

11.3 Auditor

THL has appointed Mrs. Natsarak Sarochanunjeen of A.M.T. & Associates
Office as the external auditor of the Company and its subsidiaries and
the appointment has been approved by the Office of Securities and
Exchange Commission. There are no relationships or conflicts of interest
among the independent auditor, the Company and its subsidiaries, the
executives, the shareholders, or others related to those parties.   It
was also approved by the Annual General Shareholders’ meeting with the
audit fee of Baht 0.605 million which is higher than the fee for the
years 2008.

In addition, the A.M.T. & Associates Office has serves as the
independent auditor for Company subsidiaries of 4 companies with an
audit fee for the year 2009 amounting to Baht 1.25 million. There was no
non-audit services fee for the previous year because no other services
were received from the independent auditor.