3. PRODUCTION OPERATIONS

(1) Production or Service Nature

  3.1 IGNEOUS ROCK (ANDESITE) MINING OPERATIONS

Background and Resources

Tongkah Harbour’s granodiorite (andesite) mine, located near Kaeng Khoi,
in Saraburi province, is about 140 km transport distance from central
Bangkok. Access to the immediate site is on hard surfaced roads. The
deposit area is about 215 rai (344,000 sq m) plus crushing plant,
service, maintenance, and stockpile areas. Surveyed resources currently
under license are about 12 M tons. The surveyed zone is open laterally
and to depth indicating additional mineable resources of about 15 M
tons. Production capacity has been increased to about 250 tons per hour.

Initial physical and chemical tests relating to suitability as high
strength concrete aggregate were done by the CTL labs in the U.S.A. and,
subsequently, by the AIT labs near Bangkok and by the State Railway of
Thailand (SRT). Results indicate the rock is well suited for high
strength aggregate in high strength concrete production. Depending on
client’s specifications, up to 15 % fly ash can be added to maximize
durability.

Mining and Production

The andesite mining entails site clearing followed by controlled bedrock
drilling and blasting, and transport to stockpiles or to the crushing
plant hopper. The raw material transport is by dump truck which are
loaded by backhoe. Oversized boulders are stockpiled for possible future
processing (by secondary blasting) or direct sales. As far as possible,
all mining and crushing operations are coordinated with immediate
delivery requirements so that transport and other operating costs are
kept in line with current orders. Processed product is sorted and
stockpiled based on certain size ranges in current demand, and most
commonly used in the industry.

Deliveries

Truck loading, for delivery to customers, is done by wheel loader. The
weight of each truck load is determined by the Company’s weighbridge (80
ton capacity) which is entirely computerized with printouts in several
copies showing the entire billing and invoicing data.

 Licensing 

THL’s application for a ten year miming license was approved in May
1999. Sintana Resources Ltd.’s (SRL’s) application for a ten year mining
license on behalf of THL has been approved by the Forestry Department
and is now with the Minister of Industry for final granting.

Marketing and Sales Prospects

Product application includes various construction and maintenance uses
such as: railway ballast, well grade aggregate for sleeper concrete,
road base, fine aggregate for asphaltic road surfacing, and coarse
aggregate and rip-rap for dam construction. (Government guidelines
specify igneous (silica based) rock, as prerequisite for railway
ballast, and for some layers of road surfacing where ordinary limestone
is largely precluded. Also, use of the andesite can allow less cement
consumption in structures and possibly less steel reinforcing.) The
Company’s marketing section is keeping in ongoing communication in these
areas to develop new prospects. Current sales center on the following:

1. Railway Ballast is currently the main sales product. In December, two
agreements were signed with the Italian-Thai - Cogifer Joint Venture
(ITD - Cogifer JV) to supply about 200,000 tons of ballast over 17
months beginning in January 2001. Also, an agreement was signed to
provide 15,000 tons of ballast to the SNMC joint Venture, to be
delivered in January, for its underground railway project; prospects are
also current to supply an additional 20,000 tons over the next 10
months.

2. Road Base the demand for road base (dirt) produced as a by product in
aggregate and ballast production has been in increasing and, currently,
all production is being sold.

At year end, negotiations were progressing toward supplying 40,000 tons
to the Italian-Thai Development Company.

3. Sleeper Concrete A construction company, which is a major supplier of
concrete railway sleepers to the State Railway of Thailand, has been
taking delivery of our production of well grade aggregate and requires
up to about 6,000 tons per month.

4. Ex-Site Sales (at site sales) Ex-site sales are occurring on almost a
daily basis for mixed aggregate which is a blend of sub-ballast sized
aggregate ranging from พ inch to dust and road base.

Crushing Plant Operations

Rock crushing operations have been contracted to Cholsin Limited since
June 1998 to Cholsin Limited which acquired relevant rock crushing
experience in underground mining operators at the Toh Moh mine in
southern Thailand. Cholsin’s Crushing plant permit was granted on
January 27, 1998 and is valid for five years.

Production

Monthly production figures for 2000 are given in the following table.
Production continues to focus on railway ballast. Given normal operating
conditions and provision of well sorted fresh rock to the hopper,
ballast comprises about 55 to 60 % of crushed rock output. The remainder
consists of fairly constant ratios of finer aggregate ( 3/4" and 1/2”) ,
and dust ( minus 6 mm). All product produced is salable material.
However, given the market, sales and pricing depend almost entirely on
demand and in meeting client’s product specifications such as particle
shape and abrasive index.

Crushed rock Production for 2000

[TABLE]

3.2 TIN MINING OPERATIONS

The Company owns 100% of its offshore mining leases in Phuket. The
leases are valid to years 2006 and 2008. Currently, the Company
contracts its mining operations to an independent third party. Under the
current agreement, valid to 14 June 2001, the contractor will dredge on
lease nos. 18066/13050, 18064/13448, and 18065/13449, use three dredges,
and pay the Company Baht 575,000 per month for the duration of the
contract. The Company has received the payments regularly and the
contractor has been operating normally.

Tin Prices and Production

Quarterly production figures are given in the following table.

TIN PRODUCTION BY QUARTER FOR 2000

(2) Marketing and Competition

+--------------+-----+--------+--------+--------+--------+---------+---+
| BREAKDOWN    | Un  | 1 Qtr  | 2 Qtr  | 3 Qtr  | 4 Qtr  | Overall |   |
|              | its | Totals | Totals | Totals | Totals | Total   |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Contractor   | h   | 2,     | 2,     | 3,     | 2,     | 10      |   |
| Output       | abs | 834.00 | 055.00 | 643.00 | 174.00 | ,706.00 |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Hours Run    | hrs | 4,     | 2,     | 5,     | 4,     | 16      |   |
|              |     | 052.00 | 255.00 | 274.00 | 649.00 | ,230.00 |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Vol Dredged  | cu  | 410,   | 206,   | 494,   | 421,   | 1,534   |   |
|              | m   | 500.00 | 000.00 | 500.00 | 000.00 | ,000.00 |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Sales        | h   | 2,     | 2,     | 3,     | 2,     | 10      |   |
|              | abs | 965.00 | 000.00 | 560.00 | 160.00 | ,685.00 |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Stock        | h   | 155.00 | 210.00 | 293.00 | 307.00 | 307.00  |   |
|              | abs |        |        |        |        |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Tin ore      | B   | 2      | 1      | 3      | 2      | 103,771 |   |
| sales        | aht | 7,949, | 8,713, | 5,047, | 2,061, | ,835.00 |   |
|              |     | 153.00 | 559.00 | 637.00 | 486.00 |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Trib         | "   | 1,843, | 1,370, | 2,131, | 2,162, | 7,508   |   |
| Received     |     | 149.00 | 329.00 | 999.00 | 565.00 | ,042.00 |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| (short       |     | 0.00   | 0.00   | 0.00   | 0.00   | 0.00    |   |
| production)  |     |        |        |        |        |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Production   | "   | 2      | 0.00   | 3      | 2      | 97,446  |   |
| cost         |     | 6,224, |        | 3,322, | 0,336, | ,835.00 |   |
|              |     | 153.00 |        | 637.00 | 486.00 |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Ad           | "   | 266,   | 366,   | 201,   | 217,   | 1,052   |   |
| ministration |     | 220.00 | 319.00 | 945.00 | 869.00 | ,353.00 |   |
| cost         |     |        |        |        |        |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| Net Profit   | "   | 1,465, | 2,009, | 1,990, | 1,978, | 7,443   |   |
|              |     | 922.00 | 329.00 | 361.00 | 193.00 | ,805.00 |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
|              |     |        |        |        |        |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| The price    |     |        |        |        |        |         |   |
| ranged from  |     |        |        |        |        |         |   |
| M$ 22.18 in  |     |        |        |        |        |         |   |
| January to   |     |        |        |        |        |         |   |
| M$ 19.78 in  |     |        |        |        |        |         |   |
| December     |     |        |        |        |        |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+
| and averaged |     |        |        |        |        |         |   |
| M$ 20.44 for |     |        |        |        |        |         |   |
| the year     |     |        |        |        |        |         |   |
+--------------+-----+--------+--------+--------+--------+---------+---+

2.1 Marketing

In the Tin and Gold Mining operations, the product is bought and
processed by the refinery concerned. Prices for tin and gold are at
international standards and vary according to worldwide demand. In the
Igneous Rock Mining, economic viability is controlled by local
conditions and, therefore, a marketing and sales promotion program is in
effect as follows:

Strategy is based on canvassing government agencies and private
construction businesses that intend to, or have in progress, projects
that will require large quantities of igneous rock aggregate (such as
ours) rather than normal limestone which is softer and less durable.

Pricing Policy is based on a combination of factors including transport
distance, quantity required, prevailing price range for the product, and
terms of payment. For example railway ballast is currently priced at
Baht 150 per ton plus transport at one Baht per ton per km, 30 days
credit, and interest charges after 30 days. Credit terms are allowed for
companies considered solvent. Also some reduction is given for cash
at-site sales where the customer supplies transport.

Customer Characteristics and Relationships The Customers to date are all
associated with the construction and transport industries. We are
supplying railway ballast to joint-venture consortium’s under contract
to the State Railway of Thailand (SRT), and to similar groups under
contract with the underground transit project in Bangkok.

2.2 Competition

In Off Shore Tin Mining. There is no significant domestic competition in
at this time although one other mining company also has offshore mining
rights.

In Igneous Rock (Andesite) Operations. The product has several
advantages in marketing, including competitive transport costs as the
site is about 140 km from metropolitan Bangkok. The deposit is the only
one of its kind known in the area and is central to a large region of
potential industrial expansion extending north and northeast of the
Bangkok area. In late 2000, the Company won two major contracts to
supply ballast to railway development programs in the region.

There are not many other readily available rock types that meet
standards set by the SRT. Highly silicified rock or igneous rock
material, such as the andesite, is required to meet current standards.
Alternatives of similar quality supplied by some competitors are
rhyolite, granite, and basalt. Ordinary limestone does not qualify.

Gold Mining (Tungkum Ltd). There are no registered commercial gold
mining projects in production in Thailand at this time. As gold sales
value will depend on the international market, any additional producers
in the country are not likely to significantly affect world prices.

(3) Resources and Products

3.1 In Off Shore Tin Mining, the resource base comprises 23.64 sq km of
offshore lease areas of which about 19.1 sq km are currently being
mined. The contractor sends the tin ore concentrate to a smelter in
Thailand for refining. However, the Company’s concentrates are not the
smelter’s support.

3.2 In Igneous Rock Mining (Andesite) Operations, The resource base
under license is about 12 M tons currently surveyed, and with potential
for an additional 15 M tons. The main product currently produced is
railway ballast which comprises about 55 percent of the raw material
processed. Other products are well-grade aggregate, coarse dust, and
road base comprising oxidized surface gravel and sand and minor fresh
rock-chip fragments. The products are stockpiled pending deliveries and
at-site sales.

3.3 In Gold Mining (Tungkum Ltd), The current resource, comprising
measured and inferred zones, is about 3.49 M tons at 4.36 grams per ton
gold . The gold can be sold on the international market; however, the
government reserves the right to purchase production at the prevailing
world market price. Mine development will begin as soon as the mining
license is granted, and, for which, all government regulatory conditions
have been met.

Production Processes

1. In Tin Mining, operations are contracted out to an experienced local
contractor. Production and processing methods, therefore, depend on the
contractor’s offshore dredging procedures.

2. The Igneous Rock (andesite) and Gold Mining Operations, are shown in
the following tables and Diagrams.

Sequence in Igneous Rock Mining and Production

  1. Surface clearing: vegetation and topsoil clearance from the area to
  be excavated and mined.

  2. Bedrock Drilling and Blasting: Requiring bedrock drilling at set
  spacing, loading of explosive, and blasting according to strict safe
  code.

  3. Loading and Transport: Loading onto trucks and transport to the
  primary rock crushing section (hopper) and/or stockpile.

  4. Primary Separation: Conveyor belt transport to the scalping screen,
  dirt and finer rock fragment waste is screened out. Coarser (mainly <
  200mm) is conveyed to the secondary (telsmith) cone crusher.

  5. Secondary Separation: Ballast (202-60 mm), well-grade aggregate
  (12-20 mm), and finer aggregate (< 12 mm) are separated out by
  screening (ballast screen). Oversized material is conveyed to the
  tertiary cone crusher (DKT).

  6. Tertiary Separation: At the DKT, the oversized product is crushed
  and recycled conveyed (recycled) back to the secondary screen (ballast
  screen) for separation into the categories mentioned above in 5.

  7. Stockpiling and Testing: Ballast and aggregate product is removed
  from the conveyor belt areas (by wheel loader) and the stockpiles are
  sampled and tested for flakiness, elongation, and size range to ensure
  client’s specifications are met.

  8. Loading for Delivery: Product from the stockpiles is loaded onto
  trucks (usually 10 wheeler dump trucks) by wheel loader. The trucks
  pass over the weigh bridge on entering the yard and then again on
  leaving loaded.

  9. Invoicing and Reporting: the weigh bridge is automated and results
  are automatically recorded in the computerized invoice printout in
  five copies. Records are kept on daily production; and a complete
  computerized reference database is kept for parts and maintenance
  orders, costs, delivery, distribution, and inventory.

Environmental Impact

In all the Company’s mining activities, environment protection controls
are in effect pursuant to guidelines prescribed by the Government
agencies concerned.

1. In Tin Mining, the regulations are overseen and enforced by the
Harbor Master at Phuket.

2. In Rock Mining, the guidelines include safety practice and
environmental maintenance procedures in and around the site area. For
example, rows of trees were planted around the site before mining to
help reduce noise and dust into neighboring areas. In the mining
process, vegetation and soil are cleared from the excavation site before
drilling and blasting , otherwise there is no lasting damage to the
immediate environment, and no unnatural materials are used.

The blasting does not result in any appreciable rock fragments falling
outside the lease area. Water spraying apparatus are installed in
several locations for dust suppression. In addition, workers wear
protective goggles and face masks against dust in their work areas.

3. In Gold Mining, the Office of Environmental Policy and Planning
(OEPP) and the Department of Forestry have investigated the mining site
and approved the mining operation plans, including the gold ore
processing and tailings treatment. Special emphasis will be given to
safeguarding and monitoring ground water quality. Plans for post-mining
rehabilitation of the site area have also been accepted.