2.3 Production Operation

2.3.1 Tin Mining Operations

The Company owns 100% of the following tin mining leases at Phuket,
Thailand. The Company plans to apply for extensions of the said mining
leases to the Primary Industry Ministry as appropriate in accordance to
their corresponding expiration dates.

  -------------------------- ----------- -------------- -----------------
  TIN MINING LEASES                                     

  Lease No.                  2005        Date Valid to: Area (sq.m.):
                             Dredging                   

  10866/13050                NO          19 May 2006    5,626.44

  18064/13448                NO          28 July 2008   3,883.93

  18065/13449                NO          28 July 2008   2,901.17

  18071/13369                NO          28 March 2008  2,362.35

  TOTAL MINING CONCESSION                               14,773.89
  AREA:                                                 
  -------------------------- ----------- -------------- -----------------

In FY05 the Company temporarily cease the tin mining operation in Phuket
Bay due to high royalty rate causing the Company’s tin mining
contractors to stop the operation.

THL expects the high royalty rate to be reduced in the near future as
the industry in Thailand is dormant with the Government receiving no
revenues at all under current policy. Meanwhile, THL is pursuing the
ground work involved in preparing its SML holdings for future
development. Activities now in progress include filing of mining plans,
reviewing and selection of deep-water mining technique, sourcing
relevant prospective mining expertise and operators, resource
verification, and data organization in suitable mining software for
ongoing control.

1.  TIN PRICE AND PRODUCTION

In keeping with the large price increase through years 2003 and 2004,
prices remained high in FY05 and are expected to remain so. Tin averaged
(USD) 7.35 per kg in FY05 (and rising to over (USD) 7,500 in the first
quarter of 2006). Price escalation is due mainly to a world demand
verses supply gap as tin is now used in a variety of applications , the
more prominent being tin plating, lead-free soldering (particularly in
the electronics and IT sector), and packaging.

While the Company has been able to benefit greatly from the buoyant tin
market, it is also subject to paying increasing royalty to the Royal
Thai Government on tin price escalation. The current high royalty rate
has made tin mining operations unprofitable. Thailand has the highest
tin royalty rate in the world. The Company is making concerted efforts
to dramatically reduce this rate which will allow the Company to see
more benefit from its tin operations. As the price of tin is expected to
remain buoyant, we expect to see positive results in this sector in the
near future.

In FY05 there was no offshore tin mining activity, income was derived
from selling of tin inventory. Income from tin was dropped from Baht
39.8 million to Baht 2.4 million.

Progress on Sea Mineral Limited’s operation

In FY05, THL increased its stake holding in its associated company, Sea
Minerals Limited (SML) to 83.70% allowing the Company to take full
corporate and managerial control of all SML operations. The remaining
16.3% shareholding is vested in the treasury of SML as the former
shareholder is now a defunct entity. Though currently inactive in
offshore tin mining, the Company has filed mining plans for its
previously submitted mining lease application in the Andaman Sea, about
25 km off the west coast, north of Phuket Island, for which mining plans
have been filed.

SML, on first exploring this area some two decades ago, concluded that
the depth of the resources made it technically and economically too
difficult to mine and, therefore, shifted their corporate focus away
from offshore tin mining. THL, however, feels that mining of the lease
area is now technically and commercially viable pursuant to recent
advances in deepwater mining technology. The Company is now in the
preliminary stages of commissioning a full viability study of the mining
project in light of buoyant prices for tin and its byproducts.

The lease area consists of 50,000 rai (8,000 hectares or 8 M sq m) with
a minable resource ranging from 41,460 tons with cutoff at 0.15 kg/cu m,
or 64,320 tons with cutoff at 0.10 kg/cu m. The resource is based on
extensive bore-hole data and evaluations previously completed by SML and
which have recently received qualified third party assessment with
positive results. The deposit is at the 45 to 70 m depth range which is
now within the range of deepwater mining technology.

2.3.1.2 Marketing and Competition

(A) Marketing Policy

The product is sent to be and processed by the refinery concerned.
Prices for tin and gold are subject to world demand and supply which
sets the prices at the international metal and bullion markets.

  (B) Competition

There is no significant domestic competition at this time. Though one
other mining company also has offshore mining rights, they have ceased
offshore mining operations.

  2.3.1.3 Resources and Products

  (A) Resources

About 19.1 sq km of offshore lease areas are currently being mined. The
contractor uses its dredges for mining operations and sends the tin ore
concentrate to a smelter at Phuket Thailand for refining. The
concentrate ore volume depends on dredge capacity, weather, and the
season. However, the Company’s concentrates are not the smelter’s only
support.

  (B) Environment Impact

Environmental regulations are overseen and enforced by the Harbor Master
and the DMR at Phuket. Offshore tin mining procedures use sea water for
dressing and washing and it is then drained back into the sea. Sediment
is returned to sea because the mining is in a deep-sea area that has
strong wind and wave action and tidal ebb and flow. The returned
sediment is widely dispersed by the ocean currents. However, the Company
pays annual compensation of Baht 310,300 for draining the sediment back
into the sea.

The Company samples seven locations in the lease areas at one meter
depth for testing temperature, pH, Salinity, Oxygen, Oil, Lead, Mercury,
Arsenic, Cadmium, Copper, Chromium, Iron and Manganese. The result is
within the standards set by the Office of Environment Policy and
Planning (OEPP). The Company also pays about Baht 110,000 per annum for
the test costs.

2.3.2 Igneous Rock (Andesite) Mining Operations

THL’s andesite (granodiorite) mine is located near the town of Kaeng
Khoi in central Thailand, approximately 140 km transport distance from
Bangkok. Quarry operations commenced in 1999 after having identified and
surveyed minable resources of about 12 M tons. A further 15 M tons of
minable resources are indicated in the surveyed zone which is open
laterally and to depth. The deposit area comprises roughly 215 rai
(344,000 sq m) plus crushing plant, service, maintenance, and stockpile
areas.

THL’s quarry operations are permitted via a ten year mining license
approved in 1999 by the Ministry of Industry, in addition to a second
ten year mining license granted in 2003 to Sintana Resources Company
Limited who applied for the license for and on behalf of THL.

  2.3.2.1 Mining and Production

Rock crushing operations have been contracted to Cholsin Limited, the
Company’s 72.10% owned subsidiary, since June 1998. Cholsin holds a
5-year crushing plant permit which was granted on 31 December 2002.
Cholsin acquired relevant rock crushing experience as underground mining
operators at the Toh Moh mine in southern Thailand.

Production capacity of the crushing plant is about 250 tons per hour.
The following table provides quarterly production figures for 2005.
Production is directly related to demand for any particular product.

Sales and prices charged are dependent on demand and the ability to meet
client specifications (such as particle shape and abrasive index). At
times, some product deliveries are postponed at the request of the
customer and, therefore, deliveries are not always according to contract
schedules.

  ---------------- ----------- ----------- ----------- ----------- -----------
  2005 AGGREGATE                                                   
  PRODUCTION                                                       

  Item             Qtr 1       Qtr 2       Qtr 3       Qtr 4       Total

  Road base        6,708.00    7,630.00    10,777.00   11,597.00   36,712.00

  Special 1"       0.00        0.00        0.00        0.00        000

  3/4 Well-grade   9,784.00    19,713.00   18,637.00   8,712.00    56,846.00

  Dust (Coarse)    4,385.00    9,001.00    8,463.00    5,881.00    27,730.00

  Dust (Fine)      1,713.00    3,562.00    4,718.00    3,416.00    13,454.00

  Ballast          11,143.00   0.00        10,064.00   23,494.00   44,701.00

  Quarry Dirt      970.00      1,150.00    1,850.00    1,500.00    5,470.00
  ---------------- ----------- ----------- ----------- ----------- -----------

The products are stockpiled according to size as follows:

  - Railway Ballast (1” – 2.50”)

  - Road Base

  - Fine Aggregate (3/4”)

  - Aggregate (1/2”)

  - Dust ( minus )

In FY05 andesite sales increased from Baht 17.4 million to Baht 21.5
million when compared to the previous year. The increase was mainly due
to increased sale and delivery of ballast to the contractor of the State
Railway of Thailand (SRT).

  2.3.2.2 Marketing and Competition

(A) Marketing Policy

The quarry is one of the leading producers and suppliers of hard rock
materials in central Thailand. The quarry produces a comprehensive range
of aggregates which allows our products to be used for a wide variety of
purposes, particularly in servicing the construction, road building, and
railway industries. Our products are manufactured to comply with the
stringent standards and specifications set by the State Railway of
Thailand, the Highway Department and the MRTA, thereby making them more
competitive in the market place. In fact, our aggregate is the only
product meeting the Highway Department’s specifications in the Kaeng
Khoi region.

Pursuant to the SRT’s plan, maintenance and development contracts by the
SRT are expected to increase markedly in 2006, particularly in the
central and northeast regions where extensive double tracking is planned
and where our product is most competitive.

(B) Competition

Located about 140 km form Bangkok, the product has several advantages in
marketing, including competitive transport costs. 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. There is no other deposit at Amphur Wiharndaeng, which
produces for its own projects and is not in high demand.

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. In
addition, our product is the only aggregate meeting the specifications
of the Highway Department for asphaltic road surfacing in Kaeng Khoi.

  2.3.2.3 Resources and Products

  (A) Resources

In mining lease areas, Andesite resources were found to 30 meter-depth
from surface. The surveyed zone is open laterally and to depth
indicating additional minable resources. Surveyed resources currently
under license are about 12 M tons and additional resources are estimated
to be at least about 15 M tons.

The andesite mining is an open pit operation and entails site clearing
followed by controlled bedrock drilling and blasting, and transport to
stockpiles or to the crushing plant. 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.

(B) Environment Impact

The andesite mining impacts on the environment to the extent that the
surface is altered and there is some noise and dust from blasting. The
Company operates in accordance with OEPP, DMR, and Labour Department.
The guidelines include safety practice and environmental maintenance
procedures in and around the site area such as:

1.  Rows of trees were planted around the site before mining began to
    help reduce noise and dust into neighboring areas.

2.  Vegetation and soil are cleared from the excavation site before
    drilling and blasting, otherwise there will be lasting damage to the
    immediate environment, and no unnatural materials are used.

3.  Rock blasting is controlled to reduce shock and dust. The blasting
    does not result in any appreciable rock fragments falling outside
    the lease area.

4.  Water spraying apparatus are installed in several locations for dust
    suppression.

5.  Workers wear protective goggles and face masks against dust in their
    work areas. The Company spends for protective equipment, and on
    health checks of workers and staff.

2.3.3 Gold Mining Operations

The project is being developed and operated by Tungkum Limited (TKL), an
exploration and mining company registered in Loei, Thailand, with
control and working interests held by THL.

On being awarded the Block 4 concession in October 1991, subsequent to
international bidding, THL entered into an agreement with the Department
of Mineral Resources (DMR) for exploration and mining of gold and
related minerals. As required, a signature bonus of Baht 5.8 million was
paid to the DMR and THL also commits to pay a Baht 6.5 million bonus for
the first batch of mining license applications approved. In addition,
THL agreed to maintain the right of the Royal Thai Government to buy 5
to 10% of TKL shares at cost plus interest at MLR, pay 2.5% royalties
(including administration costs), and production sharing at 1.5%.

This development was a direct result of earlier regional exploration
during the 1960’s and later decades by the DMR, in cooperation with the
United States Geological Survey and, subsequently, with expertise from
several other foreign countries including Canada (which granted C$50
million to the DMR for mapping of mineral resources for the whole of
Thailand), Germany, and Britain.

On receiving the concession special prospecting licenses in 1992, an
extensive mineral exploration program was initiated. The geological team
comprised Company geologists and foreign exploration expertise from
Australia, Canada and the U.S. By 1995, significant economically minable
gold resources were delineated and six initial mining license
applications were filed. TKL’s mining plan was then submitted to the DMR
and subsequently approved by all the necessary Government regulatory
agencies.

2.3.3.1 Resources and Products

A) Mining Concession and Licenses

In March 2003, TKL was granted 6 gold mining licenses (totaling 2.065 sq
km) within its total concession area of about 93 sq km. The mining
licenses are valid for 25 years (with an option for subsequent 25 year
extensions upon resource confirmation). TKL has submitted a further 114
mining license applications along with 8 special prospecting licenses to
cover the remaining concession areas.

+---------------------+----------+-------------------+----------------+
| Tungkum Limited     |          |                   |                |
|                     |          |                   |                |
| Gold Mining         |          |                   |                |
| Licenses &          |          |                   |                |
| Applications        |          |                   |                |
+---------------------+----------+-------------------+----------------+
| Description:        | Q        | Status:           | Area (sq km):  |
|                     | uantity: |                   |                |
+---------------------+----------+-------------------+----------------+
| Mining Licenses     | 6        | Granted for 25    | 2.07           |
|                     |          | Years             |                |
+---------------------+----------+-------------------+----------------+
| Mining License      | 114      | Under Application | 52.62          |
| Applications        |          |                   |                |
+---------------------+----------+-------------------+----------------+
| Special Prospecting | 8        | Under Application | 38.40          |
| Licenses            |          |                   |                |
+---------------------+----------+-------------------+----------------+
| TOTAL BLOCK 4 GOLD  |          |                   | 93.09          |
| MINING CONCESSION   |          |                   |                |
| AREA:               |          |                   |                |
+---------------------+----------+-------------------+----------------+

B) Resources and Mineralization

Currently, measured and inferred resources (consisting of gossanous,
surface, and near surface oxide ore) total 4.49 M tons averaging 4.14
g/t gold. Independent third party experts in the industry have recently
evaluated TKL’s ore reserves and resources. The report, compiled by Mr.
Edward Brennan, BE (app. geo.) FausImm, MMICA, CP (geo.), MGSA, MCIM,
detailed the following:

+------------+---------------+---------+---------+-----------+-------+
| Area       | Ore Type      | Tonnes  | Grade   | Contained | Strip |
|            |               |         | (g/t    | Gold (oz) | Ratio |
|            |               |         | Au)     |           |       |
+------------+---------------+---------+---------+-----------+-------+
| T-1        | Oxide         | 313,000 | 2.71    | 27,274    |       |
|            |               |         |         |           |       |
| *(1)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Transition    | 88,000  | 6.66    | 18,845    |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Sulfide       | 867,000 | 6.78    | 189,012   |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Non-mineable  | 634,000 | 5.74    | 117,097   |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Mineable      | 634,000 | 5.79    | 118,034   | 1 :   |
|            |               |         |         |           | 2.43  |
+------------+---------------+---------+---------+-----------+-------+
|            | Total         | 1,      | 5.77    | 235,131   |       |
|            |               | 268,000 |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| T-1-8      | Oxide         | 289,000 | 3.79    | 35,219    |       |
|            |               |         |         |           |       |
| *(1)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Transition    | 7,000   | 2.46    | 554       |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Sulfide       | 70,000  | 2.61    | 5,875     |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Non-mineable  | 62,000  | 2.75    | 5,480     |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Mineable      | 304,000 | 3.70    | 36,167    | 1 :   |
|            |               |         |         |           | 1.95  |
+------------+---------------+---------+---------+-----------+-------+
|            | Total         | 366,000 | 3.54    | 41,647    |       |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| QSpur *(1) | Oxide         | 48,000  | 3.93    | 6,066     | 1 :   |
|            | (eluvial)     |         |         |           | NIL   |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| GCap *(1)  | Oxide         | 16,000  | 1.47    | 756       | 1 :   |
|            | (eluvial)     |         |         |           | NIL   |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| T-1-S      | Oxide         | 346,000 | 2.73    | 30,372    |       |
|            |               |         |         |           |       |
| *(2)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Transition    | 7,000   | 16.29   | 3,667     |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Sulfide       | 109,000 | 8.07    | 28,284    |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Non-mineable  | 126,000 | 7.38    | 29,911    |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Mineable      | 336,000 | 3.00    | 32,412    | 1 :   |
|            |               |         |         |           | 3.50  |
+------------+---------------+---------+---------+-----------+-------+
|            | Total         | 462,000 | 4.20    | 62,323    |       |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| T-7        | Oxide         | 35,000  | 4.90    | 5,514     |       |
|            |               |         |         |           |       |
| *(2)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Transition    | 10,000  | 4.59    | 1,476     |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Sulfide       | 7,000   | 6.92    | 1,558     |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Total         | 52,000  | 5.11    | 8,548     | 1 :   |
|            |               |         |         |           | 4.97  |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| T-88       | Oxide         | 51,000  | 3.64    | 5,969     |       |
|            |               |         |         |           |       |
| *(2)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Transition    | 11,000  | 5.13    | 1,814     |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Sulfide       | -       | -       | -         |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Total         | 62,000  | 3.90    | 7,784     | 1 :   |
|            |               |         |         |           | 6.74  |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| T-3        | Oxide         | 605,000 | 3.91    | 76,000    |       |
|            | Inferred      |         |         |           |       |
| *(2)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Transition    | 69,000  | 4.11    | 9,000     |       |
|            | Inferred      |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Sulfide       | 1,      | 2.94    | 146,000   |       |
|            | Inferred      | 539,000 |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            | Total         | 2,      | 3.25    | 231,000   |       |
|            | Inferred      | 213,000 |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
|            |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| TOTAL      | Oxide         | 1,      | 3.15    | 111,212   |       |
|            |               | 098,000 |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| TOTAL      | Transition    | 123,000 | 6.63    | 26,222    |       |
+------------+---------------+---------+---------+-----------+-------+
| TOTAL      | Sulfide       | 1,      | 6.64    | 229,561   |       |
|            |               | 053,000 |         |           |       |
+------------+---------------+---------+---------+-----------+-------+
| TOTAL      | Non-mineable  | 822,000 | 5.95    | 157,365   |       |
+------------+---------------+---------+---------+-----------+-------+
| TOTAL      | Mineable      | 1,      | 4.49    | 209,630   | 1 :   |
|            |               | 452,000 |         |           | 2.73  |
+------------+---------------+---------+---------+-----------+-------+
| GRAND      |               | 4,      | 4.14    | 597,000   |       |
| TOTAL WITH |               | 487,000 |         |           |       |
| INFERRED   |               |         |         |           |       |
| *(3)       |               |         |         |           |       |
+------------+---------------+---------+---------+-----------+-------+

KEY

  ------ -----------------------------------------------------------------
  *(1)   Constitutes Phase I of the Phu Thap Fah Mining Program; Mining
         Licenses Approved (25 yrs); Total Mining Area = 2.065 sq. km.

  *(2)   Constitutes Phase II; Mining Licenses Pending Final Approval of
         Mining Plan; Mining Plan to be filed upon commencement of Phase I
         production

  *(3)   Constitutes Total for Phase I and II; Does Not Include the
         Regional Area of which mineralization has been intercepted but
         not calculated
  ------ -----------------------------------------------------------------

C) Environmental Managment

Environmental impact studies in the mining area were conducted in
accordance with the Office of Environmental Planning and Policy (OEPP)
guidelines and comprised a coordinated study involving SPS Consulting,
the Department of Geotechnology at Khon Kaen University, NSR
Environmental Consulting PTY LTD, Australia and Environmental
Geochemical International PTY LTD, Australia. The comprehensive program
was inclusive of, but not limited to, ground water, soil mechanics, and
soil profile studies, all of which were found acceptable to the OEPP.

During development and production operations, ground water monitoring is
ongoing with results reported to government authorities. Negotiations
are in progress to have the Ground Water Research Center (GWRC) at Khon
Kaen University undertake independent third party monitoring of
environment aspects as prescribed by the environment regulations, and
with direct reporting to the OEPP.

TKL’s staff and management are committed to sound environmental
practices and shall maintain operations in compliance with all
applicable laws and regulations. Furthermore, TKL will initiate future
rehabilitation of mined areas for suitable post-mining beneficial land
use.

2.3.3.2 Mining and Production

A) Mining Development Plans

The Project is an open pit surface to near surface gold mining operation
utilizing carbon-in-leach (CIL/CIP) methodology. The processing plant,
under installation, is designed to process approximately 1,000 to 1,200
tons of ore per day with initial production mainly from the readily
available oxide ore. The gold dore resulting from the plant processing
will be sent to internationally accredited refineries for final
processing.

After commissioning, and with ongoing mining and gold production,
delineation of further ore resources is planned focusing on: 1)
mineralized sectors in continuity with the zones now blocked out for
initial mining, 2) in other nearby oxide zones, and 3) in several
regions of primary gold and/or base metal mineralization where assays
show highly significant values for one or more of gold, copper, lead,
and zinc.

The above plans shall be implemented by TKL’s management team which
comprises expertise in mineral exploration and mining, business, finance
and administration.

  B) 2005 Gold Price

During the course of FY05, gold traded at an average price of US$444.83,
up nearly 9% from 2004’s average price of US$409.25 per ounce. Gold has
increased substantially since the year 2000. The peak price reached in
2005 was US$537 per ounce in mid- December. Currently gold is trading in
the range of US$550 per ounce.

[]

C) Project Financing

After prolonged negotiations beyond the company’s control, FY05, saw the
completion of financing arrangements with lending institutions for
project development and, thus, opening the way to full scale sourcing of
equipment and expertise, and development and installations, toward
mining and ore processing. Dating back to the previous year, the main
requirement of the lending institutions was an independent evaluation of
the Project completed by a local third party team appointed by the
lending institutions. Production of said evaluation report work took
several months longer than would reasonably be expected, even though a
third party verification report had already been completed and submitted
to the lenders by a well experienced and internationally accredited
third party.

The Board of Directors of EXIM Bank and Bank Thai formally approved
joint project financing for the Project in late 2004. In anticipation of
lender approval, the Company had already initiated infrastructure work
and mine plan implementation, the pace of which increase through FY05 as
the Company is eager to get into production and capitalize on the
buoyant gold market.

In March 2005, TKL was granted a loan of some 13.3 million (USD) to
finance the purchase and installation of plant and mining equipment and
working capital, to be paid back during the first four years of
operation.

D) Project Economics

The capital requirement for the first phase of the mine is approximately
USD 20 million. With plant capacity of 1,000-1,200 tons per day
depending on types of ore, the average annual gold production is
estimated at 45,000 ounce. The plant commissioning is scheduled in mid
April and will start to realize income in May 2006. The project is
projected to generate revenue of Baht 900 million in 2006 with an
estimated net profit of Baht 600 million.

  2.3.3.3 Marketing and Competition

(A) Marketing Policy

In the gold mining operations, the product is bought and processed by
the refinery concerned. Prices are at international standards and vary
according to worldwide demand. The Royal Thai Government has the first
option to buy the gold output at the going world rate.

(B) Competition

There is only one registered commercial gold mining project 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 affect prices.

(C) Board of Investment (BOI) Approval

BOI approval was given to Tungkum’s application on 14 October 1999. The
privileges granted can be exercised once the mining license is granted
and will include:

  1. Full exemption from import duties on machinery for two years.

  2. Full exemption from import duties on raw material for five years.

  3. Exemption from corporate income tax for eight years and a 50%
  exemption for five years thereafter.

2.3.4 Property Development

In September FY04, upon completion of payments, the Company took full
ownership of the 6-3-51.3 rai parcel of waterfront land situated between
two waterfront parcels already owned by the Company. The Company
purchased the land from The Siam Commercial Bank for Baht 25 million.
Possession of this property joins the other two land areas resulting in
a single land parcel totaling about 24-3-36.4 rai (39,745 sq m). The
ownership of this land shall greatly increase the Company’s prospects
for major

waterfront development in the future. No other significant changes
occurred in property ownership in FY05.

The following table provides a breakdown of the Company’s current land
holdings and their status.

  ------------- ----------- -----------------------------------------------
  THL PROPERTY              
  HOLDINGS                  

  Area (Sq.     Location:   Property Description:
  M.):                      

  5,447.60      Bangkok     Land held by THL’s 75% owned subsidiary, Sky
                            Cliff Limited at the Rachadapisek / Rama IV
                            MRTA station – a prime location near the CBD.
                            Development site of Le Metro Condominiums.

  1,844.69      Bangkok     THL corporate headquarters located at the 7th
                            Floor of the Muang Thai Phatara Complex, Tower
                            1.

  39,745.00     Phuket      A large land bank located on the sea front of
                            Phuket Bay. Currently the site for THL’s Phuket
                            operations. Prime for future development.

  13,644.00     Phuket      Land with improvements located in Phuket town.
  ------------- ----------- -----------------------------------------------

2.3.4.1 Sky Cliff Limited

Sky Cliff Limited (SCL) is 75% owned subsidiary of the Company. SCL owns
a 3 rai,1 ngan, 61.9 sq wah (5,447.60 sq m), land plot with prime
frontage on Ratchadapisek Road. The site, which is near the CBD, also
enjoys very close proximity to the Rama 9 subway station and
expressways, including to the new airport. Given its convenient location
and a rising property market, SCL revived plans to develop a 29 story
service apartment on the site in FY02. As such, much of FY03 and 04 was
dedicated to advancing this project. All architectural and engineering
plans have been finalized, all piling

work has been completed, and the environmental impact study has been
completed and approved by appropriate authorities in accordance with
building permit requirements.

Further to the above achievements, however, the price of construction
materials dramatically escalated following the sharp increase in the
price of crude oil. Given that our development is a luxury class
development employing very high quality specifications, the increase in
construction material prices dramatically impacted our ability to move
forward with the project while allowing us to still make a profit. As
such, Management determined that it was in the best interest of the
Company to keep this project in temporary abeyance, pending oil price
stabilization which in turn would allow construction material to settle
at more reasonable prices which would in turn increase the project’s
profit margin.

At this current time, the Company is negotiating with an institutional
fund to double the equity base and lessen the Company’s dependency on
bank borrowings.

  2.3.4.2 Phuket Property Holding

Development Plans and Proposal

In September of FY02, the Company submitted a comprehensive proposal to
the Royal Thai Government for the rehabilitation and development of
Phuket Bay. In FY03, the proposal was revised pursuant to further
extensive research and upon receiving community input. The revised
concept focused on development of a world class cruise ship terminal and
related tourist facilities, plus a marina, convention and exhibition
center, and recreation areas. The revision retained the proposal to
upgrade the Princes Mother’s Park to its original intent, and
safeguarding of the Bay’s extensive mangrove forest with a view to
promoting eco-tourism as a major part of the development.

In FY04 the Royal Thai Government stated its intentions to develop a
convention and exhibition center at Phuket Bay, for which it is expected
that external participation shall be invited. However, given the recent
tsunami, the Company is uncertain as to the government’s stance on the
timing of the convention center development as focus remains on disaster
relief. When the government does proceed, the Company shall endeavor to
play a key role in the development.