2.2 Business Nature

2.2.1 Background and Major Changes and Developments in Business
Operations

  The Tongkah Harbour organization has been in mining for 101 years
  beginning with offshore tin mining in and around Phuket Bay in 1906.
  The Company was the brainchild of Captain Edward T. Miles of Australia
  who, on observing the labor intensive methods of Chinese in offshore
  mining at Phuket in 1905, felt that he could develop equipment to
  mechanize the industry.

  In 1906, Captain Miles founded the “Tongkah Harbour Tin Dredging
  Company N.L” incorporated in Hobart Tasmania and, upon due
  arrangements with the local Governor, began, offshore tin mining in
  Phuket Bay in 1907 utilizing the world’s first sea-going bucket
  dredge. In the following decades up to the present, the Company
  experienced a successful and eventful history with some highlights as
  follows:     

  Over the years following 1907, the Company put seven more dredges into
  mining operations in the Phuket area. The British firm, the “London
  Tin Group” (Managed by Anglo Oriental), eventually gained control and
  transferred the Company’s domicile to Malaysia and renamed it “Tongkah
  Harbour Tin Dredging Ltd” which was later officially named “Tongkah
  Harbour Tin Dredging Berhad”. The London Tin Group was subsequently
  taken over by the Malaysian Mining Corporation (MMC).

  In 1980, shareholding was restructured becoming predominantly Thai in
  response to the Thai governments policy of encouraging domestic
  investment in the mining industry. On being registered in Thailand,
  the Company was renamed “Tongkah Harbour Limited” In 1988, the
  Company’s dredge sank in a storm off Phuket Island. Due mainly to low
  tin prices, the Company decided to use dredging contractors thereafter
  and not commission new equipment.

  In 1981, the Company became a listed company with registration in the
  Stock Exchange of Thailand (SET) and the trading of shares. In 1994
  the Company was again renamed as “Tongkah Harbour Public Company
  Limited” after registering with the Department of Business
  Development.

  With the collapse of the tin market in the mid 1980’s, the Company
  turned to diversification entering gold and base metal exploration in
  1990, and property development in Bangkok where it undertook the
  construction of “Tongkah Tower”, now known as the “True Tower”.

  In 1991, the Company’s subsidiary, Tungkam Limited (TKL), was founded
  and granted a concession in Loei province for the exploration and
  mining of gold and related minerals. In 1995, pursuant to successful
  exploration, TKL submitted mining plans and six gold mining license
  applications to the Department of Mineral Resources (DMR), which
  approved the plans in late 1996.

  The Company emerged from the financial crisis of 1997 with no foreign
  exchange exposure and no debts, and with a strong cash position.
  However, the SET ruled that the Company’s earnings from tin operations
  (considered by the SET to be the Company’s core business) were
  disproportionately lower than its other revenue and, accordingly,
  suspended (later reinstated) it from trading on the SET.

  In March 2003, the Ministry of Industry granted Tungkum Limited the
  gold mining license whereupon the Company could initiate its mine
  development program.

  In September 2004, the company added to its land bank in Phuket by
  acquiring land which joined together two parcels already held. With
  this acquisition, the Company now holds some 39,745 sq m of continuous
  beach-front property in a prime location for future development.

  In 2005, the Company accumulated 83.7% of Sea Minerals Limited (SML)
  which subsequently filed mining lease applications (MLA’s) over 50,000
  rai (8,000 hectars) to mine an off-shore deposit in the Andaman Sea
  where evaluations based on some 1200 drill holes indicate resources of
  some 50,000 tons of tin in the MLA area.

  In the year of 2006, Tungkum’s gold operations underwent commissioning
  and be officially commenced commercial operations as of September
  2006. Gold production aided in turning Company operations from the red
  into marginal profitable operations by the end of 2006 which was a
  special occasion as Tongkah Harbour Public Company Limited marked 100
  years of continuous operations in the mining business.

  In February 2007, the Company acquired total increased share capital
  of Baht 45.2 million of Sea Minerals which was approved for increased
  authorized share capital from Baht 72 million to Baht 288 million in
  2006. The result was interest of the Company in the equity of Sea
  Mineral increasing from 83.70% to 89.99%. Subsequently, on 13 November
  2007, the Extraordinary General Meeting of Sea Minerals Limited’s
  shareholders approved the resolution to reduce Sea Minerals Limited’s
  shares from 1,171,976 to 1,054,616 by canceling 117,360 shares, owned
  by Southern Kinta Consolidation Limited. As a result of the reduction
  in shares, Tongkah Harbour Public Company Limited’s shareholding in
  Sea Minerals Limited increased from 89.99% to 99.99%.

  On 4 May 2007, with profitable operations for 2006, the Stock Exchange
  of Thailand reinstated the Company’s security trading. Also, the
  trading of the Company shares in the form of American Depository
  Receipts was approved by US Securities Exchange Commission on 9 May
  2007.

  The Company looks forward to improving it’s gold production potential
  and concentrating on developing and putting into production its tin
  reserve areas while, in the same time, watching for the right time to
  develop its land-bank holdings in Phuket and Bangkok. With the
  beginning of it’s next one hundred year journey, Tongkah Harbour
  Public Company Limited and it’s subsidiaries will continue to focus on
  mining.

2.  Business Operations of the Company and Group

(Operations Summary and Group Holdings as at 31 December 2007)

  Business Type :Mining Operation

  Tin Mining : Six offshore tin mining leases 100% owned by THL located
  at Phuket Bay, Bangtao Bay and Pang-Nga areas. One lease expired in
  2006 and three in 2008. Resources: 15,702.52 rai (25.31 sq km) of
  mining lease area.

  Igneous Rock Mining : Igneous rock mining (Andesite) currently in
  operation at Kaeng Khoi, Saraburi Province, Thailand. Surveyed
  resources are about 12 M tons and open to dept and laterally
  indicating a further 15 M tons. Operating under a 10 year mining
  license granted on May 1999, and a second ten year mining application
  granted in 2003. 100% owned by THL.

  Land Holding : Phuket : two parcels total 33 Rai 1 Ngan 47.4 sq. wah
  (53,389 sq. m.) located in town and on sea front with potential for
  development. 100% owned by THL.

72.10% Business Type: Rock Crushing

  Crushing plant operator at the igneous rock quarry.

  72.10% owned by THL with remaining shares held by CPB Equity Co.,Ltd.
  (a subsidiary of the Crown Property Bureau), the Ministry of Finance,
  and others.

95.91% Business Type: Gold Exploration and Mining

  Gold Mining, Block 4 concession, Loei Province, Thailand. Six
  applications of the first batch were approved in January 2003. The
  mining licenses are valid for a 25-year term. Resources: 4.49 M tons
  at 4.14 g/t gold. Open pit operation with resource base open laterally
  and to depth.

75.00% Business Type: Property Development (Le Metro)

In Bangkok : a 75% holding in SCL, which owns a 3 rai 1 ngan 61.9 sq wah
(5,447.60 sq m) of land on Ratchadapisek Road. Sky Cliff plans to
develop a 29 storey office and service apartments. The site is
strategically located near the Pha Ram 9 subway station entrance, Rama
III expressway and motorway entrances leading to the Suvarnabhumi
airport.

89.99% Business Type: Offshore Tin Mining

  In Phuket: An 89.99% holding in SML, application of lease have been
  filed for lease area of 50,000 rai with minable resources of about
  64,320 tons, cutoff at 0.10 kg/cu m. Verification studies pending.

  Subsequently, the company increased its capital through shareholders’
  meeting in February 2007, to Baht 288 million from Baht72 million.

3.  Revenue Structure

The Group's revenue was generated from its core businesses, which are
tin mining, andesite aggregate production, gold mining and the interest
income from banks and financial institutions.

  ----------- --------------------- ----------- -------- --------- -------- --------- --------
  Nature of   Operated by           Revenue                                           
  Income                            Structure                                         

                                    2007                 2006               2005      

                                    Baht        %        Baht      %        Baht      %
                                    million              million            million   

  Gold Sales  Tungkum Limited (TKL) 419.11      88.27    269.47    91.49    -         -

  Andesite    Tongkah Harbour       8.98        1.89     21.08     7.16     21.46     77.72
  Sales       Public Company                                                          
              Limited (THL) and                                                       
              Cholsin Limited                                                         

  Tin Ore     THL                   -           -        -         -        2.35      8.52
  Sales                                                                               

  Other       THL                                                                     
  income                                                                              

              Amortisation of       -           -        -         -        -         -
              excess of net book                                                      
              value over cost of                                                      
              investments accounted                                                   
              (equity method)                                                         

              Interest Income and   46.71       9.84     4.00      1.36     3.80      13.76
              others                                                                  

  Total                             474.80      100.00   294.55    100.00   27.61     100.00
  Revenue                                                                             
  ----------- --------------------- ----------- -------- --------- -------- --------- --------