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 to the Primary Industry Ministry
for extensions of said mining leases pending revisions in the royalty
rates and to competitive levels, and revival of the local offshore
dredging and mining industry.

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

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

  10866/13050       19 May 2006         5,626.44         9,002,304
                    (expired)                            

  18071/13369       28 March 2008       2,362.35         3,779,760

  18064/13448       28 July 2008        3,883.93         6,214,288

  18065/13449       28 July 2008        2,901.17         4,641,872

  TOTAL MINING                          14,773.89        23,638,224
  CONCESSION AREA:                                       
  ----------------- ------------------- ---------------- ----------------

In FY06 the Company has no income from tin operation. Due to high
royalty rate on tin, the Company continues to cease the operation for
another year.

The Company 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, the
Company is pursuing the ground work involved in preparing its Sea
Minerals 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 increases over the past three years,
prices stayed high in FY06 and are expected to remain so. Tin prices
closed at (USD) 11.60/kg at the end of 2006 and continued rising through
the first quarter of 2007 to over (USD) 13.00/kg. Price increases are
due mainly to a world demand verses supply gap as tin is now used in a
variety of applications pursuant to industry’s research into new
applications, industrial expansion in china, and its increasing use in
place of other materials. Current application include metal alloys, tin
plating, lead-free soldering (particularly in the electronics and IT
sector), and packaging.

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 FY06 there
was no offshore tin mining activity.

Progress on Sea Mineral Limited’s operation

In FY06, THL maintained its 83.70% holding and full corporate and
managerial control in its associated company, Sea Minerals Limited
(SML). The remaining 16.3% shareholding is vested in the treasury of SML
as the former shareholder is now a defunct entity. Although THL is
currently inactive in offshore tin mining, SML has filed mining plans
for its previously submitted mining lease application in the Andaman
Sea, about 25 km off the west coast, northwest of Phuket Island.

After first exploring this area some two decades ago, SML 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 due to recent advances
in deepwater mining technology.

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. These figures are based on
extensive bore-hole data and evaluations which have recently received
qualified third party assessment with positive results. The deposit is
at the 45 to 70 m depth range and is now within the range of deepwater
mining technology.

2.3.1.2 Marketing and Competition

(A) Marketing Policy

The product is sent and to be 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.

  2.3.1.3 Resources and Products

  (A) Resources

About 14.6 sq km of offshore lease areas in Phuket are currently valid.
On the operation, 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 igneous rock (andesite) 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. Current operations utilize about 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 which applied for the license for and on behalf of THL. The two
surveyed licensed areas total about 243.5 rai (about 390,000 sq m)

  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.
Sales and prices charged are dependent on demand for any particular
product 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.

The following table provides quarterly production figures for 2006.
Although demand for our product is high, contractors have not been able
to take deliveries as logistics and managerial problems at major project
sites continue to be unsettled. Accordingly, production was reduced in
some months of FY06. However, it is now likely that bidding will be
resumed in year 2007 for extensive maintenance and double tracking in
the Central region requiring about 850,000 tons of ballast. Our quarry
is in a good competitive location to supply this demand.

  -------------------- ---------- ---------- ---------- ---------- ----------
  2006 AGGREGATE                                                   
  PRODUCTION (tons)                                                

  Item                 Qtr 1      Qtr 2      Qtr 3      Qtr 4      Total

  Road base            9,053      12,699     5,978      2,733      30,463

  Railway Ballast      25,232     27,002     -          -          52,234

  Aggregate ¾”         7,911      11,791     9,373      6,199      35,274

  Dust (Coarse)        5,828      7,410      4,997      2,970      21,205

  Dust (Fine)          3,547      4,504      2,422      1,555      12,028

  TOTAL                51,571     63,406     22,770     13,457     151,204
  -------------------- ---------- ---------- ---------- ---------- ----------

In FY06 andesite sales slightly decreased from Baht 21.5 million to Baht
21.1 million when compared to the previous year. The decrease was mainly
due to decreased 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 igneous
rock materials in central Thailand. The quarry produces a wide range of
aggregate sizes applicable mainly to the construction, road building,
and railway industries. Products are made to comply with specifications
set by the State Railway of Thailand (SRT), the Highway Department, and
the MRTA, thereby making them more competitive in the market place. The
quarry’s andesite aggregate is the only product in the Kaeng Khoi region
meeting the Highway Department’s specifications.

The Company prospect that the SRT will commence new double-track
projects in the Central Region and northeast regions in the near future
as bidding on projects in 2007 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 committed THL 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 including
administration costs, pay 2.5% royalties, 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 Germany, Britain, and Canada
which granted (CAD)50 million to the DMR for mapping of mineral
resources for the whole of Thailand.

On receiving Special Prospecting Licenses (SPL’s) on the concession 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 Government
regulatory agencies concerned.

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

B) Resources and Mineralization

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 (reconfirmed in
November 2006) by Mr. Edward Brennan, BE (app. geo.) FausImm, MMICA, CP
(geo.), MGSA, MCIM, detailed the following:

  ---------- ----------- -------------- ----------- ----------- ---------------- ---------
             Target Area Ore Type       Tonnes      Grade (g/t  Contained Gold   Strip
                                                    Au)         (oz)             Ratio

  A          T-1         Oxide          313,000     2.71        27,274           

                         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          1,268,000   5.77        235,131          

  A          T-1-8       Oxide          289,000     3.79        35,219           

                         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           

  A          Qz Spur     Oxide          48,000      3.93        6,066            1 : NIL
                         (eluvial)                                               

             Gsn Cap     Oxide          16,000      1.47        756              1 : NIL
                         (eluvial)                                               

  B          T-1-S       Oxide          346,000     2.73        30,372           

                         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           

                                                                                 

  B          T-7         Oxide          35,000      4.90        5,514            

                         Transition     10,000      4.59        1,476            

                         Sulfide        7,000       6.92        1,558            

                         Total          52,000      5.11        8,548            1 : 4.97

                                                                                 

  B          T-88        Oxide          51,000      3.64        5,969            

                         Transition     11,000      5.13        1,814            

                         Sulfide        -           -           -                

                         Total          62,000      3.90        7,784            1 : 6.74

                                                                                 

  B          T-3         Oxide Inferred 605,000     3.91        76,000           

                         Transition     69,000      4.11        9,000            
                         Inferred                                                

                         Sulfide        1,539,000   2.94        146,000          
                         Inferred                                                

                         Total Inferred 2,213,000   3.25        231,000          

                                                                                 

  C          Total       Oxide          1,098,000   3.15        111,212          

             Total       Transition     123,000     6.63        26,222           

             Total       Sulfide        1,053,000   6.64        229,561          

             Total       Non-mineable   822,000     5.95        157,365          

             Total       Mineable       1,452,000   4.49        209,630          1 : 2.73

  Grand                                 2,274,000   5.02        366,995          
  total less                                                                     
  T-3                                                                            
  inferred                                                                       

  Grand                                 4,487,000   4.14        597,000          
  total with                                                                     
  inferred                                                                       
  ---------- ----------- -------------- ----------- ----------- ---------------- ---------

KEY

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

  B     Constitutes Phase II; Mining Licenses Pending Final Approval of
        Mining Plan; Mining Plan to be filed upon commencement of Phase I
        production

  C     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 for the Project were conducted in
accordance with the Office of Natural Resources and Environmental Policy
and Planning (“ONEP”, previously known as “Office of the Environment
Policy and Planning or OEPP”) guidelines and consisting of 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 included ground water, soil mechanics, and soil
profile studies, all of which were approved by the ONEP.

Prior to production baseline surveys on soil and groundwater properties
were conducted by the Ground Water Research Center (GWRC) at Khon Kaen
University. Since production began, the GWRC team has been conducting
environmental site monitoring in accordance with ONEP and DPIM
regulations

TKL’s staff and management are committed to sound environmental
practices and compliance with all applicable laws and regulations during
operations. In addition, 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 operation utilizing
carbon-in-leach (CIL/CIP) methodology. The processing plant is designed
to process up to 1,500 tons of ore per day with initial production
mainly from the readily available oxide ore. Gold dore produced is being
sent to Heraeus Limited’s refinery in Hong Kong

With gold production and refining ongoing, plans are in progress to
delineate further ore resources 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 will be implemented by TKL’s management team consisting
of expertise in mineral exploration and mining, business, finance and
administration.

  B) 2006 Gold Price

During FY06, gold prices averaged USD 603.46/oz compared to USD 444.7
for FY05 and closed the year at USD 632/oz. During the first quarter of
2007, the gold price went to over USD 670/oz and generally hovered
around USD 650/oz.

[]

C) Project Financing

This project was previously financed by local consortium banks, as at 29
December 2006, TKL signed a new loan with Deutsche Bank for USD 25
million, and part of the new loan was utilized to refinance the local
consortium banks. The drawdown of the USD 25 million was then completed
on 29 January 2007. The remaining loans will be utilized to for further
plant expansion and proving of reserves.

D) Project Economics

The capital requirement for the first phase of the mine is approximately
USD 20 million. With plant capacity of 1,200-1,500 tons per day
depending on types of ore, the average annual gold production is
estimated at 25,000 ounce. The Commercial for operation commences in
September 2006. The average gold production for 2007 is estimated at
25,000 ounce

  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 2004, the Company acquired a 6-3-51.3 rai (11,005.20 sq m) parcel of
waterfront land from the Siam Commercial Bank for Baht 25 million.
Possession of this property joins the other two land areas (also
waterfront areas) resulting in a single land parcel totaling about
24-3-36.4 rai (39,745 sq m). Ownership of this land as a single unit
greatly increases the Company’s prospects for major waterfront
development in the future. No other significant changes occurred in
property ownership in FY06.

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

+------------+--------+------------------------------------------------+
| THL        |        |                                                |
| PROPERTY   |        |                                                |
| HOLDINGS   |        |                                                |
+------------+--------+------------------------------------------------+
| Area (sq   | Loc    | Property Description:                          |
| m):        | ation: |                                                |
+------------+--------+------------------------------------------------+
| 5,447.60   | B      |   Land held by THL’s 75% owned subsidiary, Sky |
|            | angkok |   Cliff Limited at the Rachadapisek / Rama IV  |
|            |        |   MRTA station - a prime location near the     |
|            |        |   CBD. Development site of Le Metro office and |
|            |        |   service apartments / condominiums.           |
+------------+--------+------------------------------------------------+
| 1,844.69   | B      |   THL corporate headquarters located at the    |
|            | angkok |   7th Floor of the Muang Thai Phatra 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 is near the CBD and close to
the Rama 9 subway station and expressways with convenient connections to
the new airport. Given its convenient location and a rising property
market, SCL is reviewing plans to develop a 28 story office and service
apartment / condominium complex on the site in 2007.

The years since 2003 were dedicated to advancing the Le Metro project,
structural and engineering plans have been finalized, all piling work
has been completed, and the environmental impact study has been
completed and approved by appropriate Government authorities in
accordance with building permit requirements. However, the price of
construction materials dramatically escalated then following the sharp
increase in the price of crude oil.

As the building was then slated to be a luxury class development at high
quality specifications, the increase in construction material prices
dramatically impacted our ability to move forward with the project
profitably. Therefore, Management decided to put the Project on hold
pending stabilization of oil prices and construction materials costs at
more reasonable rates.

Pursuant to changes in the area’s business environment, a review of
potential was implemented and, pending results of third party reports,
construction of an office space and service apartment/condominium
complex (rather than an all condominium complex) will resume during the
second half of the year. The Project location is now more enhanced with
the construction of the Markasan high speed railway central station to
the new airport. Given the slowdown of the demand of the construction
industry and the likelihood of financing availability it augurs well for
the Company to complete the project.

  2.3.4.2 Phuket Property Holding

Development Plans and Proposal

Land holdings at Phuket remained unchanged during the year. The Company
had previously acquired full ownership of a Phuket Bay land plot which
adjoins two already existing land parcels owned by the Company. The
Company now owns one large contiguous piece of waterfront land at Phuket
Bay which dramatically increases the land value and prospects for future
development.