MercoPress. South Atlantic News Agency

Hunting for hidden riches: gold and oil exploration gather pace in the Falklands

HOPES of a new gold rush in the Falklands will come a step closer next week with the start of an exploratory drilling programme near Goose Green.

A rig brought down by Falklands Gold and Minerals Ltd (FGML) is due to start extracting sample cores from the ground at Camilla Creek to get a clearer idea of what lies below the surface.

The company has already carried out an aeromagnetic survey of the Islands, and drilling is to be carried out in an area that showed 20-30 potential concentrations of mineral deposits.

Chairman of Global Petroleum, which owns a 10.11 per cent stake in FGML, John Armstrong, was understandably upbeat this week during a visit to the Islands. Even he is aware, however, that there may ? or may not ? be gold in them thar hills.

"We had 100 metre flight spacing, which identifies areas where the magnetic field of the earth is different. You might drill it and you might just find its iron ore and no other minerals but it's just a start as to where to put the drill," he said.

A former woolshed at Goose Green has been converted into a workshop, where a local technician, currently training in La Serena, Chile, will process the cores before sending them away for analysis.

Dr Armstrong said the company had so far raised sufficient funds - £10 million ? for two to three years' work. A second drilling rig is on order and they hope to see it arrive in the Islands in a month's time.

Dr Armstrong was joined on his trip to the Islands by David Hudd, Chairman of Falkland Islands Holdings (FIH), which owns a 14.38 per cent share of FGML.. The two men were mainly visiting the Falkland Islands on behalf of Falklands Oil and Gas Ltd (FOGL), in which FIH has an 18.1 per cent share, and Global Petroleum 16.1 per cent. In addition, Dr Armstrong is himself chairman of FOGL.

The company is in the middle of its own exploratory programme. The seismic survey vessel GSI Admiral is currently working in waters to the east and south east of the Islands which have been licensed to FOGL.

The company has the largest acreage of any oil investor in Falkland's waters, as sole licensee of 50,000 square km and joint licensee of a further 33,000 square km with Australian investor Hardman.

FOGL raised £14 million from shareholders for the current exploration programme, and it is possible that the company will use the new electromagnetic survey technique marketed by a company named OHM. After that, it will have to attract other companies as "farm in" partners to further the work.

So how big a gamble is oil prospecting in the Falklands for investment companies?

Dr Armstrong advised that the process was one of taking an informed, rather than a wild guess, at the existence of oil in the licence area. Oil and gas fields have already been discovered in Argentine waters to the west of their licence area, and he said experts would be searching for four indicating factors in one place before they considered going ahead with a drilling programme: "It is not a straight gamble but a carefully calculated risk". "Ultimately you only find out what's in the ground by drilling a well. All this other stuff is intended to minimise the risk to investors."

Mr Hudd said the existence of a stable and supportive government in the Falklands was also an attraction for investors, in contrast to some of the World's more volatile locations: "The other factor you have got to impress upon all this is, ?What's the geo-political regime within which we are doing this?' Is it in a regime where they [the Government] will suddenly say ?We own it, you don't own it?' "We are under a situation where there are UK legal rules."

Talk of gold rushes and oil booms aside, Mr Hudd clearly senses a whiff of the pioneers in all this. Between all the oil prospectors together, he says: "Over £50 million has been raised in the UK to explore for minerals and hydrocarbons in this area. I think that's quite remarkable. From the 1850s where people invested in cattle ranching here, today's cattle ranching is oil."

Sue Gyford (MP) Stanley