MercoPress. South Atlantic News Agency

Falkland Gold and Minerals Limited report

Mr. Richard Linnell FGML Chairman report on the activities of Falkland Gold and Minerals Ltd ('FGML' or 'the Company') for the six month period ended 31 March 2006.

During the period the Company returned a loss before tax of £490,517 (6 months to 31 March 2005: £345,869). A further £158,104 has been invested in tangible fixed assets this period, most of which was spent on operating plant and machinery. Current monthly cash expenditure is approximately £170,000.

The Company is now well into the second year of its exploration programme in the Falklands. This programme has been designed to establish the source of alluvial gold discovered in some of the streams in the Islands and the operations are going well with over 14,000 metres of core having been drilled over ten targets as at the end of May 2006.

3,900 metres of drilling is planned on four other targets that are drill ready and an additional 4,000 metres of drilling is planned on three further targets where we have yet to use ground sampling techniques to assist in focusing the drill targeting.

In addition to the investigative drilling campaign, we will be undertaking a peat soil geochemical sampling programme on two additional areas. This work is specifically aimed at developing new drill targets and should generate around 10,000 samples for analysis. Taken together, the drilling and sampling work programme is likely to take us well into 2007 and this can be financed from existing resources.

The British Geological Survey completed a review of the exploration work carried out up to the end of March 2006 and also of the methodologies employed. They made several constructive suggestions on the way forward and commented positively on the implementation of the exploration programme. Their services are being retained in order to provide additional interpretative capacity.

Your Board continues to believe that the potential outlined in the prospectus issued in November 2004 remains and that the continuing work programme should identify the geological model accounting for the various anomalies. We remain hopeful that this will lead on to some discoveries of economic value.

More info: www.FGML.com