Update on Operations

Falkland Gold and Minerals Ltd
07 September 2006

                       FALKLAND GOLD AND MINERALS LIMITED
                           ('FGML' or the 'Company')


Falkland Gold and Minerals Limited (AIM: FGML), the exploration company with
exclusive rights to explore for gold and minerals in the Falkland Islands, is
pleased to provide the following overview of the operations and an update on the
work performed during the Winter season in the Falkland Islands.


•  The concept of an economically viable gold deposit in the Falkland
   Islands remains valid;

•  FGML's strategy, as set out in the Company's admission document dated
   24 November 2004 (the 'Admission Document'), remains in place;

•  The British Geological Survey ('BGS') are conducting geochemical and
   morphology testing on gold particle parcels (minimum 50 gold grains each)
   collected from the streams draining Area 6 and T11;

•  The Ground Geophysics programme is being extended to cover targets T11,
   T25 and some of the Black Shale area.

•  A site visit by the board of directors of the Company (the 'Board') is
   planned for November 2006 to review the exploration prospects ahead of the
   scheduled  relinquishment of 50% of the Company's licence area in January 
   2007, further details of which are set out in the Admission Document;

•  The cash balance stood at over £6 million as at 31 July 2006.


Overview of Original Rationale


The rationale for gold prospecting in the Falkland Islands derived from the
findings of  exploration work performed between 1999 and 2003. This involved
stream sediment sampling, airborne magnetic surveys and ground geochemistry.
That work identified several unexplained discoveries of alluvial gold in the
streams to the West of Mount Usborne (known as Area 6) and from the streams
draining Lafonia in the southern part of East Falkland. As at the date of the
Admission Document, FGML had selected 23 drill targets and set out a programme
designed to establish the source of the gold.


Drilling Programme


FGML has two skid mounted diamond core drills in operation and currently has 15
operational staff on the Islands. Recent work has concentrated on the contacts
between softer sedimentary units and the harder tillite in Area 6. This area
contains 11 of the drill targets and the contacts include the Black Shale
(stratigraphically above the Tillite) and the Bluff Cove Beds (below the
Tillite).


In total we have drill tested eleven of the original twenty three targets being
T1N, T2N, T5, T6, T7, T8W, T8E, T9N, T10, T12, and T15E. As a result of this
work four further targets have been identified - T22, T23, T24 and T25 some of
which have already been partially drilled. By the end of 31 July 2006, a total
of 16,042 metres of predominantly HQ core had been drilled and 7,093 samples had
been sent for assaying.


Ground Magnetics


The groundwork programme has extended beyond that originally planned at the date
of the Admission Document.  Outside contractors were used to conduct 2 major
surveys. Between March and May 2005, a 1,500 line km survey was performed across
targets T2S, T2N, T8E, T9N, T9S-1 to 3, T10, T18 and T20. A second, 1,676 line
km survey was conducted in late 2005 across targets T1, T5, T7, T8W, T12, T15,
T23 and T24.


Further ground geophysics is planned over three areas with the methods to be
used being very low frequency ('VLF') electro-magnetic ('EM'), Induced
Polarisation ('IP') and gravity. The surveys will be conducted during the
Spring, once the ground has dried out sufficiently.


Sampling and Trenching


We have been acquiring geochemical data on the soil/clay horizon in four of six
planned areas being Target 11, Target 9S, Area 6 and the Warrah prospect. We are
looking for a geochemical signature or 'halo' of mineralised zones that are
related to weathered mineral deposits. We have been assaying for a range of
minerals to identify concentration spikes of pathfinder elements such as
arsenic, mercury, silver, antimony, copper and lead. This sampling method was
successful in delineating a gold soil anomaly over Target 11 that was confirmed
by shallow trenching (nine trenches and over 2,400 trench samples).  This is now
being followed up with the ground geophysical surveys to delineate a sub-surface
target that can be drill tested. Depending on the results of the geophysical
work, drilling could commence early in the 4th quarter.


Outline Findings


The exploration work has largely confirmed FGML's prior geological
interpretations.   More specifically, the findings have:

•  confirmed the presence of intrusive rocks (dolerite) with associated
   veining;

•  shown that where the intrusive rock has intruded less competent rock, such 
   as black shale, veining is more prominent and the shale is mineralised with
   pyrite;

•  highlighted that the Fitzroy Tillite is highly competent and restricts
   veining.

The samples taken from the trenching programme have demonstrated higher than
background gold values.  This has encouraged FGML to begin the ground geophysics
which should enable the Company to revise the drilling programme.


Outlook


Taken together, the remaining drilling, sampling and groundwork programmes will
take us well into 2007 and this can be financed from existing resources. The
Board continues to believe that the potential outlined in the prospectus issued
in November 2004 remains and that the revisions to the work programme will put
us in a good position from which to identify the geological model accounting for
the various anomalies.


Richard Linnell - Chairman

Enquiries:

Falkland Gold and Minerals Limited
Richard Linnell (Chairman)                    [phone]


WH Ireland Limited
Peter Jackson / Paul Dudley                  020 7220 1666


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