Mining venture hopes to find gold in the Falklands

A mining company is to systematically explore the Falkland Islands for gold and diamond deposits for the first time. If successful, a major discovery would turn the inhabitants of the thinly populated south Atlantic territory into millionaires.

A new company, Falkland Minerals, is to be formed that will combine the Falkland mining licences held by two AIM-listed companies, Cambridge Mineral Resources and Falkland Island Holdings, plus the share of a licence owned by an Australian company, Global Petroleum. Most of the $1.5m (£796,000) required for the initial exploration will be provided by Rab Capital, a UK investment house, which will own 51 per cent of the new company.

David Bramhill, the managing director of Cambridge, said the Falkland Islands were believed to have been part of South Africa - one of the world's richest minerals areas - before breaking away millions of years ago. Whether the Falklands had similar properties would depend on whether the diamonds and gold deposits had been created by the time the islands split off.

"The theory is that if it came from the tip of South Africa, it must be loaded with diamonds and gold. The honest answer is that we just don't know what the prospects are at this stage," Mr Bramhill said.

Initial work in the Falklands has shown the presence of gold but it is not clear what sort of quantities are present. Starting next week, Falkland Minerals will conduct "an aeromagnetic survey", mapping the geology of the 14,000 sq km of the islands from a plane. It will take about three months to complete and is the equivalent of taking an X-ray of the land, to show where there are promising geological formations.

Separately, other companies, led by Desire Petroleum, are exploring around the islands for oil, another potential source of riches for the inhabitants.

Cambridge will own 11.5 per cent of Falkland Minerals, while Falkland Island Holdings will have 22.5 per cent.

David Hudd, the chairman of Falkland Island Holdings, said: "The Falkland Islands remains practically unexplored for minerals. The funding which has been secured will enable a comprehensive exploration programme to be undertaken, which for the first time will have the benefit of modern technology."