Malaga Inc.

Malaga Inc.

October 22, 2012 08:54 ET

Malaga's Pasto Bueno Process Plant in Care and Maintenance

MONTRÉAL, QUÉBEC--(Marketwire - Oct. 22, 2012) - Malaga Inc. ("Malaga" or the "Corporation") (TSX:MLG)(OTCQX:MLGAF) announces that it has suspended production at its Pasto Bueno tungsten process plant and put it in care and maintenance. The hydro-electric transmission line was accidently severed and several transmission poles were damaged causing a complete power outage to the plant and mine. Production has continued using diesel powered generators. However, this has increased operating cost significantly and resulted in a negative cash flow position. Work to repair the power line is expected to take four weeks. The Corporation is maintaining its mining operations at a reduced pace.

Cash flow from operations at the Pasto Bueno property has been lower than expected in 2012 due to the decrease in the production of tungsten caused mainly by lower head grade of the ore extracted and a reduction in selling price of tungsten. Operational improvements have not yet been fully implemented and there have been delays in building a decline ramp to access ore in lower levels of the Huayllapon zone (see news release of August 15, 2012 and management discussion and analysis of Q2-2012). The cost of building the new tailing pond is also higher than expected. Malaga is implementing various cost reduction measures at the Pasto Bueno property, the head office in Montréal and its office in Lima, Peru.

The Corporation is in the process of securing financing to allow it to pursue objectives related to mine development and increase of production. Term sheets for debt and equity financings have been received and are being evaluated.

"This has been a difficult decision for all of us, as we consider that Pasto Bueno remains a property of high quality with significant resources and the potential to develop hydro-electric power on site", said Pierre Monet, President and CEO. "We intend to return to full production once we secure the necessary financing and will also review the mine development plan to improve our operational efficiency".

Forward-looking Statement

This news release contains certain forward-looking statements or forward looking-information. These forward looking statements are subject to a variety of risks and uncertainties beyond the Corporation's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward looking statements. Such risks and uncertainties are disclosed under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2011 and dated March 27, 2012. Further, forward-looking information is in addition based on various assumptions, including, without limitation, the expectation and beliefs of management, the assumed long term price of tungsten, that the Pasto Bueno property is a technical viable and economic operation and that the Corporation can access financing. Should one or more of these risks and uncertainties materialize, or should the underlying assumption prove incorrect or different, actual results may vary materially from those described in the forward-looking statements. The information provided reflects management's current expectations regarding future events and performance as of the date of this news release. Accordingly, readers should not place undue reliance on forward-looking statements.

Contact Information

  • Nicole Blanchard
    Corporate Strategy and Investor Relations
    Sun International Communications