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Press release from Marketwire

Malaga Maintains Profitability and Generates Cashflow From Operating Activities of $1.1M in Q1 2012

Wednesday, May 09, 2012

Malaga Maintains Profitability and Generates Cashflow From Operating Activities of $1.1M in Q1 201207:00 EDT Wednesday, May 09, 2012MONTREAL, QUEBEC--(Marketwire - May 9, 2012) - Malaga Inc. ("MLG")(TSX:MLG)(OTCQX:MLGAF) is pleased to report its financial results today for the first quarter ended March 31, 2012. The management discussion and analysis and unaudited financial statements can be found on the Company's website (www.malaga.ca) and on SEDAR (www.sedar.com). All amounts are in US dollars unless otherwise indicated. First Quarter HighlightsNet income of $0.1M compared to $0.8M in Q1 2011; Cash flow from operating activities of $1.1M compared to $0.7M in Q1 2011; EBITDA of $0.6M compared to $1.3M in Q1 2011; Sales of $3.6M compared to $5.2M in Q1 2011; A 19% increase in the average APT average reference selling price, from $360 in Q1 2011 to $430 in Q1 2012; Advance on sales of $0.8M was repaid. "The commencement of the underground drilling campaign, acceleration of the development program, particularly in the Huayllapon sector, and the addition of a new contractor on site should help to increase tungsten production for the remainder of the year", said Pierre Monet, President and CEO of Malaga.Financial ResultsFor the first quarter of 2012, Malaga generated a net income of $0.1M compared to $0.8M in Q1 2011. The decrease is mainly the result of a decrease in tungsten sales as well as copper sales, which were partially offset by a 19% increase in the APT selling price during the first quarter of 2012 compared with Q1 2011. This was a result of the rainy season which was particularly strong during the first quarter of 2012, with heavy rainfall causing the erosion of certain roads and overpasses, making transportation difficult. The rate of production has since improved to 350 tpd during April compared with a rate of 308 tpd during Q1-2012. Sales amounted to $3.6M for the first quarter compared with $5.3M in Q1 2011. This includes $0.1M from copper sales compared to $0.6M in Q1 2011. This shortfall of by-product sales will be recovered in Q2 and Q3 2012.Sales of tungsten in MTU amounted to 10,331 in the first quarter of 2012 compared to 18,090 in the first quarter of 2011 because of lower production (11,943 MTU compared to 17,493 MTU in Q1 2011) due to lower tonnes extracted (26,182 tonnes compared to 31,388 in Q1 2011) and a lower head grade of 0.62% compared to 0.75% in Q1 2011. During Q1 2012, cash cost of production was $197 per MTU, up from $129 per MTU for the same period a year ago, mainly due to the decrease in production. With production levels expected to return to 350 tpd during Q2 2012, Malaga expects to lower cash costs during the second quarter. This still remains a competitive advantage for the Company.According to the Metal Bulletin European quotations for APT, tungsten prices should continue to remain strong despite the decrease in the APT reference price in late April. As well, the Chinese APT selling price is currently ranging from $385 to $405. The Company believes long-term market fundamentals remain robust with limited availability of tungsten in the market and strong demand for tungsten concentrate.Continued development at the mineMalaga continues extensive underground development at its Pasto Bueno mine in order to replace the mined reserves and define new reserves and resources. During the first quarter of 2012, 1,136 meters of underground development work was completed. While current production is extracted from five veins, there are more than 79 veins on the property, excluding the southern part of the property that is under exploration. The Company has also applied for a medium-producer permit which allows for production of 500 tpd up to a maximum of 750 tpd. Exploration CampaignThe Company initiated an exploration campaign in 2011 on the southern part of the property, the area of the mantos, which will be completed in Q2 2012, with all results published during Q2. The Company will then determine the scope of the next exploration campaign.Key Financial Data:For the three-month periods ended March 31,(in $M)20122011Sales3.65.3Cost of sales (including depreciation and depletion)2.43.5Depreciation and depletion0.50.7Income from mining activities0.30.9General and administrative expenses0.80.9Net income0.10.8EBITDA0.61.3Earnings per share (basic and fully diluted)$0.00$0.00Cash cost of production per MTU197129Production in MTU11,94317,493LIQUIDITY Following the end of the quarter, on April 17 2012, Malaga obtained a financing from its customer to undertake the construction of a pilot plant to validate the proof-of-concept studies for recovering and reprocessing tungsten from its existing tailings pond. Construction will begin during the second quarter with first delivery expected during the third quarter 2012. The Company's NI 43-101 report indicated that the tailings pond contains 450,000 tonnes @ 0.14% WO3 of inferred resources. Assuming a 50% recovery rate, Malaga would produce an additional 31,500 MTU over the next few years from the current tailings pond, which is the equivalent value of $9.0M in revenues at current market prices ($370 per MTU at May 8, 2012).In addition to the tailings pond pilot plant funding, a new advance on sales in the amount of $0.8M was secured from its current customer to increase tungsten output. The Company also obtained an unsecured guarantee from Export and Development Canada that will be used to set-up a stand-by letter of credit facility in Peru for $0.8M. On May 7, 2012, 36.4M warrants having a $0.25 strike price and that were issued in May 2010, went unexercised. The remaining 875,000 warrants are still outstanding and will expire at the end of Q2-2012. ANNUAL GENERAL MEETING The annual general meeting will be held on June 6, 2012 at 10am at 1 Place Ville-Marie, 40th floor.The Company will be presenting at the Euro-Pacific Conference in New York on May 31, 2012 and is available to meet investors.ABOUT MALAGA INC. Malaga Inc. owns the Pasto Bueno mine in Peru and is one of the few publicly-traded producers of tungsten outside of China. Malaga is a low cost producer due to its gravimetric ore concentration process and the availability of hydroelectric power generated on its property. Malaga's production capacity represents about 10% of the tungsten available for sale outside of China. The Company plans to increase production and continue to explore the property to develop its reserves and resources.FORWARD‐LOOKING STATEMENTS Certain statements in the foregoing may constitute forward‐looking statements which involve known and unknown risks, uncertainties and other factors that may cause Malaga's actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward‐looking statements. The information provided reflects management's current expectations regarding future events and performance as of the date of this news release.FOR FURTHER INFORMATION PLEASE CONTACT: President & CEOPierre MonetMalaga Inc.514 288-3224ORCorporate Strategy and Investor RelationsNicole BlanchardSun International Communications450 973-6600