Malaga: Q2 2008 financial results and outlook for 2008

    Malaga Inc. (malaga)
    Symbol: MLG
    Toronto Stock Exchange (TSX)

    MONTREAL, Aug. 22 /CNW Telbec/ - Malaga Inc. (TSX: MLG) reports its
financial results for the three-month period ending on the 30th of June 2008.
The consolidated financial statements (all currency figures appear in Canadian
dollars unless otherwise specified) along with the management's discussion and
analysis are available for the viewing on the Malaga website at
and the documents have been filed with SEDAR at

    Q2 Overview

    During the three-month period ending on the 30th of June 2008, the
Company recorded a net loss of $1.0M or $(0.01) per share compared to a net
loss of $0.5M or $(0.01) per share for the comparative period in 2007. This
increased net loss is due to the low average tungsten grade (0.79%) milled
during Q2 2008 as compared to 1.14% during Q2 2007. The Company is actively
implementing a series of remedial actions to increase the tungsten grade,
which are discussed in detail below.
    In Q2 2008 mined tonnage increased (21,811 tons compared to 18,438 tons
in Q2 2007), recovery rates increased (81.6% compared to 74.9% in Q2 2007) but
the amount of tungsten concentrate sold dropped to 14,411 MTU's totalling
$2.5M (15,044 MTU in Q2 2007) due to the low tungsten grades encountered in
the mine.
    Cash, cash equivalents and short-term investments totalling $1,886,861 as
at June 30, 2008 and working capital was $900,000 on June 30, 2008.
    In order to develop new higher grade mining zones, during the last
three-month period Malaga has invested $800,000 in mine development and has
purchased $300,000 in capital assets which brings the total amount invested
since the beginning of 2008 to $1,800,000 and $900,000, respectively.
    Finally, during the quarter the Company reinforced its financial and
technical expertise by nominating A. Michel Lavigne, Jean C. Lavoie,
Luc Filiatreault and Paul Cregheur to its Board of Directors.

    Operating results
    Metal sales and production
    Metal sales are:

                                    Three-month period      Six-month period
                                         ended June 30         ended June 30
                                       2008       2007       2008       2007

    In MTU                           14,411     15,044     26,260     15,044

    Production :

    Extracted tonnage                21,811     18,438     42,064     18,438
    Recovery (%)                       81.6       74.9       80.4       74.9
    Grade (%)                          0.79       1.14       0.81       1.14
    Production (MTU)                 14,068     15,762     27,391     15,762

      Cash cost                         152        125        144        125
      Amortization and depreciation      24         11         34         11
                                  ---------- ---------- ---------- ----------
      Total operating cost              176        136        178        136
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Three-month period ended June 30, 2008

    The Company recorded a net loss of $1M compared to a net loss of $0.5M for
the corresponding period in 2007. The Company recorded a negative gross margin
of $0.1M for the three-month period ended June 30, 2008. This loss comes from
the low grade WO3 ore extracted from the Huaura sector of the Pasto Bueno mine
which was 0.68%. Some ore from higher grade zones was also extracted to
increase the overall grade but this increased the cash cost per UTM by $17
compared to the first quarter 2008 due to the extra mining effort required.
Other items contributed to an increase of $2/MTU.

    Administrative expenses are detailed below:

                                    Three-month period      Six-month period
                                         ended June 30,        ended June 30,
                                       2008       2007       2008       2007
                                          $          $          $          $

    Peru                            358,798    261,418    613,831    561,993
    Salaries and remuneration       126,811    111,208    241,884    218,764
    Professional fees               136,822    136,806    208,918    207,025
    Investor relations              141,432     62,135    216,261    136,238
    Office expenses - Canada        -41,687     64,130     -2,304    114,721
    Travel expenses                  34,730     73,544     59,391    134,206
                                  ---------- ---------- ---------- ----------
                                    756,906    709,241  1,337,981  1,372,947
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    The increase in the administrative expenses can be explained by an
increase of $98,360 in Peru in comparison to the corresponding period in 2007.
This increase comes from the higher level of activities compared to 2007
related to environmental studies and some development projects as well as
salaries increase. The Company shares the same senior management with Dynacor
Gold Mines Inc. Common expenses are billed to Dynacor Gold Mines Inc.
according to their use. The investor relations fees have increased by over
$80,000 due to the increased activities. Travel expenses are comprised of
different trips to Peru by management. Travel expenses have decreased by
$38,000 in comparison to the corresponding period in 2007. The Canadian office
expenses are in a credit position pursuant to a reimbursement of capital
    The Company recorded a gain on foreign exchange of $17,048 (loss of
$120,154 for the corresponding period in 2007) arising from the increase in
value of the Nuevo Sol compared to the Canadian dollar. Stock based
compensation amounts to $107,510 ($381,220 for the corresponding quarter in
2007) following the issuance of options to Board's members.

    Pasto Bueno Property
    Underground Development Program

    During the past 6 months, Malaga has invested 2.7 million dollars in
underground exploration (tunnelling and drilling) and for the purchase of
capital assets for the Pasto Bueno mine and plant.
    Malaga's 10,650 meters drilling campaign in the Huaura and Huayllapon
sectors is now well underway. As of the 1st of August, approximately 73% of
the drilling program has been completed (7,752 meters) adding up to a total of
20 drill holes.
    Malaga is also pleased to be able to report that underground exploration
and development work is also progressing quickly. More than 1,070 m of access
tunnels were excavated during Q2 (789 m during Q1 2008) adding up to a total
of 1,859 m during the first six months of 2008.
    Several different sectors of the Pasto Bueno mine are being developed
simultaneously, the objective is to gain access and to prepare newly
discovered high grade mineralized zones as quickly as possible in order to
increase the mine's production. As these new zones are brought into production
the grade of ore that is extracted and milled will also increase Three zones
are being developed:


    Development work is underway extending inwards from levels 8, 10, 12 and
13 in order to prepare new production zones and bring them online as soon as
possible. These new areas will begin producing tungsten ore in the autumn of


    Development work continues in the Huayllapon sector in order to prepare
new mining zones in the Chabuca vein. These zones will be put into production
in Q4 2008.


    Excavation of a lateral access tunnel began in early 2008 continues
forward towards to reach the Santa Marta vein which was recently uncovered by
drill holes HDD8, 10, 11, 12 and 14 and which is located 450 meters west of
the Consuelo vein. This rather important underground development will continue
throughout 2008 and should be completed by the end of Q1 2009.


    Hidropesac had initially planned to have two hydroelectric generators
with a rated capacity of 600 KW/h online during the Q2 2008. All the necessary
equipment and infrastructure was installed by the end of June 2008, however
during the testing phase at the end of June a major problem occurred which led
to significant damage in the water conduit that feeds the plant. Reparations
to the conduit will take about two months and will be supervised by Emerging
Power Developers (Malaga's Swiss partner in Hidropesac). Power production is
now expected to begin towards the end of Q3 or the beginning of Q4 2008.


    Mine development work continues at Pasto Bueno in order to increase the
ore grade to above 1% WO3 and with the objective of increasing the daily
processing capacity to 350 tons by Q1 2009 (an increase of 40%). Further work
on both the plant and the mine during 2009 should enable the Company to
further increase its daily production capacity by the end of 2009. Malaga also
intends to publish a new resource estimation that is National Instrument
43-101 compliant on part of its mining concessions, as soon as possible.


    Malaga Inc. is a tungsten mining company that uses modern, efficient and
productive mining technology. The Company is committed to growth, through
increasing its tungsten concentrate production, continuing the exploration of
the Pasto Bueno property, and through strategic acquisitions. It also seeks
diverse growth opportunities such as developing the hydroelectric potential of
the Pasto Bueno property, through Hidropesac, in which the Company holds 44%,
as well as through its holding in Dynacor Gold Mines Inc., in which the
Company owns 13.3%.

For further information:

For further information: Jean Martineau, President & CEO, Malaga Inc.,
(514) 288-3224; Renmark Financial Communications: Julien Ouiment:; John Boidman:,
(514) 939-3989, Fax: (514) 939-3717,

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