MONTREAL, QUEBEC--(Marketwire - Aug. 15, 2011) - Malaga Inc. (News - Market indicators) today reported its financial results for the second quarter of 2011 for the quarter ended June 30, 2011. 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.

For the second quarter of 2011, Malaga generated a net income of $1.6 million ($0.01 per share), compared to $0.3 million ($0.00 per share) in the same quarter of 2010, an increase of $1.3 million. This performance resulted from an average reference selling price increase of $217 for APT from $222 in the second quarter of 2010 to $439 in Q2-2011 and a $1.1 million gain on the revaluation of the warrants.

Demand for tungsten continues to grow as no new significant production capacity is expected outside of China for the coming years. In addition, according to Bloomberg, a large number of illegal Chinese mines were shut down in early 2011 and China's Ministry of Land and Resources suspended new mine applications, namely for tungsten.

Sales increased to $5.3 million during the quarter, up 54% from $3.5 million in the second quarter of 2010. For the first six months, sales amounted to $10.6 million, an increase of 50% compared to $7.1 million in the same period of 2010. Production was less than expected at 13,073 MTU for the quarter due to the combination of lower head grade at the mill and the intense competition for skilled labour. Consequently, the cash cost of production was $189 per MTU, up from $122 per MTU for the same period a year ago, with more than 70% of the cash cost increase due to the volume reduction. The remainder of the increased cost was linked mostly to increase in mining wages to retain key Malaga personnel in the very competitive mining industry in Peru, an increase in electricity rate and general maintenance.

For the six-month period of 2011, production amounted to 33,566 MTU compared to 36,932 MTU in the same period of 2010. 

Jean Martineau, Chairman and CEO of Malaga commented:"Malaga is profitable for the third consecutive quarter. We will continue to focus on growth and controlling our costs while continuing the exploration of the mantos".

Development Program

As previously announced, Malaga is undertaking an extensive underground development program to increase the quantity of high-grade tungsten ore to the mill. To date, 2,481 meters were completed and it is expected that, due to the scarcity of qualified miners to hire for this program, approximately 4,400 meters out of the originally planned 7,300 meters will be completed by year-end. The program will continue into 2012.

Drilling Campaign

The $1.5 million exploration campaign is well underway with two long-range drill holes completed below the level corresponding to the Pelagatos River, in order to confirm the northern extension of the Loreto vein. Results should be available during the third quarter. The four manto structures to the south of the property are also currently being drilled with a planned 10 holes for a total of 4,900 m. The manto structures were discovered in 2009 and a road was recently built to reach all four structures, in particular up to the highest point at the Manto Santa, where a channel sample taken in 2010 was graded 1.17% W03 over 6.8 meters.

Hydro-electricity

Malaga is already much less dependent on electricity than other miners in the region since it owns a hydro-electricity plant that supplies about 70% of its current energy needs at a very low cost. Given the abundant water resource of the Pelagatos River that runs across the property, Malaga is planning to build a bigger hydro-electric power plant (19 to 35 MW) with its joint-venture partner in the Hidropesac entity.

The Company said a new manager was hired earlier in 2011 to work full time for Hidropesac in order to secure all necessary permits and supervise the environmental and archaeological studies required by the Peruvian authorities to obtain the permanent hydro-electrical concession. The objective is to start construction in late 2012 so that Malaga will ultimately be able to have complete autonomy in power generation, sustain its planned production growth and further decrease its production costs.

Q2 Key financial data:

Liquidity

As at June 30, 2011, there was $1.2 million in available cash. The Company sold shares of Dynacor Gold Mines during 2011 and the market value of these shares amounted to $3.2 million as of June 30, 2011 of which 1.5 million shares ($1.6 million) are given as guarantee on the long term debt.

IFRS

On January 1, 2011, International Financial Reporting Standards ("IFRS") became Canadian GAAP for publicly-accountable enterprises. MLG's interim and annual financial statements are therefore prepared in accordance with IFRS as of January 1, 2011, and comparable figures for 2010 have been restated accordingly. MLG has also therefore adopted the US dollar as its functional and reporting currency.

ABOUT MALAGA INC.

Malaga Inc. owns and operates a 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 at its Pasto Bueno property. Malaga produces 15% of the tungsten outside of China. The Company plans to increase production and 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 result, performance or achievement 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.