Malaga Inc. 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. 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 Montreal and its office in Lima, Peru.