Malaga Inc. ("MLG") (TSX:MLG)(OTCQX:MLGAF) reported its financial
results today for the quarter ended September 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.
Q3-2011 Highlights
-- Net income of $2.0M for Q3-2011 compared to a net loss of $0.9M in Q3-
2010, and $4.4M for the nine-month period ended September 30, 2011,
compared to a net loss of $1.6M last year
-- Income from mining activities of $1.6M for the quarter compared to $0.4M
in Q3-2010, and $5.4M for the nine-month period ended September 30, 2011
compared to $1.0M in 2010
-- Adjusted EBITDA of $1.3M in Q3-2011 compared to $0.4M in Q3-2010 and
$4.2M for the nine-month period ended September 30, 2011 compared to
$1.0M in 2010
-- Cash flow from operations before changes in non-cash working capital
items of $1.2M for an improvement of $1.0M over Q3-2010, and $4.1M for
the nine-month period ended September 30, 2011, compared to $0.8M in
2010
-- Sales revenue up 18% to $4.6M for the quarter from $3.8M in Q3-2010, and
up 29% for the nine-month period ended September 30, 2011, to $15.2M
-- An 89% increase in the APT average reference selling price, from $240 in
Q3-2010 to $454 in Q3-2011; on November 11, 2011, the APT price was at
$445
-- The mine development program is underway, with 1,250 metres of advance
completed in Q3-2011
-- Exploration on the southern part of the property is ongoing, with a
total of 1,988 metres of diamond drilling completed in the third
quarter.
For the third quarter of 2011, Malaga generated a net income of
$2.0 million ($0.01 earnings per share), for an increase of $2.9
million compared to a net loss of $0.9 million ($0.01 net loss per
share) in the same quarter of 2010. This performance resulted from
an average reference selling price increase per MTU of $214 (89%),
from $240 in Q3-2010 to $454 in Q3-2011, and a $1.3 million gain on
the revaluation of the warrants. Adjusted net income amounted to
$0.6 million in Q3-2011 compared to a loss of $0.6 million in
Q3-2010.
Sales increased to $4.6 million during the quarter, up 18% from
$3.8 million in the third quarter of 2010. For the first nine
months, sales amounted to $15.2 million, an increase of 29%
compared to $10.8 million in the same period of 2010. Third quarter
2011 production was similar to the second quarter of 2011, reaching
13,302 MTU due to lower head grade at the mill and the intense
competition for skilled labour.
Consequently, the cash cost of production was $178 per MTU, up
from $131 per MTU for the same period a year ago, although the
average cost of production has decreased from $189 per MTU in
Q2-2011 to $178 in the current quarter, representing a 6%
improvement. With the expected increase in production for Q4-2011,
the Company believes that continued control of the average cost of
production is achievable. For the nine-month period ended September
30, 2011, production amounted to 43,868 MTU compared to 55,655 MTU
in the same period of 2010.
The Company believes that demand for tungsten will continue to
grow, as no new significant production capacity is expected outside
of China for the next three years. In addition, China has slashed
its export quotas for antimony, indium, tungsten, molybdenum and
tin by up to 5% for 2012 as it continues to protect its metal
resources. The commerce ministry said that the export quota for
tungsten and tungsten products is expected to fall to 15,700
tonnes, down 2% from 2011. Furthermore, during the third quarter,
the British Geological Survey published its 2011 risk list, citing
tungsten as one of four elements with the highest relative supply
risk index.
Pierre Monet, President of Malaga, commented that: "Despite
lower production in the quarter, Malaga continues to be profitable
and to generate a positive cash flow from operations. We are
addressing the retention of personnel with measures such as wage
increases and improvements in camp conditions as well as focussing
on underground development. As a result, monthly production has
risen since August."
Development Program
As previously announced, Malaga has undertaken an extensive
underground development program to increase the quantity of
high-grade tungsten ore sent to the mill. Through the first nine
months, 3,711 metres of development have been completed. The
Company will continue the program for the remainder of the year and
into 2012, with the objective of reaching the optimal production
capacity at the mill.
Drilling Campaign
The exploration campaign is well underway, with eight long-range
holes targeting the Loreto vein and the four manto structures to
the south of the property. This program will allow the Company to
start defining the potential of this part of the property. The
first drill results were published on October 18, 2011 and
re-issued on November 9, 2011, and additional results will be
published as assays become available. The initial results are very
positive, since the drill core (5.60 m long) reported 2.36 m in
length of 4.04% WO3. Secondary mineralization (gold/copper) has
also been detected and future assays will continue to test for a
wide range of mineralization.
Tailings Ponds
Malaga reinforced and stabilized the current tailing pond
facility, thereby extending its useful life until the second
quarter of 2012. This work was completed during the quarter. The
Company is concurrently building a new tailing pond that is
currently 75% complete and should be 100% complete by year-end. At
500 tonnes per day production, the new facility will have a useful
life of five to six years.
Q3 Key Financial Data:
For the three-month For the nine-month
periods ended September periods ended September
30 30
(in $'000) 2011 2010 2011 2010
------------------------------------------------
------------------------------------------------
Sales 4,644 3,791 15,230 10,848
Cost of sales (including
depreciation and depletion) (3,058) (3,383) (9,784) (9,864)
Depreciation and depletion (562) (717) (1,837) (2,208)
Income from mining
activities 1,586 408 5,446 984
General and administrative
expenses (853) (715) (2,998) (2,301)
Adjusted net income (loss) 632 (611) 1,907 (2,130)
Adjusted EBITDA 1,344 383 4,183 1,039
Earnings (loss) per share
(basic and diluted) $0.01 ($0.01) $0.02 ($0.01)
Cash cost of production per
MTU 178 131 163 129
Production in MTU 13,302 18,724 43,868 55,655
FINANCING
The Company has entered into an agreement whereby its customer
has agreed to make an advance payment of $800,000, repayable on or
before February 28, 2012.
In addition, on November 11, 2011, the Company agreed to terms
on a bridge financing loan in the amount of CA $1,000,000 (USD
$982,500) bearing a 12% annual rate of interest payable quarterly
and a premium of CA$ 60,000 (USD $ $59,000) payable November 30,
2012, which is contingent on EBITDA (earnings before interest,
taxes, depreciation and amortization) exceeding USD $5,400,000 for
a 12 month period beginning October 1, 2011 through September 30,
2012. The issuance of the loan is expected to close by the end of
November with a maturity date of November 30, 2012. The loan will
be secured by 1,000, 000 common shares of the Company's available
for sale investment in Dynacor.
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. As a
result, Malaga has adopted the US dollar as its functional and
reporting currency.
ABOUT MALAGA INC.
Malaga Inc. owns and operates the Pasto Bueno tungsten 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 on its property. Malaga's production capacity
represents approximately 10% of the tungsten produced outside
China. The Company plans to continue to increase production and
explore other deposits on its property to expand 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.
Contacts: Malaga Inc. Jean Martineau Chairman of the Board and
Chief Executive Officer 514 288-3224 Malaga Inc. Pierre Monet
President 514 288-3224 Sun International Communications Nicole
Blanchard Corporate Strategy and Investor Relations 450
973-6600
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