Malaga Reports Financial Results for Third Quarter 2011

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