Malaga to Build New Hydroelectric Plant in Peru

Malaga Inc. ("MLG")(TSX:MLG)(OTCQX:MLGAF) and Hidropesac, a joint venture between Malaga and its Swiss partners, Emerging Power Developers and Stucky S.A., are pleased to announce that they will build a new hydroelectric power plant on Malaga's Pasto Bueno property in Peru. While initial capacity is expected to be 20 MW, given the area's watershed and water flow characteristics, as well as enhanced dam retention capacity, potential capacity could subsequently be increased up to 38 MW.

"Tungsten concentrate at the Pasto Bueno mine is currently produced using a gravimetric process that's powered by a 600-kW feed from a hydroelectric plant (about 70% of the power requirements) built by Hidropesac in 2007," stated Pierre Monet, President and Chief Executive Officer of Malaga. "Given the access to the large rivers on the property, we are now planning an expansion that would enable us not only to meet our long-term power requirements, estimated at 3-4 MW, but also sell surplus power to private users or the Peruvian national power grid."

Monet noted that Malaga's goal in terms of energy has always been to ensure an adequate supply of power, control the related costs, be as environmentally friendly as possible and, provided the opportunity, maximize the value of this asset, which until now has been intangible. "The bottom line is that the new hydroelectric power plant will provide Malaga's Pasto Bueno mine with a distinct advantage."

The decision to build a new power source was based on Hidropesac's updated feasibility study on the construction of a hydroelectric power plant using the water resources of the Pelagatos and Plata rivers. Hidropesac has a temporary concession permit and is presently updating the environmental assessment and archeological artefacts study. When those studies are finished, it will then complete the generation and transmission technical specification, a feasibility study for the electromechanical equipment, engineering for the civil and electromechanical works, and engineering for the substations and transmission line in order to obtain the permanent concession.

Malaga expects to obtain final approval early in the fourth quarter of 2012, which would allow building to begin the following quarter. Construction is expected to take 18 to 24 months, followed by a six-month commissioning period.

ABOUT MALAGA INC.

Malaga Inc. owns and operates the Pasto Bueno 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 generated on its property. Malaga's production capacity represents about 10% of the tungsten available for sale outside of China, and the Company plans to increase production and is currently exploring the property to develop its reserves and resources.

HIDROPESAC - A joint venture between Malaga (49%) and its Swiss partner EPD (Emerging Power Developers, a subsidiary of Stucky S.A.) has invested over US $3 million at Pasto Buena to build and commission a hydroelectric power plant with a nominal capacity of 600 kW. The plant includes two hydroelectric generators - one 150 kW vertical and one 450 kW horizontal - couple to Pelton-type turbines, as well as a 22.9 kV/400 V transformer and a 15-km transmission line that connects Pasto Bueno to the Peruvian national power grid.

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: Pierre Monet President and Chief Executive Officer Malaga Inc. [phone] Nicole Blanchard Corporate Strategy and Investor Relations Sun International Communications [phone]