MRO Magazine

Montreal's Malaga places tungsten process plant in care and maintenance


Industry

October 29, 2012
By PEM Magazine

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 (see news release of August 15, 2012 and management discussion and analysis of Q2-2012). 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.

The corporation is in the process of securing financing to allow it to pursue objectives related to mine development and increase of production. Term sheets for debt and equity financings have been received and are being evaluated.

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"This has been a difficult decision for all of us, as we consider that Pasto Bueno remains a property of high quality with significant resources and the potential to develop hydro-electric power on site," said Pierre Monet, president and CEO. "We intend to return to full production once we secure the necessary financing and will also review the mine development plan to improve our operational efficiency."
www.malaga.ca