There's something really compelling about a niche player who is completely focused on one opportunity. In some cases, it can be daring (and even risky) but when fate works in their favor, it's an exciting and even profitable opportunity.

Investors will find Malaga, Inc. to be that kind of investment. Malaga, Inc. (TXS: MLG) is the world's only publicly traded tungsten producer; they currently own one of the few operating tungsten mine in the Western hemisphere. Not only that, but they have built their production in lean times and now that the markets are turning around, they are seeing some substantial avenues for growth.

We spoke with Jean Martineau, the President and CEO of Malaga, Inc. about the company, its present and future, and the reasons he thinks they are on the cusp of something exciting. Mr. Martineau brings a range of cross-industry experience to Malaga, having worked in pulp and paper and as a stockbroker. "I went into mining in 1992 and I have been with Malaga since 1996," he said. He's served as the director of Wesdome Gold Mines and became the President of Malaga, Inc. in 2007.

Malaga, Inc. has a unique position in the marketplace, Mr. Martineau explained: "Malaga is the only publicly traded tungsten producer in the world, and the only tungsten producer in the Americas." Tungsten is used in industrial products, hardened steel alloys, and military and electronic applications. In the 1980's and 1990's, China flooded the market with cheap tungsten and drove the price down. But in the first decade of the twenty-first century, China's demand for tungsten increased and they started restricting the export of tungsten (of which they produced 90% of the world's supply). The rapidly growing Asian market has continued to devour tungsten and increased the amount of the world's available tungsten it purchases.

That's where Malaga comes in, the only publicly traded tungsten producer outside of China. They operate the Pasto Bueno tungsten mine, located in on the western portion of central Peru. Mr. Martineau gave us a quick review of their sole property: "The mine was discovered in 1910, it went into commercial production in 1941, and continued regular production until 1982. It reached 1,000 tons per day in the 1970's. However, the property was privately owned and went bankrupt in 2002. We acquired it in 2005 and brought it to production in 2007."

At first, that sounds like the mine could be played out with that history of production but Mr. Martineau disagreed: "They never explored the property," he said. "They extracted more than 6 million tons from 5 veins. We did a surface exploration and found 62 veins on the property. Then we began drilling… and today we have 78 veins of which 25 are major structures that are between 1 and 15 meters wide. There is a huge potential to explore."

This is an exciting project but it hasn't been without its challenges. The biggest issue, Mr. Martineau pointed out, was the price of tungsten. Although a popular metal, the price was prohibitively low for production to progress at the speed that Malaga would have liked. "When we started the production in 2007, the tungsten price was $250 and then during the financial crisis it went down by 36%. We had to finance so we could double production to build an expansion mill during the financial crisis." Fortunately, for Mr. Martineau and Malaga's investors, the financial crisis didn't last.

"We had a hard time last year but now we are going to be producing 500 tons a day this year. And, the price of tungsten is coming back up. So now the situation is looking very, very good in the coming months. In fact, we had our first quarterly report for this year and we are cash flow positive and we expect to generate our first profit by the end of the year."

Their success is helped along by their client – their only client – who purchases all of their production. "Our only client is Global Tungsten Products (GTP). The relationship is very good and we have a 5 year contract with them to buy everything we produce based on the  APT market price."

So, why should investors get excited about investing in Malaga? Mr. Martineau believes there are a few reasons but he gave us his top three: "First, there is huge potential. We have 78 veins and 25 are major structures… and six million tons were extracted from just 5 veins."

"Secondly," he adds, "the world tungsten market: 90% of tungsten is produced in China and they control the market. And, through 2014, there is no new, significant tungsten production in the world. The market will be very tight and we expect a higher price in coming years."

The third one is increasing profitability. Against the rising price of tungsten, Malaga is driving down its production costs. Mr. Martineau explained: "In 2008, our production cash costs were $144 per MTU. In 2009 it went down to $138 per MTU. And this year we're forecasting it to be $105 per MTU in the last quarter". This can be attributed to their expanding production which drives down the per MTU price.

We asked Mr. Martineau about what the next steps were for Malaga. He said he has plenty to do. "We're not thinking of acquisitions in the short term because we're just getting profitable. So first we want to get to 500 tons a day and generate a good cash flow. We also have a lot to do to expand the resource and then to expand the production in the coming years. We're going to drill all of the veins and in the coming 12 to 18 months we should have many exploration results." After that will come some acquisitions and a few deal opportunities have already come their way.

This is an interesting "comeback" story of a company that has some interesting potential. "We're in a nice niche right now," Mr. Martineau said, "because of the world's [tungsten] situation." This is an exciting opportunity for investors who are attracted to the niche play and the rewards it could provide if the tungsten market continues to grow.

References

www.malaga.ca

2000, McGill College

Suite 510

Montreal (Quebec), CANADA

H3A 3H3

Phone : 514.288.3224

Investor relations :

Dale Nejmeldeen

Email : nejmeldeen@malaga.ca

Phone : 778 574 2806

               514.288.3224