Malaga and Hidropesac, a joint venture between Malaga and its Swiss partners, Emerging Power Developers and Stucky S.A., 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 CEO, 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 to obtain the permanent concession.

Malaga expects to obtain final approval early in the fourth quarter of 2012, which would allow construction to begin the following quarter. Construction is expected to take 18 to 24 months, followed by a six- month commissioning period. Malaga is one of the few publicly-traded producers of tungsten outside of China.