UPDATE 1-Malaga suspends operations at tungsten mill in Peru

Mon Oct 22, 2012 1:01pm EDT

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Oct 22 (Reuters) - Canadian miner Malaga Inc said it has suspended operations at its tungsten mill in Peru for at least four weeks due to a power disruption, and that full production at the project would not resume until the company secures financing.

The company, which has been struggling with lower ore grade and a fall in selling prices, said the power supply to its only producing mine, Pasto Bueno, was disrupted after a hydro-electric transmission line was cut accidentally.

The company said costs are expected to rise because it is relying on diesel generators to maintain a reduced level of production at the mine while repairs are made to the line.

The mill has a capacity to process 500 tonnes of ore per day (tpd) but the mine has a capacity to produce only 350 tpd.

The company is in talks to raise funds to expand the capacity of the mine, spokeswoman Nicole Blanchard said.

She declined to say when the power outage started, how much production was being lost, or how much the company was seeking to raise. Malaga had cash and equivalents of about C$76,000 as of June 30, according to Thomson Reuters data.

The company, which is looking at both debt and equity financing, is not looking for a joint venture partner, Blanchard said.

Malaga said it was implementing various cost reduction measures at Pasto Bueno as well as at its offices in Peru and Montreal, but did not provide details. However, Blanchard said there may be job cuts.

Malaga's shares fell by a third to a life low of 5 Canadian cents on the Toronto Stock Exchange.

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