Pasto Bueno

Malaga Inc. announced the terms of a rights offering to existing shareholders to raise gross proceeds of up to approximately $3.43 million. Net proceeds of the offering will be approximately $3.33 million, assuming that all of the Rights are exercised. The company intends to use the proceeds of the offering towards the development of the Pasto Bueno property, including exploration and development of the Pasto Bueno mine and improvement of the mill and the balance, for general corporate purposes.

For the quarter ended, underground development work is underway in several different sectors of the mining property to in order to prepare new zones and gradually increase production. Huayllapon Development work was performed in the Huayllapon sector in order to prepare the production site in the Chabuca vein. This new sector stated production during January 2009. Huaura Development work is ongoing in levels 8, 10, 12 and 13 in order to prepare new zones and gradually increase production. Production in these sectors is expected to commence during the first quarter of 2009. Also, development work continued on the lateral access tunnel at level 10 with the goal to arrive at the Santa Marta vein which was uncovered by drill holes HDD8, 10, 11, 12 and 14 and is located 450 meters west of the Consuelo vein. This work will continue throughout the first quarter of 2009.

Underground work is underway in several different sectors of the Pasto Bueno property to prepare a new technical report and to prepare new sectors. More than 505 meters of access tunnels were excavated during Q3 adding up to a total of 2,364 meters during the nine-month period ended September 30, 2008 Huayllapon Work continues in the Huayllapon sector. The Chabuca vein has been intercepted during the third quarter and development work is underway in this sector. Brownsfield Excavation of a lateral access tunnel at level 10 began in early 2008 continues towards the Santa Marta vein which was recently uncovered by drill holes HDD8, 10, 11, 12 and 14 and which is located 450 meters west of the Consuelo vein. This work will continue throughout 2008 and Q1 2009. During this work, the Sauco vein, intersected during the drilling campaign, was intercepted and development work in ongoing in this vein.