PERUVIAN SUBSIDIARY ORDERED TO PAY TAX AUTHORITY $3.5 M; LIENS PLACED ON ASSETS

 

  •  Summary: Liens have been placed on certain Malaga assets following a US$3.5 million assessment by Peru’s National Superintendance of Tax Administration. The Company has filed a petition requesting the liens be lifted, but this could remain outstanding for some time, as Peru’s judicial workers recently began a national strike. Furthermore, Global Tungsten & Powder Corp.’s (GTP) US$1.2 million advance on future sales recently became guaranteed by Malaga’s Peruvian subsidiaries.

 

  • Chances of Capital Injection Diminished: With a potential sales tax bill of $US3.5 million and ~US$2.7 million pledged to Global Tungsten & Powder Corp., we believe that the Company’s only real hope of raising capital is through the monetization of certain assets. However, we estimate the maximum value of the assets in question at under US$2 million.

 

  • Valuation and Recommendation: We are revising our recommendation on Malaga to SELL from HOLD and reducing our 12-month target price to C$0.04 from C$0.10. Based on the Company’s financial obligations, lack of cash flow, our estimate of its current cash position and the difficulties we believe it will face in raising capital, we feel that Malaga’s future does not look promising.

 

  • While we continue to believe that the Pasto Bueno project holds considerable potential, Malaga’s position as a potential acquisition target is greatly impeded by GTP’s US$2.7 million loan and advance on future sales guarantee and the US$3.5 million tax assessment.

Jennings Capital