Malaga Inc MLGAF

RE: HIGHLIGHTS

[Nick777]

Management Discussion and Analysis Malaga Inc.

March 31, 2011
- 3 -
Q1 2011 Highlights

· Net income of
.8M compared to a loss of $1.0M in Q1-2010
· Income from mining activities of $1.7M compared to
.2M in Q1-2010
· EBITDA of $1.3M (compared to
.0M in Q1-2010).
· Cash flow from operations before changes in non-cash working capital items of $1.4M an
improvement of
.9M over Q1-2010.

· Sales revenue for the quarter $5.3M compared to $3.6M in Q1-2010, an increase of 46%.
· Sales volume achieved in Q1-2011 was 18,090 MTU’s (18,108 MTU’s in Q1-2010).
· APT average reference selling price increase from $201 in Q1-2010 to $360 in Q1-2011, an
increase of 79%. On June 14, 2011 the APT price was at $460.

· An improvement in average cash cost of production(2) of $7 per MTU ($129 compared to $136
in Q1-2010).

· The mine development program is underway and 1,172 meters of advancements were
completed in Q1-2011.

Status of 2011 Objectives

Accelerate the development and exploration of the mine in order to sustain the increased production
output and to increase the reserves as well as all mineral resources.
In the current year, the Company is planning an extensive development and exploration program in the
amount of $3 to $4 million whereby 7,300 meters of underground advancements is forecasted. This
program has commenced in Q1-2011 and 1,172 meters of underground development work was
completed. In addition, the Company has announced a $1.5M exploration program. The drilling
campaign began in early May and Malaga intends to drill 12 short and long range holes adding up to a
total of 6,300 meters. The two main objectives are: 1) to explore the deeper extensions of the Loreto
vein; and 2) to explore in depth for the first time the four Manto structures in the southern part of the
property.

Increase plant’s production capacity to 600 tpd by the end of 2011 and produce 80,000 MTU in 2011
The Company has produced 17,493 MTU’s in the current quarter. The plant has a production capacity
of 500 tpd but the mine has been the bottleneck producing about 400 tpd. An accelerated
development program has been undertaken at the mine.
Generate net income for the entire 2011 fiscal year

The Company generated a net income of
.8M in Q1-2011 and it believes that it will continue to be
profitable in each of the next three quarters.

Reduce average cash cost of production (2) to US$115 per MTU
Average cash cost of production was $129 per MTU in Q1-2011 compared to $137 in 2010. The
Company believes that by increasing its production capacity, improving its recovery rate by
implementing certain process changes, the average cash cost of production(2) should be reduced to
approximately US$115 by the end of the year.