New Gold sells 68,627 ounces of gold in Q2
Ticker Symbol: C:NGD

New Gold sells 68,627 ounces of gold in Q2

New Gold Inc (C:NGD)
Shares Issued 355,747,033
Last Close 7/16/2009 $3.08
Friday July 17 2009 - News Release

Ms. Melanie Hennessey reports

NEW GOLD ANNOUNCES 2009 SECOND QUARTER PRODUCTION AND CASH COST RESULTS

New Gold Inc. has provided 2009 second quarter combined gold sales of 68,627 ounces at a total cash cost of $499 per ounce, net of byproduct sales. The production and total cash cost information provided are approximate figures and may differ slightly from the second quarter earnings and include results for the period prior to the close of the business combination with Western Goldfields Inc. on June 1, 2009.

Second quarter highlights:

• Combined gold sales of 68,627 ounces at a total cash cost of $499 per ounce sold;

• Combined gold production of 72,677 ounces;

• Closed business combination with Western Goldfields on June 1, 2009.

All figures are in United States dollars unless otherwise stated.

The Cerro San Pedro and Peak mines performed as expected during the quarter and for the six months ended June 30, 2009. The Mesquite mine has underperformed which is largely due to equipment availability issues, fewer ounces of gold than expected in an area of the Rainbow pit and increased consumption of cyanide and lime. The first two issues are in hand, while the increased reagent consumption is necessary to achieve optimum recovery. An additional factor in the increased total cash cost per gold ounce sold at Mesquite is due to a one-time charge in May to convert the haulage fleet from bias ply tires to radial tires. Mesquite will experience the operational and cost benefits of the radial tires for the remainder of 2009 and going forward. In order to catch up on waste stripping and get the mine plan back on schedule, a mining contractor has been temporarily retained to augment the Mesquite mining fleet.

Robert Gallagher, president and chief executive officer, said: "With continued strong performance at Cerro San Pedro and Peak, we are very pleased to see our production increase and cash cost decrease compared to the second quarter of 2008. We continue to maintain our focus on operations, including the current integration of Mesquite, where we have completed a full review and are taking the necessary steps to best position New Gold to achieve its strategic goals."

2009 forecast update

For the combined company, previously announced 2009 guidance for gold production of 330,000 to 360,000 ounces at a total cash cost per ounce of gold sold, net of byproduct sales, of $490 to $510, remains unchanged. For the period of New Gold ownership of Mesquite, the 2009 guidance of the combined company represents gold production of 270,000 to 300,000 ounces at a total cash cost per ounce of gold sold, net of byproduct sales, of $470 to $490.

Operations overview

Mesquite mine

Gold production for the second quarter at Mesquite was 26,085 ounces compared with 28,524 ounces in the second quarter 2008. Gold production was lower in the second quarter 2009 mainly due to equipment availability, fewer ounces of gold than expected in an area of the Rainbow pit, and lower grades in comparison with the same quarter the prior year. Gold grades were well above the life of mine average in the second quarter 2008 resulting in the higher production, whereas second quarter 2009 gold grade is in-line with the life of mine plan. For the period of New Gold ownership, from June 1 to 30, 2009, gold production was 9,041 ounces. For the six months ending June 30, 2009, gold production was 59,745 ounces compared with 37,670 ounces produced in the same period in 2008, during the initial ramp up period. Total cash cost per ounce of gold sold for the second quarter of 2009 was $647 compared with $548 in the second quarter of 2008. For the period of New Gold ownership, total cash cost per gold ounce sold was $708 in June, 2009. Total cash cost increase in the second quarter is mainly attributable to higher operating costs due to an increase in total tonnes moved of 13.9 million versus 12.5 million, and lower production. Total cash cost per ounce of gold sold for the six months ended June 30, 2009, was $607 compared with $667 in the same period last year. The decrease in cash cost year-over-year is attributable to the production start up phase at Mesquite in the first half of 2008. Gold production and total cash cost guidance in 2009 of 140,000 to 150,000 ounces at a total cash cost per ounce of gold sold between $530 and $540 remains unchanged.

Cerro San Pedro mine

Gold production for the second quarter at Cerro San Pedro was 24,210 ounces compared with 20,653 ounces produced in the second quarter of 2008. The increase in production was due to higher tonnes placed on the pad and increased recovery rate, partially offset by lower feed grade. For the six months ending June 30, 2009, gold production was 44,793 ounces compared with 38,943 ounces produced in the same period in 2008. Silver production for the second quarter was 414,038 ounces compared with 283,749 ounces produced in the second quarter of 2008. For the six months ending June 30, 2009, silver production was 841,477 ounces compared with 512,372 ounces produced in the same period in 2008. The increase in silver production year over year is attributed to higher silver grades mined during the first half of 2009. Total cash cost per ounce of gold sold, net of byproduct sales, for the second quarter was $429 compared with $375 in the second quarter of 2008. Total cash cost per ounce of gold sold, net of byproduct sales, for the six months ended June 30, 2009 was $483 compared with $426 in the same period last year. The increase in cash cost is due to lower silver prices and higher consumables costs, which were partly offset by higher silver production and the depreciation in the Mexican Peso versus the U.S. dollar. Second quarter gold production and cash cost are consistent with the 2009 guidance of 90,000 to 100,000 ounces of gold and 1.1 million to 1.3 million ounces of silver at a total cash cost per ounce of gold sold, net of byproduct sales, between $550 and $570. The Cerro San Pedro sulphide drilling program continued during the second quarter with the completion of six holes totalling 3,576 metres. The drill program is testing the resource potential of a zone of sulphide mineralization that extends from immediately beneath the current open pit mining operation to an area of historic underground mining located approximately 500 metres to the southwest. Since the start of drilling during the fourth quarter of 2008, 12 holes totalling 7,216 meters have been completed. Based on the encouraging results returned from these 12 twelve holes, a second phase of drilling has been initiated to extend the drilling coverage into the area of the current open pit. The second phase of drilling will involve the completion of an additional 15 holes totalling approximately 10,000 metres as well as preliminary metallurgical test work and preparation of an updated mineral resource estimate by year-end.

Peak mines

Gold production for the second quarter at Peak Mines was 22,382 ounces compared with 21,114 ounces produced in the second quarter of 2008. The increase in gold production was due to higher tonnes milled and higher recovery, partially offset by lower grade. For the six months ending June 30, 2009, gold production was 43,011 ounces compared with 46,213 ounces produced in the same period in 2008. Gold production in the first half of 2009 was lower due to a reduction in grade as mining sequenced from lower gold grade to higher copper grade ore bodies. Copper production for the second quarter was 4.27 million pounds compared with 1.24 million pounds produced in the second quarter 2008. For the six months ending June 30, 2009, copper production was 8.08 million pounds compared with 3.41 million pounds produced in the same period in 2008. The significant increase in copper production year over year is attributed to the transition into the Chesney ore body which contains high copper grades.Total cash cost per ounce of gold sold, net of byproduct sales, for the second quarter was $364 compared with $472 in the second quarter of 2008. Total cash cost per ounce of gold sold, net of byproduct sales, for the six months ended June 30, 2009 was $349 compared with $352 in the same period last year. The decrease in cash cost is primarily due to higher copper revenues, and a favourable Australian dollar exchange rate, which was partially offset by lower gold ounces sold due to increased inventory attributable to the timing of concentrate shipments.Second quarter gold production and cash cost are consistent with the 2009 guidance of 90,000 to 100,000 ounces of gold and 13 million to 15 million pounds of copper at a total cash cost per ounce of gold sold, net of byproduct sales, between $370 and $390.

New Afton Project

New Afton is New Gold's primary development project expected to commence production in the second half of 2012. The project will be an underground block cave mine and concentrator, which will produce an annual estimated average of 85,000 ounces of gold, and 75 million pounds of copper over a 12 year mine life.During the second quarter of 2009, the New Afton underground development crews advanced development by 424 metres compared with 195 metres advanced during the first quarter of 2009. An innovative fibrecrete spraying technique was used to fully line one of the vent raises with shotcrete, which completed the support lining for all three ventilation boreholes excavated to date.Planned surface construction was completed in the second quarter as per the schedule and is expected to resume in early 2011 once the underground development has reached the bottom of the ore body. The mill building was structurally completed and the grinding mill shells were set on cradles during the quarter. Construction activities were completed as planned and contractors have demobilized. Engineering reached 92% completion and will remain at this level until surface construction resumes in 2011.

Second Quarter Production and Cash Cost Overview

Second quarter and year to date results for 2009 are presented in the table below, for the period of ownership for the Mesquite and Cerro San Pedro mines, following the business combinations with Western Goldfields on June 1, 2009, and Metallica Resources Inc. and Peak Gold Ltd. on June 30, 2008, respectively.

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                                 Q2-2009     Q2-2008    YTD 2009    YTD 2008
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    Gold Production oz
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      Mesquite                     9,041           -       9,041           -
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      Cerro San Pedro             24,210           -      44,793           -
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      Peak Mines                  22,382      21,114      43,011      46,213
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      Amapari(3)                       -      20,938      13,726      39,139
    -------------------------------------------------------------------------
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      Total Gold Production oz    55,633      42,052     110,571      85,352
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      Copper m lbs (Peak)           4.27        1.24        8.08        3.41
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      Silver oz (Cerro San
       Pedro)                    414,038           -     841,477           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gold sales oz                 52,890      40,540     108,287      92,240
    -------------------------------------------------------------------------
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    Total cash cost/oz              $468        $742        $491        $566
    -------------------------------------------------------------------------

    Second quarter and year to date results for 2009 are presented in the
table below on a combined basis, which include results for the period prior to
the business combinations with Western Goldfields on June 1st, 2009 and with
Metallica Resources and Peak Gold Ltd on June 30, 2008.

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                                 Q2-2009     Q2-2008    YTD 2009    YTD 2008
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    Gold Production oz
    -------------------------------------------------------------------------
      Mesquite                    26,085      28,524      59,745      37,670
    -------------------------------------------------------------------------
      Cerro San Pedro             24,210      20,653      44,793      38,943
    -------------------------------------------------------------------------
      Peak Mines                  22,382      21,114      43,011      46,213
    -------------------------------------------------------------------------
      Amapari(3)                       -      20,938      13,726      39,139
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total Gold Production oz    72,677      91,229     161,275     161,965
    -------------------------------------------------------------------------
      Copper m lbs (Peak)           4.27        1.24        8.08        3.41
    -------------------------------------------------------------------------
      Silver oz (Cerro San
       Pedro)                    414,038     283,749     841,477     512,372
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gold sales oz                 68,627      85,490     156,739     163,072
    -------------------------------------------------------------------------
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    Total cash cost/oz              $499        $595        $519        $553
    -------------------------------------------------------------------------

Conference Call-in Details

The second quarter financial results will be issued before market open on Thursday, August 6, 2009. New Gold will hold a conference call to discuss these results at 10:00am Eastern on August 6th. Anyone may join the call by dialling toll free 1-888-789-9572 or +1-416-695-7806 to access the call from outside Canada or the U.S. Passcode 4424442. You can listen to a recorded playback of the call after the event until September 18, 2009 by dialling 1-800-408-3053 or +1-416-695-5800 for calls outside Canada and the U.S. Passcode # 7505820.

� 2009 Canjex Publishing Ltd.