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New Gold Announces 2011 Third Quarter Results with 105% Increase in Net Cash Generated from Operations to $71 million

November 4, 2011

(All figures are in US dollars unless otherwise indicated)

VANCOUVER, Nov. 4, 2011 /PRNewswire/ – New Gold Inc. (“New Gold”)
(TSX:NGD)(NYSE AMEX:NGD) today announces financial and operational
results for the third quarter of 2011. The company finished the third
quarter with gold sales of 93,028 ounces at a total cash cost((1)) per ounce sold, net of by-product sales, of $528 per ounce. The
combination of increased gold sales and the continued strength of the
gold price led to another quarter of strong financial results, despite
certain temporary operational challenges resulting in higher total cash
cost((1)). During the quarter, the company’s earnings from mine operations
increased by 61% to $76 million, resulting in net earnings of $41
million, or $0.09 per share. Net cash generated from operations
increased by 105% to $71 million when compared to the third quarter of
2010.

New Gold Third Quarter Highlights

        --  Quarterly gold sales increased to 93,028 ounces from 89,692
            ounces in the same period in 2010
        --  Net cash generated from operations increased by 105% to $71
            million
        --  Underground mine production commenced at New Afton with first
            drawbell blasts successfully initiating the caving process
        --  $433 million of cash at September 30, 2011
        --  Updated NI 43-101 compliant mineral resource estimate for the
            Blackwater Project (100% basis):
      o Indicated gold resource: 165 million tonnes at an average grade of
        1.01 g/t containing 5.4 million ounces of gold
      o Inferred gold resource: 39 million tonnes at an average grade of
        0.94 g/t containing 1.2 million ounces of gold

“The third quarter saw New Gold continue to build on its momentum,
particularly through the start of underground mining at New Afton and
the significant growth in gold resources at Blackwater,” stated Randall
Oliphant, Executive Chairman. “While our quarterly cash costs were
impacted by certain operational challenges, the performance of our
mines in the first nine months of the year has allowed us to maintain a
very strong financial footing. It is from this solid foundation that we
advance our three exciting projects which provide our company with an
even more promising future.”

2011 Third Quarter Operations Overview


          New Gold 2011 Third Quarter Consolidated - Summary Operational
                                     Results 

                                Three months ended       Nine months ended

                                     September 30,           September 30,

                                2011          2010      2011          2010

    Gold                                                                  

    Sales                                     89.7                   252.1
    (thousand
    ounces)                     93.0                   292.3

    Production                                91.3                   258.5
    (thousand
    ounces)                     90.4                   286.5

    Average                                 $1,181                  $1,137
    realized
    price ($ per
    ounce)                    $1,570                  $1,430

    Silver                                                                

    Sales                                    748.7                 1,447.6
    (thousand
    ounces)                    379.6                 1,567.8

    Production                               733.5                 1,487.2
    (thousand
    ounces)                    380.6                 1,536.3

    Average                                 $19.25                  $18.66
    realized
    price ($ per
    ounce)                    $37.71                  $36.25

    Copper                                                                

    Sales                                      2.3                     9.3
    (million
    pounds)                      4.9                    12.4

    Production                                 3.1                    11.1
    (million
    pounds)                      2.6                     9.4

    Average realized price ($  $3.39                   $3.84         $3.28
    per pound)                               $3.33

    Total cash cost(1)- net                                           $456
    of by-productsales ($ per   $528                    $409
    ounce)                                    $422

    Average realized margin   $1,042                  $1,021          $681
    ($ per ounce)                             $759

 

The company’s portfolio of three operating mines delivered another
strong quarter of gold production and sales, however, total cash cost((1)) per ounce sold, net of by-product sales, increased when compared to the
prior year quarter. While the reasons for the total cash cost((1)) increases at the individual operations are discussed further in the
mine-by-mine results below, the primary driver was the increase in
total cash cost((1)) at the Peak Mines. Peak’s costs were negatively impacted by a
combination of higher labour and foreign exchange rates and lower mill
recoveries, particularly for copper. Further, as Peak’s concentrate
inventory was sold at the end of September, the realized copper price
was below the prevailing average copper price during the third quarter
of 2011 thus resulting in a lower copper by-product revenue.

During the third quarter, each of New Gold’s three large development
projects continued to advance. New Afton, the company’s most immediate
development project, is now just eight months from production. The
third quarter marked the official beginning of underground mine
production at New Afton as caving was initiated through the blasting of
the first drawbells. With both surface construction and underground
development progressing well, New Afton remains on track for its
targeted mid-2012 production start. At El Morro, the company’s 70%
partner Goldcorp Inc. (“Goldcorp”), continued to oversee the update of
the 2008 feasibility study where the technical work on the update was
completed during the third quarter and is now under Goldcorp
management’s review. The company’s newest project, Blackwater,
progressed significantly during the quarter as highlighted by the
company’s September 19, 2011 announcement regarding the project’s
updated mineral resource estimate. On a 100% basis, the updated
resource, which included holes drilled through the end of July 2011,
contained 5.4 million ounces of indicated gold mineral resources and an
additional 1.2 million ounces of inferred gold mineral resources.
Further, New Gold has continued to upgrade the mine camp at Blackwater
to facilitate the addition of more drills and has held multiple
positive meetings with the local First Nations, communities,
governments and other regulatory bodies. Subsequent to the end of the
third quarter, on October 17(th), the company announced offers to acquire both Silver Quest Resources
Ltd. (“Silver Quest”) and Geo Minerals Ltd. (“Geo”). Upon closing,
these acquisitions would both consolidate New Gold’s ownership of 100%
of the Blackwater Project and add to New Gold’s already significant
landholdings in the area surrounding the current Blackwater mineral
resource.

“The third quarter saw our operating teams deliver another strong
quarter of gold production and while our costs increased, I am pleased
with how the teams worked proactively to minimize the overall impact on
our results,” stated Robert Gallagher, President and Chief Executive
Officer. “While the cash cost increase at Peak during the quarter was
compounded due to the timing of the concentrate sale, the cost
pressures and recovery challenges at the mine remain a core focus for
us as we move into the fourth quarter and into 2012.”

2011 Third Quarter Consolidated Financial Results


       New Gold 2011 Third Quarter Consolidated- Summary Financial Results 

                                   Three months ended     Nine months ended

    Figures in US$ millions,
    expect per share amounts            September 30,         September 30,

                                   2011          2010    2011          2010

    Revenue                       175.5         127.1   518.3         341.1

    Average realized gold
    price ($ per ounce)           1,570         1,181   1,430         1,137

    Average margin per ounce ($   1,042
    per ounce)                                    759   1,021           681

    Earnings from mine
    operations                     76.1          47.1   240.0         120.4

    Net earnings from continuing   40.7
    operations                                   44.8   144.0          31.8

    Net earnings per share from    0.09
    continuing operations                        0.11    0.34          0.08

    Adjusted net earnings from     49.5
    continuing operations                        29.3   145.7          58.7

    Adjusted net earnings
    per share                      0.11          0.07    0.34          0.15

    Pre-tax cash generated from    93.0
    operations                                   49.3   240.8         125.9

    Net cash generated from        70.7
    operations                                   34.5   163.6          97.8

 

The combination of increased gold sales and higher average realized gold
prices resulted in New Gold reporting increases in key financial
categories during the quarter. Importantly, despite the increase in
total cash cost((1)) during the quarter, the company was able to provide shareholders with
an average margin of over $1,000 per ounce for the second straight
quarter. Increased gold sales at higher average realized gold prices
led to a 38% increase in revenue during the third quarter of 2011,
which, in turn, resulted in a 61% increase in earnings from mine
operations to $76 million.

Net earnings from continuing operations in the third quarter of 2011
were $41 million, or $0.09 per share. Adjusted net earnings from
continuing operations((2)) were $49 million, or $0.11 per share, during the quarter compared to
$29 million, or $0.07 per share, in the third quarter of 2010. Net
earnings has been adjusted and tax affected for the group of costs in
“Other gains (losses)” on the condensed consolidated income statement.
The most significant adjustment is the fair value change of the
company’s share purchase warrants and convertible debentures in the
third quarter of 2011 which was a pre-tax loss of $35 million, relative
to a pre-tax loss of $10 million in the same period of the prior year.
See the notes at the end of the release for a reconciliation of
Adjusted net earnings.

Net cash generated from operations increased by 105% to $71 million when
compared to the prior year quarter. Cash flow during the quarter
benefitted from strong earnings and New Gold’s ability to reduce
working capital.

Mesquite Mine Increases Production and Earnings from Mine Operations


                                                   Mesquite

                                   Three months ended     Nine months ended

                                        September 30,         September 30,

                                   2011          2010    2011          2010

    Gold                                                                   

    Sales (thousand
    ounces)                        32.5          30.9   117.5         119.2

    Production
    (thousand ounces)              31.8          30.2   114.4         113.0

    Average realized
    prices                                                                 

    Gold ($ per ounce)            1,311         1,079   1,259         1,067

    Total cash cost(1)
    ($ per ounce)                   732           670     628           600

    Earnings from mine operations  13.7                  57.7
    ($ millions)                                  7.5                  34.3

 

Gold sales and production at Mesquite increased by 5% in the third
quarter of 2011 and were relatively consistent in the year-to-date
period, when compared to the same periods of the prior year. During the
quarter and through 2011, the operating team has remained focused on
cost control despite year-over-year input cost pressures, most notably
from increased diesel prices. By working to offset some of the impact
of input cost pressures on total cash cost((1)) and through the increase in the average realized gold price, Mesquite
increased earnings from mine operations by 83% to $14 million during
the third quarter of 2011. Similarly, in the first nine months of 2011,
earnings from mine operations increased by 68% to $58 million when
compared to the same period of the prior year.

The increases in gold production and sales during the third quarter were
a result of greater ore tonnes being placed on the leach pad at grades
and recoveries consistent with those realized in the third quarter of
2010. Year-to-date gold production and sales were consistent with the
prior year as the benefit of mining at grades closer to reserve grade
offset the impact of fewer ore tonnes being placed on the pad. The
change in total cash cost((1)) was primarily driven by increased inputs costs, such as diesel fuel,
where prices have been approximately 40% higher than in both the third
quarter and year-to-date periods of 2010. The higher diesel prices were
partially offset by a lower strip ratio resulting in lower waste tonnes
moved during the third quarter and increased operator efficiencies.

Based on Mesquite’s strong performance through the first nine months of
2011 and the forecast for the fourth quarter, it is anticipated that
Mesquite should achieve the upper end of its 2011 gold production
guidance of 145,000 to 155,000 ounces. In addition, depending on the
movements in the diesel price in the final months of the year, Mesquite
should be lower than the total cash cost((1)) guidance range of $660 to $680 per ounce of gold sold.

Cerro San Pedro Mine Continues On Path to Best Year in its History


                                             Cerro San Pedro

                              Three months ended       Nine months ended

                                   September 30,           September 30,

                              2011          2010      2011          2010

    Gold                                                                

    Sales
    (thousand
    ounces)                   34.4          38.1     109.7          76.0

    Production
    (thousand
    ounces)                   34.3          37.5     109.6          79.8

    Silver                                                              

    Sales
    (thousand
    ounces)                  379.6         748.7   1,567.8       1,447.6

    Production
    (thousand
    ounces)                  380.6         733.5   1,536.3       1,487.2

    Average
    realized
    prices                                                              

    Gold ($ per
    ounce)                   1,693         1,234     1,531         1,205

    Silver ($
    per ounce)               37.71         19.25     36.25         18.66

    Total cash cost(1)- net
    of by-product sales ($
    per ounce)                 193           151        73           277

    Earnings from mine
    operations ($ millions)   45.1          29.5     135.2          47.4

 

Cerro San Pedro had another strong quarter, increasing earnings from
mine operations by 53% to $45 million, despite lower gold and silver
production and sales when compared to the third quarter of 2010. For
the nine months ended September 30, 2011, the combination of a 44%
increase in gold sales, higher realized gold prices and a $204 per
ounce decrease in total cash cost((1)) per ounce of gold sold, net of by-product sales, led to a 185% increase
in earnings from mine operations to $135 million when compared to the
same period of the prior year.

Gold and silver production and sales during the third quarter of 2011
were lower than the prior year period due to a combination of lower ore
grades and leach pad recoveries. The lower grades were a result of mine
sequencing while the lower recoveries were driven by reduced cyanide
supply. Cerro San Pedro’s cyanide supplier experienced production
issues at its plant during the quarter, which resulted in Cerro San
Pedro and various other mining operations receiving only a partial
allotment of their usual cyanide supply. The team successfully
minimized the impact of the cyanide shortage by placing more ore tonnes
on the pad thus leading Cerro San Pedro to another strong quarter. The
cyanide supply issues have now been resolved and Cerro San Pedro is
receiving its full cyanide allotment. Gold and silver production and
sales increased in the year-to-date period due to a 57% increase in ore
tonnes placed on the leach pad. The increase in total cash cost((1)) during the third quarter was primarily due to lower silver by-product
revenue. The decrease in total cash cost((1)) in the year-to-date period was largely a result of higher silver
by-product revenues driven by both higher silver sales and prices.

Cerro San Pedro remains on track to achieve the best year in its history
with year-to-date earnings from mine operations of $135 million already
well exceeding the 2010 full year total, despite the cyanide supply
issues during the third quarter. Cerro San Pedro is forecast to meet
its 2011 gold production guidance of 135,000 to 145,000 ounces and also
remains well positioned as the company’s lowest cost producer. As a
result of lower third quarter silver sales volumes and the time
required for the leach pad to reach historical silver recoveries, the
company anticipates Cerro San Pedro’s 2011 total cash cost((1)) per ounce of gold sold, net of by-product sales, could be slightly
above the guidance range of $90 to $110 per ounce.

Peak Mines’ Costs Negatively Impacted by Stronger Australian Dollar and
Operating Cost Inflation


                                                 Peak Mines

                                  Three months ended     Nine months ended

                                       September 30,         September 30,

                                  2011          2010    2011          2010

    Gold                                                                  

    Sales
    (thousand
    ounces)                       26.2          20.7    65.1          56.9

    Production
    (thousand
    ounces)                       24.4          23.7    62.5          65.6

    Copper                                                                

    Sales
    (million
    pounds)                        4.9           2.3    12.4           9.3

    Production
    (million
    pounds)                        2.6           3.1     9.4          11.1

    Average
    realized
    prices                                                                

    Gold ($ per
    ounce)                       1,731         1,234   1,568         1,194

    Copper ($ per
    pound)                        3.39          3.33    3.84          3.28

    Total cash cost(1)- net of
    by-product sales ($ per
    ounce)                         715           549     580           393

    Earnings from mine
    operations ($ millions)       17.1          10.1    47.2          38.7

Gold and copper sales at Peak Mines increased in the third quarter of
2011 and year-to-date periods as Peak was able to sell down the
majority of its concentrate inventory during the quarter. As a result
of the increases in gold sales and average realized gold prices, and
despite the increase in total cash cost((1)), Peak Mines increased earnings from mine operations by 69% and 22% in
the third quarter of 2011 and year-to-date, respectively, when compared
to the same periods of the prior year.

While gold production during the third quarter of 2011 and year-to-date
periods remained similar with that of the prior year periods, copper
production declined due to lower copper grades and recoveries.
Recoveries were negatively impacted by the slower than anticipated
commissioning of a new floatation plant during the quarter. The
start-up issues associated with the floatation plant are being resolved
with recoveries increasing towards historic levels.

The increase in total cash cost((1)) during the third quarter of 2011 and year-to-date periods resulted
primarily from a combination of higher labour and foreign exchange
rates and the lower mill recoveries. The appreciation of the Australian
dollar and inflationary cost pressures each contributed approximately
$200 per ounce to the increase in total cash cost((1)) when comparing the third quarter of 2011 with the prior year quarter.
These cost increases were partially offset by higher by-product
revenues from the increased copper sales volumes reducing total cash
cost((1)) by approximately $225 per ounce when compared to the prior year
quarter. The increase in total cash cost((1)) in the year-to-date period is for similar reasons to those noted for
the third quarter. While labour and exchange rate pressures continue to
be a factor in Australia, they are largely a result of Australia being
a desired place to operate and a politically secure country to invest
in mining.

In September, the company was able to sell down its concentrate
inventory as additional rail cars became available for New Gold to ship
greater than its usual allotment of concentrate to the port. While the
inventory reduction was positive as it reduced New Gold’s working
capital and increased the company’s cash flow, the timing of the
inventory sale at the end of the quarter also contributed to the
increased costs. The combination of lower copper recoveries and
production in the quarter and the fact the concentrate sale occurred in
late September when the copper price declined well below its quarterly
and year-to-date average levels, meant the aforementioned increases in
costs did not have as significant a by-product offset as anticipated.
Had Peak realized the quarterly average copper price of $4.08 per
pound, total cash cost((1)) would have been lower by approximately $125 per ounce and more in line
with the prior year quarter.

Based on Peak’s performance through the first nine months of 2011 and
the forecast for the fourth quarter, it is anticipated that the Peak
Mines should achieve the lower end of the 2011 gold production guidance
of 90,000 to 100,000 ounces. As both the year-to-date realized copper
price and the current copper price are below the forecast assumption of
$4.00 per pound and the Australian dollar remains above the assumed
parity level, it is anticipated that Peak’s 2011 total cash cost((1)) per ounce of gold sold, net of by-product sales, will remain above the
guidance range of $410 to $430 per ounce. The year-to-date total cash
cost((1)) of $580 per ounce is representative of Peak’s current 2011 full year
cost forecast.

New Afton Officially Commences Underground Operations

New Gold’s most immediate development project continued on schedule
during the third quarter of 2011 with multiple areas of development and
construction being advanced or completed. Both the underground
development work and surface construction activities continue on
schedule for the targeted mid-2012 production start. New Afton will be
an underground mine and concentrator which is expected to produce an
annual average of 85,000 ounces of gold and 75 million pounds of copper
at low operating costs.

The third quarter marked the commencement of underground mine production
at New Afton as the first drawbell was blasted on September 9(th), with the second and third drawbells being blasted on October 2(nd) and 21(st), respectively. The New Afton team is pleased with these initial blasts
as the drawbell structure, related rock behaviour and the ore flow have
been consistent with expectations. The process of removing ore from the
first drawbell commenced during the quarter and with additional
drawbell blasts scheduled in the fourth quarter, the surface stockpile
should continue to grow consistently through the mid-2012 production
start. It is anticipated that there will be approximately three months
of ore stockpiled on surface by start-up.

New Afton Third Quarter Underground Highlights

        --  First drawbell blasted on September 9th
      o Removed ~3,500 tonnes from drawbell opening by the end of the
        quarter
        --  Second and third drawbells blasted in October with fourth
            drawbell in progress
        --  ~139,000 tonnes of ore moved to surface stockpile as at
            September 30, 2011
        --  Continued blasting/development of undercut and extraction
            levels
        --  ~2,210 metres of underground advance completed
        --  Completed raise boring of two ore passes and one extraction
            level ventilation raise
        --  Underground development crusher assembled - concrete foundation
            85% completed

New Afton Third Quarter Surface Construction Highlights

        --  Erection of interior steel in mill building over 75% complete
        --  Final grading for pipes and surface road in tailings corridor
            underway
        --  Earthworks for tailings storage facility over 80% complete
        --  Overhead electrical lines installed on site

In the third quarter of 2011, project spending at New Afton was $66
million, excluding capitalized interest. On a year-to-date basis,
project spending has been $182 million, excluding capitalized interest.
Capitalized interest was $6 million and $19 million during the third
quarter and year-to-date periods, respectively.

In addition to the significant progress being made at the site, off-take
agreements are now in place for 100% of the projected concentrate
production. The company has also established an agreement for storage
and ship loading of concentrate at the Vancouver wharves. The key terms
of the contract for trucking of concentrate from New Afton to the
wharves have also been established and it is anticipated this contract
should be executed prior to the end of the year.

The company is very pleased with the continued progress at New Afton and
looks forward to additional milestones being achieved through the end
of 2011 and into 2012. With the remaining capital through the mid-2012
production start now at approximately $200 million, New Gold continues
to have a cash balance well in excess of the remaining capital
required. Once in production, New Afton is expected to contribute
significantly to New Gold’s current portfolio of operating assets
driving gold production growth at lower costs. At current commodity
prices, the mine is expected to approximately double the company’s cash
flow.

El Morro Costs and Timeline Updated – New Gold Fully Carried

El Morro is an advanced stage, world-class gold/copper project in
northern Chile, one of the most attractive mining jurisdictions in the
world. New Gold is a 30 percent partner in the project, with Goldcorp,
the project developer and operator, holding the remaining 70 percent.
The project is located in the Atacama region of Chile approximately 80
kilometres east of the city of Vallenar and comprises a large,
36-square kilometre land package with significant potential for organic
growth through further exploration. Two principal zones of gold-copper
mineralization have been identified to date – the El Morro and La
Fortuna zones – and several additional targets have also been
identified through a regional exploration plan. Currently, New Gold’s
attributable 30% share of proven and probable reserves contains 2.6
million ounces of gold and 1.8 billion pounds of copper. Future
exploration efforts will also test the potential for bulk-mineable gold
and copper production below the bottom of the current design pit. New
Gold’s attributable 30% share of the inferred mineral resource below
the open pit contains 1.3 million ounces of gold and 0.6 billion pounds
of copper.

As reported by Goldcorp on October 26(th), during the third quarter, progress continued on an update to the
project’s 2008 feasibility study. The update is aimed at evaluating the
optimum location of the project’s primary infrastructure items as well
as a reassessment of technical aspects, cost and schedule of the
project. While the results of the study are currently undergoing
Goldcorp’s review, preliminary results have indicated a total capital
cost of approximately $3.9 billion and a production start date in
mid-2017. Under the terms of New Gold’s joint venture agreement with
Goldcorp, Goldcorp is responsible for funding New Gold’s 30% share of
capital costs, or approximately $1.2 billion. The carried funding will
accrue interest at a fixed rate of 4.58%. New Gold will repay its share
of capital plus accumulated interest out of 80% of its 30% share of the
project’s cash flow with New Gold retaining 20% of its 30% share of
cash flow from the time production commences.

Condemnation drilling continues at El Morro with two rigs on site and an
additional two rigs to be added during the fourth quarter of 2011. In
addition, construction permits to authorize construction of specific
facilities are expected to be approved by the middle of the fourth
quarter.

On a 100% basis, capital expenditures, excluding capitalized interest,
during the three months ended September 30, 2011 amounted to $32
million, with year-to-date expenditures totalling $56 million. Goldcorp
is responsible for funding New Gold’s 30% share of capital costs.

As disclosed on January 13, 2010, New Gold received a Statement of Claim
filed by Barrick Gold Corporation (“Barrick”) in the Ontario Superior
Court of Justice, against New Gold, Goldcorp and affiliated
subsidiaries. The claim relates to the transactions announced on
January 7, 2010, the ultimate completion of which resulted in New Gold
and Goldcorp becoming partners at El Morro. Barrick also subsequently
filed a motion to amend its claim to add various Xstrata entities as
defendants. The trial started in June 2011 and continued in October
2011, with closing arguments expected in early 2012 and a decision
expected three to six months thereafter. New Gold continues to believe
that the claim is without merit.

Blackwater Resource Grows – Drilling Continues to Accelerate

On June 1, 2011, New Gold closed the acquisition of Richfield Ventures
Corp. thus adding the exciting Blackwater Project, located in central
British Columbia, to the company’s pipeline. In mid-September the
company updated the Blackwater mineral resource estimate to include
drilling completed from the beginning of the year through the end of
July 2011, thus incorporating an additional 71 holes (24,660 metres)
beyond that of the initial March 2011 resource estimate. The project’s
updated September mineral resource estimate included 5.4 million ounces
of indicated gold resources and an additional 1.2 million ounces of
inferred gold resources. New Gold is targeting the completion of an
additional 75 holes from the end of July through the end of 2011.

New Gold was very active in the Blackwater area both during and
subsequent to the third quarter, highlights of which include:

Blackwater Third Quarter Highlights

        --  Completed updated mineral resource estimate in September
        --  Added sixth drill rig in mid-September
        --  Completed over 22,000 metres of drilling during the third
            quarter (56 holes)
        --  Drilled seven dedicated core holes for metallurgical testing
        --  Continued camp expansion for accelerated drill program
        --  Continued engineering trade-off studies in preparation for
            project's Preliminary Economic Assessment targeted for the
            second quarter of 2012
        --  Continued implementation of sustainability program including
            interaction with local communities, local First Nations,
            government and regulatory officials
        --  Continued environmental baseline program
        --  On October 17th, announced two separate offers to acquire
            Silver Quest and Geo in an effort to consolidate the ownership
            of 100% of the Blackwater Project and add further to New Gold's
            significant landholdings in the broader Blackwater area
        --  On October 26th, the company acquired an additional 580
            hectares of land to the southwest of the Blackwater Project
            from two private individuals

The map below shows a portion of New Gold’s landholdings around the
Blackwater Project area. The Blackwater joint venture ground which is
currently owned 25% by Silver Quest and 75% by New Gold and the Geo
Minerals ground would become 100%-owned by New Gold upon closing of the
above noted October 17(th) transactions, while ownership of the private claims has now been
transferred to New Gold.

http://preview1.newswire.ca/media/2011/11/03/20111103-549191-6152-8f9deef4-1932-400d-b9e5-cd729afe38ff.pdf

Key Financial Information

New Gold’s cash balance at September 30, 2011 was $433 million. The
company had $241 million of debt outstanding at the end of the third
quarter comprised of $173 million of 10% senior secured notes due in
2017 (face value of C$187 million), $43 million of 5% convertible
debentures due in 2014 (face value of C$55 million and C$9.35
conversion price) and $25 million in El Morro project funding loans.

Management Changes

New Gold today also announces changes to its senior management team as
Executive Vice President and Chief Operating Officer, Jim Currie, will
be leaving the company. Mr. Currie joined New Gold shortly after the
company’s three-way merger in mid-2008 and has been a key contributor
in New Gold’s evolution since that time. He has successfully led the
operating teams to an enviable record of achieving production and cost
guidance over the past three years and has also played an important
role in the development of New Afton.

“Over the last three years Jim has done a wonderful job of integrating
new mines and projects into New Gold’s portfolio while creating a
strong performance culture among both our operating and development
teams who will continue to deliver strong results,” stated Robert
Gallagher, President and Chief Executive Officer. “On behalf of the
Board and entire New Gold team, I thank Jim for all that he has done
for the company and wish him success in his future endeavours.”

Robert Gallagher will assume Mr. Currie’s responsibilities until a
comprehensive search process to identify his successor is completed.

2011 Outlook

Through the first nine months of 2011, New Gold has produced 286,484
ounces of gold at total cash cost((1)), net of by-product sales, of $409 per ounce. New Gold is pleased to
reiterate the 2011 production guidance the company set at the beginning
of the year for gold production of 380,000 to 400,000 ounces. New
Gold’s initial guidance for 2011 total cash cost((1)) per ounce sold, net of by-product sales, was $430 to $450 per ounce. In
May of 2011, based on the rapid appreciation of silver and copper
prices, New Gold lowered its total cash cost((1)) guidance for the year to $390 to $410 per ounce. Among other
assumptions, this cost guidance range was based upon a $4.00 per pound
copper price. Taking into account the year-to-date realized copper
price and assuming $3.50 per pound copper in the fourth quarter, total
cash cost((1) )per ounce sold, net of by-product sales, for the year may be nominally
above the company’s reduced guidance range of $390 to $410 per ounce.
New Gold should finish the year as one of the lowest cost producers in
the industry. In addition to the three operating mines, the company’s
three development projects should continue to advance meaningfully with
multiple catalysts anticipated in late 2011 and early 2012.

Conference Call and Webcast

New Gold will hold a conference call and webcast on Friday, November
4th, 2011 at 10:00 am Eastern Time to discuss the company’s third
quarter 2011 financial results. Participants may join the conference by
calling 1-647-427-7450 or toll-free 1-888-231-8191 in North America. To
listen to a recorded playback of the call after the event, please call
1-416-849-0833 or toll-free 1-855-859-2056 in North America – Passcode
19823451.

A live and archived webcast will also be available at www.newgold.com.

About New Gold Inc.

New Gold is an intermediate gold mining company. The company has a
portfolio of three producing assets and three significant development
projects. The Mesquite Mine in the United States, the Cerro San Pedro
Mine in Mexico and Peak Gold Mines in Australia are expected to produce
between 380,000 and 400,000 ounces of gold in 2011. The fully-funded
New Afton project in Canada is scheduled to add further growth in 2012.
In addition, New Gold owns 30% of the world-class El Morro project
located in Chile and, in June 2011, New Gold acquired the exciting
Blackwater project in Canada. For further information on the company,
please visit www.newgold.com.

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this news release, including any
information relating to New Gold’s future financial or operating
performance may be deemed “forward looking”. All statements in this
news release, other than statements of historical fact, that address
events or developments that New Gold expects to occur, are
“forward-looking statements”. Forward-looking statements are statements
that are not historical facts and are generally, but not always,
identified by the words “expects”, “does not expect”, “plans”,
“anticipates”, “does not anticipate”, “believes”, “intends”,
“estimates”, “projects”, “potential”, “scheduled”, “forecast”, “budget”
and similar expressions, or that events or conditions “will”, “would”,
“may”, “could”, “should” or “might” occur. All such forward-looking
statements are based on the opinions and estimates of management as of
the date such statements are made and are subject to important risk
factors and uncertainties, many of which are beyond New Gold’s ability
to control or predict. Forward-looking statements are necessarily based
on estimates and assumptions (including that the business of Richfield
will be integrated successfully in the New Gold organization) that are
inherently subject to known and unknown risks, uncertainties and other
factors that may cause actual results, level of activity, performance
or achievements to be materially different from those expressed or
implied by such forward-looking statements. Such factors include,
without limitation: significant capital requirements; fluctuations in
the international currency markets and in the rates of exchange of the
currencies of Canada, the United States, Australia, Mexico and Chile;
price volatility in the spot and forward markets for commodities;
impact of any hedging activities, including margin limits and margin
calls; discrepancies between actual and estimated production, between
actual and estimated reserves and resources and between actual and
estimated metallurgical recoveries; changes in national and local
government legislation in Canada, the United States, Australia, Mexico
and Chile or any other country in which New Gold currently or may in
the future carry on business; taxation; controls, regulations and
political or economic developments in the countries in which New Gold
does or may carry on business; the speculative nature of mineral
exploration and development, including the risks of obtaining and
maintaining the validity and enforceability of the necessary licenses
and permits and complying with the permitting requirements of each
jurisdiction that New Gold operates, including, but not limited to,
Mexico, where New Gold is involved with ongoing challenges relating to
its environmental impact statement for the Cerro San Pedro Mine; the
lack of certainty with respect to the Mexican and other foreign legal
systems, which may not be immune from the influence of political
pressure, corruption or other factors that are inconsistent with the
rule of law; the uncertainties inherent to current and future legal
challenges the company is or may become a party to, including the third
party claim related to the El Morro transaction with respect to New
Gold’s exercise of its right of first refusal on the El Morro
copper-gold project in Chile and its partnership with Goldcorp Inc.,
which transaction and third party claim were announced by New Gold in
January 2010; diminishing quantities or grades of reserves;
competition; loss of key employees; additional funding requirements;
actual results of current exploration or reclamation activities;
changes in project parameters as plans continue to be refined;
accidents; labour disputes; defective title to mineral claims or
property or contests over claims to mineral properties. In addition,
there are risks and hazards associated with the business of mineral
exploration, development and mining, including environmental hazards,
industrial accidents, unusual or unexpected formations, pressures,
cave-ins, flooding and gold bullion losses (and the risk of inadequate
insurance or inability to obtain insurance to cover these risks) as
well as “Risk Factors” included in New Gold’s disclosure documents
filed on and available at www.sedar.com. Forward-looking statements are
not guarantees of future performance, and actual results and future
events could materially differ from those anticipated in such
statements. All of the forward-looking statements contained in this
news release are qualified by these cautionary statements. New Gold
expressly disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
events or otherwise, except in accordance with applicable securities
laws.

Cautionary Note to U.S. Readers Concerning Estimates of Measured,
Indicated and Inferred Mineral Resources

Information concerning the properties and operations discussed herein
has been prepared in accordance with Canadian standards under
applicable Canadian securities laws, and may not be comparable to
similar information for United States companies. The terms “Mineral
Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource”
and “Inferred Mineral Resource” used in this news release are Canadian
mining terms as defined in accordance with NI 43-101 under guidelines
set out in the Canadian Institute of Mining, Metallurgy and Petroleum
(“CIM”) Standards on Mineral Resources and Mineral Reserves adopted by
the CIM Council on December 11, 2005. While the terms “Mineral
Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource”
and “Inferred Mineral Resource” are recognized and required by Canadian
regulations, they are not defined terms under standards of the United
States Securities and Exchange Commission. Under United States
standards, mineralization may not be classified as a “reserve” unless
the determination has been made that the mineralization could be
economically and legally produced or extracted at the time the reserve
calculation is made. As such, certain information contained in this
news release concerning descriptions of mineralization and resources
under Canadian standards is not comparable to similar information made
public by United States companies subject to the reporting and
disclosure requirements of the United States Securities and Exchange
Commission. An “Inferred Mineral Resource” has a great amount of
uncertainty as to its existence and as to its economic and legal
feasibility. It cannot be assumed that all or any part of an “Inferred
Mineral Resource” will ever be upgraded to a higher category. Under
Canadian rules, estimates of Inferred Mineral Resources may not form
the basis of feasibility or other economic studies. Readers are
cautioned not to assume that all or any part of Measured or Indicated

Resources will ever be converted into Mineral Reserves. Readers are also
cautioned not to assume that all or any part of an “Inferred Mineral
Resource” exists, or is economically or legally mineable. In addition,
the definitions of “Proven Mineral Reserves” and “Probable Mineral
Reserves” under CIM standards differ in certain respects from the
standards of the United States Securities and Exchange Commission.

Technical Information

The Blackwater Project resource estimate was prepared by Mr. Ronald
Simpson, P. Geo, President of Geosim Services Inc., an independent
“Qualified Person” under NI 43-101 National Instrument 43-101 Standards
of Disclosure for Mineral Projects (“NI 43-101″) and a NI 43-101
technical report in respect of the mineral resource estimate disclosed
has been filed on SEDAR. The El Morro Project reserves and resources
were prepared by Ms. Maryse Belanger, P. Geo and Ms. Sophie Bergeron,
Ing. both of Goldcorp, each a “Qualified Person” under NI 43-101.

The scientific and technical information in this news release has been
reviewed by Mark Petersen, a Qualified Person under National Instrument
43-101 and employee of New Gold.

(1) TOTAL CASH COST
“Total cash cost” per ounce figures are calculated in accordance with a
standard developed by The Gold Institute, which was a worldwide
association of suppliers of gold and gold products and included leading
North American gold producers. The Gold Institute ceased operations in
2002, but the standard is widely accepted as the standard of reporting
cash cost of production in North America. Adoption of the standard is
voluntary and the cost measures presented may not be comparable to
other similarly titled measures of other companies. New Gold reports
total cash cost on a sales basis. Total cash cost includes mine site
operating costs such as mining, processing, administration, royalties
and production taxes, but is exclusive of amortization, reclamation,
capital and exploration costs. Total cash cost is reduced by any
by-product revenue and is then divided by ounces sold to arrive at the
total by-product cash cost of sales. The measure, along with sales, is
considered to be a key indicator of a company’s ability to generate
operating earnings and cash flow from its mining operations. This data
is furnished to provide additional information and is a non-IFRS
measure. Total cash cost presented do not have a standardized meaning
prescribed by IFRS and may not be comparable to similar measures
presented by other mining companies. It should not be considered in
isolation as a substitute for measures of performance prepared in
accordance with IFRS and is not necessarily indicative of operating
costs presented under IFRS.  A reconciliation will be provided in the
MD&A accompanying the quarterly financial statements.

(2) RECONCILIATION OF ADJUSTED NET EARNINGS FROM CONTINUING OPERATIONS


          New Gold 2011 Third Quarter Consolidated - Adjusted Net Earnings
                                                            Reconciliation

                                 Three months ended      Nine months ended

    Figures in US$ millions,              September
    except per share amounts                    30,          September 30,

                                   2011        2010     2011          2010

    Net earnings from continuing
    operations                     40.7        44.8    144.0          31.8

    Net earnings per share from
    continuing operations          0.09        0.11     0.34          0.08

        Adjustments:                                                      

        Fair value of derivative
    - Senior notes                (9.7)      (10.9)   (10.5)        (11.6)

        Fair value of derivative
    - Warrants/Convertibles        34.6        10.5     28.9          49.9

        Gain/(loss)
    on foreign
    exchange                     (18.0)         4.2   (20.0)           9.2

        Other                       0.8       (2.0)      5.4         (4.6)

        Tax impact
    of adjustments                  1.1      (17.2)    (2.0)        (16.0)

                                    8.8      (15.4)      1.7          26.9

    Adjusted net earnings from
    continuing operations          49.5        29.3    145.7          58.7

    Adjusted net
    earnings per
    share                          0.11        0.07     0.34          0.15

 


    New Gold Inc.                                                          

    Condensed consolidated income statements                               

    Three and nine month periods ended September 30                        

    (Expressed in thousands of U.S. dollars, except share and
    per share amounts)                                                     

    (Unaudited)                                                            

                                   Three months ended     Nine months ended

                                     2011        2010       2011       2010

                                       $           $          $          $ 

    Revenues                      175,501     127,116    518,349    341,095

    Operating expenses             83,550      58,874    225,209    167,933

    Depreciation and depletion     15,901      21,122     53,122     52,791

    Earnings from mine
    operations                     76,050      47,120    240,018    120,371

    Corporate administration
    expenses                        6,214       4,977     17,392     16,584

    Share-based payment expenses    3,567       1,418      8,986      5,265

    Exploration and corporate
    development expenses            1,413       4,939      7,747      9,925

    Income from operations         64,856      35,786    205,893     88,597

      Finance income                  962       1,188      2,930      1,840

      Finance costs               (1,311)       (333)    (3,968)    (1,180)

      Other gains (losses)        (7,618)     (1,819)    (3,596)   (42,961)

    Earnings before taxes          56,889      34,822    201,259     46,296

    Income tax (expense)
    recovery                     (16,180)       9,932   (57,229)   (14,506)

    Net earnings from continuing
    operations                     40,709      44,754    144,030     31,790

    Loss from discontinued
    operations                          -           -          -    (9,886)

    Net earnings                   40,709      44,754    144,030     21,904

    Earnings per share from
    continuing operations                                                  

      Basic                          0.09        0.11       0.34       0.08

      Diluted                        0.09        0.11       0.33       0.08

    Loss per share from
    discontinued operations                                                

      Basic                             -           -          -     (0.03)

      Diluted                           -           -          -     (0.02)

    Earnings per share from continuing and
    discontinued operations                                                

      Basic                          0.09        0.11       0.34       0.05

      Diluted                        0.09        0.11       0.33       0.06

    Weighted average number of shares
    outstanding                                                            

    (in thousands)                                                         

      Basic                       450,138     391,686    422,135    390,186

      Diluted                     456,499     401,564    433,789    399,628

    New Gold Inc.                                                        

    Condensed consolidated statements of financial position

    (Expressed in thousands of U.S. dollars)                             

    (Unaudited)                                                          

                                               September 30   December 31

                                                       2011          2010

                                                         $             $ 

    Assets                                                               

    Current assets                                                       

      Cash and cash equivalents                     433,113       490,754

      Trade and other receivables                    20,616        11,929

      Inventories                                   122,073       103,055

      Prepaid expenses and other                      6,624         7,325

    Total current assets                            582,426       613,063

    Investments                                           -         7,533

    Mining interests                              2,413,101     1,767,240

    Deferred tax assets                              21,728        10,058

    Other                                            33,740        31,295

    Total assets                                  3,050,995     2,429,189

    Liabilities                                                          

    Current liabilities                                                  

      Trade and other payables                       90,438        69,245

      Current derivative liabilities                 53,068        40,072

      Current non-hedged derivative
      liabilities                                    14,656             -

      Current tax liabilities                        31,053        31,392

    Total current liabilities                       189,215       140,709

    Reclamation and closure obligations              41,431        34,173

    Provisions                                       17,979         9,227

    Non-current derivative liabilities              111,642       113,303

    Non-current non-hedged derivative
    liabilities                                     159,336       155,365

    Deferred tax liabilities                        136,699       179,180

    Long-term debt                                  241,055       229,884

    Deferred benefit                                 46,276        46,276

    Other                                               765           577

    Total liabilities                               944,398       908,694

    Equity                                                               

    Common shares                                 2,356,107     1,845,886

    Contributed surplus                              79,425        81,176

    Other reserves                                (118,311)      (51,913)

    Deficit                                       (210,624)     (354,654)

                                                  (328,935)     (406,567)

    Total equity                                  2,106,597     1,520,495

    Total liabilities and equity                  3,050,995     2,429,189

 


    New Gold Inc.                                                          

    Condensed consolidated statements of
    cash flows

    Three and nine month periods ended
    September 30

    (Expressed in thousands of
    U.S. dollars)

    (Unaudited)                                                            

                                   Three months ended     Nine months ended

                                      2011       2010        2011      2010

                                        $          $           $         $ 

    Operating activities                                                   

      Net earnings                  40,709     44,754     144,030    21,904

      Loss from discontinued             -          -           -     9,886
      operations

      Adjustments for:                                                     

        Unrealized gain on         (2,259)    (2,013)     (6,469)   (6,178)
        gold contracts

        Unrealized loss on               -         55           -       238
        fuel contracts

        Unrealized foreign        (18,048)      4,237    (20,029)     9,189
        exchange (gain) loss

        Unrealized and
        realized gain on                 -    (2,126)     (1,349)   (7,018)
        investments

        Unrealized loss on          34,576     10,487      28,895    49,892
        non-hedged derivatives

        Loss on disposal of            396         32         648     1,449
        assets

        Depreciation and            15,770     21,044      52,625    52,806
        depletion

        Equity-settled
        share-based payment          1,778      1,340       5,498     5,064
        expense

        Unrealized gain on
        embedded derivative        (9,670)   (10,916)    (10,520)  (11,568)
        contract

        Unrealized loss on
        cash flow hedging              481          -       4,167         -
        items

        Income tax expense          16,180    (9,932)      57,229    14,506
        (recovery)

        Finance income               (962)    (1,188)     (2,930)   (1,840)

        Finance costs                1,311        333       3,968     1,180

                                    80,262     56,107     255,763   139,510

      Change in non-cash
      operating working             12,723    (6,794)    (15,003)  (13,565)
      capital 

    Cash generated from             92,985     49,313     240,760   125,945
    operations

      Income taxes paid           (22,298)   (14,832)    (77,116)  (28,106)

    Net cash generated from         70,687     34,481     163,644    97,839
    operations

    Cash used in discontinued            -          -           -   (1,696)
    operations

    Investing activities                                                   

      Mining interests           (112,009)   (34,159)   (255,094)  (82,621)

      Interest paid                      -       (22)    (11,412)  (10,523)

      Recovery (contribution)            -        (2)       8,147      (45)
      of reclamation deposits

      Cash acquired in asset
      acquisition, net of                -          -      18,589         -
      transaction costs

      Cash received in El
      Morro transaction, net             -          -           -    46,276
      of transaction costs

      Investment in El Morro             -          -           - (463,000)

      Proceeds from sale of              -          -       8,927    48,112
      investments

      Interest received                980        785       2,521     1,577

      Proceeds from disposal           285        243         500       272
      of assets

    Cash used in continuing      (110,744)   (33,155)   (227,822) (459,952)
    operations

    Cash generated from                  -          -           -    34,410
    discontinued operations

    Financing activities                                                   

      Exercise of options to         2,408        379      15,001     6,789
      purchase common stock

      Exercise of warrants to           65          -          65         -
      purchase common stock

      El Morro loan                      -          -           -   463,000

      Repayment of long-term             -          -           -  (27,235)
      debt

    Cash generated by                2,473        379      15,066   442,554
    financing activities

    Cash generated from (used
    in) discontinued                     -          -           -         -
    operations

    Effect of exchange rate
    changes on cash and cash      (19,749)     13,207     (8,529)     5,497
    equivalents

    (Decrease) increase in        (57,333)     14,912    (57,641)   118,652
    cash and cash equivalents

    Cash and cash equivalents,     490,446    376,092     490,754   272,352
    beginning of period

    Cash and
    cashequivalents,end of         433,113    391,004     433,113   391,004
    period

    Cash and cash equivalents
    are comprised of

      Cash                         267,466    120,133     267,466   120,133

      Short-term money market      165,647    270,871     165,647   270,871
      instruments

                                   433,113    391,004     433,113   391,004

 

 

 

SOURCE New Gold Inc.

PDF with caption: “New Gold Inc. Blackwater Project map”. PDF available at: http://stream1.newswire.ca/media/2011/11/04/20111104_C2448_DOC_EN_6152.pdf


Source: PR Newswire