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New Gold Provides Development and Exploration Update on New Afton and Blackwater Projects in British Columbia

April 17, 2012

(All figures are in US dollars unless otherwise indicated)

VANCOUVER, April 17, 2012 /PRNewswire/ – New Gold Inc. (“New Gold”) (TSX and
NYSE AMEX:NGD) today provides a development and exploration update for
its two exciting British Columbia growth projects, New Afton and
Blackwater. The company’s New Afton project remains on schedule with
milling starting in June 2012 and commercial production expected in
August of this year. At Blackwater, exploration activity continues to
accelerate with the completion of 112 holes totaling 44,334 metres in
the first three months of the year. Today, New Gold is reporting assays
for an additional 38 holes totaling 15,104 metres received since its
March 7, 2012 resource and exploration update. In March, after the
signing of exploration agreements with the two local First Nations, New
Gold received a Multi-Year Area Based (“MYAB”) exploration permit
enabling the company to expand its drill grid in the Blackwater area.
There are currently 10 drills active at site. Four to six additional
drills will be added in May which will further increase the drilling
rate at Blackwater.

New Afton 2012 Development Highlights – Through March 31, 2012

        --  Nine drawbells completed in first three months of 2012 bringing
            total number of drawbells to 17
      o Meeting targeted monthly drawbell development rate
      o On track for 26 drawbells by the end of June to support a 6,600
        tonne per day initial mining rate
        --  Currently mining at a rate of ~4,200 tonnes per day, or 38% of
            the nameplate 11,000 tonne per day capacity
        --  Ore stockpiled on surface totaled 565,000 tonnes at March 31,
            2012
      o Average grade of 0.97 grams per tonne gold and 1.04% copper
        --  Underground crusher and conveyors to surface fully commissioned
            and operating at design capacity
        --  Buried piping 100% complete with water and gas lines in service
        --  All major processing equipment installed with piping and
            cabling more than 80% complete
        --  Dry commissioning of mill services in progress

As New Afton is now less than two months from starting production, the
company is pleased to report that the final stages of development are
coming together as planned. The underground block caving operation is
active and progressing as expected with continued drawbell development,
mining rate build-up and growth of the surface ore stockpile all
meeting or exceeding expectations. The final stages of completion of
the mill building are also on track, with the first ore scheduled to be
put through the mill circuit in June as originally planned.

“This is a very exciting time  for us as New Afton, which is such an
important part of the history of New Gold, is about to begin production
to further propel our company forward,” stated Robert Gallagher,
President and Chief Executive Officer. “We are proud of what the teams
have accomplished at New Afton thus far and we remain focused on
executing a rapid transition from development to operations.”

After its June production start, New Afton is forecast to produce 35,000
to 45,000 ounces of gold and 30 to 35 million pounds of copper at total
cash cost((1)), net of by-product credits, of ($1,200) to ($1,300) per ounce in 2012.
On a co-product basis, total cash costs((1)) in 2012 are expected to be $630 to $650 per ounce of gold and $1.35 to
$1.45 per pound of copper, respectively. Both the by-product and
co-product costs at New Afton are expected to come down meaningfully in
2013 and beyond as the mine hits its full capacity.

New Afton’s production range includes gold and copper produced between
mill start-up and achievement of commercial production. The revenue
from this pre-commercial production will be offset against capital
costs. New Afton gold and copper sales for 2012 from the point of
commercial production forward are expected to be 20,000 to 30,000
ounces and 20 to 25 million pounds, respectively.

Over its currently estimated 12 year mine life, New Afton is expected to
produce an average of 85,000 ounces of gold and 75 million pounds of
copper annually at total co-product cash costs((1)) of approximately $525 per ounce of gold and $1.15 per pound of copper,
or a total cash cost((1)), net of by-product credits, of approximately ($1,750) per ounce.

Once production starts at New Afton, New Gold’s exploration team will
further drill the C-zone block of mineralization that lies below and to
the side of the New Afton reserve blocks. New Gold has budgeted $5
million for exploration at New Afton in the second half of 2012.

Blackwater Exploration Update

     _____________________________________________________________________________________
    |                                 Blackwater 2012 Drill Program Highlights            |
    |_____________________________________________________________________________________|
    |     Northern Half of Blackwater Deposit  |     Southern Half of Blackwater Deposit  |
    |__________________________________________|__________________________________________|
    | Hole |  From  |   To   |Interval|Weighted| Hole |  From  |   To   |Interval|Weighted|
    |  ID  |(metres)|(metres)|(metres)|Average |  ID  |(metres)|(metres)|(metres)|Average |
    |      |        |        |        |  Gold  |      |        |        |        |  Gold  |
    |      |        |        |        | Grade  |      |        |        |        | Grade  |
    |      |        |        |        | (g/t)  |      |        |        |        | (g/t)  |
    |______|________|________|________|________|______|________|________|________|________|
    |BW-331|     188|     345|     157|   1.36 |BW-344|     105|     179|      74|   1.74 |
    |______|________|________|________|________|      |     179|     194|      15|  47.49 |
    |BW-334|     261|     371|     110|   1.00 |      |        |        |        |        |
    |      |        |        |        |        |      |        |        |        |        |
    |______|________|________|________|________|______|________|________|________|________|
    |BW-337|     219|     332|     113|   1.02 |BW-353|      68|     257|     189|   1.06 |
    |______|________|________|________|________|______|________|________|________|________|
    |BW-343|     150|     210|      60|   1.06 |BW-354|     232|     271|      39|   1.05 |
    |______|________|________|________|________|______|________|________|________|________|
    |BW-352|     325|     478|     153|   1.63 |BW-366|     176|     248|      72|   1.02 |
    |______|________|________|________|________|______|________|________|________|________|

The highlights shown confirm strong continuity of mineralization across
the Blackwater deposit and extension of mineralization in other areas.
Holes BW-331, BW-334, BW-337, BW-343 and BW-352, located in the
northern portion of the deposit, continue to demonstrate that the
Blackwater resource remains open, particularly to the north beyond the
limits of the current delineation drill grid. Additional step-out
drilling farther north is planned. At the same time, holes BW-344,
BW-353, BW-354 and BW-366 further increase the confidence in continuity
of gold grades in the central and southeastern portions of the resource
where open pit mining could commence. In particular, hole BW-344 has
yielded a 47.49 g/t gold intercept over a 15 meter down-hole thickness,
representing one of the highest grade intercepts encountered at
Blackwater to date.

“Today’s results provide further confirmation of the robust potential of
the Blackwater deposit,” stated Mark Petersen, Vice President
Exploration. “We are excited to see such strong and persistent
mineralization as we continue to explore for the outer limits of the
deposit while also working to upgrade the mineral resource
classification. Our plans to expand our drilling activities across the
greater Blackwater area as well as at Capoose only add to our
enthusiasm.”

For the latest drill hole location map and complete summary of the drill
hole assays received thus far in 2012, please refer to the company’s
website at http://www.newgold.com/Properties/Projects/Blackwater/default.aspx.

In addition to ongoing exploration drilling, New Gold continues to
progress its environmental baseline studies and geotechnical drilling.
The company looks forward to providing additional updates on the
progress at Blackwater over the coming months and the completion of a
Preliminary Economic Assessment on the project in the third quarter of
2012.

Quality Assurance/Quality Control, Mineral Resource Estimation
Parameters and Qualified Persons

New Gold maintains a Quality Assurance/Quality Control (“QA/QC”) program
at the Blackwater Project using industry best practices that are
consistent with the QA/QC protocols in use at all of its exploration
and development projects. Key elements of New Gold’s QA/QC program
include controlled chain of custody of samples, regular insertion of
certified reference standards and blanks, and duplicate check assays.
Drill core is halved and shipped in sealed bags to ALS Global,
Vancouver, British Columbia, where it is analyzed for gold and silver
along with a suite of other elements. Gold analyses are performed via
fire assay/AA finish methods and silver analyses are performed via
Induction Coupled Plasmaspectrometry (“ICP”). Silver ICP analyses are
not known with the same precision as gold fire assay analyses so the
reader is cautioned regarding the relative precision of silver grades
when compared to gold grades reported in the current mineral resource
estimate.

ALS Global is an independent ISO accredited and registered analytical
services provider.

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. New Gold’s most immediate development project, New Afton, is
scheduled to begin production in mid-2012 and together with the
Mesquite Mine in the United States, the Cerro San Pedro Mine in Mexico
and Peak Gold Mines in Australia, the company is forecasting between
405,000 and 445,000 ounces of gold production in 2012. In addition, New
Gold owns 30% of the world-class El Morro project located in Chile and
100% of 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 press release, including any
information relating to New Gold’s future financial or operating
performance may be deemed “forward looking”. All statements in this
press 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 use of forward-looking terminology such as “plans”,
“expects”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “intends”, “anticipates”, “projects”, “potential”,
“believes” or variations of such words and phrases or statements that
certain actions, events or results “may”, “could”, “would”,  “should”,
“might” or “will be taken”, “occur” or “be achieved” or the negative
connotation. 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 various transactions 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
press 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.

TECHNICAL INFORMATION

The scientific and technical information in this press 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 does 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. 

 

SOURCE New Gold Inc.


Source: PR Newswire