Quantcast

New Gold Announces its Rainy River Feasibility Study Results

January 16, 2014

325,000 Ounces of Annual Gold Production at Low Costs during First Nine
Years

(All figures are in US dollars unless otherwise indicated)

VANCOUVER, Jan. 16, 2014 /PRNewswire/ – New Gold Inc. (“New Gold”) (TSX:NGD)
and (NYSE MKT:NGD) today announces the results of its Feasibility Study
for the Rainy River project (“Rainy River” or the “Project”) in
Ontario, Canada. The company successfully completed the acquisition of
Rainy River Resources Ltd. (“Rainy River Resources”) on October 16,
2013. Through the second half of 2013, New Gold’s development team
worked with third party consultants to complete its Feasibility Study
for the Project. The purpose was to ensure that the key inputs and
assumptions used for Rainy River were consistent with those used for
New Gold’s other projects and operations. This Feasibility Study builds
upon the study completed and filed by Rainy River Resources on May 24,
2013.

Feasibility Study Highlights

        --  First nine years - average annual gold production of 325,000
            ounces at total cash costs(1) of $613 per ounce and all-in
            sustaining costs(2) of $736 per ounce
      o First nine years - average mill head grade of 1.44 grams per tonne
        gold
        --  Life-of-mine gold and silver production of 3.4 million ounces
            and 6.0 million ounces at total cash costs(1) of $663 per ounce
            and all-in sustaining costs(2) of $765 per ounce
        --  Base case economics - at $1,300 per ounce gold, $22.00 per
            ounce silver and a 0.95 US$/C$ foreign exchange rate, Rainy
            River has a pre-tax 5% net present value ("NPV") of $438
            million, an internal rate of return ("IRR") of 13.1% and a
            payback period of 5.4 years
        --  Alternative case economics - at $1,600 per ounce gold, $26.00
            per ounce silver and a parity US$/C$ foreign exchange rate,
            Rainy River has a pre-tax 5% NPV of $1.0 billion, an IRR of
            21.1% and a payback period of 3.6 years
        --  Development capital costs of $885 million inclusive of a $70
            million contingency
        --  Targeted commissioning in late 2016 with first year of full
            production in 2017
        --  14-year mine life with direct processing of open pit and
            underground ore, at a rate of 21,000 tonnes per day ("tpd"),
            for first nine years and processing of a combination of
            stockpile and underground ore thereafter

“We are very pleased to have completed the Feasibility Study for our
Rainy River project,” stated Randall Oliphant, Executive Chairman of
New Gold. “The results of the study are entirely consistent with our
expectations when we decided to acquire Rainy River Resources. The
Project provides our company with an asset that meets all of our key
criteria including: solid returns with strong leverage to higher gold
prices, manageable capital costs, a robust, long-lived production base
with continued regional exploration potential, below industry average
costs, and located in a great mining jurisdiction.”

“The project team has done a great job advancing Rainy River to this
stage,” added Robert Gallagher, President and Chief Executive Officer
of New Gold. “In parallel with this Feasibility Study, the
Environmental Assessment report has also been finalized and is
scheduled to be released in the coming days for regulatory agency and
stakeholder review. We look forward to progressing the Project further
through 2014.”

Mineral Reserve and Resource Estimate

Mineral Resource

The Rainy River mineral resource, effective November 2, 2013, is
reported in relation to a conceptual open pit shell at a gold cut-off
of 0.30 grams per tonne for open pit resources and a gold cut-off value
of 2.5 grams per tonne for underground resources. Globally, the deposit
contains Measured and Indicated mineral resources suitable for direct
processing, from mine to mill, of 106 million tonnes at 1.54 grams per
tonne gold and 2.88 grams per tonne silver, representing 5.2 million
ounces of gold and 9.8 million ounces of silver. In addition, the open
pit Measured and Indicated mineral resources suitable for stockpiling
and future processing total 71 million tonnes at 0.43 grams per tonne
gold and 2.09 grams per tonne silver, representing 1.0 million ounces
of gold and 4.8 million ounces of silver. A table summarizing the
mineral resource, including key assumptions, is included at the
conclusion of this news release in the section entitled Technical Information.

This mineral resource estimate has been completed by SRK Consulting
(Canada) Inc. (“SRK”) in conformity with generally accepted CIM
“Estimation of Mineral Resource and Mineral Reserves Best Practices”
guidelines and is reported in accordance with Canadian Securities
Administrators’ NI 43-101 (as defined at the conclusion of this
release). The mineral resource estimate is based upon a geologic block
model that incorporates 382,182 individual assays from over 742,000
metres of core from 1,656 drill holes. Assay data density is sufficient
to classify the mineral resource at the Measured and Indicated
confidence levels as necessary to support the estimation of a mineral
reserve. SRK has conducted a series of routine verifications to ensure
the reliability of the quality assurance/quality control for the drill
assay data supporting the Rainy River mineral resource. Through SRK’s
independent review, it has been concluded that the field samples and
assaying procedures meet industry best practices and that assay grades
can be reasonably reproduced, indicating that the primary assay
laboratories are sufficiently reliable for the resource estimation used
in the Feasibility Study.

Mineral Reserve

A proposed mining production schedule was developed through the design
of a combined open pit and underground mine within the mineral resource
model. The Rainy River mineral reserve, which represents the portion of
Measured and Indicated mineral resources included in the production
schedule, has been diluted using an average of 4.0% additional tonnes
containing 0.21 grams per tonne gold and 1.19 grams per tonne silver
for the open pit and an average of 11.7% for the underground stoping,
which includes dilution from both overbreak and backfill dilution.
Including the development ore, the total underground dilution averages
8.3%. The open pit mineral reserve estimate has been completed by BBA
Inc. and the underground mineral reserve estimate has been completed by
AMC Mining Consultants (Canada) Ltd. The Rainy River mineral reserve is
summarized in the following table.

     __________________________________________________________________
    |     Rainy River Mineral Reserve Estimate - Effective November 2, |
    |                                2013                              |
    |__________________________________________________________________|
    |                                |Tonnes |Gold |Silver|Gold |Silver|
    |                                | (Kt)  |(g/t)|(g/t) |(Koz)|(Koz) |
    |________________________________|_______|_____|______|_____|______|
    |Direct processing material      |       |     |      |     |      |
    |Open Pit                        |       |     |      |     |      |
    |  Proven                        |15,839 |1.47 | 2.04 | 746 |1,038 |
    |  Probable                      |46,866 |1.26 | 3.05 |1,896|4,594 |
    |Underground                     |       |     |      |     |      |
    |  Proven                        |  --   | --  |  --  | --  |  --  |
    |  Probable                      | 4,187 |4.96 |10.31 | 668 |1,388 |
    |Total direct processing material|66,892 |1.54 | 3.26 |3,311|7,021 |
    |________________________________|_______|_____|______|_____|______|
    |Stockpile material              |       |     |      |     |      |
    |Open Pit                        |       |     |      |     |      |
    |  Proven                        | 6,843 |0.38 | 1.51 | 84  | 332  |
    |  Probable                      |30,541 |0.39 | 2.10 | 378 |2,058 |
    |Total stockpile material        |37,384 |0.38 | 1.99 | 462 |2,390 |
    |________________________________|_______|_____|______|_____|______|
    |Direct processing and stockpile |       |     |      |     |      |
    |material                        |       |     |      |     |      |
    |Open Pit                        |22,681 |1.14 | 1.88 | 830 |1,370 |
    |  Proven                        |77,407 |0.91 | 2.67 |2,275|6,652 |
    |  Probable                      |100,088|0.96 | 2.49 |3,105|8,022 |
    |  Total                         |       |     |      |     |      |
    |Underground                     |  --   | --  |  --  | --  |  --  |
    |  Proven                        | 4,187 |4.96 |10.31 | 668 |1,388 |
    |  Probable                      | 4,187 |4.96 |10.31 | 668 |1,388 |
    |  Total                         |       |     |      |     |      |
    |________________________________|_______|_____|______|_____|______|
    |Total Combined                  |       |     |      |     |      |
    |  Proven                        |22,681 |1.14 | 1.88 | 830 |1,370 |
    |  Probable                      |81,594 |1.12 | 3.06 |2,943|8,040 |
    |Total                           |104,275|1.13 | 2.81 |3,773|9,410 |
    |________________________________|_______|_____|______|_____|______|

    Notes:

    1. Open pit mineral reserves have been estimated using an optimized pit
    shell based on metal prices of $800 per ounce gold and $25 per ounce
    silver,
    a foreign exchange rate of CAD $1.05 to USD $1.00, gold recovery of
    89.9% (non-CAP Zone) and 74.3% (CAP Zone) and a silver recovery of
    67.1%
    (non-CAP Zone) and 69.5% (CAP Zone). The cut-off grade is based on a
    gold price of $1,200. Underground reserves have been estimated from
    mining
    shapes generated using a cut-off grade of 3.5 g/t gold-equivalent.
    Development material from stope access drives above a cut-off grade of
    1.5 g/t
    gold-equivalent is also assumed to be sent to the mill for processing.
    Underground breakeven cut-off grade is calculated at 2.75 g/t
    gold-equivalent based
    on metal prices of $1,300 per ounce gold and $22 per ounce silver, a
    foreign exchange rate of CAD $1.05 to USD $1.00, gold recovery of 95%
    and a
    silver recovery of 75%.
    2. Open pit reserves have been estimated using a dilution of 4% at 0.21
    g/t Au and 1.19 g/t Ag, and Underground reserves have been estimated
    using an
    overall dilution of 8.3%, inclusive of both rock and backfill dilution.
    Open pit and underground reserves have been estimated using a mining
    recovery of
    95% and 96.5%, respectively.
    3. Open pit direct processing material is defined as mineralization
    likely to be mined and processed directly and above a variable cut-off
    grade ranging
    from 0.3-0.7 Au g/t.
    4. Stockpile material includes all material within designed open pit
    between variable cut-offs described above in Note 3, as well as
    material within the
    CAP zone (code 500) that is suitable for stockpiling and future
    processing.
    5. Mineral Reserves for the open pit are derived from the resource
    model effective November 2, 2013. Models for the underground reserves
    were
    derived from the August 2013 and September 2013 models for the main ODM
    zone and Intrepid Zone, respectively. Models were prepared by Dorota
    El-Rassi, P.Eng. (APEO #100012348) and Glen Cole, P.Geo. (APGO #1416),
    of SRK, both independent "Qualified Persons" as that term is defined in
    Canadian National Instrument 43-101. Rainy River's exploration program
    in Richardson Township is being supervised by Mark A. Petersen, (AIPG
    Certified Professional Geologist #10563), Vice President, Exploration
    for New Gold and a "Qualified Person" as defined in Canadian National
    Instrument
    43-101. New Gold continues to implement a rigorous QA/QC program to
    ensure best practices in drill core sampling, analysis and data
    management.
    6. Qualified persons - The open pit portion of the mineral reserve
    statement was prepared under the supervision of Patrice Live (OIQ
    #38991) of BBA,
    and the underground portion of the mineral reserve statement was
    prepared by Colm Keogh, P.Eng. (APEGBC #37433) of AMC Mining
    Consultants
    (Canada) Ltd., both independent "Qualified Persons" as that term is
    defined in Canadian National Instrument 43-101.
    7. The mineral reserve estimate may be materially affected by
    environmental, permitting, legal, title, taxation, sociopolitical,
    marketing, and other relevant issues.

Mining Operations and Metallurgy

Conventional open pit mining has been chosen as the primary method to
mine the Rainy River deposit given the proximity of mineralization to
the surface. Deeper, higher grade portions of the deposit will be mined
from underground. The open pit mining production schedule incorporates
an elevated cut-off grade strategy during the first nine years of
mining to increase the mill feed grade. Material below the elevated
cut-off grade will be stockpiled for processing during the later years
of the Project life. In addition, upon the start of production from the
open pit, the development of the underground mine would commence with
initial production from underground expected in 2018. The targeted mill
throughput of 21,000 tpd will initially be sourced exclusively from the
open pit and then, once in full production, the underground mine will
contribute 1,500 tpd of ore, with the balance of the 19,500 tpd coming
from the open pit.

Open Pit Operations

At full capacity, open pit mining operations would be carried out with
an equipment fleet comprising: three 216 millimetre blast hole drills,
one 29 cubic metre and two 26 cubic metre hydraulic shovels, one 18
cubic metre wheel loader and 22 – 220 tonne haul trucks. A 10 metre
bench height has been selected for mining. The open pit mine would
provide process plant feed starting at a nominal rate of 21,000 tpd, or
7.7 million tonnes per year, declining to 19,500 tpd, or 7.1 million
tonnes per year, once the underground mine reaches its full production.
Total annual mining of ore, waste and overburden would peak at 69
million tonnes. The operational stripping ratio, excluding waste and
overburden stripping during the development phase, is 3.5:1.0.

Underground Operations

The underground mine will be accessed via a four kilometre decline from
a surface portal located to the east of the open pit. The underground
design supports the ultimate extraction of 1,500 tpd of ore by
longitudinal longhole open stoping. The underground mineralization
occurs in sub-vertical horizons varying in width from approximately
three metres to 20 metres, with the weighted average width across the
various zones being approximately eight metres. The various areas of
underground mineralization provide for flexibility in the production
schedule to recover higher grade material earlier in the mine life.
Longitudinal longhole open stoping in each zone will proceed in a
retreating pattern from the strike extent of ore to a common access
point on all levels. Mining is scheduled to proceed upwards from the
lowest level of the zone, or from an adopted sill elevation, with
backfill providing the working platform for each successive lift. On
average, stopes eight metres in width, 20 metres in length and 20
metres in height have been used for mine planning. At full capacity,
ore handling from underground workings to surface will be accomplished
through a fleet of four 7 cubic metre loaders and six 45 tonne haul
trucks.

Metallurgy

The metallurgical evaluation was supported by an extensive grinding and
extraction test program. Comminution tests were conducted on drill hole
composites selected via geometallurgical methodology to ensure
representative process plant feed, from both the open pit and
underground, as well as to investigate the impact of variability in
hardness on the crushing and grinding circuit design. The composites
were derived from over 170 exploration drill holes and 13 dedicated
large bore HQ/PQ drill holes. Mineralogical and diagnostic leach tests
were conducted on approximately 120 composite samples. The test work
determined the base flowsheet as well as the optimum leaching
parameters. An additional 275 variability leach tests were then
conducted on specific geometallurgically selected drill core composite
samples to investigate the impact of the selected leaching parameters
on the various ore zones throughout the deposit. Estimated process
plant feed grade, recoveries and metal production from commercial
production forward are summarized below.

     ______________________________________________________________
    |         Rainy River Feasibility Study Production Schedule    |
    |______________________________________________________________|
    |            |         |            |           |Average Annual|
    | Production |Mill Feed| Head Grade |  Recovery |  Production  |
    |   Years    |  (Mt)   |____________|___________|______________|
    |            |         |Gold |Silver|Gold|Silver|Gold | Silver |
    |            |         |(g/t)|(g/t) |(%) | (%)  |(Koz)| (Koz)  |
    |____________|_________|_____|______|____|______|_____|________|
    |1 through 9 |   68.9  |1.44 |  3.1 |91.9| 63.7 | 325 |   480  |
    |____________|_________|_____|______|____|______|_____|________|
    |Life-of-mine|   103.9 |1.12 |  2.8 |90.6| 64.1 | 243 |   429  |
    |____________|_________|_____|______|____|______|_____|________|

Note: Table excludes 0.4 Mt of material milled in the preproduction
period.

Mineral Processing

The 21,000 tpd process plant would use conventional crushing, grinding,
leaching, carbon-in-pulp (“CIP”) and gold recovery technology to
produce gold-silver doré. The overall design utilizes a simple and
conventional flowsheet.

Run-of-mine material will be crushed to 165 millimetres in the gyratory
crusher and subsequently conveyed and ground in the SAG mill in closed
circuit with a scalping screen and a pebble crusher. Undersize from the
scalping screen will be combined with the ball mill discharge and
pumped to a cyclone cluster. The underflow from the cyclone cluster
will feed the ball mill. A portion of the ball mill discharge will be
treated by a gravity circuit. The cyclone overflow will be thickened in
a pre-leach thickener and pumped to the cyanide leaching circuit, which
is designed for approximately 30 hours retention time. The discharge
from the leach circuit will flow by gravity to a CIP circuit where the
leached gold will be adsorbed onto carbon. Loaded carbon will be sent
to the carbon stripping circuit where the gold and silver will be
recovered as sludge in electrowinning cells then filtered, dried and
smelted into doré bars.

The tailings from the CIP circuit will be sent to the cyanide
destruction circuit and then discharged into the tailings storage
facility.

Key process equipment would consist of:

        --  A 1,371 x 1,950 millimetre (54" x 75") gyratory crusher
        --  A SAG/ball mill/crusher grinding circuit:
      o One 11.0 x 6.1 metre diameter (36' x 20') 15-Megawatt SAG mill
      o One 7.9 x 12.3 metre diameter (26' x 40.5') 15-Megawatt Ball mill
      o One 448-Kilowatt pebble crusher
      o One 45 metre diameter pre-leach thickener
        --  Whole ore leaching and CIP circuit:
      o Eight leach tanks of 18 metre diameter
      o Seven 360 cubic metre capacity CIP tanks
      o One 45 metre diameter pre-detox thickener

Project Capital Costs

The Project is located 50 kilometres northwest of Fort Frances, a town
with a population of approximately 8,000 people, in northwestern
Ontario. The Project benefits from its proximity to existing
infrastructure. Hydroelectric power will be sourced through the
construction of a new 17 kilometre transmission line that will connect
the Project to a pre-existing 230 kV line that currently links Fort
Frances and Kenora, Ontario, a small city with a population of
approximately 15,000 people, located to the north of the Project.

The Rainy River project site is easily accessible by a network of
all-weather roads that branch off the well-maintained Trans-Canada
Highways 11 and 71. Access roads are serviced, allowing year-round
access. The Canadian National Railway is located 21 km to the south of
the Project and runs east-west.

During the initial development stage, the direct on-site personnel
requirement peaks at approximately 450 people. As a result of the
Project’s proximity to various towns, no camp facilities are envisioned
during the construction or operational phase. The underground mine is
scheduled to be developed once the open pit begins production.
Development capital costs related to the underground mine are included
in the sustaining capital estimate.

The total estimated development capital cost for the Project is $885
million inclusive of a $70 million contingency. The estimated
development capital cost is based on the fourth quarter 2013 capital
environment. The development capital cost equates to $260 per
recoverable gold ounce over the current reserve life of the Project.
Total sustaining capital over the life of the Project is estimated to
be $348 million, which includes $105 million related to the development
of the underground mine. In total, the sustaining capital, including
the development of the underground, is equivalent to an annual average
of $102 per recoverable gold ounce over the current life of the
Project.

     ___________________________________________________________________
    |  Breakdown of Feasibility Study Project Development Capital Costs |
    |___________________________________________________________________|
    |                                Description           |($ millions)|
    |______________________________________________________|____________|
    |Direct Costs                                          |            |
    |______________________________________________________|____________|
    |Process facilities                                    |      297   |
    |______________________________________________________|____________|
    |Site development (Truck shop, Warehousing, Earthworks,|            |
    |etc.)                                                 |      111   |
    |______________________________________________________|____________|
    |Open pit mine equipment                               |       81   |
    |______________________________________________________|____________|
    |Overburden and waste stripping                        |       80   |
    |______________________________________________________|____________|
    |Tailings and water management                         |       48   |
    |______________________________________________________|____________|
    |Power line and roads                                  |       21   |
    |______________________________________________________|____________|
    |Total Direct Costs                                    |      638   |
    |______________________________________________________|____________|
    |Owner's Costs and EPCM                                |            |
    |______________________________________________________|____________|
    |Owner's costs                                         |       76   |
    |______________________________________________________|____________|
    |Engineering, Procurement and Construction Management  |       48   |
    |______________________________________________________|____________|
    |Other Indirect Costs                                  |            |
    |______________________________________________________|____________|
    |Freight and logistics                                 |       13   |
    |______________________________________________________|____________|
    |Construction facilities and services                  |       10   |
    |______________________________________________________|____________|
    |Spare parts and equipment                             |       10   |
    |______________________________________________________|____________|
    |Other indirect costs                                  |       20   |
    |______________________________________________________|____________|
    |Total Indirect Costs                                  |       53   |
    |______________________________________________________|____________|
    |Total Owner's Costs, EPCM and Indirect Costs          |      177   |
    |______________________________________________________|____________|
    |Subtotal                                              |      815   |
    |______________________________________________________|____________|
    |Contingency                                           |       70   |
    |______________________________________________________|____________|
    |Total Project Development Capital Costs               |      885   |
    |______________________________________________________|____________|
     ________________________________________________________
    |Breakdown of Feasibility Study Sustaining Capital Costs |
    |________________________________________________________|
    |                        Description        |($ millions)|
    |___________________________________________|____________|
    |Open pit sustaining capital                |      111   |
    |___________________________________________|____________|
    |Underground development capital (equipment,|            |
    |infrastructure, development)               |      105   |
    |___________________________________________|____________|
    |Underground sustaining capital             |      132   |
    |___________________________________________|____________|
    |Total Sustaining Capital Costs             |      348   |
    |___________________________________________|____________|

Project Operating Costs

Rainy River’s combined open pit and underground operation delivers
strong gold head grades which, when combined with the Project’s
proximity to infrastructure and silver by-product revenue, results in
Rainy River’s estimated total cash costs((1)) and all-in sustaining costs((2)) being well below today’s industry average.

After the start of commercial production, the Project’s mining costs are
projected to be C$2.04 per tonne of material for the open pit and
C$90.10 per tonne of material for the underground. Costs per tonne
milled over the life-of-mine are summarized below.

     __________________________________________________________________
    |       Breakdown of Base Case Feasibility Study Operating Costs   |
    |__________________________________________________________________|
    |Description               |(C$ per tonne milled)|($ per gold ounce|
    |                          |                     |    produced)    |
    |__________________________|_____________________|_________________|
    |Open pit mining           |                     |                 |
    |(overburden, waste, direct|            9.22     |                 |
    |processing ore and        |                     |          373    |
    |stockpile)                |                     |                 |
    |__________________________|_____________________|                 |
    |Underground mining        |            3.63     |                 |
    |__________________________|_____________________|_________________|
    |Processing                |            9.25     |          268    |
    |__________________________|_____________________|_________________|
    |General and administrative|            1.54     |           45    |
    |__________________________|_____________________|_________________|
    |Royalties                 |            0.41     |           12    |
    |__________________________|_____________________|_________________|
    |Refining and transport    |            0.14     |            4    |
    |__________________________|_____________________|_________________|
    |Cash costs                |            24.19    |          702    |
    |__________________________|_____________________|_________________|
    |Silver by-product sales at|           (1.34)    |         (39)    |
    |$22.00 per ounce silver   |                     |                 |
    |__________________________|_____________________|_________________|
    |Total cash costs(1)       |            22.85    |          663    |
    |__________________________|_____________________|_________________|
    |Sustaining capital        |            3.53     |          102    |
    |__________________________|_____________________|_________________|
    |All-in sustaining costs(2)|            26.38    |          765    |
    |__________________________|_____________________|_________________|

The above base case cost estimates assume an electricity rate of C$0.065
per kilowatt hour and a diesel cost of C$0.95 per litre.

Economic Sensitivity Analysis

The summary below, showing a range of commodity price and foreign
exchange scenarios, holds the above-noted electricity rate and diesel
cost constant. The NPV figures are calculated to the beginning of 2015
when, assuming the receipt of necessary permits and approvals within
expected timelines, construction would begin. For purposes of the
calculations, any 2014 development expenditures are treated as
undiscounted costs.

     ______________________________________________________________
    |    Summary of Feasibility Study Project Economics (Pre-tax)  |
    |______________________________________________________________|
    | Gold Price  |Silver Price | US$/C$ |  5% NPV    |IRR |Payback|
    |($ per ounce)|($ per ounce)|exchange|($ millions)|(%) |Period |
    |             |             |        |            |    |(Years)|
    |_____________|_____________|________|____________|____|_______|
    |      1,150  |      20.00  |   0.93 |      138   |7.8 |   6.8 |
    |_____________|_____________|________|____________|____|_______|
    |      1,300  |      22.00  |   0.95 |      438   |13.1|   5.4 |
    |_____________|_____________|________|____________|____|_______|
    |      1,450  |      24.00  |   0.97 |      738   |17.6|   4.3 |
    |_____________|_____________|________|____________|____|_______|
    |      1,600  |      26.00  |   1.00 |     1,009  |21.1|   3.6 |
    |_____________|_____________|________|____________|____|_______|

Using the base case assumptions as the foundation, other important
sensitivities include:

        --  Every $100 per ounce change in the life-of-mine gold price,
            where all other assumptions are held constant, results in an
            approximate $232 million change in pre-tax NPV and 3.7% change
            in pre-tax IRR
        --  Every $0.05 change in the US$/C$ foreign exchange rate, where
            all other assumptions are held constant, results in an
            approximate $141 million change in pre-tax NPV and 2.8% change
            in pre-tax IRR
        --  Every $50 million change in development capital costs, where
            all other assumptions are held constant, results in a $46
            million change in pre-tax NPV and 1.3% change in pre-tax IRR

Tax Considerations

Part of New Gold’s growth strategy, including the successful acquisition
of Rainy River Resources in 2013, has been to build its business in
jurisdictions where it already has an established presence. One of the
many benefits of this approach is that it enables the company to manage
its business in a tax-efficient manner. In the case of Rainy River, New
Gold plans to implement tax planning strategies that would allow it to
realize tax synergies by utilizing a portion of the tax attributes that
have been, and will continue to be, generated in the corporate entity
holding the company’s portfolio of Canadian assets. Currently, the
company’s primary objective is to maximize the cash flow generation of
its New Afton Mine in Kamloops, British Columbia, with any remaining
tax attributes planned to be used to maximize Rainy River’s future
after-tax cash flow. As New Gold’s focus in such allocation will be
maximizing the company’s overall profitability rather than that of any
one operation or project, this will remain a dynamic process.

At the end of 2012, on a combined basis, the New Gold corporate entity
had over $900 million in Canadian Exploration Expenditures, Canadian
Development Expenditures and Class 41 capital cost allowance as well as
over $100 million in net operating losses. These totals exclude those
attributes specifically related to the Blackwater project. In addition,
the company’s annual corporate administration expenses are
approximately $30 million and its annual interest expenses are $52
million, both of which can be combined with the above noted attributes
to shelter taxable profits from one or both of New Afton and Rainy
River going forward. New Gold intends to implement tax planning
strategies that would allow it the flexibility to access the existing
tax attributes of Rainy River Resources and utilize them in a manner
which would maximize New Gold’s overall profitability.

For purposes of calculating the base case Rainy River after-tax
economics, the company has assumed the Ontario Provincial and Federal
taxes noted below as well as the distribution of the above-noted tax
attributes as between Rainy River, New Afton and New Gold’s other
operations in a manner that first maximizes New Afton’s life-of-mine
cash flow generation based on the current New Afton mine plan.

        --  10% Ontario provincial income tax on taxable income
      o 10% Ontario mining taxes on mining income
      o 2.7% Ontario corporate minimum tax
        --  15% federal income taxes on taxable income

These assumptions result in the below after-tax economics for the
Project.

     ______________________________________________________________
    |   Summary of Feasibility Study Project Economics (After-tax) |
    |______________________________________________________________|
    | Gold Price  |Silver Price | US$/C$ |  5% NPV    |IRR |Payback|
    |($ per ounce)|($ per ounce)|exchange|($ millions)|(%) |Period |
    |             |             |        |            |    |(Years)|
    |_____________|_____________|________|____________|____|_______|
    |      1,150  |      20.00  |   0.93 |      100   |7.1 |   6.8 |
    |_____________|_____________|________|____________|____|_______|
    |      1,300  |      22.00  |   0.95 |      314   |11.3|   5.5 |
    |_____________|_____________|________|____________|____|_______|
    |      1,450  |      24.00  |   0.97 |      520   |14.9|   4.4 |
    |_____________|_____________|________|____________|____|_______|
    |      1,600  |      26.00  |   1.00 |      706   |17.8|   3.8 |
    |_____________|_____________|________|____________|____|_______|

2014 Feasibility Study Key Parameters

The results of the 2014 Rainy River Feasibility Study, including
life-of-mine capital costs, average annual production and costs and
project economics, are all consistent with those developed by New Gold
in connection with its acquisition of Rainy River Resources in 2013.
Additional detail on the key Project parameters, including changes in
certain assumptions since Rainy River Resources’ May 2013 study, is
provided below:

Life-of-mine capital costs

        --  Increase in development capital costs primarily attributable to
            New Gold's plan to purchase, rather than lease, equipment and
            more conservative assumptions on labour productivity and rates
        --  Decrease in sustaining capital costs primarily attributable to
            above-noted plan to purchase equipment and reclassification of
            certain overburden and waste stripping costs from sustaining
            capital to operating costs
        --  In Canadian dollar terms, the total life-of-mine capital costs,
            including development and sustaining capital for both the open
            pit and underground, have increased by 8% when compared to the
            May 2013 study, which has been offset by an 8% depreciation in
            the Canadian dollar from US$/C$0.99 at the time of the 2013
            study results announcement to US$/C$0.91 today

Production

        --  Increased underground mineral reserves, from inclusion of
            Intrepid zone, and updated mine planning has resulted in
            contribution from higher grade underground now reaching 1,500
            tpd rate
        --  Life-of-mine total underground gold production increased by
            148,000 ounces
        --  Life-of-mine total open pit gold production decreased by
            391,000 ounces due to more conservative approach of using 10 x
            10 x 10 metre blocks for modelling rather than the 5 x 5 x 5
            metre blocks used previously

Operating Costs

        --  Minimal 5% increase in open pit mining cost per tonne mined,
            despite above-noted overburden and waste stripping costs being
            reclassified as mine operating costs
        --  Increase in underground mining cost per tonne resulting from
            updated mine planning and more conservative assumptions on
            productivity and rates
        --  Increase in processing costs due to increased electricity rate
            assumption of C$0.065 per kilowatt hour
        --  Lower all-in sustaining costs(2) during the first nine years as
            a result of the decrease in sustaining capital more than
            offsetting the increase in operating costs

Environment, Permitting and Corporate Social Responsibility

New Gold is an active member of the local community with offices in both
Emo and Thunder Bay, Ontario that offer residents easily accessible
locations to learn about the Rainy River project. The company has
engaged the local communities, as well as local First Nations and Métis
community members in its Project planning activities.

Environmental aspects have figured prominently in the development of the
layouts and designs for the Rainy River project. Among other aspects,
this includes consideration of the implications of design alternatives
from an environmental management perspective, with a particular focus
on mineral waste management, as well as the siting and location of
facilities and infrastructure. From an environmental perspective, the
Rainy River project is unique in that there are no lakes located
within, or adjacent to, the Project. Based on multiple years of
aquatics baseline investigations, with the exception of some limited
baitfish harvesting, the area streams do not support a significant
commercial or recreational fishery. There is considerable environmental
baseline information currently available regarding the site and the
surrounding area, compiled through extensive field investigations
conducted over a four-year period. This information is being augmented
as appropriate to support the progressing engineering design.

New Gold plans to operate the Project in accordance with the
International Cyanide Management Code.

The Rainy River project is being reviewed through a coordinated Federal
Environmental Assessment (“EA”) – Provincial Individual EA process.
During the second and third quarters of 2013, the draft EA report was
reviewed by local First Nations and Métis groups, Federal and
Provincial regulatory agencies and other stakeholders. All comments
received were addressed and a final EA report was submitted on December
3, 2013 for Federal conformity review. On December 12, 2013, the
company was informed that the final EA report had successfully passed
the Federal conformity review step. This milestone enables the company
to move forward with the next step in the review process as planned.
Consistent with the Project schedule, the final EA report is being
issued to the Federal and Provincial agencies, the local First Nations
and Métis groups and other stakeholders in the coming days to complete
the second consultation engagement.

The objective of final reclamation for the Rainy River project is to
return the site to a productive condition on completion of mining
activities. A conceptual closure plan consistent with regulatory
requirements was part of the draft EA report issued for review in 2013
and is also included in the final EA report. Consistent with the
Ontario Mining Act requirements, the formal Mine Closure Plan document
will be submitted later in 2014 for proposed filing concurrent with the
decision on the Provincial Individual EA. As much as possible,
reclamation will be completed progressively during operations,
consistent with industry best practices.

Once in full operation, Rainy River is expected to create approximately
600 permanent jobs. The construction work force would be approximately
450 people. New Gold is committed to maximizing local employment and
contracting opportunities. The company plans to work collaboratively
with community partners to prepare local workers and establish programs
for specific training where necessary.

     ____________________________________________________________________
    |About New Gold Inc.                                                 |
    |                                                                    |
    |New Gold is an intermediate gold mining company. The company has a  |
    |portfolio of four producing assets and three significant development|
    |projects. The New Afton Mine in Canada, the Cerro San Pedro Mine in |
    |Mexico, the Mesquite Mine in the United States and the Peak Mines in|
    |Australia provide the company with its current production base. In  |
    |addition, New Gold owns 100% of the Blackwater and Rainy River      |
    |projects, both in Canada, as well as 30% of the El Morro project    |
    |located in Chile. New Gold's objective is to continue to establish  |
    |itself as a leading intermediate gold producer, focused on the      |
    |environment and sustainability. 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 Rainy River’s expected future performance is
“forward looking”. All statements in this news release, other than
statements of historical fact, that address events, results, outcomes
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 of such terms.
Forward-looking statements in this news release primarily relate to the
results of the Rainy River Feasibility Study, and include, among
others, statements with respect to: the economic and feasibility
parameters of the Rainy River project, the cost and timing of
development of the Project, expected capital costs, sustaining capital
costs, production, cash costs and all-in sustaining costs; the expected
mine life, scale, mining methods and plan, processing methods and rate,
grades, recovery rates, stripping ratio, production and other
attributes of the Rainy River project; the estimation of mineral
reserves and resources; the timing for submission of the Rainy River
Environmental Assessment report and receipt of permits; the timing of
development of Rainy River in the future; and the expected pre- and
after-tax NPV, IRR and payback period associated with the Rainy River
project as well as the company’s plans with respect to tax planning and
allocation of tax attributes.

All forward-looking statements in this news release are based on the
opinions and estimates made as of the date such statements and are made
and are subject to important risk factors and uncertainties, many of
which are beyond New Gold’s ability to control or predict. Material
assumptions regarding forward looking statements are discussed in this
news release, where applicable, and will also be discussed in our
Technical Report, which will be filed on SEDAR within 45 days of this
news release. In addition to, and subject to, such specific
assumptions, the forward-looking statements in this new release are
subject to the following assumptions: (1) there being no signification
disruptions affecting the development and operation of the project; (2)
the exchange rate between the Canadian dollar and U.S. dollar being
approximately consistent with current levels; (3) the availability of
certain consumables and services and the prices for diesel, natural
gas, fuel oil, electricity and other key supplies being approximately
consistent with current levels; (4) labour and materials costs
increasing on a basis consistent with current expectations; (5)
permitting and arrangements with First Nations and other Aboriginal
groups being consistent with current expectations; (6) that all
environmental approvals, required permits, licenses and authorizations
will be obtained from the relevant governments and other relevant
stakeholders within the expected timelines; (7) certain tax rates,
including the allocation of certain tax attributes to the project; (8)
the availability of financing for New Gold’s development activities;
(9) the timelines for exploration and development activities on the
project; and (10) assumptions made in mineral resource and reserve
estimates, including geological interpretation grade, recovery rates,
gold price assumption, and operational costs; and general business and
economic conditions. Forward-looking statements are necessarily based
on estimates and assumptions that are inherently subject to known and
unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements to be materially different from
those expressed or implied by such forward-looking statements. Such
risks, uncertainties and factors include, without limitation:
significant capital requirements and availability of capital resources
to fund such requirements; price volatility in the spot and forward
markets for commodities; fluctuations in the international currency
markets and in the rates of exchange of the currencies of Canada and
the United States; 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; taxation; changes
to New Afton’s mine plan or profitability or to New Gold’s asset
profile that might alter the allocation of tax attributes to Rainy
River; controls, regulations and political or economic developments in
Canada; the speculative nature of mineral exploration and development;
risks associated with obtaining and maintaining the necessary licenses
and permits and complying with permitting requirements, including,
without limitation approval of the EA and receipt of all related
permits, authorizations or other rights, including under the Endangered Species Act and Public Lands Act; the uncertainties inherent to current and future legal challenges New
Gold is or may become a party to; diminishing quantities or grades of
reserves and resources; competition; loss of key employees; additional
funding requirements; rising costs of labour, supplies, fuel and
equipment; actual results of current exploration activities;
uncertainties inherent to mining economic studies such as the
Feasibility Study for Rainy River, including the risk that the
assumptions underlying the Feasibility Study and its economic
parameters will not be realized; 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; delays and costs inherent to consulting and accommodating
rights of First Nations and other Aboriginal Groups; and uncertainties
with respect to obtaining all necessary surface rights, land use rights
and other tenure from the Crown and private landowners required for the
Rainy River project. In addition, there are risks and hazards
associated with the business of mineral exploration, development and
mining, including environmental events and 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 (and, in respect to information related
to the Rainy River project, in Rainy River’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. Accordingly, readers should not place
undue reliance on forward-looking 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 of New Gold 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 National Instrument 43-101 (“NI 43-101″)
under guidelines set out in the Canadian Institute of Mining,
Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral
Resources and Mineral Reserves adopted by the CIM Council on November
27, 2010. While the terms “Mineral Resource”, “Measured Mineral
Resource”, “Indicated Mineral Resource” and “Inferred Mineral Resource”
are recognized and required by Canadian securities 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 pre-feasibility
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 Definition Standards differ in
certain respects from the standards of the United States Securities and
Exchange Commission.

Technical Information

The scientific and technical information in this news release has been
reviewed and approved by Mark Petersen, an AIPG Certified Professional
Geologist under National Instrument 43-101 and officer of New Gold. A
Technical Report to be prepared in accordance with Form 43-101F1 will
be filed on SEDAR within 45 days of this news release. For further
information with respect to the key assumptions, parameters and risks
associated with the results of the Feasibility Study, the mineral
reserve estimate and other technical information with respect to the
Rainy River project, please refer to the Technical Report to be made
available at www.sedar.com. The following qualified persons, as that term is defined in NI 43-101,
have prepared or supervised the preparation of their relevant portions
of the technical information in this news release and the related
Technical Report to be filed:

        --  Colin Hardie, P. Eng., BBA Inc.
        --  David Runnels, Eng., BBA Inc.
        --  Patrice Live, Eng., BBA Inc.
        --  Sheila Daniel, M. Sc., P. Geo, AMEC
        --  David G. Ritchie, P. Eng., AMEC
        --  Adam Coulson, PhD., P. Eng., AMEC
        --  Glen Cole, P. Geo., SRK Consulting (Canada) Inc.
        --  Dorota El-Rassi, P. Eng., SRK Consulting (Canada) Inc.
        --  Colm Keogh, P. Eng., AMC Consultants, Ltd.
        --  Mo Molavi, P. Eng., AMC Consultants, Ltd.

Mineral Resources

     _____________________________________________________________
    |Rainy River Mineral Resource Estimate - Effective November 2,|
    |                            2013                             |
    |_____________________________________________________________|
    |                          |Tonnes |Gold |Silver|Gold |Silver |
    |                          | (Kt)  |(g/t)|(g/t) |(Koz)| (Koz) |
    |__________________________|_______|_____|______|_____|_______|
    |Direct processing material|       |     |      |     |       |
    |Open Pit                  |       |     |      |     |       |
    |  Measured                |20,282 |1.45 | 1.93 | 947 | 1,261 |
    |  Indicated               |80,411 |1.35 | 2.55 |3,486| 6,584 |
    |  Measured and Indicated  |100,693|1.37 | 2.42 |4,433| 7,846 |
    |  Inferred                | 9,388 |0.97 | 2.28 | 292 |  687  |
    |Underground               |       |     |      |     |       |
    |  Measured                |  89   |4.95 | 2.75 | 14  |   8   |
    |  Indicated               | 5,469 |4.53 |11.34 | 796 | 1,994 |
    |  Measured and Indicated  | 5,558 |4.53 |11.20 | 810 | 2,002 |
    |  Inferred                | 2,641 |4.46 | 8.30 | 379 |  707  |
    |__________________________|_______|_____|______|_____|_______|
    |Stockpile material        |       |     |      |     |       |
    |Open Pit                  |       |     |      |     |       |
    |  Measured                | 6,294 |0.37 | 1.29 | 74  |  262  |
    |  Indicated               |64,816 |0.44 | 2.17 | 919 | 4,526 |
    |  Measured and Indicated  |71,110 |0.43 | 2.09 | 993 | 4,788 |
    |  Inferred                | 8,626 |0.37 | 1.16 | 102 |  323  |
    |__________________________|_______|_____|______|_____|_______|
    |Total Combined            |       |     |      |     |       |
    |  Measured                |26,665 |1.21 | 1.79 |1,035| 1,531 |
    |  Indicated               |150,696|1.07 | 2.70 |5,202|13,104 |
    |  Measured and Indicated  |177,361|1.09 | 2.57 |6,236|14,635 |
    |  Inferred                |20,655 |1.16 | 2.58 | 773 | 1,717 |
    |__________________________|_______|_____|______|_____|_______|

    Notes:

    1. Mineral resources are reported in relation to conceptual pit shells
    and are inclusive of the Intrepid zone. Vertical limit of -150m msl.
    2. Open pit mineral resources are reported at a cut-off grade of 0.30
    gpt gold, underground mineral resources are reported at a cut-off
    grade of 2.5 gpt gold based on a gold price of $1,400 per ounce, a
    silver price of $24.00 per ounce, a foreign exchange rate of C$1.10
    to US$1.00, gold recovery of 88% for open pit resources and 90% for
    underground resources with silver recovery at 75%.
    3. Direct processing material is defined as mineralization above a
    cut-off of 0.45 g/t gold and likely to be mined and processed directly.
    4. Stockpile material includes all material within conceptual pit
    shells in the gold grade range 0.30 - 0.45 gpt as well as all material
    within
    the CAP zone that is suitable for stockpiling and future processing
    based on average metallurgical recoveries of 88% gold and 75% silver.
    5. Qualified Persons - The mineral resource statement was prepared by
    Dorota El-Rassi, P. Eng. (APEO #100012348) and Glen Cole
    (APGO #1416) from SRK, both independent "Qualified Persons" as that
    term is defined in National Instrument 43-101.
    6. Mineral resources are inclusive of mineral reserves.  Mineral
    resources that are not mineral reserves do not have demonstrated
    economic viability.
    7. The mineral resource estimate may be materially affected by
    environmental, permitting, legal, title, taxation, sociopolitical,
    marketing
    and other relevant issues.

Non-GAAP Measures

(1) TOTAL CASH COSTS

“Total cash costs” per ounce figures are non-GAAP measures which are
calculated in accordance with a standard developed by The Gold
Institute, a worldwide association of suppliers of gold and gold
products and included leading North American gold producers that ceased
operations in 2002. 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 costs on a
sales basis. Total cash costs include mine site operating costs such as
mining, processing, administration, royalties and production taxes, but
are exclusive of amortization, reclamation, capital and exploration
costs. Total cash costs are 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-GAAP measure. Total cash costs
presented do not have a standardized meaning under GAAP 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 GAAP and is not necessarily
indicative of operating costs presented under GAAP.

(2) ALL-IN SUSTAINING COSTS

Consistent with guidance announced in 2013 from the World Gold Council,
an association of various gold mining companies from around the world
of which New Gold is a member, New Gold defines “all-in sustaining
costs” per ounce as the sum of total cash costs, sustaining capital
expenditures, corporate general & administrative costs, capitalized and
expensed exploration that is sustaining in nature and environmental
reclamation costs, all divided by the ounces sold to arrive at a per
ounce figure. New Gold believes this non-GAAP measure provides further
transparency into costs associated with producing gold and will assist
analysts, investors and other stakeholders of the company in assessing
the Rainy River project’s expected operating performance, ability to
generate free cash flow and its overall value. This data is furnished
to provide additional information and is a non-GAAP measure. All-in
sustaining costs presented do not have a standardized meaning under
GAAP and may not be comparable to similar measures presented by other
mining companies. It should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with GAAP
and is not necessarily indicative of operating costs presented under
GAAP.

SOURCE New Gold Inc.


Source: PR Newswire



comments powered by Disqus