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New Gold Announces 2011 Second Quarter Results with Gold Sales of 95,039 Ounces at Total Cash Cost(1) of $354 Per Ounce

August 3, 2011

(All figures are in US dollars unless otherwise indicated)

VANCOUVER, Aug. 3, 2011 /PRNewswire/ - New Gold Inc. (“New Gold”) (TSX:NGD)(NYSE AMEX:NGD) today announces
financial and operational results for the second quarter of 2011. The
company finished the second quarter with gold sales of 95,039 ounces at
a total cash cost((1)) per ounce sold, net of by-product sales, of $354 per ounce. The
company’s ability to deliver increased gold sales at lower costs along
with the continued strength in commodity prices resulted in another
quarter of robust financial results. During the quarter, the company’s
earnings from mine operations increased by 129% to $83 million with net
earnings increasing to $79 million, or $0.19 per share, while pre-tax
cash generated from operations increased by 96% to $88 million and net
cash generated from operations was $44 million.

New Gold is also pleased to reiterate its production and cost guidance
for 2011 with gold production of 380,000 to 400,000 ounces at total
cash cost((1)) per ounce sold, net of by-product sales, of $390 to $410 per ounce. The
company believes that with the continued strength of silver and copper
prices, the total cash cost((1)) may be below the above noted cost range as it has been on a
year-to-date basis.

New Gold Second Quarter Highlights

        --  Second quarter total cash cost(1) per ounce sold, net of
            by-product sales, decreased to $354 per ounce from $481 per
            ounce in the same period in 2010
        --  Quarterly gold sales increased by 15% to 95,039 from 82,403 in
            the same period in 2010
        --  Second quarter net earnings of $79 million, or $0.19 per share
        --  First caving-related blast successfully completed at New Afton
            connecting two underground levels below the ore body
        --  $490 million of cash at June 30, 2011
        --  Completed the acquisition of Richfield Ventures Corp.
            ("Richfield"), and its flagship Blackwater Project in British
            Columbia on June 1, 2011
        --  Increased the exploration program at the Blackwater Project -
            targeting 40,000 to 50,000 metres of drilling in the second
            half of 2011

“The second quarter was particularly important in the continued
evolution of New Gold,” stated Randall Oliphant, Executive Chairman.
“Our operating results further established our company as a low cost
producer in the industry, while development at New Afton and El Morro
only helped add further value to those projects. With this foundation,
we were able to complete the acquisition of Richfield, adding the
exciting Blackwater Project with its established gold resource base and
significant exploration potential to our pipeline, all while minimizing
dilution to our shareholders and maintaining our financial
flexibility.”

2011 Second Quarter Operations Overview


       New Gold 2011 Second Quarter Consolidated - Summary Operational
                                   Results 

                                   Three months ended   Six months ended

                                             June 30,           June 30,

                                     2011        2010      2011     2010

    Gold                                                                

    Sales (thousand                  95.0        82.4     199.3    162.4
    ounces)

    Production
    (thousand                        88.5        89.9     196.1    167.1
    ounces)

    Average realized
    price ($ per                   $1,417      $1,147    $1,365   $1,113
    ounce)

    Silver                                                              

    Sales (thousand                 602.3       505.4   1,188.1    698.9
    ounces)

    Production
    (thousand                       520.4       547.1   1,155.7    753.8
    ounces)

    Average realized
    price ($ per                   $38.85      $18.38    $35.78   $18.02
    ounce)

    Copper                                                              

    Sales (million                    3.6         3.0       7.5      7.1
    pounds)

    Production                        3.4         4.0       6.9      8.0
    (million pounds)

    Average realized price ($ per   $4.05       $3.09     $4.12    $3.26
    pound)

    Total cash cost(1)- net of       $354        $481      $353     $475
    by-product sales ($ per ounce)

    Average realized margin ($ per $1,063        $666    $1,012     $638
    ounce)

Together, the company’s portfolio of three operating mines delivered yet
another strong quarter, while New Gold’s three large
exploration/development projects each made significant progress.
Operationally, while the Peak Mines went through a challenging quarter
as anticipated, Mesquite and Cerro San Pedro especially performed very
well, leading the group to a quarter of increased gold sales at
significantly lower total cash cost((1)) resulting in meaningful margin expansion for New Gold’s shareholders.

New Afton, the company’s most immediate development project, continues
its rapid progression towards production less than 12 months from now.
The second quarter saw a number of milestones, two of which included
the first caving-related blast which connected two underground levels
below the ore body and the commencement of the installation of the
processing equipment in the mill building. At El Morro, after the
Environmental Impact Assessment (“EIA”) was received on March 16, 2011,
the company’s 70% partner Goldcorp Inc. (“Goldcorp”) aggressively began
work on the project’s advancement including application for additional
permits, condemnation drilling, site plan optimization, detailed
engineering of infrastructure and contract negotiation with key
suppliers. The company’s newest project, Blackwater, was added to the
portfolio on June 1, 2011. Since that time, New Gold has increased the
2011 drill program, released the results for an additional 22 holes and
has been working to upgrade the mine camp to facilitate the addition of
more drills while also building on a number of pre-established
relationships with the local First Nations, communities, governments
and other regulatory bodies.

“Our second quarter was very active and importantly it demonstrated the
capacity of our various teams to deliver strong results in their
respective areas,” stated Robert Gallagher, President and Chief
Executive Officer. “The execution by our operating teams continues to
underpin our ability to add value by advancing our development assets
and adding in new and exciting projects such as Blackwater.”

2011 Second Quarter Consolidated Financial Results


    New Gold 2011 Second Quarter Consolidated - Summary Financial Results 

                                      Three months ended   Six months ended

    Figures in US$ millions unless              June 30,           June 30,
    otherwise noted

                                       2011         2010    2011       2010

    Revenue                           171.6        112.4   342.8      214.0

    Average realized
    gold price ($ per                 1,417        1,147   1,365      1,113
    ounce)

    Average margin per ounce ($ per   1,063          666   1,012        638
    ounce)

    Earnings from mine                 83.5         36.5   164.0       73.3
    operations

    Net earnings/(loss) from           78.6       (26.0)   103.3     (13.0)
    continuing operations

    Net earnings/(loss)                0.19       (0.07)    0.25     (0.03)
    per share

    Adjusted net earnings/(loss) from  49.8         14.1    96.6       29.6
    continuing operations

    Adjusted net earnings/(loss) per   0.12         0.04    0.24       0.08
    share

    Pre-tax cash generated from        87.6         44.6   148.6       76.6
    operations

    Net cash generated from            44.0         40.4    93.7       63.4
    operations

As a result of New Gold’s strong operating results and the continued
strength in the underlying commodity prices, the company was able to
realize meaningful increases in virtually all financial categories.
Increased gold sales at higher average realized gold prices led to a
53% increase in revenue during the second quarter of 2011. Importantly,
the company was able to couple this revenue growth with lower total
cash cost((1)) resulting in a $397 per ounce increase in the average realized margin
leading to a 129% increase in earnings from mine operations.

Net earnings from continuing operations in the second quarter of 2011
grew significantly to $79 million, or $0.19 per share, after being in a
net loss position in the same period of 2010. Adjusted net earnings
from continuing operations((2)) increased to $50 million, or $0.12 per share, during the quarter. Net
earnings has been adjusted and tax affected for the group of costs in
“Other gains and 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
second quarter of 2011 which was a pre-tax gain of $30 million,
relative to a pre-tax loss of $29 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 9% to $44 million when
compared to the prior year quarter, however, cash flow in the quarter
was negatively impacted by a $20 million increase in cash taxes related
to the payment of the company’s 2010 final tax liability, which had
previously been accrued, as well as an increase in the quarterly
payments for 2011 instalments. The pre-tax cash generated from
operations increased by 96% in the second quarter of 2011 compared to
the same period of the prior year.

Mesquite Mine Steadily Delivers Growth in Earnings from Mine Operations


                                                   Mesquite

                                      Three months ended   Six months ended

                                                June 30,           June 30,

                                       2011         2010    2011       2010

    Gold                                                                   

    Sales (thousand ounces)            34.6         38.8    85.0       88.3

    Production (thousand               33.8         38.8    82.6       82.9
    ounces)

    Average realized prices                                                

    Gold ($ per ounce)                1,241        1,083   1,240      1,063

    Total cash cost(1) ($               654          616     588        576
    per ounce)

    Earnings from mine operations ($   15.2          9.4    44.0       26.8
    millions)

Gold sales at Mesquite in the second quarter of 2011 and year-to-date
period remained relatively consistent with the prior year periods while
the operating team remained focused on cost control despite
year-over-year input cost pressures. By minimizing the impact of cost
pressures on total cash cost((1)) and through the increase in the average realized gold price, Mesquite
increased earnings from mine operations by 62% to $15 million during
the second quarter of 2011. Similarly, in the first six months of 2011,
earnings from mine operations increased 64% to $44 million when
compared to the same period of the prior year.

Gold production and sales during both the second quarter and
year-to-date period were marginally lower than the comparative prior
year periods due to fewer ore tonnes being placed on the leach pad as
mining temporarily transitioned into an area of higher waste stripping.
This was partially offset by the continued benefit of higher grade ore
being placed on the leach pad during the second quarter of 2011 and
year-to-date period. The change in total cash cost((1)) was primarily driven by the increases in waste tonnes moved and inputs
costs, such as diesel fuel, and was partially offset by increased
operator efficiencies.

Cerro San Pedro Mine Has Stellar Second Quarter and Start to 2011


                                              Cerro SanPedro

                                     Three months ended   Six months ended

                                               June 30,           June 30,

                                      2011         2010      2011     2010

    Gold                                                                  

    Sales (thousand                   43.6         24.8      75.4     38.0
    ounces)

    Production (thousand              39.7         29.4      75.3     42.4
    ounces)

    Silver                                                                

    Sales (thousand                  602.3        505.4   1,188.1    698.9
    ounces)

    Production (thousand             520.4        547.1   1,155.7    753.8
    ounces)

    Average realized
    prices

    Gold ($ per ounce)               1,506        1,205     1,458    1,175

    Silver ($ per ounce)             38.85        18.38     35.84    18.02

    Total cash cost(1)- net of          26          288        18      403
    by-productsales ($ per ounce)

    Earnings from mine operations ($  55.7         14.7      90.1     17.9
    millions)

Cerro San Pedro has had a very strong start to 2011, with increases in
gold sales and decreases in total cash cost((1)) in both the second quarter and first six months of 2011 when compared
to the same periods in 2010. In the second quarter, the combination of
a 76% increase in gold sales, a decrease in total cash cost((1)) per ounce of gold sold, net of by-product sales, to $26 per ounce and
the higher realized gold price resulted in a 280% increase in earnings
from mine operations to $56 million. For the six months ended June 30,
2011, with even more significant increases in gold sales and decreases
in total cash cost((1)), Cerro San Pedro increased earnings from mine operations by 402% to $90
million.

Gold production and gold and silver sales during both the second quarter
of 2011 and year-to-date periods were higher than the comparative prior
year periods due to increased ore tonnes being placed on the leach pad
in the second quarter and first half of 2011. In 2010, Cerro San Pedro
experienced a delay in receiving its explosives permit which resulted
in less ore tonnes being moved in the prior year periods. The benefit
of the additional ore tonnes in 2011 was partially offset by lower gold
and silver grades due to mine sequencing. The decrease in total cash
cost((1)) in both the second quarter of 2011 and year-to-date periods was a
result of higher by-product revenues driven by both higher silver sales
and prices. This benefit was partially offset by the appreciation of
the Mexican peso relative to the prior year periods.

Peak Mines Through Challenging Quarter – Looks to Stronger Second Half


                                                  PeakMines

                                      Three months ended   Six months ended

                                                June 30,           June 30,

                                       2011         2010    2011       2010

    Gold                                                                   

    Sales (thousand                    16.8         18.8    38.9       36.2
    ounces)

    Production
    (thousand                          15.0         21.6    38.1       41.9
    ounces)

    Copper                                                                 

    Sales (million                      3.6          3.0     7.5        7.1
    pounds)

    Production                          3.4          4.0     6.9        8.0
    (million pounds)

    Average realized
    prices

    Gold ($ per                       1,549        1,201   1,458      1,171
    ounce)

    Copper ($ per                      4.05         3.09    4.12       3.26
    pound)

    Total cash cost(1)- net of          585          459     488        303
    by-product sales ($ per ounce)

    Earnings from mine operations ($   12.6         12.4    30.1       28.5
    millions)

Gold sales at Peak Mines in the second quarter of 2011 and year-to-date
periods were similar to the prior year periods, while copper sales
increased. As a result of the increases in average realized gold price,
and despite the cost pressures experienced in Australia, Peak Mines
increased earnings from mine operations moderately in both the second
quarter of 2011 and year-to-date when compared to the same periods of
the prior year.

Gold and copper production during the second quarter of 2011 were lower
than the prior year period as mine sequencing led to ore being sourced
primarily from a new zone. As anticipated, the ore from this zone
generally contained lower average gold grades with the mill also
realizing lower recoveries of gold and copper. The increase in total
cash cost((1)) during both the second quarter of 2011 and year-to-date periods is
driven by two primary factors: the appreciation of the Australian
dollar and the largely fixed cost base being spread over lower gold
ounces as a result of the lower grades and recoveries. The copper
production and continued strength of the copper price continue to
provide a meaningful offset to costs and provide for attractive
operating margins despite the relative increase in total cash cost((1)).

New Afton Development Moving Quickly – Close to 600 Workers on Site

New Gold’s most immediate development project continued on schedule
during the second 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.

New Afton achieved an important milestone during the second quarter as
the crews successfully completed the first caving-related blast at the
base of the ore body. An area was drilled and blasted to connect the
level at the base of the ore body, referred to as the undercut level,
with the level directly above it, referred to as the apex level. This
first caving-related blast proceeded as planned with crews now planning
for the first drawbell blast, scheduled for the third quarter, which
will mark the official beginning of mine production and ore delivery to
surface at New Afton.

New Afton Second Quarter Underground Highlights

        --  First caving-related blast successfully completed connecting
            two underground levels below the ore body
        --  2,166 metres of underground advance completed
        --  Six additional drawpoints mined on the extraction level
        --  ~68,000 tonnes of ore moved to surface stockpile as at June 30,
            2011
        --  Commenced development of first ore pass from undercut to
            haulage level
        --  Commissioned two vent raises adding significant ventilation
        --  Received remaining equipment including longhole drills, bolters
            and jumbos to complete underground development

New Afton Second Quarter Surface Construction Highlights

        --  Completed all civil works associated with coarse ore stockpile
            and reclaim tunnel
        --  Completed tie-in to 138kV power line with materials mobilized
            for extension of line to tailings storage facility
        --  Commenced construction activities for tailings pipeline
            corridor and tailings pond area
        --  Commenced installation of processing equipment with associated
            structural steel including conveyors and flotation cells
        --  Completed construction of water storage tanks and commissioned
            water distribution system

In the second quarter of 2011, project spending at New Afton was $83
million, including capitalized interest. On a year-to-date basis,
project spending has been $127 million, including capitalized interest.

In addition to the significant progress being made at the site,
negotiations regarding the New Afton concentrate were also advanced
during the quarter. The off-take agreement for the last 15% of the
estimated concentrate production was finalized and is currently
awaiting execution. The company also established an agreement for
storage of concentrate at the Vancouver wharves which, similarly, has
been completed and is now awaiting execution. Further, New Gold has
selected the counterparty it intends to use for the trucking of
concentrate from New Afton to the wharves and the negotiation of the
agreement has commenced.

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 $260 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 more than double the company’s cash
flow.

El Morro Lays Foundation for Successful Development

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. Future exploration
efforts will also test the potential for bulk-mineable gold and copper
production below the bottom of the current pit. 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.

During the second quarter of 2011, Goldcorp worked to prepare the
project for development on numerous fronts.

El Morro Second Quarter Highlights

        --  Completed an 18-kilometre road linking existing access road to
            the property
        --  Commenced condemnation drilling to verify infrastructure
            locations
        --  Commenced application process for additional construction
            permits
        --  Continued negotiations with potential providers of power and
            port facilities, engineering of pipelines and equipment
            manufacturers of long lead time items
        --  Continued evaluation of optimum plant and other facility
            configuration - updated feasibility study expected in third
            quarter of 2011

On a 100% basis, capital expenditures, excluding capitalized interest,
during the three months ended June 30, 2011 amounted to $21 million,
with year-to-date expenditures totalling $32 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 is currently recessed,
but will resume in October 2011. New Gold continues to believe that the
claim is without merit.

Blackwater Acquisition Completed – Aggressive Exploration Started

On June 1, 2011, New Gold closed the acquisition of Richfield thus
adding the exciting Blackwater Project to the company’s pipeline.
Blackwater is located in central British Columbia, with New Gold’s
share of the initial mineral resource estimate including 1.8 million
ounces of indicated gold resources and an additional 2.0 million ounces
of inferred gold resources. The company looks forward to building on
this initial resource and on June 15, 2011, New Gold announced an
expanded drill program that will see the company drill between 40,000
and 50,000 metres in the second half of 2011.

Since acquiring the project on June 1(st), the company has been very active in preparing for its continued
exploration and development, highlights of which include:

Blackwater Second Quarter Highlights

        --  Successfully retained majority of geologic staff and
            consultants
        --  Established site safety and environmental standards consistent
            with New Gold standards
        --  Commenced implementation of sustainability program including
            proposed sourcing from local communities and related
            discussions with local First Nations, government and regulatory
            officials
        --  Added fifth drill rig on June 15th
        --  Completed over 6,200 metres of drilling in June (16 holes)
        --  Commenced upgrade of 17-kilometre access road to site
        --  Commenced camp expansion for accelerated drill program
        --  Continued environmental baseline program
        --  Continued trade-off studies on potential locations for site
            facilities
        --  Identified samples for further metallurgical test program

New Gold looks forward to providing further updates on the Blackwater
exploration results through the third and fourth quarters as the
deposit remains open in all directions and at depth. The company is
targeting an updated resource estimate in early 2012.

Key Financial Information

New Gold’s cash balance at June 30, 2011 was $490 million. The company
had $247 million of debt outstanding at the end of the second quarter
comprised of $185 million of 10% senior secured notes due in 2017 (face
value of C$187 million), $46 million of 5% convertible debentures due
in 2014 (face value of C$55 million and C$9.35 strike price) and $16
million in El Morro project funding loans.

2011 Outlook

Through the first six months of 2011, New Gold has produced 196,100
ounces of gold at total cash cost((1)), net of by-product sales, of $353 per ounce. New Gold is pleased to
reiterate its production and cost guidance for 2011 with gold
production of 380,000 to 400,000 ounces at total cash cost((1)) per ounce sold, net of by-product sales, of $390 to $410 per ounce. The
combination of operational execution and the continued strength of
silver and copper prices have allowed the year-to-date total cash cost((1)) to be below the guidance range despite relative foreign exchange rates
and industry-wide cost inflation negatively impacting costs.

Looking forward to the second half of 2011, the three operations should
remain relatively consistent with targeted increases in gold production
from Peak Mines offsetting any potential drop in production from
Mesquite and Cerro San Pedro. Depending on the relative movements of
silver and copper prices versus certain input costs and foreign
exchange rates, total cash cost((1) )are expected to be below the guidance range thus offering shareholders
superior margins. The company’s three exploration/development projects
should continue to advance meaningfully with multiple catalysts
anticipated in the second half of 2011.

Conference Call and Webcast

New Gold will hold a conference call and webcast on Thursday, August
4th, 2011 at 10:00 am Eastern Daylight Time to discuss the company’s
second 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 85279963.

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 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 SecondQuarter Consolidated - Adjusted Net Earnings
                                 Reconciliation

                                     Three months ended   Six months ended

    Figures inUS$millions unless               June 30,           June 30,
    otherwise noted

                                       2011        2010    2011       2010

    Net earnings/(loss) from           78.6      (26.0)   103.3     (13.0)
    continuing operations

    Net earnings/                      0.19      (0.07)    0.25     (0.03)
    (loss) per share

        Adjustments:                                                      

        Fair value of derivative -    (3.3)         1.3   (0.9)      (0.7)
        Senior notes

        Fair value of derivative     (30.0)        29.3   (5.7)       39.4
        -Warrants/Convertibles

        Gain/(loss) on
        foreign                         1.1         6.3   (2.0)        5.0
        exchange 

        Other                           3.8       (0.3)     4.5      (2.6)

        Tax impact of                 (0.4)         3.6   (2.7)        1.5
        adjustments

                                     (28.8)        40.1   (6.8)       42.6

    Adjusted netearnings/(loss)        49.8        14.1    96.6       29.6
    fromcontinuing operations

    Adjusted net earnings/(loss) per   0.12        0.04    0.24       0.08
    share

 


    New Gold Inc.                                                          

    Condensed
    consolidated income
    statements

    Three and six month periods
    ended June 30,

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

    (Unaudited)                                                            

                                  Three months             Six months ended
                                         ended

                             2011         2010        2011             2010

                               $            $           $                $ 

    Revenues              171,635      112,359     342,848          213,979

    Operating expenses   (70,943)     (57,173)   (141,659)        (109,059)

    Depreciation and     (17,194)     (18,706)    (37,221)         (31,669)
    depletion

    Earnings from mine     83,498       36,480     163,968           73,251
    operations

    Corporate             (5,172)      (6,137)    (11,178)         (11,607)
    administration
    expenses

    Share-based           (2,563)      (1,907)     (5,419)          (3,847)
    payment expenses

    Exploration and       (4,033)      (3,017)     (6,334)          (4,986)
    corporate
    development
    expenses

    Income from            71,730       25,419     141,037           52,811
    operations

      Finance income          922          396       1,968              652

      Finance costs       (1,520)        (289)     (2,657)            (847)

      Other gains and      28,420     (36,530)       4,022         (41,142)
      losses

    Earnings (loss)        99,552     (11,004)     144,370           11,474
    before taxes

    Income tax expense   (20,950)     (15,002)    (41,049)         (24,438)

    Net earnings           78,602     (26,006)     103,321         (12,964)
    (loss) from
    continuing
    operations 

    Loss from                   -     (10,191)           -          (9,886)
    discontinued
    operations

    Net earnings           78,602     (36,197)     103,321         (22,850)
    (loss)

    Earnings (loss)
    per share from
    continuing
    operations

      Basic                  0.19       (0.07)        0.25           (0.03)

      Diluted                0.16       (0.07)        0.25           (0.03)

    Earnings (loss)
    per share from
    discontinued
    operations

      Basic                     -       (0.03)           -           (0.03)

      Diluted                   -       (0.03)           -           (0.03)

    Earnings (loss) per share
    from continuing and
    discontinued operations

      Basic                  0.19       (0.09)        0.25           (0.06)

      Diluted                0.16       (0.09)        0.25           (0.06)

    Weighted average
    number of shares
    outstanding

    (in thousands)                                                         

      Basic               416,372      389,885     407,901          389,423

      Diluted             428,763      389,885     420,063          389,423

 


    New Gold Inc.                                                          

    Condensed consolidated statements of financial position

    (Expressed in thousands of U.S. dollars)                               

    (Unaudited)                                                            

                                                      June 30   December 31

                                                         2011          2010

                                                           $             $ 

    Assets                                                                 

    Current assets                                                         

      Cash and cash equivalents                       490,446       490,754

      Trade and other receivables                      25,398        11,929

      Inventories                                     118,895       103,055

      Prepaid expenses and other                        5,862         7,325

    Total current assets                              640,601       613,063

    Investments                                             -         7,533

    Mining interests                                2,375,677     1,767,240

    Deferred tax assets                                18,800        10,058

    Reclamation deposits and other                     24,239        31,295

    Total assets                                    3,059,317     2,429,189

    Liabilities                                                            

    Current liabilities                                                    

      Trade and other payables                         71,560        69,245

      Current derivative liabilities                   45,016        40,072

      Current non-hedged derivative liabilities        12,405             -

      Current tax liabilities                          27,716        31,392

    Total current liabilities                         156,697       140,709

    Reclamation and closure obligations                38,606        34,173

    Provisions                                         14,661         9,227

    Non-current derivative liabilities                106,553       113,303

    Non-current non-hedged derivative                 141,688       155,365
    liabilities

    Deferred tax liabilities                          174,754       179,180

    Long-term debt                                    246,692       229,884

    Deferred benefit                                   46,276        46,276

    Other                                                 651           577

    Total liabilities                                 926,578       908,694

    Equity                                                                 

    Common shares                                   2,347,620     1,845,886

    Contributed surplus                                78,897        81,176

    Other reserves                                   (42,445)      (51,913)

    Deficit                                         (251,333)     (354,654)

                                                    (293,778)     (406,567)

    Total equity                                    2,132,739     1,520,495

    Total liabilities and equity                    3,059,317     2,429,189

 


    New Gold Inc.                                                          

    Condensed consolidated statements of
    cash flows

    Three and six month periods ended
    June 30,

    (Expressed in thousands of
    U.S. dollars)

    (Unaudited)                                                            

                                   Three months ended      Six months ended

                                     2011        2010        2011      2010

                                       $           $           $         $ 

    Operating activities                                                   

      Net earnings (loss)          78,602    (36,197)     103,321  (22,850)

      Earnings from                     -      10,191           -     9,886
      discontinued operations

      Adjustments for:                                                     

        Unrealized gain on        (2,208)     (2,089)     (4,210)   (4,165)
        gold contracts

        Unrealized loss on              -         118           -       183
        fuel contracts

        Unrealized foreign          1,134       6,321     (1,981)     4,952
        exchange (gain) loss

        Unrealized and                  -       (948)     (1,349)   (4,892)
        realized gain on of
        investments

        Unrealized (gain) loss   (30,036)      29,296     (5,681)    39,405
        on non-hedged
        derivatives

        Loss on disposal of           144       1,019         252     1,417
        assets

        Depreciation and           17,218      18,692      36,855    31,762
        depletion

        Share-based payments        1,945       1,826       3,720     3,724

        Unrealized (gain) loss    (3,304)       1,255       (850)     (652)
        on embedded derivative
        contract

        Unrealized loss on          1,859           -       3,686         -
        cash flow hedging
        items

        Income tax expense         20,950      15,002      41,049    24,438

        Finance income              (922)       (396)     (1,968)     (652)

        Finance costs               1,520         289       2,657       847

                                   86,902      44,379     175,501    83,403

      Change in operating             653         179    (26,948)   (6,771)
      working capital 

    Cash generated from            87,555      44,558     148,553    76,632
    operations

      Income taxes paid          (43,582)     (4,154)    (54,818)  (13,274)

    Net cash generated from        43,973      40,404      93,735    63,358
    operations

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

    Investing activities                                                   

      Mining interests           (85,903)    (26,460)   (143,085)  (48,462)

      Interest paid              (11,147)    (10,295)    (11,412)  (10,501)

      Recovery (contribution)           -         (2)       8,147      (43)
      of reclamation deposits

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

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

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

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

      Interest received               495         560       1,541       792

      Proceeds from disposal           83           -         215        29
      of assets

    Cash used in continuing      (77,883)    (36,197)   (117,078) (426,797)
    operations

    Cash generated from                 -      34,629           -    34,410
    discontinued operations

    Financing activities                                         

      Exercise of options to        1,353       5,645      12,593     6,410
      purchase common stock

      El Morro loan                     -           -           -   463,000

      Revolving credit              (347)           -       (778)         -
      facility costs

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

    Cash generated by               1,006       5,645      11,815   442,175
    financing activities

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

    Effect of exchange rate         3,181    (13,005)      11,220   (7,710)
    changes on cash and cash
    equivalents

    (Decrease) increase in       (29,723)      31,476       (308)   103,740
    cash and cash equivalents

    Cash and cash equivalents,    520,169     344,616     490,754   272,352
    beginning of period

    Cash and cash equivalents,    490,446     376,092     490,446   376,092
    end of period

    Cash and cash equivalents
    are comprised of

      Cash                        269,236     128,972     269,236   128,972

      Short-term money market     221,210     247,120     221,210   247,120
      instruments

                                  490,446     376,092     490,446   376,092

 

 

 

SOURCE New Gold Inc.


Source: newswire



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