New Gold Announces Q2 Production, Cash Cost and New Afton Project Update



    (All figures are in US dollars unless otherwise stated)

    VANCOUVER, July 24 /CNW/ - New Gold Inc. ("New Gold") (TSX and AMEX -
NGD) is pleased to announce the second quarter production and cash cost, an
update on the New Afton project, and a revised forecast for 2008. The
production and cash cost information provided below are approximate figures
and might differ slightly from the second quarter earnings and includes
results for the period prior to the close of the business combination between
New Gold, Peak Gold Ltd. and Metallica Resources Inc. on June 30, 2008. It
should be noted that because the business combination closed on June 30, the
consolidated interim statements of New Gold for the period ended June 30, 2008
that will be released on August 14, 2008 will not include the results
presented below for the Cerro San Pedro mine and the New Afton project.

    
    Second Quarter Highlights

    Second quarter highlights reflect the operating results for the three
months ended June 30th, 2008 for Cerro San Pedro, Amapari and Peak Mines.

    -  Gold production was 62,705 ounces
    -  Gold sales were 62,730 ounces
    -  Total cash cost was $612 (net of by-product sales)
    -  Copper production was 1.237 million pounds
    -  Silver production was 284 thousand ounces

    First Half 2008 Highlights

    For the six month period ending June 30, 2008, the operational results for
Cerro San Pedro, Amapari and Peak Mines are as follows:

    -  Gold production was 124,295 ounces
    -  Gold sales were 130,351 ounces
    -  Total cash cost was $532 per ounce (net of by-product sales)
    -  Copper production was 3.4 million pounds
    -  Silver production was 512 thousand ounces
    

    The Cerro San Pedro mine in Mexico achieved excellent results in the
second quarter with gold sales increasing 39% at 22,190 ounces compared to
15,922 ounces in the first quarter of 2008. Silver sales increased 47% at
300,728 ounces in comparison to 203,973 ounces in the first quarter of 2008.
Gold and silver production for the second quarter was 20,653 ounces and
283,749 ounces respectively and for the six month period ending June 30, 2008,
gold and silver production was 38,943 ounces and 512,372 ounces respectively.
Total cash cost net of by product sales for the second quarter was $375 per
ounce and for the six month period ending June 30, 2008, was $426 per ounce.
Cash cost showed a 24% improvement in the second quarter in comparison to the
first quarter reflecting the production ramp up from the heaps.
    Operations at the Amapari mine in Brazil continued to be challenged by
low equipment availabilities and extreme rain falls. Second quarter gold
production was 20,938 ounces and for the six month period ending June 30,
2008, the gold production was 39,139 ounces. Total cash costs for the quarter
were $968 per ounce bringing the figure for the six month period ending
June 30, 2008 to $829 per ounce. During the quarter, access to higher grade
materials was restricted due to unfavourable weather conditions, while mobile
and plant equipment availabilities adversely impacted the amount of ore
processed. Unit costs were also impacted by $165 per ounce due to
reconciliation of leach pad inventory. A comprehensive review of operations at
Amapari is underway and is expected to return the project to normal operating
levels by year end.
    Second quarter results at Peak Mines in Australia included production of
21,114 ounces of gold and 1.2 million pounds of copper and for the six month
period ending June 30, 2008, gold production was 46,213 ounces and copper
production was 3.4 million pounds. Total cash cost net of by product sales for
the second quarter was $472 per ounce and for the six month period ending
June 30, 2008, was $360 per ounce. Production was adversely affected by
delayed development of two high grade stopes due to difficult ground
conditions deferring production to later in the year. While expenditures in
Australian dollar terms were at expected levels, lower production and exchange
rate movement impacted the cash costs.
    Commenting on operating results, Robert Gallagher, President and Chief
Executive Officer said, "The results at Cerro San Pedro are excellent and
in-line with expectations. Great work has also been done at the community
level in the environs of the mine. Operations at the Amapari mine continued to
face challenges during the quarter and we have recently embarked on an in
depth program to get to the heart of the issues. A team of experts has been
assembled and have begun their analysis. They will work with site staff to
implement and maintain the systems required to turn the operation around.
Engineering continues on processing plant modifications while, with a view to
the longer term at Amapari, New Gold is conducting a study of alternatives to
optimize production from the existing oxide and sulphide resources. Resource
conversion drilling continues with a total of five rigs. The Peak Mines were
adversely impacted by lower than expected gold and copper grades due to
unfavourable but temporary ground conditions and overestimation of grade in
two stopes. Grades will return to planned levels from the third quarter
onwards" concluded Mr. Gallagher.

    New Afton Project

    The New Afton project in Kamloops, Canada, gained momentum in the second
quarter. Underground development continued to ramp-up with three Cementation
development crews producing 1,267 metres of finished drift in the conveyor,
access decline and associated ventilation access drifts and crosscuts.
Excavation of the first 3.5m diameter ventilation borehole was completed
providing ventilation connections from the surface down to the exhaust
ventilation drift 307 metres below surface. Dewatering of the Afton pit
commenced and is ahead of schedule. The mining contractor has now expanded to
working four development faces and there are presently three mining crews
working seven days a week, 20 hours a day.
    Construction of the process plant commenced early in 2008 with the goal
of completing the earthworks and associated foundation and mill building work
by the end of 2008. The first concrete was poured for the New Afton processing
facilities in June 2008, three weeks ahead of schedule. The concentrator and
related facilities will be completed during the first three quarters of 2009.
The first ore is scheduled to be trucked to surface and along with stockpiled
development ore will enable commencement of milling operations during the
fourth quarter of 2009. Ramp up to four million tonnes per year capacity will
continue throughout 2010 and into early 2011.
    "The New Afton project is proceeding as scheduled and offers significant
internal growth opportunities for New Gold in the near future. At today's gold
and copper prices, the New Afton mine will be an enormous cash generator for
the Company," said Robert Gallagher

    2008 Forecast Update

    Metal production for 2008 is now forecast to be approximately 250,000
ounces of gold, 1.1 million ounces of silver and 9.4 million pounds of copper.
Total cash cost, net of by product credits is forecast to be between $500 and
$520 per ounce.
    New Gold will hold a conference call on Thursday, August 14, 2008 at
10:00 a.m. Pacific time to discuss these results. You may join the call by
dialing toll free 1-888-789-9572 or 1-416-695-7806 to access the call from
outside Canada or the U.S. You can listen to a recorded playback of the call
after the event until September 11, 2008 by dialing 1-800-408-3053 or
1-416-695-5800 for calls outside Canada and the U.S. Passcode: 3266725
followed by the number sign.
    New Gold also wishes to announce that Jim Simpson who was previously the
Executive Vice President and Chief Operating Officer for Peak Gold Ltd. will
be leaving New Gold at the end of August 2008. "On behalf of the Board and
Management, I would like to thank Jim for his prior contribution and wish him
all the success in the future," said Robert Gallagher, President and Chief
Executive Officer.
    New Gold is a new intermediate gold mining company with three operating
assets in Mexico, Brazil and Australia and two development projects in each of
Canada and Chile. For further information on New Gold, please visit our
website at www.newgold.com.

    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Certain information contained in the press release, including any
information as to New Gold's future financial or operating performance, may be
deemed "forward looking". All statements in this press release, other than
statements of historical fact, that address events or developments that New
Gold expects to occur, are "forward-looking statements". Forward-looking
statements are statements that are not historical facts and are generally, but
not always, identified by the words "express", "plans", "anticipates",
"believes", "intends", "estimates", "projects", "potential" "budget" and
similar expressions, or that events or conditions "will", "would", "may",
"could", or "should" occur. All such forward-looking statements 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 that are inherently subject to known and
unknown risks, uncertainties and other factors that may cause New Gold's
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: anticipated synergies
from the business combination may not be realized, there may be difficulties
in integrating the operations and personnel of New Gold, Peak Gold and
Metallica, New Gold is subject to significant capital requirements associated
with its expanded operations and portfolio of development projects since
completion of the business combination, fluctuations in the international
currency markets and in the rates of exchange of the currencies of Canada, the
United States of America, 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, Mexico, Chile and
Australia 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 necessary licenses and permits; 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). Forward-looking statements are not
guarantees of future performance, and actual results and future events could
materially differ from those anticipated in such statements. All of the
forward-looking statements contained in this press release are qualified by
these cautionary statements. New Gold expressly disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, events or otherwise, except in accordance with
applicable securities laws.

    CASH COST

    "Total cash cost" figures for gold production 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 the accepted standard of reporting cash costs 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. 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 then divided by ounces produced to arrive at the
total cash costs of production. The measure, along with production, 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. 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.





For further information:

For further information: Mélanie Hennessey, Vice President, Investor
Relations, New Gold Inc., Direct: (604) 639-0022, Toll-free: 1-888-315-9715,
Email: info@newgold.com, Website: www.newgold.com


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