New Gold Announces First Quarter 2009 Results

    (All figures are in US dollars unless otherwise stated)

    VANCOUVER, May 12 /CNW/ - New Gold Inc. ("New Gold") (TSX and NYSE AMEX
US - NGD) today announced unaudited financial results and operational results
for the quarter ended March 31, 2009 and an update on the business combination
with Western Goldfields Inc.

    Q1 2009 Highlights

    -   Net earnings of $12.1 million or $0.06 per share
    -   Cash flow from operations of $7.7 million
    -   Gold production of 54,938 ounces
    -   Gold sales of 55,397 ounces at a total cash cost of $513 per ounce,
        net of by-product sales(1)
    -   Cash and cash equivalents of $137 million
    -   Reduced debt position by C$50 million through the buy back of a
        portion of New Gold's Senior Secured Notes for cash consideration of
        C$30 million, reducing debt position to C$242 million
    -   Announced business combination with Western Goldfields Inc., which,
        if approved, targets the combined gold production forecast at 330,000

    As disclosed in New Gold's news release issued on April 21, 2009, sales
were higher and cash cost(1) was lower than expected. Guidance remains
unchanged with 190,000 to 210,000 ounces of gold production at total cash cost
of $465 to $485 per ounce, net of by product sales.
    "We are pleased to report excellent operational performance for the first
quarter of 2009, performing in line with our expectations. This reflects the
quality of our team and is consistent with management's commitment to
delivering on our operational targets," said Robert Gallagher, President and
Chief Executive Officer. "As we look forward to the business combination with
Western Goldfields, we remain focused on our operational objectives, as well
as executing on our exciting growth strategy and delivering on our vision of
becoming a million ounce producer by 2012."

    First Quarter Financial Review

    Consolidated revenues for the first quarter 2009 were $58.8 million
compared to $56.2 million in the first quarter of 2008, with higher volume
sold offsetting lower realized price. Gold sales in the first quarter were
55,397 ounces with an average realized gold price of $898 per ounce compared
to 51,700 ounces at a gold price of $933 per ounce in the corresponding
quarter of 2008. Total cash cost per ounce(1), net of by-product sales, for
the first quarter was $513 in comparison to $427 in the first quarter of 2008.
The increase is attributed primarily to lower copper concentrate revenues at
Peak Mines, with significantly lower copper prices offset by higher
production. This increase was partially offset by the inclusion of Cerro San
Pedro and the weakening of the currencies of Brazil and Australia against the
US dollar. Lower gold sales at Amapari were more than offset by the inclusion
of Cerro San Pedro production, which was not part of consolidated sales until
the third quarter of 2008. Copper sales volume was slightly higher in the
first quarter of 2009 with 2.75 million pounds compared to 2.55 million pounds
in the same period last year, offset by lower copper prices in the first
quarter of 2009 compared to the first quarter in 2008 (Q1 2009 - $1.70/lb., Q1
2008 - $3.75/lb.).
    Net earnings for the first quarter 2009 were $12.1 million or $0.06 per
share compared to $9.8 million or $0.13 per share in the first quarter of
2008. Net earnings include a gain of $10.1 million after income taxes on the
buy back of a portion of Senior Secured Notes. Before this item, earnings were
lower in 2009 than in the corresponding quarter of 2008 because of lower
by-product revenue and higher depreciation and exploration expenditures.
    Cash flow from mine operations in the first quarter 2009 was $7.7 million
compared to $18.4 million for the same period last year. Higher gold and
silver revenue from the inclusion of Cerro San Pedro were offset by lower
copper revenue due to lower price, increased working capital (primarily copper
concentrate inventory) and exploration spending.

    Operational Review

    Cerro San Pedro

    Cerro San Pedro gold sales totalled 18,314 ounces at a realized gold
price of $906 per ounce sold. Silver production increased significantly during
the quarter to 427,439 ounces from 290,520 ounces in the prior quarter. This
significant increase in silver production can be attributed to higher silver
grades mined in the first quarter of 2009 and higher recovery primarily due to
the impact of the secondary leaching. Total cash cost per ounce(1), net of
by-product sales, was $551 in comparison to $522 in the fourth quarter of
2008. The increase in cash cost(1) is mainly attributable to lower gold sold
which was slightly off-set by increased silver production and a 10% weakening
of the Mexican peso against the US dollar. Earnings from Cerro San Pedro were
$1.2 million for the quarter. Cash flow from operations in the first quarter
2009 was $7.2 million.
    First quarter gold sales and cash cost(1) are in line with the mine plan
and guidance of 90,000 to 100,000 ounces of gold and 1.1 million to 1.3
million ounces of silver at a cash cost(1), net of by-product sales, of
between $550 and $570 per ounce.

    Peak Mines

    Peak Mines gold sales in the first quarter totaled 20,856 ounces at a
realized gold price of $897 per ounce sold. Copper sales in the first quarter
totaled 2.75 million pounds at a realized copper price of $1.70 per pound.
Gold sales were lower and copper sales higher in the first quarter 2009 in
comparison to the same quarter in the prior year, with mining shifting to the
Perseverance Zone D and Chesney ore bodies as per the mine plan. Total cash
cost per ounce(1), net of by-product sales, was $337 compared to $281 in the
corresponding period of 2008. The increase is primarily due to lower
by-product credit from copper sales and lower ounces sold partially offset by
a more favourable Australian dollar exchange rate. The average exchange rate
of the Australian dollar declined 36.1% against the US dollar in the first
quarter of 2009 compared to the same period last year. Earnings from
operations at the Peak Mines were $9.2 million for the quarter. Cash flow to
operations in the first quarter 2009 was $1.5 million, due to the receipt of a
$22.8 million partial pre-payment in the fourth quarter of 2008, at an average
price of $1.79 per pound of copper.
    First quarter gold sales and cash cost(1) are in line with the mine plan
and guidance of 90,000 to 100,000 ounces of gold and 13 million to 15 million
pounds of copper at total cash cost(1),net of by-product sales, of between
$370 and $390 per ounce.

    Amapari Mine

    On January 2, 2009, the Amapari mine in Brazil was placed on temporary
care and maintenance due to depletion of ore suitable for treatment at the
existing facilities. Gold production from previously stacked ore was 13,726
ounces for the quarter, exceeding 2009 production guidance of 10,000 to 12,000
ounces. First quarter gold sales were 16,227 ounces at a cash cost of $696 per
ounce(1). Leaching of the material stacked in the fourth quarter of 2008 has
now been completed and leach pads are in the final stage of neutralization.
Loss from operations at Amapari was $0.94 million. Cash flow from operations
in the first quarter 2009 was $4.5 million.
    New Gold is evaluating a recently completed Preliminary Assessment on the
economics of developing the sulfide resources at Amapari, which would require
installation of a conventional crush/grind/carbon-in-leach mill. Considering
the large land package in a geologically permissive setting and the occurrence
of several interesting targets, the company is also investigating other
strategic alternatives for the project. This analysis is expected to be
completed in the second quarter of 2009.

    New Afton and El Morro Projects Update

    New Afton, New Gold's primary development project, is expected to
commence production in the second half of 2012. The project will be an
underground block cave mine, which will produce an annual estimated average of
85,000 ounces of gold and 75 million pounds of copper over a 12 year mine
life. The development schedule for New Afton, which was revised in November of
last year, involves continuation of underground development through to 2012
and resumption of surface construction at the end of 2010.
    During the first quarter of 2009, the New Afton mining team successfully
transitioned from a contractor operator to owner operator work force of 87
employees with the new crews completing 195 meters of development. Erection of
the mill building was completed in the first quarter, providing a secure
location for the storage of mine and mill equipment that has been received.
During the first quarter of 2009, project spend at New Afton was C$22.4
million, which is mainly comprised of C$5.3 million in equipment, C$5.5
million to complete and enclose the mill building and C$3.5 million for
engineering and consulting fees.
    The El Morro copper-gold project, of which New Gold owns 30% with
Xstrata, entered the permitting stage with the submission of the Environmental
Impact Statement in November of 2008. It is anticipated that the permit will
be obtained within 12 to 18 months from that date, after which development
activities could proceed. Permitting activities continue and detailed
engineering of infrastructure has commenced.

    Liquidity and Capital Resources

    New Gold held cash and cash equivalents of $136.6 million as at March 31,
2009. The decrease in the cash position quarter over quarter is attributed to
the following key items: the acquisition from noteholders of C$50.0 million
face value of New Gold's senior secured notes for C$30.0 million on January 9,
2009; development expenditures at New Afton of C$22.4 million; and repayment
of approximately $7.0 million in short-term borrowings at Amapari. The
Company's overall debt position has reduced to C$242 million from C$297
million (face value). The debt is comprised of C$187 million in senior secured
notes and C$55 million in convertible debentures.
    Robert Gallagher, President and Chief Executive Officer said, "We will
continue to take the steps necessary to maintain a solid financial position
while pursuing an aggressive growth strategy. Our exceptional management team
and board, coupled with a solid financial position and cash-flow positive
operating assets, continue to position New Gold to build momentum toward
delivering increasing shareholder value."

    Update on Business Combination with Western Goldfields

    The business combination with Western Goldfields announced on March 4,
2009 continues to move forward; materials for the Annual and Special Meeting
of Shareholders were mailed to shareholders for the New Gold and Western
Goldfields meetings which are scheduled for May 13, 2009 and May 14, 2009,
respectively. Upon approval, the business combination is expected to close on
or about June 1, 2009.

    To view the financial statements, please click here:

    To download the first quarter report, please click here:

    Conference Call-in Details

    New Gold will hold a conference call to discuss these results on May 13,
2009 at 10:00am E.T. Anyone may join the call by dialling toll free
1-888-789-9572 or +1-416-695-7806 to access the call from outside Canada or
the U.S. Passcode 5423385. You can listen to a recorded playback of the call
after the event until June 25, 2009 by dialling 1-800-408-3053 or
+1-416-695-5800 for calls outside Canada and the U.S. Passcode No.2830064.

    New Gold is an intermediate gold mining company with operating assets in
Mexico and Australia and development projects in Canada and Chile. For further
information on New Gold, please visit

    (1) "Total cash cost" 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
the accepted 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-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.


    Certain information contained in this press release, including any
information relating to New Gold's future financial or operating performance,
may be deemed "forward looking". All statements in this press release, other
than statements of historical fact, that address events or developments that
New Gold expects to occur, are "forward-looking statements". Forward-looking
statements are statements that are not historical facts and are generally, but
not always, identified by the 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 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: New Gold and Western
Goldfields will be able to satisfy the conditions in the business combination
agreement, that the required approvals (shareholder, third party regulatory
and governmental) will be obtained and all other conditions will be satisfied
or waived; the results of the preliminary assessment assessing the viability
of a new process facility at Amapari; New Gold's operations are subject to
significant capital requirements; fluctuations in the international currency
markets and in the rates of exchange of the currencies of Canada, the United
States, Australia, Brazil, 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, Brazil, 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 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) as well as "Risks Factors" included in New
Gold's Annual Information Form filed on March 31, 2009 and management
information circular filed on April 15, 2009, both available at
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.

For further information:

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

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