Production Starts At The New Afton Mine

VANCOUVER - New Gold Inc. reported that production at its New Afton Mine has started with the first ore having been processed through the mill circuit on June 28, 2012 . New Gold is pleased that the June production start met the company's originally stated timeline and the commissioning of the mill circuit has been consistent with its expectations. Since the first ore was placed in the mill circuit, the mill has been running on a continuous basis with progressively more ore being added to the circuit. The company anticipates that over the course of the coming weeks, the daily milling rate will continue to increase. New Gold's target for commercial production at New Afton, defined as 30 days of operation at 60% of capacity, or 6,600 tonnes per day.

In addition to the recent mill production start, New Afton's underground mining operations, which began in the fourth quarter of 2011, continue to perform well. The daily mining rate and the growth in the surface ore stockpile are all tracking at or ahead of targeted levels.

"After a tremendous amount of hard work on the part of the entire team at New Afton, we are very excited that production has now started. We are proud to be in a position to deliver this project on schedule, and to see it become the fourth operating mine in our portfolio," stated Robert Gallagher , President and Chief Executive Officer. "New Afton is an important part of the history of our company and we look forward to this mine becoming our most significant cash flow generator."

New Afton's total development cost remains approximately C$765 million. The total development cost is net of revenue from gold and copper sales between the start of production and the commencement of commercial production in August.

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

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

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

A further benefit of New Afton's production start is New Gold's exploration team can now drill the C-zone block of mineralization that lies below and to the side of the New Afton reserve block in an effort to add to the mine's base 12 year life. The exploration team has previously limited its work on this initiative, as the on-time production start at New Afton has been the company's priority. New Gold has budgeted $5 million for exploration at New Afton in the second half of 2012 to further explore and delineate the C-zone.

About New Gold Inc.

New Gold is an intermediate gold mining company. The company has a portfolio of four producing assets and two significant development projects. New Gold's New Afton project met its targeted June 2012 production start and is scheduled to begin commercial production in August 2012 . Together with the Mesquite Mine in the United States , the Cerro San Pedro Mine in Mexico and Peak Gold Mines in Australia , the company is forecasting between 405,000 and 445,000 ounces of gold production in 2012.

The company's address is Suite 1800, Two Bentall Centre,555 Burrard Street, Vancouver, BC V7X 1M9.