New Gold Announces Preliminary Economic Assessment At Blackwater

VANCOUVER - New Gold Inc. reported positive Preliminary Economic Assessment for its Blackwater Gold Project in British Columbia, Canada. Over the initial 15 years of its mine life, Blackwater is estimated to produce an annual average of 507,000 ounces of gold and 2,039,000 ounces of silver at total cash costs per ounce sold, net of by-product sales, of $536 per ounce. At assumed gold and silver prices of $1,275 and $22.50 per ounce and a 0.94 US$/CDN$ foreign exchange rate, the Project is expected to yield a base case after-tax, 5% net present value ("NPV") of $1.1 billion and an after-tax internal rate of return ("IRR") of 14.0%. At spot commodity prices of $1,775 per ounce gold and $34.50 per ounce silver and a parity exchange rate, the after-tax, 5% NPV and IRR move to $2.8 billion and 25.8%, respectively. All NPV calculations are calculated to the beginning of the construction period in 2015. The PEA was completed on a pre-tax basis by AMEC Americas Limited ("AMEC"), an independent and internationally-recognized engineering firm. All after-tax calculations were completed by New Gold.

Preliminary Economic Assessment Highlights: Conventional truck and shovel open pit mine with 60,000 tonne per day ("tpd") whole ore leach process plant; Start of production targeted for 2017; Initial 15-year mine life with additional 1.4 years of processing low grade stockpile at end of pit life; Life-of-mine strip ratio of 2.36 to 1.00 of waste to mineralized material; Life-of-mine gold and silver recoveries of 87% and 53%, respectively; Life-of-mine gold and silver production, inclusive of low grade stockpile, of 6.2 and 18.6 million ounces from the Indicated category and 1.8 and 13.5 million ounces from the Inferred category, respectively; Development capital costs of $1.8 billion inclusive of 24 percent, or $346 million, contingency; Higher grade initial five years resulting in accelerated payback of capital costs. First five years - average annual gold production of 569,000 ounces at total cash costs per ounce sold, net of by-product sales, of $467 per ounce; Base Case - After-tax 5% NPV, IRR and payback at $1,275 per ounce gold, $22.50 per ounce silver and a 0.94 US$/CDN$ foreign exchange rate of $1.1 billion, 14.0% and 4.8 years, respectively; Spot Case - After-tax 5% NPV, IRR and payback at spot prices of $1,775 per ounce gold, $34.50 per ounce silver and a parity US$/CDN$ foreign exchange rate of $2.8 billion, 25.8 percent and 2.7 years, respectively.

The PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA based on these mineral resources will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

"We are very pleased to have delivered this important project milestone at Blackwater just 15 months after acquiring the property," stated Randall Oliphant , Executive Chairman. "We feel fortunate to have Blackwater in our portfolio. Our flagship property is expected to produce over half a million ounces of gold per year at low cash costs in a great jurisdiction. Blackwater should generate robust economic returns even at a gold price that is $500 per ounce below where it trades today."

"The completion of the PEA and upcoming filing of our Project Description allow us to formally begin the permitting process for Blackwater," added Robert Gallagher , President and Chief Executive Officer. "With the benefit of our permitting and development track record and strong stakeholder relationships at New Afton and in the Blackwater area, we look forward to advancing Blackwater with similar success."

The PEA resource is based on drill results up to mid-May 2012. Since then, New Gold's exploration program has continued apace and the company looks forward to incorporating these additional results in the Project's Feasibility Study scheduled for completion in 2013. Beyond the primary Blackwater deposit that forms the basis of this PEA,╩ the company's total land package is now over 1,000 square kilometres. New Gold looks forward to continuing its exploration efforts within and around the Capoose gold-silver deposit, located approximately 25 kilometres from Blackwater, as well as the multiple exploration targets that have been identified through New Gold's 2012 property-wide reconnaissance program.

The Blackwater mineral resource was tabulated within a conceptual open pit at 0.25, 0.30 and 0.40 gram per tonne gold equivalent cut-off values using $1,300 per ounce gold and $24 per ounce silver as shown below. At a base case lower cut-off of 0.30 gram per tonne gold equivalent, the deposit contains an Indicated mineral resource of 267 Mt at 0.88 g/t gold and 4.3 g/t silver and an Inferred mineral resource of 121 Mt at 0.69 g/t gold and 7.3 g/t silver. The mineral resource estimate is CIM 2010 compliant and prepared under Canadian National Instrument 43-101 and is based on a block model estimate that incorporates over 147,282 individual assays from 168,709 metres of diamond drill core in 449 drill holes. Average drill hole spacing of approximately 50 metres is sufficient to support mineral resource estimation up to the Indicated category. The drill hole database was supported by approximately 40,000 quality assurance/quality control (QA/QC) check assays, representing approximately 28% of the total sample assay dataset. The mineral resource includes drill data received through May 14, 2012 and thus excludes the potential success from additional drilling during New Gold's exploration program since that time. The company has drilled an additional 100,363 metres in 377 drill holes since the mid-May cut-off for the resource database. A portion of this additional drilling was intended to support upgrades in resource confidence categories as part of the company's targeted completion of a Feasibility Study next year.

A proposed mining production schedule was developed through the design of an ultimate open pit within the mineral resource model. The mine production schedule incorporates an elevated cut-off grade strategy during the initial years of mining to raise the mill feed grade. Material below the higher cut-off grade is stockpiled for processing at the end of the pit life. Large-scale open pit mining will provide process plant feed at a nominal rate of 60,000 tpd or 21.9 million tonnes per year. Annual mine production will peak at 97 million tonnes per year with a life-of-mine stripping ratio of 2.36:1.00. The production schedule summarized below was developed through four mining phases and allows for early delivery of higher grade material to the process plant.

Mining operations will be carried out with an initial equipment fleet comprising two 311 millimetre electric blast hole drills, two 56 cubic metre electric cable shovels, one 18 cubic metre front-end loader and sixteen 290 tonne trucks.╩ These will be supplemented with support graders and track and rubber-tired dozers. A 10 metre bench height has been selected for mining.

A metallurgical testwork program for the PEA was carried out on samples of composited drill core selected to represent process plant feed in the mine development plan. These samples were obtained from two primary sources: a dedicated four-hole metallurgical drilling program and composites of exploration drill core from 89 holes. Primary areas of investigation for the whole ore leach program included primary grind size and leach retention time. Estimated process plant feed grade, recoveries and metal production are summarized below.

The 60,000 tpd process plant will utilize conventional crushing, grinding, leaching and carbon-in-pulp ("CIP") to produce a gold-silver dorÄ. A gravity circuit consisting of centrifugal concentrators will treat a portion of the primary cyclone underflow to recover coarse metallic gold. The gravity concentrate will be directed to an intensive cyanidation reactor for extraction of gold and silver. Ground material will be directed to a leach feed thickener, then to a leaching and CIP extraction circuit. Extracted gold and silver will be released from carbon in the stripping columns and recovered by electrowinning before being smelted into a gold-silver dorÄ product. Stripped carbon will be treated in a regeneration kiln.

The Project is located approximately 112 kilometres southwest of Vanderhoof and is close to existing infrastructure. Access to low cost hydroelectric power is available and will require the construction of a 133 kilometre transmission line. The estimated development capital cost is $1.8 billion inclusive of a 24%, or $346 million, contingency. The capital estimate is based on the second quarter 2012 capital environment, a period of very active project construction in British Columbia, Alberta and globally. As the development capital was estimated based on the current cost environment, a parity foreign exchange rate was assumed and the capital estimate was held constant at $1.8 billion in the economic analysis irrespective of which commodity price and foreign exchange scenario was assumed upon the start of production.

Driven by the continued exploration success at Blackwater, during the 2012 summer, New Gold increased its 2012 exploration drilling target to over 250,000 metres in the Blackwater area versus the previous target of 210,000 metres. As the PEA mineral resource update incorporates 151 holes totaling 57,064 metres of the total 2012 target, the company intends to provide further exploration updates on Blackwater through the remainder of the year. Since the mid-May PEA mineral resource cut-off, the company has drilled an additional 100,363 metres in 377 holes. Currently there are 13 drills active at the Blackwater site.