New Gold Announces 44% Increase in Gold Sales, 8% Decrease in Cash Cost and $72 Million Increase in Cash in First Quarter of 2010

New Gold Announces 44% Increase in Gold Sales, 8% Decrease in Cash Cost and $72 Million Increase in Cash in First Quarter of 2010

(All figures are in US dollars unless otherwise indicated)


VANCOUVER, April 21 /CNW/ - New Gold Inc. ("New Gold") (TSX and NYSE AMEX:NGD) today announces 2010 first quarter gold sales of 80,020 ounces at a total cash cost(1) of $472 per ounce, net of by-product sales. The preliminary production, sales and total cash cost(1) information provided are approximate figures and may differ slightly from the first quarter earnings results. New Gold is also pleased to reiterate its 2010 full year guidance of 330,000 to 360,000 ounces of gold production at a total cash cost(1) of $445 to $465 per ounce sold, net of by-product sales.


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First Quarter Highlights

Results presented below are for the period of ownership for the Mesquite
Mine (June 1, 2009).

- Gold sales increased by 44% to 80,020 ounces from 55,397 ounces in
the same period in 2009

- Total cash cost(1) decreased 8% to $472 per ounce sold, net of by-
product sales, from $513 per ounce sold in the same period in 2009

- Gold production increased 41% to 77,215 ounces from 54,938 ounces in
the same period in 2009

- Cash balance increased by $72 million from year-end 2009 to $344
million at March 31, 2010

- Fully repaid the remaining $27 million of the Mesquite Term Loan
Facility

The Mesquite and Peak Mines had strong operating quarters achieving their targeted gold production levels at lower than forecasted total cash cost(1). In addition, in response to the delay in renewal of the explosives permit at Cerro San Pedro, operating parameters were adjusted to maximize the production of gold and silver and contribute meaningfully to the consolidated results in the first quarter of 2010. New Afton also continued its strong progress with a fifth straight quarter of increased underground advance since the beginning of 2009.


"We are very pleased with the operating performance and continued enhancements at all of our mines," stated Robert Gallagher, President and Chief Executive Officer. "Mesquite, Peak and New Afton all had an excellent start to 2010 and the team at Cerro San Pedro effectively maximized production from the heap leach pad despite the delayed receipt of our explosives permit."

Operations Overview

Historical results presented below include gold production, sales and total cash cost(1) for the first quarter of 2009 which reflects a period prior to the acquisition of the Mesquite Mine (June 1, 2009).

Mesquite Mine Successfully Increasing Production and Reducing Costs





Gold sales in the first quarter at Mesquite increased by 51% to 49,502 ounces from 32,715 ounces sold in the first quarter 2009. Gold production was 44,034 ounces compared to 33,660 ounces in the same period in 2009. The increased gold sales and production at Mesquite during the first quarter were primarily driven by mining at reserve grade when compared to the lower grade ore mined in the first quarter of 2009 as well as continued improvement in gold recoveries.


Total cash cost(1) per ounce of gold sold for the first quarter of 2010 was $550 compared to $573 in the same quarter of 2009. The total cash cost(1) decrease is a result of higher gold sales in the quarter partially offset by higher consumable and labour costs when compared to the first quarter of 2009.


The Mesquite Mine is forecast to produce 145,000 to 155,000 ounces of gold in 2010 at total cash cost(1) of $540 to $560 per ounce sold.





Cerro San Pedro Mine Maximizes Relative Contribution





As a result of a previously disclosed legal challenge that was subsequently dismissed in mid-March, the renewal of the Mine's explosives permit was delayed until March 18, 2010. Despite limited ore delivery in the first quarter, the team focused on optimizing the processing of heap leach ore to maximize the production of gold and silver during the quarter. Gold sales in the first quarter at Cerro San Pedro were 13,124 ounces compared to 18,314 ounces in the same period in 2009. Gold production was 12,938 ounces compared to 20,583 ounces in the same period in 2009. The decrease in production was a result of limited delivery of ore to the leach pad due to the delayed granting of the explosives permit. Silver sales in the first quarter were 193,506 ounces compared to 372,219 ounces in the first quarter of 2009.


Total cash cost(1) per ounce of gold sold, net of by-product sales, for the first quarter was $622 compared to $551 in the first quarter of 2009. The increase in total cash cost(1) is due to the fixed portion of operating costs at Cerro San Pedro being attributed to fewer gold ounces sold as well as lower by-product credits resulting from lower silver sales during the quarter. As the mine uses contracted equipment, variable mining costs were reduced, however, these were offset by increased processing costs to maximize production from the ore that was previously placed on the heap leach pad.


The company continues to work with federal and local levels of government in Mexico to resolve the ongoing legal challenges at Cerro San Pedro.


Since the receipt of the explosives permit the mine has been fully operational and the forecast for Cerro San Pedro remains unchanged with expected production of 95,000 to 105,000 ounces of gold and 1.4 to 1.6 million ounces of silver in 2010. Total cash cost(1) is forecast to be $390 to $410 per ounce sold, net of by-product sales. The full year total cash cost(1) assumption is based on a by-product silver price of $15 per ounce.





Peak Mines Continues to Deliver with Record Low Cash Cost(1)





Gold sales in the first quarter at Peak Mines were 17,394 ounces compared to 20,856 ounces sold in the first quarter of 2009. Gold production was 20,243 ounces compared to 20,629 ounces in the same period in 2009. Gold production quarter-over-quarter remained consistent, with gold sales decreasing slightly due to timing of concentrate shipments. Copper sales increased in the first quarter to 4.1 million pounds from 2.8 million pounds in the same quarter of 2009. The increase in copper production over the same quarter in 2009 was the result of higher copper grades and recoveries.


Total cash cost(1) per ounce of gold sold, net of by-product sales, for the first quarter was $136 compared to $337 in the first quarter of 2009. The decrease in total cash cost(1) is due to higher by-product sales resulting from increased copper volumes and higher average copper prices during the first quarter of 2010 compared to 2009. The first quarter cash cost further benefited from copper sales of 4.1 million pounds being netted against 17,394 ounces of gold sales. As gold sales are expected to increase in subsequent quarters of 2010, with copper sales remaining consistent, the relative by-product benefit should be lower than that recorded in the first quarter. These cost reductions were partially offset by an increase in the Australian dollar exchange rate when compared to the first quarter of 2009.


Peak Mines remains on target to produce 90,000 to 100,000 ounces of gold and 15 to 17 million pounds of copper in 2010. Total cash cost(1) is forecast to be $360 to $380 per ounce sold, net of by-product sales. The full year total cash cost(1) assumption is based on a by-product copper price of $2.75 per pound.





New Afton on Track to Contribute Significantly





New Gold's primary development project continued on schedule during the first quarter and is expected to commence production in the second half of 2012. The project will be an underground mine and concentrator which will produce an annual estimated average of 85,000 ounces of gold, and 75 million pounds of copper.


The company looks forward to production commencing in just over two years, as New Afton is expected to contribute significantly to New Gold's current portfolio of operating assets. As a low-cost operation, New Afton should meaningfully expand the company's operating margin and cash flow generation. At current commodity prices, the mine is expected to double the company's cash flow.


During the first quarter of 2010, the New Afton underground development crews continued their track record of continuous improvement advancing development 742 metres. This marks the fifth consecutive quarter of increased development.


Activities were initiated during the quarter in preparation for commencement of surface construction in May 2010, including: tendering of buried services contracts, geotechnical drilling and site grading.





El Morro Project Update





New Gold's 70% joint venture partner on the El Morro Project, Goldcorp Inc., continues to work through the permit review process for the project with a target to begin construction in early 2011. A project team has been assembled to advance exploration and development at the site during 2010 and plans to further optimize the existing feasibility study are underway.





First Quarter Production and Cash Cost(1) Overview





Results presented below are for the period of ownership for the Mesquite Mine (June 1, 2009).