New Gold Inc. Merger to Benefit Kamloops, New Afton Mine

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March 26, 2009

New Gold, Merger to Benefit Kamloops, New Afton Mine

After reading many of the research reports that came out on the New Gold - Western Goldfields Inc. merger, I was left with the impression that most analysts thought it was a good deal but not a great deal. It was a necessary stepping stone for both companies. So nobody won big, but nobody lost. It increases cash flow for them to take the next growth step.

But I can tell you one group that won big: the city of Kamloops, B.C. and everyone associated with the New Afton gold copper project there.

You see, even with the lower metal prices the world is experiencing today, this project would still be economic. Investors don't realize this. They think if the asset has been delayed, it's not economic.

If there was no credit crisis and the gold was $900 and copper was $1.60, it would be full steam ahead for this asset to be fast tracked into production. It was the availability of capital, not the economics, that caused the asset to be delayed. It has a relatively low forecast capital cost of about $600 million, of which $177 million has already been spent. But cash costs on the mine from the feasibility are $300/oz Au and $1.60 copper. It would be a significant cash cow for New Gold - even at these prices.

In an April 2, 2007 press release, New Gold had a sensitivity analysis that showed with copper at $1.50 and gold at $700, operating cash costs would be a NEGATIVE $432 per ounce, net of byproduct credits.

The mine is slated to produce 80,000 oz of gold and just under 80 million pounds of copper a year - total reserves are 1 million ounces of gold, 3 million ounces of silver and 1 billion pounds of copper.

New Gold would have spent over $300 million building the New Afton mine this year. But the credit crunch happened at the worst possible time for New Gold - just as $50 million in warrants with a $3.10 strike price were expiring. The stock crumbled to 94 cents in the October 2008 bloodbath and did not recover enough to get the warrants exercised.

The new plan is to only spend $83 million this year to continue development. It basically gets the infrastructure built to the bottom of the orebody, and when the next cash infusion comes in - from either equity or cash flow or debt or wherever - they have a turn-key asset ready to go, just insert mill.

Full article

For more information please contact:

Vanguard Shareholder Solutions
Tel: 604 608 0824
Toll Free: 1 866 398 1088

www.newgold.com

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