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Issue 13 Vol.15 April 8, 2008 Customer Service 1-800-528-0559

Peak Gold (PIK, TSXV) � Merger Enhances Future Growth

Just over a year ago when Peak Gold started trading, my heads up alert referred to Peak as possibly the new Wheaton Minerals which morphed into Goldcorp, one of the world�s largest gold producers. What was once a 50 cent penny stock now has a market cap of $30 billion and has given early investors a spectacular 1300% return.

The reason for my optimism of Peak Gold last year was largely based on the fact that some of the key players behind the success of Wheaton were also involved with Peak Gold. The initial Peak Gold board of directors comprised of the Goldcorp Chairman and the former Chairman and CEO of Wheaton, Ian Telfer. Also the mastermind behind Endeavour Financial and the key player behind many of our success stories including last year�s UrAsia Energy, Frank Giustra and Gordon Keep, another key player from Endeavour.

Also Pierre Lassonde was appointed as a Special Advisor to the Board of Directors. Lassonde is currently the Chairman of Franco Nevada Corporation and formerly served as President of Newmont, one of the world�s largest gold companies.

You�ll be hard pressed to find such a collection of heavy weights running a newly formed gold company as this bunch. Though there is no guarantee Peak Gold will be another Wheaton, success usually breeds success and this group are serious company builders.

Now just over a year later, a mega $1.3 billion all stock merger has taken place with Peak Gold, New Gold (NGD, TSX; NGD, AMEX) and Metallica Resources (MR, TSX; MRB, AMEX) which will give the new company a market cap of $1.6 billion. The new entity will retain the New Gold name.

Peak Gold shareholders will be receiving one tenth of a New Gold share for each Peak share owned while Metallica shareholders will be receiving nine-tenths for every Metallica share owned.

With this merger, Peak Gold shareholders will now own an intermediate gold producing company with 2008 output of 297,000 ounces rising to an estimated 335,000 ounces in 2009 from three mines in Australia, Brazil and Mexico. In addition the new company will have new developing mines in their portfolio including New Golds� New Afton mine, which is scheduled to commence production in late 2009.

The new company will have cash costs of production of approximately US$340 per ounce of gold, net of by-product credits in 2008. There will also be a significant leverage to the uptrending gold prices as all the production is unhedged.

Combined metal inventories will include gold reserves and resources of 11 million ounces; silver reserves and resources of 83.7 million ounces; copper reserves and resources of over 4.4 billion pounds.

The new company will be in a position for rapid growth given their healthy treasury of $500 million in cash and short-term investments (including the potential cash proceeds from the exercise of in-the-money options and warrants), $120 million in investments, and a significant operating cash flow.

Here�s the key new projects New Gold and Metallica Resources are bringing to the table.

Metallica Resources (MR, TSX; MRB, AMEX)

Metallica has two primary assets, the 100% owned Cerro San Pedro gold-silver mine in Mexico and a 30% interest in the El Morro copper-gold property in Chile which is a joint venture with Xstrata.

The Cerro San Pedro is an open pit mine which is forecasted to produce a 10 year life of mine average of 125,000 ounces of gold equivalent (90,000 ounces silver, 2.1 million ounces of gold) annually at a cash cost of US $282 oz net of the silver by product. Production began in April of 2007 with a total of 33,600 ounces of gold equivalent produced over 2007. Initial operating costs came in at US $407 per ounce but should drop significantly going forward.

This mine will be a nice cash cow for the company in the years ahead.

The 3,600 hectare El Morro property in Chile was a result of a exploration agreement with Metallica and Falconbridge � who were later taken over by Xstrata. The agreement now has Xstrata obligated to complete a feasibility study and to provide 91% of the project financing (70% and 21% at Metallica�s option) dependent on a positive production decision. A feasibility study is now in its final stages.

Preliminary numbers suggested that over a 15 year mine life, El Morro could average 157,453 tons of copper and 337,225 ounces of gold.

A couple of major obstacles remain though and that concerns obtaining water and power. One scenario is that a water desalination plant could be built on the coast and the water could be pumped up to the 3,800 meter elevation. Needless to say, a huge amount of cash would be needed.

Also another wrench in the works for this project is that Xstrata may be taken over by CVRD-Vale thus delaying the development of El Morro further.

The bottom line is that Cerro San Pedro will be a major asset and cash cow for New Gold whereas the outcome for El Morro looks a little fuzzy right now.

New Gold Inc. (NGD:TSX/AMEX)

New Gold�s major asset is the New Afton Project located 10 kms from the city of Kamloops which is about a three hour drive from Vancouver. There�s great mining infrastructure up there with a long rich history.

New Afton has a 43-101 compliant Measured and Indicated Resource containing approximately 1.5 billion pounds of copper and 1.6 million ounces of gold. The project has a projected 13 year mine life which could annually produce on average 80,000 ounces of gold, 214,000 ounces of silver and 75.4 million pounds of copper.

The kicker with New Gold is that they are $292 million in debt. In 2007, the Company incurred a loss of $61.4 million or $2.00 per share compared with a loss of $3.5 million or $0.15 per share in 2006. The increased loss is primarily attributable to the $50.1 million impairment charge which the Company took in 2007 in respect of its investments in non-bank sponsored Asset Backed Commercial Paper ("ABCP").

This financial faux pas doesn�t speak highly of New Gold�s management who have been faced with the problem of financing the completion of the New Afton mine. This merger will alleviate that problem for them. At the same time, it gave Metallica and Peak Gold some leverage in acquiring a key asset under favorable terms.

Management and Directors

The market took an immediate liking to this merger announcement with all three stocks trading higher on the news. Again, I think it�s the people behind the deal that are drawing the favorable attention.

Upon completion of the deal, Robert Gallagher, currently Chief Executive Officer of Peak Gold, will assume that role for the combined company.

Clifford Davis, the Chairman and CEO of New Gold will stay on as a Director given his 40 year international mining experience in both underground and open pit mining.

Craig Nelson is also on the board and is currently the Chairman and Director of Metallica. He�s also the President, CEO, and a Director of Avanti Mining. Nelson was also the Executive V.P. of exploration for Gold Fields, one of the world�s largest gold companies.

Paul Sweeney brings 30 years of experience in the mining industry finance and is currently the V.P. of Corporate Development of Plutonic Power Corp.

And last but certainly not least, the two of the original heavy weights behind the Peak Gold deal, Pierre Lassonde and Ian Telfer will be Directors as well.

Certainly the new board are a exponentially more powerful group who are more than capable of leading New Gold forward.

Conclusion

This deal is good for Peak Gold shareholders. The addition of Metallicas� Cerro San Pedro mine and New Golds� New Afton Mine will ramp up the company�s cash flow, profits, production, reserves and resources going forward.

At the end of the day the pro forma ownership of the New Company will work out to Metallica Resources owning 45.7%, Peak Gold owning 37.8% and New Gold controlling 16.5%.

The potential for short term share price appreciation is good. The combined company will have a price to net asset value of 0.94X whereas the peer group average for intermediate gold companies is 1.23X.

Further increased valuation will come by way of ramping up production from the existing mines and further mergers or acquisitions. With over a half a billion in cash, the board of New Gold will be able to make sharp deals when the time is right.

The merger is subject to the entering into of definitive agreements among the parties on or before May 9, 2008, the preparation and mailing of a joint information circular, and the holding of special meetings of each company�s shareholders. The parties expect to complete and mail the joint information circular in early June 2008 and plan to hold the special meetings in late June 2008. The Transaction is expected to close in early July 2008.

As I stated a year ago, Peak Gold may not turn out to be another Wheaton clone but the company does possess the potential for triple digit returns going forward. Now more than ever I still believe this will be the case.

Peak Gold is a buy for growth.

For further information go to www.jameswinston.com


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