VANCOUVER, July 17 /CNW/ - New Gold Inc. ("New Gold") (TSX and NYSE AMEX - NGD) today announces 2009 second quarter combined gold sales of 68,627 ounces at a total cash cost(1) of $499 per ounce, net of by-product sales. The production and total cash cost(1) information provided are approximate figures and may differ slightly from the second quarter earnings and include results for the period prior to the close of the business combination with Western Goldfields Inc. ("Western Goldfields") on June 1, 2009.

Second Quarter Highlights

- Combined(2) gold sales of 68,627 ounces at a total cash cost(1) of

$499 per ounce sold

- Combined gold production of 72,677 ounces

- Closed business combination with Western Goldfields on June 1, 2009

The Cerro San Pedro and Peak Mines performed as expected during the quarter and for the six months ended June 30, 2009. The Mesquite mine has underperformed which is largely due to equipment availability issues, fewer ounces of gold than expected in an area of the Rainbow pit, and increased consumption of cyanide and lime. The first two issues are in hand, while the increased reagent consumption is necessary to achieve optimum recovery. An additional factor in the increased total cash cost(1) per gold ounce sold at Mesquite is due to a one-time charge in May to convert the haulage fleet from bias ply tires to radial tires. Mesquite will experience the operational and cost benefits of the radial tires for the remainder of 2009 and going forward. In order to catch-up on waste stripping and get the mine plan back on schedule, a mining contractor has been temporarily retained to augment the Mesquite mining fleet.

Robert Gallagher, President and Chief Executive Officer said: "With continued strong performance at Cerro San Pedro and Peak, we are very pleased to see our production increase and cash cost decrease compared to the second quarter of 2008. We continue to maintain our focus on operations, including the current integration of Mesquite, where we have completed a full review and are taking the necessary steps to best position New Gold to achieve its strategic goals."

2009 Forecast Update

For the combined Company, previously announced 2009 guidance for gold production of 330,000 to 360,000 ounces at a total cash cost(1) per ounce of gold sold, net of by-product sales, of $490 to $510, remains unchanged. For the period of New Gold ownership of Mesquite, the 2009 guidance of the combined company represents gold production of 270,000 to 300,000 ounces at a total cash cost(1) per ounce of gold sold, net of by-product sales, of $470 to $490.

Operations Overview

Mesquite Mine

Gold production for the second quarter at Mesquite was 26,085 ounces compared to 28,524 ounces in the second quarter 2008. Gold production was lower in the second quarter 2009 mainly due to equipment availability, fewer ounces of gold than expected in an area of the Rainbow pit, and lower grades in comparison to the same quarter the prior year. Gold grades were well above the life of mine average in the second quarter 2008 resulting in the higher production, whereas second quarter 2009 gold grade is in-line with the life of mine plan. For the period of New Gold ownership, from June 1-30, 2009, gold production was 9,041 ounces. For the six months ending June 30, 2009, gold production was 59,745 ounces compared to 37,670 ounces produced in the same period in 2008, during the initial ramp-up period.

Total cash cost(1) per ounce of gold sold for the second quarter of 2009 was $647 compared to $548 in the second quarter of 2008. For the period of New Gold ownership, total cash cost(1) per gold ounce sold was $708 in June 2009. Total cash cost(1) increase in the second quarter is mainly attributable to higher operating costs due to an increase in total tonnes moved of 13.9 million versus 12.5 million, and lower production. Total cash cost(1) per ounce of gold sold for the six months ended June 30, 2009 was $607 compared to $667 in the same period last year. The decrease in cash cost(1) year over year is attributable to the production start-up phase at Mesquite in the first half of 2008.

2009 gold production and total cash cost guidance of 140,000 to 150,000 ounces at a total cash cost(1) per ounce of gold sold between $530 and $540 remains unchanged.

Cerro San Pedro Mine

Gold production for the second quarter at Cerro San Pedro was 24,210 ounces compared to 20,653 ounces produced in the second quarter of 2008. The increase in production was due to higher tonnes placed on the pad and increased recovery rate, partially offset by lower feed grade. For the six months ending June 30, 2009, gold production was 44,793 ounces compared to 38,943 ounces produced in the same period in 2008. Silver production for the second quarter was 414,038 ounces compared to 283,749 ounces produced in the second quarter of 2008. For the six months ending June 30, 2009, silver production was 841,477 ounces compared to 512,372 ounces produced in the same period in 2008. The increase in silver production year over year is attributed to higher silver grades mined during the first half of 2009.

Total cash cost(1) per ounce of gold sold, net of by-product sales, for the second quarter was $429 compared to $375 in the second quarter of 2008. Total cash cost(1) per ounce of gold sold, net of by-product sales, for the six months ended June 30, 2009 was $483 compared to $426 in the same period last year. The increase in cash cost(1) is due to lower silver prices and higher consumables costs, which were partly offset by higher silver production and the depreciation in the Mexican Peso versus the US dollar.

Second quarter gold production and cash cost are consistent with the 2009 guidance of 90,000 to 100,000 ounces of gold and 1.1 million to 1.3 million ounces of silver at a total cash cost(1) per ounce of gold sold, net of by-product sales, between $550 and $570.

The Cerro San Pedro sulfide drilling program continued during the second quarter with the completion of six holes totalling 3,576 meters. The drill program is testing the resource potential of a zone of sulfide mineralization that extends from immediately beneath the current open pit mining operation to an area of historic underground mining located approximately 500 meters to the southwest. Since the start of drilling during the fourth quarter of 2008, twelve holes totalling 7,216 meters have been completed. Based on the encouraging results returned from these first twelve holes, a second phase of drilling has been initiated to extend the drilling coverage into the area of the current open pit. The second phase of drilling will involve the completion of an additional 15 holes totalling approximately 10,000 meters as well as, preliminary metallurgical test work and preparation of an updated mineral resource estimate by year-end.

Peak Mines

Gold production for the second quarter at Peak Mines was 22,382 ounces compared to 21,114 ounces produced in the second quarter of 2008.