(All figures are in US dollars unless otherwise stated)

VANCOUVER, Aug. 6 /CNW/ - New Gold Inc. ("New Gold") (TSX and NYSE AMEX - NGD) today announced unaudited financial and operational results for the second quarter ended June 30, 2009. Adjusted net earnings(1) were $10.6 million, or $0.04 per share, in comparison to adjusted net loss(1) of $4.7 million, or $0.05 per share, in the same period in 2008. New Gold reported a net loss of 202.8 million or $0.79 per share in comparison to a net loss of $4.8 million, or $0.05 per share, in the same period in 2008. The main adjustments leading to the second quarter net loss were: a goodwill impairment charge of approximately $189.6 million related to the business combination with Western Goldfields; a foreign exchange loss of $31.1 million, mark-to-market gains of $9.0 million on gold and fuel contracts, and realized and unrealized gains on investments of $9.7 million. Gold sales were 52,890 ounces at a realized gold price per ounce sold of $926.

As previously announced, during the quarter, the Company closed its merger with Western Goldfields Inc. ("Western Goldfields") delivering on its strategy of value generating growth through continued merger and acquisition activity. The 2009 second quarter results presented below include one month of operations from Western Goldfields' Mesquite mine.

Q2 2009 Highlights
-   Operating cash flows of $16.5 million compared to cash flows used
    from operations of $3.0 million in the corresponding quarter of 2008
-   Adjusted net earnings(1) of $10.6 million, or $0.04 per share,
    compared to adjusted net loss(1) of $4.7 million, or $0.05 per share,
    in the corresponding quarter of 2008
-   Gold production of 55,633 ounces representing a 32% increase over the
    corresponding quarter in 2008
-   Gold sales of 52,890 ounces at a total cash cost(2) per ounce sold,
    net of by-product sales of $468 compared to 40,540 ounces at a total
    cash cost(2) per ounce sold, net of by-product sales of $742, in the
    corresponding quarter of 2008
-   Cash and cash equivalents of $141.1 million at June 30, 2009
-   Closed business combination with Western Goldfields Inc. on June 1st,
    2009

"We are pleased to report a 30% increase in gold sales, a 37% decrease in cash cost and a $19.5 million increase in operating cash flow compared to the same quarter in 2008. These results underpin the success of our continued growth strategy and we expect to see an even stronger performance from our three operations in the second half of 2009, as production is expected to increase and cash cost decrease, as per mine plans, " said Robert Gallagher, President and Chief Executive Officer.

Second Quarter Financial Review

In the second quarter 2009, adjusted net earnings(1) were $10.6 million, or $0.04 per share in comparison to adjusted net loss(1) of $4.7 million, or $0.05 per share in the same period in 2008. The 2009 increase in adjusted net earnings(1) is primarily due to the inclusion of Cerro San Pedro, one month of gold sales from Mesquite and the elimination of high costs from Amapari which ceased production on March 31, 2009. Earnings for the quarter before adjustments was a net loss of $202.8 million, or $0.79 per share, in comparison to a net loss of $4.8 million, or $0.05 per share, in the same period in 2008. The main adjustment in this quarter's net loss, was a goodwill impairment charge of approximately $189.6 million related to the business combination with Western Goldfields due mainly to $138.1 million in additional purchase consideration as a result of a 63% share price increase from the date of the announcement on March 4th to the date of acquisition on May 27th, 2009.

Gold sales improved by 30% with 52,890 ounces at an average realized gold price of $926 per ounce compared to 40,540 ounces at an average realized gold price of $898 per ounce in the corresponding quarter of 2008. Total cash cost(2) per gold ounce sold, net of by-product sales, in the second quarter was $468 in comparison to $742 in the second quarter of 2008, a reduction of 37%. The increase in gold sales and reduction in total cash cost(2) compared to the same quarter in 2008, are mainly attributed to the following items:

-   Additional gold and silver production from Cerro San Pedro which was
    acquired on June 30, 2008;
-   Increased copper sales volumes at Peak Mines in the second quarter of
    2009 due to the transition into the Chesney ore body which contains
    high copper grades, partially offset by lower copper prices;
-   No high total cash cost(2) gold production from Amapari effective
    March 31, 2009;
-   Additional production from the Mesquite mine which was acquired
    June 1 through the business combination with Western Goldfields; and
-   Favourable Australian dollar exchange rate.

Cash flow from operations in the second quarter 2009 was $16.5 million compared to cash flow used by operations of $3.0 million for the same period in 2008. The increase is mainly attributable to the acquisition of the Cerro San Pedro mine and increased copper revenues at Peak Mines, which was partially offset by care and maintenance expenditures at Amapari and one month of production at Mesquite which had higher than average operating costs and a charge related to growing inventory on the leach pad. Cash flow from operations should continue to move higher in the second half of 2009 consistent with our mine plans which projects higher production and lower cash costs.

Operational Review

Mesquite

Gold sales at Mesquite for the period of ownership (subsequent to June 1, 2009) totaled 11,601 ounces at a realized gold price of $880 per ounce sold. For the full quarter, gold sales were 27,338 ounces at a realized gold price of $854 per ounce sold, compared to 22,760 ounces at a realized gold price of $894 per ounce sold in the corresponding quarter of 2008. For the six months ending June 30, 2009, gold sales were 60,053 ounces compared to 32,720 ounces sold in the same period in 2008, during the initial ramp-up period.

For the period of ownership, total cash cost(2) per gold ounce sold was $708. Total cash cost(2) per gold ounce sold in the second quarter of 2009 was $647 compared to $548 in the second quarter of 2008. Total cash cost(2) increase in the second quarter is mainly attributable to higher operating costs due to a number of factors including:

-   An increase in total tonnes moved of 13.9 million versus
    12.5 million;
-   Fewer ounces of gold and more waste than modelled in the Rainbow
    Phase 3 layback;
-   A one-time changeover from bias ply to radial tires for the entire
    haulage fleet;
-   Use of a mining contractor to catch up on waste stripping; and
-   One time maintenance costs to correct component failures in the
    haulage fleet.

The maintenance issues at Mesquite have now been resolved and the installation of radial tires on the trucks will result in reduced operating costs and higher production rates going forward. The use of a mining contractor allows for earlier production from Rainbow Phase 2, where the gold-bearing structure is more robust than Rainbow's Phase 3.

Total cash cost(2) per gold ounce sold for the six months ended June 30, 2009 was $607 compared to $667 in the same period last year. The decrease in total cash cost(2) in comparison to the corresponding period in 2008 is attributable to the increase in production in the first half of 2009.

For the period of ownership, loss from operations at Mesquite was $1.7 million (not including goodwill impairment charge) and cash flow used by operations was $3.2 million. High operating costs and an increase in the leach pad inventory contributed to the negative cash flow in the second quarter 2009.

With significantly higher production expected in the second half of the year resulting in lower cash cost(2), we maintain our 2009 production guidance of 140,000 to 150,000 ounces, and anticipate slightly higher cash cost(2) per gold ounce sold in comparison to guidance of $530 to $540.

Cerro San Pedro

Cerro San Pedro gold sales totaled 23,350 ounces at a realized gold price of $946 per ounce sold compared to 22,190 ounces at a realized gold price of $897 per ounce sold in the same quarter in 2008. For the six months ending June 30, 2009, gold sales were 41,664 ounces compared to 38,112 ounces sold in the same period in 2008. The increase in gold sales was due to higher tonnes placed on the pad and increased recovery rate, partially offset by lower feed grade. Silver sales for the second quarter increased significantly to 422,713 ounces compared to 300,728 ounces sold in the second quarter of 2008. For the six months ending June 30, 2009, silver sales were 794,932 ounces compared to 504,701 ounces sold in the same period in 2008. The increase in silver production year over year is attributed to higher silver grades mined and the benefits of secondary leaching during the first half of 2009.

Total cash cost(2) per gold ounce sold, net of by-product sales, for the second quarter was $429 compared to $375 in the second quarter of 2008. Total cash cost(2) per gold ounce 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(2) is due to lower silver prices and higher consumables prices, which were partly offset by higher silver production and the depreciation in the Mexican Peso versus the US dollar.

Second quarter earnings from operations at Cerro San Pedro were $5.3 million and cash flow from operations was $10.5 million.

As with Mesquite, the 2009 Cerro San Pedro mine plan projects increased gold production in the second half of 2009.