VANCOUVER, Oct. 19 /CNW/ -- New Gold Inc. ("New Gold") (TSX and NYSE AMEX - NGD) today announces 2009 third quarter gold sales of 77,645 ounces at a total cash cost(1) of $470 per ounce, net of by-product sales. The preliminary production and total cash cost(1) information provided are approximate figures and may differ slightly from the third quarter earnings.

Third Quarter Highlights

Results presented below are for the period of ownership for the Mesquite (June 1, 2009) and Cerro San Pedro Mines (June 30, 2008).

-   Gold sales increased by 16% to 77,645 ounces from 67,156 ounces in
the same period in 2008
-   Total cash cost(1) decreased by 17% to $470 per ounce sold, net of
by-product sales, from $565 per ounce sold in the same period in 2008
-   Significant increase in tonnes placed on leach pads at both Cerro San
Pedro and Mesquite
-   Completion of development and initiation of production from the high
copper grade Chesney ore body at Peak and completion of development
of the high gold grade Perseverance Zone D

The Cerro San Pedro and Peak Mines gold production was in-line with expectations during the quarter and silver production at Cerro San Pedro was higher than anticipated. Mesquite's gold production was slightly below expectations in the third quarter, primarily due to lower than expected grade in the Rainbow 3 pit in the first two months of the quarter. Mining has since transitioned into the Rainbow 2 pit where production in September exceeded the prior months and was consistent with the mine plan. Gold production at Mesquite is expected to be significantly higher in the fourth quarter in comparison to the third quarter with higher tonnes and grade of material stacked.

Robert Gallagher, President and Chief Executive Officer stated that: "Performance at both Cerro San Pedro and Peak Mines remained strong in the third quarter, achieving production targets with lower than expected cash cost. Mesquite has worked hard over the last two quarters to achieve operational results in line with the mine plan and with a strong performance in September, is on track to significantly increase production in the fourth quarter."

2009 Forecast Update

For the period of ownership, New Gold's previously announced 2009 gold production guidance of 270,000 to 300,000 ounces and total cash cost(1) of $470 to $490 per ounce of gold sold, net of by-product sales, remains unchanged.

Operations Overview

Results presented below include gold production, sales and total cash cost(1) for the full year of 2009 and 2008 which includes periods prior to the acquisition of Mesquite (June 1, 2009) and Cerro San Pedro Mines (June 30, 2008).

Mesquite

Gold production for the third quarter at Mesquite was 29,012 ounces compared to 42,357 ounces in the third quarter 2008. Mesquite had gold sales in the third quarter of 27,594 ounces compared to 47,535 ounces in the third quarter 2008. Consistent with expectations, gold production was lower in the third quarter 2009 mainly due to lower gold grade, which was partially offset by higher tonnes placed on the pad. The gold grade in the third quarter 2008 was significantly higher than the reserve grade. As outlined in the mine plan, production at Mesquite began ramping up in the month of September and is expected to continue on this trend in the fourth quarter providing the highest production levels for the year.

Total cash cost(1) per ounce of gold sold for the third quarter of 2009 was $662 compared to $390 in the third quarter of 2008. Total cash cost(1) increase is mainly attributable to lower production and the following temporary items: use of a mining contractor to catch-up on waste stripping, fewer ounces of gold and more waste than modelled in the Rainbow 3 pit, and increased cost associated with abnormal equipment maintenance. In addition, Mesquite has increased the cyanide and lime consumption to achieve optimum recovery.

For the nine months ending September 30, 2009, gold production was 88,757 ounces compared to 79,947 ounces produced in the same period in 2008. Gold sales were 87,647 ounces compared to 80,255 ounces in the same period in 2008. As the strip ratio has come down during this period in comparison to 2008, Mesquite has been able to increase the tonnes processed by 3.0 million to 8.7 million tonnes which will continue to positively impact production going forward.

Total cash cost(1) per ounce of gold sold for the nine months ended September 30, 2009 was $624 compared to $503 in the same period last year. Further to the drivers of the cash cost(1) increase noted above, Mesquite had a one-time change-over from bias ply to radial tires for the entire haulage fleet.

Cerro San Pedro Mine

Gold production for the third quarter at Cerro San Pedro was 24,928 ounces compared to 24,387 ounces produced in the third quarter of 2008 and gold sales were 27,193 ounces compared to 26,070 ounces in the same period in 2008. The increase in production was due to increased tonnes of ore mined, offset by lower gold grade. Silver production increased by 21% in the third quarter to 342,633 ounces from 282,055 ounces in the third quarter of 2008. The increase in silver production over the same quarter in 2008 can be attributed to the higher silver grades and tonnes of ore mined during the quarter.

Total cash cost(1) per ounce of gold sold, net of by-product sales, for the third quarter was $416 compared to $367 in the third quarter of 2008. The increase in cash cost(1) is due to significantly higher tonnes moved and slightly higher consumable costs offset by increased silver by-product credits.

For the nine months ending September 30, 2009, gold production was 69,721 ounces compared to 63,330 ounces in the same period in 2008 and gold sales were 68,857 ounces compared to 64,182 ounces in the same period in 2008. The increase in gold production was due to higher tonnes placed on the pad which was partially offset by lower gold grade. For the nine months ending September 30, 2009, silver production was 1.2 million ounces compared to 0.8 million ounces produced in the same period in 2008.