VANCOUVER, Aug. 3, 2011 /CNW/ - New Gold Inc. ("New Gold") (TSX:NGD)(NYSE AMEX:NGD) today announces financial and operational results for the second quarter of 2011. The company finished the second quarter with gold sales of 95,039 ounces at a total cash cost(1) per ounce sold, net of by-product sales, of $354 per ounce. The company's ability to deliver increased gold sales at lower costs along with the continued strength in commodity prices resulted in another quarter of robust financial results. During the quarter, the company's earnings from mine operations increased by 129% to $83 million with net earnings increasing to $79 million, or $0.19 per share, while pre-tax cash generated from operations increased by 96% to $88 million and net cash generated from operations was $44 million.

New Gold is also pleased to reiterate its production and cost guidance for 2011 with gold production of 380,000 to 400,000 ounces at total cash cost(1) per ounce sold, net of by-product sales, of $390 to $410 per ounce. The company believes that with the continued strength of silver and copper prices, the total cash cost(1) may be below the above noted cost range as it has been on a year-to-date basis.

New Gold Second Quarter Highlights

Second quarter total cash cost(1) per ounce sold, net of by-product sales, decreased to $354 per ounce from $481 per ounce in the same period in 2010
Quarterly gold sales increased by 15% to 95,039 from 82,403 in the same period in 2010
Second quarter net earnings of $79 million, or $0.19 per share
First caving-related blast successfully completed at New Afton connecting two underground levels below the ore body
$490 million of cash at June 30, 2011
Completed the acquisition of Richfield Ventures Corp. ("Richfield"), and its flagship Blackwater Project in British Columbia on June 1, 2011
Increased the exploration program at the Blackwater Project - targeting 40,000 to 50,000 metres of drilling in the second half of 2011
"The second quarter was particularly important in the continued evolution of New Gold," stated Randall Oliphant, Executive Chairman. "Our operating results further established our company as a low cost producer in the industry, while development at New Afton and El Morro only helped add further value to those projects. With this foundation, we were able to complete the acquisition of Richfield, adding the exciting Blackwater Project with its established gold resource base and significant exploration potential to our pipeline, all while minimizing dilution to our shareholders and maintaining our financial flexibility."

2011 Second Quarter Operations Overview
New Gold 2011 Second Quarter Consolidated - Summary Operational Results
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Gold
Sales (thousand ounces) 95.0 82.4 199.3 162.4
Production (thousand ounces) 88.5 89.9 196.1 167.1
Average realized price ($ per ounce) $1,417 $1,147 $1,365 $1,113

Silver
Sales (thousand ounces) 602.3 505.4 1,188.1 698.9
Production (thousand ounces) 520.4 547.1 1,155.7 753.8
Average realized price ($ per ounce) $38.85 $18.38 $35.78 $18.02

Copper
Sales (million pounds) 3.6 3.0 7.5 7.1
Production (million pounds) 3.4 4.0 6.9 8.0
Average realized price ($ per pound) $4.05 $3.09 $4.12 $3.26

Total cash cost(1) - net of by-product sales ($ per ounce) $354 $481 $353 $475
Average realized margin ($ per ounce) $1,063 $666 $1,012 $638
Together, the company's portfolio of three operating mines delivered yet another strong quarter, while New Gold's three large exploration/development projects each made significant progress. Operationally, while the Peak Mines went through a challenging quarter as anticipated, Mesquite and Cerro San Pedro especially performed very well, leading the group to a quarter of increased gold sales at significantly lower total cash cost(1) resulting in meaningful margin expansion for New Gold's shareholders.

New Afton, the company's most immediate development project, continues its rapid progression towards production less than 12 months from now. The second quarter saw a number of milestones, two of which included the first caving-related blast which connected two underground levels below the ore body and the commencement of the installation of the processing equipment in the mill building. At El Morro, after the Environmental Impact Assessment ("EIA") was received on March 16, 2011, the company's 70% partner Goldcorp Inc. ("Goldcorp") aggressively began work on the project's advancement including application for additional permits, condemnation drilling, site plan optimization, detailed engineering of infrastructure and contract negotiation with key suppliers. The company's newest project, Blackwater, was added to the portfolio on June 1, 2011. Since that time, New Gold has increased the 2011 drill program, released the results for an additional 22 holes and has been working to upgrade the mine camp to facilitate the addition of more drills while also building on a number of pre-established relationships with the local First Nations, communities, governments and other regulatory bodies.

"Our second quarter was very active and importantly it demonstrated the capacity of our various teams to deliver strong results in their respective areas," stated Robert Gallagher, President and Chief Executive Officer. "The execution by our operating teams continues to underpin our ability to add value by advancing our development assets and adding in new and exciting projects such as Blackwater."

2011 Second Quarter Consolidated Financial Results

New Gold 2011 Second Quarter Consolidated - Summary Financial Results
Three months ended Six months ended
Figures in US$ millions unless otherwise noted June 30, June 30,
2011 2010 2011 2010

Revenue 171.6 112.4 342.8 214.0
Average realized gold price ($ per ounce) 1,417 1,147 1,365 1,113
Average margin per ounce ($ per ounce) 1,063 666 1,012 638
Earnings from mine operations 83.5 36.5 164.0 73.3

Net earnings/(loss) from continuing operations 78.6 (26.0) 103.3 (13.0)
Net earnings/(loss) per share 0.19 (0.07) 0.25 (0.03)
Adjusted net earnings/(loss) from continuing operations 49.8 14.1 96.6 29.6
Adjusted net earnings/(loss) per share 0.12 0.04 0.24 0.08

Pre-tax cash generated from operations 87.6 44.6 148.6 76.6
Net cash generated from operations 44.0 40.4 93.7 63.4
As a result of New Gold's strong operating results and the continued strength in the underlying commodity prices, the company was able to realize meaningful increases in virtually all financial categories. Increased gold sales at higher average realized gold prices led to a 53% increase in revenue during the second quarter of 2011. Importantly, the company was able to couple this revenue growth with lower total cash cost(1) resulting in a $397 per ounce increase in the average realized margin leading to a 129% increase in earnings from mine operations.

Net earnings from continuing operations in the second quarter of 2011 grew significantly to $79 million, or $0.19 per share, after being in a net loss position in the same period of 2010. Adjusted net earnings from continuing operations(2) increased to $50 million, or $0.12 per share, during the quarter. Net earnings has been adjusted and tax affected for the group of costs in "Other gains and losses" on the condensed consolidated income statement. The most significant adjustment is the fair value change of the company's share purchase warrants and convertible debentures in the second quarter of 2011 which was a pre-tax gain of $30 million, relative to a pre-tax loss of $29 million in the same period of the prior year. See the notes at the end of the release for a reconciliation of Adjusted net earnings.

Net cash generated from operations increased by 9% to $44 million when compared to the prior year quarter, however, cash flow in the quarter was negatively impacted by a $20 million increase in cash taxes related to the payment of the company's 2010 final tax liability, which had previously been accrued, as well as an increase in the quarterly payments for 2011 instalments. The pre-tax cash generated from operations increased by 96% in the second quarter of 2011 compared to the same period of the prior year.

2011 Outlook

Through the first six months of 2011, New Gold has produced 196,100 ounces of gold at total cash cost(1), net of by-product sales, of $353 per ounce. New Gold is pleased to reiterate its production and cost guidance for 2011 with gold production of 380,000 to 400,000 ounces at total cash cost(1) per ounce sold, net of by-product sales, of $390 to $410 per ounce. The combination of operational execution and the continued strength of silver and copper prices have allowed the year-to-date total cash cost(1) to be below the guidance range despite relative foreign exchange rates and industry-wide cost inflation negatively impacting costs.

Looking forward to the second half of 2011, the three operations should remain relatively consistent with targeted increases in gold production from Peak Mines offsetting any potential drop in production from Mesquite and Cerro San Pedro. Depending on the relative movements of silver and copper prices versus certain input costs and foreign exchange rates, total cash cost(1) are expected to be below the guidance range thus offering shareholders superior margins. The company's three exploration/development projects should continue to advance meaningfully with multiple catalysts anticipated in the second half of 2011.

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