(All figures are in Canadian dollars unless otherwise indicated)
VANCOUVER, Dec. 23, 2011 /CNW/ - New Gold Inc. ("New Gold") (TSX:NGD) (AMEX:NGD) and Silver Quest Resources Ltd. ("Silver Quest") (TSX.V:SQI) today announce that New Gold has completed the acquisition of all the shares of Silver Quest. Under the terms of the court approved arrangement (the "Arrangement"), 10.5 million New Gold common shares were issued to former Silver Quest securityholders on the basis of 0.09 of a New Gold share for each Silver Quest share and nominal cash consideration.

As a result of the completion of the Arrangement, New Gold has acquired Silver Quest's 25% interest in the Davidson Property, which forms the northern half of the Blackwater gold-silver deposit and in which New Gold held a 75% interest, thus consolidating a 100% ownership in the Blackwater Project. New Gold also acquired a 100% interest in the Capoose Property, located adjacent to Blackwater, covering over 410km2 of land with an established gold and silver mineral resource.

Transaction Highlights

Consolidates 100% ownership of Blackwater Project thus increasing the total mineral resource inventory:
Increases indicated gold resources by 0.6 million ounces to 5.4 million ounces (165 million tonnes at an average grade of 1.01 g/t)
Increases inferred gold resources by 0.2 million ounces to 1.2 million ounces (39 million tonnes at an average grade of 0.94 g/t)
Adds Capoose Property's mineral resource to New Gold's portfolio
Indicated resource of 0.4 and 26.6 million ounces of gold and silver, respectively (31 million tonnes at an average grade of 0.38 g/t gold and 26.5 g/t silver)
Inferred resource of 0.4 and 29.5 million ounces of gold and silver, respectively (37 million tonnes at an average grade of 0.37 g/t gold and 24.6 g/t silver)
Significantly increases total landholdings in Blackwater area from approximately 240km2 to approximately 670km2
"The consolidation of our interest in Blackwater and the addition of Capoose further confirm our excitement about the future of the Blackwater Project and surrounding area," stated Randall Oliphant, New Gold Executive Chairman. "With Blackwater already having a significant gold resource that should continue to grow and a land package now totaling over 670km2, we are excited to move forward with continued exploration and development in this area for many years to come."

New Gold continues to aggressively drill the Blackwater deposit with nine drills now active at the site. The company plans to provide a further update to the Blackwater mineral resource in February 2012. The update will incorporate additional data for drilling completed between the end of July and November 2011, representing approximately 70 additional holes totaling 20,450 metres since the September 2011 resource update.

As part of the Arrangement, for every three Silver Quest shares held, Silver Quest shareholders received one common share in a new precious metals-focused exploration company, Independence Gold Corp. ("Independence Gold"). New Gold holds 9.9% of the outstanding shares of Independence Gold with the former Silver Quest shareholders holding the remaining 90.1%. Independence Gold has approximately $15 million in cash, sufficient to fund an aggressive two year exploration program.

The TSX Venture Exchange will disseminate a notice announcing the delisting of the Silver Quest shares. Registered Silver Quest shareholders should send their completed and executed letters of transmittal and their Silver Quest share certificates to the depository, Computershare Investor Services as soon as possible in order to receive the consideration to which they are entitled under the Arrangement. Non-registered Silver Quest shareholders who hold shares through a broker or another intermediary should follow the instructions provided to them by their broker or such other intermediary. A copy of the letter of transmittal is available on SEDAR at www.sedar.com under the Silver Quest profile and at www.newgold.com.

New Gold intends to effect an amalgamation with its wholly-owned subsidiaries Silver Quest Resources Ltd., Geo Minerals Ltd. and Richfield Ventures Corp. effective January 1, 2012 ("Amalgamation"). Following completion of the Amalgamation, New Gold will be the direct operator of the Blackwater Project.

About New Gold Inc.

New Gold is an intermediate gold mining company. The company has a portfolio of three producing assets and three significant development projects. The Mesquite Mine in the United States, the Cerro San Pedro Mine in Mexico and Peak Gold Mines in Australia are expected to produce between 380,000 and 400,000 ounces of gold in 2011. The fully-funded New Afton project in Canada is scheduled to add further growth in 2012. In addition, New Gold owns 30% of the world-class El Morro project located in Chile and, in June 2011, New Gold acquired the exciting Blackwater project in Canada. For further information on the company, please visit www.newgold.com