http://www.midasletter.com/news/0905...

New Gold Earnings Growth, Acquisition Underscore Ambition

By James West
MidasLetter.com
Wednesday, May 13, 2009

New Gold’s (TSX:NGD, AMEX:NGD) ambition from the outset has been to become a major producer of gold. The acquisition of Western Goldfields (TSX:WGI, AMEX:WGW) currently under consideration by shareholders of Western Goldfields will certainly be a step in that direction.

And New Gold’s first quarter earnings announced yesterday also belie the company’s tight controls on costs resulting in improved net earnings and lower production costs. Cash flow from mine operations in the first quarter 2009 was $7.7 million compared to $18.4 million for the same period last year.

"We are pleased to report excellent operational performance for the first quarter of 2009, performing in line with our expectations. This reflects the quality of our team and is consistent with management's commitment to delivering on our operational targets," said Robert Gallagher, President and Chief Executive Officer.

The business combination with Western Goldfields announced on March 4, 2009 continues to move forward; materials for the Annual and Special Meeting of Shareholders were mailed to shareholders for the New Gold and Western Goldfields meetings which are scheduled for May 13, 2009 and May 14, 2009, respectively. Upon approval, the business combination is expected to close on or about June 1, 2009.

Consolidated revenues for the first quarter 2009 were $58.8 million compared to $56.2 million in the first quarter of 2008, with higher volume sold offsetting lower realized price. Gold sales in the first quarter were 55,397 ounces with an average realized gold price of $898 per ounce compared to 51,700 ounces at a gold price of $933 per ounce in the corresponding quarter of 2008.

New Gold was formed from the merger among Peak Gold, Metallica Resources and New Gold. New Gold forecasts organic production growth moving up from 346,000 ounces of gold this year to 438,000 ounces in 2013.

New Gold held cash and cash equivalents of $136.6 million as at March 31, 2009. The decrease in the cash position quarter over quarter is attributed to the following key items: the acquisition from noteholders of C$50.0 million face value of New Gold's senior secured notes for C$30.0 million on January 9, 2009; development expenditures at New Afton of C$22.4 million; and repayment of approximately $7.0 million in short-term borrowings at Amapari. The Company's overall debt position has reduced to C$242 million from C$297 million (face value). The debt is comprised of C$187 million in senior secured notes and C$55 million in convertible debentures.

Robert Gallagher, President and Chief Executive Officer said, "We will continue to take the steps necessary to maintain a solid financial position while pursuing an aggressive growth strategy. Our exceptional management team and board, coupled with a solid financial position and cash-flow positive operating assets, continue to position New Gold to build momentum toward delivering increasing shareholder value."