New Gold Inc. (AMEX: NGD) Benefiting from Gold, Silver, and Copper Prices as Mining Projects Continue to Produce

Following an extremely unsettling 2010 that saw shares dip to a low of 3.71 the fortunes at New Gold Inc. (AMEX: NGD) have turned significantly as the gold, silver and copper exploration company continues to put together impressive numbers in 2011 while attracting heavy trading volume while pushing their share price up to the 11.60 – 11.69 range, well above their 50-day moving average of 10.26 and their 200-day moving average of 9.74.

Bolstered by the ever-increasing value of their three targets, that being gold, silver and copper, NGD has generated $342.8 million in revenue over the first six months of 2011 compared to $214.0 million for the same six-month period in 2010. Making the news even better for shareholders, NGD has projected continued growth throughout 2011 and with new projects slated for production in 2012 the future outlook appears bright and according to company Executive Chairman Randall Oliphant, “We think that the future for this company has frankly never been brighter.”

It would be easy to simply chalk NGD’s success up to the fact that gold, silver and copper are now commanding higher prices but there is more to their accomplishments than this basic fact. NGD has done a remarkable job at controlling their operational costs, something every shareholder appreciates. In fact, NGD has managed to lower their cash costs to push their earnings from mine operations from $73.3 million during the first six months of 2010 to $164.0 million during the same period in 2011.

Assuming NGD keeps their cash costs in control the financial success of their current mining operations could be staggering. Right now they are being projected to produce 400,000 ounces of gold, 2.4 million ounces of silver, and 12.5 million pounds of copper from their Mesquite Mine in Southern California, Cerro San Pedro Mine in Mexico, and Peak Mines in Australia by the end of the year. At the six-month point they have already produced 196,100 ounces of gold, 1,155,700 ounces of silver, and 6,900,000 pounds of copper. With gold prices topping $1,750.00 per ounce, silver commanding 38.00 per ounce, and copper remaining strong NGD is in line to deliver shareholders considerable value.

The question on the minds of many investors is just how long will gold, silver, and copper command such lofty prices. This is a legitimate question for those interested in investing in NGD as their most recent quarterly figures showed a dip in production for each of these metals over the three-month period ending June 30, 2011 compared to 2010. Obviously a collapse in the price of gold, silver or copper could produce a significant setback for the company and ultimately their shareholders.

This makes NGD’s future projects all the more important and all eyes will be on their New Afton project in British Columbia. Full production at the underground mine and concentrator is scheduled to begin in late 2012 with annual average expectations of 85,000 ounces of gold and 75 million pounds of copper along with an undetermined amount of silver production also expected.

While New Afton is NGD’s most ready project the company also has a 30% interest in the El Morro project in Chile, with Goldcorp, the project developer and operator, holding the remaining 70%. The advancement of this mining operation is in full swing with work including the application for additional permits, condemnation drilling, site plan optimization, detailed engineering of infrastructure and contract negotiation with key suppliers. According to NGD’s projections their attributable 30% share of proven and probable reserves contains 2.6 million ounces of gold and 1.8 billion pounds of copper. Making things more attractive to shareholders is the fact that Goldcorp is responsible for funding New Gold’s 30% share of capital costs.

There is of course the ongoing legal question concerning claim rights of El Morro as Barrick Gold Corporation has challenged the property ownership. This battle is currently in the Ontario Superior Court of Justice and while the trial is in recess it is scheduled to resume in October. NGD has said that Barrick’s claims have no merit and they don’t foresee any problems.

In addition to the promise of New Afton and El Morro there is considerable excitement surrounding NGD’s most recent acquisition, Richfield Ventures Corp. and its Blackwater Project. NGD has taken an aggressive approach to the project after announcing an initial mineral resource estimate including 1.8 million ounces of indicated gold and an additional 2.0 million ounces of inferred gold resources. NGD has already stated they would increased the drill program for the project and plans to drill 40,000 to 50,000 meters, or approximately 100 holes, in the second half of 2011 with the exploration program exploration targeting both the 100%-owned southern portion of the project and the 75%-owned northern portion, where Silver Quest Resources Ltd. owns the remaining 25%.

As we stated back in June when shares were trading just above the 10.00 mark the future of New Gold appears strong. Having established a disciplined operation that maximizes the resources dedicated to their projects NGD has gained considerable investor confidence. The one concern surrounding the company is something they have no control over, the price of gold, silver and copper. While this may be an unknown, and we all know anything can happen, most analysts have predicted that those prices will remain high into the future.

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