http://www.newgold.com/Theme/NewGold/files/documents_news/NGD%20SQI%20Announcement%=

New Gold Agrees to Acquire Silver Quest Resources Consolidates Ownership of Blackwater Project in British Columbia

(All figures are in Canadian dollars unless otherwise indicated)

October 17, 2011 – New Gold Inc. (“New Gold”) (TSX:NGD) (AMEX:NGD) and Silver Quest Resources Ltd. (“Silver Quest”) (TSX.V:SQI) today jointly announce a binding letter agreement whereby New Gold will acquire, through a plan of arrangement (the “Arrangement”), all of the outstanding common shares of Silver Quest. Under the terms of the Arrangement, Silver Quest shareholders will receive 0.09 of a New Gold share (the “Share Consideration”) for each Silver Quest share held and one common share in a new Yukon-focused precious metals exploration company, McIntyre Minerals Inc. (“McIntyre”) for every three Silver Quest shares held (the “Spinco Consideration”). The offer values Silver Quest at $1.32 per share, representing a 52% premium based on the combination of:

The Share Consideration of $1.06 per share, representing a 22% premium based on New Gold and Silver Quest’s October 14, 2011 closing prices on the TSX and TSX.V, respectively, implying an equity offer value of approximately $131 million on a fully diluted basis and a transaction value of $121 million, net of the cash to be received from the exercise of Silver Quest’s dilutive instruments

 The Spinco Consideration of $0.26 per share, representing an additional 30% premium based on Silver Quest’s October 14, 2011 closing price on the TSX.V, implying a value of approximately $35 million