New Gold Announces Third Quarter Results with Lowest Costs in Company's History - Updates 2013 Outlook

(All figures are in US dollars unless otherwise indicated)

VANCOUVER , Oct. 29, 2013 /CNW/ - New Gold Inc. ("New Gold") (NGD.TO) and (NYSE MKT:NGD) today announces financial and operational results for the third quarter of 2013. The company previously released its quarterly operational results on October 21, 2013 .

Third Quarter 2013 Highlights

• All-in sustaining costs(1) of $779 per ounce
  • Total cash costs(2) of $280 per ounce compared to $443 per ounce in the prior year period
• Gold production of 94,038 ounces compared to 104,577 ounces in the third quarter of 2012
  • Copper production increased by 67% to 23.7 million pounds from 14.2 million pounds
• Adjusted net earnings(4) of $20 million , or $0.04 per share
• Adjusted net cash generated from operations(3) of $54 million
• New Afton reached targeted throughput increase to over 12,000 tonnes per day three months ahead of schedule
• Cash and cash equivalents of $429 million at September 30, 2013
• Completed take-over of Rainy River Resources Ltd. ("Rainy River") on October 15, 2013
  • Increased gold reserves per share by 44%
• El Morro's environmental permit reinstated on October 22, 2013
• Updated 2013 outlook: 390,000 to 400,000 ounces of gold production at all-in sustaining costs(1) of approximately $900 per ounce and total cash costs(2) of approximately $375 per ounce

"The strong performance of New Afton, our largest cash flow generator, and the successful acquisition of Rainy River during the quarter were very important milestones for our company," stated Randall Oliphant , Executive Chairman. "We are, however, disappointed that the operational challenges at Cerro San Pedro and Mesquite led us to update our outlook for the first time in the company's history. Importantly, our foundation of low costs, a solid balance sheet, and organic growth pipeline in favourable jurisdictions continues to be strong. As originally scheduled, the fourth quarter should be our highest production quarter of the year and we look forward to a strong finish to 2013."

During the third quarter, the company produced 94,038 ounces of gold at all-in sustaining costs(1) of $779 per ounce and total cash costs(2) of $280 per ounce, representing the lowest cost quarter in the company's history on both measures. For the three month period ended September 30, 2013 , New Gold generated revenue of $196 million , earnings from mine operations of $51 million , net earnings of $12 million , or $0.02 per share, and net cash generated from continuing operations of $36 million . Adjusted net earnings(4) were $20 million , or $0.04 per share, and adjusted net cash generated from continuing operations(3) was $54 million .

Financial Results Overview

Revenue remained consistent with the prior year quarter despite decreases in the average realized prices of each of the three commodities the company produces. When compared to the third quarter of 2012, the average realized gold price decreased by 13%, the copper price by 12% and the silver price by 29%. The company was able to maintain its revenue as New Afton, its highest revenue and cash flow generating mine, performed very well, thus offsetting the combination of lower commodity prices and lower gold production at Cerro San Pedro and Mesquite. Quarter-over-quarter, the company increased its revenue by 7% compared to the second quarter of 2013.

Earnings from mine operations in both the three and nine month periods ended September 30, 2013 were impacted by lower earnings contributions from Cerro San Pedro, Mesquite and the Peak Mines. The lower contribution from these operations was due to a combination of lower average realized commodity prices and lower gold production, resulting from the previously disclosed operational challenges at Cerro San Pedro and Mesquite. This was partially offset by New Afton, which delivered a 406% increase in earnings from mine operations when compared to the third quarter of 2012, its first quarter in commercial production. Quarter-over-quarter, New Gold increased its earnings from mine operations by 52%.

Net earnings in the third quarter of 2013 were $12 million , or $0.02 per share. Net earnings included: a $7 million non-cash accounting charge related to the reclassification of Other Comprehensive Income to earnings as the loss incurred on the monetization of the company's legacy hedge position in May of 2013 is realized into income over the original term of the hedge contract, $5 million in non-recurring transaction costs related to the Rainy River acquisition, a $7 million pre-tax gain on foreign exchange, and a non-cash $2 million pre-tax gain on the mark to market of the company's share purchase warrants. Adjusted net earnings(4), including the related tax impact of the above noted items, were $20 million , or $0.04 per share.

Adjusted net cash generated from operations(3) during the quarter was adjusted for non-recurring cash expenditures related to the acquisition of Rainy River . For the nine month period ended September 30, 2013 , an additional adjustment was made for the one-time $66 million charge related to the settlement of the company's legacy gold hedge position in May of 2013. Quarter-over-quarter, adjusted net cash generated from operations(3) increased by 25%.

2013 Outlook

As a result of the previously disclosed operational challenges at the company's Cerro San Pedro and Mesquite Mines, New Gold today provides an updated 2013 outlook.

Gold production at both New Afton, the company's largest cash flow contributor, and the Peak Mines remains in line with New Gold's original guidance, however, production at Mesquite and Cerro San Pedro is now expected to be below the targets set in early 2013.

Gold production at Mesquite is expected to be between 110,000 and 115,000 ounces and at Cerro San Pedro it is expected to be between 95,000 and 100,000 ounces. As a result, on a consolidated basis, the company now expects to produce between 390,000 and 400,000 ounces of gold in 2013. At the same time, consolidated copper production remains in line with the original guidance range of 78 to 88 million pounds and the silver production target at Cerro San Pedro is approximately 1.3 million ounces.

New Gold expects its consolidated 2013 all-in sustaining costs(1) to be approximately $900 per ounce and its total cash costs(2) to be approximately $375 per ounce. Both estimates have increased by $25 per ounce, with this increase largely attributable to the lower gold production expectation. For the balance of the year, the cost targets include assumptions for gold, silver and copper prices of $1,300 per ounce, $20.00 per ounce and $3.25 per pound and Canadian dollar, Australian dollar and Mexican peso exchange rates of $1.00 , $1.00 and $13.00 to the U.S. dollar.

New Gold remains well positioned as one of the lowest cost producers in the industry whether measured on an all-in sustaining or total cash costs basis.

Gold Production

New Afton - New Afton's third quarter gold production increased by 80% when compared to the same period of the prior year. The increase in production was driven by higher daily throughput, higher gold grades, which continue to reconcile favourably to the company's plans, and higher gold recoveries. The combination of these positive factors enabled New Afton to deliver continued quarter-over-quarter improvement, with production increasing by 16% over the second quarter of 2013. The third quarter was the highest gold production quarter for New Afton since it commenced production in mid-2012.

Cerro San Pedro - Cerro San Pedro's production was impacted by a combination of lower ore tonnes placed on the leach pad and lower recoveries. The placement of lower ore tonnes was primarily driven by the impact of the previously announced pit wall movement. The area impacted by the pit wall movement is now planned to be mined during the next phase of mining through 2014 and 2015.

As previously disclosed, recoveries from the leach pad during the quarter were below expectations. In response, over the course of the quarter, the metallurgical team adjusted the leach solution by increasing cyanide and sodium hydroxide levels as well as adding more lime to the ore trucks. The goal of these adjustments is to optimize the leach solution in an effort to maximize the recoveries from the multiple ore types at Cerro San Pedro over time. At the same time, as a result of the above noted pit wall movement, the company had to shift its mining efforts further towards the bottom of the open pit, where the ore has yielded lower recoveries, earlier than planned. Mining is scheduled to remain in this lower area through early 2014 after which the next phase of mining will move back to the top of the ore body where the material is more oxidized and should have recoveries more consistent with historical levels.

Mesquite - Mesquite's production in both the three and nine month periods ended September 30, 2013 was below that of the prior year periods primarily due to mining of lower grade ore. The mining of lower grade ore was further impacted by a negative variance between realized and modelled grades in the area of the pit that was mined during the third quarter. Per the mine plan, mining has since moved to a different area of the mine and Mesquite is expected to have its strongest quarter of the year in the fourth quarter.

Peak Mines - Gold production at the Peak Mines was in line with the prior year quarter. For the nine month period ended September 30, 2013 , all of the key production drivers - tonnes processed, gold grades and recoveries - increased, resulting in a 15% increase in gold production when compared to the same period of the prior year.

Copper Production

Driven by New Afton's continued strong performance, consolidated copper production increased by 67% when compared to the third quarter of 2012. Copper production at New Afton increased by 88% when compared to the prior year quarter through a combination of higher throughput, higher copper grades and higher recoveries.

At the Peak Mines, copper production was consistent with the prior year periods as increased tonnes processed largely offset the planned mining of lower copper grades.

Silver Production

Silver production in both the three and nine month periods ended September 30, 2013 was below that of the prior year periods for reasons consistent with those noted above regarding Cerro San Pedro's gold production.

All-in Sustaining Costs(1) and Total Cash Costs(2)

On a consolidated basis, during the third quarter, both all-in sustaining costs(1) and total cash costs(2) were the lowest in New