2009-04-20 17:23 ET - News Release

Mr. Raymond Threlkeld reports

WESTERN GOLDFIELDS ANNOUNCES FIRST QUARTER PRODUCTION AND STATUS OF THE NEW GOLD BUSINESS COMBINATION

Western Goldfields Inc. has released details on its 2009 first quarter production from the Mesquite mine and on the status of the New Gold business combination. All amounts are expressed in United States dollars unless otherwise indicated.

Highlights:

• Gold production for the first quarter was 33,660 ounces, which is within the 2009 quarterly guidance range.
• Cost of sales per ounce for the quarter was $573, which is below the 2009 quarterly guidance.
• Cash at March 31, 2009, was $26.6-million, including $7.5-million of restricted cash, an increase of $7.8-million during the quarter.
• The previously announced business combination with New Gold Inc. continues to move forward. Shareholders of Western Goldfields will vote on the merger on May 14, 2009.

The company today announces its 2009 first quarter production was in line with guidance at lower cost of sales per ounce. Production for the first quarter of 33,660 ounces was within the range expected of 33,000 to 38,000. During the quarter, the Mesquite mine met its operational targets, including: total tons mined, ore tons placed, ore grade and strip ratio. Cost of sales per ounce of $573 for the first quarter was below the guidance range for the first quarter of $595 to $605 per ounce. Lower costs were primarily driven by savings in the following areas: diesel, explosives, repairs and maintenance. These savings were partially offset by higher costs for cyanide and lime due to increased consumption. Consistent with prior guidance, gold production for the year is expected to be between 140,000 and 150,000 ounces.

The business combination with New Gold announced in Stockwatch on March 4, 2009, continues to move forward; materials for the annual and special meeting of shareholders were mailed for the New Gold and Western Goldfields meetings on May 13, 2009, and May 14, 2009, respectively.

"The start to 2009 has been a very exciting one for Western Goldfields both operationally at Mesquite, as we see production increasing with costs coming down, and strategically, with the announcement of our business combination with New Gold," said Randall Oliphant, chairman. "As the company merges with New Gold, we will continue to focus on delivering on our targets, with the aim of using the strength of our existing assets as a platform for future growth."

First quarter production and cost results

The Mesquite mine achieved the production outlined in the table during the first quarter compared with the first and fourth quarters of 2008.

    
                                               Q1 2009  Q4 2008  Q1 2008
    
Total tons mined (millions)                       14.8     14.1     12.3
Total ore tons mined (millions)                    2.9      2.7      1.3
Grade (ounces per ton)                           0.012    0.015    0.016
Gold production (ounces)                        33,660   28,378    9,146
Gold sales (ounces)                             32,715   30,625    9,960
Average realized gold price ($/ounce)              867      799      929
Cost of sales per ounce ($/ounce)                  573      522      939

Since the company brought the Mesquite mine back into production in January, 2008, the focus has been on continued operational improvements. The production results show the steady progression the company has made operationally. With the benefit of more experienced drivers, better performing tires and increased efficiencies from the operations being focused in the Rainbow pit, the company's tons mined in the first quarter were the highest of any quarter since the restart. Based on these operational improvements combined with lower input costs, the company expects to continue to generate significant cash flow.

Liquidity and capital resources

Western Goldfields had $26.6-million of cash, including $7.5-million of restricted cash, at March 31, 2009. This represents an increase of $7.8-million in the cash balance during the first quarter of 2009. The company's debt remains at $68.6-million as the next scheduled debt repayment of $4.7-million will occur on June 30, 2009. The company incurred $1.5-million in capital expenditures during the quarter primarily related to the purchase of a training simulator which is aimed at increasing driver efficiency and decreasing repair and maintenance costs going forward. Western Goldfields continues to expect minimal capital expenditures going forward.

Business combination with New Gold

Below is a summary schedule of the proposed business combination with New Gold:

• May 13, 2009 -- New Gold annual and special meeting of shareholders;
• May 14, 2009 -- Western Goldfields annual and special meeting of shareholders;
• June 1, 2009 -- expected closing.