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New Gold Inc
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New Gold releases NI 43-101 Rainy River FS

2014-01-16 08:41 ET - News Release

Mr. Randall Oliphant reports

NEW GOLD ANNOUNCES ITS RAINY RIVER FEASIBILITY STUDY RESULTS

New Gold Inc. has released the results of its feasibility study for the Rainy River project in Ontario, Canada (all amounts are in U.S. dollars). The company successfully completed the acquisition of Rainy River Resources Ltd. on Oct. 16, 2013. Through the second half of 2013, New Gold's development team worked with third party consultants to complete its feasibility study for the project. The purpose was to ensure that the key inputs and assumptions used for Rainy River were consistent with those used for New Gold's other projects and operations. This feasibility study builds upon the study completed and filed by Rainy River Resources on May 24, 2013.

Feasibility study highlights

  • First nine years -- average annual gold production of 325,000 ounces at total cash costs of $613 per ounce and all-in sustaining costs of $736 per ounce;
  • First nine years -- average mill head grade of 1.44 grams per tonne gold;
  • Life-of-mine gold and silver production of 3.4 million ounces and six million ounces at total cash costs of $663 per ounce and all-in sustaining costs of $765 per ounce;
  • Base-case economics -- at $1,300 per ounce gold, $22.00 per ounce silver and a U.S.-dollar/Canadian-dollar foreign exchange rate of 0.95, Rainy River has a pretax 5-per-cent net present value of $438-million, an internal rate of return of 13.1 per cent and a payback period of 5.4 years;
  • Alternative case economics -- at $1,600 per ounce gold, $26.00 per ounce silver and a parity U.S.-dollar/Canadian-dollar foreign exchange rate, Rainy River has a pretax 5-per-cent NPV of $1.0-billion, an IRR of 21.1 per cent and a payback period of 3.6 years;
  • Development capital costs of $885-million inclusive of a $70-million contingency;
  • Targeted commissioning in late 2016 with first year of full production in 2017;
  • Fourteen-year mine life with direct processing of open-pit and underground ore, at a rate of 21,000 tonnes per day, for first nine years, and processing of a combination of stockpile and underground ore thereafter.

"We are very pleased to have completed the feasibility study for our Rainy River project," stated Randall Oliphant, executive chairman of New Gold. "The results of the study are entirely consistent with our expectations when we decided to acquire Rainy River Resources. The project provides our company with an asset that meets all of our key criteria including: solid returns with strong leverage to higher gold prices; manageable capital costs; a robust, long-lived production base with continued regional exploration potential; below-industry average costs; and located in a great mining jurisdiction."

"The project team has done a great job advancing Rainy River to this stage," added Robert Gallagher, president and chief executive officer of New Gold. "In parallel with this feasibility study, the environmental assessment report has also been finalized and is scheduled to be released in the coming days for regulatory agency and stakeholder review. We look forward to progressing the project further through 2014."

Mineral reserve and resource estimate

Mineral resource

The Rainy River mineral resource, effective Nov. 2, 2013, is reported in relation to a conceptual open-pit shell at a gold cut-off of 0.30 gram per tonne for open-pit resources and a gold cut-off value of 2.5 grams per tonne for underground resources. Globally, the deposit contains measured and indicated mineral resources suitable for direct processing, from mine to mill, of 106 million tonnes at 1.54 grams per tonne gold and 2.88 grams per tonne silver, representing 5.2 million ounces of gold and 9.8 million ounces of silver. In addition, the open-pit measured and indicated mineral resources suitable for stockpiling and future processing total 71 million tonnes at 0.43 gram per tonne gold and 2.09 grams per tonne silver, representing one million ounces of gold and 4.8 million ounces of silver. A table summarizing the mineral resource, including key assumptions, is included at the conclusion of this news release in the section entitled technical information.

This mineral resource estimate has been completed by SRK Consulting (Canada) Inc. in conformity with generally accepted CIM guidelines and is reported in accordance with National Instrument 43-101. The mineral resource estimate is based upon a geologic block model that incorporates 382,182 individual assays from over 742,000 metres of core from 1,656 drill holes. Assay data density is sufficient to classify the mineral resource at the measured and indicated confidence levels as necessary to support the estimation of a mineral reserve. SRK has conducted a series of routine verifications to ensure the reliability of the quality assurance/quality control for the drill assay data supporting the Rainy River mineral resource. Through SRK's independent review, it has been concluded that the field samples and assaying procedures meet industry best practices, and that assay grades can be reasonably reproduced, indicating that the primary assay laboratories are sufficiently reliable for the resource estimation used in the feasibility study.

Mineral reserve

A proposed mining production schedule was developed through the design of a combined open-pit and underground mine within the mineral resource model. The Rainy River mineral reserve, which represents the portion of measured and indicated mineral resources included in the production schedule, has been diluted using an average of 4.0 per cent additional tonnes containing 0.21 gram per tonne gold and 1.19 grams per tonne silver for the open pit, and an average of 11.7 per cent for the underground stoping, which includes dilution from both overbreak and backfill dilution. Including the development ore, the total underground dilution averages 8.3 per cent. The open-pit mineral reserve estimate has been completed by BBA Inc. and the underground mineral reserve estimate has been completed by AMC Mining Consultants (Canada) Ltd. The Rainy River mineral reserve is summarized in the table.

                      RAINY RIVER MINERAL RESERVE ESTIMATE

                                         Tonnes   Gold  Silver   Gold   Silver
                                           (000)  (g/t)   (g/t)  (koz)    (koz)
Direct processing material
Open pit
Proven                                   15,839   1.47    2.04    746    1,038
Probable                                 46,866   1.26    3.05  1,896    4,594
Underground
Proven                                        -      -       -      -        -
Probable                                  4,187   4.96   10.31    668    1,388
Total direct processing material         66,892   1.54    3.26  3,311    7,021
Stockpile material
Open pit
Proven                                    6,843   0.38    1.51     84      332
Probable                                 30,541   0.39    2.10    378    2,058
Total stockpile material                 37,384   0.38    1.99    462    2,390
Direct processing and stockpile material
Open pit
Proven                                   22,681   1.14    1.88    830    1,370
Probable                                 77,407   0.91    2.67  2,275    6,652
Total underground                       100,088   0.96    2.49  3,105    8,022
Proven                                        -      -       -      -        -
Probable                                  4,187   4.96   10.31    668    1,388
Total                                     4,187   4.96   10.31    668    1,388
Total combined
Proven                                   22,681   1.14    1.88    830    1,370
Probable                                 81,594   1.12    3.06  2,943    8,040
Total                                   104,275   1.13    2.81  3,773    9,410

Notes:

  1. Open-pit mineral reserves have been estimated using an optimized pit shell based on metal prices of $800 per ounce gold and $25 per ounce silver, a foreign exchange rate of $1.05 to $1.00 (U.S.), gold recovery of 89.9 per cent (non-CAP zone) and 74.3 per cent (CAP zone), and a silver recovery of 67.1 per cent (non-CAP zone) and 69.5 per cent (CAP zone). The cut-off grade is based on a gold price of $1,200. Underground reserves have been estimated from mining shapes generated using a cut-off grade of 3.5 g/t gold-equivalent. Development material from stope access drives above a cut-off grade of 1.5 g/t gold-equivalent is also assumed to be sent to the mill for processing. Underground break-even cut-off grade is calculated at 2.75 g/t gold-equivalent based on metal prices of $1,300 per ounce gold and $22 per ounce silver, a foreign exchange rate of $1.05 to $1.00 (U.S.), gold recovery of 95 per cent, and a silver recovery of 75 per cent.
  2. Open-pit reserves have been estimated using a dilution of 4 per cent at 0.21 g/t Au and 1.19 g/t Ag, and underground reserves have been estimated using an overall dilution of 8.3 per cent, inclusive of both rock and backfill dilution. Open-pit and underground reserves have been estimated using a mining recovery of 95 per cent and 96.5 per cent, respectively.
  3. Open-pit direct processing material is defined as mineralization likely to be mined and processed directly and above a variable cut-off grade ranging from 0.3 to 0.7 g/t Au.
  4. Stockpile material includes all material within the designed open pit between variable cut-offs described above in Note 3, as well as material within the CAP zone (Code 500) that is suitable for stockpiling and future processing.
  5. Mineral reserves for the open pit are derived from the resource model, effective Nov. 2, 2013. Models for the underground reserves were derived from the August, 2013, and September, 2013, models for the main ODM zone and Intrepid zone, respectively. Models were prepared by Dorota El-Rassi, PEng (APEO No. 100012348), and Glen Cole, PGeo (APGO No. 1416), of SRK, both independent qualified persons as that term is defined in National Instrument 43-101. Rainy River's exploration program in Richardson township is being supervised by Mark Petersen, (AIPG certified professional geologist No. 10563), vice-president, exploration, for New Gold, qualified person as defined in National Instrument 43-101. New Gold continues to implement a rigorous quality assurance/quality control program to ensure best practices in drill core sampling, analysis and data management.
  6. Qualified persons -- The open-pit portion of the mineral reserve statement was prepared under the supervision of Patrice Live (OIQ No. 38991) of BBA, and the underground portion of the mineral reserve statement was prepared by Colm Keogh, PEng. (APEGBC No. 37433) of AMC Mining Consultants (Canada), both independent qualified persons as that term is defined in National Instrument 43-101.
  7. The mineral reserve estimate may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing and other relevant issues.

Mining operations and metallurgy

Conventional open-pit mining has been chosen as the primary method to mine the Rainy River deposit given the proximity of mineralization to the surface. Deeper, higher-grade portions of the deposit will be mined from underground. The open-pit mining production schedule incorporates an elevated cut-off grade strategy during the first nine years of mining to increase the mill feed grade. Material below the elevated cut-off grade will be stockpiled for processing during the later years of the project life. In addition, upon the start of production from the open pit, the development of the underground mine would commence with initial production from underground expected in 2018. The targeted mill throughput of 21,000 tonnes per day will initially be sourced exclusively from the open pit and then, once in full production, the underground mine will contribute 1,500 tpd of ore, with the balance of the 19,500 tpd coming from the open pit.

Open-pit operations

At full capacity, open-pit mining operations would be carried out with an equipment fleet comprising: three 216-millimetre blast hole drills, one 29-cubic-metre and two 26-cubic-metre hydraulic shovels, one 18-cubic-metre wheel loader, and 22 220-tonne haul trucks. A 10-metre bench height has been selected for mining. The open-pit mine would provide process plant feed starting at a nominal rate of 21,000 tpd, or 7.7 million tonnes per year, declining to 19,500 tpd, or 7.1 million tonnes per year, once the underground mine reaches its full production. Total annual mining of ore, waste and overburden would peak at 69 million tonnes. The operational stripping ratio, excluding waste and overburden stripping during the development phase, is 3.5 to 1.0.

Underground operations

The underground mine will be accessed via a four-kilometre decline from a surface portal located to the east of the open pit. The underground design supports the ultimate extraction of 1,500 tpd of ore by longitudinal long-hole open stoping. The underground mineralization occurs in subvertical horizons varying in width from approximately three metres to 20 metres, with the weighted average width across the various zones being approximately eight metres. The various areas of underground mineralization provide for flexibility in the production schedule to recover higher-grade material earlier in the mine life. Longitudinal long-hole open stoping in each zone will proceed in a retreating pattern from the strike extent of ore to a common access point on all levels. Mining is scheduled to proceed upward from the lowest level of the zone, or from an adopted sill elevation, with backfill providing the working platform for each successive lift. On average, stopes eight metres in width, 20 metres in length and 20 metres in height have been used for mine planning. At full capacity, ore handling from underground workings to surface will be accomplished through a fleet of four seven-cubic-metre loaders and six 45-tonne haul trucks.

Metallurgy

The metallurgical evaluation was supported by an extensive grinding and extraction test program. Comminution tests were conducted on drill hole composites selected via geometallurgical methodology to ensure representative process plant feed, from both the open pit and underground, as well as to investigate the impact of variability in hardness on the crushing and grinding circuit design. The composites were derived from over 170 exploration drill holes and 13 dedicated large bore HQ/PQ drill holes. Mineralogical and diagnostic leach tests were conducted on approximately 120 composite samples. The testwork determined the base flowsheet as well as the optimum leaching parameters. An additional 275 variability leach tests were then conducted on specific geometallurgically selected drill core composite samples to investigate the impact of the selected leaching parameters on the various ore zones throughout the deposit. Estimated process plant feed grade, recoveries and metal production from commercial production forward are summarized in the table.

                        RAINY RIVER FEASIBILITY STUDY PRODUCTION SCHEDULE   
                    
                                     Head grade           Recovery      Average annual production

Production years  Mill feed        Gold    Silver       Gold   Silver       Gold           Silver  
                        (Mt)       (g/t)     (g/t)        (%)      (%)      (koz)            (koz)

1 through 9            68.9        1.44       3.1       91.9     63.7        325              480     
Life of mine          103.9        1.12       2.8       90.6     64.1        243              429     

Table excludes 400,000 t of material milled in the preproduction period.

Mineral processing

The 21,000 tpd process plant would use conventional crushing, grinding, leaching, carbon-in-pulp (CIP) and gold recovery technology to produce gold-silver dore. The overall design utilizes a simple and conventional flowsheet.

Run-of-mine material will be crushed to 165 millimetres in the gyratory crusher, and subsequently conveyed and ground in the SAG mill in closed circuit with a scalping screen and a pebble crusher. Undersize from the scalping screen will be combined with the ball mill discharge and pumped to a cyclone cluster. The underflow from the cyclone cluster will feed the ball mill. A portion of the ball mill discharge will be treated by a gravity circuit. The cyclone overflow will be thickened in a preleach thickener and pumped to the cyanide leaching circuit, which is designed for approximately 30 hours of retention time. The discharge from the leach circuit will flow by gravity to a CIP circuit where the leached gold will be adsorbed onto carbon. Loaded carbon will be sent to the carbon stripping circuit where the gold and silver will be recovered as sludge in electrowinning cells then filtered, dried and smelted into dore bars.

The tailings from the CIP circuit will be sent to the cyanide destruction circuit and then discharged into the tailings storage facility.

Key process equipment would consist of:

  • A 1,371 mm by 1,950 mm (54 inches by 75 inches) gyratory crusher;
  • A SAG/ball mill/crusher grinding circuit:
    • One 11.0 m by 6.1 m diameter (36 feet by 20 feet) 15-megawatt SAG mill;
    • One 7.9 m by 12.3 m diameter (26 feet by 40.5 feet) 15-megawatt ball mill;
    • One 448-kilowatt pebble crusher;
    • One 45 m diameter preleach thickener;
  • Whole ore leaching and CIP circuit:
    • Eight leach tanks of 18 m diameter;
    • Seven 360 cubic m capacity CIP tanks;
    • One 45 m diameter predetox thickener.

Project capital costs

The project is located 50 kilometres northwest of Fort Frances, a town with a population of approximately 8,000 people, in Northwestern Ontario. The project benefits from its proximity to existing infrastructure. Hydroelectric power will be sourced through the construction of a new 17-kilometre transmission line that will connect the project to a pre-existing 230-kilovolt line that currently links Fort Frances and Kenora, Ont., a small city with a population of approximately 15,000 people, located to the north of the project.

The Rainy River project site is easily accessible by a network of all-weather roads that branch off the well-maintained Trans-Canada Highways 11 and 71. Access roads are serviced, allowing year-round access. The Canadian National Railway is located 21 km to the south of the project and runs east-west.

During the initial development stage, the direct on-site personnel requirement peaks at approximately 450 people. As a result of the project's proximity to various towns, no camp facilities are envisioned during the construction or operational phase. The underground mine is scheduled to be developed once the open pit begins production. Development capital costs related to the underground mine are included in the sustaining capital estimate.

The total estimated development capital cost for the project is $885-million, inclusive of a $70-million contingency. The estimated development capital cost is based on the fourth quarter 2013 capital environment. The development capital cost equates to $260 per recoverable gold ounce over the current reserve life of the project. Total sustaining capital over the life of the project is estimated to be $348-million, which includes $105-million related to the development of the underground mine. In total, the sustaining capital, including the development of the underground, is equivalent to an annual average of $102 per recoverable gold ounce over the current life of the project.

  BREAKDOWN OF FEASIBILITY STUDY PROJECT DEVELOPMENT CAPITAL COSTS 
   
Description                                                     ($M)

Direct costs                                                            
Process facilities                                              297     
Site development (truck shop, warehousing, earthworks)          111     
Open-pit mine equipment                                          81     
Overburden and waste stripping                                   80     
Tailings and water management                                    48     
Power line and roads                                             21     
Total direct costs                                              638     
Owner's costs and EPCM                                                  
Owner's costs                                                    76     
Engineering, procurement and construction management             48     
Other indirect costs                                                    
Freight and logistics                                            13     
Construction facilities and services                             10     
Spare parts and equipment                                        10     
Other indirect costs                                             20     
Total indirect costs                                             53     
Total owner's costs, EPCM and indirect costs                    177     
Subtotal                                                        815     
Contingency                                                      70     
Total project development capital costs                         885

               BREAKDOWN OF FEASIBILITY STUDY SUSTAINING CAPITAL COSTS               
Description                                                                 ($M)

Open-pit sustaining capital                                                 111     
Underground development capital (equipment, infrastructure, development)    105     
Underground sustaining capital                                              132     
Total sustaining capital costs                                              348     

Project operating costs

Rainy River's combined open-pit and underground operation delivers strong gold head grades, which, when combined with the project's proximity to infrastructure and silver byproduct revenue, result in Rainy River's estimated total cash costs and all-in sustaining costs being well below today's industry average.

After the start of commercial production, the project's mining costs are projected to be $2.04 (Canadian) per tonne of material for the open pit and $90.10 (Canadian) per tonne of material for the underground. Costs per tonne milled over the life of mine are summarized in the table.

                            BREAKDOWN OF BASE CASE FEASIBILITY STUDY OPERATING COSTS

Description                                                      (C$ per tonne milled) ($ per gold ounce produced)
Open-pit mining (overburden, waste, direct
processing ore and stockpile)                                                    9.22                         373
Underground mining                                                               3.63
Processing                                                                       9.25                         268
General and administrative                                                       1.54                          45
Royalties                                                                        0.41                          12
Refining and transport                                                           0.14                           4
Cash costs                                                                      24.19                         702
Silver byproduct sales at $22.00 per ounce silver                               (1.34)                        (39)
Total cash costs                                                                22.85                         663
Sustaining capital                                                               3.53                         102
All-in sustaining costs                                                         26.38                         765

The base-case cost estimates assume an electricity rate of 6.5 Canadian cents per kilowatt-hour and a diesel cost of 95 Canadian cents per litre.

Economic sensitivity analysis

The summary showing a range of commodity price and foreign exchange scenarios holds the electricity rate and diesel cost constant. The NPV figures are calculated to the beginning of 2015 when, assuming the receipt of necessary permits and approvals within expected timelines, construction would begin. For purposes of the calculations, any 2014 development expenditures are treated as undiscounted costs.

                      SUMMARY OF FEASIBILITY STUDY PROJECT ECONOMICS (PRETAX) 
                           
Gold price       Silver price             US$/C$           5% NPV           IRR  Payback period 
($ per ounce)    ($ per ounce)                                ($M)           (%)         (years)

1,150                   20.00               0.93              138           7.8             6.8          
1,300                   22.00               0.95              438          13.1             5.4          
1,450                   24.00               0.97              738          17.6             4.3          
1,600                   26.00               1.00            1,009          21.1             3.6          

Using the base-case assumptions as the foundation, other important sensitivities include:

  • Every $100-per-ounce change in the life-of-mine gold price, where all other assumptions are held constant, results in an approximate $232-million change in pretax NPV and 3.7-per-cent change in pretax IRR.
  • Every five-cent change in the U.S.-dollar/Canadian-dollar foreign exchange rate, where all other assumptions are held constant, results in an approximate $141-million change in pretax NPV and 2.8-per-cent change in pretax IRR.
  • Every $50-million change in development capital costs, where all other assumptions are held constant, results in a $46-million change in pretax NPV and 1.3-per-cent change in pretax IRR.

Tax considerations

Part of New Gold's growth strategy, including the successful acquisition of Rainy River Resources in 2013, has been to build its business in jurisdictions where it already has an established presence. One of the many benefits of this approach is that it enables the company to manage its business in a tax-efficient manner. In the case of Rainy River, New Gold plans to implement tax-planning strategies that would allow it to realize tax synergies by utilizing a portion of the tax attributes that have been, and will continue to be, generated in the corporate entity holding the company's portfolio of Canadian assets. Currently, the company's primary objective is to maximize the cash flow generation of its New Afton mine in Kamloops, B.C., with any remaining tax attributes planned to be used to maximize Rainy River's future aftertax cash flow. As New Gold's focus in such allocation will be maximizing the company's overall profitability rather than that of any one operation or project, this will remain a dynamic process.

At the end of 2012, on a combined basis, the New Gold corporate entity had over $900-million in Canadian exploration expenditures, Canadian development expenditures and Class 41 capital cost allowance, as well as over $100-million in net operating losses. These totals exclude those attributes specifically related to the Blackwater project. In addition, the company's annual corporate administration expenses are approximately $30-million and its annual interest expenses are $52-million, both of which can be combined with the above-noted attributes to shelter taxable profits from one or both of New Afton and Rainy River going forward. New Gold intends to implement tax-planning strategies that would allow it the flexibility to access the existing tax attributes of Rainy River Resources and utilize them in a manner which would maximize New Gold's overall profitability.

For purposes of calculating the base-case Rainy River aftertax economics, the company has assumed the Ontario provincial and federal taxes, as well as the distribution of the tax attributes as between Rainy River, New Afton and New Gold's other operations in a manner that first maximizes New Afton's life-of-mine cash flow generation based on the current New Afton mine plan.

  • 10-per-cent Ontario provincial income tax on taxable income;
  • 10-per-cent Ontario mining taxes on mining income;
  • 2.7-per-cent Ontario corporate minimum tax;
  • 15-per-cent federal income taxes on taxable income.

These assumptions result in the aftertax economics for the project shown in the table.

                      SUMMARY OF FEASIBILITY STUDY PROJECT ECONOMICS (AFTER TAX)  
                         
Gold price       Silver price             US$/C$           5% NPV           IRR  Payback period 
($ per ounce)    ($ per ounce)                                ($M)           (%)         (years)

1,150                   20.00               0.93              100           7.1             6.8          
1,300                   22.00               0.95              314          11.3             5.5          
1,450                   24.00               0.97              520          14.9             4.4          
1,600                   26.00               1.00              706          17.8             3.8          

Feasibility study 2014 key parameters

The results of the 2014 Rainy River feasibility study, including life-of-mine capital costs, average annual production, and costs and project economics, are all consistent with those developed by New Gold in connection with its acquisition of Rainy River Resources in 2013. Additional detail on the key project parameters, including changes in certain assumptions since Rainy River Resources' May, 2013, study, is provided below:

Life-of-mine capital costs

  • Increase in development capital costs primarily attributable to New Gold's plan to purchase, rather than lease, equipment and more conservative assumptions on labour productivity and rates;
  • Decrease in sustaining capital costs primarily attributable to plan to purchase equipment, and reclassification of certain overburden and waste stripping costs from sustaining capital to operating costs;
  • In Canadian-dollar terms, the total life-of-mine capital costs, including development and sustaining capital for both the open pit and underground, have increased by 8 per cent when compared with the May, 2013, study, which has been offset by an 8-per-cent depreciation in the Canadian dollar from $1/99 Canadian cents at the time of the 2013 study results announcement to $1/91 Canadian cents today.

Production

  • Increased underground mineral reserves, from inclusion of Intrepid zone, and updated mine planning have resulted in contribution from higher-grade underground now reaching 1,500 tpd rate.
  • Life-of-mine total underground gold production increased by 148,000 ounces.
  • Life-of-mine total open-pit gold production decreased by 391,000 ounces due to more conservative approach of using 10 m by 10 m by 10 m blocks for modelling rather than the five m by five m by five m blocks used previously.

Operating costs

  • Minimal 5-per-cent increase in open-pit mining cost per tonne mined, despite overburden and waste stripping costs being reclassified as mine operating costs;
  • Increase in underground mining cost per tonne resulting from updated mine planning and more conservative assumptions on productivity and rates;
  • Increase in processing costs due to increased electricity rate assumption of 6.5 Canadian cents per kilowatt-hour;
  • Lower all-in sustaining costs during the first nine years as a result of the decrease in sustaining capital more than offsetting the increase in operating costs.

Environment, permitting and corporate social responsibility

New Gold is an active member of the local community with offices in both Emo and Thunder Bay, Ont., that offer residents easily accessible locations to learn about the Rainy River project. The company has engaged the local communities, as well as local first nations and Metis community members in its project planning activities.

Environmental aspects have figured prominently in the development of the layouts and designs for the Rainy River project. Among other aspects, this includes consideration of the implications of design alternatives from an environmental management perspective, with a particular focus on mineral waste management, as well as the siting and location of facilities and infrastructure. From an environmental perspective, the Rainy River project is unique in that there are no lakes located within, or adjacent to, the project. Based on multiple years of aquatics baseline investigations, with the exception of some limited baitfish harvesting, the area streams do not support a significant commercial or recreational fishery. There is considerable environmental baseline information currently available regarding the site and the surrounding area, compiled through extensive field investigations conducted over a four-year period. This information is being augmented as appropriate to support the progressing engineering design.

New Gold plans to operate the project in accordance with the international cyanide management code.

The Rainy River project is being reviewed through a co-ordinated federal environmental assessment/provincial individual EA process. During the second and third quarters of 2013, the draft EA report was reviewed by local first nations and Metis groups, federal and provincial regulatory agencies, and other stakeholders. All comments received were addressed and a final EA report was submitted on Dec. 3, 2013, for federal conformity review. On Dec. 12, 2013, the company was informed that the final EA report had successfully passed the federal conformity review step. This milestone enables the company to move forward with the next step in the review process as planned. Consistent with the project schedule, the final EA report is being issued to the federal and provincial agencies, the local first nations and Metis groups, and other stakeholders in the coming days to complete the second consultation engagement.

The objective of final reclamation for the Rainy River project is to return the site to a productive condition on completion of mining activities. A conceptual closure plan consistent with regulatory requirements was part of the draft EA report issued for review in 2013 and is also included in the final EA report. Consistent with the Ontario Mining Act requirements, the formal mine closure plan document will be submitted later in 2014 for proposed filing concurrent with the decision on the provincial individual EA. As much as possible, reclamation will be completed progressively during operations, consistent with industry best practices.

Once in full operation, Rainy River is expected to create approximately 600 permanent jobs. The construction work force would be approximately 450 people. New Gold is committed to maximizing local employment and contracting opportunities. The company plans to work collaboratively with community partners to prepare local workers and establish programs for specific training where necessary.

Technical information

The scientific and technical information in this news release has been reviewed and approved by Mark Petersen, an AIPG certified professional geologist under National Instrument 43-101 and officer of New Gold. A technical report to be prepared in accordance with NI 43-101 will be filed on SEDAR within 45 days of this news release. For further information with respect to the key assumptions, parameters and risks associated with the results of the feasibility study, the mineral reserve estimate and other technical information with respect to the Rainy River project, please refer to the technical report to be made available at SEDAR. The following qualified persons, as that term is defined in NI 43-101, have prepared or supervised the preparation of their relevant portions of the technical information in this news release and the related

Technical report to be filed:

  • Colin Hardie, PEng, BBA;
  • David Runnels, Eng, BBA;
  • Patrice Live, Eng, BBA;
  • Sheila Daniel, MSc, PGeo, AMEC;
  • David Ritchie, PEng, AMEC;
  • Dr. Adam Coulson, PhD, PEng, AMEC;
  • Glen Cole, PGeo, SRK Consulting (Canada);
  • Dorota El-Rassi, PEng, SRK Consulting (Canada);
  • Colm Keogh, PEng, AMC Consultants;
  • Mo Molavi, PEng, AMC Consultants;

 
             RAINY RIVER MINERAL RESOURCE ESTIMATE

                              Tonnes   Gold  Silver   Gold   Silver
                                (000)  (g/t)   (g/t)  (koz)    (koz)
Direct processing material
Open pit
Measured                      20,282   1.45    1.93    947    1,261
Indicated                     80,411   1.35    2.55  3,486    6,584
Measured and indicated       100,693   1.37    2.42  4,433    7,846
Inferred                       9,388   0.97    2.28    292      687
Underground
Measured                          89   4.95    2.75     14        8
Indicated                      5,469   4.53   11.34    796    1,994
Measured and indicated         5,558   4.53   11.20    810    2,002
Inferred                       2,641   4.46    8.30    379      707
Stockpile material
Open pit
Measured                       6,294   0.37    1.29     74      262
Indicated                     64,816   0.44    2.17    919    4,526
Measured and indicated        71,110   0.43    2.09    993    4,788
Inferred                       8,626   0.37    1.16    102      323
Total combined
Measured                      26,665   1.21    1.79  1,035    1,531
Indicated                    150,696   1.07    2.70  5,202   13,104
Measured and indicated       177,361   1.09    2.57  6,236   14,635
Inferred                      20,655   1.16    2.58    773    1,717

Notes

  1. Mineral resources are reported in relation to conceptual pit shells and are inclusive of the Intrepid zone, with a vertical limit of minus-150 m.
  2. Open-pit mineral resources are reported at a cut-off grade of 0.30 g/t gold and underground mineral resources are reported at a cut-off grade of 2.5 g/t gold based on a gold price of $1,400 per ounce, a silver price of $24.00 per ounce, a foreign exchange rate of $1.10 (Canadian) to $1.00, gold recovery of 88 per cent for open pit resources and 90 per cent for underground resources, with silver recovery at 75 per cent.
  3. Direct processing material is defined as mineralization above a cut-off of 0.45 g/t gold and likely to be mined and processed directly.
  4. Stockpile material includes all material within conceptual pit shells in the gold grade range of 0.30 to 0.45 g/t as well as all material within the CAP zone that is suitable for stockpiling and future processing based on average metallurgical recoveries of 88 per cent gold and 75 per cent silver.
  5. Qualified persons -- The mineral resource statement was prepared by Dorota El-Rassi, PEng (APEO No. 100012348), and Glen Cole (APGO No. 1416) from SRK, both independent qualified persons as that term is defined in National Instrument 43-101.
  6. Mineral resources are inclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
  7. The mineral resource estimate may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing and other relevant issues.

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