New Gold Inc.

New Gold Inc.

April 25, 2008 10:16 ET

New Gold Inc.: Meeting of Noteholders Called

TORONTO, ONTARIO--(Marketwire - April 25, 2008) -

(All amounts are in Canadian $)

New Gold Inc. (the "Company" or "New Gold") (TSX:NGD)(AMEX:NGD) announced today that it has mailed to the holders of its 10% Subordinated Notes an information circular in connection with the Meeting of Noteholders on May 9, 2008 to approve certain amendments to the Note Indenture dated as of June 27, 2007. The amendments are required to enable New Gold to proceed with the proposed business combination announced on March 31, 2008 (the "Transaction") by which the Company, Metallica Resources Inc. ("Metallica") and Peak Gold Ltd. ("Peak") will combine under the name New Gold Inc. with a market capitalization of approximately U.S.$1.6 billion. The Transaction is subject to shareholder approvals of each company and to the fulfillment of a number of conditions, including the approval of the Noteholders to the proposed amendments to the Note Indenture.

Mr. Cliff Davis, the President of the Company, noted: "When the Note Indenture was entered into in June, 2007 the Company had one development project, the New Afton Mine, and no subsidiaries and the Note Indenture reflected this. As the merged company will have several projects and will operate through a number of subsidiaries, certain of the covenants in the Note Indenture as they presently stand would unduly restrict the manner in which the new entity could carry on business while denying to the Company the anticipated improved credit worthiness as a result of the Transaction. Therefore, it is necessary to request the Noteholders to approve certain changes. The directors of New Gold have unanimously recommended that the amendments be approved." The proposed amendments include:

- Removing the permit test and replacing it with a more general covenant that the Company shall work diligently toward obtaining and, once obtained, maintaining in good standing, all permits required for the operation of its properties;

- Providing for security on the New Afton Project in favour of the Noteholders;

- Creating a mechanism for cash flow movement between the Company and the new subsidiaries including mandatory offers to redeem a portion of the Notes annually;

- Renaming the Notes as "Senior Secured Notes";

- Providing for the issue pro rata to the Noteholders of 4,150,000 warrants to purchase common shares of the Company prior to June 28, 2017 for the exercise price of $15.00 per common share, subject to regulatory approval; and

- Certain other technical and housekeeping changes.

The changes are described in detail in the Circular mailed to Note holders and filed on SEDAR and the Amended and Restated Indenture is included with the Circular.

New Gold has had discussions with institutional holders of the Notes, both with respect to certain housekeeping amendments approved prior to the announcement of the Transaction and with respect to the amendments included in the Amended and Restated Indenture.

Marret Asset Management Inc., a significant holder of the Notes, participated in the structuring of the original Note issue and the amendment discussions. Barry Allan, President of Marret, stated that: "The Transaction together with the proposed amendments to the Note Indenture results in a significant enhancement to the credit quality of the Notes. In addition to security being provided over the New Afton Project, the Notes will now be supported by three operating assets, increased operating cash flows, and a significantly stronger balance sheet. We believe that the combination of the three companies along with the proposed amendments will enhance the value to all stakeholders."

The March 31, 2008 letter agreement includes a condition precedent in favour of Metallica and Peak, pursuant to which Metallica and Peak will not be obligated to complete the Transaction if the terms of the Notes have not been amended to the satisfaction of Metallica and Peak. The directors of Metallica and Peak have approved the proposed amendments.

The amendments will be made pursuant to an Extraordinary Resolution of the Noteholders which requires a quorum of Noteholders representing more than 51% of the principal amounts of the Notes being represented at the Meeting and note less than 66 2/3% so represented voting in favour. The Company may seek approval by written resolution of holders of not less than 66 2/3% of the principal amount of the Notes. If written approval is obtained in advance of the meeting, the Company will cancel the Noteholders meeting. If approved, the Amended and Restated Indenture will become effective on the date of the closing of the Transaction. The Extraordinary Resolution includes a waiver of provisions of the indenture replaced in the Amended and Restated Indenture. The waiver will expire on the earlier of (A) September 30, 2008 or (B) seven day after the date on which shareholders of any of the companies do not approve the Transaction at any meeting called to approve the combination. Noteholders may, thereafter, exercise all of their rights and remedies under the original Note Indenture and the Amended and Restated Indenture will have no effect.

Certain of the statements made and information contained herein is "forward- looking information" within the meaning of the Securities Act (Ontario) and the Securities Act (Alberta) or "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 of the United States. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, risks and uncertainties relating to the interpretation of drill results and the estimation of mineral resources and reserves, the geology, grade and continuity of mineral deposits, the possibility that future exploration, development or mining results will not be consistent with the Company's expectations, metal recoveries, accidents, equipment breakdowns, title matters and surface access, labour disputes or other unanticipated difficulties with or interruptions in production, the potential for delays in exploration or development activities or the completion of feasibility studies, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, failure to obtain adequate financing on a timely basis and other risks and uncertainties, including those described under Risk Factors in the Company's Annual Information Form and in each management discussion and analysis. Forward-looking information is in addition based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of copper and gold, that the feasibility study will confirm that a technically viable and economic operation exists, that the Company will receive required permits and access to surface rights, that the Company can access financing, appropriate equipment and sufficient labour and that the political environment within British Columbia and Canada will continue to support the development of environmentally safe mining projects so that the Company will be able to commence the development of the New Afton project within the timetable to be established by the feasibility study. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements.

Cautionary note to U.S. investors concerning estimates of Measured and Indicated Resources, and the use the terms "measured" and "indicated resources." We advise U.S. investors that, while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.

WARNING: The Company relies upon litigation protection for "forward-looking" statements.

Contact Information

  • New Gold Inc.
    Mr. Cliff Davis
    President and Chief Executive Officer
    (416) 977-1067 or Toll free: 1-877-977-1067
    New Gold Inc.
    Laura Sandilands
    Manager of Investor Relations
    (416) 977-1067 or Toll free: 1-877-977-1067
    New Gold Inc.
    70 University Avenue
    Toronto, Ontario
    M5J 2M4