New Gold Inc.
TSX : NGD
AMEX : NGD

New Gold Inc.

October 06, 2005 09:30 ET

New Gold Announces Closing of $3 Million Financing

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 6, 2005) - (All dollar amounts in Canadian dollars unless otherwise indicated)

New Gold Inc. (TSX:NGD)(AMEX:NGD) is pleased to announce the successful completion of its previously announced non-brokered private placement to investors who are at arm's length with the Company. As a result, the Company has issued 430,000 flow-through common shares at a price of $7.00 per share for gross proceeds of $3.01 million.

Proceeds of the private placement will be primarily used to extend the main underground decline in order to facilitate additional underground diamond drilling at the Company's 100% owned New Afton Copper-Gold Project, Kamloops, British Columbia, Canada. This additional drilling will test for extensions of the copper-gold mineralization to the west and at depth.

The securities offered have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States.

PROJECT UPDATE

The program of underground infill drilling continues and is still forecast to be completed by year end 2005. The process for selecting the engineering company to complete the feasibility study is progressing as forecast and, as previously indicated, the contract should be awarded in Q4, 2005. It is anticipated that this study could be completed by Q3, 2006. The feasibility study will determine the economic parameters of, and potential for, developing a new underground mine at the Company's New Afton Project. The initial permitting process has also commenced and is on-going.

CURRENT RESOURCE

The current resource at the New Afton Project was calculated using the results of approximately 100 diamond drill holes completed from surface. It was independently calculated from a kriged block model as part of an independent advanced scoping study conducted by Behre Dolbear in 2003 and updated in 2004 under the supervision of qualified person James A. Currie, P.Eng. Metal prices used in the scoping study and the resource calculation were US$0.85 per lb Cu, US$375 per oz Au, US$5.25 per oz Ag, and US$200 per oz Pd. At a cut-off of 0.70% Cu equivalent the Measured and Indicated Mineral Resource was calculated to be 68.7 Million Tonnes grading 1.68% Cu equivalent or 2.61 g/t Au equivalent (1.08% Cu, 0.85 g/t Au, 2.62 g/t Ag, 0.12 g/t Pd), which contains approximately 1.6 billion pounds of copper, and 1.9 million ounces of gold. The scoping study suggested that the project has very robust economics, with an after-tax IRR of 20% at the metal prices used. The Measured Resource category was calculated to be 9.5 Million Tonnes grading 1.29% Cu, 0.95 g/t Au, 3.44 g/t Ag, and 0.12 g/t Pd. The Indicated Resource category was calculated to be 59.2 Million Tonnes grading 1.05% Cu, 0.83 g/t Au, 2.49 g/t Ag, and 0.12 g/t Pd.

New Gold is in excellent financial condition with cash, currently, of more than CDN$18 million and no debt. The Company has only 15.0 million shares outstanding and 16.6 million shares fully diluted.

Safe Harbor Statement under the United States Private Securities Litigation Act of 1995: This release made may contain forward-looking statements that are affected by known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed, implied or anticipated by such forward-looking statements. Such forward-looking statements herein represent management's best judgment as of the date hereof based on information currently available. The Company does not intend to update this information and disclaims any legal liability to the contrary. Cautionary Note to U.S. Investors concerning resource estimates. This press release discusses the results of a scoping study, which is a "preliminary assessment" as defined in the Canadian NI 43-101, under which the use of inferred mineral resources is permitted under certain circumstances. The U.S. Securities and Exchange Commission regulations do not recognize any circumstances in which inferred mineral resources may be so used. U.S. investors are cautioned not to assume that any part or all of an inferred resource category described as a 'resource falling within the mine plan' will ever be converted into 'reserves' within the definition of that term in SEC Industry Guide 7. Cautionary Note to U.S. Investors concerning estimates of Measured and Indicated Resources. This section uses 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.

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