New Afton is New Gold's primary development project located 10 kilometers from Kamloops, which is expected to commence production in the second half of 2012. New Afton will be an underground mine, which will produce an annual estimated average of 75 million pounds of copper, 214 thousand ounces of silver and 85,000 ounces of gold over a 12 year mine life. Utility-owned 138 kV power lines, gas and oil pipelines cross the property.

Project History

In 1999, New Gold acquired an option on the New Afton property and subsequently surrounded it with additional staking. The following year, the Company began exploration work with 9,320 meters of surface diamond drilling in 21 NQ sized drill holes in the New Afton deposit.

During 2000-2003, New Gold mapped and sampled the open pit and drilled 90 surface diamond drill holes for a total of 42,450 meters. In February 2001, the Company tabled a scoping study based on drilling results to date which indicated that the New Afton deposit could be profitably exploited. In late 2003, New Gold commissioned Behre Dolbear and Company to undertake an advanced scoping study and resource estimate which was completed in 2004.

The scoping study outlined the potential for an attractive economic project and concluded that a detailed feasibility study was warranted in conjunction with additional technical investigations. Results from the underground program were encouraging and with the outlook for copper and precious metal prices remaining buoyant, New Gold commissioned a detailed feasibility study in December 2005. By April 2006 New Gold had completed and additional 78 underground diamond drill holes, for a total of 30,778 meters. In April 2007, the Company released a Feasibility Study, which was coordinated by Hatch and indicated the project had positive economics.

In October 2007, New Gold announced the receipt of the New Afton mine permit. Approval of such permits is granted only after an extensive review process administered through the multi-agency South-Central Mine Development Review Committee, which coordinates the permitting requirements of its member agencies. Any additional permits which are required as project construction moves forward will be applied for as necessary.

Current Development

During 2007 the Company commenced development and construction activities on the Project, with the initial focus being on the underground mine development which remains the critical path component of the Project. This includes the engagement of the underground contractor, Cementation, which has commenced the expansion of the existing two kilometre exploration decline, enlarging it to accommodate the equipment necessary to facilitate the mine development. Long lead time mill components have been ordered and received, as well as the mine development fleet necessary to conduct the underground development.

The development schedule for New Afton involves continuation of underground development through to 2012 and resumption of surface construction in 2011. During 2009, the New Afton mining team completed 1708 meters of underground development. The mill building was completed, providing a secure location for the storage of mine and mill equipment that has been received to date.

The projected capital expenditure at New Afton in 2010 is $68 million including capitalized interest. Total pre-production capital expenditures are now estimated at $630 million. At current metal prices, it is expected that the Company's existing assets coupled with the cash flow from current operations will be sufficient to cover the construction of the New Afton project.