As you know, 2013 was a challenging year for the gold industry, with a declining bullion price reflected in the shares of gold companies, including New Gold’s. As significant shareholders ourselves, your Company’s Board of Directors and management team shared in the pain of last year’s share price decline.

There were also other headwinds. We faced the first real operational challenges in the Company’s history during the year. We are proud of the way our team responded to these challenges, finishing the year with record-low cash costs.

We also made an exciting new addition to our growth pipeline and have plenty of potential to add value at our properties – added value that we believe should underpin share price appreciation.

Well Positioned to Prosper

Despite last year's $400 drop in the bullion price, New Gold is well positioned to prosper, whether the gold price weakens, or strengthens as we expect it will. Our all-in sustaining costs of $899 per ounce are among the lowest in the industry. As a result, we continue to generate strong cash flows even in a weak gold price environment, we continue to enjoy attractive margins, and we continue to have the financial flexibility to achieve organic growth at a pace of our choosing.


The operational challenges noted above relate to our Cerro San Pedro Mine in Mexico, which experienced a pit wall movement, and our Mesquite Mine in California, where grades did not reconcile well with our model in the area being mined in the latter part of the year. Our team worked to address these challenges, which, when combined with the very strong performances of the New Afton and Peak Mines, led to a strong fourth quarter and finish to the year.

Overall, our suite of operations once again achieved solid performances for the year, with production of 397,688 ounces of gold at total cash costs of $377 per ounce. New Afton finished its first full year of operation as our most significant cash flow generator, and is positioned to contribute even more with the benefit of further throughput increases, a planned mill expansion and exploration efforts in the mine's prospective C-zone.

Robust Growth Pipeline in Politically Secure Jurisdictions

We feel fortunate that the combination of Rainy River, Blackwater and our fully carried interest in El Morro provides our Company with one of the most robust organic growth pipelines in the business.

As previously announced, we have decided to proceed first with the development of Rainy River. We made the acquisition of Rainy River in Ontario, Canada,  last year because we viewed its combination of  ideal location, sizeable reserve, and robust production potential as presenting a truly compelling opportunity. It is a natural addition to our portfolio of assets in politically secure jurisdictions, offers tax synergies for our Canadian activities, as well as being a well-advanced development project.

Like our acquisition of the Blackwater project in British Columbia, Canada, in 2011, Rainy River just made sense. We viewed ourselves as the logical owners. We also acquired the property for an advantageous price. Together, the Blackwater and Rainy River acquisitions increased our shares outstanding by 25 percent for assets that have production potential equivalent to over two times our current production base. The feasibility studies for both projects outline cash costs and all-in sustaining costs well below today's industry average for each project. Together, they add almost 12 million ounces of gold reserves and 16 million ounces of Measured and Indicated (M&I) resources (inclusive of reserves) in Canada, or approximately two-thirds of New Gold's reserves today.

Combined with our fully carried 30 percent interest in El Morro, Chile, these development projects provide us with a bright future.

We also continue to feel well positioned as our solid cash balance of over $400 million and our continued cash flow generation provide us with flexibility as we consider the sequencing of our projects.

Value Creation

Your team has a solid track record of value creation which underpinned a rise of over 250 percent in the share price over five years starting in January 2009, compared to a 37 percent rise in the gold price and a 42 percent rise in the S&P/TSX Global Gold Index in the same period.

We have always believed that you need to step forward and build mines to access all of the additional value-enhancing options that present themselves once you do. We have shown this to be the case at New Afton and expect we can find the same at Rainy River and Blackwater, where the base-case economics do not take account of multiple embedded options that should provide additional opportunities to enhance returns as the projects evolve.

We are focused on continuing this record of value creation for the benefit of our shareholders. As we do so, we are guided by one of the most experienced, veteran group of Directors in the business. Whatever the conditions in the gold business, they have seen them before, and can be trusted to give steady, sure advice on the best strategies for our Company.


For 2014, we expect production to remain consistent with 2013 but expect costs to fall even further. Over the next three years, we expect our low-cost production to grow significantly. This growth will come from organic projects including the New Afton mill expansion, Mesquite returning to run-rate production levels, and the development of Rainy River.

Going forward, we have a financially secure outlook at lower gold prices as well as the opportunity to benefit from higher gold prices. With one of the most robust organic growth pipelines in the business, we are well positioned to continue our track record of value creation per share – value creation that we believe will ultimately be reflected in appreciation of our share price.

Thank you for your continued support for New Gold.

Randall Oliphant Signature

Randall Oliphant

Robert Gallagher Signature

Robert Gallagher