New Gold Inc. (TSX: NGD) (NYSE: NGD) reports second quarter results for the Company as of June 30, 2022. For detailed information, please refer to the Company’s Second Quarter Management’s Discussion and Analysis and Financial Statements that are available on the Company’s website at www.newgold.com and on SEDAR at www.sedar.com. The Company uses certain non-GAAP financial performance measures throughout this news release. Please refer to the “Non-GAAP Financial Performance Measures” section of this news release and the MD&A for more information. Numbered note references throughout this news release are to endnotes which can be found at the end of this news release.

Consolidated Second Quarter Highlights

• Gold equivalent¹ production for the quarter of 70,514 ounces (52,431 ounces of gold, 7.4 million pounds of copper and 117,318 ounces of silver)
• Operating expenses³ of $1,277 per gold eq. ounce
• All-in sustaining costs² of $2,373 per gold eq. ounce, including total cash costs² of $1,296 per gold eq. ounce
• Average realized gold price² of $1,879 per ounce and average realized copper price² of $4.14 per pound
• Cash generated from operations of $37 million, or $0.05 per share
• Cash generated from operations, before changes in non-cash operating working capital² of $27 million, or $0.04 per share
• Net loss of $38 million, or $0.06 per share
• Adjusted net loss² of $17 million, or $0.02 per share
• June 30, 2022 cash and cash equivalents of $277 million
• During the quarter, the Company provided an update to its 2022 consolidated operational outlook (refer to the Company’s July 11, 2022 news release for further information)
• During the quarter, the Company successfully completed the previously announced redemption of its outstanding $100 million aggregate principal amount of its 6.375% Senior Notes due 2025 (refer to the Company’s May 16, 2022 news release for further information)

“While the operational outlook changes to this year are unfortunate, our teams remained resilient during a challenging quarter and I remain confident that we are positioned to have a stronger second half of the year, and deliver on our updated guidance,” stated Renaud Adams, President & CEO. “Heavy rainfall and flooding in the quarter impacted Rainy River’s mine plan, but over the last month, we have made tremendous progress on our dewatering efforts and mining at the bottom of the pit has resumed. Our priority for the remainder of the year continues to be on positioning the open pit operations to their optimal conditions. Both of our operations also continue to review optimization opportunities and assess cost reduction initiatives to mitigate against inflationary challenges experienced across the industry. We continue to maintain a very healthy balance sheet while also paying down $100 million of our debt in the quarter, with no additional debt due until 2027. As we move forward and look beyond 2022, both of our operations continue to advance the Company’s mid to long-term strategy of increasing production and decreasing costs, leading to free cash flow generation. I strongly believe this strategy remains intact. All while we continue to execute on our drilling programs and assess the potential of our significant remaining Mineral Resource inventory. Finally, we have executed on strategic opportunities to secure our cash position and liquidity profile to enable us to execute on our short-term capital projects allowing us to unlock the maximum value at both assets.

At Rainy River, the objective over the 2022 to 2026 period is to execute a plan that extracts our remaining open pit Mineral Reserves at the lowest cost possible, and ramp-up underground operations as incremental ore to the mill, to maximize free cash flow. Our year-end 2021 open pit Mineral Reserve estimate at Rainy River contained approximately 44 million tonnes of ore at approximately 1 g/t (inclusive of low-grade ore and exclusive of stockpile material) at an attractive strip ratio of 2.32:1 per the latest technical report, which has further been reduced at the end of the second quarter. We are facing the same inflationary pressures felt by our peers and across the industry, but I remain positive on several opportunities available to us. The increase in fuel prices has had the largest impact to Rainy River, and one opportunity to reduce our fuel consumption is to minimize the amount of rehandling required to feed the mill by optimizing the in-pit blending strategy to maximize direct feed which will reduce stockpile movement. Our current technical report included approximately 22 million tonnes of ore to be rehandled during the 2022 to 2026 period. Minimizing this represents a significant opportunity to reduce fuel consumption, and improve grade at the mill, while reducing our carbon footprint. Other consumable prices have also increased, and we continue to evaluate additional opportunities to reduce our consumption. In the pit, we are improving on pumping, haulage conditions and other operational delays, all of which will have a positive impact in the near-term. Sequencing and better timing with mill operations will be key as we execute our near-term plans. Recently, we have experienced additional downtime at the mill, and we are working to address this and reduce our maintenance costs, as we look to increase our milling capacity moving forward. We continue to advance the development of the underground Intrepid zone with mining expected to begin in the fourth quarter. As we ramp-up Intrepid and incorporate other underground mining zones located below the pit over the next five years, our production growth profile at reduced costs remains very attractive with further potential to convert additional underground Mineral Resources to Mineral Reserves.

New Afton has historically proven to be a prolific block cave operation, a low-cost producer, and high free cash flow generator. We are working to return to these results as we near the completion of B3 development and continue to advance the C-Zone. With these new zones in production, we expect to return the asset, from 2024 forward, to years of low sustaining capital and higher grade, leading to increased production at low costs. Like Rainy River, New Afton has also experienced inflationary pressures however, mitigation efforts are underway including the ongoing use of a conveying system and continued efforts in electrifying the mobile fleet. These efforts should contribute significantly in reducing fuel consumption and improving our carbon footprint. Returning the mill to its full capacity should have a significant impact on reducing processing unit costs and we continue to assess further optimization opportunities. Exploration drilling programs continue to advance, with our priority on adding new higher-grade ore, to improve the mine life. There remains a meaningful inventory of Mineral Resources outside of the current mine plan, which could potentially provide further opportunities to enhance New Afton’s mine plan,” added Mr. Adams.

2022 Updated Operational Outlook

During the quarter, the Company provided an update to its 2022 consolidated operational outlook (refer to the Company’s July 11, 2022 news release for further information). All other consolidated and mine site capital investment and exploration estimate guidance, including sustaining capital and sustaining leases and growth capital, remain unchanged.

Consolidated Financial Highlights

• Revenue decreased over the prior-year periods due to lower gold and copper sales volume, partially offset by higher realized gold prices. Lower sales in the quarter were impacted by the timing of concentrate shipments at New Afton of approximately 7,500 gold eq.¹ ounces which have been deferred to the third quarter, a quarterly impact of approximately $700 and $140 per gold eq. ounce on New Afton and consolidated all-in sustaining costs².
• Operating expenses were lower than the prior-year periods due to lower gold and copper sales volumes.
• Net loss increased over the prior-year periods primarily due to lower revenue and a higher loss on revaluation of investments, partially offset by lower operating expenses and a loss on revaluation of the New Afton free cash flow interest obligation in the prior-year periods.
• Adjusted net loss² increased over the prior-year periods primarily due to lower revenues.
• Cash generated from operations decreased over the prior-year periods due to lower revenues.

Consolidated Operational Highlights

Rainy River Mine

Operational Highlights

Operating Key Performance Indicators

• Rainy River’s priority for the remainder of the year continues to be on positioning the open pit operations to its optimal conditions with the team focusing on operational efficiencies including optimizing the fleet and advancing our mining at an appropriate rate as the pit gets deeper and narrower. Significant progress has been made on dewatering the open pit and mining at the bottom of the pit has resumed and will continue to ramp-up throughout the year. Concurrently, the operation continues to make meaningful progress advancing the underground plan. The Intrepid zone continues to advance on time and on budget, with initial production expected to begin later this year. Advancing the underground plan is expected to lead to increasing production at attractive all-in sustaining costs, and at current commodity prices should generate strong margins and free cash flow over the next decade.
• Open pit tonnes mined per day decreased over the prior-year periods due to the adverse impact from heavy rainfall around the Fort Frances area in northwestern Ontario, resulting in flooding in the Rainy River open pit and impacting the mine plan. Approximately 1.1 million ore tonnes and 8.9 million waste tonnes (including 7.1 million capitalized waste tonnes) were mined from the open pit at an average strip ratio of 7.96:1. The higher-than-average strip ratio was a result of limited access to ore zones due to the in-pit flooding during the quarter, as such, equipment was re-allocated to advance waste and overburden stripping. The strip ratio is expected to average approximately 2.1:1 for the remainder of the open pit life.
• Tonnes milled per calendar day decreased over the prior-year periods due to extra mechanical maintenance and the processing of harder ore from the North Lobe. Mining from the North Lobe open pit is expected to be completed in the first half of 2023.
• Gold eq.¹ production was 43,759 ounces (42,516 ounces of gold and 93,210 ounces of silver), a decrease over the prior-year period primarily due to lower gold grade because of the use of stockpiled low-grade ore during the quarter. Quarterly gold grade milled positively reconciled with the reserve model and approximately 50% of the tonnes milled during the quarter was low-grade material. For the six-month period ended June 30, 2022, gold eq.¹ production was 103,654 ounces (101,349 ounces of gold and 172,831 ounces of silver), a decrease over the prior-year period primarily due to lower tonnes processed.
• Operating expense³ per gold eq. ounce increased over the prior-year period primarily due to lower sales volume and inflation-driven price increases of diesel, electricity, grinding media, and other inputs attributing to the higher unit costs. For the six-month period ended June 30, 2022, operating expense³ per gold eq. ounce was in-line with the prior-year period.
• All-in sustaining costs² per gold eq. ounce increased over the prior-year periods due to higher sustaining capital spend and lower sales volume.
• Total capital and leases for the quarter were $45 million, and $87 million for the six-month period ended June 30, 2022, an increase over the prior-year periods due to higher sustaining capitalized waste mining costs as a result of the higher strip ratio. Sustaining capital² during the quarter primarily related to $29 million of capitalized waste, as well as capital maintenance, and the advancement of the annual tailings dam raise. Growth capital² primarily related to the development of the Intrepid underground zone, which advanced an additional 774 metres during the quarter.
• Free cash flow² for the quarter ended June 30, 2022, was $0.2 million (net of a $7 million stream payment), a decrease over the prior-year period due to a decrease in revenue. Free cash flow² for the six months ended June 30, 2022, was $15 million (net of a $13 million stream payment), consistent with the prior-year period due to an increase in cash generated from operations offset by an increase in capital expenditures.

New Afton Mine

Operational Highlights

Operating Key Performance Indicators

• At New Afton, with the Lift 1 zone and recovery level now closed, the priority for the remainder of the year is to complete B3 development and ramp-up production in the fourth quarter. Additionally, C-Zone development continues to advance with first production expected to commence in the latter part of 2023. Gold and copper production are expected to significantly increase during the C-Zone period, with all-in sustaining costs to significantly decrease, leading to robust free cash flow during that time.
• Underground tonnes mined per day decreased over the prior-year periods due to the planned completion of Lift 1 mining activities, as well as the closure of the low grade-higher cost recovery level zone in June, earlier than planned. Production ramp-up of the B3 zone continued on schedule during the quarter, with development expected to be completed by September.
• Tonnes milled per calendar day decreased over the prior-year periods as planned and is currently incorporating lower grade surface stockpiles to supplement the overall lower tonnes mined.
• Gold eq.¹ production was 26,755 ounces (9,916 ounces of gold and 7.4 million pounds of copper), and for the six-month period ended June 30, 2021, gold eq.¹ production was 54,556 ounces (19,183 ounces of gold and 15.6 million pounds of copper), a decrease over the prior-year periods due to lower tonnes processed and lower gold and copper grades.
• Operating expense³ per gold eq. ounce increased over the prior-year periods, primarily due to lower sales volume, inflation-driven price increases, and a $4 million ($250 per gold eq. ounce in the quarter) non-cash provision related to the write down of inventory to net realizable value.
• All-in sustaining costs² per gold eq. ounce increased over the prior-year periods, primarily due to lower sales volume, and higher sustaining capital spend for the six-month period. Sales in the quarter were impacted by timing of concentrate shipments with approximately 7,500 gold eq.¹ ounces deferred to the third quarter, an impact of approximately $700 per gold eq. ounce for the quarter.
• Total capital and leases for the quarter were $34 million, and $69 million for the six-month period ended June 30, 2022, a decrease over the prior-year periods, primarily due to timing of growth capital spend. Sustaining capital² in the quarter primarily related to B3 mine development and tailings management and stabilization activities. Growth capital² in the quarter primarily related to C-Zone development, which advanced 1,009 metres during the quarter.
• Free cash flow² for the quarter and six-month period ended June 30, 2022 was a net outflow of $43 million and $76 million, a decrease over the prior-year periods due to lower revenue.

About New Gold

New Gold is a Canadian-focused intermediate mining company with a portfolio of two core producing assets in Canada, the Rainy River gold mine and the New Afton copper-gold mine. The Company also holds approximately 5% equity stake in Artemis Gold Inc., and other Canadian-focused investments. New Gold’s vision is to build a leading diversified intermediate gold company based in Canada that is committed to the environment and social responsibility.