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<SEC-DOCUMENT>0001204459-09-000445.txt : 20090318
<SEC-HEADER>0001204459-09-000445.hdr.sgml : 20090318
<ACCEPTANCE-DATETIME>20090317175130
ACCESSION NUMBER:		0001204459-09-000445
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20090317
FILED AS OF DATE:		20090318
DATE AS OF CHANGE:		20090317

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			New Gold Inc. /FI
		CENTRAL INDEX KEY:			0000800166
		STANDARD INDUSTRIAL CLASSIFICATION:	METAL MINING [1000]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-31722
		FILM NUMBER:		09689146

	BUSINESS ADDRESS:	
		STREET 1:		3110 - 666 BURRARD ST.
		CITY:			VANCOUVER
		STATE:			A1
		ZIP:			V6C 2X8
		BUSINESS PHONE:		(604) 696-4100

	MAIL ADDRESS:	
		STREET 1:		3110 - 666 BURRARD ST.
		CITY:			VANCOUVER
		STATE:			A1
		ZIP:			V6C 2X8

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DRC RESOURCES CORP                                      /FI
		DATE OF NAME CHANGE:	19860904
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>ngd031709form6k.htm
<DESCRIPTION>FORM 6-K
<TEXT>

<head>

<title>New Gold Inc.: Form 6-K - Prepared by TNT Filings Inc.</title>
</head>
<html>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<p style="text-align: center; margin-top: 14pt; margin-bottom: 0pt"><b>
<font size="5">UNITED STATES</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="5">SECURITIES AND EXCHANGE COMMISSION</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">Washington, D.C. 20549</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;<b><font size="2">___________________</font></b></p>
<p style="text-align: center; margin-top: 6pt; margin-bottom: 0pt"><b>
<font size="5">FORM 6-K</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR<br>
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">For the month of </font></b><font size="2"><b>March 2009</b></font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">Commission File Number 001-31722</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">___________________</font></b></p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="6">New Gold Inc.</font></b></p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Park Place, 3110-666 Burrard Street</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Vancouver, British Columbia V6C 2X8</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Canada</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">(</font><i><font size="2">Address of principal executive office</font></i><font size="2">)</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">___________________</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: justify; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.<br>
&nbsp;</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Form 20-F</font> <font face="Wingdings 2" size="4">&#163;</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">Form
40-F</font> <font face="Wingdings 2" size="4">Q</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: justify; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1)</font>
<font face="Wingdings 2" size="4">&#163;</font></p>
<font face="Times New Roman" size="2"><b>
<p>Note</b>: Regulation S-T Rule 101(b)(1) only permits the submission in paper
of a Form 6-K if submitted solely to provide an attached annual report to
security holders. </p>
</font>
<p style="text-align: justify; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7)</font>
<font face="Wingdings 2" size="4">&#163;</font></p>
<font face="Times New Roman" size="2"><b>
<p align="justify">Note: </b>Regulation S-T Rule 101(b)(7) only permits the
submission in paper of a Form 6-K if submitted to furnish a report or other
document that the registrant foreign private issuer must furnish and make public
under the laws of the jurisdiction in which the registrant is incorporated,
domiciled or legally organized (the registrant's &quot;home country&quot;), or under the
rules of the home country exchange on which the registrant's securities are
traded, as long as the report or other document is not a press release, is not
required to be and has not been distributed to the registrant's security
holders, and, if discussing a material event, has already been the subject of a
Form 6-K submission or other Commission filing on EDGAR. </p>
</font>
<p style="text-align: justify; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Yes</font> <font face="Wingdings 2" size="4">&#163;</font><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No</font>
<font face="Wingdings 2" size="4">Q</font></p>
<p style="text-indent: 0.25in; text-align: left; margin-top: 0pt; margin-bottom: 0pt">
&nbsp;</p>
<p style="text-align: justify; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">If &quot;Yes&quot; is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82- <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>.</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<div title="EE+ Page Break" style="font-size: 1pt; page-break-after: always; width: 100%; height: 1px">
  <hr color="#000000" SIZE="5">
</div>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">DOCUMENTS FILED AS PART OF THIS FORM 6-K</font></b></p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt"><font size="2">
<a style="text-decoration: none" href="#EXHIBIT INDEX">See the Exhibit Index
hereto.</a></font></p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2">SIGNATURES</font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-indent: 4%; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.</font></p>
<p style="text-align: justify; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<table style="border-collapse: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="50%" colSpan="2">&nbsp;</td>
    <td width="50%"><b><small>NEW</small> <small>GOLD</small> <small>INC.</small></b></td>
  </tr>
  <tr>
    <td width="50%" colSpan="2">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%" colSpan="2">&nbsp;</td>
    <td width="50%">&nbsp;</td>
  </tr>
  <tr>
    <td width="49%">&nbsp;</td>
    <td align="left" width="1%">
    <p style="margin-right: 15px"><font size="2">By: </font></td>
    <td style="border-bottom: 1px solid" width="50%"><font size="2">/s/ Susan
    Toews</font></td>
  </tr>
  <tr>
    <td width="49%">&nbsp;</td>
    <td align="left" width="1%">
    <p style="margin-right: 15px"><font size="2">Name:&nbsp;&nbsp; </font></td>
    <td style="border-top: 1px solid; border-bottom: medium none" width="50%">
    <font size="2">Susan Toews</font></td>
  </tr>
  <tr>
    <td width="49%">&nbsp;</td>
    <td align="left" width="1%">
    <p style="margin-right: 15px"><font size="2">Title: </font></td>
    <td style="border-top: medium none" width="50%"><font size="2">Corporate
    Secretary</font></td>
  </tr>
  <tr>
    <td width="50%" colSpan="2"><font size="2">Date: March 17, 2009</font></td>
    <td style="border-top: medium none" width="50%">&nbsp;</td>
  </tr>
</table>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">2</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<div title="EE+ Page Break" style="font-size: 1pt; page-break-after: always; width: 100%; height: 1px">
  <hr color="#000000" SIZE="5">
</div>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>
<font size="2"><a name="EXHIBIT INDEX">EXHIBIT INDEX</a></font></b></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="13%"><font FACE="Times New Roman" size="2"><b><u>Exhibit</u></b></font></td>
    <td WIDTH="87%"><font FACE="Times New Roman" size="2"><b><u>Description</u></b></font></td>
  </tr>
  <tr>
    <td WIDTH="13%">&nbsp;</td>
    <td WIDTH="87%">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="13%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="87%" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="13%" bgcolor="#E9F1F8"><font FACE="Times New Roman" size="2">
    <a style="text-decoration: none" href="ngd031709exh991.htm">99.1</a></font></td>
    <td WIDTH="87%" bgcolor="#E9F1F8">
    <font face="Times New Roman" size="2">
    <a style="text-decoration: none" href="ngd031709exh991.htm">Press Release dated March 17, 2009</a></font></td>
  </tr>
  <tr>
    <td WIDTH="13%">&nbsp;</td>
    <td WIDTH="87%">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="13%"><font FACE="Times New Roman" size="2">
    <a style="text-decoration: none" href="ngd031709exh992.htm">99.2</a></font></td>
    <td WIDTH="87%"><font FACE="Times New Roman" size="2">
    <a style="text-decoration: none" href="ngd031709exh992.htm">Consolidated
    Financial Statements December 31, 2008</a></font></td>
  </tr>
  <tr>
    <td WIDTH="13%" bgcolor="#E9F1F8">&nbsp;</td>
    <td WIDTH="87%" bgcolor="#E9F1F8">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="13%" bgcolor="#E9F1F8"><font FACE="Times New Roman" size="2">
    <a style="text-decoration: none" href="ngd031709exh993.htm">99.3</a></font></td>
    <td WIDTH="87%" bgcolor="#E9F1F8"><font FACE="Times New Roman" size="2">
    <a style="text-decoration: none" href="ngd031709exh993.htm">Management&#146;s
    Discussion and Analysis Year-ended December 31, 2008</a></font></td>
  </tr>
</table>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: left; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">
<font size="2">3</font></p>
<p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</p>
<hr color="#000000" SIZE="5">

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</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ngd031709exh991.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
<HTML>
<HEAD>
   <TITLE> New Gold Inc.: Exhibit 99.1 - Prepared by TNT Filings Inc.</TITLE>
</HEAD>

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<b>
<A name="page_1"></A>

</b>

<P align="right">
<b>Exhibit 99.1</b></P>

<P align="center">
<IMG src="ngexh991.jpg" border=0 width="364" height="105">
</P>
<div style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; padding-top: 1; padding-bottom: 1">
<P align="center">
<B>PRESS RELEASE</B><BR>
</P>
</div>
<div style="border-bottom-style: solid; border-bottom-width: 1; padding-bottom: 1">
<P align="center">
<B><font size="5">New Gold Announces 2008 Financial Results for its First Year as a Producer</font></B></P>
</div>
<P align="justify">
(All figures are in US dollars unless otherwise stated) </P>
<P align="justify">
March 17, 2009 &#150; VANCOUVER, BC &#150; New Gold Inc. (&#147;<B>New Gold</B>&#148; or the &#147;<B>Company</B>&#148;) (TSX and NYSE Alternext US &#150; NGD) today announced the financial and operational results for the fourth quarter and year
ended 2008<SUP>(1)</SUP>, which represents the Company&#146;s first year in production. In addition, New Gold provided an update on the execution of its accretive growth strategy. </P>
<P align="justify">
<B>Highlights</B><BR>
</P>
<UL style="text-align:justify;">
<LI>
Gold production of 272,046 ounces in 2008<SUP>(2)</SUP></LI>
<LI>
Total cash costs of &#36;549 per ounce (net of by-product sales)<SUP>(2) </SUP>in 2008</LI>
<LI>
Adjusted net earnings<SUP>(3) </SUP>of &#36;19.2 million or &#36;0.13 per share</LI>
<LI>
Cash flow from operations of &#36;66.1 million in 2008<SUP>(4)</SUP></LI>
<LI>
Year end cash and equivalents of &#36;185.6 million</LI>
<LI>
Completed business combination with Peak Gold Ltd. (&#147;Peak Gold&#148;) and Metallica Resources Inc. (&#147;Metallica&#148;) on June 30, 2008</LI>
<LI>
New Afton project construction schedule extended with start up expected in the second half of 2012</LI>
<LI>
Successful ramp-up of Cerro San Pedro in its first full year of operation</LI>
<LI>
Announced business combination with Western Goldfields Inc. on March 4<SUP>th </SUP>, 2009</LI>
</UL>
<P align="justify">
&#147;Despite the unprecedented economic challenges which unfolded in 2008, New Gold made excellent progress on its strategic objectives while exceeding production targets by 9%,&#148; said Robert Gallagher, President and Chief Executive Officer.
&#147;New Gold made difficult decisions in a tough market environment to ensure that the Company was in a stronger position to execute our accretive growth strategy through operational excellence, continued development of our New Afton project, and
further consolidation of junior gold producers. I&#146;m thrilled about the next milestone in the exciting growth of this Company; the recent announcement of the business combination with Western Goldfields further delivers on our previously stated
growth strategy.&#148; </P>
<P align="justify">
<B>Fourth Quarter and Annual Consolidated Financial Results</B><B><SUP>(1)</SUP></B><B> </B></P>
<P align="justify">
Consolidated revenue for the fourth quarter of 2008 was &#36;59.0 million for a total of &#36;218.1 million for the full year. Gold sales in the fourth quarter were 78,194 ounces at a realized gold price of &#36;792 per ounce and for the full year
totalled 237,589 ounces at a realized gold price of &#36;863 per ounce, which excludes production from Cerro San Pedro prior to the completion of the business combination with Peak Gold and Metallica.<SUP> </SUP></P>
<P align="justify">
Reported net earnings for the fourth quarter were &#36;41.1 million and the reported net loss for the full year 2008 was &#36;102.7 million. Reported earnings for 2008 were increased by foreign exchange gains (&#36;50.0 million net of tax) and were
decreased by the Amapari write down (&#36;156.9 million net of tax) as well as certain expenses related to the business combination with Peak Gold and Metallica (&#36;15.0 million, net of tax). </P>

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<P align="justify">
Cash flow from mining operations in 2008 was &#36;20.3 million in the fourth quarter and &#36;45.8 million for the year. Cash flow from mining operations for the full year including results from Cerro San Pedro for the period prior to the close of
the business combination with Peak Gold and Metallica was &#36;66.1 million. </P>
<P align="justify">
<B>2008 Operational Review</B></P>
<P align="justify">
<B>Cerro San Pedro </B><BR>
</P>
<P align="justify">
Cerro San Pedro completed its first full year of production exceeding expectations in operations, health and safety, environmental management systems and practices. Cerro San Pedro achieved gold sales of 21,180 ounces at a realized gold price of
&#36;799 per ounce sold in the fourth quarter and 85,362 ounces at a realized gold price of &#36;872 per ounce for the full year. Total cash cost, net of by-product sales was &#36;522 per ounce for the fourth quarter and &#36;432 per ounce for the
full year. The increased cost in the fourth quarter is consistent with previous guidance as mining progressed through a lower grade, higher strip ratio phase.  Also contributing were higher consumable costs, somewhat offset by depreciation of the
Mexican Peso versus the US dollar. The fourth quarter operating loss at Cerro San Pedro was &#36;18.2 million which includes an &#36;18.0 million increase in operating expenses due to purchase price allocation adjustments related to the revaluation
of heap leach inventory.<SUP> </SUP>For the full year earnings at Cerro San Pedro were &#36;5.5 million<SUP> (4)</SUP>.<SUP> </SUP> </P>
<P align="justify">
<B>Peak Mines</B><BR>
</P>
<P align="justify">
Peak Mines achieved gold sales of 28,815 ounces in the fourth quarter at a realized gold price of &#36;788 per ounce sold and 102,928 ounces at a realized gold price of &#36;877 per ounce for the full year. Record mill throughput of 768,727 tonnes
in 2008 reflected New Gold&#146;s commitment to constant improvement at its operations and demonstrates the high level of competency of the Peak Mines&#146; operating team. Total cash cost net of by-product sales was &#36;624 per ounce for the
quarter and &#36;477 per ounce for the full year. Higher cash cost is solely due to decreasing copper price through the latter half of the year with repricing of concentrate in process. Direct operating costs for 2008, in Australian dollar terms
were only 10% higher than those of 2007, with the cost per tonne milled unchanged year on year. Earnings from Peak Mines were &#36;2.5 million in the fourth quarter and &#36;28.6 million for the full year 2008. </P>
<P align="justify">
<B>Amapari Mine</B><BR>
</P>
<P align="justify">
Amapari achieved gold sales of 28,199 ounces in the fourth quarter at a realized gold price of &#36;791 per ounce and 87,412 ounces at a realized gold price of &#36;859 per ounce for the year. Total cash cost for the quarter was &#36;568 per ounce
and for the full year was &#36;748 per ounce. Earnings from Amapari were &#36;1.6 million in the fourth quarter and a loss of &#36;177.1 million for the full year 2008, net of the &#36;156.9 million impairment charge (net of tax).</P>
<P align="justify">
The full impact of the improved operating performance was realized in the fourth quarter with record quarterly gold production. However, due to depletion of ore suitable for treatment at the existing facilities, Amapari was placed on temporary care
and maintenance on January 2, 2009. New Gold is evaluating a recently completed Preliminary Economic Assessment on the economics of exploiting the underlying sulphide resources which would require installation of a conventional
crush/grind/carbon-in-leach mill. Considering the large land package in a geologically interesting setting and the occurrence of several interesting targets, the Company is also investigating other strategic alternatives for the Amapari project.
</P>
<P align="center">
2 / 6</P>

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<P align="justify">
<B>Development Projects Update</B><BR>
</P>
<P align="justify">
<B>New Afton</B><BR>
</P>
<P align="justify">
New Afton is an exciting project currently under construction in Western Canada, a region known as an attractive destination for development. At today&#146;s gold and copper prices, New Afton will be a significant cash flow generator, expecting to
more than double the current cash flow from our two operating assets in 2013. <B> </B></P>
<P align="justify">
On November 12, 2008, the Company announced that due to New Gold&#146;s cash position coupled with the funding requirements of the fast track construction of the New Afton project and the uncertainty of today&#146;s capital markets, it was extending
the development schedule of the project. Under the revised development plan, surface construction is being curtailed while the critical path development of the underground workings will continue at a reduced rate. Under the original fast track
schedule, operations were to commence in late 2009 ramping up to achieve full production in the second quarter of 2011. With the revised plan, surface construction would resume at the end of 2010 with full production achieved in the second half of
2012. The delayed start up provides additional time to arrange the required capital with initial production more likely being achieved in robust metal markets. </P>
<P align="justify">
The total project development spend excluding interest was &#36;167.8 million up to December 31, 2008 (at an average CDN:USD exchange rate of 0.95) . Under the revised development schedule the estimated remaining spend (excluding interest) to bring
the project into production is &#36;60 million in 2009 and &#36;340 million between 2010 and 2012 (at an average CDN:USD exchange rate of 0.88) . </P>
<P align="justify">
<B>El Morro</B><BR>
</P>
<P align="justify">
The El Morro copper-gold project entered the permitting stage in November 2008, with delivery of the project&#146;s Environmental Impact Statement to the Chilean Authorities. Permitting is expected to take from 12 to 18 months, after which
development activities could proceed. Total capital cost of the project has been estimated at &#36;2.5 billion. New Gold has an agreement with Xstrata whereby Xstrata will finance 70 percent of New Gold&#146;s 30 percent share of El Morro&#146;s
project development costs. New Gold will repay the funds advanced by Xstrata through 80 percent of its share of cash flow from the project. With this funding agreement in place and the project entering the permitting stage, New Gold is well
positioned to participate in this world class development project, in one of the most mining friendly jurisdictions.<B> </B></P>
<P align="justify">
<B>Liquidity and Capital Review</B><BR>
</P>
<P align="justify">
At December 31, 2008, the Company&#146;s cash balance was &#36;185.6 million. The face value of the debt at December 31, 2008 was CDN&#36;292 million, comprised of CDN&#36;237 million in Senior Secured Notes and CDN&#36;55 million in Convertible
Debentures. On January 9, 2009, the Company reduced its debt position by CDN&#36;50 million, through the buy back of a portion of its Senior Secured Notes for cash consideration of CDN&#36;30 million. As a result of this transaction, New Gold&#146;s
total debt position was reduced to CDN&#36;242 million. </P>
<P align="justify">
The Company&#146;s capital expenditures for 2008, as per the consolidated statement of cash flows, was &#36;133.8 million, which includes &#36;87.5 million for New Afton (including interest), &#36;29.4 million for Peak Mines, &#36;7.1 million for
Amapari and &#36;9.8 million for Cerro San Pedro and El Morro. Exploration expense in 2008 was &#36;8.5 million. </P>
<P align="justify">
<B>Corporate Outlook</B><BR>
</P>
<P align="justify">
New Gold is forecasting 2009 gold production of between 190,000 and 210,000 ounces at a cash cost of between &#36;465 and &#36;485 per ounce, net of by-product sales. Capital expenditures for 2009 are expected to be &#36;107.0 million, which
includes &#36;78.5 million for New Afton (including capitalized interest), &#36;24.5 million for Peak Mines and &#36;2.8 million for Cerro San Pedro. Exploration expense in 2009 is expected to be &#36;6.2 million.</P>
<P align="justify">
Assumptions used in the 2009 forecast for Peak Mines and Cerro San Pedro include copper and silver prices of &#36;2.00 per pound and &#36;10.00 per ounce, respectively, and Australian dollar and Mexican peso exchange rates of &#36;0.70 and
&#36;12.00 to the U.S. dollar, respectively. </P>
<P align="center">
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</P>

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<P align="justify">
Robert Gallagher, President and Chief Executive Officer said &#147;As we look forward to 2009, we are committed to delivering on our operational targets.  We will continue to demonstrate prudent financial management and take the steps necessary to
maintain a strong financial position.  We see sizable opportunity for growth through the development of our New Afton project, and through further consolidation of junior gold producers.&#148; </P>
<P align="justify">
Please visit <u><font color="#0000FF">
http://www.newgold.com/page/investors/financials/</font></u> to view the 2008 financial statements and management discussion and analysis. </P>
<P align="justify">
<B>Business Combination with Western Goldfields Inc. </B></P>
<P align="justify">
On March 4, 2009, the Company announced a business combination with Western Goldfields Inc. (&#147;Western Goldfields&#148;). Under the terms, New Gold will acquire by way of a plan of arrangement all of the outstanding common shares of Western
Goldfields on the basis of one New Gold common share and CDN&#36;0.0001 in cash for each common share of Western Goldfields (the "Transaction"). Upon completion of the Transaction, existing New Gold and Western Goldfields shareholders will own
approximately 58% and 42% of the combined company, respectively. </P>
<P align="justify">
Based on the closing price of New Gold's common shares on the TSX of CDN&#36;2.30 on March 3, 2009, this offer represented a premium of 19.2% to the closing price of Western Goldfields shares on the TSX on March 3, 2009 and 20.1% to the 20-day
volume weighted average trading price of both companies' shares on the TSX.</P>
<P align="justify">
Highlights of the Transaction:<BR>
</P>
<UL style="text-align:justify;">
<LI>
Diversified gold production base from three gold mines in mining- friendly jurisdictions with forecasted gold production of approximately 335,000 ounces in 2009, expected to increase to over 400,000 ounces in 2012</LI>
<LI>
Strong cash flow to fully fund development at the New Afton copper-gold project in British Columbia</LI>
<LI>
Delivers on industry consolidation in a rising gold price environment</LI>
<LI>
Combines experienced management teams and boards of directors</LI>
<LI>
Enhances market presence</LI>
<LI>
Increases mineable reserves to a total of 7.6 million gold ounces within a measured and indicated resource of 12.2 million gold ounces</LI>
</UL>
<P align="justify">
The parties expect to complete and mail the joint information circular in April 2009 and plan to hold the special meetings in May 2009. The Transaction is expected to close at the end of May 2009. </P>
<P align="justify">
Robert Gallagher, President and Chief Executive Officer said &#147;We are excited about the opportunity of building the leading intermediate gold producer with the recent announcement of the business combination with Western Goldfields. This is in
line with our growth strategy and vision of becoming a million ounce gold producer by 2012. This represents significant value for both the New Gold and Western Goldfields shareholders with a greater leverage to gold, immediate increase in production
and operating cash flow, strengthened financial position to contribute to the funding of our New Afton development project, while remaining in mining-friendly jurisdictions.&#148; </P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top align="center">
(1) 	</TD>
	<TD>
<P align="justify">Due to the business combination between New Gold, Peak Gold and Metallica which closed on June 30, 2008 the consolidated financial statements of the company are presented on the basis that Peak Gold is the acquirer for accounting
purposes. Therefore consolidated income and cash flow statements for January 1 through December 31, 2008 include results of Peak Gold for the period of January 1 to December 31 and results of Metallica and New Gold assets from July 1 to December 31.
The consolidated balance sheet at December 31, 2008 reflects the balances of the merged entity. For convenience, the operating highlights, including total cash costs include full year results from the operations of the three entities.</P>
	</TD>
</TR>
<TR><TD align="center">&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top align="center">
(2) 	</TD>
	<TD>
<P align="justify">Includes 12 months commercial operations for Peak Mines, Cerro San Pedro and Amapari. Total production excluding Cerro San Pedro for the first six months of 2008 was 237,589 ounces of gold and cash cost per ounce of gold sold was
&#36;569.</P>
	</TD>
</TR>
<TR><TD align="center">&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top align="center">
(3) 	</TD>
	<TD>
<P align="justify">This data is furnished to provide additional information and is a non-GAAP measure. It should not be considered in isolation as a substitute for measures of performance prepared in accordance with GAAP and is not necessarily
indicative of net earnings presented under GAAP.</P>
	</TD>
</TR>
<TR><TD align="center">&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top align="center">
(4) 	</TD>
	<TD>
<P align="justify">Includes 12 months commercial operations for Cerro San Pedro.</P>
	</TD>
</TR>
</TABLE>
<P align="center">
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<P align="justify">
<B>Conference Call-in Details</B><BR>
</P>
<P align="justify">
New Gold will hold a conference call on Tuesday, March 17, 2009 at 1:00 p.m. Eastern time to discuss these results. You may join the call by dialing toll free 1-888-789-9572 or 1-416-695-7806 to access the call from outside Canada or the U.S.
Passcode 3281215. You can listen to a recorded playback of the call after the event until April 14, 2009 by dialing 1-800-408-3053 or 1-416-695-5800 for calls outside Canada and the U.S. Passcode 3281215. </P>
<P align="justify">
New Gold is an intermediate gold mining company with operating assets in Mexico, and Australia and development projects in Canada and Chile. For further information on New Gold, please visit our website at
<font color="#0000FF"> <U>www.newgold.com</U></font>.</P>
<P align="justify">
<B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS </B> </P>
<P align="justify">
Certain information contained in this press release, including any information relating to New Gold&#146;s future financial or operating performance, may be deemed &#147;forward looking&#148;. All statements in this press release, other than
statements of historical fact, that address events or developments that New Gold expects to occur, are &#147;forward-looking statements&#148;. Forward-looking statements are statements that are not historical facts and are generally, but not always,
identified by the words &#147;expects&#148;, &#147;does not expect&#148;, &#147;plans&#148;, &#147;anticipates&#148;, &#147;does not anticipate&#148;, &#147;believes&#148;, &#147;intends&#148;, &#147;estimates&#148;, &#147;projects&#148;,
&#147;potential&#148;, &#148;scheduled&#148;, &#147;forecast&#148;, &#147;budget&#148; and similar expressions, or that events or conditions &#147;will&#148;, &#147;would&#148;, &#147;may&#148;, &#147;could&#148;, &#147;should&#148; or
&#147;might&#148; occur. All such forward looking statements are subject to important risk factors and uncertainties, many of which are beyond New Gold&#146;s ability to control or predict. Forward-looking statements are necessarily based on
estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and other factors that may cause New Gold&#146;s actual results, level of activity, performance or achievements to be materially different from those
expressed or implied by such forward-looking statements. Such factors include, without limitation: New Gold and Western Goldfields will be able to satisfy the conditions in the Business Combination Agreement, that the required approvals
(shareholder, third party regulatory and governmental) will be obtained and all other conditions will be satisfied or waived; the results of the preliminary economic assessment assessing the viability of a new process facility at Amapari; New
Gold&#146;s operations are subject to significant capital requirements; fluctuations in the international currency markets and in the rates of exchange of the currencies of Canada, the United States, Australia, Brazil, Mexico and Chile; price
volatility in the spot and forward markets for commodities; impact of any hedging activities, including margin limits and margin calls; discrepancies between actual and estimated production, between actual and estimated reserves and resources and
between actual and estimated metallurgical recoveries; changes in national and local government legislation in Canada, the United States, Australia, Brazil, Mexico and Chile or any other country in which New Gold currently or may in the future carry
on business; taxation; controls, regulations and political or economic developments in the countries in which New Gold does or may carry on business; the speculative nature of mineral exploration and development, including the risks of obtaining
necessary licenses and permits; diminishing quantities or grades of reserves; competition; loss of key employees; additional funding requirements; actual results of current exploration or reclamation activities; changes in project parameters as
plans continue to be refined; accidents; labour disputes; defective title to mineral claims or property or contests over claims to mineral properties. In addition, there are risks and hazards associated with the business of mineral exploration,
development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance or inability to obtain insurance, to cover
these risks) as well as &#147;Risks and Uncertainties&#148; included in New Gold&#146;s MD&amp;A filed on November 12, 2008, and available at www.sedar.com. Forward-looking statements are not guarantees of future performance, and actual results and
future events could materially differ from those anticipated in such statements. All of the forward-looking statements contained in this press release are qualified by these cautionary statements. New Gold expressly disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except in accordance with applicable securities laws.</P>
<P align="justify">
<B>CAUTIONARY NOTE TO U.S. READERS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES</B> </P>
<P align="justify">
Information concerning the properties and operations of New Gold has been prepared in accordance with Canadian standards under applicable Canadian securities laws, and may not be comparable to similar information for United States companies. The
terms &#147;Mineral Resource&#148;, &#147;Measured Mineral Resource&#148;, &#147;Indicated Mineral Resource&#148; and &#147;Inferred Mineral Resource&#148; used in this press release are Canadian mining terms as defined in accordance with NI 43-101
under guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (&#147;CIM&#148;) Standards on Mineral Resources and Mineral Reserves adopted by the CIM Council on December 11, 2005. While the terms &#147;Mineral
Resource&#148;, &#147;Measured Mineral Resource&#148;, &#147;Indicated Mineral Resource&#148; and &#147;Inferred Mineral Resource&#148; are recognized and required by Canadian regulations, they are not defined terms under standards of the United
States Securities and Exchange Commission. Under United States standards, mineralization may not be classified as a &#147;reserve&#148; unless the determination has been made that the mineralization could be economically and legally produced or
extracted at the time the reserve calculation is made. As such, certain information contained in this press release concerning descriptions of mineralization and resources under Canadian standards is not comparable to similar information made public
by United States companies subject to the reporting and disclosure requirements of the United States Securities and Exchange Commission. An &#147;Inferred Mineral Resource&#148; has a great amount of uncertainty as to its existence and as to its
economic and legal feasibility. It cannot be assumed that all or any part of an &#147;Inferred Mineral Resource&#148; will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of
feasibility or other economic studies. Readers are cautioned not to assume that all or any part of Measured or Indicated Resources will ever be converted into Mineral Reserves. Readers are also cautioned not to assume that all or any part of an
&#147;Inferred Mineral Resource&#148; exists, or is economically or legally mineable. In addition, the definitions of &#147;Proven Mineral Reserves&#148; and &#147;Probable Mineral Reserves&#148; under CIM standards differ in certain respects from
the standards of the United States Securities and Exchange Commission. </P>
<P align="center">
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<P align="justify">
<B>(1) CASH COST </B></P>
<P align="justify">
&#147;Total cash cost&#148; figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold
Institute ceased operations in 2002, but the standard is the accepted standard of reporting cash cost of production in North America. Adoption of the standard is voluntary and the cost measures presented may not be comparable to other similarly
titled measures of other
companies. New Gold reports total cash cost on a sales basis. Total cash cost includes mine site operating costs such as mining, processing, administration, royalties and production taxes, but is exclusive of amortization, reclamation, capital and
exploration costs. Total cash cost is reduced by any by-product revenue and is then divided by ounces sold to arrive at the total by-product cash cost of sales. The measure, along with sales, is considered to be a key indicator of a company&#146;s
ability to generate operating earnings and cash flow from its mining operations. This data is furnished to provide additional information and is a non-GAAP measure. It should not be considered in isolation as a substitute for measures of performance
prepared in accordance with GAAP and is not necessarily indicative of operating costs presented under GAAP. The calculation of &#147;Cash Cost&#148; is consistent with Western Goldfields&#146; prior disclosures of &#147;Cost of Sales&#148;; Western
Goldfields does not have by-product credits.</P>
<P align="justify">
<B>For further information please contact:</B><BR>
M&eacute;lanie Hennessey <BR>
Vice President Investor Relations <BR>
<B>New Gold Inc. </B><BR>
Direct: +1 (604) 639-0022 <BR>
Toll-free: +1 (888) 315-9715 <BR>
Email: info@newgold.com <BR>
Website: www.newgold.com <BR>
</P>
<P align="center">
&nbsp;</P>

<P align="center">
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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>ngd031709exh992.htm
<DESCRIPTION>EXHIBIT 99.2
<TEXT>



<HTML>
<HEAD>
   <TITLE> New Gold Inc.: Exhibit 99.2 - Prepared by TNT Filings Inc.</TITLE>
</HEAD>

<BODY style="font-size:10pt;">

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
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<P align="right">
<b>Exhibit 99.2</b></P>

<P align="right">
&nbsp;</P>

<P align="right">
&nbsp;</P>

<P align="right">
&nbsp;</P>

<P align="justify" style="margin-left: 25%">
Consolidated financial statements of</P>
<P align="justify" style="margin-left: 25%">
<B><font size="6">New Gold Inc.</font></B></P>
<P align="justify" style="margin-left: 25%">
December 31, 2008 </P>

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<P align=justify><B>New Gold Inc.</B><BR>December 31, 2008 <BR>Table of contents
<BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="15%" bgColor=#e6efff>&nbsp;</TD></TR>

  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <A
      href="#page_3" style="text-decoration: none">Auditors&#146;
      report </A></TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <A
      href="#page_3" style="text-decoration: none">1
  </A></TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=right width="15%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><A
      href="#page_4" style="text-decoration: none">Consolidated
      statements of operations </A></TD>
    <TD align=right width="15%">
    <A
      href="#page_4" style="text-decoration: none">2
  </A></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="15%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <A
      href="#page_5" style="text-decoration: none">Consolidated
      statements of comprehensive income (loss) </A></TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <A
      href="#page_5" style="text-decoration: none">3
  </A></TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=right width="15%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><A
      href="#page_6" style="text-decoration: none">Consolidated
      balance sheets </A></TD>
    <TD align=right width="15%">
    <A
      href="#page_6" style="text-decoration: none">4
  </A></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="15%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <A
      href="#page_7" style="text-decoration: none">Consolidated
      statements of shareholders&#146; equity </A></TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <A
      href="#page_7" style="text-decoration: none">5
  </A></TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=right width="15%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><A
      href="#page_8" style="text-decoration: none">Consolidated
      statements of cash flows </A></TD>
    <TD align=right width="15%">
    <A
      href="#page_8" style="text-decoration: none">6
  </A></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="15%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
    <A
      href="#page_7-40" style="text-decoration: none">Notes
      to the consolidated financial statements </A></TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <A
      href="#page_7-40" style="text-decoration: none">7-40
      </A></TD></TR></TABLE><BR>
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<div align="right">
  <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="1%" id="AutoNumber1">
    <tr>
      <td width="100%" nowrap>&nbsp;</td>
    </tr>
    <tr>
      <td width="100%" nowrap><font size="2">Deloitte &amp; Touche LLP <BR>
2800 - 1055 Dunsmuir Street<BR>
4 Bentall Centre <BR>
P.O. Box 49279 <BR>
Vancouver BC V7X 1P4 <BR>
Canada <br>
      <BR>
Tel: 604-669-4466 <BR>
Fax: 604-685-0395 <BR>
www.deloitte.ca </font></td>
    </tr>
  </table>
</div>

<P align="right">
<BR>
</P>
<P align="justify">
<B><font size="4">Auditors&#146; report</font></B><font size="4"><BR>
</font>
</P>
<P align="justify">
To the Shareholders of<BR>
New Gold Inc. <BR>
</P>
<P align="justify">
We have audited the consolidated balance sheets of New Gold Inc. as at December 31, 2008 and 2007 and the consolidated statements of operations, comprehensive income (loss), shareholders&#146; equity and cash flows for the year ended December 31,
2008 and the thirteen month period ended December 31, 2007. These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits. </P>
<P align="justify">
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. </P>
<P align="justify">
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the year ended December
31, 2008 and the thirteen month period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles.</P>
<P align="justify">
<B><I>(Signed) Deloitte &amp; Touche LLP</I></B><BR>
</P>
<P align="justify">
Chartered Accountants<BR>
March 12, 2009
</P>

<P align="justify">
<BR>
</P>

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<A name=page_4></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"> <BR>
</font><font size="4">Consolidated statements of
operations <BR></font>(Expressed in thousands of U.S. dollars, except share and
per share amounts)<BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Thirteen </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>Year ended</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">months ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Revenues </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>218,135</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>131,084 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Operating expenses </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(169,694</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(80,723</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Depreciation and depletion </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(32,961</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(18,973</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Earnings from mine operations </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>15,480</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">31,388 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Corporation administration <SUP>(1)</SUP> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(23,029</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(13,295</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Exploration </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(8,489</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(3,983</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Write-down of
      mining interests (Note 7 (b)) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>(165,252</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>(Loss) earnings from operations </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(181,290</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">14,110 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Other income (expense) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Interest and other income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>5,368</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">4,113 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Interest and finance fees </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(3,002</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(459</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; &nbsp;Gain
      (loss) on foreign exchange </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>69,222</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="12%">(2,864</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>(Loss) earnings from operations before taxes </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(109,702</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">14,900 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Income and mining taxes </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>7,023</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(287</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left><B>Net (loss)
      earnings</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%"><B>(102,679</B></TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%">14,613 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>(Loss) earnings per share </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Basic </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(0.69</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0.27 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left>&nbsp;
      &nbsp;Diluted </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%"><B>(0.69</B></TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%">0.21
    </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Weighted average number of shares outstanding </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>(in thousands) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Basic </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>148,126</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">53,428 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left
      bgColor=#e6efff>&nbsp; &nbsp;Diluted </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%"
    bgColor=#e6efff><B>148,126</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%"
    bgColor=#e6efff>68,226 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><SUP>(1) </SUP>Stock option expense (a
      non-cash item included in corporation administration) </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(7,039</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff>(6,156</TD>
    <TD align=left width="2%"  bgColor=#e6efff>)
</TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><font style="font-size: 8pt">See accompanying notes to the consolidated financial
      statements. </TD>
    <TD align=left width="15%">
    <p align="right">Page 2 </font> </TD></TR>

  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD></TR></TABLE>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_5></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"> <br>
</font><font size="4">Consolidated statements of comprehensive income (loss)</font><B><font size="4">
<br>
</font>
</B>(Expressed in thousands of U.S. dollars) <B></B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Thirteen </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>Year ended</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">months ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Net (loss) earnings</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(102,679</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>14,613 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Other comprehensive income </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Gain on available-for-sale securities (net of
      tax of $Nil) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>1,160</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=left><B>Comprehensive
      income (loss)</B> </TD>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=right
      width="12%"><B>(101,519</B></TD>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=right
      width="12%">14,613 </TD>
    <TD style="BORDER-BOTTOM: 2px solid #000000; " align=left width="2%"
    >&nbsp;</TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><font style="font-size: 8pt">See accompanying notes to the consolidated financial
      statements. </TD>
    <TD align=left width="15%">
    <p align="right">Page 3 </font> </TD></TR>

  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD></TR></TABLE>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_6></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"> <br>
</font><font size="4">Consolidated balance sheets as at December 31 <br>
</font>(Expressed in thousands of U.S. dollars) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Assets</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Current assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Cash and cash equivalents </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>185,668</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>149,924 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Short-term investments </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>-</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">32,440 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Accounts receivable </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>11,232</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>18,123 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Inventories and stockpiled ore (Note 5) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>39,402</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">39,792 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Future income and mining taxes
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>2,690</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;
      &nbsp;Prepaid expenses and other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>3,945</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">1,624
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>242,937</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>241,903 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Investments (Note 6) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>77,016</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Mining interests (Note 7) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>1,618,761</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">315,831 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Intangible royalty asset </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>14,087</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>14,664 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Reclamation
      deposits and other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>4,900</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%"
    bgColor=#e6efff><B>1,957,701</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%"
    bgColor=#e6efff>572,398 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Liabilities</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Current liabilities </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Accounts payable and accrued
      liabilities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>41,382</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>22,835 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Short-term borrowings </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>7,193</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Income and mining taxes payable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>5,126</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>4,960 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>53,701</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">27,795 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Reclamation and closure cost obligations (Note 11) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>21,949</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">18,036 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Future income and mining taxes (Note 10)
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>224,068</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>25,943 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Long-term debt (Note 8) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>212,387</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Employee benefits and other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>3,808</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>3,253 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>515,913</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">75,027 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><B>Shareholders' equity</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Common shares </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>1,321,110</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>339,796 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Special warrants (Note 9 (b)) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>-</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">104,166 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Contributed surplus </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>65,409</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>6,166 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Share purchase warrants (Note 9 (f)) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>145,614</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">57,673 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Equity component of convertible debentures
      (Note 8 (c)) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>21,604</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Accumulated other comprehensive loss </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(406</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(1,566</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Deficit </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(111,543</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(8,864</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>(111,949</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(10,430</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>1,441,788</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>497,371 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%"><B>1,957,701</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%">572,398 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
<P align=justify>Commitments and contingencies (Note 15) </P>
<P align=justify>Approved by the
Board </P>
<P align=justify><u><B><I>(Signed) Robert Gallagher</I></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <BR>
</u>Robert Gallagher, Director </P>
<P align=justify><u><B><I>(Signed) Craig Nelsen</I></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u> <BR>Craig Nelsen, Director <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><font style="font-size: 8pt">See accompanying notes to the consolidated financial
      statements. </TD>
    <TD align=left width="15%">
    <p align="right">Page 4 </font> </TD></TR>

  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD></TR></TABLE>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_7></A>
<P align=justify><B><font size="5">New</font></B><font size="5"><B> Gold Inc. </B><BR>
</font><font size="4">Consolidated statements of shareholders' equity<B> </B><BR>
</font>(Expressed in
thousands of U.S. dollars, except share amounts) <B></B><BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">Equity </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">Accumulated </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">Share </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">component of </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">other </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">(Deficit) </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">Total </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="17%"
    colSpan=4 valign="bottom">Common shares </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">Special </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">Contributed </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">purchase </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">convertible </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">comprehensive </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">retained </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">shareholders' </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%" valign="bottom">Shares
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%" valign="bottom">Amount
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%" valign="bottom">warrants </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%" valign="bottom">surplus </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%" valign="bottom">warrants </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%" valign="bottom">debentures </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%" valign="bottom">loss
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%" valign="bottom">earnings </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%" valign="bottom">equity
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" valign="bottom"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">$</TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR>
    <TD valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR>
    <TD valign="bottom">
    <p style="text-indent: -10; margin-left: 10">&nbsp; </TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD>
    <TD width="1%" valign="bottom" >&nbsp;</TD>
    <TD width="7%" valign="bottom">&nbsp; </TD>
    <TD width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10"><B>Balance, November 30, 2006</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">11,505,140 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">25,313 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">104,166 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">59 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">(1,566</TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">) </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">(23,477</TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">) </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>104,495</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Issued for cash in private placement (net of issue costs of
      $14,248) </TD>
    <TD align=left width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">43,500,000 </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">209,689 </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">57,673 </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=right width="2%" valign="bottom" ></TD>
    <TD align=right width="1%" valign="bottom" ></TD>
    <TD align=right width="7%" valign="bottom"><B>267,362</B> </TD>
    <TD align=left width="2%" valign="bottom" ></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Issued for acquisition </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">16,000,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">103,253 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>103,253</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Exercise of options </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">129,000 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">175 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">(49</TD>
    <TD align=left width="2%" valign="bottom" >) </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>126</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Exercise of warrants </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">1,495,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">1,366 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>1,366</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Stock-based compensation </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">6,156 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>6,156</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Net loss </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">14,613 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom"><B>14,613</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Balance, December 31, 2007 </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">72,629,140 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">339,796 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">104,166 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">6,166 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">57,673 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">(1,566</TD>
    <TD align=left width="2%" valign="bottom" >) </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">(8,864</TD>
    <TD align=left width="2%" valign="bottom" >) </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>497,371</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Exercise of special warrants </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">14,772,333 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">80,448 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">(104,166</TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">) </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">23,718 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>-</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Exercise of options </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">424,090 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">3,022 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">(1,664</TD>
    <TD align=left width="2%" valign="bottom" >) </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>1,358</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Exercise of warrants </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">561,645 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">3,167 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">(1,533</TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">) </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>1,634</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Acquisition of Metallica (Note 4 (a)(i)) </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">87,447,821 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">605,139 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">7,294 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">46,674 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>659,107</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Acquisition of NGI (Note 4 (a)(ii)) </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">37,005,717 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">289,538 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">8,241 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">57,415 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">21,604 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>376,798</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Expiry of warrants </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">38,333 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">(38,333</TD>
    <TD align=left width="2%" valign="bottom" >) </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="7%" valign="bottom">&nbsp; </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>-</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Stock-based compensation </TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">7,039 </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom">- </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff valign="bottom"><B>7,039</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff valign="bottom">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Other comprehensive income </TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">1,160 </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom">- </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD>
    <TD align=left width="1%" valign="bottom" >&nbsp;</TD>
    <TD align=right width="7%" valign="bottom"><B>1,160</B> </TD>
    <TD align=left width="2%" valign="bottom" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff valign="bottom">
    <p style="text-indent: -10; margin-left: 10">Net loss </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom">(102,679</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom">) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff valign="bottom">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff valign="bottom"><B>(102,679</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff valign="bottom"><B>)</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left valign="bottom">
    <p style="text-indent: -10; margin-left: 10"><B>Balance,
      December 31, 2008</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="7%" valign="bottom">212,840,746 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="7%" valign="bottom">1,321,110 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="7%" valign="bottom">- </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="7%" valign="bottom">65,409
    </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="7%" valign="bottom">145,614 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="7%" valign="bottom">21,604
    </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
width="7%" valign="bottom">(406</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >) </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="7%" valign="bottom">(111,543</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >) </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" valign="bottom"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="7%" valign="bottom"><B>1,441,788</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" valign="bottom"
    >&nbsp;</TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><font style="font-size: 8pt">See accompanying notes to the consolidated financial
      statements. </TD>
    <TD align=left width="15%">
    <p align="right">Page 5 </font> </TD></TR>

  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD></TR></TABLE>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_8></A>
<P align=justify><B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Consolidated statements of cash flows<br>
</font>(Expressed in thousands of U.S. dollars) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Thirteen </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>Year ended</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">months ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Operating activities</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Net (loss) earnings </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(102,679</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">14,613 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Items not involving cash </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Depreciation and depletion </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>32,961</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">18,973 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Write-down of
      mining interests </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>165,252</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Unrealized foreign exchange
      (gain) loss </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(68,008</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">5,062 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Stock option
      expense </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>7,039</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>6,156 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;Future income and mining taxes
    </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(13,496</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(6,537</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp; &nbsp;Other </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>1,569</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>224 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;
      &nbsp;Change in non-cash working capital (Note 12) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2,047</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(11,871</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>24,685</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>26,620 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><B>Investing activities</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Mining interests </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(133,868</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(27,052</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Reclamation deposits </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(1,225</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp;&nbsp;Cash acquired in business combination and
      asset acquisition (Note 4 (a)) </TD>
    <TD align=left width="1%" ></TD>
    <TD align=right width="12%"><B>137,718</B> </TD>
    <TD align=left width="2%" ></TD>
    <TD align=left width="1%" ></TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" ></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Acquisition, net of cash
      acquired (Note 4 (b)) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>-</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(190,552</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Purchase of short-term investments </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(32,440</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Proceeds from short-term investments </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>32,440</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>35,065</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(250,044</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><B>Financing activities</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;&nbsp;&nbsp;Common shares issued on
      exercise of warrants/ options </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff><B>2,991</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff>1,492 </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Proceeds from short-term borrowing </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>8,500</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Repayment of short-term
      borrowing </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(11,500</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Common shares issued in private placement, net
    </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>-</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">267,362 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Special warrants issued in private placement,
      net </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>-</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>104,166 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>(9</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">373,020 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Effect of exchange rate changes on cash and cash equivalents </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><B>(23,997</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="12%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="12%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Increase in cash and cash equivalents </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%"><B>35,744</B> </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">149,596 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left bgcolor="#E6EFFF">Cash and cash
      equivalents, beginning of period </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%" bgcolor="#E6EFFF"><B>149,924</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%" bgcolor="#E6EFFF">328
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left><B>Cash and cash equivalents, end of period</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%"><B>185,668</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right width="12%">149,924 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="12%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD width="12%" bgcolor="#E6EFFF">&nbsp; </TD>
    <TD width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cash and cash equivalents are comprised of
    </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF">&nbsp; &nbsp;Cash </TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF"><B>21,398</B> </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6EFFF">10,312 </TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; &nbsp;Short-term money market instruments </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"><B>164,270</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">139,612 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left bgcolor="#E6EFFF">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%" bgcolor="#E6EFFF"><B>185,668</B> </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="1%" bgcolor="#E6EFFF"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=right
      width="12%" bgcolor="#E6EFFF">149,924 </TD>
    <TD style="BORDER-BOTTOM: 3px solid #000000; " align=left width="2%" bgcolor="#E6EFFF"
    >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Supplemental cash flow information (Note 12) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><font style="font-size: 8pt">See accompanying notes to the consolidated financial
      statements. </TD>
    <TD align=left width="15%">
    <p align="right">Page 6 </font> </TD></TR>

  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD></TR></TABLE>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_9></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><BR><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>1.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Description of business and nature of
      operations</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>On June 30, 2008 New Gold Inc. (&#147;NGI&#148;), Metallica
      Resources Inc. (&#147;Metallica&#148;) and Peak Gold Ltd. (&#147;Peak Gold&#148; or the
      &#147;Company&#148;) completed a business combination and the acquisition of assets
      (the &#147;Transaction&#148; see Note 4). In accordance with the provisions of the
      Canadian Institute of Chartered Accountants (&#147;CICA&#148;) Handbook Section
      1581, <I>Business Combinations</I>, Peak Gold has been identified as the
      acquirer for accounting purposes. As such, these consolidated financial
      statements are a continuation of the consolidated financial statements of
      Peak Gold, with the comparative information being that of Peak Gold.
      Following completion of the Transaction, Peak Gold is now known as New
      Gold Inc. (&#147;New Gold&#148;). References to NGI in these consolidated financial
      statements refer to transactions involving the pre-transaction public
      company New Gold Inc.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>In connection with the Transaction shareholders of Peak
      Gold exchanged one common share of Peak Gold for 0.1 of a New Gold common
      share and nominal cash consideration. All information related to common
      shares for the current and prior period has been restated to give effect
      to this share exchange.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Company is a gold producer engaged in gold mining and
      related activities including acquisition, exploration, extraction,
      processing and reclamation. The Company&#146;s assets are comprised of the
      Amapari mine in Brazil, the Cerro San Pedro mine in Mexico, and the Peak
      mine in Australia. Significant development projects include the New Afton
      copper-gold project in Canada and a 30% interest in an advanced stage
      copper-gold project in Chile.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>2.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Summary of significant accounting
  policies</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>These consolidated financial statements have been
      prepared in accordance with Canadian generally accepted accounting
      principles (&#147;Canadian GAAP&#148;) using the following significant accounting
      policies:</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD>
      <P align=justify><I>Basis of presentation and principles of
      consolidation</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>These consolidated financial statements include the
      accounts of the Company and all of its subsidiaries.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The principal subsidiaries of the Company as of December
      31, 2008 are as follows:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Subsidiary </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">Interest </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Metallica Resources Inc. <SUP>(1)</SUP> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>100% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Metallica Resources Alaska Inc. <SUP>(1)</SUP> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">100% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Minera Metallica Resources Chile Limitada
      <SUP>(1)</SUP> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>100% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Minera San Xavier, S.A. de C.V. <SUP>(1)</SUP> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">100% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Minera&#231;&#227;o Pedra Branca do Amapari Ltda
      (&#147;Amapari&#148;) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>100% </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Peak Gold Mines Pty </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">100% </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Sociedad Contractual Minera El Morro
      <SUP>(1)</SUP> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>100% </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR>
    <TD vAlign=top width="5%"><SUP>(1)</SUP> </TD>
    <TD>
      <P align=justify>These subsidiaries are included in the Company&#146;s results
      from June 30, 2008, the date of acquisition, onward (Note 4
  (a)).</P></TD></TR></TABLE>
</div>
<P align=right><font size="1">Page 7</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_10"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>2.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Summary of significant accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(a)</I> 	</TD>
	<TD>
<P align="justify"><I>Basis of presentation and principles of consolidation (continued)</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Variable interest entities (&#147;VIE&#146;s&#148;) as defined by the Accounting Standards Board in Accounting Guideline (&#147;AcG&#148;) 15, <I>Consolidation of Variable Interest Entities</I>, are entities in which equity
investors do not have the characteristics of a &#147;controlling financial interest&#148; or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIE&#146;s are subject to
consolidation by the primary beneficiary who will absorb the majority of the entities&#146; expected losses and/or expected residual returns. The Company has determined that it does not have any investments that qualify as VIE&#146;s.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">All intercompany transactions and balances are eliminated.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(b)</I> 	</TD>
	<TD>
<P align="justify"><I>Use of estimates</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The preparation of consolidated financial statements in conformity with Canadian GAAP requires the Company&#146;s management to make estimates and assumptions about future events that affect the amounts reported in the
consolidated financial statements and related notes to the financial statements. Actual results may differ from those estimates.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Significant estimates used in the preparation of these consolidated financial statements include, but are not limited to, the recoverability of accounts receivable and investments, measurement of revenue and accounts receivable,
the quantities of material on leach pads and in circuit and the recoverable gold in this material used in determining the estimated net realizable value of inventories, the proven and probable ore reserves and resources and the related depletion and
amortization, the estimated tonnes of waste material to be mined and the estimated recoverable tonnes of ore from each mine area, the assumptions used in the accounting for stock-based compensation, valuation of warrants, valuation of embedded
derivatives, the provision for income and mining taxes and composition of future income and mining tax assets and liabilities, the expected economic lives of and the estimated future operating results and net cash flows from mining interests, the
anticipated costs of reclamation and closure cost obligations, and the fair value of assets and liabilities acquired in business combinations.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(c)</I> 	</TD>
	<TD>
<P align="justify"><I>Cash and cash equivalents</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Cash and cash equivalents include cash, and those short-term money market instruments that are readily convertible to cash with an original term of less than three months.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(d)</I> 	</TD>
	<TD>
<P align="justify"><I>Inventories and stockpiled ore</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Finished goods, work-in-process, heap leach ore and stockpiled ore are valued at the lower of average production cost or net realizable value. Production costs include the cost of raw materials, direct labor, mine-site overhead
expenses and depreciation and depletion of mining interests. Net realizable value is calculated as the estimated price at the time of sale based on prevailing and long-term metal prices less estimated future production costs to convert the
inventories into saleable form.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 8</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">




<A name="page_11"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>2.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Summary of significant accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(d)</I> 	</TD>
	<TD>
<P align="justify"><I>Inventories and stockpiled ore (continued)</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The recovery of gold and silver from certain oxide ores is achieved through the heap leaching process. Under this method, ore is placed on leach pads where it is treated with a chemical solution which dissolves the gold contained
ore. The resulting &#147;pregnant&#148; solution is further processed in a plant where the gold is recovered. For accounting purposes, costs are added to ore on leach pads on current mining and leaching costs, including applicable depreciation,
depletion and amortization relating to mining interests. Costs are removed from ore on leach pads as ounces of gold and silver are recovered based on the average cost per recoverable ounce on the leach pad.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the leach pads (measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data), and a
recovery percentage (based on ore type). Although the quantities of recoverable gold and silver placed on each leach pad are reconciled by comparing the grades of ore placed on the leach pad to the quantities actually recovered, the nature of the
leaching process inherently limits the ability to precisely monitor inventory levels. The recovery of gold and silver from the leach pad is not known until the leaching process has concluded.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">In-process inventory represents materials that are currently in the process of being converted into finished goods. The average production cost of finished goods represents the average cost of in-process inventories incurred prior
to the refining process, plus applicable refining costs and associated royalties.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Supplies are valued at the lower of average cost and net realizable value.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(e)</I> 	</TD>
	<TD>
<P align="justify"><I>Mining interests</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Mining interests represent capitalized expenditures related to the development of mining properties, related plant and equipment and expenditures related to exploration arising from property acquisitions. Capitalized costs are
depreciated and depleted using either a unit-of-production method over the estimated economic life of the mine to which they relate, or for plant and equipment, using the straight-line method over their estimated useful lives, if shorter than the
mine life.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 9</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">




<A name="page_12"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>2.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Summary of significant accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(e)</I> 	</TD>
	<TD>
<P align="justify"><I>Mining interests (continued)</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The costs associated with mining properties are separately allocated to reserves, resources and exploration potential, and include acquired interests in production, development and exploration stage properties representing the
fair value at the time they were acquired. The value associated with resources and exploration potential is the value beyond proven and probable reserves assigned through acquisition. The value allocated to reserves is depreciated on a
unit-of-production method over the estimated recoverable proven and probable reserves at the mine. The resource value represents the property interests that are believed to potentially contain economic mineralized material such as inferred material
within pits; measured, indicated, and inferred resources with insufficient drill spacing to qualify as proven and probable reserves; and inferred resources in close proximity to proven and probable reserves. Exploration potential represents the
estimated mineralized material contained within (i) areas adjacent to existing reserves and mineralization located within the immediate mine area; (ii) areas outside of immediate mine areas that are not part of measured, indicated, or inferred
resources; and (iii) greenfields exploration potential that is not associated with any other production, development, or exploration stage property, as described above. At least annually or when otherwise appropriate, and subsequent to its review
and evaluation for impairment, value from the non-depletable category is transferred to the depletable category as a result of an analysis of the conversion of resources or exploration potential into reserves.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Costs related to property acquisitions are capitalized until the viability of the mineral property is determined. When it is determined that a property is not economically recoverable the capitalized costs are written off.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Exploration costs incurred to the date of establishing that a property is economically recoverable are included in operations. Further development expenditures are capitalized to the property.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral deposit which contains proven and probable reserves are exploration expenditures and are expensed as
incurred to the date of establishing that property costs are economically recoverable. Further development expenditures, subsequent to the establishment of economic recoverability, are capitalized to the property.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Upon sale or abandonment the cost of the property and equipment, and related accumulated depreciation or depletion, are removed from the accounts and any gains or losses thereon are included in operations.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company reviews and evaluates its mining properties for impairment annually or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if the
total estimated future undiscounted cash flows are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on expected future
production, commodity prices, operating costs and capital costs.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Interest expense allocable to the costs of developing mining properties and constructing new facilities are capitalized and included in the carrying amounts of related assets until mining properties reach commercial production and
facilities are ready for their intended use.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 10</font></P>

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<A name="page_13"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>2.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Summary of significant accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(f)</I> 	</TD>
	<TD>
<P align="justify"><I>Reclamation and closure cost obligations</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company&#146;s mining and exploration activities are subject to various governmental laws and regulations relating to the protection of the environment. These environmental regulations are continually changing and are
generally becoming more restrictive. The Company has made, and intends to make in the future, expenditures to comply with such laws and regulations. The Company has recorded a liability and corresponding asset for the estimated future cost of
reclamation and closure, including site rehabilitation and long-term treatment and monitoring costs, discounted to net present value. Such estimates are, however, subject to change based on negotiations with regulatory authorities, or changes in
laws and regulations.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(g)</I> 	</TD>
	<TD>
<P align="justify"><I>Intangible royalty asset</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Intangible assets consist of a royalty agreement between Amapari and a third party, valued upon acquisition (Note 4 (b)). The agreement arose from the initial purchase of the Amapari mine leases. Under the agreement, the Company
receives 1% of gross revenues from iron ore mined by the third party on adjacent properties. The asset is amortized on a units-of-production basis which is measured by a portion of the third party mine&#146;s economically recoverable and proven ore
reserves recovered during the period. The carrying value of the intangible royalty asset was &#36;14.1 million.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company reviews and evaluates the intangible annually or when events or changes in circumstances indicate the carrying amount may not be recoverable.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(h)</I> 	</TD>
	<TD>
<P align="justify"><I>Income and mining taxes</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company uses the liability method of accounting for income and mining taxes. Under the liability method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax losses and other deductions carried forward. Upon business acquisitions, the liability method results in a gross-up of mining
interests to reflect the recognition of the future tax liabilities for the tax effect of such differences.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Future tax assets and liabilities are measured using substantively enacted tax rates expected to apply when the asset is realized or the liability settled. A reduction in respect of the benefit of a future tax asset (a valuation
allowance) is recorded against any future tax asset if it is not more likely than not to be realized. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period in which the change is substantively
enacted.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(i)</I> 	</TD>
	<TD>
<P align="justify"><I>Employee benefits</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured
reliably. Liabilities recognized in respect of employee benefits expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.</P>
	</TD>
</TR>
</TABLE>
<P align="justify" style="margin-left: 10%">
Liabilities recognized in respect of employee benefits which are not expected to be settled within one year are measured at the present value of the estimated future cash outflows to be made by the Company in respect of services provided by
employees up to reporting date. </P>
<P align="right">
<font style="font-size: 8pt">Page 11</font></P>

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<A name="page_14"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>2.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Summary of significant accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(j)</I> 	</TD>
	<TD>
<P align="justify"><I>Foreign currency translation</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company&#146;s functional currency and that of its subsidiaries is the U.S. dollar. Transaction amounts denominated in foreign currencies (currencies other than U.S. dollars) are translated into U.S. dollars at exchange rates
prevailing at the transaction dates. Carrying values of foreign currency monetary assets and liabilities are adjusted at each balance sheet date to reflect the U.S. exchange rate prevailing at that date. Gains and losses arising from translation of
foreign currency monetary assets and liabilities at each period end are included in earnings. In addition, unrealized gains and losses due to movement in exchange rates on cash balances held in foreign currencies are shown separately on the
consolidated statements of cash flows.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The accounts of subsidiaries, which are considered to be integrated operations, are translated into U.S. dollars using the temporal method. Under this method, monetary assets and liabilities of foreign subsidiaries are translated
at exchange rates in effect at the end of each period and non-monetary assets and liabilities are translated using historical exchange rates. Revenues and expenses are translated at the average exchange rate for the period. Foreign currency
transaction gains and losses are included in the determination of net income or loss.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(k)</I> 	</TD>
	<TD>
<P align="justify"><I>Earnings (loss) per share</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Earnings (loss) per share calculations are based on the weighted average number of common shares and common shares equivalents issued and outstanding during the year. Diluted earnings per share are calculated using the treasury
method and if converted method, as applicable, which requires the calculation of diluted earnings per share by assuming that outstanding stock options, warrants and convertible debentures with an average market price that exceeds the average
exercise prices of the options and warrants for the period, are exercised and the assumed proceeds are used to repurchase shares of the Company at the average market price of the common share for the period.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(l)</I> 	</TD>
	<TD>
<P align="justify"><I>Revenue recognition</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Revenue from the sale of metals is recognized in the accounts when persuasive evidence of an arrangement exists, title and risk passes to buyer, collection is reasonably assured and the price is reasonably determinable. Revenue
from the sale of metals in concentrate may be subject to adjustment upon final settlement of estimated metal prices, weights and assays. Adjustments to revenue for metal prices are recorded monthly and other adjustments are recorded on final
settlement. Refining and treatment charges are netted against revenue for sales of metal concentrate.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(m)</I> 	</TD>
	<TD>
<P align="justify"><I>Stock-based compensation</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company applies the fair value method of accounting for all stock option awards. Under this method the Company recognizes a compensation expense for all stock options awarded to employees, based on the fair value of the
options on the date of grant which is determined by using the Black-Scholes option pricing model. The fair value of the options is expensed over the vesting period of the options.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 12</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">




<A name="page_15"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>2.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Summary of significant accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(n)</I> 	</TD>
	<TD>
<P align="justify"><I>Financial instruments - recognition and measurement</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company classifies all financial instruments as either held-to-maturity, available- for-sale, held for trading, loans and receivables, or other financial liabilities. Financial assets held to maturity, loans and receivables
and financial liabilities other than those held for trading, are measured at amortized cost. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Instruments classified
as held for trading are measured at fair value with unrealized gains and losses recognized on the statement of operations.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The fair value of financial instruments traded in active markets (such as available-for- sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the
Company is the current bid price.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The carrying value less impairment provision, if necessary, of trade receivables and payables are assumed to approximate their fair values.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company has designated its cash and cash equivalents and short-term investments as held-for-trading. The Company has designated its asset backed commercial paper (&#147;ABCP&#148;) as available-for-sale. Receivables are
classified as loans and receivables. Accounts payable and accrued liabilities, short-term borrowings and long-term debt are classified as other financial liabilities.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Transaction costs related to financial instruments classified as held for trading are recognized immediately into income. For financial instruments classified as other than as held for trading, transaction costs are added to the
financial instrument in accordance with the provision of CICA Handbook Section 3855.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Long-term debt are financial instruments which have been recorded at fair value at the date of acquisition and will be measured at amortized cost going forward.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(o)</I> 	</TD>
	<TD>
<P align="justify"><I>Comprehensive income</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Comprehensive income is the change in shareholders&#146; equity during a period from transactions and other events and circumstances from non-owner sources. In accordance with this standard, the Company reports a statement of
comprehensive income and a new category, accumulated other comprehensive income, in the shareholders&#146; equity section of the consolidated balance sheet. The components of this new category may include unrealized gains and losses on financial
assets classified as available-for-sale, exchange gains and losses arising from the translation of financial statements of a self-sustaining foreign operation and the effective portion of the changes in fair value of cash flow hedging
instruments.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 13</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_16></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>3.</B> </TD>
    <TD colSpan=3>
      <P align=justify><B>Changes in accounting policies</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Accounting policies implemented effective January 1,
      2008</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(i) </TD>
    <TD>
      <P align=justify>Capital disclosures and financial instruments -
      disclosures and presentation</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company adopted three new presentation and disclosure
      standards that were issued by the CICA: Handbook Section 1535, <I>Capital
      Disclosures </I>(&#147;Section 1535&#148;), Handbook Section 3862, <I>Financial
      Instruments - Disclosures </I>(&#147;Section 3862&#148;) and Handbook Section 3863,
      <I>Financial Instruments - Presentation </I>(&#147;Section 3863&#148;).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Section 1535 requires the disclosure of both qualitative
      and quantitative information that enables users of financial statements to
      evaluate the entity&#146;s objectives, policies and processes for managing
      capital. Section 1535 specifies the disclosure of (i) an entity&#146;s
      objectives, policies and processes for managing capital; (ii) quantitative
      data about what the entity regards as capital; (iii) whether the entity
      has complied with any capital requirements; and (iv) if it has not
      complied, the consequences of such non-compliance.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Sections 3862 and 3863 replace Handbook Section 3861,
      <I>Financial Instruments - Disclosure and Presentation</I>, revising and
      enhancing its disclosure requirements and carrying forward unchanged its
      presentation requirements for financial instruments. Sections 3862 and
      3863 place increased emphasis on disclosures about the nature and extent
      of risks arising from financial instruments and how the entity manages
      those risks.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(ii) </TD>
    <TD>
      <P align=justify>Inventories</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On January 1, 2008, the Company adopted Section 3031,
      <I>Inventories</I>, which replaces the existing Section 3030, and
      establishes standards for the measurement and disclosure of inventories.
      The new standard provides more extensive guidance on the determination of
      cost, including allocation of overhead, requires impairment testing and
      expands the disclosure requirements. The adoption of Section 3031 did not
      have a material impact on the Company&#146;s consolidated financial position
      and results of operations for the year ended December 31, 2008.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Accounting policies to be implemented effective
      January 1, 2009</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Effective January 1, 2009, the Company will adopt Section
      3064, <I>Goodwill and Intangible Assets</I>, which replaces Section 3062,
      and establishes revised standards for recognition, measurement,
      presentation and disclosure of goodwill and intangible assets. Concurrent
      with the introduction of this standard, the CICA restricted the
      application of EIC 27, <EM>Revenues and Expenditures in the Pre-operating
      Period </EM>(&#147;EIC 27&#148;). The Company is evaluating the impact of the
      adoption of this new Section on its consolidated financial
    statements.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 14</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_17"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>3.</B> 	</TD>
	<TD colspan=3>
<P align="justify"><B>Changes in accounting policies (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(c)</I> 	</TD>
	<TD colspan=2>
<P align="justify"><I>Accounting policies to be implemented effective January 1, 2011</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">In January 2009, the CICA issued Handbook Sections 1582, <I>Business Combinations, </I>(&#147;Section 1582&#148;), 1601, <I>Consolidated Financial Statements, </I>(&#147;Section 1601&#148;) and 1602, <I>Non-controlling Interests,
</I>(&#147;Section 1602&#148;) which replaces CICA Handbook Sections 1581, <I>Business Combinations, </I>and 1600, <I>Consolidated Financial Statements</I>. Section 1582 establishes standards for the accounting for business combinations that is
equivalent to the business combination accounting standard under International Financial Reporting Standards (&#147;IFRS&#148;). Section 1582 is applicable for the Company&#146;s business combinations with acquisition dates on or after January 1,
2011. Early adoption of this Section is permitted. Section 1601 together with Section 1602 establishes standards for the preparation of consolidated financial statements. Section 1601 is applicable for the Company&#146;s interim and annual
consolidated financial statements for its fiscal year beginning January 1, 2011. Early adoption of this Section is permitted. If the Company chooses to early adopt any one of these Sections, the other two sections must also be adopted at the same
time. The Company is evaluating the impact of the adoption of these new Sections on its consolidated financial statements.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(d)</I> 	</TD>
	<TD colspan=2>
<P align="justify"><I>International Financial Reporting Standards</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">In February 2008, the CICA announced that Canadian generally accepted accounting principles (&#147;GAAP&#148;) for publicly accountable enterprises will be replaced by IFRS for fiscal years beginning on or after January 1, 2011.
The conversion from Canadian GAAP to IFRS will be applicable to the Company&#146;s reporting for the first quarter of 2011 for which the current and comparative information will be prepared under IFRS. The Company expects the transition to IFRS to
impact accounting policies, financial reporting, IT systems and processes as well as certain business activities. The Company is currently in the process of finalizing an IFRS changeover plan. This process involves assessing the impact of the
transition to IFRS and planning to ensure that the appropriate resources are available for a timely conversion.</P>
	</TD>
</TR>
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TR>
	<TD width=5% valign=top>
<B>4.</B> 	</TD>
	<TD colspan=3>
<P align="justify"><B>Business combination and asset acquisition</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(a)</I> 	</TD>
	<TD colspan=2>
<P align="justify"><I>Acquisition of Metallica and NGI</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">On May 9, 2008, the Company entered into an agreement to complete a business combination (the &#147;Transaction&#148;) with Metallica and NGI.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
(i) 	</TD>
	<TD>
<P align="justify">Metallica</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The acquisition of Metallica has been accounted for as a purchase transaction. Shareholders of Metallica received 0.9 of a New Gold common share and nominal cash consideration for each one common share of Metallica.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">87,447,821 common shares issued to Metallica shareholders were valued at &#36;6.92 per share. The value per share was determined with reference to the share price of New Gold common shares for the two days prior to, the day of,
and the two days subsequent to the date of the announcement on March 31, 2008. Holders of options, warrants or other convertible instruments of Metallica (&#147;Metallica equity instruments&#148;) exchanged such equity instrument for similar
securities of New Gold at an exchange ratio of 0.9 and at a price equivalent to the original price divided by 0.9.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 15</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_18></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>4.</B> </TD>
    <TD colSpan=3>
      <P align=justify><B>Business combination and asset acquisition
      (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD colspan="2">
      <P align=justify><I>Acquisition of Metallica and NGI
  (continued)</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%">
      <P align=justify>(i) </P></TD>
    <TD>
      <P align=justify>Metallica (continued)</P></TD></TR></TABLE>
<P align=justify style="margin-left: 15%">The final allocation of the purchase price based on the
consideration paid and Metallica&#146;s net assets acquired is as follows: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="85%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Issuance of New Gold shares (87,447,821
      common shares) </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff>605,139 </TD>
    <TD align=left width="2%"  bgColor=#e6efff></TD></TR>
  <TR vAlign=top>
    <TD align=left>Fair value of options issued </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">7,294 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Fair value of warrants issued </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>46,674 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Transaction costs
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">3,651
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Purchase consideration </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>662,758 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net assets acquired </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Net working capital acquired (including cash
      of $34,154) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">35,340 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Mineral property, plant and
      equipment </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>814,352 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Other long-term assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,214 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Long-term liabilities </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(3,684</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;
      &nbsp;Future income tax liability </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(185,464</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>662,758 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">(ii) </TD>
    <TD>
      <P align=justify>NGI</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>This element of the Transaction has been accounted for as
      a purchase of assets and assumption of liabilities of NGI by Peak
    Gold.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>In accordance with the determination that Peak Gold is
      the accounting acquirer in this Transaction, the deemed consideration is
      the market value of the 37,005,717 NGI common shares and the fair value of
      options, warrants and convertible or exchangeable securities of NGI
      currently outstanding. As at June 30, 2008, there were options, warrants,
      convertible or exchangeable securities and other rights to acquire an
      aggregate of 30,678,500 common shares of NGI. The common shares of NGI
      have been valued at $7.82 per share, the share price of NGI as of June 30,
      2008, the closing date of the Transaction.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 16</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_19></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>4.</B> </TD>
    <TD colSpan=3>
      <P align=justify><B>Business combination and asset acquisition
      (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD colspan="2">
      <P align=justify><I>Acquisition of Metallica and NGI
  (continued)</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%">
      <P align=justify>(ii)  </P></TD>
    <TD>
      NGI (continued)</TD></TR></TABLE>
<P align=justify style="margin-left: 15%">The final allocation of the purchase price based on the
consideration paid and NGI&#146;s net assets acquired is as follows: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="85%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Issuance of New Gold shares (37,005,717
      common shares) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>289,538 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Fair value of options issued </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">8,241 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Fair value of warrants issued </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>57,415 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Transaction costs
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">4,011
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Purchase consideration </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>359,205 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net working capital (including cash of
      $103,564) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>85,687 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Mineral property, plant and equipment </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">537,720 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Other assets </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>94,631 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Long-term liabilities </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(252,892</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Future income tax liability </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(84,337</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Convertible
      debentures </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(21,604</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>359,205 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>For the purposes of these consolidated financial
      statements, the purchase consideration has been allocated to the fair
      value of assets acquired and liabilities assumed, including allocation of
      mining interests to depletable and non-depletable properties, based on
      management&#146;s best estimates and all available information at the time of
      the Transaction.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Acquisition of Amapari and Peak Mines</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On February 15, 2007, the Company entered into an
      agreement with Goldcorp Inc. (&#147;Goldcorp&#148;), a company related by a director
      in common, to acquire Goldcorp&#146;s Amapari mine in Brazil and Peak mine in
      Australia (the &#147;Acquisition&#148;). The Company completed the acquisition of
      the Amapari mine and the Peak mine on April 3, 2007 and April 27, 2007,
      respectively. In consideration for the acquisition of the Amapari and Peak
      Mines, the Company issued to Goldcorp 155 million common shares with a
      value of $100 million and paid $200 million in cash,
  respectively.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Upon completion of the Acquisition, Goldcorp held
      approximately 22% ownership in Peak Gold and a position on the Board of
      Directors of the Company.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The business combination has been accounted for as a
      purchase transaction, with the Company as the acquirer and the Amapari and
      Peak Mines as the acquiree. The results of the operations of the acquired
      assets are included in the consolidated financial statements of the
      Company from the dates of the Acquisition.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 17</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_20></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>4.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Business combination and asset acquisition
      (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Acquisition of Amapari and Peak Mines
      (continued)</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The final allocation of the assets and liabilities
      acquired is as follows:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Purchase price </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Cash </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">200,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Common shares </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>100,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;
      &nbsp;Acquisition costs </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">5,032
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>305,032 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Net assets acquired </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Cash and cash equivalents </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">11,212 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Accounts receivable </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>4,391 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Inventories and stockpiled ore </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">40,286 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Mining interests </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>299,535 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Intangible asset </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">14,664 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Other </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>5,091 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Current liabilities </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(23,618</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Reclamation and closure cost
      obligations </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(16,662</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;
      &nbsp;Future income tax liabilities, net </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(29,867</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>305,032 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>5.</B> </TD>
    <TD>
      <P align=justify><B>Inventories and stockpiled
ore</B></P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Supplies </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>12,179</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">15,092 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Work-in-process (a) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>5,008</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>7,505 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Heap leach ore (b) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>19,141</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">12,254 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Stockpiled ore (c) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>112</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,106 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Finished goods </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2,962</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">3,835
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>39,402</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>39,792 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD>
      <P align=justify><I>Work-in-process</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Work-in-process is the stage between the product (gold,
      silver and copper) as it sits as a raw material (mined or stockpiled) and
      when it has been converted into the finished product (dor&#233; or
      concentrate).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Heap leach ore</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The recovery of gold from certain oxide ores is achieved
      through the heap leaching process used at the Amapari and Cerro San Pedro
      mines. Under this method, ore is placed on leach pads where it is treated
      with a chemical solution which dissolves the gold contained in the
    ore.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 18</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_21"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>5.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Inventories and stockpiled ore (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(c)</I> 	</TD>
	<TD>
<P align="justify"><I>Stockpiled ore</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The low-grade stockpiled ore is located at Amapari and Peak Mines and is forecasted to be drawn down throughout the remainder of the life of the mines.</P>
	</TD>
</TR>
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TR>
<TD width=5%></TD>	<TD colspan=2>
<P align="justify">The amount of inventories recognized in operating expenses for the year is &#36;116 million, which includes a &#36;1.3 million write-down related to inventories at Amapari. There were no reversals of write-downs during the
year.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
	<TD width=5% valign=top>
<B>6.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Investments</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD colspan=2>
<P align="justify">As at December 31, 2008, the Company had &#36;139 million (Cdn&#36;169 million) invested in ABCP which was rated R1-high by Dominion Bond Rating Service when it was initially acquired by NGI. In mid-August 2007, a number of
non-bank sponsors of ABCP, including those with which NGI had invested, announced that they could not place ABCP due to unfavourable conditions in the Canadian capital markets. As a result, there is presently no active market for the ABCP held by
the Company.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD colspan=2>
<P align="justify">As at December 31, 2008, the non-bank ABCP market remained the subject of a restructuring process with the expressed intention of replacing the ABCP with a number of long-term floating rate notes (&#147;New Notes&#148;). The
restructuring plan, which was completed on January 21, 2009, pooled all of the underlying assets from all the ABCP trusts with the exception of those assets designated as ineligible for pooling (&#147;Ineligible Assets&#148;) and those series of
assets backed exclusively by traditional financial assets (&#147;Traditional Series&#148;). Upon completion of the restructuring, income which had been accumulating from the underlying assets was distributed to investors.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD colspan=2>
<P align="justify">ABCP relating to the pooled assets was replaced with four classes of asset backed notes named A1, A2, B and C in declining order of seniority. ABCP relating to Ineligible Assets and Traditional Series was replaced with new
tracking notes whose characteristics are designed to track the performance of the particular assets of the series to which they correspond.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD colspan=2>
<P align="justify">The Company has designated these new notes as held-for-trading.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 19</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_22></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>6.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Investments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD>
      <P align=justify>The Company has estimated the fair value of ABCP at
      December 31, 2008 using the methodology and assumptions outlined below.
      The fair value estimate of the New Notes to be received under the
      restructuring has been calculated based on information provided by the Pan
      Canadian Investor Committee as well as Ernst &amp; Young, the Monitor of
      the restructuring. The table below summarizes the Company&#146;s
    valuation.</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Base case </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" nowrap>&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Restructuring </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Face </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">fair value </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" nowrap>Expected </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>categories </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">value
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">estimate* </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%" nowrap>maturity date </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">millions $ </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">millions $ </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" nowrap>&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>MAV 2 notes </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="10%" bgColor=#e6efff nowrap>&nbsp; </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;A1 (rated A) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">81.2 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">46.6 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" nowrap>December 31, 2016 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;A2 (rated A) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>27.9 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>14.9 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff nowrap>December 31, 2016 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;B </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">5.0 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">0.9 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" nowrap>December 31, 2016 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;C </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3.5 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0.3 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff nowrap>December 31, 2016 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Traditional asset tracking notes </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" nowrap>&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;MAV3 - Class 9 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>7.8 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>7.6 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff nowrap>September 12, 2015 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Ineligible asset tracking notes </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%" nowrap>&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;MAV2 - Class 3/13/15 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>13.0 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2.0 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff nowrap>December 20, 2012 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%" nowrap>to October 24, 2016 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Accrued interest income </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>4.7 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff nowrap>January 2, 2009 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Total original
      investment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">138.4
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">77.0
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%" nowrap>&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">* </TD>
    <TD>
      <P align=justify>the range of fair values estimated by the Company varied
      between $76 million and $99 million</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD colSpan=2>
      <P align=justify>The A1, A2 and traditional asset tracking notes comprise
      the major categories of the notes contemplated to be received totalling
      79% of the face value of the original investments made and 85% of the fair
      value estimate of the Company&#146;s holdings excluding accrued income. In the
      case of the A1 and A2 notes, it is estimated that they will pay interest
      at a rate 0.5% less than the bankers&#146; acceptance (&#147;BA&#148;) rate and it is
      estimated that prospective buyers of these notes will require premium
      yields between 7% and 8% over the BA rate.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(c) </TD>
    <TD colSpan=2>
      <P align=justify>The traditional asset notes are estimated to generate
      interest income of 0.5% above the BA rate and a prospective buyer of those
      notes is estimated to require a premium of 5% over the BA
  rate.</P></TD></TR></TABLE>
<P align=justify style="margin-left: 5%">The Company has applied its best estimate of prospective
buyers&#146; required yield and calculated the present value of the New Notes using
required yield as the discount factor. Using a range of potential discount
factors allows the Company to estimate a range of recoverable values. </P>
<P align=justify style="margin-left: 5%">The Class B notes are not expected to pay any current interest
until the Class A1 and A2 notes are paid in full, which is not anticipated until
December 31, 2016. These notes, which will be subordinate to the Class A1 and A2
notes, will not receive a credit rating. </P>
<P align=justify style="margin-left: 5%">The Class C notes also will not pay any current interest and
are subordinate to the Class B notes. In light of this subordination, the Class
C notes are viewed as highly speculative with regard to ultimate payment of
principal at maturity in 2016.</P>
<P align=right><font style="font-size: 8pt">Page 20</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_23></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>6.</B> </TD>
    <TD>
      <P align=justify><B>Investments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company will also receive three classes of ineligible
      tracking notes, two of which have direct exposure to the U.S. sub-prime
      mortgage market and one of which is backed by a leveraged super senior
      (&#147;LSS&#148;) credit default swap. The fair value of the sub-prime backed notes
      is less than 10% of par value while the LSS backed note has a fair value
      of less than 20% of par value.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Restructuring costs are excluded from this valuation as
      it has been stated that the costs will be deducted from the accrued
      interest that the Company will receive shortly after the completion of the
      restructuring.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Based upon a sensitivity analysis of the assumptions
      used, the expected yield required by a potential investor remains the most
      significant assumption included in the fair value estimate. There can be
      no assurance that this estimate will be realized. Subsequent adjustments,
      which could be material, may be required in future reporting
    periods.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><B>7.</B> </TD>
    <TD>
      <P align=justify><B>Mining interests</B></P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>Accumulated</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>depreciation,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>depletion and</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>Net book</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>Cost</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>write-downs</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>value</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Mining properties </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><B>1,540,195</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><B>98,518</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><B>1,441,677</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Plant and
      equipment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>280,720</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>103,636</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>177,084</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><B>1,820,915</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><B>202,154</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff><B>1,618,761</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<P align=justify style="margin-left: 5%">The Company capitalized $10.6 million of interest in 2008 (2007
- -$Nil) related to the New Afton Project. </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Accumulated </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">depreciation </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Net book </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">Cost
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">and
      depletion </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">value
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Mining properties </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>190,163 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2,687 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>187,476 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Plant and
      equipment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">144,641 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">16,286 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">128,355 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>334,804 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>18,973 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>315,831 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 21</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_24></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial
statements December 31, 2008<BR></font>(Tabular amounts expressed in thousands of
U.S. dollars, except share and per share amounts) <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>7.</B> </TD>
    <TD>
      <P align=justify><B>Mining interests (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>A summary of net book value by property is as
    follows:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Mining </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">properties </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Non- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Plant and </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>Total</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Total </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">Depletable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">depletable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">Total
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">equipment </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Amapari (b) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>5,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>5,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>4,537 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>9,537</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>174,744 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cerro San Pedro </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">260,305 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">84,822 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">345,127 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">54,503 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>399,630</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>El Morro project </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>377,430 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>377,430 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>377,430</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>New Afton project </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">567,358 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">567,358 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">64,727 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>632,085</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Peak Mines </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>3,036 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>116,980 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>120,016 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>52,694 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>172,710</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>140,497 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Other projects (a) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">26,746 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">26,746 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>26,746</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Corporate </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>623 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff><B>623</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>590 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">263,341 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">1,178,336 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">1,441,677 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">177,084 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%"><B>1,618,761</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">315,831 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD colSpan=3>
      <P align=justify>(i) Chile - El Morro Project</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=3>
      <P align=justify>The El Morro copper-gold project consists of the La
      Fortuna and El Morro areas. Xstrata has a 70% interest in the El Morro
      project.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=3>
      <P align=justify>The Company has other projects in Chile that consist of
      copper-gold exploration concessions that are contiguous to the El Morro
      project.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(ii) </TD>
    <TD colSpan=2>
      <P align=justify>Other projects include</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>Chile - Rio Figueroa Project</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company has an option agreement with Sociedad
      Contractual Minera Los Potrillos (&#147;Potrillos&#148;) to acquire a 100% interest
      in a copper-gold exploration project referred to as the Rio Figueroa
      project.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(2) </TD>
    <TD>
      <P align=justify>USA - Liberty Bell</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company entered into an exploration agreement with
      the right to acquire the Liberty Bell gold project in central
    Alaska.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(3) </TD>
    <TD>
      <P align=justify>Canada - Ajax</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company owns a 100% interest in the Ajax-Python Claim
      Group.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD colSpan=3>
      <P align=justify>During the third quarter of 2008, the Company recorded an
      impairment charge of $165.3 million before tax recoveries of $8.4 million
      on its investment in the Amapari Mine. On January 2, 2009, the Company
      placed the mine on temporary care and maintenance. Mining at Amapari has
      been suspended and leaching of stacked material is expected to continue
      until it is no longer economical to do so. The Company is currently
      preparing a preliminary economic assessment to exploit the underlying
      sulphide resource with a conventional crush/grind/carbon in leaching mill.
      Commitments related to placing Amapari Mine on temporary care and
      maintenance total approximately $2.2 million.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 22 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_25></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial
statements December 31, 2008<BR></font>(Tabular amounts expressed in thousands of
U.S. dollars, except share and per share amounts) <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>8.</B> </TD>
    <TD>
      <P align=justify><B>Long-term debt</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Long-term debt consists of the
  following:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Senior secured notes (a) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>182,553 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Embedded early redemption feature at fair value (b) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Subordinated convertible debentures (c) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>29,834 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">212,387 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Senior secured notes</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The face value of the Notes at December 31, 2008 was
      Cdn$237 million.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Notes, originally issued by NGI pursuant to a note
      indenture dated June 28, 2007, mature and become due and payable on June
      28, 2017 and bear interest at the rate of 10% per annum. Under the terms
      of the Notes, the Company has agreed to certain additional restrictions on
      its business as it relates to the New Afton assets. In particular, the
      Company has agreed:</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">
      <LI>&nbsp;</LI></TD>
    <TD>
      <P align=justify>to grant to the Trustee under the note indenture, for the
      benefit of the noteholders, a first-ranking security interest on the New
      Afton project assets;</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">
      <LI>&nbsp;</LI></TD>
    <TD>
      <P align=justify>that it will not sell or otherwise transfer any of the
      New Afton project assets except for transfers made in the ordinary course
      of business for fair market value or transfers of production from the New
      Afton project pursuant to any risk management or offtake
  agreement;</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">
      <LI>&nbsp;</LI></TD>
    <TD>
      <P align=justify>that it will not incur additional indebtedness except for
      certain permitted indebtedness and it will not create any security
      interest of any kind securing indebtedness on any New Afton project assets
      except for certain permitted encumbrances; and</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">
      <LI>&nbsp;</LI></TD>
    <TD>
      <P align=justify>to certain limitations on its ability to make advances to
      its subsidiary companies for cash flow produced from the New Afton project
      assets.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Interest is payable in arrears in equal semi-annual
      instalments on January 1 and July 1 in each year.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>Subsequent to year end, the Company acquired Cdn$50
      million face value of its senior secured notes for consideration of Cdn$30
      million from the noteholders. This results in a reduction of approximately
      $5 million per year in interest payments.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Embedded early redemption feature at fair
    value</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Company has the right to redeem the Notes in whole or
      in part at any time and from time to time prior to June 27, 2017 at a
      price ranging from 120% to 100% (decreasing based on the length of time
      the Notes are outstanding) of the principal amount of the Notes to be
      redeemed.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The early redemption feature in the Notes qualifies as an
      embedded derivative that must be bifurcated for reporting purposes. As of
      December 31, 2008, the fair value of the derivative asset is determined to
      be $Nil.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 23 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_26"></A>

<P align="justify">
<B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>8.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Long-term debt (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(c)</I> 	</TD>
	<TD>
<P align="justify"><I>Subordinated convertible debentures</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">In 2007, NGI issued 55,000 convertible subordinated debentures (&#147;Debentures&#148;) for an aggregate principal amount of Cdn&#36;55 million. The Debentures, which were issued pursuant to a Debenture Indenture dated June 28,
2007 (the &#147;Debenture Indenture&#148;), each have a principal amount of &#36;1,000, bear interest at a rate of 5% per annum and are convertible by the holders into common shares of the Company at any time up to June 28, 2014 at a conversion
price of Cdn&#36;9.35 per share. The Debentures do not allow forced conversion by the Company prior to January 1, 2012 but after that date the Company may redeem the Debentures if the market price of the Company&#146;s shares is at least 125% of the
conversion price. The Debentures are classified as compound financial instruments for accounting purposes because of the holder conversion option.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Interest is payable in arrears in equal semi-annual instalments on January 1 and July 1 in each year.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Debenture Indenture provides that in the event of a change of control of the Company, as defined therein, where 10% or more of the aggregate purchase consideration is cash, the Company must offer to either (i) redeem the
outstanding Debentures at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest up to but excluding the date of redemption, or (ii) convert the outstanding Debentures into common shares at conversion prices
ranging from Cdn&#36;7.48 at inception to Cdn&#36;9.35, based on a time formula specified in the Debenture Indenture.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Debentures are subordinate to the Notes and any secured indebtedness incurred subsequent to the issue of the Debentures.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">At the time of acquisition by the Company, the Company allocated &#36;34.5 million of the &#36;56.2 million fair value as a liability based on the fair value of a similar debt instrument without an associated conversion option.
The similar debt instrument was assumed to have an interest at 8% at the time of acquisition. The equity component was valued using the Black-Scholes model with the following assumptions: no dividends paid, volatility of 60%, risk free interest rate
of 3.45% and expected life of six years. The debt component of the Debentures will be accreted over the expected term to maturity using the effective interest method.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Debenture Indenture requires the Company to comply with certain reporting and other covenants.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 24</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_27></A>
<P align=justify><B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>9.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Share capital</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(a)</I> </TD>
    <TD>
      <P align=justify><I>Authorized</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Unlimited number of voting common shares without par
      value</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Special warrants</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On November 28, 2007, the Company completed a private
      placement financing of 14,772,333 Special Warrants at a price of Cdn$7.50
      per Special Warrant for total gross proceeds of Cdn$110.8 million
      (US$111.8 million) and net proceeds after issue costs of Cdn$103.2 million
      (US$104.2 million). Each Special Warrant entitled the holder thereof to
      receive one unit of the Company, at no additional cost. Each unit
      comprised one common share of the Company and one-half of one common share
      purchase warrant. Each whole common share purchase warrant entitled the
      holder to acquire one additional common share, at a price of Cdn$9.00
      until November 28, 2012.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On February 28, 2008, the 14,772,333 Special Warrants
      outstanding at December 31, 2007 were converted into 14,772,333 common
      shares of the Company and 7,386,168 common share purchase warrants. The
      warrants were valued at $23.7 million using the Black-Scholes pricing
      model and that amount is included in share purchase warrants. A fair value
      of approximately $3.20 for each warrant was calculated using the following
      assumptions: no dividends are paid, volatility of 60%, risk free interest
      rate of 3.4%, and expected life of five years. Every 10 warrants are
      exercisable into 1 New Gold common share.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(c)</I> </TD>
    <TD>
      <P align=justify><I>Stock options</I></P></TD></TR></TABLE>
<P align=justify style="margin-left: 10%">The Company has established a &#147;rolling&#148; stock option plan (the
&#147;Plan&#148;) in compliance with the TSX Exchange&#146;s policy for granting stock options.
Under the Plan, the maximum number of shares reserved for issuance may not
exceed 10% of the total number of issued and outstanding common shares. The
exercise price of each option shall not be less than the market price of the
Company&#146;s stock at the date of grant. Options generally vest over three years,
and have a maximum term of seven years from date of grant. </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Weighted </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">average </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Number of </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">exercise </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">options </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">price
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Cdn$ </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Balance, November 30, 2006 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>160,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.00 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Exercised </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(129,000</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1.00 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cancelled </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(40,900</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>9.30 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Granted </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">2,159,500 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">9.30
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Balance, December 31, 2007 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,149,600 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>9.10 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Granted </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">3,084,700 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">6.92 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Options assumed on acquisition of Metallica
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,930,095 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>4.07 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Options assumed on acquisition of NGI </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,828,500 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">7.03 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Exercised </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>(424,090</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>3.39 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Forfeited </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(578,917</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">8.44
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff><B>Balance, December 31, 2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>8,989,888 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>6.94 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 25</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_28></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>9.</B> </TD>
    <TD colspan="2">
      <P align=justify><B>Share capital (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%">
      <P align=justify><I>(c) </I></P></TD>
    <TD>
      <I>Stock options (continued)</I></TD></TR></TABLE>
<P align=justify style="margin-left: 10%">The following table summarizes information about the stock
options outstanding at December 31, 2008: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Options </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Options </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">outstanding </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="10%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">exercisable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Weighted </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Weighted </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">average </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Weighted </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>Number of </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">average </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">remaining </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Number of </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">average </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>stock options </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">exercise </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">contractual </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">options </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">exercise </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right>outstanding </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">price
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">life
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">exercisable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">price
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Cdn$ </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">Cdn$ </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>75,000 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1.29 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>6.9 years </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1.29 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>184,500 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">1.70 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">0.9 years </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">184,500 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">1.70 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>103,500 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2.74 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0.8 years </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>103,500 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>2.74 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>520,187 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">3.44 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">1.3 years </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">520,187 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">3.44 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>600,000 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>4.60 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>0.8 years </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>600,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>4.60 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>1,167,768 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">5.52 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">3.3 years </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">901,102 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">5.55 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>1,849,400 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>6.42 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3.2 years </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>1,062,467 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>6.55 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>2,262,700 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">7.66 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">4.1 years </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">839,233 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">7.37 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>1,749,333 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>9.29 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>3.2 years </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>633,111 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>9.27 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right>477,500 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">11.00
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">1.3
      years </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">477,500 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">11.00
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      bgColor=#e6efff>8,989,888 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>6.94 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>3.0 years </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>5,321,600 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"
    bgColor=#e6efff>6.47 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>On February 17, 2009, the Company granted 2,306,000 stock
      options to employees. These options have an exercise price of Cdn$2.71.
      The options vest over a three year period and have a contractual life of
      seven years from date of grant.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(d)</I> </TD>
    <TD>
      <P align=justify><I>Stock-based compensation</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>For the year ended December 31, 2008, the Company
      recorded $7.0 million as stock- based compensation expense (2007 - $6.2
      million). The Company recorded this amount in contributed surplus. The
      value was determined using the Black-Scholes pricing model. A weighted
      average grant-date fair value of Cdn$7.38 (2007 - $0.37) was calculated
      using the following assumptions: no dividends are to be paid, volatility
      of 50% (2007 - 60%), risk free interest rate of 3.35% (2007 - 4.00%), and
      expected life of 4.62 years (2007 - 3.50 years).</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 26</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_29></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>9.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Share capital (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(e)</I> </TD>
    <TD>
      <P align=justify><I>Share purchase warrants</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>A summary of the changes in share purchase warrants is
      presented below:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Weighted </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">average </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Number of </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">exercise </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">warrants </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">price
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Cdn$ </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Balance, November 30, 2006 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1,495,000 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>1.00 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Exercised </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(1,495,000</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1.00 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Issued </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>21,750,000 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>15.00 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Balance, December 31, 2007 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">21,750,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">15.00 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Issued </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>7,386,167 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>9.00 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Metallica share purchase warrants exercisable into New Gold
      shares </TD>
    <TD align=left width="1%" ></TD>
    <TD align=right width="12%">17,196,115 </TD>
    <TD align=right width="2%" ></TD>
    <TD align=right width="1%" ></TD>
    <TD align=right width="12%">3.93 </TD>
    <TD align=left width="2%" ></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>NGI share purchase warrants </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>27,825,352 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>15.00 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Expired </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(14,046,115</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">3.44
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff><B>Balance, December 31, 2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>60,111,519 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>13.80 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<P align=justify style="margin-left: 10%">The following table summarizes information about outstanding
share purchase warrants at December 31, 2008: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=right>Number </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Exercise </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right>of warrants </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">prices </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">Expiry date </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=bottom>
    <TD align=right>&nbsp;&nbsp; </TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=right width="12%" >&nbsp;Cdn$</TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="12%" >&nbsp;</TD>
    <TD align=center width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>3,150,000 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>6.11 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>December 20, 2009 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>21,750,000 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">15.00 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">April 3, 2012 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right bgColor=#e6efff>7,386,167 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>9.00 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>November 28, 2012 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=right>4,150,000 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">15.00 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">June 28, 2017 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      bgColor=#e6efff>23,675,352 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>15.00 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>June 28, 2017 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right>60,111,519 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="12%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="12%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 27</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_30></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial
statements December 31, 2008<BR></font>(Tabular amounts expressed in thousands of
U.S. dollars, except share and per share amounts) <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>9.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Share capital (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(f)</I> </TD>
    <TD>
      <P align=justify><I>Diluted (loss) earnings per share</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The following table sets forth the computation of diluted
      earnings per share:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#ffffff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#ffffff><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#ffffff>2007 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>(Loss) earnings available to common shareholders </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff><B>$</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(102,679</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>$</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>14,613 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><I>(in thousands)</I> </TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>Basic weighted average number of shares
      outstanding </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff><B>148,126</B> </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>53,428 </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Effect of dilutive securities </TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>&nbsp; &nbsp;Special warrants </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff><B>-</B> </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>14,772 </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Stock options </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>-</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>26 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">Diluted weighted average number of shares
      outstanding </TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1"><B>148,126</B> </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">68,226 </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=right width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>(Loss) earnings per share </TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Basic </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(0.69</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>0.27 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>&nbsp; &nbsp;Diluted </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff><B>(0.69</B></TD>
    <TD align=left width="2%"  bgColor=#ffffff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#ffffff>0.21 </TD>
    <TD align=left width="2%"
  bgColor=#ffffff>&nbsp;</TD></TR></TABLE>
</div>
<P align=justify style="margin-left: 10%">The following lists the equity securities excluded from the
computation of diluted earnings per share because the exercise prices exceeded
the average market value of the common shares of Cdn$5.48 (2007 - Cdn$0.63) for
the year. The warrants related to Special Warrants (Note (9 b)) were issued
subsequent to the year end. </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><I>(in thousands)</I> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Stock options </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>7,271</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,119 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Share purchase warrants </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>60,136</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">21,750 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Convertible debentures </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>55,000</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%"><I>(g)</I> </TD>
    <TD>
      <P align=justify><I>Share capital of NGI</I></P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Number of </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">shares </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">Amount </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Cdn$ </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Balance, December 31, 2007 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>36,945,727 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>213,278 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Exercise of stock options </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">56,000 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">469 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Tax effect for flow-through shares </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(5,209</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Balance, June 30,
      2008 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">37,001,727 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">208,538 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 28 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_31></A>
<P align=justify><B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>10.</B> </TD>
    <TD>
      <P align=justify><B>Income and mining
taxes</B></P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;Current income and mining tax expense
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>6,473</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>6,824 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;Future
      income and mining tax recovery </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>(13,496</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="12%">(6,537</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(7,023</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>287 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left colSpan=6>Income tax expense differs from
      the amount that would result from applying the Canadian federal and
      provincial income tax rates to earnings before taxes. These differences
      result from the following items: </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left colSpan=6>&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp;(Loss) earnings before income taxes </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(109,702</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>14,900 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp;Canadian federal and provincial income tax rates </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>31.00%</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>34.12% </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp;Income tax (recovery) expense based
      on above rates </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(34,008</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>5,084 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;Increase (decrease) due to </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Non-taxable income </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(27,786</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp; &nbsp;Non-deductible expenditures </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>8,192</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,486 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Lower statutory tax rates on earnings of
      foreign subsidiaries </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff><B>(992</B></TD>
    <TD align=left width="2%"  bgColor=#e6efff><B>)</B> </TD>
    <TD align=left width="1%"  bgColor=#e6efff></TD>
    <TD align=right width="12%" bgColor=#e6efff>(1,183</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Adjustment of prior year provision to statutory tax returns
    </TD>
    <TD align=left width="1%" ></TD>
    <TD align=right width="12%"><B>(872</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" ></TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" ></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp; &nbsp;Benefit of losses not
      recognized in period </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>4,589</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,137 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; &nbsp;
      &nbsp;Change in valuation allowance and other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>43,854</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="12%">(8,237</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(7,023</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>287 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 29 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_32></A>
<P align=justify><B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>10.</B> </TD>
    <TD>
      <P align=justify><B>Income and mining taxes (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The components of future income taxes are as
    follows:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Future income and mining tax assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Tax loss carryforwards </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>18,904</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>11,308 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Deductible temporary differences and other </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>43,840</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">13,601 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Deferred financing costs and other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>14,620</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Value of future income tax and mining assets
    </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>77,364</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">24,909 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Valuation allowance </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(49,381</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(8,399</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD align=left>Future income and mining tax assets </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>27,983</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">16,510 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Future income and mining tax liabilities </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Accumulated cost base differences on assets
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(249,361</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(42,453</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Future income and
      mining tax liabilities, net </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>(221,378</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(25,943</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Presented on the consolidated balance sheets as </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Future income and mining tax
      assets </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>2,690</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp;
      &nbsp;Future income and mining tax liabilities </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>(224,068</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    ><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(25,943</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Future income and mining tax liabilities, net </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(221,378</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(25,943</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left colSpan=2>
    <p align="justify">Deductible temporary differences are
      comprised primarily of book to tax differences relating to the Company&#146;s
      reclamation liabilities. Taxable temporary differences are comprised
      primarily of book to tax differences relating to the value of the
      Company&#146;s mining interests acquired from corporate acquisitions. </TD></TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD>&nbsp; </TD></TR>
  <TR>
    <td>&nbsp;</td>
    <td colspan="2"><i>Tax loss carryforwards</i></td>
    </TR>
  <TR>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left colSpan=2>At December 31, 2008, the Company has: </TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left>(i) </TD>
    <TD align=left>Canadian income tax losses of approximately
      $34,100,000 that expire from 2009 through 2028; </TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left>(ii) </TD>
    <TD align=left>U.S. loss carryforwards of approximately
      $10,400,000 that expire from 2021 through 2028; </TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left>(iii) </TD>
    <TD align=left>Mexican loss carryforwards of approximately
      $18,700,000 that expire from 2009 through 2017; </TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left>(iv) </TD>
    <TD align=left>Brazilian loss carryforwards of approximately
      $9,730,000 that may be available for tax purposes. These losses carry forward
      indefinitely; and </TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;</TD>
    <TD align=left>(v) </TD>
    <TD align=left>Chilean loss carryforwards of approximately
      $1,100,000 that may be available for tax purposes. These losses carry forward
      indefinitely. </TD></TR>
  </TABLE>
<P align=right><font style="font-size: 8pt">Page 30 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_33></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial
statements December 31, 2008</font><BR>(Tabular amounts expressed in thousands of
U.S. dollars, except share and per share amounts) <BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>11.</B> </TD>
    <TD>
      <P align=justify><B>Reclamation and closure cost obligations</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;s asset retirement obligations consist of
      reclamation and closure costs for Amapari Mine, Cerro San Pedro Mine, New
      Afton development project and Peak Mines. Significant reclamation and
      closure activities include land rehabilitation, demolition of buildings
      and mine facilities, ongoing care and maintenance and other
  costs.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The liability for reclamation and closure cost
      obligations at December 31, 2008 is $22.0 (2007 - $18.0 million). The
      undiscounted value of this liability is $35.5 million (2007 - $28.8
      million). An inflation rate assumption ranging from 1.6% to 5.0% has been
      used. An accretion expense component of $1.0 million (2007 - $2.0 million)
      has been charged to operations in 2008 to reflect an increase in the
      carrying amount of the asset retirement obligation which has been
      determined using a discount rate ranging from 8.0% to 10.0%. Changes to
      the reclamation and closure cost balance during the year are as
      follows:</P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="15%">
    <p style="margin-right: 4"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="15%">
    <p style="margin-right: 4">2007
    </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4"><B>$</B> </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4">$ </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Reclamation and closure cost obligations,
      opening balance </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>18,036</B> </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left>Arising on acquisition of Amapari (Note 4) </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4">10,312 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Arising on acquisition of Peak Mines (Note
      4) </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-right: 4">6,349 </TD></TR>
  <TR vAlign=top>
    <TD align=left>Arising on acquisition of Metallica (Note 4) </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4"><B>3,228</B> </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Reclamation expenditures </TD>
    <TD align=right width="15%" bgColor=#e6efff><B>(98)</B> </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left>Accretion expense, included in depreciation and depletion
    </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4"><B>1,077</B> </TD>
    <TD align=right width="15%">
    <p style="margin-right: 4">2,025 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Revisions in estimates and liabilities
      incurred </TD>
    <TD align=right width="15%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>3,400</B> </TD>
    <TD align=right width="15%" bgColor=#e6efff>(650) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Foreign exchange
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="15%"><B>(3,694)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="15%">
    <p style="margin-right: 4">-
  </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">Reclamation and closure cost obligations,
      closing balance </TD>
    <TD align=right width="15%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4"><B>21,949</B> </TD>
    <TD align=right width="15%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">18,036 </TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 31 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_34></A>
<P align=justify><B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>12.</B> </TD>
    <TD>
      <P align=justify><B>Supplemental cash flow
  information</B></P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Thirteen </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>Year ended</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">months ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Change in non-cash working capital </TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Accounts receivable </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>8,664</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">(17,554</TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Inventories and stockpiled ore
    </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>24,684</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>2,279 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Accounts payable and accrued liabilities </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>(28,016</B></TD>
    <TD align=left width="2%" ><B>)</B> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">5,400 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; &nbsp;Other </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>(3,285</B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff><B>)</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>(1,996</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2,047</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">(11,871</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD></TR>
  <TR>
    <TD bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Non-cash financing and investing activities </TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Shares/options/warrants issued on
      acquisition (Note 4 (a) and 4 (b)) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>894,677</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>103,253 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD>
    <TD align=right width="1%" >&nbsp;</TD>
    <TD align=right width="12%">&nbsp; </TD>
    <TD align=right width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Operating activities included the following
      payments </TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff></TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff></TD>
    <TD align=right width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; &nbsp;Interest paid </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>3,075</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>&nbsp; &nbsp;Income taxes paid </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>12,223</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>3,092 </TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD>
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=top width="5%"><B>13.</B> </TD>
    <TD>
      <B>Segmented information</B></TD></TR></TABLE>
<P align=justify style="margin-left: 5%">The Company manages its operations by geographical location.
These reportable operating segments are summarized in the table below: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="17%"
    colSpan=4><B>Year ended December 31, 2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">(Loss) </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Depletion </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">earnings </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Expenditures </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">and </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">from </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Total </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">for mining </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">Revenues </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">depreciation </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">operations </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">assets
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">interest </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Brazil </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>75,052 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>14,408 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>(177,053</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>44,857 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>7,077 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Chile <SUP>(2)</SUP> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">377,430 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Canada <SUP>(2)</SUP> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>9 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>(4,901</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>640,133 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>87,466 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Mexico <SUP>(2)</SUP> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">47,285 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">8,788 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">(12,549</TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">444,555 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">9,812 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Australia </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>95,798 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>9,665 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>28,595 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>198,477 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>29,389 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Other
      <SUP>(1)</SUP> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">91 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
    width="7%">(15,382</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">252,249 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">124
</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>218,135 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>32,961 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>(181,290</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>1,957,701 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>133,868 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR>
    <TD vAlign=top width="5%"><SUP>(1)</SUP> </TD>
    <TD>
      <P align=justify>Other includes corporate balances and intercompany
      eliminations and exploration properties</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%"><SUP>(2)</SUP> </TD>
    <TD>
      <P align=justify>Segments acquired on June 30, 2008 (Note
  1)</P></TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 32 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_35></A>
<P align=justify><B><font size="5">New Gold Inc.<br>
</font></B><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts) </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>13.</B> </TD>
    <TD>
      <P align=justify><B>Segmented information
(continued)</B></P></TD></TR></TABLE><BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="27%"
    colSpan=7><B>Thirteen months ended December 31, 2007</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">(Loss) </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Depletion </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">earnings </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Expenditures </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">and </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">from </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Total </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">for mining </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">Revenues </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">depreciation </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">operations </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">assets
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">interest </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Brazil </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>48,369 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>9,129 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>(321</TD>
    <TD align=left width="2%"  bgColor=#e6efff>) </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>215,971 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>6,108 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Australia </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">82,715 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">9,805 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">25,786 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">184,056 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">20,315 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Other <SUP>(1)</SUP> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>39 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>(11,355</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>) </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>172,371 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>629 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">131,084 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">18,973
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">14,110
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%">572,398 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">27,052
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<P align=justify style="margin-left: 5%"><SUP>(1)</SUP> Other includes corporate balances and
intercompany eliminations </P>
<P align=justify style="margin-left: 5%">The Company sells all of its concentrate production to one
customer under an off-take contract. The loss of this customer or unexpected
termination of the off-take contract could have a material adverse effect on the
Company&#146;s results of operations, financial condition and cash flows. The Company
is in the process of renegotiating the terms of the existing agreement for the
period commencing January 1, 2009. The Company is currently evaluating its
alternatives for a new contract which will commence when the existing contract
terminates. The Company has not experienced any bad debts with this customer.
</P>
<P align=justify style="margin-left: 5%">The Company is not economically dependent on a limited number
of customers for the sale of its gold because gold can be sold through numerous
commodity market traders worldwide. </P>
<P align=justify style="margin-left: 5%">The Company has four customers that account for 100% of the
concentrate and dor&#233; sales revenue. </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="95%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Metal sales </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="12%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="12%">&nbsp;
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Thirteen </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">months </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>Year ended</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>Customer </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>1 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>75,052</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>48,369 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>2 </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>56,649</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">47,090 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>3 </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>47,285</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>4 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>39,149</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">35,625 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Total </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>218,135</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>131,084 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>% of total metal
      sales </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>100%</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">100%
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 33 </font> </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_36"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>14.</B> 	</TD>
	<TD colspan=2>
<P align="justify"><B>Financial instruments</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD colspan=2>
<P align="justify">The Company thoroughly examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, market risk and other price
risks. Where material, these risks are reviewed and monitored by the Board of Directors.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(a)</I> 	</TD>
	<TD>
<P align="justify"><I>Capital risk management</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">In the management of capital, the Company includes the components of shareholders&#146; equity, short-term borrowings and long-term debt, as well as the cash and cash equivalents, short-term and long-term investments.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may
attempt to issue new shares, issue new debt, acquire or dispose of assets or sell its investments.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">In order to facilitate the management of its capital requirements, the Company prepares annual budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry
conditions. The annual and updated budgets are approved by the Board of Directors.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Prior to June 30, 2008, the Company&#146;s investment policy was to invest its cash in highly liquid, lower risk short-term interest-bearing investments with maturities of 120 days or less at the original date of acquisition,
selected with regards to the expected timing of expenditures from continuing operations.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">Upon completion of the Transaction, the Company adopted a new investment policy. Going forward, the Company must invest its funds in investments with a minimum credit rating at the time of purchase of R-1 (high) from the Dominion
Bond Rating Service (&#147;DBRS&#148;) or an equivalent rating from Standard &amp; Poor, and Moody&#146;s. At all times, more than 50% of the aggregate amount of permitted investments must be invested in treasury bills, bonds, notes and other
indebtedness of Canada or the Provinces of British Columbia, Alberta and Ontario. All investments must have a maximum term to maturity of six months and the average term will generally range from seven days to 90 days. Under the new policy, the
Company is no longer permitted to invest in asset backed commercial paper (&#147;ABCP&#148;) (Note 6) or auction rate securities (&#147;ARS&#148;).</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD>
<P align="justify">The Company has long-term note indentures (Note 8) that contain a 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.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 34</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_37></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Financial instruments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(b)</I> </TD>
    <TD>
      <P align=justify><I>Credit risk</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Credit risk is the risk of an unexpected loss if a party
      to its financial instrument fails to meet its contractual
    obligations.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;s financial assets are primarily composed of
      cash and cash equivalents, investments and accounts receivable. Credit
      risk is primarily associated with trade receivables and investments;
      however it also arises on cash and cash equivalents.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>To mitigate exposure to credit risk, the Company has
      established policies to limit the concentration of credit risk, to ensure
      counterparties demonstrate minimum acceptable worthiness, and to ensure
      liquidity of available funds.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company closely monitors its financial assets and
      does not have any significant concentration of credit risk. The Company
      sells its gold exclusively to large international organizations with
      strong credit ratings. The Company&#146;s revenue is comprised of gold sales to
      four customers.</P></TD></TR></TABLE>
<P align=justify style="margin-left: 10%">The historical level of customer defaults is minimal and, as a
result, the credit risk associated with gold and copper concentrate trade
receivables at December 31, 2008 is not considered to be high. </P>
<P align=justify style="margin-left: 10%">The Company&#146;s maximum exposure to credit risk at December 31,
is as follows: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash and cash equivalents </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>185,668</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>149,924 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Short-term investments </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>-</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">32,440 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Accounts receivable </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>11,232</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>18,123 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>196,900</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%">200,487 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<BR>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left colSpan=21><FONT size=2>The aging of accounts receivable at
      the reporting date was as follows: </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">0-30 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">31-60 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">61-90 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">91-120 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">Over </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>2008</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">2007 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">days
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">days
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">days
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">days
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">120
      days </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%"><B>Total</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">Total
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="7%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="7%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Corporate </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>305 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>42 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>50 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>25 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>391 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>813</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>723 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Amapari </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>-</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Peak Mines </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>3,440 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>2 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>13 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>3,455</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>17,400 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>New Afton </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">2,148 </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%"><B>2,148</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="7%">- </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Cerro San Pedro </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>2,024 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>583 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>1,669 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>280 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>260 </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff><B>4,816</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">7,917
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">625
</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">1,721
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">305
</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">664
</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="7%"><B>11,232</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%">18,123
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<P align=justify style="margin-left: 10%">A significant portion of the Company&#146;s cash and cash
equivalents are held in large Canadian financial institutions. Short term
investments (including those presented as part of cash and cash equivalents) are
composed of financial instruments issued by Canadian banks and government with
high investment-grade ratings. </P>
<P align=justify style="margin-left: 10%">The Company employs a restrictive investment policy as detailed
in the capital risk management section (Note 14 (a)). </P>
<P align=right><font style="font-size: 8pt">Page 35</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_38></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Financial instruments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(c)</I> </TD>
    <TD>
      <P align=justify><I>Liquidity risk</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>Liquidity risk is the risk that the Company will not be
      able to meet its financial obligations as they fall due. The Company
      manages liquidity risk through the management of its capital structure and
      financial leverage as outlined in Note 14 (a).</P></TD></TR></TABLE>
<P align=justify style="margin-left: 10%">The following are the contractual maturities of debt
commitments. The amounts presented represent the future undiscounted principal
and interest cash flows and therefore do not equate to the carrying amounts on
the consolidated balance sheet.</P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>Less than </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>After </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><B>2008</B> </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>2007 </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#ffffff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff>1 year </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff>1-3 years </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff>4-5 years </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff>5 years </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><B>Total</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff>Total </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>&nbsp; </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>$</TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>$</TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>$</TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>$</TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><B>$</B></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>&nbsp; </TD>
    <TD align=right width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Accounts payable and accrued liabilities
</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>41,382 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>41,382</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>22,835 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff>Short-term borrowings </TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>7,193 </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>- </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>- </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>- </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><B>7,193</B> </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>- </TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Long-term debt </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>238,447 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff><B>238,447</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">Interest payable on long-term debt </TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">21,599 </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">43,198 </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">43,198 </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">79,659 </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1"><B>187,654</B> </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">- </TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left
      bgColor=#e6efff>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="7%"
    bgColor=#e6efff>70,174 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="7%"
    bgColor=#e6efff>43,198 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="7%"
    bgColor=#e6efff>43,198 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="7%"
    bgColor=#e6efff>318,106 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="7%"
    bgColor=#e6efff><B>474,676</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="7%"
    bgColor=#e6efff>22,835 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
</div>
<P align=justify style="margin-left: 10%">In the opinion of management, the working capital of $189
million at December 31, 2008, together with cash flows from operations, are
sufficient to support the Company&#146;s normal operating requirements through its
current reporting period. However, taking into consideration the Company&#146;s
current cash position, volatile equity markets, global uncertainty in the
capital markets and increasing cost pressures, the Company is continuing to
review expenditures in order to ensure adequate liquidity and flexibility to
support its growth strategy while maintaining production levels at its current
operations. </P>
<P align=justify style="margin-left: 10%">The Company believes that external financing (which may include
bank borrowings and future debt and equity offerings) will be required to
complete its major development projects; however, these development projects are
not likely to commence full construction until the second half of 2010 at the
earliest. Continuing low copper prices may necessitate the deferral of capital
expenditures which may impact production from mining operations. In addition,
the Company may need external financing to repay its long-term debt in 2017.
</P>
<P align=right><font style="font-size: 8pt">Page 36</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_39></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD colSpan=3>
      <P align=justify><B>Financial instruments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(d)</I> </TD>
    <TD colSpan=2>
      <P align=justify><I>Currency risk</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>The Company operates in Australia, Brazil, Canada, Chile,
      Mexico and the United States. As a result, the Company has foreign
      currency exposure with respect to items denominated in foreign currencies.
      The three main types of foreign exchange risk of the Company can be
      categorized as follows:</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(i) </TD>
    <TD>
      <P align=justify>Transaction exposure</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;s operations sell and incur costs in
      different currencies. This creates exposure at the operational level,
      which may affect the Company&#146;s profitability as exchange rates fluctuate.
      The Company has not hedged its exposure to currency
fluctuations.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(ii) </TD>
    <TD>
      <P align=justify>Translation exposure</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD>
      <P align=justify>The Company&#146;s functional and reporting currency is U.S.
      dollars. The Company&#146;s operations translate their operating results from
      its host currency to U.S. dollars. Therefore, exchange rate movements in
      the U.S. dollar, Brazilian real, Mexican peso, Australian dollar and
      Canadian dollar can have a significant impact on the Company&#146;s
      consolidated operating results. Some of the Company&#146;s earnings translation
      exposure is offset by interest on foreign currency denominated loans and
      debt.</P></TD></TR></TABLE>
<P align=justify style="margin-left: 15%">A 10% strengthening (weakening) of the U.S. dollar against the
following currencies would have decreased (increased) the Company&#146;s net loss
from these financial instruments by the amounts shown below.</P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="85%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Canadian dollar </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>14,226</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>66 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Australian dollar </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>1,673</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,736 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Mexican peso </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>7,580</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>- </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Brazilian real </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>2,929</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">1,877 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff>Chilean peso </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff><B>6,594</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>- </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>33,002</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">4,679
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 37</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_40></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD colSpan=3>
      <P align=justify><B>Financial instruments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%"><I>(d)</I> </TD>
    <TD colspan="2">
      <P align=justify><I>Currency risk (continued)</I></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="5%">
      <P align=justify>(iv) </P></TD>
    <TD>
      Exposure to currency risk</TD></TR></TABLE>
<P align=justify style="margin-left: 15%">The Company is exposed to currency risk through the following
assets and liabilities denominated in currencies other than the U.S. dollar:
cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities and short-term and long-term debt. The currencies of the Company&#146;s
financial instruments and other foreign currency denominated liabilities, based
on notional amounts, were as follows: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="85%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%"><B>2008</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>Canadian</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>Australian</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>Mexican</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>Brazilian</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>Chilean</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4"><B>dollar</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4"><B>dollar</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4"><B>peso</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4"><B>real</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4"><B>peso</B> </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Cash and cash equivalents </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>88,977</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>15,213</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>531</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>3,655</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left>ABCP </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>77,017</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>-</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Accounts receivable </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>2,667</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>5,228</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left>Accounts payable and accruals </TD>
    <TD align=right width="10%"><B>(14,414)</B> </TD>
    <TD align=right width="10%"><B>(7,980)</B> </TD>
    <TD align=right width="10%"><B>(3,028)</B> </TD>
    <TD align=right width="10%"><B>(12,756)</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>-</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Future income tax liabilities </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(72,375)</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(18,518)</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(75,020)</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(65,939)</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left>ARO </TD>
    <TD align=right width="10%"><B>(182)</B> </TD>
    <TD align=right width="10%"><B>(5,449)</B> </TD>
    <TD align=right width="10%"><B>(3,270)</B> </TD>
    <TD align=right width="10%"><B>(13,000)</B> </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4"><B>-</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Short-term and long-term debt </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(223,951)</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(238)</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff><B>(7,193)</B> </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4"><B>-</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">Gross balance sheet exposure </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><B>(142,261)</B> </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><B>(16,734)</B> </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><B>(75,797)</B> </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><B>(29,294)</B> </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><B>(65,939)</B> </TD></TR>
  <TR>
    <TD style="border-top-style: solid; border-top-width: 1">&nbsp; </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1">
    <p style="margin-right: 4">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">
    <p style="margin-right: 4">2007
    </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">Canadian </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">Australian </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">Mexican </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">Brazilian </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">Chilean </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4">dollar </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="10%">
    <p style="margin-right: 4">dollar </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">
    <p style="margin-right: 4">peso
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">
    <p style="margin-right: 4">real
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%">
    <p style="margin-right: 4">peso
    </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>Cash and cash equivalents </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">2,804 </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">8,988 </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">2,120 </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Accounts receivable </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">149 </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">10,806 </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left>Accounts payable and accruals </TD>
    <TD align=right width="10%">(2,291) </TD>
    <TD align=right width="10%">(8,139) </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%">(10,894) </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Future income tax liabilities </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff>(21,683) </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff>(7,135) </TD>
    <TD align=right width="10%" bgColor=#e6efff>
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left>ARO </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%">(6,530) </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%">(13,670) </TD>
    <TD align=right width="10%">
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">Short-term and long-term debt </TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">Gross balance sheet exposure </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">662 </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">(27,364) </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">(18,773) </TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-right: 4">- </TD></TR></TABLE>
</div>
<P align=right><font style="font-size: 8pt">Page 38</font></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>



<A name="page_41"></A>

<P align="justify">
<B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31, 2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except share and per share amounts)</P>
<TABLE BCLLIST style="font-size:10pt;border-color:black;border-collapse:collapse;" cellpadding="0" cellspacing="0" width="100%" border="0">
<TR>
	<TD width=5% valign=top>
<B>14.</B> 	</TD>
	<TD colspan=3>
<P align="justify"><B>Financial instruments (continued)</B></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(e)</I> 	</TD>
	<TD colspan=2>
<P align="justify"><I>Interest rate risk</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">Interest rate risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">The Company is exposed to interest rate risk on its outstanding borrowings and short- term investments. In particular, the Company is exposed to interest rate changes on those ABCP investments that are expected to pay interest.
Interest is proposed to be based on the Canadian bankers&#146; acceptance rate which may fluctuate. A 100 basis points change in the bankers&#146; acceptance rate would result in an annual difference of approximately &#36;0.4 million in the interest
income to the Company. The Company has not entered into any derivative contracts to manage this risk.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">The Company follows the policy of issuing fixed interest rate debt to avoid future fluctuations in its debt service costs.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD>	<TD width=5% valign=top>
<I>(f)</I> 	</TD>
	<TD colspan=2>
<P align="justify"><I>Commodity price risk</I></P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">The Company&#146;s earnings and cash flows are subject to price risk due to fluctuations in the market price of gold, silver and copper. World gold prices have historically fluctuated widely. World gold prices are affected by
numerous factors beyond our control, including:</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">the strength of the U.S. economy and the economies of other industrialized and developing nations;</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">global or regional political or economic crises;</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">the relative strength of the U.S. dollar and other currencies;</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">expectations with respect to the rate of inflation;</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">interest rates;</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">purchases and sales of gold by central banks and other holders;</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">demand for jewelry containing gold; and</P>
	</TD>
</TR>
<TR>
<TD width=5%></TD><TD width=5%></TD>	<TD width=5% valign=top>
<LI>&nbsp;</LI> 	</TD>
	<TD>
<P align="justify">investment activity, including speculation, in gold as a commodity.</P>
	</TD>
</TR>
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">In 2008, the Company&#146;s revenues and cash flows were negatively impacted by the declining copper prices. There is a time lag between the time of shipment for copper and final pricing and changes in copper pricing can
significantly impact the Company&#146;s revenue and working capital position. As of December 31, 2008, working capital includes copper concentrate receivables totalling 8.1 million pounds. A &#36;0.10 change in copper price would have an impact of
&#36;0.8 million on the Company&#146;s working capital position.</P>
	</TD>
</TR>
<TR><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR><TR>
<TD width=5%></TD><TD width=5%></TD>	<TD colspan=2>
<P align="justify">The Company is also subject to price risk for fluctuations in the cost of energy, principally electricity and purchased petroleum products. The Company&#146;s production costs are also affected by the prices of commodities it
consumes or uses in its operations, such as lime, reagents and explosives. The prices of such commodities are influenced by supply and demand trends affecting the mining industry in general and other factors outside the Company&#146;s control. The
Company has not entered into any hedging activities to mitigate these price risks.</P>
	</TD>
</TR>
</TABLE>
<P align="right">
<font style="font-size: 8pt">Page 39</font></P>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<A name=page_42></A>
<P align=justify><B><font size="5">New Gold Inc.</font></B><font size="5"><BR>
</font><font size="4">Notes to the consolidated financial statements December 31,
2008<br>
</font>(Tabular amounts expressed in thousands of U.S. dollars, except
share and per share amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>14.</B> </TD>
    <TD colspan="2">
      <P align=justify><B>Financial instruments (continued)</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD width="5%">
      <P align=justify><I>(f) </I></P></TD>
    <TD>
      <I>Commodity price risk (continued)</I></TD></TR></TABLE>
<P align=justify style="margin-left: 10%">A 10% change in commodity prices would impact the Company&#146;s net
earnings as follows: </P>
<div align="right">
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="90%" border=0>

  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="12%">&nbsp; </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">Thirteen </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>Year ended</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">months ended </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>December 31,</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">December 31, </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2008</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2007
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>$</B></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">$</TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="12%">&nbsp; </TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Gold price </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff><B>16,322</B> </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff>11,203 </TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Copper price </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%"><B>969</B> </TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="12%">2,604 </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR></TABLE>
</div>
<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><B>15.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Commitments and contingencies</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(a) </TD>
    <TD>
      <P align=justify>The Company has entered into a number of contractual
      commitments related to equipment orders to purchase long lead items or
      critical pieces of mining equipment related to the New Afton project. At
      December 31, 2008, these commitments totalled $9.4 million and are
      expected to fall due over the next 12 months.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(b) </TD>
    <TD>
      <P align=justify>The Company has entered into a number of contractual
      commitments related to equipment orders to purchase long lead items or
      critical pieces of mining equipment at its mines. At December 31, 2008,
      these commitments totalled $12.5 million and are expected to fall due over
      the next 12 months.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(c) </TD>
    <TD>
      <P align=justify>The Company has received notice that legal claims in the
      amount of approximately $46 million have been filed in Brazilian courts
      against the Company&#146;s subsidiary, Minera&#231;&#227;o Pedra Branca do Amapari Ltda
      (&#147;MPBA&#148;). The claims allege that MPBA has adversely impacted the quality
      of William Creek causing economic loss and health concerns. The Company
      believes that these claims are unfounded and intends to vigorously defend
      against them. Accordingly, the Company has not made an accrual for this
      claim.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD vAlign=top width="5%">(d) </TD>
    <TD>
      <P align=justify>The Company is, from time to time, involved in various
      claims, legal proceedings and complaints arising in the ordinary course of
      business. The Company cannot reasonably predict the likelihood or outcome
      of these actions. The Company does not believe that adverse decisions in
      any other pending or threatened proceedings related to any matter, or any
      amount which may be required to be paid by reason there it, will have a
      material effect on the financial condition or future results of
      operations.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%"><B>16.</B> </TD>
    <TD colSpan=2>
      <P align=justify><B>Subsequent event</B></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%"></TD>
    <TD colSpan=2>
      <P align=justify>On March 4, 2009, the Company announced that it had
      entered into a definitive agreement to acquire all of the outstanding
      common shares of Western Goldfields Inc. (&#147;Western Goldfields&#148;). Under the
      agreement, the Company will exchange one common share and Cdn$0.0001 in
      cash for each common share of Western Goldfields (the &#147;Transaction&#148;). Upon
      completion of the Transaction, existing New Gold and Western Goldfields
      shareholders will own approximately 58% and 42% of the combined company,
      respectively, subject to approval of both companies and regulatory
      approval.</P></TD></TR></TABLE>
<P align=right><font style="font-size: 8pt">Page 40</font></P>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>ngd031709exh993.htm
<DESCRIPTION>EXHIBIT 99.3
<TEXT>

<HTML>
<HEAD>
   <TITLE> New Gold Inc.: Exhibit 99.3 - Prepared by TNT Filings Inc.</TITLE>
   </HEAD>

<BODY style="font-size:10pt;">

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">

<HR noshade size=5 color="black">
</div>
<A name=page_1></A>
<P align=right><b>Exhibit 99.3</b></P>
<P align=justify><B><font size="4">NEW GOLD INC.</font></B><font size="4"><BR>
</font><B>Management&#146;s Discussion and
Analysis</B><BR>Year Ended December 31, 2008 <BR>(in United States
dollars, except where noted) </P>
<P align=justify><I>This Management&#146;s Discussion and Analysis should be read in
conjunction with New Gold Inc.&#146;s audited consolidated financial statements for
the year ended December 31, 2008 and related notes thereto which have been
prepared in accordance with Canadian Generally Accepted Accounting Principles
(&#147;GAAP&#148;). This Management&#146;s Discussion and Analysis contains &#147;forward-looking
statements&#148; that are subject to risk factors set out in a cautionary note
contained herein. The reader is cautioned not to place undue reliance on
forward-looking statements. All figures are in United States dollars, tabular
amounts are in thousands, unless otherwise noted. This Management&#146;s Discussion
and Analysis has been prepared as of March 13, 2009. Additional information
relating to the Company is available on SEDAR at
<U>www.sedar.com</U>.</I><I></I></P>
<P align=justify>Further to the recent business combination of New Gold Inc.
(&#147;NGI&#148;), Metallica Resources Inc. (&#147;Metallica&#148;) and Peak Gold Ltd. (&#147;Peak Gold&#148;)
on June 30, 2008, audited consolidated financial statements of the newly formed
company (&#147;New Gold&#148; or the &#147;Company&#148;) for the year ended December 31, 2008 are
presented on the basis that Peak Gold is the acquirer for accounting purposes.
Following completion of the transaction, Peak Gold is now known as New Gold Inc.
</P>
<P align=justify><B>2008 Financial / Operation Highlights </B></P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>On June 30, 2008, the business combination between New Gold, Metallica and
  Peak Gold closed <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Gold production of 233,103 ounces
  <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Gold sales of 237,589 ounces <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Total cash cost of $569 per ounce (net of by-product sales)
  <SUP>(1) <br>
&nbsp;</SUP></b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Net Loss of $102.7 million <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>The Company has written down its investment in Amapari by $156.9 million,
  net of tax recoveries, to $10.6 million <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Decision to slow development of the New Afton Project
  <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Completion of El Morro Feasibility study and permitting process started
  <br>
&nbsp;</b><LI>
  <p style="margin-top: 0; margin-bottom: 0"><b>Successful ramp-up of Cerro San Pedro in its first full year of production
  </b>
  </LI></UL>
<P style="MARGIN-LEFT: 5%" align=justify>(1) &#147;Total cash cost&#148; figures are
calculated in accordance with a standard developed by The Gold Institute, which
was a worldwide association of suppliers of gold and gold products and included
leading North American gold producers. The Gold Institute ceased operations in
2002, but the standard is the accepted standard of reporting cash cost of
production in North America. Adoption of the standard is voluntary and the cost
measures presented may not be comparable to other similarly titled measures of
other companies. The Company reports total cash cost on a sales basis. Total
cash cost includes mine site operating costs such as mining, processing,
administration, royalties and production taxes, but is exclusive of
amortization, reclamation, capital and exploration costs and net of by-product
sales. Total cash cost is then divided by ounces sold to arrive at the total
cash cost. The measure, along with sales, is considered to be a key indicator of
a company&#146;s ability to generate operating earnings and cash flow from its mining
operations. This data is furnished to provide additional information and is a
non-GAAP measure. It should not be considered in isolation as a substitute for
measures of performance prepared in accordance with GAAP and is not necessarily
indicative of operating costs presented under GAAP. </P>
<P align=center>1 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_2></A>
<P align=justify><I><B><font size="2">Background </font> </B></I></P>
<P align=justify>New Gold is an intermediate gold producer with a portfolio of
global assets in Mexico, Canada, Australia, Brazil, Chile and the United States
(Alaska). The Company&#146;s operating assets consist of the Cerro San Pedro (&#147;CSP&#148;)
gold-silver mine in Mexico (the &#147;CSP Mine&#148;), the Peak gold-copper mine (&#147;Peak
Mines&#148;) in Australia and the Amapari gold mine in Brazil (the &#147;Amapari Mine&#148;).
Significant development projects include the New Afton copper-gold project in
Canada (the &#147;New Afton Project&#148;) and a 30% interest in the El Morro copper-gold
project in Chile (the El Morro Project&#148;). New Gold has a clear vision of
becoming a million ounce gold producer, with a lower than industry average cash
cost per ounce by 2012. New Gold will achieve this vision through:</P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 0">Delivering on operational targets (safety, cost, production and,
  environment and social responsibility); <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Maintaining a strong financial position;
  <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Internal growth through project development and continuous improvement of
  our existing operations; and <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">External growth through continued consolidation of junior gold producers.
  </LI></UL>
<P align=justify>New Gold is working towards maximizing shareholder value
through diversified production, maintaining a reduced risk profile and enhancing
growth potential. The board of directors, management and the employees of New
Gold are committed to achieving this in a socially responsible and sustainable
manner. </P>
<P align=justify><I><B><font size="2">Corporate Developments </font> </B></I></P>
<P align=justify><I><B>Business Combination </B></I></P>
<P align=justify>On June 30, 2008 NGI, Metallica and Peak Gold completed a
business combination and asset acquisition (the &#147;Transaction&#148;) to form New Gold.
In accordance with the provisions of the Canadian Institute of Chartered
Accountants (&#147;CICA&#148;) Handbook Section 1581, Business Combinations, Peak Gold has
been identified as the acquirer for accounting purposes. As such, this
Management&#146;s Discussion and Analysis is a continuation of the operations of Peak
Gold, with the comparative information being that of Peak Gold. References to
NGI are to the pre-transaction corporate entity whereas a reference to New Gold
refers to the post-transaction consolidated entity. </P>
<P align=justify>Under terms of the Transaction, shareholders of Peak Gold
received 0.1 shares of New Gold common shares and nominal cash consideration for
each common share of Peak Gold. The Transaction has been accounted for as a
purchase of assets and assumption of liabilities of NGI by Peak Gold.
Shareholders of Metallica received 0.9 shares of New Gold common shares and
nominal cash consideration for each common share of Metallica. For accounting
purposes the acquisition of Metallica has been accounted for as a purchase
transaction. Refer to Note 4 of the Company&#146;s audited consolidated financial
statements for the year ended December 31, 2008 for further information on the
Transaction.</P>
<P align=justify>The Transaction provides the Company with an improved
production profile through the diversification of producing assets and increased
reserves and resources, and it broadens growth potential with an inventory of
development and exploration stage assets.</P>
<P align=center>2 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_3></A>
<P align=justify><I><B>Investment in Amapari </B></I></P>
<P align=justify>In the third quarter of 2008, the Company reviewed the carrying
value of its investment in Amapari and concluded that it was impaired. Based on
results from the 2007/2008 drill program, it was determined that heap leachable
material will be exhausted in 2009. As a result of the limited mine life for the
oxides and unproven economic viability of the identified sulphide resources,
management wrote down its investment in Amapari by $156.9 million, net of tax
recoveries, to a value of $10.6 million. </P>
<P align=justify>Subsequent to year-end, the Company placed Amapari on temporary
care and maintenance. The Company determined that it would be more
cost-effective to process the remaining oxide ore with the underlying sulphide
resource in a new process facility. The leaching of stacked material is expected
to continue until it is no longer economic to do so. All environmental
monitoring and ongoing exploration remediation programs will continue during
this period and beyond, as will ongoing exploration programs on the Company&#146;s
concessions at Amapari. The Company is currently evaluating the results of a
Preliminary Economic Assessment (&#147;PEA&#148;) to exploit the resource with a
conventional crush/grind/carbon-in-leach (&#147;CIL&#148;) mill. </P>
<P align=justify><I><B>New Afton Project Development Schedule </B></I></P>
<P align=justify>On November 12, 2008, the Company announced that due to the
volatility and uncertainty of the markets, and the Company&#146;s cash position, and
the funding requirements for the fast track construction of the New Afton
Project, that the Company had decided to slow development of the project. </P>
<P align=justify>Under the revised development plan, surface construction will
be shut down while development of the underground workings will continue at a
reduced rate to gain access to the bottom of the ore body. The revised schedule
projects a cash requirement of approximately $78.5 million in 2009, as compared
to the previous fast track schedule which had a cash requirement of $286.0
million. Under the original fast track schedule operations were to commence in
late 2009, ramping up to achieve full production in the second quarter of 2011.
Under the revised plan, surface construction will resume at the end of 2010 with
full production achieved in the second half of 2012.</P>
<P align=center>3 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_4></A>
<P align=justify><B><I>Selected Quarterly Financial Information
<BR></I></B>(US dollars in thousands, except per share amounts and per ounce
amounts) </P>
<TABLE
style="FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse"
cellSpacing=0 cellPadding=0 width="100%" border=0 bordercolor="#000000">

  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="452" colspan="10">
    <p align="center"><FONT size=2>&nbsp; <B>Three Months Ended
      </B><SUP><B>(1</B></SUP></FONT><SUP><B>)</B></SUP> </TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="10">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2><B>Four</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="354" colSpan=8>
    <p align="center"><FONT size=2><B>Three Months Ended </B><SUP><B>(1</B></SUP></FONT><SUP><B>)</B></SUP> </TD>
    </TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="10">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2><B>Months</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="10">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2><B>Ended</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR>
    <TD width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="10">&nbsp;</TD>
    <TD width="88"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2><B>Q1</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2><B>Q2</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2><B>Q3</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>Q4</B> </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2><B>Q1</B> </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2><B>Q2</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2><B>Q3</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2><B>Q4</B> </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="265"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86"><FONT
      size=2><B>2008</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86"><FONT
      size=2><B>2008</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86"><FONT
      size=2><B>2008</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86" bgcolor="#E6E6E6"><FONT
      size=2><B>2008</B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left
      width="23" bgcolor="#E6E6E6"><SUP><B>(5)</B></SUP> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
    width="10">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="88"><FONT
      size=2><B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left
      width="23"><SUP><B>(3)</B></SUP> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86"><FONT
      size=2><B>2007</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86"><FONT
      size=2><B>2007</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="24">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="12">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="86"><FONT
      size=2><B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      width="24"><SUP><B>(4)</B></SUP> </TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Revenues </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$56,221 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$39,497 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$63,384 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$59,033 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$39,442 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$44,663 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$46,979 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Gold produced (ounces) </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>43,300 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>42,052 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>68,801 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>78,950 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>Nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>42,500 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>53,900 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>53,430 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Gold sales (ounces) </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>51,700 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>40,540 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>67,156 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>78,194 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>Nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>48,000 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>55,000 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>52,351 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Average realized price ($/ounce) </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$933 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$898 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$870 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$792 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$662 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$697 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$793 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR>
    <TD width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="86" bgcolor="#E6E6E6"><FONT size=2><B>&nbsp; </B></FONT></TD>
    <TD width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD width="88"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Depreciation and depletion </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($6,404</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($7,657</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($9,666</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>($9,234</B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">) </TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($9,481</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($13,258</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($3,766</FONT></TD>
    <TD align=left width="24">) </TD></TR>
  <TR>
    <TD width="265"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="86" bgcolor="#E6E6E6"><FONT size=2><B>&nbsp; </B></FONT></TD>
    <TD width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD width="88"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD>
    <TD width="12">&nbsp;</TD>
    <TD width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Corporate administration </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$4,027 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$3,196 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$8,334 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$7,472 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$67 </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$5,290 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$2,814 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$5,122 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Earnings (loss) from operations </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$13,479 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($5,895</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($167,588</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>($21,287</B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">) </TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>($67</FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">) </TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($1,525</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$2,612 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$13,090 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Interest and other income </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,967 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,355 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,123 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$924 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$14 </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,651 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,250 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,198 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Net earnings (loss) </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$9,790 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($4,751</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($148,852</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$41,135 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>($54</FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">) </TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($1,289</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,180 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$14,789 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Earnings (loss) per share: </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="86" bgcolor="#E6E6E6"><FONT size=2><B>&nbsp; </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=left width="88"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=left width="86"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center width="265">
    <p align="left"><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$0.01 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($0.05</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($0.70</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$0.19 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$0.02 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center width="265">
    <p align="left"><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Diluted </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$0.01 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($0.05</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($0.70</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$0.19 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$0.02 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Cash flow from (to) operating activities </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$18,394 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($2,987</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>($10,459</FONT></TD>
    <TD align=left width="24">) </TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$19,737 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>($3</FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">) </TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$5,856 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$7,823 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$12,944 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Total cash costs (per gold ounce) <SUP>(2)</SUP> </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$427 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$742 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$566 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$576 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$343 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$303 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$398 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Cash and cash equivalents </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$197,636 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$319,179 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$251,131 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$185,668 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$643 </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$77,388 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$77,111 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$149,924 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Short term investments </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$&nbsp;nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$nil </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$1,110 </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$32,440 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Investments </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$91,193 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$87,645 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$77,016 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="265"><FONT size=2>Total assets </FONT></TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$590,691 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$2,166,962 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$1,979,246 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="86" bgcolor="#E6E6E6"><FONT size=2><B>$1,957,700 </B></FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="10" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="88"><FONT size=2>$nil </FONT></TD>
    <TD align=left width="23" style="border-right-style: solid; border-right-width: 1">&nbsp;</TD>
    <TD align=left width="12" style="border-left-style: solid; border-left-width: 1">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>&nbsp;$nil </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$456,912 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD>
    <TD align=left width="12">&nbsp;</TD>
    <TD align=right width="86"><FONT size=2>$572,398 </FONT></TD>
    <TD align=left width="24">&nbsp;</TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>Results for CSP and New Afton are included from the
      period of June 30, 2008 to December 31, 2008.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(2) </TD>
    <TD>
      <P align=justify>The calculation of total cash cost per ounce of gold for
      Peak Mines is net of by-product copper sales revenue. The calculation of
      total cash cost per ounce of gold for CSP is net of by-product silver
      sales revenue.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(3) </TD>
    <TD>
      <P align=justify>The Company changed its fiscal year end from November 30
      to December 31, commencing with the thirteen month period ending December
      31, 2007. As a result, the quarter ended March 31, 2007 is a four month
      period.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(4) </TD>
    <TD>
      <P align=justify>In the fourth quarter of 2007, the Company finalized the
      purchase price allocation of the assets and liabilities acquired in the
      acquisition of the Peak Mines and the Amapari Mine. The result of the
      fourth quarter includes adjustments made upon completion of the allocation
      of the purchase consideration of the Peak Mines and the Amapari
    Mine.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(5) </TD>
    <TD>
      <P align=justify>In the fourth quarter of 2008, the Company finalized the
      purchase price allocation of the assets and liabilities acquired in the
      acquisition of NGI and Metallica. The result of the fourth quarter
      includes adjustments made upon completion of the allocation of the
      purchase consideration of NGI and Metallica.</P></TD></TR></TABLE>
<P align=center>4 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_5></A>
<P align=justify><B><I>Overview of the fourth quarter 2008 financial
results</I></B><B><I> </I></B></P>
<P align=justify>Net earnings for the fourth quarter of 2008 were $41.1 million,
compared to net earnings of $14.8 million for the fourth quarter of 2007. The
increase is mainly attributed to a $54.9 million gain on foreign exchange in the
fourth quarter of 2008. Foreign exchange gains and losses arise mainly from
Canadian dollar denominated monetary items, revaluation of long-term debt and
foreign future income tax liabilities. Loss from operations was $21.3 million
for the fourth quarter of 2008 compared to earnings from operations of $13.1
million for the same period last year, which is mainly attributable to a 97.6%
increase in operating expenses at the mine sites related to increases in
consumables and maintenance and the inclusion of CSP operations in 2008. Total
cash cost was $576 per ounce for the fourth quarter of 2008 compared to $398 in
the fourth quarter of 2007. The increase can be attributed to higher operating
costs at the Amapari mine and lower copper concentrate sales (by-product
credits) at Peak Mines compared to the same period last year and the impact of
falling copper prices on revenues not yet received.<B> </B></P>
<P align=justify><B><I>Overview of the third quarter 2008 financial
results</I></B><B><I> </I></B></P>
<P align=justify>Net loss for the third quarter of 2008 was $148.9 million,
which included an impairment charge of $156.9 million (net of tax recovery of
$8.4 million) and $2.5 million in stock-based compensation. Net earnings were
$8.0 million (excluding the impairment charge of $156.9 million) compared to net
earnings of $1.2 million for the third quarter of 2007. The increase is mainly
attributable to a $15.5 million gain on foreign exchange in the third quarter of
2008 compared to $1.1 million foreign exchange loss in the third quarter of
2007. Foreign exchange gains arise mainly from Canadian dollar denominated
monetary items and revaluation of foreign future income tax liabilities. Loss
from operations was $167.6 million compared to earnings from operations of $2.6
million for the same period last year. Total cash cost was $566 per ounce for
the third quarter of 2008 compared to $303 in the third quarter of 2007. The
increase can be attributed to higher operating costs at the Amapari mine and
lower copper concentrate sales (by-product credits) at Peak Mines compared to
the same period last year and the impact of falling copper prices on copper
revenues not yet received. </P>
<P align=justify><B><I>Overview of the second quarter 2008 financial results
</I></B></P>
<P align=justify>Net loss for the second quarter of 2008 was $4.8 million, which
includes $0.6 million related to stock-based compensation expense (a non-cash
charge). This was a $3.5 million increase in net loss compared to the second
quarter of 2007. Combinations of lower gold sales and lower than anticipated
grades were contributing factors to the increased loss for the second quarter of
2008. Total cash cost was $742 per ounce for the second quarter of 2008, which
was negatively impacted by the appreciation of the Australian and Brazilian
currencies against the US dollar, lower gold sales and a lower production as
compared to previous quarters.</P>
<P align=justify><B><I>Overview of the first quarter 2008 financial results
</I></B></P>
<P align=justify>Prior to the acquisition of the Peak Mines and the Amapari
Mine, the Company did not generate revenues from operations and the Company had
minimal transactions. Due to the limited activity of the Company prior to the
acquisition of the mines, the Company has not presented a narrative comparative
analysis for results prior to this acquisition. Net earnings for the first
quarter of 2008 were $9.8 million, which includes $1.0 million foreign exchange
loss arising from the revaluation of future income tax liabilities and $2.6
million related to stock-based compensation (a non-cash charge). Total cash
costs were $427 per ounce for the first quarter of 2008, which were negatively
impacted by the appreciation of the Australian and Brazilian currencies against
the US dollar and lower gold sales as compared to previous quarters. </P>
<P align=center>5 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_6></A>
<P align=justify><I><B>Summarized Annual Financial Results </B><BR></I><B>(US
dollars in thousands, except per share amounts and per ounce amounts) </B></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left>&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%" bgcolor="#E6E6E6"><B>2008</B><SUP><B>(5)</B></SUP><B> </B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      width="2%" bgcolor="#E6E6E6"><SUP><B>&nbsp;</B></SUP></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>2007</B><SUP><B>(1)</B></SUP><B><sup>(3)(6)</sup> </B></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      width="2%"><SUP><B>&nbsp;</B></SUP><B>&nbsp; </B></TD></TR>
  <TR vAlign=top>
    <TD align=left>Revenues </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$218,135 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$131,084 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Gold produced (ounces) </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">233,103 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">149,830 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Gold sold (ounces) </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">237,589 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">155,351 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Average realized gold price (per ounce) </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$863 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$721 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Depreciation and depletion </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$32,961 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$18,973 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Corporate administration <SUP>(4) </SUP></TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$23,029 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$13,295 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Earnings (loss) from operations </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">($181,290</TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$14,110 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Interest and other income </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$5,368 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$4,113 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Net earnings (loss) </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">($102,679</TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$14,613 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Earnings (loss) per share </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">($0.69</TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$0.03 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cash flow from (used) operating activities </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$24,685 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$26,620 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Total cash costs (per gold ounce) <SUP>(2) </SUP></TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$569 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$349 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Cash and cash equivalents </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$185,668 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$149,924 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Short term investments </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">- </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$32,440 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>Total assets </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="12%" bgcolor="#E6E6E6">$1,957,701 </TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="12%">$572,398 </TD>
    <TD align=left width="2%">&nbsp;</TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>Includes the Peak Mines and the Amapari Mine operating
      results from April 3, 2007 and April 27, 2007 respectively, to December
      31, 2007.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(2) </TD>
    <TD>
      <P align=justify>The calculation of total cash cost per ounce of gold for
      Peak Mines is net of by-product copper sales revenue. The calculation of
      total cash cost per ounce of gold for CSP is net of by-product silver
      sales revenue.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(3) </TD>
    <TD>
      <P align=justify>The Company changed its fiscal year end from November 30
      to December 31, commencing with the thirteen month period ending December
      31, 2007. As a result, the quarter ended March 31, 2007 is a four month
      period.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(4) </TD>
    <TD>
      <P align=justify>Includes stock based compensation.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(5) </TD>
    <TD>
      <P align=justify>Includes six months of operations for CSP.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(6) </TD>
    <TD>
      <P align=justify>In April 2006, the Company emerged from bankruptcy. The
      Company has not presented financial information for 2006 as transactions
      prior to 2007 are not deemed significant.</P></TD></TR></TABLE>
<P align=justify><I><B>Overview of the financial results </B></I></P>
<P align=justify>Net loss for the year ended 2008 was $102.7 million compared to
net earnings of $14.6 million in 2007. Net loss in 2008 is attributed to the
$156.9 million (net of tax) write-down of Amapari which was partially offset by
foreign exchange gains, net of losses, arising from the weakening of the
Australian, Brazilian, Canadian and Mexican currencies against the US dollar.
Operating cash flows were $24.7 million in 2008 compared to $26.6 million in
2007. The decrease is primarily attributable to higher operating costs at the
Amapari mine and reduced revenue from the sale of copper concentrate at Peak
Mines.</P>
<P align=justify>Gold production for the year was 233,103 ounces compared to
149,830 in 2007 with the increase due to the acquisition of CSP. Cash costs were
$569 per ounce in 2008, compared to $349 per ounce in 2007. The increase in cash
costs compared to the prior year is the result of increased costs at Amapari
and lower copper concentrate sales (by-product credits) in 2008. </P>
<P align=center>6 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_7></A>
<P align=justify><B><I>Operation Review </I></B></P>
<P align=justify><B><I>Amapari, Brazil </I></B></P>
<P align=justify>The Company&#146;s Amapari gold mine is located in the state of
Amap&#225;, Brazil approximately 130 kilometers northwest of the city of Macap&#225;. The
project property consists of a mining lease and multiple exploration
concessions, covering approximately 2,450 square kilometers of prospective
ground centering on the Company&#146;s Amapari gold mining operation. </P>
<P align=justify>(US dollars in thousands, except ounce and per ounce amounts)
</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="37%" colspan="10">
    <p align="center"><FONT size=2>&nbsp; <B>Three Months Ended
      </B>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="27%" colSpan=7>
    <p align="center"><FONT size=2>&nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<B>Three Months Ended </B></FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>Q1 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>Q2 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>Q3 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><FONT size=2><B>Q4 </B></FONT></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2><B>FY </B></FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>Q2 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>Q3 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>Q4 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%">
    <p align="right"><FONT size=2>&nbsp; FY</FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Operating Data </B></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; " align=left
    width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2><B>2008 </B></FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2008 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2008 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2008 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=left
    width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%" bgcolor="#E6E6E6"><FONT
      size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><b><FONT
      size=2>&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><FONT
      size=2>2007 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of ore mined </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>448,752 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>353,813 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>493,285 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>705,623 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>2,001,473 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>481,900 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>591,993 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>598,695 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,196,300 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of low grade </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; mined </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>177,081 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>251,042 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>260,670 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>94,916 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>783,709 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>140,000 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>162,183 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>247,485 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>668,000 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of waste </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; removed </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1,198,743 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1,491,231 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,708,792 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>2,353,250 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>7,752,016 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1,494,600 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,273,088 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,193,579 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>8,713,700 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Ratio of waste to ore </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>3.1 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>4.9 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>6.0 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>3.5 </FONT></b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>4.3 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>3.4 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>4.1 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>4.1 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>4.3 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of ore </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; processed </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>384,000 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>388,000 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>517,239 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>588,669 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>1,877,251 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>461,400 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>519,400 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>529,800 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,004,600 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average mill head </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; grade (grams/tonne) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2.35 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1.76 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1.89 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>1.97 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>1.98 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2.49 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2.41 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>3.41 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2.47 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average recovery rate </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; (%) <SUP>(1) </SUP></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>63.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>60.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>76.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>71.5% </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>68.5% </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>68.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>62.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>62.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>67.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Gold (ounces) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&#150; Produced <SUP>(2) </SUP></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>18,201 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>20,938 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>17,752 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>30,101 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>86,992 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22,700 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22,200 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>24,400 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>96,400 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&#150; Sold </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>20,453 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22,099 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>16,661 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>28,199 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>87,412 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>23,200 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22,200 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22,600 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>96,100 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average realized gold </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; price (per ounce) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>918 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>895 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>853 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$791 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$859 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$666 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$684 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$785 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$694 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Total cash costs (per </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp;&nbsp; <FONT size=2>ounce) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>650 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>968 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>882 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$568 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$748 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$539 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$491 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$583 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$515 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>Financial Data </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%" bgcolor="#E6E6E6">
    <b><FONT
      size=2>&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><b><FONT
      size=2>&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Revenues </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>18,767 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>19,775 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%">$<FONT size=2>14,213 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$22,297 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$75,052 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$15,470 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$15,190 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$17,710 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$66,688 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>(Loss) earnings from </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp; operations* </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($327</FONT></TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($7,668</FONT></TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($170,660</FONT></TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$1,602 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>($177,053</FONT></b></TD>
    <TD align=left width="2%"><b>) </b> </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($2,512</FONT></TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($1,560</FONT></TD>
    <TD align=left width="2%">) </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>3,751 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($1,021</FONT></TD>
    <TD align=left width="2%">) </TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>Gold recovery is determined when the individual leach
      pads are reclaimed and production is reconciled.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(2) </TD>
    <TD>
      <P align=justify>Tonnes of ore processed each quarter do not necessarily
      correspond to ounces produced during the quarter, as there is a time delay
      between placing tonnes on the leach pad and pouring ounces of
  gold.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD>
      &nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(*) </TD>
    <TD>
      Includes the impairment charge of $156.9 million (net of tax recoveries of
      $8.4 million) in the third quarter </TD></TR></TABLE>
<P align=center>7 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_8></A>
<P align=justify>Amapari produced 30,101 ounces of gold during the fourth
quarter of 2008, a record for the operation. Plant throughput was 588,669
tonnes, which was considerably higher than the 517,239 tonnes processed in the
third quarter. Higher throughput and gold production can be attributed to
improved equipment availability and dry weather. Cash costs of $568 per ounce
were the lowest of the year. Capital expenditures in the fourth quarter were
$1.0 million. </P>
<P align=justify>Hard transition ore, which cannot be economically mined or
processed at the existing facilities at Amapari, started to become increasingly
pervasive in the fourth quarter. </P>
<P align=justify>Amapari processed 1,877,251 tonnes of ore grading 1.98 grams
per tonne (gpt) to produce 86,992 ounces of gold during 2008. This compares with
processing 2,004,600 tonnes of ore, grading 2.47 gpt to produce 96,400 ounces of
gold in 2007. Lower plant throughput was a result of low equipment
availabilities, while lower gold production was a result of this low throughput
and lower gold grades in the mining areas. Gold recovery, at 68.5% was slightly
higher than the 67.0% recovery achieved in 2007. </P>
<P align=justify>Cash costs for 2008 averaged $748 per ounce compared to $515
per ounce for 2007. This increase is attributable to lower grade ore and higher
maintenance and consumables costs, particularly during the first half of 2008.
Capital expenditures for 2008 were $7.1 million (2007 -$3.1 million). </P>
<P align=justify>The limited mine life of the oxides and unproven economic
viability of the identified sulphide resources resulted in the Company writing
down the value of Amapari to $10.6 million in the third quarter, taking an
impairment charge of $156.9 million (net of tax recoveries of $8.4 million).
</P>
<P align=justify>Subsequent to year-end, the Company placed Amapari on temporary
care and maintenance. The Company determined that it would be more
cost-effective to process the remaining oxide ore with the underlying sulphide
resource in a new process facility. The leaching of stacked material is expected
to continue until it is no longer economic to do so. All environmental
monitoring and ongoing exploration remediation programs will continue during
this period and beyond, as will ongoing exploration programs on the Company&#146;s
concessions at Amapari. The Company is currently evaluating the results of a PEA
to exploit the resource with a conventional crush/grind/carbon-in-leach (&#147;CIL&#148;)
mill. </P>
<P align=center>8 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_9></A>
<P align=justify><B><I>Operation Review </I></B></P>
<P align=justify><B><I>Peak Mines, Australia </I></B></P>
<P align=justify>The Company&#146;s 100% owned Peak gold and copper mining operation
is located in the Cobar Mineral Field near Cobar, New South Wales, Australia.
The Peak property consists of combined mining and exploration licenses totalling
845 square kilometres of prospective ground covering the Peak operation and
mineralized extensions. </P>
<P align=justify>(US dollars in thousands, except ounce and per ounce
amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="37%" bgColor=#ffffff colspan="10">
    <p align="center"><FONT size=2>&nbsp; <B>Three Months Ended </B>&nbsp; </FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="7%" bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="37%" bgColor=#ffffff colSpan=10>
    <p align="center"><FONT
      size=2><B>Three Months Ended </B>&nbsp; </FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Q1
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Q2
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Q3
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><FONT size=2><B>Q4
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>FY
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Q2
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Q3
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Q4
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>FY
    </B></FONT></TD>
    <TD align=left width="2%" bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#ffffff><FONT size=2><B>Operating Data </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#E6E6E6>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#E6E6E6><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#E6E6E6>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2>&nbsp;<B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
    bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Tonnes of
      ore milled </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">179,087 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">186,326 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">196,633 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">206,681 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">768,727 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">132,241 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">182,835 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">188,933 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">709,230 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Average
      mill head grade </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Gold
      (grams/tonne) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">4.96 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">4.18 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">4.95 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">4.6 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">4.67 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">5.29 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">6.21 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">5.55 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">5.87 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Copper
      (%) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.70% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.46% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.67% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">0.64% </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">0.62% </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.78% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.65% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.59% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">0.65% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Average
      recovery rate </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Gold (%)
      </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">87.9% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">84.2% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">85.1% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">90.4% </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">87.0% </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">88.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">87.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">86.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">88.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Copper
      (%) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">78.9% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">64.9% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">81.1% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">84.2% </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">78.5% </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">77.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">74.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">70.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">73.0% </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Produced
      </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Gold
      (ounces) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">25,099 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">21,114 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">26,662 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">27,618 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">100,493 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">19,800 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">31,703 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">29,030 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">116,488 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Copper
      (thousands of pounds) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">2,172 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">1,237 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">2,365 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">2,474 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">8,249 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">1,748 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">1,932 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">1,746 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">7,490 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Sold
      </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Gold
      (ounces) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">31,247 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">18,441 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">24,425 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">28,815 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">102,928 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">24,800 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">32,800 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">29,751 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">118,298 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Copper
      (thousands of pounds) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">2,551 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">855 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">1,715 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">2,634 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">7,754 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">2,776 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">1,908 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">2,469 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">7,153 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Average
      realized price </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Gold
      (per ounce) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$943 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$902 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$878 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b><FONT
      color=#000000 size=2>$788 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b><FONT
      color=#000000 size=2>$877 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$672 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$707 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$799 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$694 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">&#150; Copper
      (per pound) </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$3.75 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$4.27 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$2.76 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b><FONT
      color=#000000 size=2>$1.32 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b><FONT
      color=#000000 size=2>$2.76 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$3.19 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$3.47 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$2.99 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$3.29 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Total cash
      cost per gold ounce <SUP>(1) </SUP></FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$281 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$472 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$560 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b><FONT
      color=#000000 size=2>$624 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b><FONT
      color=#000000 size=2>$477 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$160 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$176 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$258 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$243 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR>
    <TD bgColor=#ffffff><FONT size=2 color="#000000">&nbsp;
    </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff>
    <FONT
      size=2 color="#000000">&nbsp; </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#ffffff><FONT size=2 color="#000000">Financial Data
      </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#E6E6E6>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#E6E6E6><b><FONT size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#E6E6E6><b><FONT color=#000000>&nbsp;</FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><b><FONT size=2 color="#000000">&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="1%"
    bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2 color="#000000">&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="2%"
    bgColor=#ffffff><FONT color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Revenues
      </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$37,454 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$19,722 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$21,732 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b><FONT
      color=#000000 size=2>$16,890 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b><FONT
      color=#000000 size=2>$95,798 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$23,970 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$29,467 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$29,278 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$101,218 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff><FONT size=2 color="#000000">Earnings
      from operations </FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$17,144 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$2,944 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$6,018 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#E6E6E6>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#E6E6E6><b><FONT
      color=#000000 size=2>$2,489 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#E6E6E6><b><FONT
      color=#000000>&nbsp;</FONT></b></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><b><FONT
      color=#000000 size=2>$28,595 </FONT></b></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$</FONT><FONT
      size=2 color="#000000">5,876 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$</FONT><FONT
      size=2 color="#000000">6,494 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$</FONT><FONT
      size=2 color="#000000">13,416 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD>
    <TD align=right width="1%" bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT
      color=#000000 size=2>$</FONT><FONT
      size=2 color="#000000">32,711 </FONT></TD>
    <TD align=right width="2%" bgColor=#ffffff><FONT
      color=#000000>&nbsp;</FONT></TD></TR></TABLE>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD>
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>The calculation of total cash cost per ounce of gold is
      net of by-product sales revenue. If the copper sales were treated as a
      co-product, average total cash cost at Peak Mines for the three months
      ended December 31, 2008, would be $414 per ounce of gold and $0.693 per
      pound of copper compared to $390 per ounce of gold and $2.14 per pound of
      copper in the previous year.</P></TD></TR></TABLE>
<P align=center>9 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_10></A><BR>
<P align=justify>Peak Mines produced 27,618 ounces of gold and 2,474,444 pounds
of copper during the fourth quarter of 2008. Mill throughput of 206,681 tonnes
for the fourth quarter is yet another operational record and reflects consistent
underground production and increased milling capacity. Total cash costs for the
quarter were $624 per ounce sold. The high cash costs for the quarter are
primarily the result of the impact of falling copper prices on the by-product
credit. The decrease in copper price increased cash costs by approximately $291
per ounce. Capital expenditures in the fourth quarter were $7.6 million. </P>
<P align=justify>Peak Mines produced 100,493 ounces of gold and 8,249,000 pounds
of copper for the year 2008 compared to 116,488 ounces of gold and 7,490,000
pounds of copper for the year 2007. This reflects mining in zones with lower
grade gold and higher grade copper in 2008. Mill throughput of 768,727 tonnes is
a new record for Peak, exceeding the previous record of 709,230 tonnes set in
2007. Recoveries for gold (87.0%) and copper (78.5%) were consistent with
recoveries for 2007 (gold 88.0% and copper 73.0%) . </P>
<P align=justify>Cash costs for the year 2008 averaged $477 per ounce versus
$243 per ounce for 2007. Most of this year over year increase was attributable
to lower copper prices and a high Australian dollar during the first half of the
year. In Australian dollars, unit operating costs per tonne milled for 2008 were
8.0% higher than 2007, largely due to higher consumable prices. Capital
expenditures in the year 2008 were $29.4 million (2007 - $12.5 million). </P>
<P align=justify>During 2008, the Peak Mines poured their millionth ounce of
gold, completed initial development of the Chesney orebody and advanced
development into the Perseverance &#147;D&#148; orebody; zones which will provide a
significant percentage of the mine&#146;s mill feed over the coming few years. </P>
<P align=center>10 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_11></A>
<P align=justify><B><I>Operation Review </I></B></P>
<P align=justify><B><I>Cerro San Pedro, Mexico
</I></B></P>
<P align=justify>The CSP Mine is located in the state of San Luis Potos&#237; in
central Mexico approximately 20 kilometers east of the city of San Luis Potos&#237;.
The project property consists of 52 mining and exploration concessions totaling
78 square kilometers of mining and exploration concessions centering on the
historic CSP mining district. The current focus of exploration is on the
southern half of the CSP mining district along a trend of gold-silver-zinc-lead
mineralization that extends more than 2 kilometers south from the Company&#146;s
current open pit mine operation. </P>
<P align=justify>(US dollars in thousands, except ounce and per ounce
amounts)</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="37%" colspan="10">
    <p align="center"><b><FONT size=2>&nbsp; Three Months Ended
      <SUP>(1</SUP></FONT>) <FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>Q1 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>Q2 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>Q3 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>Q4 </FONT></b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>FY </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>Q4 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR>
    <TD><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><b><FONT
      size=2>Operating Data </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><b><FONT
      size=2>2008 </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><b><FONT
      size=2>2008 </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><b><FONT
      size=2>2008 </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%" bgcolor="#E6E6E6">
    <b><FONT
      size=2>2008 </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><b><FONT
      size=2>2008 </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"><b><FONT
      size=2>2007 </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of ore mined </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,276,533 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,440,293 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>2,059,429 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>2,128,235 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>8,917,449 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,290,846 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of waste removed </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>3,051,869 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>3,074,769 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>3,831,513 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>4,255,114 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>14,057,376 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,706,370 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Ratio of waste to ore </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1.34 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1.26 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>1.86 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>2.00 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1.58 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1.18 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Tonnes of ore processed </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,276,533 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>2,440,293 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>2,059,429 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>2,128,235 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>8,917,450 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>4,997,000 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average gold head grade (grams/tonne)
    </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>0.61 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>0.64 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>0.59 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>0.57 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>0.60 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>0.56 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average silver head grade (grams/tonne)
    </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>20.82 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>18.88 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>24.22 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>33.50 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>24.10 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>18.14 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average gold recovery rate (%) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>41.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>41.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>65.0% </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>54.8% </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>48.7% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>47.9% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average silver recovery rate (%) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>15.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>19.0% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>18.0% </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>12.7% </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>15.7% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22.2% </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Gold (ounces) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&#150; Produced <SUP>(2) </SUP></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>18,290 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>20,653 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>24,387 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>21,231 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>84,561 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>13,621 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&#150; Sold </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>15,922 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>22,190 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>26,070 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>21,180 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>85,362 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>13,312 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Silver (ounces) </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><b><FONT size=2>&nbsp; </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="7%" bgcolor="#E6E6E6"><b><FONT size=2>&nbsp; </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&#150; Produced <SUP>(2) </SUP></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>228,623 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>283,749 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>282,055 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>290,520 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1,084,947 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>194,539 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&#150; Sold </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>203,973 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>300,728 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>305,430 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>289,781 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>1,099,912 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>187,430 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Average realized gold price (per ounce)
    </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$933 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$897 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$874 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$799 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$872 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$790 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Total cash cost net silver credits (per
      ounce)<SUP>(3) </SUP></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$496 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$375 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$369 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$522 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$432 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$759 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>Financial Data </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><b><FONT
      size=2>&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%" bgcolor="#E6E6E6">
    <b><FONT
      size=2>&nbsp; </FONT></b></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="1%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="7%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
    width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Revenues </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$18,477 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$25,050 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$27,439 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>$19,846 </FONT>
    </b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$90,812 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$13,172 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>(Loss) Profit from operations<SUP>(4)
      </SUP></FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$7,497 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$10,523 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><b><FONT size=2>$5,618 </FONT></b></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6E6E6">&nbsp;</TD>
    <TD align=right width="7%" bgcolor="#E6E6E6"><b><FONT size=2>($18,169</FONT></b></TD>
    <TD align=left width="2%" bgcolor="#E6E6E6"><b>) </b> </TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>$5,469 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="7%"><FONT size=2>($3,224</FONT></TD>
    <TD align=left width="2%">) </TD></TR></TABLE><BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%" >&nbsp;</TD>
    <TD vAlign=top width="5%">(1) </TD>
    <TD>
      <P align=justify>Commercial production at CSP commenced on May 1, 2007;
      however, the operation was still in its ramp up stage and production
      results are not comparable and therefore have not been presented. As such,
      the comparative analysis will be presented using Q4, 2007 data.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(2) </TD>
    <TD>
      <P align=justify>Tonnes of ore processed each quarter do not necessarily
      correspond to ounces produced during the quarter, as there is a time delay
      between placing tonnes on the leach pad and pouring ounces of
  gold.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(3) </TD>
    <TD>
      <P align=justify>The calculation of total cash costs per ounce of gold is
      net of by-product sales revenue. If the silver sales were treated as a
      co-product, average total cash costs at CSP for the three months ended
      December 31, 2008, would be $563 per ounce of gold and $7.11 per ounce of
      silver.</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD vAlign=top width="5%">(4) </TD>
    <TD>
      <P align=justify>CSP operations are included in New Gold&#146;s operating
      results for the period subsequent to June 30, 2008 only. Prior quarter
      information is presented for information purposes
only.</P></TD></TR></TABLE>
<P align=justify>Gold production for the fourth quarter of 2008 decreased by
13.0% to 21,231 ounces compared to 24,387 ounces produced in the third quarter
of 2008. The decrease in production over the third quarter was due to a lower
recovery rate, which is a function of the type of material placed on the
leach pad. Silver production increased slightly during the quarter to 290,520
ounces from 282,055 ounces. </P>
<P align=center>11 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_12></A>
<P align=justify>Cash costs quarter over quarter increased by $153 per ounce of
gold. This was due to a number of factors including lower gold production, a
higher strip ratio, lower by-product silver production, lower silver prices and
higher consumables costs. Increased cash costs were offset by depreciation in
the Mexican Peso versus the US dollar. Capital expenditures in the fourth
quarter were $2.9 million. </P>
<P align=justify>Revenue for the fourth quarter was $19.8 million which was a
28.0% decrease compared to the third quarter revenue of $27.4 million. The main
driver for this decrease was the reduced sales volume; gold volume was 4,890
ounces lower and silver volume was 15,649 ounces lower. Additionally, the
average realized price of gold fell quarter over quarter from $874 to $799 per
ounce and the average realized silver price dropped from $15.24 to $10.09 per
ounce.</P>
<P align=justify>The CSP mine did not operate a full year in 2007, but it is
noteworthy that in the fourth quarter of 2008, the mine produced significantly
higher quantities of gold (21,231 ounces in 2008 compared to 13,621 ounces in
2007) and silver (290,520 ounces compared to 194,539 ounces). Cash costs per
ounce were also significantly lower ($522 per ounce in 2008 compared to $759 per
ounce in 2007) demonstrating that in 2008 the mine achieved &#147;steady-state&#148;
production. </P>
<P align=justify>Capital expenditures for the full twelve months of 2008 were
$13.2 million. Capital expenditures for six months in 2008 were $5.1 million;
construction work on two leach pads and a pilot cell accounted for over $10.0
million of this expenditure. </P>
<P align=justify>During 2008, the mine attained certification in ISO 14001:
2004, which demonstrates that the operations are operating in accordance with
environmental regulations and international standards. </P>
<P align=justify>The mine earned two important accolades in 2008. The first was
winning the &#147;Casco de Plata&#148; award which is awarded to the safest open pit
mining operations with up to 500 employees in Mexico. This exemplifies the
commitment that the Company has with regards to safety. The second award was
received in recognition of explosives management which was issued by the Orica
Company. </P>
<P align=center>12 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_13></A>
<P align=justify><I><B>Project Development Review</B></I></P>
<P align=justify><I><B>New Afton
Project</B></I></P>
<P align=justify>The New Afton Project commenced in 2008 with the transition
from feasibility study to construction phase in January 2008. At this time the
underground contractor started excavation of critical path underground
development for the conveyor decline access and the in pit portal on multiple
headings. Surface construction activities started in late February and
construction continued on a fast track schedule until the decision was announced
on November 12, 2008 to slow development activities in light of the Company&#146;s
cash position, volatile equity markets, global uncertainty in the capital
markets and increasing cost pressures. </P>
<P align=justify>Despite the decision to slow development, good progress was
made as underground heading advance during 2008 totaled 4,477 meters, including
significant work on the conveyor access and decline access drives. Two
ventilation raises were completely excavated and approximately half of a third
raise was back-reamed during 2008. Total raise excavation for the year was 911
meters.</P>
<P align=justify>Surface construction activity during 2008 consisted of three
main areas: earthworks, concrete and erection of the mill building. Concrete
pouring activities consisted of foundations and supporting structures for the
mill building, the SAG mill, the ball mill, the vertical mill and other major
components for the processing equipment and facilities. A total of 6,779 cubic
meters of concrete was placed during the year representing 52.0% of the total
required for the project. Mill building construction began in October and
continued throughout the year. The 632 tonnes of structural steel that had been
erected by year-end represents 53.0% of that required for the mill building
which is scheduled for completion in April 2009. Delivery of the long lead items
such as the SAG mill, ball mill and vertical mill will be completed by the end
of the second quarter of 2009, at which time project activities will be limited
to the underground development excavation. Overall, the New Afton Project ended
2008 on schedule at 30.0% complete. </P>
<P align=justify>The B.C. Ministry of Energy, Mines and Petroleum Resources
granted approval on September 25, 2008 for construction of the Pothook pit dam
following a review of the detailed engineering report. On November 21, 2008, the
Ministry also granted approval for construction of the tailings storage facility
dam. </P>
<P align=justify>Project costs for the six month period (July to December 2008)
were $72.8 million. The revised schedule projects total expenditure of
approximately $78.5 million in 2009, which includes approximately $19.3 million
of interest. Equipment purchases in 2009 are budgeted to be approximately $13.1
million.</P>
<P align=justify><I><B>El Morro Joint Venture</B></I></P>
<P align=justify>The Company&#146;s 30.0% owned El Morro copper-gold project is
located in Chile approximately 80 kilometers east of the city of Vallenar. It is
a development stage project managed under a shareholders agreement between
Xstrata Copper (&#147;Xstrata&#148;), owner of a 70.0% interest, and the Company. </P>
<P align=center>13 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_14></A>
<P align=justify>In January 2008 the Company, through its subsidiary Metallica,
accepted delivery of a feasibility study for which details are provided in an
independent NI 43-101 Technical Report filed on SEDAR on May 29, 2008. The
project entered into the permitting stages during 2008.<I></I></P>
<P align=justify>In November 2008 the Company, through its subsidiary Datawave
Sciences Inc., signed a formal shareholders agreement (&#147;Shareholders Agreement&#148;)
with Xstrata, Inversiones El Morro Limitada and Sociedad Contracual Minera El
Morro (&#147;El Morro&#148;) which provides for the ongoing funding and management of El
Morro.</P>
<P align=justify>In December 2008 the Company provided an election notice to
Xstrata pursuant to the Shareholders Agreement, to have Xstrata fund 70.0% of
all program funding commitments of the Company until commercial production
commences. The Company estimates its funding commitment in 2009 to be $1.6
million. </P>
<P align=justify><I><B>Exploration Review </B></I></P>
<P align=justify><I><B>Amapari Mine </B></I></P>
<P align=justify>During 2008 the Company completed a total of 28,377 meters of
diamond drilling at the Amapari Mine. The majority of this work was conducted
around and beneath the areas of active mining, and has resulted in an updated
mineral resource and reserve estimate for the project. The updated resource
estimate includes a breakdown of oxide resources into the separate categories of
saprolite and transitional material. Saprolite material is generally softer and
more easily mined and crushed, while transitional material is harder and more
difficult to mine and crush using existing process facilities. Evaluation of the
drill results and an updated resource estimate indicates the 2008 program did
not significantly add to saprolite oxide resources that could be developed into
an economic ore reserve and mine plan for the existing heap leach circuit. As a
result, the project was placed on temporary care and maintenance during the
fourth quarter of 2008. A PEA is currently in progress to exploit the remaining
oxide and sulfide resources with a conventional crush/grind/Carbon-in-leach
(CIL) mill. </P>
<P align=justify>Exploration plans for 2009 will focus on assessing the
potential economic viability of remaining oxide and sulfide resources around the
area of active mining, and on assessing the mineral potential of other less
explored areas within the greater Amapari project property holdings.</P>
<P align=justify><I><B>Cerro San Pedro Mine </B></I><I></I></P>
<P align=justify>Exploration at Cerro San Pedro Deeps commenced in July 2008 and
by year-end had resulted in the completion of 1,050 meters of diamond drilling
in an area of previous underground mining. This area is reported to have
produced approximately 235,000 ounces of gold and 20 million ounces of silver
along with significant amounts of zinc, lead and copper between 1929 and 1949. A
minimum of 5,000 meters of exploration drilling is currently forecast for the
Cerro San Pedro Deeps project during 2009. </P>
<P align=center>14 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_15></A>
<P align=justify><I><B>Peak Mines</B></I><I></I></P>
<P align=justify>During 2008 the Company completed 42,822 meters of diamond
drilling from both underground and on surface with three prime objectives:
increasing the level of confidence and resource classification for known
deposits for subsequent development into mineable reserves, testing for possible
extensions to known deposits to add to the existing mineral resource inventory
and to test the mineral potential of less explored areas. </P>
<P align=justify>Drilling at New Cobar and New Occidental totalled 10,030 and
7,714 meters respectively to replace depleted reserves in these areas. New Cobar
and New Occidental produced 57.0% of the ore feed during 2008. Drilling at
Chesney and Perseverance Zone D totalled 9,358 meters and 13,764 meters
respectively. Chesney and Perseverance Zone D are being developed in parallel to
provide future ore feed for the Peak mill. </P>
<P align=justify>Earlier stage exploration during 2008 included the completion
of 1,872 meters of drilling on new targets outside the immediate mine areas and
the commencement of a regional scale targeting initiative. The latter involves
an integrated approach that combines high resolution aeromagnetics and gravity
geophysical surveys with existing data to develop a regional scale three
dimensional model covering the entire 845 square kilometre Peak Mines property
and greater Cobar basin. Once completed in early 2009, this program is expected
to lead to the next generation of exploration targets in the Cobar Mineral
Field. </P>
<P align=justify>Exploration in 2009 will concentrate on extending the known
resources at Perseverance and Chesney, continuing near mine exploration of
satellite ore bodies around known deposits and evaluating regional targets
generated from the regional targeting initiative. </P>
<P align=justify>During 2008, the Peak Mines produced their 2 million<SUP>th
</SUP>ounce of gold and maintain a resource base of over 1 million ounces, a
resource base that is greater than the original feasibility study resource that
led to the development of the Peak Mines in 1991.</P>
<P align=justify><I><B>Rio Figueroa Project </B></I></P>
<P align=justify>The Company&#146;s Rio Figueroa project is located in Region III of
northern Chile approximately 85 kilometers east of the city of Copiap&#243;. The
project property position consists of approximately 77 square kilometers of
mining and exploration concessions covering multiple areas of prospective copper
and gold mineralization. The Company holds an option to purchase a 100% interest
in the Rio Figueroa property from SCM Potrillos SA, a private company controlled
by Chilean state mining company ENAMI. The remaining requirement for completing
the purchase of the property is a $1.85 million cash payment to ENAMI due
September 2, 2009. Upon completion of the purchase, SCM Potrillos/ENAMI will
retain a 1.5% Net Smelter Return (&#147;NSR&#148;) royalty interest against future mineral
production from the SCM Potrillos property and a 2.0% NSR interest from three
mineral concessions that are currently held by ENAMI.</P>
<P align=center>15 </P>
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<P align=justify>In June 2008, the Company entered into an agreement with
Antofagasta Minerals S.A. (&#147;Antofagasta&#148;) which provides Antofagasta an option
to earn up to a 70.0% interest in the Rio Figueroa copper-gold exploration
project in Region III, Chile. The agreement has a three-tiered structure: 1)
Antofagasta will make a one-time cash payment of $50,000 (subsequently paid) due upon signing of the agreement and make
cash option payments to the underlying landowners totaling $2.6 million through
September 2009 (this amount includes a $750,000 payment made in September 2008)
to earn an initial 30.0% interest in the project; 2) Antofagasta will then have
the option to increase its interest in the project from 30.0% to 50.0% by making
qualified exploration expenditures totaling $7.0 million during the period from
June 2008 through June 2012. At least $4.6 million of this amount must be
directed toward exploration drilling on the Rio Figueroa property; 3)
Antofagasta can further increase its interest in the project from 50.0% to 70.0%
by making a onetime cash payment to the Company of $5.0 million and delivering a
feasibility study for the project by June 2015. Antofagasta also retains the
right to act as project operator during the respective earn-in phases of the
option agreement.</P>
<P align=justify>During the third and fourth quarters of 2008, Antofagasta
completed a comprehensive review of the Rio Figueroa project to assess the
resource potential of the Cerro Matta copper-gold porphyry target and to
identify new exploration targets within the project land holdings and greater
region. A drilling program in 2009 focusing on these objectives is envisioned.
</P>
<P align=justify><I><B>Liberty Bell Project</B></I></P>
<P align=justify>The Company&#146;s 100.0% owned Liberty Bell gold project is located
approximately 110 kilometers (70 miles) southeast of Fairbanks, Alaska, USA. The
project property consists of 174 Alaska state mining claims covering
approximately 52 square kilometers (20 square miles) of prospective ground that
is held under three separate option and lease agreements with various underlying
claim owners.</P>
<P align=justify>During 2008 the Company&#146;s exploration program at Liberty Bell
involved the completion of a property-wide geophysical IP-Resistivity survey in
combination with surface mapping and geochemical sampling. This work, combined
with the results of work completed in 2007, has resulted in the delineation of
five separate areas of prospective gold mineralization that will be the focus of
more detailed exploration in 2009.</P>
<P align=justify><I><B>Alaska Peninsula Project </B></I></P>
<P align=justify>In October 2008 the Company terminated its option agreement
with Full Metal Minerals Ltd. (&#147;FMM&#148;) to earn an interest in FMM&#146;s Alaska
Peninsula Project in southwest Alaska.</P>
<P align=center>16 </P>
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<P align=justify><I><B>Review of Financial Results</B></I><I></I></P>
<P align=justify><I><B>Three months ended December 31, 2008 compared to the
three months ended December 31, 2007 </B></I></P>
<P align=justify>Net earnings amounted to $41.1 million for the three months
ended December 31, 2008, compared to net earnings of $14.8 million in the same
period last year. The increase in net earnings is mainly attributable to the
$54.9 million foreign exchange gain realized due to the appreciation in value of
the US dollar in comparison to the Australian dollar, Brazilian real, Canadian
dollar, Chilean peso and the Mexican peso and the inclusion of CSP&#146;s operating
results beginning in the third quarter of 2008. </P>
<P align=justify>In addition, net earnings for the three months ended December
31, 2008 were impacted by the following factors: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 0">Revenues for the fourth quarter of 2008 increased by 25.7% or $12.0
  million to $59.0 million compared to $47.0 million for the fourth quarter of
  2007 primarily as result addition of CSP&#146;s revenues in the fourth quarter of
  2008. Gold sales for the fourth quarter of 2008 increased by 49.4% to 78,194
  ounces compared to 52,351 ounces for the fourth quarter of 2007 which is
  mainly attributable to the addition of CSP&#146;s gold ounces sold in the fourth
  quarter of 2008. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Operating expenses increased by 97.6% to $60.8 million compared to the
  same quarter of 2007 as a result of higher operating costs at the mines
  related to increases in consumables and maintenance and the inclusion of the
  operating results for CSP. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Depreciation and depletion, which relates to mining activities, was $9.2
  million for the quarter compared to $3.8 million in the same quarter of 2007.
  Depreciation and depletion was $2.0 million for Amapari, $4.9 million for CSP
  and $2.3 million for Peak Mines. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Overall, corporate activities have increased as a result of merged
  operations from the Transaction. Corporate administration, including stock
  based compensation, was $7.5 million in the fourth quarter of 2008 compared to
  $5.1 million in the same quarter of 2007. Stock-based compensation was $1.3
  million for fourth quarter of 2008 compared to $1.0 million in the same
  quarter of 2007. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Exploration expense increased by $1.0 million in the fourth quarter of
  2008 as compared to the same period in 2007, as a result of continued
  exploration work at the Peak Mines and the Amapari Mine and other properties
  acquired in the Transaction. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Total cash costs per ounce were $576 for the period as compared to $398 in
  the same period in 2007. The increase is due to lower production at the Peak
  Mines and the Amapari Mine, higher labour costs, rising cost of consumables
  and unplanned maintenance costs offset by the weakening of the Australian
  dollar, Brazilian real, Mexican peso and Canadian dollar. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">The Company recorded a $54.9 million foreign exchange gain during the
  period as a result of the strengthening US dollar compared to the Australian
  dollar, Brazilian real, Mexican peso and Canadian dollar. The majority of the
  gain arose due to the revaluation of monetary assets and liabilities and
  future income tax liabilities recorded on the acquisition of the Amapari
  Mines, the Peak Mines, Metallica and NGI. </LI></UL>
<P align=center>17 </P>
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<P align=justify><I><B>Year ended December 31, 2008 compared to the year ended
December 31, 2007 </B></I></P>
<P align=justify>In the prior year the Company changed its fiscal year end from
November 31 to December 31. As a result, the Company&#146;s operating results as at
December 31, 2007 reflect operations for a thirteen month period. </P>
<P align=justify>The net losses of $102.7 million for the twelve months ended
December 31, 2008 were impacted by the following factors: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 0">Revenues increased by 66.4% or $87.1 million in the twelve months ended
  December 31, 2008 as compared to the same period in 2007, primarily as result
  of a full twelve months of sales for the Peak Mines and the Amapari Mine
  compared to only nine months of sales for the same period in 2007 and the
  addition of CSP&#146;s revenues for six months in 2008. Average realized gold
  prices were $863 per ounce in 2008, compared to $721 per ounce in 2007, an
  increase of 20.0%. Total ounces of gold sold increased to 237,589 (2007 &#150;
  155,351).<B> <br>
&nbsp;</B><LI>
  <p style="margin-top: 0; margin-bottom: 0">Operating expenses increased by 110.3% to $169.7 million (2007 - $80.7
  million), primarily due to a full year of production in 2008 for the Peak
  Mines and Amapari Mine and the inclusion of the CSP Mine for six months (July
  to December 2008). The thirteen months ended December 31, 2007 included
  operating results for the Peak Mines and the Amapari Mine from April 3, 2007
  and April 27, 2007, respectively to December 31, 2007. Operating expenses for
  2008 includes a full year of results for the Peak Mines and Amapari Mine. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Depreciation and depletion increased by 73.7% to $33.0 million (2007 -
  $19.0 million) primarily due to a full twelve months of commercial production
  and inclusion of the CSP Mine for six months. In addition, the finalized
  purchase price allocations of assets and liabilities acquired in the
  acquisition of Peak Mines and Amapari were not completed until the fourth
  quarter of 2007. Accordingly, the twelve months ended December 31, 2008
  included depreciation based on finalized purchase price allocations while 2007
  did not. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Corporate administration increased by 73.2% to $23.0 million (2007 - $13.3
  million) in part as a result of increased corporate activity and due to the
  business combination costs of approximately $2.5 million. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Exploration expense increased by $4.5 million in the twelve months ended
  December 31, 2008 as compared to the same period in 2007, as a result of
  continued exploration work at the Peak Mines and the Amapari Mine and other
  properties acquired in the Transaction. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Interest income, of which the majority was earned on funds received from a
  private placement in December 2007 and the cash acquired in the business
  combination which closed on June 30, 2008, increased by $1.3 million in the
  twelve months ended December 31, 2008, as compared to the prior year. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Net losses amounted to $102.7 million for the twelve months ended December
  31, 2008, compared to net earnings of $14.6 million last year. <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Higher net losses are primarily a result of the 156.9 million (net of tax)
  write-down of the Amapari Mine , partially offset by a full twelve months of
  commercial operations at the Peak Mines and the Amapari Mine and six months of
  commercial operations at CSP and significant increases in realized gold prices
  ($863 per ounce compared to $721 per ounce in the same period last year); <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Total cash costs per ounce were $569 for the twelve months ended December
  31, 2008 as compared to $349 in the same period in 2007. The increase is due
  to lower production at the Peak Mines and the Amapari Mine, higher labour
  costs, rising cost of consumables and unplanned maintenance costs at Amapari,
  and lower metal by-product prices offset by the weakening of the Australian
  dollar, Brazilian real, Mexican peso and Canadian dollar.</LI></UL>
<P align=center>18 </P>
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<P align=justify><B><I>Non-GAAP Measure &#150; Total Cash Cost per Gold Ounce
Calculation </I></B></P>
<P align=justify>The Company reports total cash cost on a sales basis. In the
gold mining industry, this is a common performance measure but does not have any
standardized meaning, and is a non-GAAP measure. The Company follows the
recommendations of the Gold Institute standard. The Company believes that, in
addition to conventional measures prepared in accordance with GAAP, certain
investors use this information to evaluate the Company&#146;s performance and ability
to generate cash flow. Accordingly, it is intended to provide additional
information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. The following table
provides a reconciliation of total cash cost per ounce to the financial
statements: </P>
<DIV>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
borderColor=#000000 cellSpacing=0 cellPadding=3 width="100%" border=1>

  <TR vAlign=top>
    <TD align=left style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>(In thousands of USD except for ounces
      </B></FONT></TD>
    <TD align=center width="13%" style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>Three months </B></FONT></TD>
    <TD align=center width="13%" style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>Three months </B></FONT></TD>
    <TD align=center width="13%" style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>Twelve Months </B></FONT></TD>
    <TD align=center width="13%" style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>Thirteen months
  </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>of gold and cash cost per ounce)
    </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>ended </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>ended </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>ended </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>ended </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>December 31, </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>December 31, </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>December 31, </B></FONT></TD>
    <TD align=center width="13%" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>December 31,
</B></FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=left><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=center
      width="13%"><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=center
      width="13%"><FONT size=2><B>2007 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=center
      width="13%"><FONT size=2><B>2008 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=center
      width="13%"><FONT size=2><B>2007 </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2><B>Operating expenses per financial statements </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$60,815 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$30,772 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$169,694 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$80,723 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT size=2><B>Treatment and refining charges on concentrate sales
      </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>1,599 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>2,189 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>5,085 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>5,479 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2><B>By-product copper and silver sales </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>1,289 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(7,681) </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(18,207) </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(16,877) </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2><B>Non-cash adjustments </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(18,662) </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(4,444) </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(21,384) </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>(36,200) </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2><B>Total cash costs </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>45,041 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>20,836 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>135,188 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>33,125 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2><B>Ounces of gold sold </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>78,194 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>52,351 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>237,589 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>155,351 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2><B>Total cash cost per ounce of gold </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$576 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$398 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$569 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$349 </FONT></TD></TR></TABLE></DIV>
<P align=center>19 </P>
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<P align=justify><I><B>Liquidity and Capital Resources</B></I></P>
<P align=justify>As of December 31, 2008, the Company held cash and cash
equivalents of $185.7 million (2007 - $149.9 million). The majority of the
increase is attributed to cash and cash equivalents of $137.7 million acquired
on closing of the Transaction, however this increase is partially offset by
development capital expenditure at the New Afton Project. On January 9, 2009,
the Company acquired Cdn$50.0 million face value of its senior secured notes for
Cdn$30.0 million from noteholders. The Company had approximately $7.0 million in
short-term borrowings at Amapari at the end of December 2008. However this has
been fully repaid subsequent to year end. The Company has no other short-term
borrowings outstanding. </P>
<P align=justify>The Company&#146;s cash and cash equivalents are invested in highly
liquid, low risk, interest-bearing investments with maturities of 90 days or
less from the original date of acquisition. The counter-parties include banks,
governments and government agencies. This does not include the asset backed
commercial paper (&#147;ABCP&#148;) discussed below. </P>
<P align=justify>As part of the Transaction, the Company acquired Cdn$170.0
million in ABCP which was previously rated R1-high by Dominion Bond Rating
Service. In mid-August 2007, a number of non-bank sponsors of ABCP, including
those with which NGI had invested, announced that they could not place ABCP due
to unfavorable conditions in the Canadian capital markets. Accordingly, there
has been no active market for the ABCP held by the Company. However, on January
16<SUP>th </SUP>2009 the Ontario Superior Court approved the restructuring of
the Third Party Asset Backed Commercial Paper market which has been frozen since
August 2007. Under the agreement the Company received new notes with a par value
of Cdn$168.9 million, the majority of which will mature in 2017. On closing of
the restructuring, the Company received a payment of approximately Cdn$5.8
million representing its share of interest earned on its ABCP to August 2008 net
of restructuring costs. The Company classifies its holdings in ABCP as long-term
investments and has estimated the fair value of ABCP at approximately $77.0
million as at December 31, 2008. There can be no assurance that this estimated
value will be realized. Subsequent adjustments, which could be material, may be
required in future reporting periods (Refer to the Risks and Uncertainties
section for more information).</P>
<P align=justify>As of December 31, 2008, the Company had working capital of
$189.2 million (December 31, 2007 - $214.1 million). During the year, the
Company&#146;s working capital was negatively impacted by the decline in copper
prices during the third and fourth quarters of 2008. As of December 31, 2008,
working capital includes copper concentrate receivables at a value of $3.5
million, which has been revalued at December 31, 2008 at $1.32 per pound. The
Company received a $22.8 million partial pre-payment in the fourth quarter of
2008 at an average price of $1.79 per pound with final pricing and settlement
expected to occur before the end of the first quarter of 2009.</P>
<P align=justify>In the opinion of management, the working capital at December
31, 2008, together with cash flows from operations, are sufficient to support
the Company&#146;s normal operating requirements on an ongoing basis. However, taking
into consideration the Company&#146;s current cash position, volatile equity markets,
global uncertainty in the capital markets and increasing cost pressures, the
Company is continually reviewing expenditures in order to ensure adequate
liquidity and flexibility to support its growth strategy while maintaining
production levels at its current operations. </P>
<P align=justify>The Company had expected to receive additional funds of
approximately Cdn$50.0 million from the exercise of 14,456,965 share purchase
warrants at Cdn$3.44 per share which expired on December 11, 2008. However, due
to the low share price and the difficult current market conditions at the expiry
date the Company did not receive material proceeds from investors. </P>
<P align=center>20 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_21></A>
<P align=justify>During the year ended December 31, 2008, the Company had
positive operating cash flows of $24.7 million and invested a total of $133.9
million in mining interests, including $7.1 million at Amapari, $29.4 million at
Peak Mines, $9.8 million at Metallica and $87.5 million at New Afton.</P>
<P align=justify><I><B>Liquidity and Capital Resources Outlook </B></I></P>
<P align=justify>New Gold&#146;s future profits and cash position are highly
dependent on metal prices, including gold, silver and copper. Copper will become
increasingly important when the New Afton and El Morro projects are completed
post-2011. In addition to these internal growth opportunities, the Company has
other prospective properties which include, but are not limited to, Rio
Figueroa, Cerro San Pedro Deeps, Amapari sulphides, the Abacus joint venture at
New Afton and Liberty Bell in Alaska. Internal growth will focus on New Afton
and El Morro; however there are other potential development properties that may
become high priorities as further exploration and assessment is completed. In
order to supplement this internal growth, the Company will consider expansion
through mergers and acquisitions. </P>
<P align=justify>Capital expenditures for 2009 are expected to be approximately
$107.0 million with $78.5 million (including capitalized interest) allocated to
continued development of the New Afton Project and $24.5 million allocated to
Peak Mines. The New Afton Project capital expenditures include approximately
$13.1 million for cancellation and completion costs for equipment orders in
place at the time of the announcement of the slowdown in November 2008. These
cancellation and completion costs should be fully paid by the end of June 2009
and the demobilization of all contractors should be complete by mid-June 2009
after contractors have completed the testing of the mills. In the second half of
2009, the monthly cash requirements at New Afton will be reduced to a minimal
level of approximately $2.7 million to Cdn$3.6 million. In addition, we
anticipate funding of $1.6 million for El Morro capital during the permitting
stage, which is net of the carried funding from Xstrata (i.e. 70% of New Gold&#146;s
30% share of project costs). </P>
<P align=justify>Management believes that the Company will need external
financing (which may include acquisitions of cash generating mines, bank
borrowings and future debt and equity offerings) to complete its major
development projects, however these development projects are not likely to
commence full construction until the second half of 2010 at the earliest.
Continuing low copper prices may necessitate the deferral of capital
expenditures which may impact future production from mining operations. In
addition, the Company will need external financing to repay its long-term debt
in 2014 and 2017. These statements are based on the current financial position
of the Company and are subject to change if any acquisitions or external growth
opportunities are realized. </P>
<P align=center>21 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_22></A>
<P align=justify><I><B>Contractual Obligations </B></I></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse"
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=left
      bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="7%"
    bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="7%"
    bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=right width="17%"
    bgColor=#ffffff colSpan=4><FONT size=2><B>Payments due by period
      </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="7%"
    bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-left-style: solid; border-left-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="7%" bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>Less than
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="7%" bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="7%" bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="7%" bgColor=#ffffff><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-right-style: solid; border-right-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
      bgColor=#ffffff><FONT size=2><B>Contractual obligations (in 000's US$)
      </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>Total </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>1 year </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>1 - 3 years </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>4 - 5 years </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>After 5 years </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-left-style: solid; border-left-width: 1"><FONT size=2><B>Long-term debt
    </B></FONT></TD>
    <TD align=left width="1%"  bgColor=#ffffff><FONT
      color=#ffffff size=2><B>$</B></FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>238,447
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff><FONT
      color=#ffffff size=2><B>$</B></FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff><FONT
      color=#ffffff size=2><B>$</B></FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff><FONT
      color=#ffffff size=2><B>$</B></FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff><FONT
      color=#ffffff size=2><B>$</B></FONT></TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>238,447
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-right-style: solid; border-right-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-left-style: solid; border-left-width: 1"><FONT size=2><B>Interest payable on
      long-term debt </B></FONT></TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>187,654
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>21,599
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>43,198
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>43,198
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>79,659
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-right-style: solid; border-right-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-left-style: solid; border-left-width: 1"><FONT size=2><B>Commitments </B></FONT></TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>25,591
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>21,916
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>3,675
      </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-right-style: solid; border-right-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#ffffff style="border-left-style: solid; border-left-width: 1"><FONT size=2><B>Other </B></FONT></TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>406
    </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>231
    </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>175
    </B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#ffffff>&nbsp;</TD>
    <TD align=right width="7%" bgColor=#ffffff><FONT size=2><B>0
</B></FONT></TD>
    <TD align=left width="2%"  bgColor=#ffffff style="border-right-style: solid; border-right-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
      bgColor=#ffffff><FONT size=2><B>Asset retirement obligations
</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>33,200 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>0 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>13,000 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>0 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>20,200 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
      bgColor=#ffffff><FONT size=2><B>Total contractual obligations
    </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff><FONT color=#ffffff
size=2><B>$</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>485,298 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff><FONT color=#ffffff
size=2><B>$</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>43,746 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff><FONT color=#ffffff
size=2><B>$</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>60,048 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff><FONT color=#ffffff
size=2><B>$</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>43,198 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="1%"
     bgColor=#ffffff><FONT color=#ffffff
size=2><B>$</B></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="7%"
    bgColor=#ffffff><FONT size=2><B>338,306 </B></FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#ffffff>&nbsp;</TD></TR></TABLE>
<P align=justify>The majority of the Company&#146;s contractual obligations consist
of long-term debt and interest payable. Long-term debt obligations comprise of
senior secured notes and subordinated convertible debentures. The senior secured
notes (&#147;Notes&#148;), which were originally issued by NGI pursuant to a note
indenture dated June 28, 2007, mature and become payable on June 28, 2017 and
bear interest at a rate of 10% per annum. At December 31, 2008 the face value of
the Notes totaled Cdn$237.0 million with remaining interest payable totaling
Cdn$229.8 million. Interest is payable in arrears in equal semi-annual
installments on January 1 and July 1 each year. Once the New Afton Project is in
commercial production the Company is obliged to offer to repay a face value
amount equal to 50.0% of excess cash flow each year, at the option of the
noteholders. The Company also has the option to prepay the Notes at a premium
ranging from 117.0% to 101.0% (decreasing based on the length of time the Notes
are outstanding). These Notes are secured on the New Afton Project assets and do
not have recourse to the other assets of New Gold. </P>
<P align=justify>Subsequent to the year-end, the Company acquired Cdn$50.0
million face value of its Notes for Cdn$30.0 million from noteholders. This will
result in reductions of principal of Cdn$50.0 million and interest of
approximately Cdn$5.0 million per year (this reduction is not reflected in the
above table). </P>
<P align=justify>The Company has 55,000 subordinated convertible debentures that
bear interest at a rate of 5.0% per annum and are convertible by the holders
into common shares of the Company at any time up to June 28, 2014. At December
31, 2008 the aggregate principal of the subordinated convertible debentures was
Cdn$55.0 million with remaining interest payable totaling $15.6 million.
Interest is payable in arrears in equal semi-annual installments on January 1
and July 1 each year.</P>
<P align=justify>In May 2008, the Company entered into a one year $25.0 million
revolving credit facility, which is secured on the assets of the Metallica group
of companies and is available for general corporate purposes. Amounts drawn
incur interest at LIBOR plus 1.5% per annum and undrawn amounts are subject to a
0.5% per annum commitment fee. At December 31, 2008 the Company had not drawn on
the facility. </P>
<P align=center>22 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_23></A>
<P align=justify><I><B>Commitments </B></I></P>
<P align=justify>The Company has entered into a number of contractual
commitments related to equipment to purchase long lead items or critical pieces
of mining equipment related to the New Afton Project. At December 31, 2008,
these commitments totaled $9.4 million and re expected to fall due over the next
12 months.</P>
<P align=justify>In addition to the above, the Company has entered into a number
of contractual commitments related to equipment orders to purchase long lead
items or critical pieces of mining equipment at its operating mines. At December
31, 2008, these commitments totaled $12.5 million and are expected to be paid
over the next 12 months. </P>
<P align=justify><I><B>Contingencies </B></I></P>
<P align=justify>The Company is terminating various employment, consulting and
service agreements as a result of slowing development activities at the New
Afton Project and placing Amapari on temporary care and maintenance. Certain of
the affected parties may make legal claims in response to such terminations, but
to date no such claims have been commenced. The Company cannot reasonably
predict the likelihood or outcome of any such actions, but would vigorously
defend against them.</P>
<P align=justify>The Company has received notice that legal claims in the amount
of approximately $46 million have been filed in Brazilian courts against the
Company&#146;s subsidiary, Minera&#231;&#227;o Pedra Branca do Amapari Ltda (&#147;MPBA&#148;). The
claims allege that MPBA has adversely impacted the quality of William Creek
causing economic loss and health concerns. The Company believes that these
claims are unfounded and intends to vigorously defend against them. </P>
<P align=justify>The Company is, from time to time, involved in various claims,
legal proceedings and complaints arising in the ordinary course of business. The
Company cannot reasonably predict the likelihood or outcome of these actions.
New Gold does not believe that adverse decisions in any other pending or
threatened proceedings related to any matter, or any amount which may be
required to be paid by reason therein, will have a material effect on the
financial condition or future results of operations.</P>
<P align=justify><I><B>Subsequent Events </B></I></P>
<P align=justify>On March 4, 2009, the Company announced that it had entered
into a definitive agreement to acquire all of the outstanding common shares of
Western Goldfields Inc. (&#147;Western Goldfields&#148;). Under the agreement, the Company
will exchange one common share and Cdn$0.0001 in cash for each common share of
Western Goldfields (the &#147;Western Goldfields Transaction&#148;). Upon completion of
the Western Goldfields Transaction, existing New Gold and Western Goldfields
shareholders will own approximately 58% and 42% of the combined company,
respectively, subject to the approval of both companies and regulatory approval.
</P>
<P align=justify><I><B>Off-Balance Sheet Transactions </B></I></P>
<P align=justify>The Company has no off-balance sheet arrangements.</P>
<P align=justify><I><B>Outstanding Shares </B></I></P>
<P align=justify>As of March 13, 2009, there were 212,860,746 common shares of
the Company outstanding. The Company had 11,125,304 stock options outstanding
under its share option plan. In addition, the Company had 60,136,032 common
share purchase warrants outstanding. </P>
<P align=center>23 </P>
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<P align=justify><I><B>Risks and uncertainties </B></I></P>
<P align=justify>Readers of this Management&#146;s Discussion and Analysis should
give careful consideration to the information included or incorporated by
reference in this document and the Company&#146;s audited consolidated financial
statements and related notes. Significant risk factors for the Company are metal
prices, currency fluctuations, government regulations, foreign operations,
environmental compliance, the ability to obtain additional financing, risks
relating to recent acquisitions, and dependence on management. </P>
<P align=justify><I><B>Metal Prices </B></I></P>
<P align=justify>The Company&#146;s revenues and cash flows are subject to
fluctuations in gold, silver and copper prices. At Peak Mines there can be a
significant time lag between the time of recording of copper revenues and final
pricing of copper. Therefore changes in the price of copper during this period
can have a significant impact on the Company&#146;s revenue and working capital
position (refer to liquidity section for further analysis). Metal prices are
affected by a variety of factors including interest rates, exchange rates,
international economic and political trends, inflation or deflation,
fluctuations in the value of the US dollar and foreign currencies, global and
regional supply and demand and the political and economic conditions of major
metal producing countries throughout the world. However, to address the recent
volatility in copper prices, the Company is currently renegotiating its copper
concentrate contract to mitigate the Company&#146;s exposure to fluctuations in
copper price. The Company does not presently have a metals hedging policy nor
has it conducted any metals hedging in the past. </P>
<P align=justify><I><B>Currency Fluctuations </B></I></P>
<P align=justify>Exchange rate fluctuations may affect the costs that the
Company incurs in its operations. Gold, silver and copper are sold in US dollars
and the Company&#146;s costs are incurred principally in Canadian dollars, Australian
dollars, Mexican pesos and Brazilian reals. The appreciation of non-US dollar
currencies against the US dollar can increase the cost of gold, silver and
copper production and capital expenditure in US dollar terms and the
depreciation of non-US dollar currencies against the US dollar can decrease the
cost of gold, silver and copper production and capital expenditure in US dollar
terms.</P>
<P align=justify>The Company has recorded future income tax liabilities on
mineral interests relating to the acquisitions of the Amapari Mine, Peak Mines,
Metallica and NGI. The future income tax liabilities and long-term debt
obligations are monetary items, which are revalued each period end at current
exchange rates, with the gain or loss recorded in income for the period.</P>
<P align=justify>The Company has assessed this risk and has not presently
adopted an active currency hedging program given the correlation between metal
prices and the currencies in which the Company operates. In 2008, favorable
changes in metal prices have mitigated the adverse effect of the appreciation of
relevant foreign currencies against the US dollar.</P>
<P align=justify><I><B>Government Regulations </B></I></P>
<P align=justify>The mining, processing, development and exploration activities
of the Company are subject to various laws governing prospecting, development,
production, taxes, labour standards and occupational health, mine safety, toxic
substances, land use, water use, land claims of local people and other matters. No assurance can be
given that new rules and regulations will not be enacted or that existing rules
and regulations will not be applied in a manner which could have an adverse
effect on the Company&#146;s financial position and results of operations.</P>
<P align=center>24 </P>
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<P align=justify><I><B>Foreign Operations </B></I></P>
<P align=justify>The Company&#146;s operations are currently conducted in Brazil,
Mexico, Canada, the United States, Chile and Australia, and as such the
Company&#146;s operations are exposed to various levels of political, economic and
other risks and uncertainties. These risks and uncertainties vary for each
country and include, but are not limited to, extreme fluctuations in currency
exchange rates; high rates of inflation; labor unrest; exploration and
fluctuations in currency and exchange rates; renegotiation or nullification of
existing concessions, licenses, permits and contracts; illegal mining; changes
in taxation policies; restrictions on foreign exchange and repatriation; and
changing political conditions, currency controls and governmental regulations
that favor or require the awarding of contracts to local contractors or require
foreign contractors to employ citizens of or purchase supplies from a particular
jurisdiction. </P>
<P align=justify>Changes, if any, in mining or investment policies or shifts in
political attitude in these countries could adversely affect the Company&#146;s
operations or profitability. Operations may be affected in varying degrees by
government regulations with respect to, but not limited to, restrictions on
production, price controls, export controls, currency remittance, income taxes,
expropriation of property, foreign investment, maintenance of claims,
environmental legislation, land use, land claims of local people, water use and
mine safety.</P>
<P align=justify>Failure to comply strictly with applicable laws, regulations
and local practices relating to mineral right applications and tenure, could
result in loss, reduction or expropriation of entitlements. </P>
<P align=justify>The occurrence of these various factors and uncertainties
cannot be accurately predicted and could have an adverse effect on the Company&#146;s
operations or profitability.</P>
<P align=justify><I><B>Environmental </B></I></P>
<P align=justify>All phases of the Company&#146;s operations are subject to
environmental regulation in the various jurisdictions in which it operates.
These regulations mandate, among other things, the maintenance of air and water
quality standards and land reclamation. They also set forth limitations on the
generation, transportation, storage and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors, and employees. There is no assurance that future
changes in environmental regulation, if any, will not adversely affect the
Company&#146;s operations. </P>
<P align=justify>Government approvals and permits are currently, and may in the
future be, required in connection with the Company&#146;s operations. To the extent
that such approvals are required and not obtained, the Company could be
curtailed or prohibited from continuing its mining operations or from proceeding
with planned exploration or development of mineral properties.</P>
<P align=center>25 </P>
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<P align=justify><I><B>Asset Backed Commercial Paper (ABCP) </B></I></P>
<P align=justify>As at December 31, 2008, the non-bank ABCP market remained the
subject of a restructuring process with the express intention of replacing the
ABCP with a number of long-term floating rate notes. The restructuring plan
would upon completion pool all of the underlying assets from all the ABCP trusts
with the exception of those assets designated as ineligible for pooling
(&#147;Ineligible Assets&#148;) and those series of assets backed exclusively by
traditional financial assets (&#147;Traditional Series&#148;). ABCP relating to the pooled
assets will be replaced with four classes of notes named A1, A2, B and C in
declining order of seniority. ABCP relating to Ineligible Assets and Traditional
Series would be replaced with new tracking notes whose characteristics are
designed to track the performance of the particular assets of the series to
which they correspond. The planned completion date for the restructuring was
January 21, 2009 (see Subsequent Event).</P>
<P align=justify>The Company has estimated the fair value of ABCP at December
31, 2008 by using a discounted cash flow approach which estimated the cash flows
to be received in respect of each class of notes and then discounted each class
of notes at a rate that reflects an estimated yield requirement for that
particular class. Additionally, the valuation incorporates the anticipated
distribution of income earned by the Company&#146;s ABCP during the restructuring
period from August 2007 through August 31, 2008.</P>
<P align=justify>There can be no assurance that this estimate will be realized
in the market. Subsequent adjustments, which could be material, may be required
in future reporting periods.</P>
<P align=justify>A number of the notes to be received by the Company are not
rated by any credit rating agency and the Company has not yet had access to the
underlying asset information which would enable it conduct its own assessment of
the credit quality of the new notes. Accordingly, the Company&#146;s valuation and
credit assumptions rely heavily on the limited information that has been
disclosed during the course of the restructuring process. </P>
<P align=justify>The ABCP restructuring was completed on January 21, 2009 and
the Company received its new notes. Additionally, income relating to the period
from when the ABCP was initially purchased until August 31, 2008 was distributed
to all investors. New Gold received Cdn$5.8 million in respect of its holdings.
Accordingly, this amount will be excluded from the value of its notes in future
periods. </P>
<P align=justify><I><B>Additional Financing </B></I></P>
<P align=justify>The Company&#146;s mining, processing, development and exploration
activities may require additional external financing. Failure to obtain
sufficient financing could result in the delay or indefinite postponement of
exploration, development or production on any or all of our projects. There can
be no assurance that additional capital or other types of financing will be
available if needed or that, if available, the terms of such financing will be
favorable.</P>
<P align=justify><I><B>Risk Relating to Recent Acquisitions </B></I></P>
<P align=justify>The Company recently completed a business combination of NGI,
Metallica and Peak Gold. There can be no assurances that the benefits
anticipated from these acquisitions will be realized.</P>
<P align=justify>Peak Gold has been identified as the acquirer for accounting
purposes for the business combination. The cost of the acquisition will be
allocated to the assets acquired and liabilities assumed based on the fair value
at the date of acquisition. The estimation of fair value for mining interests
takes into account expected future cash flows associated with the life of mine
plans.</P>
<P align=center>26 </P>
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<P align=justify><I><B>Dependence on Management </B></I></P>
<P align=justify>The Company relies heavily on the business and technical
expertise of its management team and it is unlikely that this dependence will
diminish in the near term. </P>
<P align=justify><I><B>Title to the Company&#146;s Mineral Properties </B></I></P>
<P align=justify>The acquisition of title to mineral properties is a very
detailed and time-consuming process. Title to mineral concessions may be
disputed. Although the Company believes it has taken reasonable measures to
ensure proper title to its properties, there is no guarantee that title to any
of such properties will not be challenged or impaired. Third parties may have
valid claims underlying portions of the Company&#146;s interest, including prior
unregistered liens, agreements, transfers or claims, including aboriginal land
claims, and title may be affected by, among other things, undetected defects. As
a result, the Company may be constrained in its ability to operate its
properties or unable to enforce its rights with respect to the properties. An
impairment to or defect in our title to certain properties could have a material
adverse effect on our business, financial condition or results of operations.
</P>
<P align=justify><I><B>Exploration and Development </B></I></P>
<P align=justify>Risks related to our recent start of production at the CSP Mine
include risks associated with the operation of a mine and risks of encountering
unexpected geological formations or unanticipated variations in grade. </P>
<P align=justify><I><B>Accounting Policies implemented effective January 1, 2008
</B></I></P>
<P align=justify>The Company has adopted three new presentation and disclosure
standards that were issued by the Canadian Institute of Chartered Accountants:
Handbook Section 1535, Capital Disclosures (&#147;Section 1535&#148;), Handbook Section
3862, Financial Instruments &#150; Disclosures (&#147;Section 3862&#148;) and Handbook Section
3863, Financial Instruments &#150; Presentation (&#147;Section 3863&#148;). </P>
<P align=justify>Section 1535 requires the disclosures of both qualitative and
quantitative information that enables users of financial statements to evaluate
an entity&#146;s objective, policies and processes for managing capital. Section 1535
requires that disclosure of (i) an entity&#146;s objective, policies and processes
for managing capital; (ii) quantitative data about what the entity regards as
capital; (iii) whether the entity has complied with any capital requirements;
and (iv) if it has not complied, the consequences of such non-compliance. </P>
<P align=justify>Section 3862 and 3863 replace Handbook Section 3861, Financial
Instruments &#150; Disclosures and Presentation, revising and enhancing disclosure
requirements and carrying forward unchanged the presentation requirements for
financial instruments. Section 3862 and 3863 place increased emphasis on
disclosures about the nature and extent of risk arising from financial
instruments and how an entity manages those risks. </P>
<P align=justify>On January 1, 2008, the Company adopted Section 3031,
Inventories, which replaces the existing Section 3030, and establishes standards
for the measurement and disclosure of inventories. The new standard provides
more extensive guidance on the determination of cost, including allocation of
overhead, requires impairment testing and expands the disclosure requirements.
The adoption of Section 3031 did not have a material impact on the Company&#146;s
consolidated financial position and results of operations for the year ended
December 31, 2008. </P>
<P align=center>27 </P>
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<P align=justify><I><B>Accounting Policies to be implemented</B></I></P>
<P align=justify>Effective January 1, 2009, the Company will adopt Section 3064,
Goodwill and Intangible Assets, which replaces Section 3062, and establishes
revised standards for recognition, measurement, presentation and disclosure of
goodwill and intangible assets. Concurrent with the introduction of this
standard, the CICA withdrew EIC 27, Revenues and Expenditures in the
Pre-operating Period (&#147;EIC 27&#148;). The Company is still evaluating the impact of
this new accounting pronouncement on the Company&#146;s financial position and
results of operations.</P>
<P align=justify>In January 2009, the CICA issued Handbook Sections 1582,
Business Combinations, (&#147;Section 1582&#148;), 1601, Consolidated Financial
Statements, (&#147;Section 1601&#148;) and 1602, Non-controlling Interests, (&#147;Section
1602&#148;) which replaces CICA Handbook Sections 1581, Business Combinations, and
1600, Consolidated Financial Statements. Section 1582 establishes standards for
the accounting for business combinations that is equivalent to the business
combination accounting standard under International Financial Reporting
Standards (&#147;IFRS&#148;). Section 1582 is applicable for the Company&#146;s business
combinations with acquisition dates on or after January 1, 2011. Early adoption
of this Section is permitted. Section 1601 together with Section 1602
establishes standards for the preparation of consolidated financial statements.
Sections 1601 and 1602 are applicable for the Company&#146;s interim and annual
consolidated financial statements for its fiscal year beginning January 1, 2011.
Early adoption of this Section is permitted. If the Company chooses to early
adopt any one of these Sections, the other two sections must also be adopted at
the same time.</P>
<P align=justify><I><B>Critical Accounting Policies and Estimates </B></I></P>
<P align=justify>In preparing financial statements, management has to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Based on historical experience, current
market conditions and expert advice, management makes assumptions that are
believed to be reasonable under the circumstances. These estimates and
assumptions form the basis for judgments about the carrying value of assets and
liabilities and reported amounts for revenues and expenses. The Company&#146;s
accounting policies relating to work-in-progress inventory valuation,
depreciation and depletion of mineral property, plant and equipment and site
reclamation and closure accruals are critical accounting policies that are
subject to estimates and assumptions regarding reserves, recoveries, future
metal prices and future mining activities. All estimates used are subject to
periodic review and are adjusted as appropriate. Life of mine plans are prepared
each year, so all estimates relating to mining activities, reserves, recoveries
and gold prices are re-assessed annually, or more frequently as determined by
management. Because of the ongoing review process, the Company has been able to
update its estimates on a timely basis as developments affecting the underlying
assumptions have necessitated such modifications. </P>
<P align=justify><I><B>Inventories </B></I></P>
<P align=justify>Finished goods, work-in-progress, heap leach ore and stockpile
ore are valued at the lower of average production costs or net realizable value.
</P>
<P align=justify>The Company records the cost of mining ore stacked on its leach
pads and in process at one of its mines as work-in-progress inventory and values
work-in progress inventory at lower of cost or estimated net realizable value.
These costs are charged to earnings and included in cost of sales on the basis
of ounces of gold recovered. The assumptions used in the valuation of
work-in-process inventories include estimates of metal contained in the
ore stacked on leach pads, assumptions of the amount of metal stacked that is
expected to be recovered from the leach pads, the amount of metal in these mill
circuits and an assumption of the metal price expected to be realized when the
metal is recovered. If these estimates or assumptions prove to be inaccurate,
the Company could be required to write-down the recorded value of its
work-in-process inventories, which would reduce the Company&#146;s earnings and
working capital. </P>
<P align=center>28 </P>
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<P align=justify><I><B>Asset Backed Commercial Paper </B></I></P>
<P align=justify>For the assumptions used in the valuation of the Company&#146;s ABCP
see &#147;Asset-backed Commercial Paper (&#147;ABCP&#148;) under the &#147;Risks and uncertainties&#148;
secton. </P>
<P align=justify><I><B>Mineral Properties </B></I></P>
<P align=justify>The Company records mineral property acquisition expenditures
and mine development expenditures at cost. The Company capitalizes
pre-production expenditures net of revenues received until the commencement of
commercial production in accordance with GAAP.</P>
<P align=justify>A significant portion of the Company&#146;s mineral property, plant
and equipment is depreciated and amortized on a unit-of-production basis. Under
the unit-of-production method, the calculation of depreciation, depletion and
amortization of mineral property, plant and equipment is based on the amount of
reserves expected to be recovered from each location. If these estimates of
reserve prices turn out to be inaccurate, or if the Company revises its mining
plan for a location due to reductions in the price of gold or otherwise to
reduce the amount of reserves expected to be recovered, the Company could be
required to write-down the recorded value of the mineral property, plant and
equipment or to increase the amount of future depreciation, depletion and
amortization expense, both of which would reduce the Company&#146;s earnings and net
assets. </P>
<P align=justify>In addition, GAAP requires the Company to consider at the end
of each accounting period whether or not there has been an impairment of
capitalized mineral property, plant and equipment. Due to the volatility and
uncertainty in today&#146;s markets and the Company&#146;s current cash position, coupled
with the funding requirements of the fast track construction at the New Afton
Project, the Company made the decision in the fourth quarter to slow development
of the New Afton Project. In light of the slow down, management reviewed the
carrying value of the New Afton Project to determine whether there has been an
impairment. Based on management&#146;s current view of future metal prices, foreign
exchange rates, and cost assumptions, the carrying value of the New Afton
Project was not impaired as of December 31, 2008.</P>
<P align=justify>For producing properties, this assessment is based on whether
factors are present that may indicate a need for a write-down. If the Company
determines there has been an impairment because its prior estimates of future
cash flows have proven to be inaccurate, due to reductions in the price of gold,
increases in the costs of production, reductions in the amount of reserves
expected to be received or otherwise, or because the Company has determined that
the deferred costs of non-producing properties may not be recovered based on
current economics or permitting considerations, the Company would be required to
write-down the recorded value of its mineral property, plant and equipment,
which would reduce the Company&#146;s earnings and net assets.</P>
<P align=justify>The recent volatility in equity and commodity markets could
have a significant impact on the valuation of our mineral properties and the
potential for impairment of these mineral properties.</P>
<P align=center>29 </P>
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<P align=justify>During the third quarter of 2008 the Company reviewed the
carrying value of the Amapari Mine and concluded that there was impairment of
$156.9 million. Based on management&#146;s current view of future metal prices,
foreign exchange rates, and costs assumptions, the carrying value of the
Company&#146;s other mineral interests was not impaired as of December 31, 2008. </P>
<P align=justify><I><B>Reclamation Obligations </B></I></P>
<P align=justify>The Company has an obligation to reclaim its properties after
the minerals have been mined from the site and has estimated the costs necessary
to comply with exiting reclamation standards. Generally accepted accounting
principles require the Company to recognize the fair value of a liability for an
asset retirement obligation, such as site closure and reclamation costs, in the
period in which it is incurred if a reasonable estimate of fair value can be
made. The Company records the estimated present value of future cash flows
associated with site closure and reclamation as a liability when the liability
is incurred and increases the carrying value of the related assets by the same
amount. Subsequently, these asset retirement costs are amortized to expense over
the life of the related assets using the unit-of-production method. At the end
of each period the liability is increased to reflect the passage of time
(accretion expense) and changes in the estimated future cash flows underlying
any initial fair value measurements (additional asset retirement costs). If
these estimates of costs or recoverable mineral resources prove to be
inaccurate, the Company could be required to write-down the recorded value of
its mineral property or increase the amount of future depreciation and accretion
expense, or both, all of which would reduce the Company&#146;s earnings and net
assets. </P>
<P align=justify><I><B>Future Tax Assets and Liabilities </B></I></P>
<P align=justify>The Company recognizes the future tax benefit related to future
income tax assets and sets up a valuation allowance against any portion of those
assets that it believes will, more likely than not, fail to be realized.
Assessing the recoverability of future income tax assets requires management to
make significant estimates related to expectations of future taxable income.
Estimates of future taxable income are based on forecast cash flows from
operations and the application of existing tax laws in each jurisdiction. In
light of the recent volatility in commodity prices, in particular copper prices,
the Company has reviewed its tax assets at December 31, 2008 and based on
management&#146;s current view of future metal prices and exchange rates has
determined that the tax assets are still recoverable. </P>
<P align=justify>In circumstances where the applicable tax laws and regulations
are either unclear or subject to ongoing varying interpretations, it is
reasonably possible that the changes in these estimates could occur and
materially affect the amount of future income tax liabilities recorded at the
balance sheet date.</P>
<P align=justify><I><B>Revenue Recognition </B></I></P>
<P align=justify>Revenue from the sale of metals is recognized in the accounts
when persuasive evidence of an arrangement exists, title and risk passes to
buyer, collection is reasonably assured and the price is reasonably
determinable. Revenue from the sale of metals in concentrate may be subject to
adjustment upon final settlement of estimated metal prices, weights and assays.
Adjustments to revenue for metal prices are recorded monthly and other
adjustments are recorded on final settlement. These types of adjustments can
have a material impact on revenues.</P>
<P align=center>30 </P>
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<A name=page_31></A>
<P align=justify><I><B>Stock-based compensation </B></I></P>
<P align=justify>CICA Handbook, Section 3870, Stock-based Compensation and Other
Stock-Based Payments establishes standards for the recognition, measurement and
disclosure of stock-based compensation and other stock-based payments made in
exchange for goods and services. Compensation expense is determined using the
Black-Scholes Option Pricing Model based on estimated fair values of all
stock-based awards at the date of grant and is expensed to operations over each
award&#146;s vesting period. The Black-Scholes Option Pricing Model utilizes
subjective assumptions such as expected price volatility and expected life of
the option. Changes in these input assumptions can significantly affect the fair
value estimate.</P>
<P align=justify><I><B>Financial Instruments </B></I></P>
<P align=justify>The Company thoroughly examines the various financial
instrument risks to which it is exposed and assesses the impact and likelihood
of those risks. The following discussion on risks and risk management includes
some of the required disclosures under the CICA Handbook Section 3862 &#150;
Financial Instruments &#150; Disclosures related to the nature and extent of risks
arising from financial instruments, as required by the standard. Further
information is also available in note 4 of the notes to the audited consolidated
financial statements for the year-ended December 31, 2008. The Company is
exposed to a number of risks associated with financial instruments that have the
potential to impact operating and financial performance. The Company&#146;s primary
financial instrument risk exposures are liquidity risk, currency risk, commodity
price risk and credit risk.</P>
<P align=justify>In 2007, NGI issued 55,000 convertible subordinated debentures
(the &#147;Debentures&#148;) for an aggregate principal amount of Cdn$55 million. The
Debentures, which were issued pursuant to a debenture indenture dated June 28,
2007 (the &#147;Debenture Indenture&#148;), each have a principal amount of $1,000, bear
interest at a rate of 5% per annum and are convertible by the holders into
common shares of the Company at any time up to June 28, 2014 at a conversion
price of Cdn$9.35 per share. The Debentures do not allow forced conversion by
the Company prior to January 1, 2012, but after that date the Company may redeem
the Debentures if the market price of the Company&#146;s shares is at least 125% of
the conversion price. The Debentures are classified as compound financial
instruments for accounting purposes because of the holder conversion option.
</P>
<P align=justify><I><B>Liquidity Risk </B></I></P>
<P align=justify>Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Company manages liquidity
risk through the management of its capital structure and financial leverage as
outlined in Note 14 (a). The following table summarizes the contractual
maturities of debt commitments. The amounts represent the future undiscounted
principal and interest cash flows and therefore do not equate to the carrying
amounts on the consolidated balance sheet. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%"><FONT size=2>Less than </FONT></TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%"><FONT size=2>After </FONT></TD>
    <TD align=right width="10%"><FONT size=2><B>2008 </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>1 year </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>1-3 years </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>4-5 years </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>5 years </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2><B>Total </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%"><FONT size=2>$ </FONT></TD>
    <TD align=right width="10%"><FONT size=2>$ </FONT></TD>
    <TD align=right width="10%"><FONT size=2>$ </FONT></TD>
    <TD align=right width="10%"><FONT size=2>$ </FONT></TD>
    <TD align=right width="10%"><FONT size=2><B>$ </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Accounts payable and accrued liabilities </FONT></TD>
    <TD align=right width="10%"><FONT size=2>44,823 </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2><B>44,823 </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Short-term borrowings </FONT></TD>
    <TD align=right width="10%"><FONT size=2>7,198 </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2><B>7,198 </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Long-term debt </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%"><FONT size=2>238,447 </FONT></TD>
    <TD align=right width="10%"><FONT size=2><B>238,447 </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>Interest payable on long-term debt </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>21,599 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>43,198 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>43,198 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>79,659 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2><B>187,654 </B></FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>73,615 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>43,198 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>43,198 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2>318,106 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="10%"><FONT
      size=2><B>478,117 </B></FONT></TD></TR></TABLE>
<P align=center>31 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_32></A>
<P align=justify><I><B>Credit Risk </B></I></P>
<P align=justify>Credit risk is the risk of an unexpected loss if a party to its
financial instrument fails to meet its contractual obligations. </P>
<P align=justify>The Company&#146;s financial assets are primarily composed of cash
and cash equivalents, investments and accounts receivable. Credit risk is
primarily associated with trade receivables and investments; however it also
arises on cash and cash equivalents. </P>
<P align=justify>To mitigate exposure to credit risk, the Company has
established policies to limit the concentration of credit risk, to ensure
counterparties demonstrate minimum acceptable worthiness, and to ensure
liquidity of available funds. </P>
<P align=justify>The Company closely monitors its financial assets and does not
have any significant concentration of credit risk. The Company sells its gold
exclusively to large international organizations with strong credit ratings. The
Company&#146;s revenue is comprised of gold sales to four customers.</P>
<P align=justify>The historical level of customer defaults is minimal and, as a
result, the credit risk associated with gold and copper concentrate trade
receivables at December 31, 2008 is not considered to be high. </P>
<P align=justify>A significant portion of the Company&#146;s cash and cash
equivalents are held in large Canadian financial institutions. Short term
investments (including those presented as part of cash and cash equivalents) are
composed of financial instruments issued by Canadian banks and government with
high investment-grade ratings. </P>
<P align=justify><I><B>Currency Risk </B></I></P>
<P align=justify>The Company operates in Australia, Brazil, Canada, Mexico, and
the United States. As a result, the Company has foreign currency exposure with
respect to items denominated in foreign currencies. In particular, the Company
is exposed to currency risk through the following assets and liabilities
denominated in currencies other than the US dollar: cash and cash equivalents,
accounts receivable, ABCP, accounts payable and accrued liabilities, short-term,
long-term investments and long term debt and future income taxes and
liabilities.</P>
<P align=justify><I><B>Interest Rate Risk </B></I></P>
<P align=justify>Interest rate risk is the risk that the fair value of the
future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. </P>
<P align=justify>The Company is exposed to interest rate risk on its outstanding
borrowings and short-term investments. In particular, the Company is exposed to
interest rate changes on those ABCP investments that are expected to pay
interest. Interest is proposed to be based on the Canadian bankers&#146; acceptance
rate which may fluctuate. A 1% change in the bankers&#146; acceptance rate would
result in an annual difference of approximately $0.4 million in the interest
income to the Company. The Company has not entered into any derivative contracts
to manage this risk.</P>
<P align=justify>The Company follows the policy of issuing fixed interest rate
debt to avoid future fluctuations in its debt service costs.</P>
<P align=center>32 </P>
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<A name=page_33></A>
<P align=justify><I><B>Commodity Price Risk </B></I></P>
<P align=justify>The Company&#146;s earnings and cash flows are subject to price risk
due to fluctuations in the market price of gold, silver and copper. World gold
prices have historically fluctuated widely. World gold prices are affected by
numerous factors beyond our control, including: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 0">The strength of the US economy and the economies of other industrialized
  and developing nations <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Global or regional political or economic crises
  <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">The relative strength of the US dollar and other currencies
  <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Expectations with respect to the rate of inflation
  <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Interest rates <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Purchases and sales of gold by central banks and other holders
  <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Demand for jewelry containing gold
  <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">Investment activity, including speculation, in gold as a commodity
</LI></UL>
<P align=justify>In 2008, the Company&#146;s revenues and cash flows were negatively
impacted by the declining copper prices. There is a time lag between the time of
shipment for copper and final pricing and changes in copper pricing can
significantly impact the Company&#146;s revenue and working capital position. As of
December 31, 2008, working capital includes copper concentrate receivables
totaling 8.1 million pounds. A $0.10 change in copper price would have an impact
of $0.8 million on the Company&#146;s working capital position. </P>
<P align=justify>The Company is also subject to price risk for fluctuations in
the cost of energy, principally electricity and purchased petroleum products.
The Company&#146;s production costs are also affected by the prices of commodities it
consumes or uses in its operations, such as lime, reagents and explosives. The
prices of such commodities are influenced by supply and demand trends affecting
the mining industry in general and other factors outside the Company&#146;s control.
The Company has not entered into any hedging activities to mitigate these price
risks. </P>
<P align=justify><I><B>International Financial Reporting Standards (&#147;IFRS&#148;)
</B></I></P>
<P align=justify>In February 2008, the Canadian Accounting Standards Board
(&#147;AcSB&#148;) confirmed January 1, 2011 as the date IFRS will replace current
Canadian generally accepted accounting principles (&#147;Canadian GAAP&#148;) for publicly
accountable enterprises. This will result in the Company reporting under IFRS
starting with the interim period ending March 31, 2011, with restatement for
comparative purposes of amounts reported under Canadian GAAP.</P>
<P align=justify>The conversion to IFRS will likely impact the Company&#146;s
statement of financial position and results of operations. To transition to
IFRS, changes may be required to the Company&#146;s information technology and data
systems, internal control over financial reporting, disclosure controls and
procedures, financial reporting expertise and training requirements, and
business activities, such as compensation programs, debt covenants and other
contractual arrangements. </P>
<P align=justify>The Company has established a project team to manage the
conversion process in January 2009 and, completed a high-level impact assessment
to identify key areas that will be affected by the conversion. The development
of a detailed IFRS conversion plan is expected to be completed by end of the
first quarter of 2009. The detailed analysis of the IFRS &#150; Canadian GAAP differences, and the selection of accounting policy choices
under IFRS has commenced and is expected to be completed by the end of the third
quarter of 2009. The Company will continuously monitor changes in IFRS leading
up to the changeover date, and will update its conversion plan as required. </P>
<P align=center>33 </P>
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<A name=page_34></A>
<P align=justify><I><B>Outlook </B></I></P>
<P align=justify>Weak global economic conditions and a tightening in credit
markets have lead to uncertainty in the general global outlook. As a result, the
markets experienced significant decreases in copper prices in the second half of
2008 (from over $3.50 per pound in July to under $1.50 per pound in December
2008). However, gold and silver prices have held up relatively well. Volatility
has been exceptionally high and forecasting metal prices and demand,
particularly base metals such as copper, has been difficult. In addition, credit
market conditions have severely restricted the ability to raise equity and debt
financing. In response to these difficult conditions management is assessing the
effects on the business; however, we believe that the long term environment and
prospects for our business remain favorable. </P>
<P align=justify>In the current volatile global economic environment, the
Company intends to preserve capital and maximize cash balances while maintaining
flexibility and a strong balance sheet. New Gold is committed to maximizing cash
balances by increasing operating cash flow, containing costs, controlling
expansion capital and reviewing strategic alternatives for non-core assets. This
commitment is evidenced through the recent decisions to slow down the
development of the New Afton Project, and temporarily suspend mining operations
at the Amapari Mine while we complete a PEA of the sulphide resource and
consider strategic alternatives. As inflation and general price levels moderate
or even decrease, the Company expects to achieve lower costs in the areas of
consumables, steel, transportation and other products and services. In addition,
New Gold expects to benefit from recent favorable movements in local currencies
(against the US dollar) where the Company operates, particularly in Canada,
Australia and Mexico. In Australia, the declining currency effectively serves as
a natural hedge to declining copper and other metal prices. We have not hedged
metal prices and foreign exchange rates. </P>
<P align=justify>New Gold&#146;s growth plan is focused on organic and acquisition
led growth and the Company is seeking to maintain flexibility in the current
environment in order to be able to respond to opportunities as they arise, such
as acquisitions, debt buybacks and other transactions. In order to fund its
major development properties, namely the New Afton Project and the El Morro
Project, the Company will need external financing. Sources of external financing
may include acquisitions of cash generating mines, bank borrowings and future
debt and equity offerings. There can be no assurance that financing will be
available on acceptable terms if the current economic environment does not
become more favourable, however these projects are of a long term nature and
short term financing is not required. </P>
<P align=justify>New Gold&#146;s operations are forecasting 2009 gold production of
between 190,000 and 210, 000 ounces. Total cash cost for 2009 is expected to be
between $465 and $485 per ounce (net of by-product sales). Assumptions used in
the 2009 forecast include copper and silver prices of $2.00 per pound and $10.00
per ounce respectively and Canadian dollar, Australian dollar and Mexican peso
exchange rates of $0.90, $0.70 and $12.00 to the US dollar, respectively. </P>
<P align=justify>Capital expenditures for 2009 are expected to be $107 million,
including $78.5 million for continued development at the New Afton Project
(including capitalized interest of $19.3 million) and $24.5 million for Peak
Mines. As a result of current difficult market conditions we have been reviewing
our discretionary capital expenditure and will continue to do so in 2009.</P>
<P align=center>34 </P>
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<A name=page_35></A>
<P align=justify><I><B>Controls and Procedures </B></I></P>
<P align=justify><I><B>Disclosure Controls and Procedures </B></I></P>
<P align=justify>Disclosure controls and procedures are designed to provide
reasonable assurance that all relevant information is gathered and reported on a
timely basis to senior management, so that appropriate decisions can be made
regarding public disclosure. As at the end of the period covered by this
Management&#146;s Discussion and Analysis, management evaluated the effectiveness of
the Company&#146;s disclosure controls and procedures as required by Canadian
securities laws. </P>
<P align=justify>Based on this evaluation, management has concluded that the
disclosure controls and procedures were effective in providing reasonable
assurance that information required to be disclosed in the Company&#146;s annual
filings was appropriately disclosed as such term is defined under National
Instrument 52-109 &#150; Certification of Disclosure in Issuers&#146; Annual and Interim
Filings (&#147;NI 52-109&#148;), is recorded, processed, summarized and reported within
the time periods specified by those laws, and that material information is
accumulated and communicated to management as appropriate to allow timely
decisions regarding required disclosure.</P>
<P align=justify><I><B>Internal Controls and Procedures </B></I></P>
<P align=justify>On May 9, 2008 NGI entered into an agreement to complete a
business combination with Metallica and Peak. The transaction was completed June
30, 2008 wherein the three companies consummated a reverse merger. Although the
&#147;New Gold&#148; name prevailed, Peak became the accounting acquirer. The new
management of New Gold acting reasonably carefully considered the scope of their
evaluation of internal control over financial reporting (ICFR) taking into
consideration guidance in National Instrument 52-109 Certification of Disclosure
in Issuers&#146; Annual and Interim Filings when a business is acquired not more than
365 days before year end. Management concluded that it would be impractical to
complete an evaluation of the design and operational effectiveness of the
controls over the Peak business, other that the controls over the period-end
financial close process, as of December 31, 2008. Accordingly management
excluded from its assessment the internal control over financial reporting
concerning the former Peak business other than the controls over the period-end
financial close process from their evaluation of the design and operational
effectiveness of ICFR as of December 31, 2008 </P>
<P align=justify>The Company evaluated the design and operational effectiveness
of its internal control and procedures over financial reporting as defined under
NI 52-109 for the year ended December 31, 2008. Based on this evaluation,
management has concluded that the design and operational effectiveness of these
internal controls and procedures over financial reporting are effective. There
has been no change in the Company&#146;s design of internal controls and procedures
over financial reporting that has materially affected, as is reasonably likely
to materially affect, the Company&#146;s internal control over financial reporting
during the period covered by this Management&#146;s Discussion and Analysis.</P>
<P align=center>35 </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<A name=page_36></A>
<P align=justify><I><B>Limitations on Controls and Procedures </B></I></P>
<P align=justify>The Company&#146;s management, including its President and Chief
Executive Officer and Executive Vice President and Chief Financial Officer,
believe that any internal controls and procedures for financial reporting, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met.
Furthermore, a design of a control system must reflect the fact that there are
resource constraints and the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, they
cannot provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been prevented and detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty and breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by unauthorized override
control. The design of any system controls is also based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Accordingly, because of the inherent limitations in a cost
effective control system, misstatements due to error or fraud may occur and not
be detected.</P>
<P align=center>36 </P>
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<A name=page_37></A>
<P align=justify><B>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
</B></P>
<P align=justify><I>This Management&#146;s Discussion and Analysis contains &#147;forward-
looking statements&#148;, within the meaning of the United States Private Securities
Litigation and Reform Act of 1955 and applicable Canadian Securities
legislation. Forward-looking statements include, but are not limited to,
statements with respect to the future prices of gold, silver and copper, the
estimation of mineral reserves and resources, the realization of mineral reserve
estimates, the timing and amount of estimated future production, costs of
production, capital expenditures, costs and timing of the development of new
deposits, success of exploration activities, permitting time lines, currency
exchange rate fluctuations, requirements for additional capital, government
regulation of mining operations, environmental risks, unanticipated reclamation
expenses, title disputes or claims and limitations on insurance coverage.
Generally, these forward- looking statements can be identified by the use of
forward-looking terminology such as &#147;plans&#148;, &#147;expects&#148;, or &#147;does not expect&#148;,
&#147;is expected&#148;, &#147;budget&#148;, &#147;scheduled&#148;, &#147;estimates&#148;, &#147;forecasts&#148; ,&#148;intends&#148; ,&#148;
anticipates&#148;, or &#147;does not anticipate&#148;, or &#147;believes&#148;, or variations of such
words and phrases or state that certain actions, events or results &#147;may&#148;,
&#147;could&#148;, &#147;would&#148;, &#147;might&#148; or &#147;will&#148; or &#147;will be taken&#148;, &#147;occur&#148; or &#147;be
achieved&#148;. Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of
activity, performance or achievements of the Company to be materially different
from those expressed or implied by such forward-looking statements, including
but not limited to: anticipated synergies from the business combination may not
be realized; there may be difficulties in integrating the operations and
personnel of the NGI, Peak Gold and Metallica; the Company is subject to
significant capital requirements associated with its expanded operations and
portfolio of development projects since completion of the Transaction;
fluctuations in the international currency markets and in the rates of exchange
of the currencies of Brazil, Canada, the United States, Australia, Mexico and
Chile; price volatility in the spot and forward markets for commodities; impact
of any hedging activities, including margin limits and margin calls;
discrepancies between actual and estimated production, between actual and
estimated reserves and resources and between actual and estimated metallurgical
recoveries; changes in national and local government legislation in Brazil,
Canada, the United States, Australia, Mexico and Chile; or any other country in
which the Company currently or may in the future carry on business; taxation
controls, regulations and political or economic developments in the countries in
which the Company does or may carry on business; the speculative nature of
mineral exploration and development, including the risks of obtaining necessary
licenses and permits; diminishing quantities or grades of reserves; competition;
loss of key employees; additional funding requirements; actual results of
current exploration or reclamation activities; changes in project parameters as
plans continue to be refined accidents; labour disputes; and defective title to
mineral claims or property or contests over claims to mineral properties. In
addition, there are risks and hazards associated with the business of mineral
exploration, development, and mining, including environmental hazards,
industrial accidents, unusual or unexpected formations, pressures, cave-ins,
flooding and gold bullion losses (and risk of inadequate insurance or inability
to obtain insurance, to cover these risks) as well as the &#147;Risks and
Uncertainties&#148; included in this document and the section entitled &#147;Risk Factors&#148;
in the Joint Disclosure Booklet of the Company, Peak Gold and Metallica and the
section entitled &#147;Risk Factors Relating to the Operations of the Combined
Company&#148; in the Company&#146;s management information circular dated May 16, 2008,
both available on SEDAR at www.sedar.com Although the Company has attempted to
identify important factors that would cause actual results to differ materially
from those contained in forward-looking statements, there may be other factors
that cause results not to be as anticipated, estimated, or intended. There can
be no assurance that such statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. The Company does not undertake to update any
forward-looking statements contained herein, except in accordance with
applicable securities laws.</I></P>
<P align=center>37 </P>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
