EX-99.1 2 mesquite2010.htm MESQUITE MINE TECHNICAL REPORT DATED FEB 2010

Exhibit 99.2

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TABLE OF CONTENTS

|  | PAGE
1 | SUMMARY | 1-1
| Executive Summary | 1-1
| Economic Analysis | 1-3
| Technical Summary | 1-8
2 | INTRODUCTION | 2-1
3 | RELIANCE ON OTHER EXPERTS | 3-1
4 | PROPERTY DESCRIPTION AND LOCATION | 4-1
| Location | 4-1
| Land Tenure | 4-1
| Environmental Permitting Requirements | 4-6
5 | ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY | 5-1
6 | HISTORY | 6-1
7 | GEOLOGICAL SETTING | 7-1
| Regional Geology | 7-1
| Property Geology | 7-6
8 | DEPOSIT TYPES | 8-1
9 | MINERALIZATION | 9-1
10 | EXPLORATION | 10-1
11 | DRILLING | 11-1
12 | SAMPLING METHOD AND APPROACH | 12-1
13 | SAMPLE PREPARATION, ANALYSES AND SECURITY | 13-1
14 | DATA VERIFICATION | 14-1
15 | ADJACENT PROPERTIES | 15-1
16 | MINERAL PROCESSING AND METALLURGICAL TESTING | 16-1
| Metallurgical Testing | 16-1
| Process Plant | 16-6
17 | MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES | 17-1
| Mineral Resource Estimate | 17-1
| Mineral Reserve Estimate | 17-9
18 | OTHER RELEVANT DATA AND INFORMATION | 18-1
19 | ADDITIONAL REQUIREMENTS | 19-1
| Mining Operations | 19-1

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| Mineral Processing | 19-7
| Markets | 19-8
| Contracts | 19-9
| Environmental Considerations | 19-9
| Taxes | 19-9
| Capital and Operating Cost Estimates | 19-9
| Economic Analysis | 19-10
20 | INTERPRETATION AND CONCLUSIONS | 20-1
21 | RECOMMENDATIONS | 21-1
22 | REFERENCES | 22-1
23 | DATE AND SIGNATURE PAGE | 23-1
24 | CERTIFICATE OF QUALIFIED PERSON | 24-1
25 | APPENDIX A | 25-7
| Claim List | 25-7

LIST OF TABLES

|  | PAGE
Table 1-1 | Income Statement | 1-5
Table 1-2 | After-tax Cash Flow Summary | 1-6
Table 1-3 | Sensitivity Analyses | 1-8
Table 1-4 | Mineral Resources Inclusive of Mineral Reserves – December 31, 2009 | 1-11
Table 1-5 | Mineral Reserves – December 31, 2009 | 1-11
Table 1-6 | Open Pit Optimization Parameters | 1-12
Table 4-1 | Permits | 4-7
Table 6-1 | Historic Production | 6-3
Table 11-1 | Twin Hole Comparison | 11-4
Table 14-1 | Comparison of Block Estimates from Decline vs. Drill Holes | 14-2
Table 16-1 | Historical Mesquite Mine Production | 16-1
Table 16-2 | Comparison of Mesquite Ore Type Ultimate Gold Recovery Estimates | 16-2
Table 16-3 | Comparison of Non-Oxide Vista and Rainbow 21-Day Column Tests | 16-4
Table 16-4 | Micon Gold Recovery Estimates Based on Head Grade | 16-5

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Table 17-1 | Mineral Resources Inclusive of Mineral Reserves – December 31, 2009 | 17-2
Table 17-2 | Statistics of Bedrock Au Assays in Mineral Resource Model Developed by IMC in 2006 | 17-3
Table 17-3 | Block Grade Estimation Parameters | 17-7
Table 17-4 | Mineral Reserves – December 31, 2009 | 17-10
Table 17-5 | Open Pit Optimization Parameters | 17-11
Table 17-6 | Material Tonnage Factors | 17-12
Table 19-1 | Mine Design Parameters | 19-3
Table 19-2 | Historic Production | 19-6
Table 19-3 | Life-of-Mine Production | 19-6
Table 19-4 | Mine Equipment Fleet | 19-7
Table 19-5 | Income Statement | 19-12
Table 19-6 | After-tax Cash Flow Summary | 19-13
Table 19-7 | Sensitivity Analyses | 19-15

LIST OF FIGURES

|  | PAGE
Figure 1-1 | Sensitivity Analysis | 1-7
Figure 4-1 | Location Map | 4-3
Figure 4-2 | Claim Map | 4-4
Figure 7-1 | Regional Geology Map | 7-4
Figure 7-2 | Stratigraphic Section | 7-5
Figure 7-3 | Property Geology | 7-8
Figure 11-1 | Drill Hole Location Plan | 11-2
Figure 13-1 | Assay Lab Sample Preparation and Assaying Procedure | 13-3
Figure 16-1 | Carbon Circuit Process Flowsheet | 16-8
Figure 16-2 | Adsorption Plant Process Flowsheet | 16-9
Figure 16-3 | Process Plant Organization | 16-11
Figure 19-1 | General Mine Layout | 19-2
Figure 19-2 | Ultimate Pit Design | 19-5
Figure 19-3 | Sensitivity Analysis | 19-15

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1 SUMMARY
EXECUTIVE SUMMARY
Scott Wilson Roscoe Postle Associates (Scott Wilson RPA) has been retained by New Gold Inc. (New Gold) to prepare an independent Technical Report for the Mesquite Mine, located near Brawley, California, U.S.A. This Technical Report has been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and, as such, meets the Canadian exchange requirements. Scott Wilson RPA visited the property on July 22-23, 2009.
This report is an Operational Update of the previous Technical Report filed for the Mesquite Mine by Western Goldfields Inc. (WGI) based on the 2006 Feasibility Study. New Gold became the owner of the Mesquite Mine following a business combination with WGI in June 2009. The property is operated as Western Mesquite Mines, Inc. (WMMI), a wholly-owned subsidiary of New Gold.
The Mesquite Mine received regulatory approval to begin mining operations on July 2, 2007, after the issuance of the Air Quality permit from the Imperial County Air Pollution Control District. Commercial production at Mesquite began in January 2008. The mine sold 144,000 ounces of gold in calendar year 2009.
CONCLUSIONS
ADEQUACY OF PROCEDURES
Scott Wilson RPA and various other firms and independent consultants have reviewed the methods and procedures utilized by New Gold, WGI, Newmont, Santa Fe, and Gold Fields Mining Corporation (Gold Fields) at the Mesquite Mine to gather geological, geotechnical, and assaying information and found them reasonable and meeting generally accepted industry standards for an operating property.
ADEQUACY OF DATA
Scott Wilson RPA believes that the Mesquite Mine has conducted exploration and development sampling and analysis programs using standard practices, providing

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generally reasonable results. Scott Wilson RPA believes that the resulting data can effectively be used in the subsequent estimation of resources and reserves.
ADEQUACY OF STUDY
This Technical Report is based on the operating data over the past two years for the Mesquite Mine. Scott Wilson RPA believes that this data and the supporting documents were prepared using standard industry practices and provide reasonable results and conclusions.
COMPLIANCE WITH CANADIAN NI 43-101 STANDARDS
Scott Wilson RPA believes that the current drill hole database is sufficient for generating a resource model for use in resource and reserve estimation. Recovery and cost estimates are based upon sufficient data and engineering to support a reserve statement. Economic analysis using these estimates generates a positive cash flow, which supports a reserve statement.
Measured and indicated resources for all areas, inclusive of mineral reserves, are 319.8 million tons at 0.015 oz/ton for 4.83 million contained troy ounces of gold. Inferred resources are an additional 24.1 million tons at 0.015 oz/ton. The estimated proven and probable mineral reserves for the Mesquite Mine total 184.8 million tons grading 0.017 oz/ton of gold, containing 3.14 million ounces.
Scott Wilson RPA believes that the resource and reserve estimates have been created utilizing acceptable methodologies. Scott Wilson RPA is also of the opinion that the classification of measured and indicated resources, stated in Table 1-4, and proven and probable reserves, stated in Table 1-5, meet the definitions as stated by NI 43-101, Form 43-101F1, and Companion Policy 43-101CP dated December 23, 2005.
RECOMMENDATIONS
Scott Wilson RPA offers the following recommendations:

1. | Continue operating the Mesquite Mine. Annual operating costs are a nominal $80 million per year.

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2. | Continue monitoring and optimizing the pit slopes. Redesign ultimate pits for each area based on new geotechnical data and allow flatter slopes in the areas where backfill material is encountered. A follow-up study from a recognized geotechnical consultant should review the redesigned pits. The costs for a geotechnical review are estimated at $45,000.

3. | Prioritize the pit design phase development based on profitability of the individual phases. This could provide a better cash flow for the life-of-mine plan. This is an ongoing process included in the mine operating and engineering budget; no additional costs are anticipated.

4. | Continue to monitor the heap leach pad recoveries. This is an ongoing process included in the mine operating budget; no additional costs are anticipated.

ECONOMIC ANALYSIS
The economic project evaluation is based on actual operating costs supplied to Scott Wilson RPA. This project evaluation work includes an economic summary, discounted cash flow analysis, as well as capital and operating cost estimates. The mine plan for this analysis is based on WMMI’s mine planning work.
Based on the actual costs for 2008 and 2009, Scott Wilson RPA created an economic analysis. The economic analysis shows that, at a long-term gold price of $800 per troy ounce and a silver price of $12 per troy ounce, the project has a net present value (NPV) at a 5% discount rate of $250 million. After-tax cash flow is $231 million plus $120 million in sunk capital for a total after-tax cash flow of $351 million.
A preliminary income statement and cash flow are presented as Tables 1-1 and 1-2.
The total life-of-mine capital is approximately $45 million in addition to the $120 million of sunk capital since start-up in late 2007. The cash operating cost per ounce of gold produced is $546 after by-product silver credits. When future and sunk capital costs are added, total cash and non-cash costs (fully loaded) are $628 per ounce of gold.

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ECONOMIC CRITERIA
REVENUE

· | Nominal 13 million tons per year.

· | Gold and silver at refinery 99.9% and 97.0% payable, respectively.

· | Metal price: US$800 per ounce gold and US$12.00 per ounce silver.

· | Net Smelter Return includes doré refining, transport, and insurance costs.

· | Silver revenue based on average silver:gold assay value.

· | Revenue is recognized at the time of production.

COSTS

· | Mine life: 14.5 years.

· | Life-of-mine production plan as summarized in Table 19-3 of this report.

· | Mine life capital totals $45.3 million.

· | Sunk capital totals $119.6 million

· | Average operating cost over the mine life is $5.98 per ton ore processed.

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SENSITIVITY ANALYSIS
Sensitivity analyses were performed for gold price, silver price, capital cost, and operating cost. The sensitivity analyses indicate that project economics are most heavily influenced by the gold price and operating costs. A 10% change in gold price results in a ± $61 million change in the after-tax NPV at a 5% discount rate. A 10% change in operating costs results in a ± $44 million change in the after-tax NPV at a 5% discount rate. The project is least affected by changes in silver price as there is little silver produced. A 10% change in the silver price results in a less than ± $1 million change in the after-tax NPV at a 5% discount rate.
Project economics are less sensitive to change in capital costs as the majority of capital has already been expended. A 10% change in the capital costs results in a ± $2 million change in the after-tax NPV at a 5% discount rate. Results of the price sensitivity analyses are shown in Figure 1-1 and Table 1-3.
Reserve estimates were based on a gold price of $800 per troy ounce and a silver price of $12.00 per troy ounce. Results from the economic analysis at these prices are shown in Table 1-2. Since an after-tax total cash flow of $351 million is achieved, the economic criteria for the reserve statement are met.
FIGURE 1-1 SENSITIVITY ANALYSIS

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TABLE 1-3 SENSITIVITY ANALYSES
New Gold Inc. – Mesquite Mine, U.S.A.
Parameter Variables | Units | -20% | -10% | Base | +10% | +20%
Gold Price | US$/oz | 640 | 720 | 800 | 880 | 960
Silver Price | US$/oz | 9.60 | 10.80 | 12.00 | 13.20 | 14.40
Operating Cost | $millions | 884 | 994 | 1,105 | 1,215 | 1,326
Capital Cost | $millions | 36 | 40 | 45 | 49 | 54
NPV @ 5% | Units | -20% | -10% | Base | +10% | +20%
Gold Price | $millions | 113 | 187 | 250 | 311 | 373
Silver Price | $millions | 249 | 249 | 250 | 250 | 250
Operating Cost | $millions | 337 | 293 | 250 | 206 | 161
Capital Cost | $millions | 253 | 252 | 250 | 248 | 246

TECHNICAL SUMMARY
PROPERTY DESCRIPTION AND LOCATION
The Mesquite Mine is located in Imperial County, in southern California, approximately 24 miles north of the border with Mexico and 16 miles west of the border with the State of Arizona. Access to the property is from California State Highway 78 and then north along a paved private road into the Mesquite site. Local resources are available in either the town of Brawley, California, 35 miles to the west of the mine, or the city of Yuma, Arizona, 52 miles southeast.
LAND TENURE
The mineral rights at the Mesquite Mine consist of 213 unpatented and 53 patented mining lode claims, 127 patented and 97 unpatented mill site claims, 658 acres of California state leased land, and 315 acres of fee lands that cover a total area of approximately 5,200 acres. All the aforementioned properties are controlled by WMMI.
The claims located on federally owned lands are administered by the Bureau of Land Management (BLM). Patented mining lode claims and patented mill site claims on U.S. Federal Land represent a secure title to the land. Unpatented mining and mill site claims

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do not have a termination date as long as annual assessment work is maintained and the land is held for mining purposes. The Federal fee land is leased by WMMI and can also be maintained indefinitely as long as the annual maintenance fees are paid.
SITE INFRASTRUCTURE
Currently, the major assets and facilities associated with the Mesquite Mine are:

Ÿ | Mineral resources and mineral reserves in the Cholla, Big Chief, Rainbow, Vista, and North Big Chief deposits.

Ÿ | The physical plant site including heap leach pads, process plant, workshops, warehouses, administration buildings, and dry facilities.

Ÿ | Facilities providing basic infrastructure to the mine, including: electric power, heat, water treatment and supply, and sewage treatment.

Ÿ | Mine infrastructure including open pits, ramps, maintenance shops, and mobile equipment fleet.

Ÿ | Access by paved highway to towns and cities with additional infrastructure.

HISTORY
Gold was first discovered at Mesquite by track crews building the Southern Pacific railroad around 1876. The first strike and claims in the area were staked at this time by Felisaro Parro. During the 1920s and 1930s, small-scale subsistence placer mining was conducted in the district by jobless men searching for gold in the Chocolate Mountains and surrounding foothills. Larger placer and lode mining was reported in the area from 1937 through to the mid-1970s.
Commercial gold production at Mesquite started in March 1986 as a heap leach gold operation by Gold Fields. In 1993, Santa Fe Pacific Gold Corporation (Santa Fe) acquired the Mesquite Mine in California from Gold Fields. In May 1997, Santa Fe was acquired by Newmont Mining Corporation (Newmont). Newmont mined the deposit through May 2001 when there was a slope failure in the Big Chief pit and the existing reserves at a $300/oz gold price were deemed to be uneconomic. Gold recovery from the Mesquite heap continued through to 2007.

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A total of 154 million tons of material grading 0.026 oz/ton Au had been placed on the leach pads when mining operations stopped in 2001. Approximately 3.05 million ounces of gold were recovered between 1985 and 2007 with a calculated average gold recovery of 76.5% prior to the restart of operations in late 2007.
WGI acquired the Mesquite Mine from Newmont in November 2003. WGI completed a feasibility study in 2006 and restarted operations in late 2007. Commercial production was achieved in January 2008. In June 2009, following a business combination with WGI, New Gold became the operator. Newmont’s 2% net smelter royalty on the project was transferred to Franco-Nevada Corporation in 2007.
GEOLOGY
The Mesquite District lies on the southwest flank of the Chocolate Mountains, in amphibolite grade metamorphic rocks of the upper plate of the Vincent-Chocolate Mountain Thrust. These upper plate rocks represent a fragment of Precambrian and Mesozoic continental crust that has an extremely complex history.
The Mesquite Mine comprises two subparallel, Oligocene-age orebodies: Big Chief –Vista (Big Chief, Cholla, and Lena, Rubble Ridge, Panhandle, and Vista), and Rainbow (Cherokee, Rainbow, and East Rainbow). Gold mineralization is hosted in Mesozoic gneisses that are intruded by biotite/muscovite rich granites. The district is covered by a thin veneer (0-300 ft) of Tertiary and Quaternary sediments, shed from the south slope of the Chocolate Mountains. Gold mineralization is bound by post-mineral faulting related to the Neogene San Andreas fault system.
MINERAL RESOURCES AND MINERAL RESERVES
The mineral resources, exclusive of mineral reserves, effective December 31, 2009, are summarized in Table 1-4.

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TABLE 1-4 MINERAL RESOURCES INCLUSIVE OF MINERAL RESERVES – DECEMBER 31, 2009
New Gold Inc. - Mesquite Mine, U.S.A.
Class | Classification | Tons | Grade | Contained Au
|  | (000s) | (oz/ton Au) | (ozs)
Measured | Oxide | 86,772 | 0.014 | 1,119,000
| Non oxide | 34,017 | 0.019 | 660,000
| Subtotal | 120,788 | 0.015 | 1,849,000
Indicated | Oxide | 122,265 | 0.014 | 1,663,000
| Non oxide | 76,790 | 0.017 | 1,321,000
| Subtotal | 199,055 | 0.015 | 2,984,000
Measured & | Total | 319,844 | 0.015 | 4,833,000
Indicated |  |  |  |
Inferred | Oxide | 10,563 | 0.011 | 119,000
| Non oxide | 13,579 | 0.017 | 234,000
| Total | 24,142 | 0.015 | 353,000

Notes:

1. | Mineral resources are inclusive of mineral reserves.

2. | CIM definitions were used for mineral resource estimation.

3. | A gold price of US$900/oz was used.

4. | Mineral resources were estimated using cut-off grades of 0.006 oz/ton Au and 0.012 oz/ton Au in the oxide and non-oxide, respectively.

5. | Columns may not add exactly due to rounding.

The mineral reserve estimate for the Mesquite Mine, effective December 31, 2009, is summarized in Table 1-5.

TABLE 1-5 MINERAL RESERVES – DECEMBER 31, 2009
New Gold Inc. - Mesquite Mine, U.S.A.
Class | Classification | Tons | Grade | Contained Au
|  | (000s) | (oz/ton Au) | (ozs)
Proven | Oxide | 63,768 | 0.015 | 982,000
| Non oxide | 17,722 | 0.024 | 433,000
Proven | Subtotal | 81,490 | 0.017 | 1,415,000
Probable | Oxide | 75,355 | 0.015 | 1,137,000
| Non oxide | 27,988 | 0.021 | 592,000
Probable | Subtotal | 103,343 | 0.017 | 1,729,000
Proven & | Oxide | 139,123 | 0.015 | 2,119,000
Probable | Non oxide | 45,710 | 0.022 | 1,025,000
| Total | 184,833 | 0.017 | 3,144,000

Notes:

1. | CIM definitions were used for mineral reserve estimation.

2. | Mineral reserve estimation parameters are summarized in Table 1-6.

3. | Rows and columns may not add exactly due to rounding.

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The mineral resource model was imported into Whittle pit optimization software. Pit shells were optimized based on the parameters summarized in Table 1-6.

TABLE 1-6 OPEN PIT OPTIMIZATION PARAMETERS
New Gold Inc. - Mesquite Mine, U.S.A.
Pit Slopes 1 | Above Water Table |
| North | 40°, 38° in gravels
| East | 46°, 43° in Rainbow
| South | 46°
| West | 46°
| Below Water Table |
| North | 37°
| East | 43°, 40° in Rainbow
| South | 43°
| West | 43°
Operating Cost | Mining | $0.93/ton mined
| Process + General & Administration | $1.33/ton processed
Dilution |  | 5%
Mining Recovery |  | 95%
Process Recovery - Oxides |  | 75%
Process Recovery - Non Oxides |  | 35%
Gold Price |  | $800/oz
Gold Selling Price |  | $12.00
Cut-off Grade - Oxides |  | 0.006 oz/ton Au
Cut-off Grade - Non Oxides |  | 0.012 oz/ton Au

Notes: 1 Pit slopes may vary slightly for individual pits.
MINING OPERATIONS
Mining is performed using a conventional truck/shovel open-pit mining method. Operations include drilling, blasting, loading, and hauling. Run-of-mine ore is hauled directly to the leach pad to the south for processing. Waste mining uses the same equipment fleet used to produce ore. Current mine production is a nominal 165,000 tons per day of total material, including a nominal 30,000 to 40,000 tons per day of ore that is hauled to the leach pad. For 2009, gold production was 150,000 ounces.

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MINERAL PROCESSING
Mineral processing uses a heap leaching technique. At the leach pad, a weak cyanide solution (0.4 lb/ton) is applied to dissolve the gold and take it into solution. The solution is collected in the carbon-in-column plant where the gold is collected on the carbon. The gold is stripped from the carbon using a strong cyanide solution. The gold in solution is electrowon onto steel wool. The steel wool is sent to a furnace where the gold is separated from the impurities and the molten metal poured out to create gold doré bars assaying approximately 60% gold and 35% silver.
Process recoveries are determined by oxidation. Inception-to-date recoveries are slightly higher than predicted at 76.5%. The process recoveries for the mine reserves and life-of-mine production plan are based on 75% recovery of the oxide ores and gravels and 35% recovery of the non-oxide ores.
ENVIRONMENTAL CONSIDERATIONS
The Mesquite Mine received regulatory approval to begin mining operations on July 2, 2007, after the issuance of the Air Quality permit from the Imperial County Air Pollution Control District. WMMI is in compliance with all permits.
The closure and reclamation plan for the Mesquite Mine has been developed by WMMI with the assistance of independent consultants, with the specific objective of leaving the land in a useful, safe, and stable configuration capable of supporting native plant life, providing wildlife habitat, maintaining watershed functions, and supporting limited livestock grazing. Total closure costs are estimated to be $4.6 million prior to taking the salvage value of the assets into account.
CAPITAL AND OPERATING COST ESTIMATES
WMMI has developed a capital cost estimate for the life of mine. Capital over the remaining eleven years is $45.3 million.

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The average operating cost for the Mesquite operation over the life of mine is estimated at $0.99 per ton mined for ore and waste, $1.47 per ton for processing, and $0.48 per ton processed for general and administrative costs.

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2 INTRODUCTION
Scott Wilson RPA was retained by New Gold Inc. (New Gold), to prepare an independent Technical Report on the Mesquite Mine near Brawley, California, U.S.A. The purpose of this report is to provide an update, for public disclosure, of the Mesquite Mine operations. This Technical Report conforms to NI 43-101 Standards of Disclosure for Mineral Projects (NI 43-101). Scott Wilson RPA visited the property on July 22-23, 2009. The mine operations were reviewed, including the active mining phases, waste dumps, heap leach pad, and process facilities.
New Gold is an intermediate gold mining company with three operating assets: Mesquite Mine in the United States, Cerro San Pedro in Mexico, and Peak Mines in Australia. In addition, the company has development projects in Canada and Chile. New Gold completed a business combination with Western Goldfields Inc. (WGI) on June 1, 2009.
Western Mesquite Mines, Inc. (WMMI), a wholly-owned subsidiary of New Gold, is the current operator of the mine. The major assets and facilities of WMMI are an open-pit gold heap-leach mining operation with a carbon-in-column (CIC) processing circuit. A smelting furnace, assay laboratory, administration building, and truck shop facility are also located on the mine site. In 2009, the mine sold 144,000 ounces of gold.
SOURCES OF INFORMATION
For this Technical Report, a site visit was carried out by Richard Lambert, P.E., Scott Wilson RPA Principal Mining Consultant, and Wayne W. Valliant, P.Geo., Scott Wilson RPA Principal Geologist, on July 22-23, 2009. During the site visit, discussions were held with:

· | Tony Casagranda, Director of Mineral Processing, WMMI.

· | Jerry Hepworth, Environmental Manager, WMMI.

· | Don Wagstaff, Engineering Manager, WMMI.

· | Ed Diekman, Chief Engineer, WMMI.

· | Darcy Johnson, Mine Engineer, WMMI.

· | Nick Legere, Mine Geologist, WMMI.

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· | John Ochs, Consulting Geologist.

· | On-site staff involved in blasting, sample collection, assaying and exploration core logging.

Scott Wilson RPA inspected and/or observed the blasthole operations, blasthole sample collection procedures, sample preparation and analysis facilities, and the CIC plant. A tour of the pit areas was given by Mr. Wagstaff.
Richard Lambert is responsible for reviewing the mining operations and reserve statement. Wayne Valliant is responsible for reviewing the geology, resource statement, quality assurance/quality control (QA/QC) procedures and for compiling the report. Holger Krutzelmann is responsible for the metallurgical testing and mineral processing section of the report.
The documentation reviewed, as well as any other sources of information, is listed at the end of this report in Section 22 (References).

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LIST OF ABBREVIATIONS
Units of measurement used in this report conform to the imperial system. All currency in this report is US dollars (US$) unless otherwise noted.

m | micron | kPa | kilopascal
°C | degree Celsius | kVA | kilovolt-amperes
°F | degree Fahrenheit | kW | kilowatt
mg | microgram | kWh | kilowatt-hour
A | ampere | L | litre
a | annum | L/s | litres per second
bbl | barrels | m | metre
Btu | British thermal units | M | mega (million)
C$ | Canadian dollars | m2 | square metre
cal | calorie | m3 | cubic metre
cfm | cubic feet per minute | mi | mile
cm | centimetre | min | minute
cm2 | square centimetre | MASL | metres above sea level
d | day | mm | millimetre
dia. | diameter | mph | miles per hour
dmt | dry metric tonne | MVA | megavolt-amperes
dwt | dead-weight ton | MW | megawatt
ft | foot | MWh | megawatt-hour
ft/s | foot per second | m3/h | cubic metres per hour
ft2 | square foot | opt, oz/st | ounce per short ton
ft3 | cubic foot | oz | Troy ounce (31.1035g)
g | gram | oz/dmt | ounce per dry metric tonne
G | giga (billion) | ppm | part per million
Gal | Imperial gallon | psia | pound per square inch absolute
g/L | gram per litre | psig | pound per square inch gauge
g/t | gram per tonne | RL | relative elevation
gpm | Imperial gallons per minute | s | second
gr/ft3 | grain per cubic foot | st | short ton
gr/m3 | grain per cubic metre | stpa | short ton per year
hr | hour | stpd | short ton per day
ha | hectare | t | metric tonne
hp | horsepower | tpa | metric tonne per year
in | inch | tpd | metric tonne per day
in2 | square inch | US$ | United States dollar
J | joule | USg | United States gallon
k | kilo (thousand) | USgpm | US gallon per minute
kcal | kilocalorie | V | volt
kg | kilogram | W | watt
km | kilometre | wmt | wet metric tonne
km/h | kilometre per hour | yd3 | cubic yard
km2 | square kilometre | yr | year

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3 RELIANCE ON OTHER EXPERTS
This report has been prepared by Scott Wilson RPA for New Gold. The information, conclusions, opinions, and estimates contained herein are based on:

· | Information available to Scott Wilson RPA at the time of preparation of this report;

· | Assumptions, conditions, and qualifications as set forth in this report; and

· | Data, reports, and other information supplied by New Gold, WMMI, and other third party sources.

For the purpose of this report, Scott Wilson RPA has relied on ownership information provided by New Gold. Scott Wilson RPA has not researched property title or mineral rights for the Mesquite Mine and expresses no opinion as to the ownership status of the property.
Scott Wilson RPA has relied on New Gold for guidance on applicable taxes, royalties, and other government levies or interests, applicable to revenue or income from the Mesquite Mine.
Except for the purposes legislated under provincial securities law, any use of this report by any third party is at that party’s sole risk.

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4 PROPERTY DESCRIPTION AND LOCATION
LOCATION
The Mesquite Mine is located at Latitude 33° 31’ North and Longitude 114° 59’ West in Imperial County, in southern California. The property is approximately 24 miles north of the border with Mexico and 16 miles west of the border with the State of Arizona. The Mesquite Mine is operated by New Gold’s wholly owned subsidiary, Western Mesquite Mines, Inc. (WMMI). A location map for the project is presented in Figure 4-1.
The project survey control is based on a local coordinate system.
LAND TENURE
MINERAL CONCESSIONS
The mineral rights at the Mesquite Mine consist of 213 unpatented and 53 patented mining lode claims, 127 patented and 97 unpatented mill site claims, 658 acres of California state leased land, and 315 acres of fee lands, for a total of approximately 5,200 acres. All the aforementioned properties are controlled by WMMI.
The claims located on federally owned lands are administered by the Bureau of Land Management (BLM). Details on the property claims and mining claims are included in Appendix A and a detailed claim map is provided as Figure 4-2.
Patented mining lode claims and patented mill site claims on U.S. Federal Land represent a secure title to the land. Unpatented mining and mill site claims do not have a termination date as long as annual assessment work is maintained and the land is held for mining purposes. The Federal fee land is leased by WMMI and can also be maintained indefinitely as long as the annual maintenance fees are paid.

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AGREEMENTS AND ENCUMBRANCES
In November 2003, WGI acquired the Mesquite Mine from Newmont Mining Corporation (Newmont) through an Asset Purchase Agreement. Under this agreement, WGI acquired the Mesquite Mine through a transfer of WGI common stock and warrants. In addition, WGI assumed the environmental reclamation and closure liability at the Mesquite Mine.
Previously mined material and any newly mined material will be subject to production royalties ranging from 2% to 6.8% depending on the location. Newmont has retained a 50% interest in the net operating cash flow on ore placed prior to 2002 on the leach pad that is undergoing residual leaching.
All of the claims have certain restrictions in common which are:

· | the applicable land use restrictions of the California Desert Conservation Areas;

· | any multiple use rights of third parties as provided for in the applicable federal laws and regulations; and

· | reservations to the United States, for right of way for ditches or canals constructed by the Federal Government.

Some of the unpatented claims may have small areas that encroach on the Chocolate Mountain Gunnery Range. Any portions of the claims that are located inside the gunnery range are invalid, but do not affect any known potential mining areas.

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SURFACE RIGHTS
LOS ANGELES COUNTY SANITATION DISTRICT LANDFILL
In 1993, a Mineral Lease and Landfill Agreement was signed between Hanson Resource Company (HNRC) and Hospah Coal Company (Hospah), a subsidiary of Newmont Mining Corporation (Newmont), in conjunction with Santa Fe Pacific Minerals Corporation (SFPMC). Los Angeles County Sanitation District (LACSD) is now the successor to HNRC and WMMI assumed the rights and obligations of Hospah / SFPMC / Newmont when the Mesquite operation was acquired by WGI on November 9, 2003.
LACSD has constructed a landfill facility adjacent to and overlying portions of the existing Mesquite Mine property. The landfill project will be located on private land owned by LACSD, as shown in Figure 4-2. The landfill is expected to have an operational life of 100 years with a receiving capacity of 20,000 tons of landfill material per day. As part of the landfill project, LACSD plans to construct a future rail spur from the main rail line at Brawley to the site for delivery of containerized waste from their facilities in the Los Angeles area.
Under the agreement, WMMI has retained the right to explore, mine, extract, process, market and sell ore, and otherwise conduct mining and processing activities, anywhere within the Mesquite property for an initial period through 2024 with automatic extensions until 2078. LACSD has the right to utilize portions of the overburden stockpiles and spent ore from the leach pads for use as daily cover for the landfill as well as for construction materials for general purposes as well as liner design. This resource will be jointly used by both LACSD and WMMI, but WMMI will have a priority.
WMMI remains responsible for the reclamation and environmental obligations for materials mined and processed from previous or future mining activities according to the existing permit requirements. If LACSD requires additional treatment, relocation, or additional processing of stockpiled or rinsed heap materials, the Landfill Lease Agreement stipulates that WMMI will be compensated for any additional costs incurred.

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The 1993 Agreement provides for joint use of assets associated with the Mesquite Property for the mutual benefit of both parties. Water is delivered to the property by WMMI from a well field located southeast of the mine. The water wells and associated pipeline will be operated and maintained by WMMI and water will be provided to LACSD with the costs shared based on proportional usage. Other infrastructure items, such as access roads, power lines, and communications systems, will be treated on an individual basis. LACSD has realigned the access road for the landfill project. Power lines and communication systems have been chosen to operate as independent systems with all costs being the responsibility of the individual parties.
ROYALTIES
Newmont retained a production royalty on the Mesquite property from WGI at the time of sale in November 2003 for any newly mined ore. In 2007, this interest was transferred to Franco-Nevada Corporation. The majority of the property is not subject to production royalties due to the original owner’s claims having been mined out during prior mining at Mesquite. The majority of the tons planned for future mining at Mesquite will be subject only to the 2% production royalty due Franco-Nevada Corporation.
ENVIRONMENTAL PERMITTING REQUIREMENTS
STATUS OF PERMITS
Operations resumed on the Mesquite property in late 2007. The Mesquite Mine operates under a variety of permits issued by local, State, and Federal agencies. Operating permits exist for full operation. WMMI is in compliance with all permit conditions (1,602) including monitoring and reporting conditions. Major operating permits at the site are listed in Table 4-1.

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TABLE 4-1 PERMITS
New Gold Inc. – Mesquite Mine, U.S.A.

Permit | Agency | Permit # | Date | Comment
Plan of Operations | Bureau of Land Management | 98121054 | 30-Jan-85 | Approval of Mesquite Project
|  |  | 04-Nov-87 | Approval of VCR Project
|  |  | 16-Jul-02 | Approval of Mesquite Expansion
Conditional Use Permit | Imperial County Planning and Building Development Services | #98-0022 | 22-Mar-02 | Covers Reclamation and Contingency Plans
Air Quality Permit | Imperial County Air Pollution Control District | #1920-C | 02-Jul-07 | Permit to Operate
|  | #2613 | 10-Jul-96 | Permit to Operate
|  | #3814 | 25-Sep-08 | Authority to construct lime silo
Reclamation Plans | California Office of Mine Reclamation | #23-84 | 22-Apr-85 | Reclamation plan for Mesquite Project
|  | #28-88 | 02-May-88 | Reclamation plan for VCR Project
|  | #98-0004 | 27-Mar-02 | Reclamation plan for Mesquite Expansion
Waste Discharge Permit | California Regional Water Quality Control Board | #95-016 | 29-Mar-93 | For cyanide management
|  | #93-043 | 17-Nov-93 | For waste management facility
NPDES General Permit | California Regional Water Quality Control Board | #95-016 | 29-Mar-93 | For cyanide management
Streambed Alteration Permit | California Department of Fish and Game | #6-097-00 | 18-Feb-03 | Allows alteration to unnamed drainages for site construction
|  | #5-373-96 | 19-Dec-96 | Allows alteration to unnamed drainages for diversion channel
Incidental Take Permit | California Department of Fish and Game | #2081-2003-011-06 | 12-Aug-03 | Covers threatened desert tortoise
Biological Opinion | US Fish & Wildlife Service | #1-6-92-F-22R3 | 10-Aug-01 | Section 7 Consultation
|  | #1-6-92-F-28 | 01-Jun-92 | Initial consultation
|  | #1-6-92-F-22 | 06-Jul-92 | Raised speed limit to 30 mph on access road
|  | #1-6-92-F-22 | 22-Apr-94 | Increased acreage for Vista Leach pad
Solid Waste Facility | California Dept. of Health Services | #13-AA0025 | 10-Oct-84 | Exemption for solid waste
|  | #BO 93-043 | 01-Jul-99 | Exemption for solid waste

Note. VCR – Vista, Cherokee, Rainbow

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ENVIRONMENTAL PERMITTING COMPLIANCE
The closure and reclamation plan for the Mesquite Mine has been developed by WMMI with the assistance of independent consultants, with the specific objective of leaving the land in a useful, safe, and stable configuration capable of supporting native plant life, providing wildlife habitat, maintaining watershed functions, and supporting limited livestock grazing.
In 2003, California became the first state to adopt a backfilling standard (CCR Section 3704.1) requiring that open pit metallic mines be backfilled. This standard includes a grandfather provision, which exempts any surface mining operation “for which the lead agency has issued final approval of a reclamation plan and a financial assurance prior to December 18, 2002.” As Mesquite’s Conditional Use Permit was issued in March 2002, and the Mesquite Expansion Plan of Operations was approved in July 2002, the current operational footprint is exempt from the backfill standard.

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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
ACCESSIBILITY
The Mesquite Mine is located about 35 miles to the east of the town of Brawley, California, and about 52 miles northwest of the city of Yuma, Arizona. Access to the property is from California State Highway 78 and then north along a paved private road into the Mesquite site. Figure 4-1 shows the general location.
CLIMATE
The climate for Mesquite is arid, with high temperatures in the summer generally in the 100-110°F range and winter highs generally in the 70-80°F range. Winter temperatures are rarely below 32°F. Based on data collected at the Yuma weather station, the average annual temperature is 73°F. The lowest minimum average temperature is 42°F occurring during January. Precipitation can occur throughout the year, but is most common during the late summer months (August, September) or during the winter months of January through March. Precipitation at the property totals less than three inches per year. Commonly, the majority of a year’s precipitation occurs in one or two short duration storm events. Annual evaporation as measured at the Yuma weather station is 97.7 inches.
The combination of low precipitation and high evaporation results in a situation where surface runoff from the area is uncommon. Washes in the area are dry and will channel runoff only during severe storm events. On average, this may occur once per year, although it is not uncommon to have one to two year periods with no surface flows. When surface flows do occur, washes will typically flow for periods of less than one hour.

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LOCAL RESOURCES
Accommodations, supplies, and labour are available in either Brawley, California, population 22,000 (2000 census), or Yuma, Arizona, population 77,500 (2006 census). Consequently, mining suppliers and contractors are locally available.
INFRASTRUCTURE
ELECTRICAL POWER
Electricity for the mine is provided through a 92 kV power line. Power is supplied to the site by Imperial Irrigation District Power Company. Power is stepped down from 92 kV to 13.2 kV on-site. All power distribution from this point onwards is distributed on equipment and infrastructure owned by WMMI.
WATER
Water for the project is supplied from the existing Vista well field located approximately two miles south of California State Highway 78. The two current active wells are deemed capable of supplying the water requirements for both WMMI and the LACSD. With the new 18 in. diameter line in place, the two existing pumping systems are capable of supplying approximately 2,000 gpm of fresh water to the operation. The mine will require about 1,000 gpm and the landfill a maximum of 700 gpm when operating at full capacity.
HEAP LEACH PAD
Leach pad 6 has been designed by Vector Colorado LLC with total capacity of a nominal 138 million tons based on a maximum lift height of 300 ft. As of December 2008, there was remaining capacity of a nominal 129 million tons. WMMI is currently permitting an expansion area between Leach Pad 3 and Leach Pad 5 that should provide another nominal 35 million tons of leach capacity.

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PHYSIOGRAPHY
The Mesquite Mine is located a few miles to the southwest of the Chocolate Mountains and the Chocolate Mountain Gunnery Range, at an elevation of between 600 ft and 1,000 ft above sea level. The property is on an alluvial fan that slopes gently from the northeast to the southwest. The vegetation consists of sparse desert vegetation with creosote bush, brittle brush, barrel cactus, and cholla cactus present.

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6 HISTORY
The description of the history of the project is summarized from the Micon (2006) report.
Gold was first discovered at Mesquite by track crews building the Southern Pacific railroad around 1876. The first strike and claims in the area were staked at this time by Felisaro Parro. During the 1920s and 1930s, small-scale subsistence placer mining was conducted in the district by jobless men searching for gold in the Chocolate Mountains and surrounding foothills. Larger placer and lode mining was reported in the area from 1937 through to the mid-1970s.
In 1957, prospectors Richard and Ann Singer, staked 27 claims in the area, and began a dry washing campaign that lasted until the late 1980s. Attempts at lode mining on the Mesquite property were initiated during the 1950s and continued through the late 1970s with no significant production recorded. The largest shaft was the Big Chief, sunk by Charlie Wade and K.W. Kelly, to a depth of 150 ft. Gold Fields Mining Corporation (Gold Fields) became interested in the property in 1980 and spent the next two years exploring and acquiring a land position. Once a land position had been acquired, Gold Fields started an exploratory drill program and, in late 1982, announced that it had identified a bulk mineable gold deposit. A more detailed description of the history of the exploration programs is found in Section 10, Exploration, and Section 11, Drilling.
Gold Fields began commercial gold production in the Big Chief pit at Mesquite in March 1986 as a heap leach gold operation. In 1993, Santa Fe Pacific Gold Corporation (Santa Fe) acquired the Chimney Creek Mine in Nevada and the Mesquite Mine in California from Gold Fields. In May 1997, Santa Fe was acquired by Newmont Mining Corporation (Newmont). Newmont mined the deposit through May 2001, when there was a slope failure in the Big Chief pit and the existing reserves at a $300/oz gold price were deemed to be uneconomic. Gold recovery from the Mesquite heap continued through to 2007.

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A total of 154 million tons of material grading 0.026 oz/ton Au had been placed on the leach pads when mining operations stopped in 2001. Approximately 3.05 million oz of gold were recovered between 1985 and 2007 with a calculated average gold recovery of 76.5% prior to the restart of operations in late 2007. Table 6-1 shows a summary of the historical mine production.
WGI acquired the Mesquite Mine from Newmont in November 2003. WGI completed a feasibility study in 2006, and restarted operations in late 2007. In May 2006, WGI reported 201.9 million tons grading 0.018 oz/ton Au containing 3.56 million ounces gold of Measured and Indicated Mineral Resources and 12.4 million tons grading 0.019 oz/ton Au of Inferred Mineral Resources. Proven and Probable Mineral Reserves were estimated at 130.9 million tons grading 0.018 oz/ton Au. The foregoing Mineral Reserves and Mineral Resources were considered NI 43-101 compliant.
Commercial production was achieved in January 2008. In June 2009, following a business combination with WGI, New Gold became the operator. Newmont’s 2% net smelter royalty on the project was transferred to Franco-Nevada Corporation in 2007.

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TABLE 6-1 HISTORIC PRODUCTION
New Gold Inc. – Mesquite Mine, U.S.A.

Year | Ore Placed | Au Grade | Au Placed | Au Produced | Annual Au Recovery | Cum. Au Recovery
(tons) | (oz/ton) | (ozs) | (ozs) | (%) | (%)
1985 | 329,800 | 0.0549 | 18,110 | 0 | 0.0 | 0.0
1986 | 3,019,700 | 0.0624 | 188,410 | 152,810 | 81.1 | 74.0
1987 | 3,908,200 | 0.0519 | 202,700 | 179,660 | 88.6 | 81.2
1988 | 4,881,900 | 0.0455 | 222,070 | 173,170 | 78.0 | 80.1
1989 | 7,670,300 | 0.0321 | 246,220 | 199,690 | 81.1 | 80.4
1990 | 8,230,800 | 0.0359 | 295,430 | 202,260 | 68.5 | 77.4
1991 | 7,924,100 | 0.0304 | 240,880 | 201,730 | 83.7 | 78.5
1992 | 9,079,900 | 0.0294 | 266,830 | 207,890 | 77.9 | 78.4
1993 | 9,749,900 | 0.0297 | 289,260 | 205,910 | 71.2 | 77.3
1994 | 10,770,280 | 0.0301 | 324,250 | 209,570 | 64.6 | 75.5
1995 | 13,766,790 | 0.0223 | 306,480 | 193,360 | 63.1 | 74.1
1996 | 15,527,630 | 0.0229 | 356,240 | 186,800 | 52.4 | 71.5
1997 | 16,463,000 | 0.0165 | 271,530 | 227,940 | 83.9 | 72.5
1998 | 11,536,700 | 0.0160 | 185,080 | 154,080 | 83.3 | 73.1
1999 | 14,087,100 | 0.0166 | 234,040 | 164,570 | 70.3 | 72.9
2000 | 12,840,900 | 0.0162 | 208,090 | 120,920 | 58.1 | 72.1
2001 | 4,225,500 | 0.0309 | 130,620 | 92,630 | 70.9 | 72.1
2002 |  |  |  | 57,100 |  | 73.5
2003 |  |  |  | 48,796 |  | 74.7
2004 |  |  |  | 29,001 |  | 75.5
2005 |  |  |  | 21,776 |  | 76.0
2006 |  |  |  | 14,001 |  | 76.4
2007 |  |  |  | 7,392 |  | 76.5
Total/Avg | 154,012,500 | 0.0259 | 3,986,240 | 3,051,056 | 76.5 |

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7 GEOLOGICAL SETTING
The following description of the geological setting was summarized from a Technical Report prepared by IMC entitled “Mesquite Gold Project, Imperial County, California, USA, Technical Report”, dated May 26, 2006.
REGIONAL GEOLOGY
The description of the regional geology was taken from a paper written by Newmont Mesquite personnel (Smith et al., 1999).
The Mesquite District lies on the southwest flank of the Chocolate Mountains, in amphibolite grade metamorphic rocks of the upper plate of the Vincent-Chocolate Mountain Thrust. These upper plate rocks represent a fragment of Precambrian and Mesozoic continental crust that has an extremely complex history. During the Precambrian a gneissic complex was formed, followed by several episodes of plutonic intrusion into the gneisses. Granitic rocks were again intruded during the early Triassic and late Jurassic – early Cretaceous periods. The upper plate rocks were also subjected to several phases of amphibolite facies regional metamorphism, ranging from Precambrian to Mesozoic. Figure 7-1 illustrates the relationship between the Mesquite deposit and the major faulting in the area. The map also includes the locations of some other prospects/deposits that seem to be associated with the same regional faulting.
Lithologies exposed in the southern Chocolate Mountains include Proterozoic granitic and metamorphic rocks, Mesozoic metamorphic and plutonic units, early to mid-Tertiary volcanic and plutonic rocks, and Tertiary to recent sedimentary units shown in Figure 7-1 (Manske, 1991). The Proterozoic is represented by the Chuckwalla Complex, while the Mesozoic terrain is a structurally complicated package of gneisses, schist, phyllite, and plutons (Manske, 1991). Mesozoic rock units include the Orocopia Schist, and Jurassic (?) Winterhaven Formation, which are overlain by Tertiary Quechan Volcanic rocks and Quaternary alluvial deposits. A stratigraphic section of the Mesquite area is shown in Figure 7-2.

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The Chuckwalla Complex, locally referred to as the Mesquite Gneiss package, consists of amphibolite to greenschist grade gneisses and schists and plutonic rocks (Manske, 1991). These upper plate Proterozoic to Mesozoic metamorphic rocks are intruded by a series of Mesozoic quartz diorite to peraluminous granite plutons (Haxel and Dillon, 1978). U/Pb isotope dating of these intrusives indicates Jurassic to Cretaceous ages (80 Ma to 105 Ma) (Manske, 1991).
The Chuckwalla Complex was thrust over the Orocopia Schist along the Vincent-Chocolate Mountain Thrust (80 Ma to 74 Ma). The Orocopia is a medium to coarse-grained albite-epidote-amphibolite grade schist, which is exposed along the core of the Chocolate Mountains (Manske, 1991). The protolith of this formation was a middle Jurassic graphitic greywacke. This unit does not outcrop in the Mesquite Mine, but it presumably underlies the district as the regional basement (Haxel and Dillon, 1978).
The Chuckwalla and Orocopia sequence has been offset by the high-angle, normal Singer Fault (8 Ma to 10 Ma). This N60o-70oW (75o-85o NE dipping) fault places the younger Winterhaven Formation in contact with the older, higher metamorphic grade Chuckwalla and Orocopia. The Winterhaven Formation comprises phyllites, quartzites, conglomerates, and metavolcanics and appears to represent Jurassic volcanic and sedimentary protoliths, metamorphosed at a lower greenschist grade (Manske, 1991).
The metamorphic and plutonic terrains were uplifted and eroded during the early Tertiary. Oligocene calc-alkaline magmatism, consisting of andesite and rhyodacite flows (32 Ma) and ignimbrites and tuffs (26 Ma) covered the eroded surface as part of the Quechan Volcanics. The Mt. Barrow quartz monzonite sequence was then intruded (Crowe, 1978, Manske, 1991). These dates are coincident with gold mineralization events, dated at approximately 26 Ma to 38 Ma. Following emplacement of the Mt. Barrow stock, the district was subjected to Tertiary extension. This tectonism generated large-scale northwest-trending faults, and reactivated some Mesozoic thrusts (Haxel and Grubensky, 1984). Near the end of Tertiary extension, the area was regionally deformed resulting in fold axes trending west-northwest. The Chocolate Mountains form the axis of

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a west-northwest trending antiform within the regional fold set, with Mesquite lying on a z-fold along the southwest limb (Manske, 1991).
Erosion of these folded terrains produced poorly sorted conglomerates, fanglomerates, sands, and silts. These Miocene deposits provide a mantle (10 ft to 500 ft thick) over most the Mesquite district (Manske, 1991). A late Miocene basalt flow and recent alluvial gravel deposits cap these units. The right-lateral strike slip motions on the San Andreas system (8 Ma to 10 Ma) have transected all of above noted lithologies, with the exception of recent gravel deposits. A local splay of this system, the Singer Fault, is located between the Chocolate Mountains and the Mesquite Mine.

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PROPERTY GEOLOGY
The Mesquite Mine comprises two subparallel, Oligocene-age orebodies: Big Chief –Vista (Big Chief, Cholla, and Lena, Rubble Ridge, Panhandle, and Vista), and Rainbow (Cherokee, Rainbow, and East Rainbow). Gold mineralization is hosted in Mesozoic gneisses that are intruded by biotite/muscovite rich granites. The district is covered by a thin veneer (0-300 ft) of Tertiary and Quaternary sediments, shed from the south slope of the Chocolate Mountains. Gold mineralization is bound by post-mineral faulting related to the Neogene San Andreas fault system.
STRATIGRAPHY
The Mesquite deposit is hosted by a Jurassic-aged gneiss and pluton terrane. Within this package, a Mesquite District tecto-stratigraphic sequence has been defined (from bottom to top): mafic gneiss (MG), hornblende-biotite gneiss (HBG), biotite gneiss (BG), Bay Horse Quartzite (BQ), and Muscovite Schist (MS). These units have been crosscut by a number of quartz, feldspar, biotite and muscovite-rich granite sills, plutons, and dikes.
The MG, HBG, and BG units are present in a shallowly dipping stratigraphic sequence, offset by numerous high and low-angle faults. The MG unit is recognized by an increase in mafic rocks, development of a schistose fabric, and the presence of tonalite. The HBG unit tends to contain an augen texture, large euhedral sphene crystals (altered to yellow leucoxene), and is the major ore host within the deposit. The BG unit, a salt-and pepper coloured, well-banded gneiss, is commonly brecciated and bleached. This package is overlain by 0-400 ft of Tertiary alluvium (lithified silts, sands, and gravels) and unconsolidated Quaternary gravels.
STRUCTURE
There are four main structural components in the Mesquite mining district. In order of decreasing age:

· | N45o-60oW-striking low-angle reverse faults (25o-35o SW dip). These faults have a 5 ft to 10 ft thick zone of pale green gouge and commonly separate

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mineralized, strongly fractured HBG in the hanging wall from unmineralized MG in the footwall. These structures appear to predate alluvium deposition.

· | E-W-striking high-angle strike slip faults (80o-90o S dip). These faults are right-lateral strike slip faults between which dilational extension (northwesters) probably occurred. These faults show evidence of reactivation, and offset the Tertiary-Bedrock contact.

· | N40o-60oW, high-angle (80o-90o) faults with relatively small offsets, which reflect the primary distribution of gold mineralization.

· | N30o-40oE near-vertical normal faults that offset all other structural elements and the alluvial overburden.

These structures have provided both conduits and offsets to the mineralized zones found at Mesquite. The high-angle northwest structures appear to have the greatest control on gold distribution, while the high-angle northeast faults have offset the orebodies in a stair step fashion. Finally, the system is bounded by San Andreas parallel structures that terminate known mineralization to the south and north. These structures (Singer Fault to north, unnamed to south) have emplaced relatively unprospective ground in contact with the more favourable Mesquite gneissic package. Figure 7-3 and 7-4 illustrate the local geology of the Mesquite Mine area.

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8 DEPOSIT TYPES
The following description of the deposit types was summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
The gold mineralization at Mesquite was deposited in an epithermal setting, within 500 ft to 1,000 ft of the surface. The majority of the economically attractive mineralization is found in the biotite gneiss and hornblende-biotite gneiss, while the mafic gneiss and intrusive rocks are generally less mineralized. Gold mineralization is found both disseminated and vein hosted within these units. The majority of the veining is controlled by faults and fault junctions which have moderate to steep dips.
The gold mineralization dominantly occurs in two types:

· | Pods of mineralization that are limited in lateral and vertical extent at fault intersections.

· | Trends of mineralization along faults.

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9 MINERALIZATION
The following description of the mineralization was summarized from a document written by Newmont personnel describing the Mesquite operation (Smith et al., 1999) and reported in the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
Gold occurs at Mesquite as both submicron disseminated and coarse gold. All documented gold occurrences are native gold, and classification has been based on silver content and grain size. A silver-free native gold is the most common type in the oxidized zone. It occurs in particles less than five microns, although clusters up to 100 µ are common in fault zones. Gold grains are subhedral to anhedral in shape, with anhedral morphology predominating. In general, the grains are characterized by irregular, ragged boundaries and equant to elongate shape. Gold within the oxide portion of the deposit is commonly associated with goethite pseudomorphs after pyrite and mica minerals. Later stage gold, less than five microns, is found along the cleavages of the micas.
A second type of gold is the silver-bearing (5% to 20%) coarse (10 µ to 600 µ) gold. Its average size is 30 µ to 50 µ and it is typically found in the unoxidized zone, and only occasionally in the oxidized zone. Grains have octahedral morphology, with cuspate to sharp boundaries. Gold specimens are usually bright yellow electrum, with minor inclusions of galena and pyrite. Silver-bearing gold is associated with quartz-adularia pyrite veins containing arsenopyrite, magnetite, and chalcopyrite.
Visible gold has been identified throughout Mesquite. Small flakes, less than 50 µ, of free “flour” gold have been found within the oxidized gouge and clay fault zones. The flour gold is thought to be a result of remobilization during oxidation and is supergene in nature. Gold is typically associated with titanium oxides (rutile) and hematite. These zones are limited in extent (one inch to three feet wide, with three feet to 50 ft of strike length), but can be extremely high grade. Selective sampling indicates typical gold values of 1.0 oz/ton to 2.0 oz/ton Au, with a high of 35.9 oz/ton Au recorded in Big Chief.

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Coarse-grained hypogene gold has also been noted with more frequency and larger size in the unoxidized portion of the deposits. Recent test work on non-oxidized ore indicates that 65% to 78% of the gold is liberated free milling gold, 13% is associated with refractory sulphide minerals, and the remainder is associated with iron oxides and carbonates. Grain size ranges from 10 µ to 600 µ, with no textural indications of re-mobilization. Coarse gold generally occurs as electrum within quartz veins (occluded and void fill), while the refractory portion is found within overgrowth rims of arsenopyrite, chalcopyrite, and pyrite.

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10 EXPLORATION
New Gold and its predecessor WGI have not conducted any exploration work on the property. The following description of the surface exploration by Newmont, Santa Fe, and Gold Fields was summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
The first gold production at the Mesquite project dates to the late 1800s and early 1900s when placer gold was recovered on a small scale. After World War II, small-scale subsistence mining continued. At times, hundreds of people worked the mines or prospected in the area.
Exploration during the 1970s included work by Placer-Amax, Conoco, Glamis Gold Corporation (Glamis Gold), Newmont, and Gold Fields. Exploration sampling, trenching, and drilling identified a number of gold bearing zones. The results and details concerning the pre-Gold Fields exploration are not available for inclusion in this report.
In 1980, Gold Fields acquired the property and conducted exploration. They initiated a thorough exploration program that included surface sampling and geophysics. In September 1981, Gold Fields drilled twelve rotary drill holes, ten of which encountered significant mineralization within 200 ft of the surface. In 1982, Gold Fields drilled the Big Chief deposit on a 141 ft fence line, with holes spaced 141 ft apart along the fence line.
This campaign employed 5-1/4 inch reverse circulation (RC) holes above the water table (approximately 200 ft) and 3-1/16 inch core holes below the water table. By September 1982, 350 exploration holes had been drilled. By September 1983, a total of 868 holes were completed totalling 284,439 ft of drilling. About half of the holes in the present database were completed by mid-year 1988 (3,200 holes and 1.3 million ft). Gold Fields, Santa Fe, and Newmont continued to drill on the Mesquite property by mostly RC drilling as they mined the deposits, although Gold Fields completed most of the drilling

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on the property. By 1993, over 5,000 holes had been completed by Gold Fields totalling 2.4 million ft.
In late 1982, sinking of a decline began with the objective of improving the confidence in the drill results of the Big Chief deposit. A total of 2,390 ft of underground decline development (586 rounds) near the centre of the deposit was completed in 1983 (Bechtel, 1984). The decline was driven to provide material for pilot heap leach tests and to allow detailed geologic mapping and bulk sampling of the deposit. Each round from the decline was bulk sampled and a comparison with drill sampling was noted by Bechtel (1984). A total of 50 model blocks were estimated from the decline data and compared to the same blocks estimated from drill holes drilled along the path of the decline on 20 ft intervals. The average grade of the two estimates compared closely, although the grade estimates of individual blocks did not correlate well.
Gold Fields, Santa Fe, and Newmont continued to drill and develop the Big Chief, Vista, Cherokee, Rainbow, Lena, and Gold Bug deposits on the property. The initial grid at Big Chief was reduced to 70 ft with infill drilling along the 141 ft space fence lines. The Vista deposit was initially drilled on 140 ft sections, with drill holes spaced 70 ft apart on the sections. The other deposits were drilled initially on 200 ft to 400 ft grids, with infill drilling generally completed on 100 ft spacing.

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11 DRILLING
New Gold and its predecessor company WGI have not carried out any drilling on the property. The following description of the drilling by previous operators was summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
The Mesquite Mine database comprises 2.7 million ft of drilling in 6,221 drill holes, most of which are RC holes. A total of 103 holes in the database were diamond drill holes. During the early development of the property, 128 of the RC drill holes were deepened by diamond drilling below the water table. A total of 13 PQ core holes that were drilled for metallurgical testing were not found in the current drill hole database. Most of the drill holes were vertical holes and have not been downhole surveyed.
In general, the disseminated mineralization appears to be flat-lying or with a moderate 16º southwest dip. The vertical drilling provides an appropriate measure of the true mineralization thickness.
The drill hole locations are illustrated in Figure 11-1.
REVERSE CIRCULATION DRILLING AND LOGGING
The initial sampling by Gold Fields on the RC drilling was completed using two field samplers to collect and quarter each 2.5 ft drill interval from a Jones riffle beneath the drill cyclone. Approximately 85% of the samples were dry. Wet sampling was completed by a rotary wet sampler located beneath the drill cyclone, and during wet sampling flocculent was added to aid the settling of fines.
Portions of each 2.5 ft interval bags were poured into sieves and washed. The washed samples were then placed into trays to half fill the cells in the trays. The sample chips in the trays were then logged by a company geologist. No sample trays are available because the trays were discarded before WGI acquired the property.

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Gold Fields completed most of the RC drilling on the property. The methods used by Santa Fe and Newmont have not been documented.
CORE DRILLING AND LOGGING
Core drilling was generally completed using HQ core, which was transported to Yuma, Arizona, where it was cleaned and photographed. The core was logged, marked, and rock quality designation (RQD) measurements were taken from each five-foot interval. Core recovery information is not available in the database. The core from the various drill campaigns was discarded before WGI acquired the property.
TWIN HOLE COMPARISON
Gold Fields drilled two pairs of twin RC/diamond drill holes during the preproduction exploration. They concluded that the assays showed the same overall distribution of gold grades although with high local variation. The correlation coefficient for the paired composites is 55%; the mean value of the core composites (20 ft) was 0.028 oz/ton Au; and the mean of the RC composites (also 20 ft) was 0.027 oz/ton Au. The coefficient of variation was 1.3 for the core composites and 0.9 for the RC composites (Bechtel, 1984).
Mine Development Associates (MDA) found, and reported in its December 2004 Technical Report, that a number of the vertical diamond drill holes had been drilled within 25 ft of vertical RC drill holes. MDA compared 32 core holes with nearby RC drill holes representing approximately 10,000 ft of compared data. This comparison showed significant differences between some of the holes (Table 11-1), indicating that the RC assays tend to return higher assays than comparable core assays.
In its 2006 Technical Report, IMC concluded that though it was possible there was a bias in the RC samples, resource modelling methods employed at the property, particularly capping of high grade assays to get models to conform to production results, must have compensated for this bias. This is supported by the performance of the resource models to the actual mined tonnage.

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TABLE 11-1 TWIN HOLE COMPARISON
New Gold Inc. – Mesquite Mine, U.S.A.

Core Holes | RC Hole | Interval | Footage | Core | RC
Hole # | East | North | Hole # | East | North | From | To |  | Oz/ton Au | Oz/ton Au
LDH-01 | 12948 | 9925 | MR-1995 | 12943 | 9914 | 275 | 540 | 265 | 0.029 | 0.032
LDH-02 | 12804 | 10065 | MR-0809 | 12791 | 10062 | 135 | 500 | 365 | 0.015 | 0.020
LDH-03 | 12752 | 10020 | MR-1824 | 12742 | 10012 | 205 | 460 | 255 | 0.019 | 0.019
LDH-04 | 12687 | 9970 | MR-1830 | 12694 | 9961 | 165 | 440 | 275 | 0.014 | 0.021
LDH-05 | 12889 | 9964 | MR-0811 | 12877 | 9963 | 250 | 520 | 270 | 0.017 | 0.036
LDH-08 | 12044 | 10582 | MR-1700 | 12049 | 10586 | 75 | 380 | 305 | 0.014 | 0.018
LDH-09 | 12188 | 10616 | MR-0780 | 12198 | 10621 | 75 | 420 | 345 | 0.013 | 0.059
LDH-10 | 12200 | 10507 | SM-0484 | 12193 | 10503 | 135 | 380 | 245 | 0.018 | 0.015
LDH-11 | 12895 | 10069 | MR-0678 | 12883 | 10063 | 135 | 540 | 405 | 0.014 | 0.050
LDH-12 | 12375 | 10283 | MR-0671 | 12389 | 10294 | 105 | 360 | 255 | 0.012 | 0.021
LDH-13 | 12563 | 10140 | MR-0178 | 12581 | 10152 | 225 | 360 | 135 | 0.034 | 0.049
LDH-14 | 11664 | 10574 | MR-1731 | 11659 | 10576 | 100 | 330 | 230 | 0.024 | 0.024
LDH-15 | 11513 | 10529 | MR-0798 | 11508 | 10523 | 115 | 480 | 365 | 0.023 | 0.025
LDH-18 | 12325 | 10442 | MR-1717 | 12342 | 10457 | 55 | 400 | 345 | 0.013 | 0.012
LDH-20 | 11648 | 10578 | MR-1731 | 11659 | 10576 | 100 | 420 | 320 | 0.030 | 0.028
LDH-21 | 11232 | 10963 | SM-1488 | 11243 | 10963 | 260 | 500 | 240 | 0.011 | 0.158
VDH-01 | 17173 | 6997 | MR-0479 | 17181 | 7004 | 0 | 200 | 200 | 0.035 | 0.012
VDH-02 | 17039 | 7039 | MR-1219 | 17052 | 7029 | 0 | 400 | 400 | 0.012 | 0.020
VDH-04 | 17362 | 7149 | MR-1388 | 17351 | 7158 | 65 | 300 | 235 | 0.032 | 0.028
VDH-05 | 17442 | 7056 | MR-1230 | 17450 | 7037 | 160 | 360 | 200 | 0.040 | 0.063
VDH-07 | 17257 | 7234 | MR-1220 | 17277 | 7248 | 0 | 300 | 300 | 0.016 | 0.012
VDH-09 | 17071 | 7271 | MR-1367 | 17059 | 7259 | 0 | 360 | 360 | 0.024 | 0.014
VDH-10 | 17191 | 7170 | MR-2982 | 17198 | 7165 | 0 | 470 | 470 | 0.015 | 0.030
VDH-11 | 18033 | 7051 | MR-1339 | 18044 | 7052 | 85 | 500 | 415 | 0.024 | 0.033
VDH-12 | 16307 | 7105 | MR-0969 | 16302 | 7106 | 15 | 300 | 285 | 0.006 | 0.046
VDH-13 | 16743 | 7137 | MR-1216 | 16757 | 7152 | 15 | 500 | 485 | 0.011 | 0.016
VDH-14 | 18012 | 7196 | MR-0089 | 18005 | 7184 | 45 | 380 | 335 | 0.025 | 0.024
VDH-16 | 16391 | 7180 | MR-0349 | 16399 | 7200 | 20 | 300 | 280 | 0.033 | 0.014
VDH-17 | 18140 | 6949 | MR-1253 | 18144 | 6963 | 120 | 555 | 435 | 0.038 | 0.104
VDH-18 | 18177 | 6997 | MR-0613 | 18187 | 7000 | 100 | 550 | 450 | 0.148 | 0.039
VDH-19 | 18135 | 7134 | MR-1310 | 18137 | 7151 | 95 | 360 | 265 | 0.019 | 0.026
VDH-21 | 17176 | 6994 | MR-0479 | 17181 | 7004 | 0 | 260 | 260 | 0.011 | 0.011
Totals |  |  |  |  |  |  |  | 9,995 | 0.026 | 0.033

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12 SAMPLING METHOD AND APPROACH
The following description of the sample method and approach was summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
REVERSE CIRCULATION SAMPLING
Gold Fields’ initial sampling on the RC drilling was completed using two field samplers to collect and quarter each 2.5 ft drill interval from a Jones riffle located beneath the drill cyclone. The succeeding 2.5 ft interval split was combined to produce a quarter split of the five-foot interval. This sample generally weighed 25 lb to 30 lb. This sample was placed in bags and trucked to Yuma, Arizona, to the Gold Fields in-house sample preparation facility. The samples were dried in Yuma prior to processing.
Details of Santa Fe and Newmont sampling methods have not been documented.
DIAMOND DRILL CORE SAMPLING
The whole core was transported to Gold Fields in-house sample preparation facility in Yuma, Arizona. The whole core was reduced, with the primary size reduction done with a jaw crusher followed by secondary crushing with a rolls crusher. After crushing, the sample preparation was similar to RC drilling.
BLASTHOLE DRILLING
In addition to the drilling data, over 650,000 blasthole samples were taken during mine operations from 1985 to 2001. Blastholes were drilled on 19 ft to 24 ft spacing on each bench to define the ore and waste boundaries while mining. The blasthole samples were collected by the blasthole driller using a through-the-deck “rocket” sampler, and assayed at the mine laboratory using methyl-isobutylketone (MIBK) gold dissolution and atomic absorption assaying.

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The assay information for most of these data is available in a database. Historically, the blasthole database has been used to reconcile the various resource models developed for the property. This means that, on a continuous basis, a key step in the development of resource models was the comparison of how the modelling techniques performed compared to these historic data. IMC also used these data to reconcile the model on which the current mineral resource estimate is based.
COMMENTS REGARDING SAMPLING METHOD AND APPROACH
The sampling methods and approaches used for the sampling of the Mesquite deposit are consistent with the deposit and mineralization type. Though the data are historic in nature, the descriptions provided indicate the sampling was done correctly. IMC (2006) reported that they were not aware of any deficiencies in sampling method or sample recovery that would impact on the reliability of the results.
In Scott Wilson RPA’s opinion, the sampling method and approach are appropriate for mineral resource estimation. Although the data are historic and details of the Santa Fe and Newmont sampling methods have not been documented, the mineral resource estimates vs. actual production reconciliation has been reasonable and therefore minimizes these issues.

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13 SAMPLE PREPARATION, ANALYSES AND SECURITY
The following description of the sample method, analysis and security was summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
SAMPLE SECURITY
The samples were collected, split, and placed in sealed bags at the drill site and transported to the Mesquite Mine exploration sample preparation facilities located in Yuma, Arizona, by company employees. The sample pulps were prepared in Yuma and were shipped to assay laboratories. Most of the samples were shipped to Gold Fields’ assay laboratory facilities in Lakewood, Colorado. Although the procedure used by Santa Fe or Newmont has not been formally documented, the only probable change to sampling protocol was that the Yuma office was closed during this time resulting in sample preparation work being done at the mine site.
DRILL SAMPLE PREPARATION AND ANALYSIS
Reverse circulation drill samples, core samples, and bulk samples (from the decline), were treated at the Gold Fields sample preparation facility in Yuma, Arizona. The previously prepared 40 lb bulk sample and the drill samples were crushed to -10 mesh and then split in a Jones splitter to approximately one pound. This sample was pulverized to -150 mesh and split into four pulps. One of these pulps was fire-assayed at Gold Fields’ laboratory in Lakewood, Colorado. Check assays were run on 20% of the samples by submitting a second pulp to either Skyline Laboratory or Barringer Laboratory. The check assays made on the duplicate pulps were noted to agree with the original assay with no bias and 95% correlation coefficient. It is unknown if the aforementioned laboratories were certified.

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During sample preparation, periodic checks were made for coarse gold by running the reject material through a Denver gold saver and carrying out both visual and quantitative assessments of the results (Bechtel, 1984).
Due to the historic nature of the Mesquite assay data, the certification applicable to the Barringer and Skyline laboratories during the course of their work is not known. Both were commercial laboratories that were heavily relied on by the mining industry during that time. It is also reported that a significant number of the assays were done by the Gold Fields facility in Lakewood. Note that much of the Gold Fields laboratory analyses would have been in the areas of Big Chief that have been mostly mined out and would not be a major factor for future production.
QUALITY ASSURANCE/QUALITY CONTROL, CHECK SAMPLES, CHECK ASSAYS
According to Bechtel (1984), Gold Fields prepared all drill samples (both core and RC) and the bulk samples from the decline at its sample preparation laboratory in Yuma, Arizona. After the samples were fire assayed at the Gold Fields’ laboratory in Lakewood, Colorado, check assays were done on approximately 20% of the samples. A second duplicated pulp was assayed by either Barringer Laboratory or Skyline Laboratory.
Gold Fields’ comparison of 1,383 check assays with the corresponding original assays shows a good correlation of the two sets of data. The means were within approximately 5% and the correlation coefficient was 95%.
The QA/QC procedures by Santa Fe or Newmont have not been formally documented, but QA/QC, check samples, and check assays were done as evidenced by information in the hard copy files existing for each individual hole. In addition, a program of soluble cyanide assaying was performed along with the fire assaying.
Figure 13-1 illustrates the sample preparation and assay procedure. In Scott Wilson RPA’s opinion, the sample preparation, security, and analytical procedures were adequate for Mineral Resource estimation.

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14 DATA VERIFICATION
The following description of the data verification was summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006.
BULK SAMPLES BY GOLD FIELDS
In 1982 and 1983, a decline and crosscuts were developed in the Big Chief deposit to provide material for a pilot heap leach and to obtain geologic information in the deposit. A total of 2,390 ft of underground development was completed. Each blast round of approximately 40 tons was split into two portions, one for metallurgical testing and the other for assaying. A total of 58 rounds were bulk sampled. Table 14-1 shows a comparison of model blocks estimated from the decline samples with the same model blocks estimated using only the drill data. It can be seen that the means of the two data sets compare very well at 0.052 oz/ton and 0.051 oz/ton, respectively. The low correlation coefficient, however, indicates that on a round-by-round basis there was considerable variability between the bulk and drill sample results. The results of the study demonstrate that a mineral resource estimate should be reliable on a global basis, but less so on a smaller scale.
OTHER EARLY GOLD FIELDS DATA CHECKS
Bechtel (1984) reported that Gold Fields compared the results of RC and core drilling and concluded that there was no bias in either type of drilling. During the initial reserve estimation, Gold Fields also made a comparison of block estimates based on drill holes with block estimates based on four or more bulk samples within each block. The mean grades of 50 blocks were within 2%. In addition, Gold Fields made a comparison of the grade estimates for 1,122 blocks based on 141 ft spaced drilling with grade estimates of the same blocks based on drill spacing averaging less than 100 ft. The difference in the means of the block estimates was less than 1%, although individual blocks did not compare well (Bechtel, 1984). The results are summarized in Table 14-1.

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TABLE 14-1 COMPARISON OF BLOCK ESTIMATES FROM DECLINE VS. DRILL HOLES
New Gold Inc. – Mesquite Mine, U.S.A.

Item | Drill | Decline
Mean – oz/ton Au | 0.052 | 0.051
Minimum Grade – oz/ton Au | 0.010 | 0.010
Maximum Grade –oz/ton Au | 0.099 | 0.175
Standard Deviation | 0.018 | 0.034
Number of Blocks | 50 | 50
Correlation Coefficient | 12.70% | 12.70%

IMC DATA COMPARISON AND COMMENTS
IMC (2006) did a comparison of the drilling data with the blasthole data by pairing drill hole composites with the closest blasthole within 10 ft. The summary statistics compared well, indicating good agreement between these two key data sets.
IMC (2006) believed that the sampling database at Mesquite was adequate to develop the resource model, mineral resource estimate, and ultimately, the mineral reserve estimate to the level of accuracy required for the feasibility study.
The MDA analysis presented in Table 11-1 indicates the possibility that the RC data are slightly high biased compared to core. IMC proposed that, if this was true, it had been accounted for in the resource modelling, mostly due to, in the opinion of IMC, fairly aggressive grade capping. The comparison of blasthole data to RC data does not show this bias.
SCOTT WILSON RPA CHECKS
Original assay results from the individual drill programs are located in the hard copy files containing drill hole logs and assay sheets. Scott Wilson RPA compared the assays from the original assay certificates with the entries in two diamond drill logs and found no errors. In Scott Wilson RPA’s opinion the definitive check is the Mineral Reserve model vs. actual production discussed in Item 17, Mineral Resources and Mineral Reserves.

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15 ADJACENT PROPERTIES
Several properties have been mined within a mineralized belt running between the Chocolate Mountains to the north and the southern slopes of the Cargo Muchacho Mountains to the south. The belt extends from the Mesquite Mine to about 20 miles to the southeast. Properties that have been mined include the Picacho Mine and the American Girl Mine. The Imperial Project is located about 10 miles to the southeast from the Mesquite Mine.
On a larger scale the mineralized belt is thought to continue south into northern Mexico. Newmont is a joint venture partner with Penoles on La Herradura Mine located 250 miles southeast of Mesquite in Northern Mexico.
Scott Wilson RPA has not verified the information presented here on the adjacent properties. Information regarding mineralization at adjacent properties is not necessarily indicative of mineralization at Mesquite.

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16 MINERAL PROCESSING AND METALLURGICAL TESTING
METALLURGICAL TESTING
HISTORICAL RECOVERIES
Between October 1985 and May 2001, 154 million tons of ore containing 3,986,000 oz of gold were placed on the heap leach pads with an average grade of 0.0259 oz/ton Au. Leaching of the pads to recover residual gold continued until the end of 2007. By December 2007, a total of 3,051,100 oz of gold had been produced, having an overall recovery of 76.5%. A summary is provided in Table 16-1.
TABLE 16-1 HISTORICAL MESQUITE MINE PRODUCTION
New Gold Inc. – Mesquite Mine, U.S.A.

Year | Tons Mines | Au Grade (oz/ton) | Gold Mined (oz) | Gold Produced (oz) | Annual Au Recovery (%) | Cum. Au Recovery (%)
1985 | 329,800 | 0.055 | 18,110 |  |  |
1986 | 3,019,700 | 0.062 | 188,410 | 152,810 | 81 | 74
1987 | 3,908,200 | 0.052 | 202,700 | 179,660 | 89 | 81
1988 | 4,881,900 | 0.045 | 222,070 | 173,170 | 78 | 80
1989 | 7,670,300 | 0.032 | 246,220 | 199,690 | 81 | 80
1990 | 8,230,800 | 0.036 | 295,430 | 202,260 | 68 | 77
1991 | 7,924,100 | 0.030 | 240,880 | 201,730 | 84 | 78
1992 | 9,079,900 | 0.029 | 266,830 | 207,890 | 78 | 78
1993 | 9,749,900 | 0.030 | 289,260 | 205,910 | 71 | 77
1994 | 10,770,280 | 0.030 | 324,250 | 209,570 | 65 | 76
1995 | 13,766,790 | 0.022 | 306,480 | 193,360 | 63 | 74
1996 | 15,527,630 | 0.023 | 356,240 | 186,800 | 52 | 71
1997 | 16,463,000 | 0.016 | 271,530 | 227,940 | 84 | 73
1998 | 11,536,700 | 0.016 | 185,080 | 154,080 | 83 | 73
1999 | 14,087,100 | 0.017 | 234,040 | 164,570 | 70 | 73
2000 | 12,840,900 | 0.016 | 208,090 | 120,920 | 58 | 72
2001 | 4,225,500 | 0.031 | 130,620 | 92,630 | 71 | 72
2002 |  |  |  | 57,100 |  | 74
2003 |  |  |  | 48,796 |  | 75
2004 |  |  |  | 29,001 |  | 75
2005 |  |  |  | 21,776 |  | 76
2006 |  |  |  | 14,001 |  | 76
2007 |  |  |  | 7,392 |  | 76.5
TOTAL | 154,012,500 | 0.026 | 3,986,240 | 3,051,056 | 76.5 | 76.5

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During the life of the mine, a number of predictions were made for ultimate gold recoveries of the different ore classifications, by WMMI; Kappes, Cassidy & Associates (KCA); and Newmont. A comparison of their predictions is shown below in Table 16-2.
The estimates were based on recovery projections for the five ore categories, which were developed from the analysis and interpretation of laboratory column tests, test heap results, and historical production data from discrete leach pad areas.
TABLE 16-2 COMPARISON OF MESQUITE ORE TYPE ULTIMATE GOLD RECOVERY ESTIMATES
New Gold Inc. – Mesquite Mine, U.S.A.

Ore Category | WMMI (1999) % | KCA (1999) % | Newmont (2004) %
Crushed oxide1 | 80.2 | 82.0 | 82.0
ROM high grade oxide2 | 80.0 | 79.0 | 79.0
ROM low grade oxide3 | 75.0 | 75.0 | 75.0
Crushed non-oxide1 | 29.0 | 30.0 | 30.0
ROM non-oxide | 40.0 | 40.0 | 40.0
Overall Average | 75.3 | 76.3 | 76.3

Notes:

1. | Crusher shut down in September 1996.

2. | Gold grade > 0.016 oz/ton.

3. | Gold grade < 0.016 oz/ton.

4. | ROM – run-of-mine

The total estimated weighted averages of KCA and Newmont are similar to the actual life-of-mine gold recovery of 76.5% shown in Table 16-1.
HISTORICAL TESTWORK
The following historical testwork was carried out:

1. | McClelland Laboratories Inc. (McClelland) Metallurgical Review (December 1995)

· | Results indicated that leaching performance of Mesquite oxide mineralization was independent of ore type and mining area.

· | McClelland concluded that crushed and run-of-mine (ROM) mineralization appeared to leach to comparable levels and with similar kinetics.

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· | McClelland recommended not to crush Mesquite oxide ore before placing it on the leach pad as crushing would likely not provide any economic benefit to the operation.

· | Observations included the following:

o | Tail grade decreased with decreasing head grade.

o | Tail grade and leach performance were relatively independent of ore type and mining area.

o | Tail grade increase recognized in 1994 was a result of increased tonnages of non-oxide ore being mined and placed on the heaps.

2. | McClelland Run-of-Mine Leach Tests (1997)

· | Results justified the run-of-mine decision.

· | Agglomeration would not be beneficial to the heap leaching process performance.

3. | Newmont Pilot Non-Oxide Heap Leach Test Review (December 1999)

· | A 25,000 ton sample pilot heap, grading 0.062 oz/ton, was operated for a total of 502 days.

· | Gold extraction 21% after the first 56 days, 40% after day 396 and 42% after day 505.

· | Low solution pH, probably due to oxidizing sulphides, resulted in low cyanide concentrations, which would have retarded the leaching performance during the test.

· | Total cyanide consumption was 2.4 lb/ton, but this would be significantly lower with improved pH control.

4. | Newmont Metallurgical Review of Vista and Rainbow Non-Oxide Mineralization (1999)

· | Bottle rolls and column tests were carried out on composite samples from the Vista and Rainbow pits.

· | Column test results (Table 16-3) indicated that increase of cyanide concentration did not improve recovery significantly.

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TABLE 16-3 COMPARISON OF NON-OXIDE VISTA AND RAINBOW 21-DAY COLUMN TESTS
New Gold Inc. – Mesquite Mine, U.S.A.

| Au Extraction (%)
Conditions | Rainbow | Vista
NaCN conc. - 150 ppm | 19.0 | 30.4
NaCN conc. - 300 ppm | 19.5 | 34.0
Pb nitrate addition – 20 ppm1 | 23.3 | 37.3
Pb nitrate addition – 40 ppm1 | 25.7 | 38.0

1 Leach NaCN concentration of 300 ppm.

5. | Non-Oxide Gravity Separation Tests on samples of Vista non-oxide mineralization (1990)

· | Gravity concentrate gold recoveries were consistently above 90% into less than 5% of the sample mass and concentration ratios were generally above 50.

· | Of the few concentrates assayed for sulphide sulphur, the average content was approximately 50%.

· | Number of the gravity concentrates had coarse gold (>1 mm).

· | Testwork suggested that flotation could be used for the recovery of gold associated with sulphide minerals.

· | Gravity separation appeared to be the most preferred option as it recovered both coarse free gold and gold associated with sulphide mineralization.

RECENT TESTWORK
Recent testwork included:

1. | Bulk Sample Leach Tests (2004)

· | Seven bulk samples were taken by Mesquite personnel to be used for a metallurgical testing program.

· | The average oxide sample column test gold extraction was 76%, which compares well with historical production data (discounting one bulk sample).

· | Gold extraction tended to increase with an increase in head grade.

· | No significant metallurgical performance trend was observed in terms of sample location within the orebody.

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2. | Review of Drill Hole Cyanide Assays (2006)

· | 529 Southeast Rainbow samples (from 57 drill holes) and 343 Bayhorse samples (from 31 drill holes) were hot cyanide shake leached and assayed.

· | Purpose of this work was to compare the leaching performance of potential future ore by using a relatively quick and inexpensive test protocol.

· | Results suggested that the cyanide assay method would indicate relative gold solubility when applied to finely ground samples.

· | Procedure was proposed for exploration and production samples to determine potential recoveries from oxide/non-oxide transition zones within the orebodies.

RECOVERY PREDICTIONS
As part of the feasibility study, Micon reviewed the production and test data discussed in the previous subsections and suggested that the oxide mineralization heap leach performance was dependent on head grade but relatively independent of ore type and mining area. Micon’s estimates of ultimate gold recoveries for ROM oxide mineralization at various head grade intervals are shown in Table 16-4.
TABLE 16-4 MICON GOLD RECOVERY ESTIMATES BASED ON HEAD GRADE
New Gold Inc. – Mesquite Mine, U.S.A.

Head Grade Interval (oz./ton Au) | Estimated Oxide Recovery (%)
Less than 0.01 | 73
0.01 to 0.02 | 75
0.02 to 0.03 | 79
0.03 to 0.04 | 81
Greater than 0.04 | 82

As far as the non-oxide material was concerned, Micon’s comments in the feasibility report were:
The metallurgical test performance of mineralization categorized as non-oxide has been extremely variable. This is considered to be due to varying levels of oxidation of this material with transition or mixed (oxide plus non-oxide) being categorized with purely non-oxide mineralization. A program of cyanide leach assaying of exploration and production blast hole samples is being introduced at Mesquite which will assist in the leach gold recovery prediction of mixed ore classified as non-oxides.

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As well, Micon commented:
Due to the occurrence of coarse gold in the non-oxide mineralization, the ultimate gold recovery will depend on the length of time the material is under leach. Micon suggests that a conservative gold extraction estimate of 35% is reasonable for non-oxide material. However, cyanide assay data should be used to assess the leachability of mixed samples and additional recovery should be applied to non-oxides that exhibit low refractory characteristics.
PROCESS PLANT
SUMMARY
The processing facilities are designed to process 7,500 gpm of pregnant gold solution producing up to 140,000 oz of gold annually from a combination of 107 million tons of oxide ore grading 0.016 oz/ton and 25 million tons of non-oxide ore. The total life-of-mine tonnage will be approximately 132 million tons at an average grade of 0.017 oz/ton gold.
The processing facilities will include the following operations:

· | Heap leaching.

· | Carbon adsorption.

· | Desorption and gold recovery.

· | Reagents and utilities.

· | Water services.

ROM ore, with lime added for pH control, is trucked to the heap leach pad. The ore is leached with a dilute cyanide solution which percolates through the pile. The gold bearing pregnant solution is collected in a series of flume boxes, with the option to send solution to ponds, the barren solution tank, or the pregnant solution tank.
From the pregnant solution tank, the gold bearing solution is pumped to the adsorption plant, comprising a new set of carbon columns (CIC), where the gold is removed from the solution using activated carbon. Solution that discharges from the last column overflows to the barren tank where liquid sodium cyanide, fresh water, liquid caustic and antiscalant are added, as necessary, to make up fresh leach solution, which is

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returned to the leach pad for additional leaching of the ore. The flowsheet is shown in Figure 16-1.
Loaded carbon from the CIC circuit is transported to the desorption circuit located at the existing gold plant via trailer (Figure 16-2). There, it is washed with a dilute hydrochloric acid solution and stripped in a traditional pressure AARL strip circuit. Electrowinning cells are used to recover gold. The electrowinning sludge is mixed with fluxes and treated in an induction furnace to produce doré gold bars. The barren solution is returned for reuse on the heap leach pad.
Caustic soda, liquid sodium cyanide, antiscalant, hydrochloric acid, and lime are received in bulk quantities and stored as required. Appropriate storage and containment facilities are provided for all of the reagents and all acids are stored separately from all cyanide mixing and distribution areas.
The processing circuits are designed to contain the water associated with normal precipitation events. The storm water ponds are designed to contain the excess water from an extreme event, such as a 24-hour, 100-year storm.

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MODIFICATIONS TO OLDER PROCESS FACILITIES
The following modifications were made to upgrade the process facilities as required:

· | New adsorption area in the southwest corner of Pad #5.

· | New CIC circuit rated for 7,500 gpm.

· | One new stripping vessel with heat exchangers.

· | One new pregnant solution tank.

· | One new barren solution tank.

· | Two new electrowinning cells.

· | New complete system for liquid sodium cyanide.

The future work planned for the leaching and reagents area includes the following:

· | Expansion of Leach Pad #6 in 2 phases; including liners, distribution and collection piping and launders.

· | Modification to solution distribution system to deliver barren solution to heaps.

· | New reagent handling systems at the adsorption area.

WATER SERVICES
From the water wells, fresh water will be pumped to the raw water tank, the barren solution tank or the barren solution pond. From the raw water tank, it will be distributed to the potable water system, the gland water tank, and the process water tank. Process water will be used for dust suppression, for make-up water in the heap leaching circuit, as wash water for the carbon screens, to mix strip solution and acid wash solution, and for carbon attrition.
PROCESS ORGANIZATION
Figure 16-3 outlines the process plant organization, which consists of operating, maintenance and support personnel.

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17 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
MINERAL RESOURCE ESTIMATE
IMC estimated the mineral resources at the Mesquite Mine in 2006 using proprietary mining software. In 2008, WGI staff, using Vulcan mining software, reviewed the IMC estimate by creating a resource block model using identical IMC coordinate limits, input parameters and methodology, including: variography ranges and search directions/ distances, assay-compositing thicknesses, grade capping, mineralization domains, indicator and ordinary kriging parameters, and maximum/minimum number of samples to define the blocks, among other criteria. The resultant Vulcan model compared very closely to the IMC model; in terms of replicating an interpolated grade model for auditing purposes, IMC stated that the WGI model compared quite closely. Consequently, the IMC model was validated by WGI and remains the effective model currently in use. Because of differences in algorithms between the IMC and Vulcan software packages, however, replicating the material-type proportions within the WGI resource model of measured, indicated, and inferred classification was not possible, even though the identical input parameters were utilized in Vulcan as those used by IMC. This situation is not uncommon, as attested to by IMC. As a result, to keep IMC’s overall material classification scheme intact, WGI assigned, on a block-by-block basis, the identical classification designation in its resource model as that used by IMC.
IMC validated the year-end WGI 2008 Mineral Resources in March 2009 by creating a floating cone shell using $650/oz Au as per the original estimate. IMC also ran a floating cone at $850/oz Au using operating costs from the 2009 budget and stated that the WGI resource estimate was reasonable, though slightly conservative.
The mineral resources, inclusive of mineral reserves, effective December 31, 2009, are summarized in Table 17-1 and were derived by comparing the end of December 2009 surface.

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TABLE 17-1 MINERAL RESOURCES INCLUSIVE OF MINERAL RESERVES – DECEMBER 31, 2009
New Gold Inc. - Mesquite Mine, U.S.A.
Class | Classification | Tons | Grade | Contained Au
|  | (000s) | (oz/ton Au) | (ozs)
Measured | Oxide | 86,772 | 0.014 | 1,189,000
| Non oxide | 34,017 | 0.019 | 660,000
| Subtotal | 120,788 | 0.015 | 1,849,000
Indicated | Oxide | 122,265 | 0.014 | 1,663,000
| Non oxide | 76,790 | 0.017 | 1,321,000
| Subtotal | 199,055 | 0.015 | 2984,000
Measured & | Total | 319,844 | 0.015 | 4,833,000
Indicated |  |  |  |
Inferred | Oxide | 10,563 | 0.011 | 119,000
| Non oxide | 13,579 | 0.017 | 234,000
| Total | 24,142 | 0.015 | 353,000

Notes:

1. | Mineral resources are inclusive of mineral reserves.

2. | CIM definitions were used for mineral resource estimation.

3. | A gold price of US$900/oz was used.

4. | Mineral resources were estimated using cut-off grades of 0.003 oz/ton Au and 0.006 oz/ton Au in the oxide and non-oxide, respectively.

5. | Columns may not add exactly due to rounding.

The following description of the mineral resource estimation procedures is summarized from the Technical Report prepared by IMC entitled “Mesquite Gold Project Imperial County, California, USA, Technical Report”, dated May 26, 2006. The same estimation procedures were followed by WGI in the development of their resource model. A summary of the results is presented herein.
DATABASE
The mineral resource estimates noted in Table 17-1, above, are based on approximately 2.8 million ft of drilling in 6,393 drill holes. The hole spacing ranged from 70 ft by 140 to 140 ft by 140 ft. Drill holes were sampled on five-foot intervals. Vertical cross sections were created including drill hole traces with Au grades and lithology. A total of 435,566 assay intervals were used for the 2006 IMC Mineral Resource estimate, excluding approximately 35,000 intervals in overburden and/or

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outside the model limits. The univariate statistics of the Au grades in the database are summarized in Table 17-2.
TABLE 17-2 STATISTICS OF BEDROCK AU ASSAYS IN MINERAL RESOURCE MODEL DEVELOPED BY IMC IN 2006
New Gold Inc. – Mesquite Mine, U.S.A.

Deposit | No. of Assays | Mean (oz/ton) | Std. Dev. (oz/ton) | Coeff. of Variation | Maximum (oz/ton)
Cholla | 151,280 | 0.0082 | 0.0445 | 5.43 | 4.78
Big Chief | 105,841 | 0.0155 | 0.0910 | 5.87 | 7.50
Rainbow | 66,369 | 0.0075 | 0.0151 | 2.01 | 0.73
Vista | 93,564 | 0.0128 | 0.1010 | 7.89 | 15.30
North Big Chief | 18.512 | 0.0036 | 0.0195 | 5.42 | 0.92
Total | 435,566 | 0.0107 | 0.0705 | 6.59 | 15.30

Generally, the Mesquite deposit is well drilled. Based on review of cross sections, there are very few areas where mineralization is extrapolated long distances into unsampled ground. The mineralized zones developed by the indicator kriging are almost always cut off due to drilling in waste.
CORRELATION OF MINERALIZED ZONES
IMC accepted the gravel/hard rock geologic contact as represented in the block model. The interpretation incorporated into the block model was developed by Newmont personnel. Visually, based on cross sections, the gravel/hard rock contact in the model compares well with the contacts in the drilling data. IMC also accepted the oxide/non-oxide contact as represented in the block model. IMC did not have sufficient data to review that contact and the current model interpretation has considerably more non-oxide material than is indicated by the drilling data. It is reported that Newmont personnel re-interpreted the non-oxide material to correspond with the first occurrence of pyrite, a more conservative assumption than was coded into the original assay database.
There was considerable backfilling of the Big Chief/Cholla area pits and also some backfilling of the Vista and Rainbow pits. With the interruption of the open pit operation, there is some uncertainty of the limits of mining activity before the backfilling began.

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IMC examined: 1) actual 1996 mining topography available due to previous IMC work on the project; 2) 1996 final pit mine designs; and 3) the available blasthole data, to establish the limits of mining activity before backfilling. IMC is confident in the limits of mining at Big Chief, Vista, and Rainbow. Cholla mining limits are less certain and, therefore, IMC used a conservative assumption with respect to the interpreted end of Cholla mining. Model blocks interpreted as fill were not assigned gold grades.
COMPOSITING
Block grade estimations were based on 15 ft regular bench composites, even though the block height was 30 ft. Assays were length weighted for each composite. Lithology was assigned based on the majority rock type in each composite. Initially, IMC did block grade estimations based on 30 ft bench composites, but the resultant block grade distribution appeared too smooth, as compared to estimates of the actual mining distribution based on the blasthole data. Block grade estimates based on the 15 ft composites were done to better match the apparent mining distribution.
GRADE CAPPING
For the Big Chief/Cholla area, assays were capped at 0.6 oz/ton prior to compositing. This amounted to 274 assays in the Big Chief/Cholla model area. For North Big Chief, assays were capped at 0.375 oz/ton, amounting to nine assays in the area. Vista area assays were capped at 0.25 oz/ton amounting to 360 assays. There were no assays capped in the Rainbow area. The cap grades were selected to get a reasonable match of the block grade estimates with blasthole model results in the mined areas.
TONNAGE FACTORS
Block tonnage factors of 13.58 ft3/ton and 15.94 ft3/ton were assigned for hard rock and gravel, respectively, based on historical data. These correspond to specific gravities of 2.36 and 2.01, respectively. These also correspond to 1,381 tons and 1,176 tons per block for rock and gravel, respectively.

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VARIOGRAPHY
The Big Chief, Cholla, North Big Chief, and Vista areas tend to show fairly reasonable continuity of mineralization in the primary direction (N45°W) but are quite erratic in the secondary (N45°E) direction. In some areas there appears to be a slight 15°SW dip to the mineralization, while in others it is essentially flat. It seems likely that there are significant structures parallel to the major direction cutting the mineralization. The apparent slight dip may actually be en-echelon faulting. IMC used maximum search radii of 250 ft in the primary direction, 125 ft to 175 ft in the secondary direction, and 45 ft to 60 ft in the tertiary, near vertical direction. These search radii are quite short compared to the variogram ranges, but, due to a large amount of drilling data, longer search radii are not necessary.
Rainbow mineralization appears significantly more continuous, especially in the secondary direction, than the other areas. The southeast end of Rainbow, where new mining will occur, appears somewhat tabular. Due to wider drill spacing in southeast Rainbow, maximum search radii of 450 ft in the primary direction, 300 ft in the secondary direction, and 45 ft in the tertiary direction were used. These distances are well supported by the variogram ranges. Note that IMC also assumed a slight rotation in the primary direction (N67.5°W) compared to the other areas.
METHODOLOGY
The model is based on regular blocks of size 25 ft by 25 ft by 30 ft high. All of the deposit areas are in one computer model. The model is not rotated.
An additional ore/waste zone was established in the model by indicator kriging. A discriminator of 0.003 oz/ton was used for this kriging. Composites greater than 0.003 oz/ton were assigned a value of one and composites less than 0.003 oz/t were assigned a value of zero. The ones and zeros were ordinary kriged to obtain a value between zero and one for each block that may be interpreted as the probability the block is above 0.003 oz/ton gold. Blocks with a probability over 0.5 were assigned to the ore population and blocks below 0.5 to the waste population. Composites were then assigned the ore/waste code based on the code of the block in which they were located.

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Block gold grades were estimated by ordinary kriging. The ore/waste boundaries discussed above were the primary control for grade kriging. Only the blocks in the mineralized zone (as defined by the indicator kriging) were estimated and only composites in the mineralized zone blocks were used for the kriging. The gravel/hard rock and oxide/non-oxide contacts were not considered boundaries for kriging. Visual inspection did not indicate significant changes in the gold mineralization at these contacts. The exception is that, in Rainbow, there was no evidence of mineralization in the gravel, so it was not estimated. The gravels were estimated for the remaining areas as there were occasional mineralized drill hole intercepts in them. Only a small amount of resource is in the gravels.
Table 17-3 summarizes the various estimation parameters used in the block model. A relatively small number of composites, i.e., ten 15 ft composites, were used to estimate grades. This was to avoid oversmoothing the grade distribution compared to the blastholes as described previously. A minimum of two composites were used for the indicator kriging to establish the mineralized zone. Once established, a minimum of one composite was used to estimate grade.

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MINERAL RESOURCE CLASSIFICATION
The resource classification for the Mesquite deposits was based on a special gold grade kriging performed by IMC when their original 2006 model was generated. Material classifications for each model block of the IMC model were transferred identically into the WGI model generated in Vulcan. The gold grade from this kriging was not used, but the number of samples and kriging standard deviation were used for the resource classification. The following discussion is specific to Rainbow, but the other areas were done similarly.
The maximum search radii for the kriging was set to 300 ft in the primary, 200 ft in the secondary, and 45 ft in the tertiary direction. These radii represent two-thirds of the maximum search radii used for grade kriging in the primary and secondary directions. The variogram was also normalized to a sill of one and a nugget of 10% of the sill. A maximum of one composite per drill hole was allowed in the kriging and the ore/waste boundaries were ignored. This procedure counts the number of holes within two-thirds of the maximum search radius and calculates a kriging standard deviation with this data. The number of holes and kriging standard deviation were stored in the model.
Probability plots of block kriging standard deviations by the number of holes were plotted.
All blocks with a kriged gold grade were set to a default of inferred resource. Blocks with the closest composite more than the 300 ft by 200 ft search were not examined in the special kriging.
The plots of kriging standard deviations indicate that blocks estimated with four or more holes generally have a standard deviation less than 0.6. These were classified as indicated resource.
Blocks kriged with three holes and with a kriging standard deviation less than 0.6 were classified as indicated resources. This is about 96% of the blocks kriged with three holes. Blocks kriged with two holes and with a kriging standard deviation less than 0.5

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were also classified as indicated resources. This represents approximately 16% of those blocks. Blocks kriged with one hole and a kriging standard deviation less than 0.4 (1% of these blocks) were also classified as indicated resources.
All blocks with a kriging standard deviation less than 0.35 were then reclassified as measured resources. This accounts for approximately 10% of all blocks for Rainbow.
Visually, the described method appears to give good results. Indicated resources are not extrapolated far outside of the drilling data and measured resources are developed only in well-drilled areas. Blocks kriged with one or two holes can generate indicated resources only very close to the holes.
A similar method was used for the other deposit areas. Due to the shorter search radii used for those areas, the special kriging utilized the full search radius, instead of two-thirds of it as in Rainbow. Also, due to the nested character of the variograms used for the other areas, the numeric values used for resource classes for the different number of holes was different.
MINERAL RESERVE ESTIMATE
The mineral reserve estimate for the Mesquite Mine, effective December 31, 2009, is summarized in Table 17-4.

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TABLE 17-4 MINERAL RESERVES – DECEMBER 31, 2009
New Gold Inc. - Mesquite Mine, U.S.A.
Class | Classification | Tons | Grade | Contained Au
|  | (000s) | (oz/ton Au) | (ozs)
Proven | Oxide | 63,768 | 0.015 | 982,000
| Non oxide | 17,722 | 0.024 | 433,000
Proven | Subtotal | 81,490 | 0.017 | 1,415,000
Probable | Oxide | 75,355 | 0.015 | 1,137,000
| Non oxide | 27,988 | 0.021 | 592,000
Probable | Subtotal | 103,343 | 0.017 | 1,729,000
Proven & | Oxide | 139,123 | 0.015 | 2,119,000
Probable | Non oxide | 45,710 | 0.022 | 1,025,000
| Total | 184,833 | 0.017 | 3,144,000

Notes:

1. | CIM definitions were used for mineral reserve estimation.

2. | Mineral reserve estimation parameters are summarized in Table 17-5.

3. | Rows and columns may not add exactly due to rounding.

PIT OPTIMIZATION PARAMETERS
The mineral resource model was imported into Whittle and reblocked into 100 ft by 100 ft by 30 ft blocks. Pit shells were optimized based on the parameters summarized in Table 17-5.

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TABLE 17-5 OPEN PIT OPTIMIZATION PARAMETERS
New Gold Inc. - Mesquite Mine, U.S.A.
Pit Slopes 1 | Above Water Table |
| North | 40°, 38° in gravels
| East | 46°, 43° in Rainbow
| South | 46°
| West | 46°
| Below Water Table |
| North | 37°
| East | 43°, 40° in Rainbow
| South | 43°
| West | 43°
Operating Cost | Mining | $0.93/ton mined
| Process + General & Administration | $1.33/ton processed
Dilution |  | 5%
Mining Recovery |  | 95%
Process Recovery - Oxides |  | 75%
Process Recovery - Non Oxides |  | 35%
Gold Price |  | $800/oz
Gold Selling Price |  | $12.00
Cut-off Grade - Oxides |  | 0.006 oz/ton Au
Cut-off Grade - Non Oxides |  | 0.012 oz/ton Au

Notes: Pit slopes may vary slightly for individual pits.
MINE DESIGN
In December 2009, the current topography and fill material proportion were coded into the model. This was done through the use of site survey data, historical survey data from Santa Fe Pacific and Newmont, and a recent I-Site survey. Material tonnage factors were coded into the model based on material types. The tonnage factors used are as shown in Table 17-6.

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TABLE 17-6 MATERIAL TONNAGE FACTORS
New Gold Inc. – Mesquite Mine, U.S.A.

Material Type | Tonnage factor ft³/t
Gravel | 15.94
Oxide | 13.58
Non-Oxide | 13.58
Fill | 17.64
Leach pad | 17.64

The Vulcan resource model was then converted into Medsystem Minesight format, the software package that was used for the pit optimization and designs. The 2009 year-end survey data was used to update the topography in the active mining areas. No changes were made to the geology, material classification, or interpolated grades.
The Lerchs-Grossmann algorithm was used in Minesight to produce an ultimate pit shell. The Floating Cone algorithm at a series of gold prices was used within the ultimate pit shell to define the mining phases. These shells were constrained within the current permitted area.
After the pits were designed, the resultant pit shell was used to extract the measured and indicated mineral resources within the design. These are reported in Table 17-4 as proven and probable mineral reserves.
RECONCILIATION
WGI acquired the Mesquite Mine in 2003 and restarted the operation in 2007. From January 2008 to January 2010, the operation has produced 5% more tons at the modelled grade for 5% more contained ounces Au than defined by the mineral reserve model for the same volume of mineralization mined.
The actual tonnage mined was determined by surveyed volumes and a tonnage factor of 13.58 ft3/ton. The production grade was estimated based on the blasthole sample grades.

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In Scott Wilson RPA’s opinion, this is a reasonable reconciliation and supports the accuracy of the mineral reserve model.
Scott Wilson RPA is unaware of any non-technical issues, e.g., social, political, legal, environmental, that would affect the Mineral Resource and Mineral Reserve estimates.

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18 OTHER RELEVANT DATA AND INFORMATION
Scott Wilson RPA is not aware of any other relevant data or information that should be included in this Technical Report.

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19 ADDITIONAL REQUIREMENTS
MINING OPERATIONS
The Mesquite Mine is an operating open pit mine with ore processing by heap leaching in a carbon-in-column circuit that recovers gold. Current mine production is a nominal 165,000 tons per day of total material, including a nominal 30,000 to 40,000 tons per day of ore that is hauled to the leach pad. For 2009, gold production was 150,000 ounces.
The mine operations started in late 2007 with commercial production in January 2008. There are two years of operating data which were combined with the life-of-mine plan to develop an economic model and life-of-mine cash flow.
MINE DESIGN
Mining is performed through a conventional truck/shovel open-pit mining method. Operations include drilling, blasting, loading and hauling. ROM ore is hauled directly to the leach pad to the south for processing. Waste mining utilizes the same equipment fleet used to produce ore. The primary waste disposal facilities are to the south and north of the active mining pits with a potential opportunity for backfilling some of the mining areas as they are completed. The mine general layout is shown in Figure 19-1.
The Lerchs-Grossmann algorithm was used in Minesight to produce an ultimate pit shell. The Floating Cone algorithm at a series of gold prices was used within the ultimate pit shell to define separate mining phases. Shells were constrained within the current permitted area. Mineral reserves were generated from the pit designs produced around these shells.
The optimization utilized prior metallurgical results, third-party pit stability analysis, historic and current in-house operating cost estimates, and current refining prices. Mineral reserves and pit design parameters are summarized in Tables 17-4 and 17-5 in Section 17.

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Given the results of the Whittle pit optimization, a final mineable pit was developed by WMMI. Slope angles used for design held to criteria established by Engineering Analytics, Inc. of Fort Collin, CO. Numerous pit slope stability analyses have been conducted over the years with work from Call & Nicholas (1986), Shepard Miller (1999), C.O. Brawner (1999, 2000), Agra Earth & Environmental (2000), and Engineering Analytics (2008, 2009).
Final highwall slope angle criteria are based on a water table at 580 ft elevation and vary by area with the steepest walls on the southwest and shallowest on the north. Pit design not only considered the purely operational concerns such as highwall slopes, ramp placement and phase pit geometry, but also encompassed protection of a barrier around State Highway 78. Road geometry considered adequacy for the 205-ton haulage fleet to be used for width and performance characteristics up to the maximum gradeabilty. Maintaining haulage ramps to a maximum of 10% has been proven to maintain fleet performance and equipment longevity. Minimum pushback widths accounted for fleet access, shovel turn radius, and mobility within the active mining areas. The key design parameters are shown in Table 19-1.

TABLE 19-1 MINE DESIGN PARAMETERS
New Gold Inc. – Mesquite Mine, U.S.A.
Haul Road Width | 100 ft
Haul Road Grade | 10%
Interramp Slope Angles: | Above 580 ft | Below 580 ft
- North walls | 38°in gravel 40° all others | 37°
- East walls | 43° in Rainbow 46° all others | 40° in Rainbow 43° all others
- South walls | 46° | 43°
- West walls | 46° | 43°
Mining Bench Height | 30 ft
Vertical Interval between Catch benches | 60 ft
Minimum Operating Width | 100 ft
Minimum Design Pushback Width | 150 ft

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The ultimate pit designs for Rainbow, Vista, and Big Chief are shown in Figure 19-2, with the State Highway 78 barrier adjacent to the Rainbow pit.
MINE PLANNING
The Mesquite open pit designs were developed based on an $800 per ounce gold price. The low-grade nature of the deposit dictated the use of large-scale open pit mining equipment for efficient and cost-effective mine development. The pits were divided into multiple phases to meet the ore production rate and maintain a nominal 2.8:1 (W:O) stripping ratio through the mine life. There are four phases for the Rainbow area, four phases for the Big Chief area, and two phases for the Vista area.
Haulage profiles were determined for each bench from each phase to the leach pad or waste dump location for each production year. The mining schedule is based on a nominal annual ore production rate of 13.5 million tons of ROM ore per annum. The life of the mine spans 14 years from 2010 to 2023. Average mining cost per tonne of material over the life of mine is expected to be $0.99 for ore and waste. Backfilling of prior mined pits is used wherever possible to reduce haulage costs.
Scott Wilson RPA recommends prioritizing the phase development based on profitability of the individual phases. This could provide a better cash flow for the life-of-mine plan.

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MINE PRODUCTION SCHEDULE
The mine production schedule was generated based on reserves within the designed pit phases using the following parameters and guidelines:

· | Target of a nominal 13.5 million tons of ore per annum, or 38,500 tons per day.

· | Target high grade and low stripping in the earlier pit phases.

The schedule includes 184.8 million tons of proven and probable mineral reserves. The historic production figures are shown in Table 19-2 and life-of-mine production, in Table 19-3.

TABLE 19-2 HISTORIC PRODUCTION
New Gold Inc. – Mesquite Mine, U.S.A.

| Ore | Waste | Total | Strip
Year | kTons | Au (oz/t) | kTons | kTons | Ratio
2007 | 979 | 0.020 | 18,934 | 19,913 | 19.34
2008 | 8,944 | 0.022 | 45,606 | 54,550 | 5.10
2009 | 13,971 | 0.015 | 45,036 | 59,459 | 3.22

TABLE 19-3 LIFE-OF-MINE PRODUCTION
New Gold Inc. – Mesquite Mine, U.S.A.
| Ore | Waste | Total | Strip
Year | kTons | Au (oz/t) | kTons | kTons | Ratio
2010 | 13,630 | 0.016 | 46,254 | 59,884 | 3.4
2011 | 14,866 | 0.017 | 44,999 | 59,866 | 3.0
2012 | 11,875 | 0.018 | 42,150 | 54,024 | 3.5
2013 | 12,898 | 0.016 | 42,093 | 54,991 | 3.3
2014 | 13,018 | 0.015 | 35,654 | 48,671 | 2.7
2015 | 10,962 | 0.017 | 48,932 | 59,895 | 4.5
2016 | 13,995 | 0.015 | 45,940 | 59,935 | 3.3
2017 | 14,668 | 0.015 | 40,756 | 55,424 | 2.8
2018 | 14,933 | 0.015 | 34,293 | 49,226 | 2.3
2019 | 15,486 | 0.017 | 35,102 | 50,588 | 2.3
2020 | 14,127 | 0.017 | 38,218 | 52,346 | 2.7
2021 | 12,318 | 0.017 | 41,271 | 53,589 | 3.4
2022 | 15,000 | 0.023 | 16,820 | 31,820 | 1.1
2023 | 7,056 | 0.023 | 6,693 | 13,750 | 0.9
TOTAL | 184,833 | 0.017 | 519,176 | 704,009 | 2.8

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MINE EQUIPMENT
Hydraulic shovels (44 yd3) are used as the primary loading units. The hydraulic shovels are supported by a front-end-loader (28 yd3) which provides additional loading capacity as well as clean-up support. Off-highway 205-ton haul trucks are used as the primary haulage unit. Mine mobile equipment fleet requirements are based on the annual mine production schedule for ore and waste, mine shift schedules, and equipment productivity estimates. Table 19-4 lists the current major mine equipment fleet. The mine work schedule is two 12-hour shifts per day, 7 days per week.
Drilling is performed with a fleet of rotary down-the-hole hammer drills (6¾ in. diameter) on a nominal 20 ft x 20 ft pattern, with a 16 ft x 20 ft pattern on the pit perimeter (trim) and 9 ft centres along the toes for pre-splitting. Blasting is controlled to minimize backbreak. The overall powder factor is 0.21 lb/ton. Holes are drilled to a 30 ft bench height with 3 ft of subdrilling for a total depth of 33 ft.

TABLE 19-4 MINE EQUIPMENT FLEET
New Gold Inc. – Mesquite Mine, U.S.A.

Equipment | Manufacturer | Quantity
Truck - MT3700AC | Terex | 14
Wheel Loader - L1350 | LeTourneau | 1
Wheel Loader - WA1200 | Komatsu | 1
Hydraulic Shovel - RH340 | Terex | 2
Motor Grader - 16M | Caterpillar | 2
Track Dozer - D10T | Caterpillar | 2
Wheel Dozer - 834H | Caterpillar | 2
Drill - D45KS | Sandvik | 3
Water Truck - 777F | Caterpillar | 2

MINERAL PROCESSING
Mineral processing uses a heap leaching technique. At the leach pad, a weak cyanide solution (0.4 lb/ton) is applied to dissolve the gold and take it into solution. The solution is collected in the carbon-in-column plant where the gold is collected on the carbon. The gold is stripped from the carbon using a strong cyanide solution. The gold in solution is

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electrowon onto steel wool. The steel wool is sent to a furnace where the gold is separated from the impurities and the molten metal poured out to create gold doré bars assaying approximately 60% gold and 35% silver.
RECOVERABILITY
Process recoveries are determined by oxidation. Inception-to-date recoveries are slightly higher than predicted at 76.5% (see Table 16-1). The process recoveries for the mine reserves and life-of-mine production plan are based on 75% recovery of the oxide ores and gravels and 35% recovery of the non-oxide ores.
MARKETS
The gold markets are mature global markets with reputable smelters and refiners located throughout the world.
Gold is a principal metal traded at spot prices for immediate delivery. The market for gold trading typically spans 24 hours a day within multiple locations around the world (such as New York, London, Zurich, Sydney, Tokyo, Hong Kong, and Dubai). Daily prices are quoted on the New York spot market and can be found on www.kitco.com. The average New York spot gold price for 2009 was $972 per troy ounce. The New York price, as of December 31, 2009, was $1,135 per troy ounce. The three-year and five-year rolling average prices through the end of December 2009 are $847 and $718 per troy ounce, respectively. This Technical Report uses the long-term price forecasts from the major banks with a long-term average price for gold of $800 per troy ounce for the economic analysis.
Operations at Mesquite are expected to produce a nominal 10,000 ounces of gold, annually, over an estimated remaining mine life of fourteen years.

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CONTRACTS
Doré is shipped from site to a major refiner. Contracts are in place for refining with charges of $0.60 per ounce (silver plus gold) with payment of 99.9% of the gold and 97.0% of the silver.
ENVIRONMENTAL CONSIDERATIONS
The Mesquite Mine received regulatory approval to begin mining operations on July 2, 2007, after the issuance of the Air Quality permit from the Imperial County Air Pollution Control District. WMMI is in compliance with all permits.
The closure and reclamation plan for the Mesquite Mine has been developed by WMMI with the assistance of independent consultants with the specific objective of leaving the land in a useful, safe, and stable configuration capable of supporting native plant life, providing wildlife habitat, maintaining watershed functions, and supporting limited livestock grazing. Total closure costs are estimated to be $4.6 million prior to taking the salvage value of the assets into account.
TAXES
Scott Wilson RPA has relied on WMMI for guidance on applicable taxes, royalties, and other government levies or interests, applicable to revenue or income from Mesquite. U.S. Federal income taxes are 35% and California State income taxes are 8.8% for a combined income tax of 40.7%. The only outstanding royalty is a 2.0% net smelter royalty to Franco-Nevada Corporation.
CAPITAL AND OPERATING COST ESTIMATES
OPERATING COSTS
Mesquite has developed a life-of-mine production plan (Table 19-3). Scott Wilson RPA used the production and operating costs based on this life-of-mine plan. Average mining cost per ton over the life of mine is expected to be $0.99 for ore and waste.

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These mining costs were used in conjunction with processing and general and administrative costs the life-of-mine plan. Process operating costs are expected to average $1.47 per ore ton over the mine life, and general and administrative costs are expected to average $0.48 per ore ton.
CAPITAL COSTS
Mesquite has developed a capital cost estimate for the life of mine. Capital over the remaining fourteen years is $45.3 million.
Future exploration drilling is excluded from the capital costs as the drilling should help find additional resources.
ECONOMIC ANALYSIS
The economic project evaluation is based on actual operating costs supplied to Scott Wilson RPA. This project evaluation work includes an economic summary, discounted cash flow analysis as well as capital, and operating cost estimates. The mine plan for this analysis is based on WMMI’s mine planning work and is based exclusively on proven and probable mineral reserves.
Based on the actual costs for 2008 and 2009, Scott Wilson RPA created an economic analysis. The economic analysis shows that, at a long-term gold price of $800 per troy ounce and a silver price of $12 per troy ounce, the project has a net present value (NPV) at a 5% discount rate of $250 million. After-tax cash flow is $231 million plus $120 million in sunk capital for a total after-tax cash flow of $351 million.
A preliminary income statement and cash flow are presented as Tables 19-5 and 19-6.
The total life-of-mine capital is approximately $45 million in addition to the $120 million of sunk capital since start-up in late 2007. The cash operating cost per ounce of gold produced is $546 after by-product silver credits. When future and sunk capital costs are added, total cash and non-cash costs (fully loaded) are $628 per ounce of gold.

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ECONOMIC CRITERIA
REVENUE

· | Nominal 13 million tons per year.

· | Gold and silver at refinery 99.9% and 97.0% payable, respectively.

· | Metal price: US$800 per ounce gold and US$12.00 per ounce silver.

· | Net Smelter Return includes doré refining, transport, and insurance costs.

· | Silver revenue based on average silver:gold assay value.

· | Revenue is recognized at the time of production.

COSTS

· | Mine life: 14.5 years.

· | Life-of-mine production plan as summarized in Table 19-3 of this report.

· | Mine life capital totals $45.3 million.

· | Sunk capital totals $119.6 million

· | Average operating cost over the mine life is $5.98 per ton ore processed.

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SENSITIVITY ANALYSIS
Sensitivity analyses were performed for gold price, silver price, capital cost, and operating cost. The sensitivity analyses indicate that project economics are most heavily influenced by the gold price and operating costs. A 10% change in gold price results in a ± $61 million change in the after-tax NPV at a 5% discount rate. A 10% change in operating costs results in a ± $44 million change in the after-tax NPV at a 5% discount rate. The project is least affected by changes in silver price as there is little silver produced. A 10% change in the silver price results in a less than ± $1 million change in the after-tax NPV at a 5% discount rate.
Project economics are less sensitive to change in capital costs as the majority of capital has already been expended. A 10% change in the capital costs results in a ± $2 million change in the after-tax NPV at a 5% discount rate. Results of the price sensitivity analyses are shown in Figure 19-3 and Table 19-7.
Reserve estimates were based on a gold price of $800 per troy ounce and a silver price of $12.00 per troy ounce. Results from the economic analysis at these prices are shown in Table 19-6. Since an after-tax total cash flow of $351 million is achieved, the economic criteria for the reserve statement are met.

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FIGURE 19-3 SENSITIVITY ANALYSIS

TABLE 19-7 SENSITIVITY ANALYSES
New Gold Inc. – Mesquite Mine, U.S.A.
Parameter Variables | Units | -20% | -10% | Base | +10% | +20%
Gold Price | US$/oz | 640 | 720 | 800 | 880 | 960
Silver Price | US$/oz | 9.60 | 10.80 | 12.00 | 13.20 | 14.40
Operating Cost | $millions | 884 | 994 | 1,105 | 1,215 | 1,326
Capital Cost | $millions | 36 | 40 | 45 | 49 | 54
NPV @ 5% | Units | -20% | -10% | Base | +10% | +20%
Gold Price | $millions | 113 | 187 | 250 | 311 | 373
Silver Price | $millions | 249 | 249 | 250 | 250 | 250
Operating Cost | $millions | 337 | 293 | 250 | 206 | 161
Capital Cost | $millions | 253 | 252 | 250 | 248 | 246

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20 INTERPRETATION AND CONCLUSIONS
ADEQUACY OF PROCEDURES
Scott Wilson RPA and various other firms and independent consultants have reviewed the methods and procedures utilized by New Gold, WGI, Newmont, Santa Fe, and Gold Fields at the Mesquite Mine to gather geological, geotechnical, and assaying information and found them reasonable and meeting generally accepted industry standards for an operating property.
ADEQUACY OF DATA
Scott Wilson RPA believes that the Mesquite Mine has conducted exploration and development sampling and analysis programs using standard practices, providing generally reasonable results. Scott Wilson RPA believes that the resulting data can effectively be used in the subsequent estimation of resources and reserves.
ADEQUACY OF STUDY
This Technical Report is based on the operating data over the past two years for the Mesquite Mine. Scott Wilson RPA believes that this data and the supporting documents were prepared using standard industry practices and provide reasonable results and conclusions.
COMPLIANCE WITH CANADIAN NI 43-101 STANDARDS
Scott Wilson RPA believes that the current drill hole database is sufficient for generating a resource model for use in resource and reserve estimation. Recovery and cost estimates are based upon sufficient data and engineering to support a reserve statement. Economic analysis using these estimates generates a positive cash flow, which supports a reserve statement.
Measured and indicated resources for all areas, inclusive of mineral reserves, are 319.8 million tons at 0.015 oz/ton for 4.83 million contained troy ounces of gold. Inferred resources are an additional 24.1 million tons at 0.015 oz/ton. The estimated proven and probable mineral reserves for the Mesquite Mine total 184.8 million tons grading 0.017 oz/ton of gold, containing 3.14 million ounces.

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Scott Wilson RPA believes that the resource and reserve estimates have been created utilizing acceptable methodologies. Scott Wilson RPA is also of the opinion that the classification of measured and indicated resources, stated in Table 17-1, and proven and probable reserves, stated in Table 17-4, meet the definitions as stated by NI 43-101, Form 43-101F1, and Companion Policy 43-101CP dated December 23, 2005.

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21 RECOMMENDATIONS
Scott Wilson RPA offers the following recommendations:

1. | Continue operating the Mesquite Mine. Annual operating costs are a nominal $80 million per year.

2. | Continue monitoring and optimizing the pit slopes. Redesign ultimate pits for each area based on new geotechnical data and allow flatter slopes in the areas where backfill material is encountered. A follow-up study from a recognized geotechnical consultant should review the redesigned pits. The costs for a geotechnical review are estimated at $45,000.

3. | Prioritize the pit design phase development based on profitability of the individual phases. This could provide a better cash flow for the life-of-mine plan. This is an ongoing process included in the mine operating and engineering budget; no additional costs are anticipated.

4. | Continue to monitor the heap leach pad recoveries. This is an ongoing process included in the mine operating budget; no additional costs are anticipated.

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22 REFERENCES

| Engineering Analytics, Inc., 2009: Stope Stability Analyses of the East Rainbow Pit Expansion, March 2009.

| Bechtel Civil and Minerals, 1984: Mesquite Project Feasibility Study, prepared for Gold Fields Operating Co.

| Haxel, G.B., and Dillon, J.T., 1978: The Pelona-Orocopia Schist and the Vincent-Chocolate Mountain Thrust System, Southern California, in D.G. Howell and K.A. MacDougall, Mesozoic Paleogeography of the Western United States, SEPM Pacific Coast Paleogeography Symposium 2, pp. 453-469.

| Independent Mining Consultants Inc., 2009: Mineral Resources and Mineral Reserves Verification, Letter Report, March 30, 2009.

| Independent Mining Consultants Inc., 2006: Mesquite Gold Project Imperial County, California, USA, Technical Report, May 26, 2006.

| Manske, S.L., 1991: Epithermal Gold Mineralization in Gneissic Rocks of the Mesquite District, Imperial County, California, Ph.D. Dissertation at Stanford University.

| Micon International Limited, 2006: Technical Report on the Mesquite Mine Expansion, Feasibility Study, Imperial County, California, by R.M. Gowans and M.G. Hester, prepared for Western Goldfields, Inc., August 6, 2006.

| Smith et al., 1999: Regional Geology, Internal Report to Newmont Mining Corporation.

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23 DATE AND SIGNATURE PAGE
This report titled “Technical Report on the Mesquite Mine, Brawley, California, U.S.A.” prepared for New Gold Inc. and dated February 26, 2010, was prepared and signed by the following authors:

| (Signed & Sealed)
Dated at Toronto, Ontario | Richard J. Lambert, P.E.
February 26, 2010 | Principal Mining Consultant
| (Signed & Sealed)
Dated at Toronto, Ontario | Wayne W. Valliant, P.Geo
February 26, 2010 | Principal Geologist
| (Signed & Sealed)
Dated at Toronto, Ontario | Holger Krutzelmann, P.Eng.
February 26, 2010 | Principal Metallurgist

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24 CERTIFICATE OF QUALIFIED PERSON
RICHARD J. LAMBERT
I, Richard J. Lambert, P.E., as an author of this report entitled “Technical Report on the Mesquite Mine, Brawley, California, U.S.A.” prepared for New Gold Inc. and dated February 26, 2010, do hereby certify that:

1. | I am Principal Mining Consultant with Scott Wilson Roscoe Postle Associates Inc. of Suite 501, 55 University Ave Toronto, ON, M5J 2H7.
2. | I am a graduate of Mackay School of Mines, University of Nevada, Reno, with a Bachelors of Science degree in Mining Engineering in 1980, and Boise State University, with a Masters of Business Administration degree in 1995.
3. | I am a Registered Professional Engineer in the state of Wyoming (#4857), the state of Idaho (#6069), and the state of Montana (#11475). I have been a member of the Society for Mining, Metallurgy, and Exploration (SME) since 1975, and a Registered Member (#1825610) since May 2006. I have worked as a mining engineer for a total of 29 years since my graduation. My relevant experience for the purpose of the Technical Report is
| Ÿ | Review and report as a consultant on numerous mining projects for due diligence and regulatory requirements
| Ÿ | Mine engineering, mine management, mine operations and mine financial analyses, involving copper, gold, silver, nickel, cobalt, uranium, oil shale, phosphates, coal and base metals located in the United States, Canada, Zambia, Madagascar, Turkey, Bolivia, Chile, Brazil, Serbia, Australia, Russia and Venezuela.
4. | I have read the definition of "qualified person" set out in National Instrument 43-101 (NI43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI43-101.
5. | I visited the Mesquite Mine on July 22-23, 2009.
6. | I am responsible for the preparation of Sections 1 through 6, and Sections 18 through 23.
7. | I am independent of the Issuer applying the test set out in Section 1.4 of National Instrument 43-101.

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8. | I have had no prior involvement with the property that is the subject of the Technical Report.
9. | I have read National Instrument 43-101, and the Technical Report has been prepared in compliance with National Instrument 43-101 and Form 43-101F1.
10 | To the best of my knowledge, information, and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

Dated this 26th day of February, 2010
(Signed & Sealed)
Richard J. Lambert, P.E.

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WAYNE W. VALLIANT
I, Wayne W. Valliant, P.Geo., as an author of this report entitled “Technical Report on the Mesquite Mine, Brawley, California, U.S.A.” prepared for New Gold Inc. and dated February 26, 2010, do hereby certify that:

1. | I am Principal Geologist with Scott Wilson Roscoe Postle Associates Inc. of Suite 501, 55 University Ave Toronto, ON, M5J 2H7.
2. | I am a graduate of Carleton University, Ottawa, Ontario, Canada in 1973 with a Bachelor of Science degree in Geology.
3. | I am registered as a Geologist in the Province of Ontario (Reg.# 1175). I have worked as a geologist for a total of 37 years since my graduation. My relevant experience for the purpose of the Technical Report is:
|  | Ÿ | Review and report as a consultant on more than thirty mining operations and projects around the world for due diligence and resource/reserve estimation
|  | Ÿ | General Manager of Technical Services for corporation with operations and mine development projects in Canada and Latin America
|  | Ÿ | Superintendent of Technical Services at three mines in Canada and Mexico
|  | Ÿ | Chief Geologist at three Canadian mines, including two gold mines
4. | I have read the definition of "qualified person" set out in National Instrument 43-101 ("NI43-101") and certify that by reason of my education, affiliation with a professional association (as defined in NI43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI43-101.
5. | I visited the Mesquite Mine on July 22-23, 2009.
6. | I am responsible Sections 7–15 and 17 of the Technical Report.
7. | I am independent of the Issuer applying the test set out in Section 1.4 of National Instrument 43-101.
8. | I have had no prior involvement with the property that is the subject of the Technical Report.
9. | I have read National Instrument 43-101, and the Technical Report has been prepared in compliance with National Instrument 43-101 and Form 43-101F1.

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10. | To the best of my knowledge, information, and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

Dated this 26th day of February, 2010
(Signed & Sealed)
Wayne W. Valliant, P. Geo.

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HOLGER KRUTZELMANN
I, Holger Krutzelmann, as an author of this report entitled “Technical Report on the Mesquite Mine, Brawley, California, U.S.A.” prepared for New Gold Inc. and dated February 26, 2010, do hereby certify that:

1. | I am Principal Metallurgist with Scott Wilson Roscoe Postle Associates Inc. of Suite 501, 55 University Ave Toronto, ON, M5J 2H7.
2. | I am a graduate of Queen’s University, Kingston, Ontario, Canada in 1978 with a B.Sc. degree in Mining Engineering (Mineral Processing).
3. | I am registered as a Professional Engineer with Professional Engineers Ontario (Reg.# 90455304). I have worked as a metallurgist for a total of 30 years since my graduation. My relevant experience for the purpose of the Technical Report is:
| Ÿ | Reviews and reports as a metallurgical consultant on a number of mining operations and projects for due diligence and financial monitoring requirements
| Ÿ | Senior Metallurgist/Project Manager on numerous gold and base metal studies for a leading Canadian engineering company.
| Ÿ | Management and operational experience at several Canadian and U.S. milling operations treating various metals, including copper, zinc, gold and silver.
4. | I have read the definition of "qualified person" set out in National Instrument 43-101 (NI43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the purposes of NI43-101.
5. | I have not visited the Mesquite Mine.
6. | I am responsible for preparation of Section 16 of the Technical Report.
7. | I am independent of the Issuer applying the test set out in Section 1.4 of National Instrument 43-101.
8. | I have had no prior involvement with the property that is the subject of the Technical Report.
9. | I have read National Instrument 43-101, and the Technical Report has been prepared in compliance with National Instrument 43-101 and Form 43-101F1.

New Gold Inc. – Mesquite Mine Technical Report NI 43-101 – February 26, 2010 | Page 24-5

SCOTT WILSON RPA WWW.SCOTTWILSON.COM

10. | To the best of my knowledge, information, and belief, the Technical Report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

Dated this 26th day of February, 2010
(Signed & Sealed)
Holger Krutzelmann, P.Eng.

New Gold Inc. – Mesquite Mine Technical Report NI 43-101 – February 26, 2010 | Page 24-6

SCOTT WILSON RPA WWW.SCOTTWILSON.COM

25 APPENDIX A
CLAIM LIST

New Gold Inc. – Mesquite Mine Technical Report NI 43-101 – February 26, 2010 | Page 25-7