EX-99.1 2 v423149_ex99-1.htm CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30, 2015

Exhibit 99.1

Contents

CONDENSED CONSOLIDATED INCOME STATEMENTS | 2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | 3
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | 4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | 6
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 7
1. Description of business and nature of operations | 7
2. Significant accounting policies | 7
3. Expenses | 9
4. Trade and other receivables | 10
5. Trade and other payables | 10
6. Inventories | 11
7. Mining interests | 12
8. Assets and liabilities held for sale | 14
9. Long-term debt | 15
10. Gold stream Obligation | 18
11. Derivative instruments | 19
12. Share capital | 22
13. Income and mining taxes | 25
14. Reclamation and closure cost obligations | 26
15. Supplemental cash flow information | 27
16. Segmented information | 28
17. Fair value measurement | 32
18. Commitments and contingencies | 33

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CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited)

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars, except per share amounts) | Note | 2015 | 2014 | 2015 | 2014
Revenues |  | 177.3 | 169.3 | 513.9 | 537.9
Operating expenses | 3 | 105.4 | 94.2 | 303.2 | 288.0
Depreciation and depletion |  | 60.8 | 53.7 | 166.6 | 158.0
Earnings from mine operations |  | 11.1 | 21.4 | 44.1 | 91.9
Corporate administration |  | 5.2 | 6.0 | 16.7 | 20.2
Provision for office consolidation |  | 3.0 | - | 3.0 | -
Share-based payment expenses | 12 | 1.7 | 1.5 | 5.7 | 6.0
Exploration and business development |  | 2.5 | 5.0 | 4.8 | 12.4
Earnings from operations |  | (1.3) | 8.9 | 13.9 | 53.3
Finance income | 3 | 0.4 | 0.5 | 1.0 | 1.0
Finance costs | 3 | (10.0) | (7.1) | (31.4) | (21.8)
Other (losses)/ gains | 3 | (230.7) | (13.8) | (251.5) | (21.5)
(Loss) earnings before taxes |  | (241.6) | (11.5) | (268.0) | 11.0
Income tax recovery (expense) | 13 | 83.8 | (48.1) | 76.1 | (56.2)
Net loss |  | (157.8) | (59.6) | (191.9) | (45.2)
Loss per share |  |  |  |  |
Basic | 12 | (0.31) | (0.12) | (0.38) | (0.09)
Diluted | 12 | (0.31) | (0.12) | (0.38) | (0.09)
Weighted average number of shares outstanding (in millions) |  |  |  |
Basic | 12 | 509.1 | 503.9 | 508.9 | 503.7
Diluted | 12 | 509.1 | 503.9 | 508.9 | 503.7

See accompanying notes to the condensed consolidated financial statements (interim).

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

|  | Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | Note | 2015 | 2014 | 2015 | 2014
Net loss |  | (157.8) | (59.6) | (191.9) | (45.2)
Other comprehensive income (loss)(1) |  |  |  |  |
Unrealized foreign exchange (loss)/ gain on cash and cash equivalents designated as hedging instruments | 11 | (9.9) | - | (9.7) | -
Realized foreign exchange loss on cash and cash equivalents designated as hedging instruments | 11 | 2.3 | - | 2.1 | -
Unrealized (loss)/ gain on mark-to-market of diesel swap contracts | 11 | (2.2) | - | (2.1) | -
Realized loss on settlement of diesel swap contracts | 11 | 0.4 | - | 0.6 | -
Gain/ (loss) on revaluation of gold stream obligation |  | 15.0 | - | 15.0 | -
Unrealized (loss)/ gain on available-for-sale securities (net of tax) |  | - | (0.2) | - | (0.1)
Reclassification of discontinued gold contracts |  | - | 6.8 | - | 20.5
Deferred income tax related to derivative contracts | 11 | (4.1) | - | (4.1) | -
Deferred income tax related to gold contracts |  | - | (2.8) | - | (8.5)
Total other comprehensive income |  | 1.5 | 3.8 | 1.8 | 11.9
Total comprehensive loss |  | (156.3) | (55.8) | (190.1) | (33.3)

| 1. | All items recorded in other comprehensive income (“OCI”) will be reclassified in subsequent periods to net earnings.

See accompanying notes to the condensed consolidated financial statements (interim).

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited)

|  | As at September 30 | As at December 31
(in millions of U.S. dollars) | Note | 2015 | 2014
Assets |  |  |
Current assets |  |  |
Cash and cash equivalents |  | 384.6 | 370.5
Trade and other receivables | 4 | 110.7 | 34.8
Inventories | 6 | 160.4 | 187.5
Current income tax receivable |  | 23.8 | 31.1
Prepaid expenses and other |  | 4.3 | 10.6
Total current assets |  | 683.8 | 634.5
Assets held for sale | 8 | 259.4 | -
Non-current inventories | 6 | 105.8 | 66.5
Mining interests | 7 | 2,710.5 | 3,008.7
Deferred tax assets | 13 | 157.1 | 168.3
Other |  | 3.2 | 3.8
Total assets |  | 3,919.8 | 3,881.8
Liabilities and equity |  |  |
Current liabilities |  |  |
Trade and other payables | 5 | 160.0 | 97.0
Current income tax payable |  | 4.8 | 7.9
Total current liabilities |  | 164.8 | 104.9
Liabilities held for sale | 8 | 140.4 | -
Reclamation and closure cost obligations | 14 | 69.1 | 63.5
Provisions |  | 12.7 | 9.4
Gold stream obligation | 10 | 163.2 | -
Derivative liabilities | 11 | 5.9 | 16.9
Long-term debt | 9 | 787.1 | 874.3
Deferred tax liabilities |  | 470.4 | 494.9
Deferred benefit |  | - | 46.3
Other |  | 0.3 | 0.4
Total liabilities |  | 1,813.9 | 1,610.6
Equity |  |  |
Common shares | 12 | 2,840.1 | 2,820.9
Contributed surplus |  | 102.3 | 96.7
Other reserves |  | 0.3 | (1.5)
Deficit |  | (836.8) | (644.9)
Total equity |  | 2,105.9 | 2,271.2
Total liabilities and equity |  | 3,919.8 | 3,881.8

See accompanying notes to the condensed consolidated financial statements (interim).

Approved and authorized by the Board of Directors on October 28, 2015

______________________________ | ______________________________
Robert Gallagher, Director | James Estey, Director

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

|  | Nine months ended September 30
(in millions of U.S. dollars) | Note | 2015 | 2014
Common shares |  |  |
Balance, beginning of period |  | 2,820.9 | 2,815.3
Acquisition of Bayfield Ventures Corp. | 7 | 16.8 | -
Shares issued for exercise of options and land purchases | 12 | 2.4 | 2.7
Balance, end of period |  | 2,840.1 | 2,818.0
Contributed surplus |  |  |
Balance, beginning of period |  | 96.7 | 90.0
Exercise of options |  | 0.3 | (1.0)
Equity settled share-based payments |  | 5.3 | 4.5
Reclassification of share-based payments |  | - | 1.4
Balance, end of period |  | 102.3 | 94.9
Other reserves |  |  |
Balance, beginning of period |  | (1.5) | (17.6)
Change in fair value of hedging instruments (net of tax) | 11 | (8.5) | 12.0
Gain/ (loss) on revaluation of financial instruments |  | 10.3 | -
Change in fair value of available-for-sale investments |  | - | (0.1)
Balance, end of period |  | 0.3 | (5.7)
deficit |  |  |
Balance, beginning of period |  | (644.9) | (167.8)
Net loss |  | (191.9) | (45.2)
Balance, end of period |  | (836.8) | (213.0)
Total equity |  | 2,105.9 | 2,694.2

See accompanying notes to the condensed consolidated financial statements (interim).

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

|  | Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | Note | 2015 | 2014 | 2015 | 2014
Operating activities |  |  |  |  |
Net earnings (loss) |  | (157.8) | (59.6) | (191.9) | (45.2)
Adjustments for: |  |  |  |  |
Realized losses on gold contracts |  | - | 6.8 | - | 20.5
Foreign exchange (gains) losses | 3 | 40.8 | 23.1 | 72.6 | 26.1
Reclamation and closure costs paid | 14 | (0.2) | (0.3) | (0.4) | (0.9)
Loss on disposal of assets |  | - | 0.1 | 0.7 | (0.2)
Impairment loss on reclassification of asset as held for sale | 8 | 182.0 | - | 182.0 | -
Depreciation and depletion |  | 60.9 | 54.1 | 166.4 | 157.8
Other non-cash adjustments | 15 | 1.9 | (3.8) | (4.0) | 3.5
Income tax expense/ (recovery) | 13 | (83.8) | 48.1 | (76.1) | 56.2
Finance income | 3 | (0.4) | (0.5) | (1.0) | (1.0)
Finance costs | 3 | 10.0 | 7.1 | 31.4 | 21.8
Unrealized (gain)/ loss on gold stream liability |  | 3.2 | - | 3.2 | -
Financial instrument transaction costs |  | 2.6 | - | 2.6 | -
|  | 59.2 | 75.1 | 185.5 | 238.6
Change in non-cash operating working capital | 15 | (7.4) | (20.4) | (10.8) | (41.7)
Income taxes (paid) refunded |  | (0.8) | 3.5 | 3.0 | 2.0
Cash generated from operations |  | 51.0 | 58.2 | 177.7 | 198.9
Investing activities |  |  |  |  |
Mining interests |  | (76.7) | (73.7) | (219.8) | (190.6)
Government grant received |  | - | 20.5 | - | 20.5
Proceeds from the sale of assets |  | 0.1 | 0.1 | 0.9 | 0.4
Interest received |  | 0.4 | 0.2 | 1.0 | 0.6
Cash used by investing activities |  | (76.2) | (52.9) | (217.9) | (169.1)
Financing activities |  |  |  |  |
Proceeds received from exercise of options | 12 | 0.1 | 0.4 | 0.2 | 1.4
Gold stream agreement deposit |  | 100.0 | - | 100.0 | -
Financing initiation costs |  | (2.6) | (2.2) | (2.6) | (2.2)
Interest paid |  | - | (0.1) | (26.1) | (26.2)
Cash generated from/ (used by) financing activities |  | 97.5 | (1.9) | 71.5 | (27.0)
Effect of exchange rate changes on cash and cash equivalents |  | (14.5) | (1.3) | (17.2) | (1.1)
Change in cash and cash equivalents |  | 57.8 | 2.1 | 14.1 | 1.7
Cash and cash equivalents, beginning of period |  | 326.8 | 414.0 | 370.5 | 414.4
Cash and cash equivalents, end of period |  | 384.6 | 416.1 | 384.6 | 416.1
Cash and cash equivalents are comprised of: |  |  |  |  |
Cash |  | 272.6 | 251.1 | 272.6 | 251.1
Short-term money market instruments |  | 112.0 | 165.0 | 112.0 | 165.0
|  | 384.6 | 416.1 | 384.6 | 416.1

See accompanying notes to the condensed consolidated financial statements (interim).

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2015 and 2014

(Amounts expressed in millions of U.S. dollars, except per share amounts and unless otherwise noted)

1. Description of business and nature of operations

New Gold Inc. (“New Gold” or the “Company”) is an intermediate gold mining company engaged in the development and operation of mineral properties. The assets of the Company, directly or through its subsidiaries, are comprised of the New Afton Mine in Canada (“New Afton”), the Mesquite Mine in the United States (“Mesquite”), the Peak Mines in Australia (“Peak Mines”) and the Cerro San Pedro Mine in Mexico (“Cerro San Pedro”). Significant projects include the Rainy River (“Rainy River”) and Blackwater (“Blackwater”) projects, both in Canada, and a 30% interest in the El Morro gold-copper project (“El Morro”) in Chile which is currently held for sale.

The Company is a corporation governed by the Business Corporations Act (British Columbia). The Company’s shares are listed on the Toronto Stock Exchange and the New York Stock Exchange MKT under the symbol NGD.

The Company’s registered office is located at 1800 – 555 Burrard Street, Vancouver, British Columbia, V7X 1M9, Canada.

2. Significant accounting policies

(a) Statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, on a basis consistent with the accounting policies disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2014, with the exception of policies noted in 2(b) and 2(c).

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2014 which includes information necessary or useful to understanding the Company's business and financial statement presentation. In particular, the Company's significant accounting policies are presented as Note 2 in the audited consolidated financial statements for the year ended December 31, 2014, and have been consistently applied in the preparation of these unaudited condensed consolidated interim financial statements, except as noted in 2(b) and 2(c).

These unaudited condensed consolidated interim financial statements were approved by the Board of Directors of the Company on October 28, 2015.

(b) Changes in accounting policies

The Company has adopted the following new and revised IFRS policies along with any amendments, effective January 1, 2015. These changes were made in accordance with the applicable transitional provisions.

IFRS 9 - Financial instruments

During the nine months ended September 30, 2015 the Company early adopted International Financial Reporting Standard (“IFRS”) 9 (2013), Financial Instruments (“IFRS 9”) as a complete standard. This standard replaces the guidance in IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) on the classification and measurement of financial assets and financial liabilities. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value through profit and loss and those measured at amortized cost, with the determination made at initial recognition. The classification depends on an entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that in cases where the fair value option is selected for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the statements of operations, unless this creates an accounting mismatch. IFRS 9 has also been updated to amend the requirements around hedge accounting.

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During the nine months ended September 30, 2015 the Company entered into diesel fuel swap contracts and transferred a portion of cash which had been held in U.S. dollars to Canadian dollars and designated this cash to fund the construction of Rainy River. In both these instances the Company has designated these instruments as hedged items under IFRS 9. The adoption of IFRS 9 did not require the Company to re-state comparative prior period figures, as the adoption of this standard did not have a material impact on the Company’s comparative information. The impact of applying hedge accounting during the nine months ended September 30, 2015 is disclosed in Note 11.

During the nine months ended September 30, 2015 the Company entered into a gold stream agreement with Royal Gold Inc. (“Royal Gold”). In accordance with IFRS 9, management has determined that based on the terms of the agreement, the Company assumes the risks associated with the timing and amount of ounces of gold and silver delivered. As such, the Company has recognized the deposit received from Royal Gold as a financial liability at fair value through profit and loss, with initial and subsequent measurement at fair value. Transaction costs directly attributable to the gold stream obligation are expensed through profit and loss as incurred.

Fair value of the gold stream obligation on initial recognition is determined by the amount of the cash advance received. Subsequent fair value is calculated on each reporting date with gains and losses recorded in profit and loss. Fair value adjustments as a result of the Company’s own credit risk will be recorded in the Statement of Other Comprehensive Income. Components of the adjustment to fair value at each reporting date include:

| · | Accretion expense due to passage of time

| · | Change in the risk free interest rate

| · | Change in the Company specific credit spread

| · | Change in any expected ounces to be delivered

| · | Change in future metal prices

(c) Assets and Liabilities Held for Sale

The Company classifies non-current assets and liabilities, or disposal groups consisting of assets and liabilities, as held for sale when it expects to recover their carrying amounts primarily through sale rather than through continuing use. To meet criteria to be held for sale, the sale must be highly probable, and the assets and liabilities or disposal groups must be available for immediate sale in their present condition. The Company must be committed to a plan to sell the assets and liabilities or disposal group, and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification. The Company measures assets or disposal groups at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains and losses on remeasurement are recognized in profit or loss; however, gains are not recognized in excess of any cumulative impairment loss. Upon classifying assets and liabilities or disposal groups as held for sale, the Company presents the assets separately as a single amount and the liabilities separately as a single amount on the balance sheet. When an asset no longer meets the criteria for classification as an asset held for sale, the Company records the asset at the lower of its recoverable amount and the carrying amount net of depreciation before the asset was classified as held for sale.

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3. Expenses

(a) Operating expenses by nature

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
Operating expenses by nature |  |  |  |
Raw materials and consumables | 48.3 | 52.1 | 140.5 | 149.9
Salaries and employee benefits | 31.3 | 35.9 | 99.1 | 109.1
Repairs and maintenance | 8.5 | 9.2 | 23.4 | 25.5
Contractors | 11.7 | 11.9 | 36.5 | 33.3
Royalties | 3.2 | 3.1 | 9.0 | 9.0
Operating leases | 8.5 | 9.0 | 26.4 | 26.4
Drilling and analytical | 1.7 | 2.1 | 6.0 | 6.2
General and administrative | 5.2 | 6.4 | 16.4 | 19.7
Other | 0.4 | 0.7 | 2.0 | 1.6
Total production expenses | 118.7 | 130.4 | 359.2 | 380.7
Less: Production expenses capitalized | (8.8) | (19.7) | (47.1) | (63.3)
Less: Change in inventories and work-in-progress | (4.6) | (16.5) | (9.0) | (29.4)
Total operating expenses | 105.4 | 94.2 | 303.2 | 288.0

(b) Finance costs and income

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
Finance costs |  |  |  |
Interest on senior unsecured notes | 13.6 | 13.5 | 40.3 | 40.3
Interest on El Morro funding loan | 1.1 | 1.0 | 3.1 | 2.8
Accretion expense on decommissioning obligations (Note 14) | 0.4 | 0.4 | 1.0 | 1.4
Other finance costs | 1.0 | 0.7 | 2.4 | 1.8
| 16.0 | 15.6 | 46.8 | 46.3
Less: amounts included in cost of qualifying assets | (6.0) | (8.5) | (15.4) | (24.5)
Total finance costs | 10.0 | 7.1 | 31.4 | 21.8
Finance income |  |  |  |
Interest income | 0.4 | 0.5 | 1.0 | 1.0

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(c) Other (losses) gains

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
OTHER (LOSSES) GAINS |  |  |  |
Unrealized gains (loss) on share purchase warrants | (1.7) | 9.2 | 9.8 | 4.4
Gain (loss) on foreign exchange | (40.8) | (23.1) | (72.6) | (26.1)
Impairment loss on reclassification of asset as held for sale | (182.0) | - | (182.0) | -
Other loss on disposal of assets | - | (0.1) | (0.7) | 0.2
Impairment loss of AFS securities | (0.1) | - | (0.1) | -
Financial instrument transaction costs | (2.6) | - | (2.6) | -
Unrealized gains (loss) on revaluation of gold stream obligation | (3.2) | - | (3.2) | -
Other | (0.3) | 0.2 | (0.1) | -
Total other (losses) gains | (230.7) | (13.8) | (251.5) | (21.5)

4. Trade and other receivables

| As at September 30 | As at December 31
(in millions of U.S. dollars) | 2015 | 2014
Trade and other receivables |  |
Trade receivables | 13.4 | 4.8
Sales tax receivable | 22.2 | 28.7
Unsettled provisionally priced concentrate derivatives and copper swap contracts (Note 11) | (0.6) | (0.4)
Gold stream agreement deposit receivable | 75.0 | -
Other | 0.7 | 1.7
Total trade and other receivables | 110.7 | 34.8

5. Trade and other payables

| As at September 30 | As at December 31
(in millions of U.S. dollars) | 2015 | 2014
Trade and other payables |  |
Trade payables | 45.0 | 31.4
Interest payable | 21.3 | 8.4
Accruals | 93.0 | 55.5
Current portion of decommissioning obligations (Note 14) | 0.7 | 1.7
Total trade and other payables | 160.0 | 97.0

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6. Inventories

| As at September 30 | As at December 31
(in millions of U.S. dollars) | 2015 | 2014
Inventories |  |
Heap leach ore | 195.7 | 185.0
Work-in-process | 15.4 | 12.8
Finished goods(1) | 8.2 | 11.5
Stockpile ore | 2.6 | 2.4
Supplies | 44.3 | 42.3
| 266.3 | 254.0
Less: non-current inventories(2) | (105.8) | (66.5)
Total current inventories | 160.4 | 187.5

| 1. | The amount of inventories recognized in operating expenses for the three and nine months ended September 30, 2015 was $99.7 million and $285.9 million (2014 – $88.1 million and $268.2 million).

| 2. | Heap leach inventories of $105.8 million (December 31, 2014 – $66.5 million) are expected to be recovered after one year.

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7. Mining interests

| Depletable | Non- depletable | Plant & equipment | Construction in progress | Exploration & evaluation | Total
(in millions of U.S. dollars) |  |  |  |  |  |
Cost |  |  |  |  |  |
As at December 31, 2013 | 1,350.1 | 1,690.7 | 735.7 | 25.7 | 9.7 | 3,811.9
Additions | 68.7 | 58.3 | 3.9 | 208.3 | 7.5 | 346.7
Disposals | - | - | (15.5) | - | (9.7) | (25.2)
Impairments | (75.0) | (334.7) | (18.7) | (6.7) | - | (435.1)
Government grants | - | (25.7) | - | - | - | (25.7)
Transfers | 81.5 | (36.0) | 44.0 | (89.5) | - | -
As at December 31, 2014 | 1,425.3 | 1,352.6 | 749.4 | 137.8 | 7.5 | 3,672.6
Additions | 47.2 | 45.5 | 46.7 | 181.5 | - | 320.9
Acquisition of Bayfield Ventures Corp. | - | 19.7 | - | - | - | 19.7
Government grants | - | (15.0) | - | - | - | (15.0)
Disposals | - | (2.9) | (13.0) | - | - | (15.9)
Impairment loss on reclassification of asset as held for sale | - | (182.0) | - | - | - | (182.0)
Reclassification of El Morro as held for sale | - | (259.4) | - | - | - | (259.4)
Transfers | 13.8 | - | 35.2 | (49.0) | - | -
As at September 30, 2015 | 1,486.3 | 958.5 | 818.3 | 270.3 | 7.5 | 3,540.9
Accumulated depreciation |  |  |  |  |  |
As at December 31, 2013 | 249.0 | - | 226.4 | - | - | 475.4
Depreciation for the year | 157.2 | - | 86.1 | - | - | 243.3
Disposals | - | - | (15.5) | - | - | (15.5)
Impairments | (29.4) | - | (9.9) | - | - | (39.3)
As at December 31, 2014 | 376.8 | - | 287.1 | - | - | 663.9
Depreciation for the year | 126.5 | - | 53.6 | - | - | 180.1
Disposals | - | (1.4) | (12.2) | - | - | (13.6)
As at September 30, 2015 | 503.3 | (1.4) | 328.5 | - | - | 830.4
carrying amount |  |  |  |  |  |
As at December 31, 2014 | 1,048.5 | 1,352.6 | 462.3 | 137.8 | 7.5 | 3,008.7
As at September 30, 2015 | 983.0 | 959.9 | 489.8 | 270.3 | 7.5 | 2,710.5

The Company capitalized interest of $6.0 million and $15.5 million for the three and nine months ended September 30, 2015 (2014 – $8.5 million and $24.5 million) to qualifying development projects. The Company’s annualized capitalization rate is 6.75% (2014 – 6.53%).

Asset acquisition

On January 1, 2015 the Company completed the acquisition of Bayfield Ventures Corp. (“Bayfield”), consequently acquiring all of Bayfield’s assets, including a 100% interest in three mineral properties, totaling ten square kilometers, located adjacent to New Gold’s Rainy River project in northwestern Ontario and valued at $19.7 million. In addition, the Company received cash of $0.1 million and assumed liabilities of $1.3 million, the majority of which related to deferred tax liabilities. The acquisition was accounted for as a purchase of assets and an assumption of liabilities by the Company.

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As consideration for the Bayfield acquisition, the Company issued 3.8 million common shares. The shares issued were valued at C$5.21, for total consideration of $16.8 million. In addition up to 0.2 million common shares of the Company became issuable in connection with the potential exercise of share purchase warrants (“Bayfield warrants”) issued by Bayfield, with a consideration value of $0.2 million (refer to Note 11 (b) for additional information on the Bayfield warrants). The Company also incurred transaction costs of $1.5 million in relation to the acquisition.

Carrying amount by property as at September 30, 2015:

| As at September 30, 2015
(in millions of U.S. dollars) | Depletable | Non- depletable | Plant & equipment | Construction in progress | Total
mining interest by site |  |  |  |  |
New Afton | 684.1 | 7.1 | 286.2 | 17.7 | 995.1
Mesquite | 179.5 | - | 103.3 | 8.9 | 291.7
Peak Mines | 119.1 | 17.5 | 73.9 | 4.9 | 215.4
Cerro San Pedro | 0.3 | - | - | 0.7 | 1.0
Rainy River(1) | - | 423.0 | 5.1 | 238.1 | 666.2
Blackwater | - | 512.3 | 14.6 | - | 526.9
Other(2) | - | 7.5 | 6.7 | - | 14.2
Carrying amount as at September 30, 2015 | 983.0 | 967.4 | 489.8 | 270.3 | 2,710.5

| 1. | Rainy River includes non-depletable mineral interest acquired in the acquisition of Bayfield

| 2. | Other includes corporate balances and exploration properties.

Carrying amount by property as at December 31, 2014:

| As at December 31, 2014
(in millions of U.S. dollars) | Depletable | Non- depletable | Plant & equipment | Construction in progress | Total
mining interest by site |  |  |  |  |
New Afton | 745.2 | 3.7 | 266.7 | 33.9 | 1,049.5
Mesquite | 179.5 | - | 94.8 | 9.6 | 283.9
Peak Mines | 123.8 | 17.5 | 77.1 | 12.4 | 230.8
Cerro San Pedro | - | - | - | - | -
Rainy River | - | 383.7 | 1.1 | 81.9 | 466.7
Blackwater | - | 508.8 | 15.5 | - | 524.3
El Morro | - | 438.7 | - | - | 438.7
Other(1) | - | 7.7 | 7.1 | - | 14.8
Carrying amount as at December 31, 2014 | 1,048.5 | 1,360.1 | 462.3 | 137.8 | 3,008.7

| 1. | Other includes corporate balances and exploration properties.

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8. Assets and liabilities held for sale

On August 27, 2015 the Company announced that it entered into an agreement with Goldcorp Inc. ("Goldcorp") to sell the Company’s 30% interest in the El Morro project to Goldcorp in exchange for $90.0 million in cash, a 4% stream on gold production from the El Morro property (valued at $32.0 million) and the cancellation of the Company’s $94.1 million carried funding loan. The agreement is expected to incur $3.0 million of transaction costs. El Morro is a copper-gold project located in the northern end of Chile in the Atacama Region. The transaction is expected to close in the fourth quarter of 2015.

As at September 30, 2015, the El Morro asset met criteria for classification as an asset held for sale. At that date, the interest in El Morro’s carrying value prior to classification as an asset held for sale exceeded the fair value less costs to sell and therefore an impairment loss on reclassification of asset as held for sale of $182.0 million was recorded on the Company’s Condensed Consolidated Income Statement ($100.5 million net of tax recovery). The Company determined the fair value based on the cash consideration received and terms of the sale agreement. El Morro is reported within the other operating segment.

| As at September 30
(in millions of U.S. dollars) | 2015
Impairment loss on reclassification of asset as held for sale included within income from operations |
El Morro non-depletable mining interest | (182.0)
Tax Recovery | 81.5
Total impairment loss after tax | (100.5)

As at September 30, 2015, the major classes of assets and liabilities of the Company’s interest in El Morro classified as held for sale were as follows:

| As at September 30
(in millions of U.S. dollars) | 2015
Assets |
Mineral interest | 259.4
Total Assets | 259.4
Liabilities |
Long-term debt | 94.1
Deferred benefit | 46.3
Total Liabilities | 140.4
Net Assets Held for Sale | 119.0
Less deferred tax liability associated with disposal of El Morro | (27.4)
Net assets held for sale less deferred tax liability | 91.6

El Morro funding loan

Under the terms of an agreement between subsidiaries of New Gold and a subsidiary of Goldcorp, Goldcorp is responsible for funding New Gold's 30% share of the Chilean company Sociedad Contracual Minera El Morro (“SCM El Morro”) project capital costs. New Gold will repay its share of capital plus accumulated interest out of 80% of its share of the project's cash flow with New Gold retaining 20% of its share of cash flow from the time production commences.

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The interest rate on the Company’s share of the capital funded by Goldcorp is 4.58%. For the three and nine months ended September 30, 2015, non-cash investing activities were $0.4 and $2.5 million (2014 – $nil and $5.4 million) excluding accrued interest, and represent the Company’s share of contributions to El Morro funded by Goldcorp. The loan is secured against all rights and interests of the Company’s Chilean subsidiaries, including a pledge of the SCM El Morro shares, limiting recourse to the Company’s investment in its Chilean subsidiaries. On August 27, 2015 the Company announced that it entered into an agreement with Goldcorp Inc. to sell the Company’s 30% interest in El Morro. As part of the agreement, Goldcorp will cancel the Company’s $94.1 million carried funding loan.

9. LONG-TERM DEBT

Long-term debt consists of the following:

| As at September 30 | As at December 31
(in millions of U.S. dollars) | 2015 | 2014
Long-term debt |  |
Senior unsecured notes - due April 15, 2020 (a) | 294.9 | 294.2
Senior unsecured notes - due November 15, 2022 (b) | 492.2 | 491.6
El Morro funding loan (note 8) | 94.1 | 88.5
Revolving credit facility (c) | - | -
Total long-term debt | 881.2 | 874.3
Less long-term debt classified as held for sale | (94.1) | -
Long-term debt | 787.1 | 874.3

(a) Senior Unsecured Notes – due April 15, 2020

On April 5, 2012, the Company issued $300.0 million of Senior Unsecured Notes (“2020 Unsecured Notes”). As at September 30, 2015 the face value was $300.0 million. The 2020 Unsecured Notes are denominated in U.S. dollars, mature and become due and payable on April 15, 2020, and bear interest at the rate of 7% per annum. Interest is payable in arrears in equal semi-annual instalments on April 15 and October 15 of each year.

The Company incurred transaction costs of $8.0 million which have been offset against the carrying amount of the 2020 Unsecured Notes and are being amortized to net earnings using the effective interest method.

The 2020 Unsecured Notes are subject to a minimum interest coverage incurrence covenant (EBITDA to interest) of 2:1. The test is applied on a pro-forma basis prior to the Company incurring additional debt, entering into business combinations or acquiring significant assets, or certain other corporate actions.

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The 2020 Unsecured Notes are redeemable by the Company in whole or in part:

| · | At any time prior to April 15, 2016 at a redemption price of 100% of the aggregate principal amount of the 2020 Unsecured Notes, plus a make-whole premium, plus accrued and unpaid interest, if any, to the redemption date.

| · | During the 12-month period beginning on April 15 of the years indicated at the redemption prices below, expressed as a percentage of the principal amount of the 2020 Unsecured Notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date:

Date | Redemption prices (%)
2016 | 103.50%
2017 | 101.75%
2018 and thereafter | 100.00%

(b) Senior Unsecured Notes – due November 15, 2022

On November 15, 2012, the Company issued $500.0 million of Senior Unsecured Notes (“2022 Unsecured Notes”). As at September 30, 2015 the face value was $500.0 million. The 2022 Unsecured Notes are denominated in U.S. dollars, mature and become due and payable on November 15, 2022, and bear interest at the rate of 6.25% per annum. Interest is payable in arrears in equal semi-annual instalments on May 15 and November 15 of each year.

The Company incurred transaction costs of $9.9 million which have been offset against the carrying amount of the 2022 Unsecured Notes and are being amortized to net earnings using the effective interest method.

The 2022 Unsecured Notes are subject to a minimum interest coverage incurrence covenant (EBITDA to interest) of 2:1. The test is applied on a pro-forma basis prior to the Company incurring additional debt, entering into business combinations or acquiring significant assets, or certain other corporate actions.

The 2022 Unsecured Notes are redeemable by the Company in whole or in part:

| · | At any time prior to November 15, 2017 at a redemption price of 100% of the aggregate principal amount of the 2022 Unsecured Notes, plus a make-whole premium, plus accrued and unpaid interest, if any, to the redemption date.

| · | During the 12-month period beginning on November 15 of the years indicated at the redemption prices below, expressed as a percentage of the principal amount of the 2022 Unsecured Notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date:

Date | Redemption prices (%)
2017 | 103.13%
2018 | 102.08%
2019 | 101.04%
2020 and thereafter | 100.00%

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(c) Revolving credit facility

On August 14, 2014, the Company replaced its $150.0 million revolving credit facility (due to expire on December 14, 2014) with a $300.0 million revolving credit facility (the “Facility”) which expires on August 14, 2018. The Facility also provides the Company with the option to draw an additional $50.0 million above and beyond the base $300.0 million, subject to lender participation. Net debt is used to calculate leverage for the purpose of covenant tests and pricing levels. The Facility contains various covenants customary for a loan facility of this nature, including limits on indebtedness, asset sales and liens. The Facility contains two covenant tests, the minimum interest coverage ratio (EBITDA to interest) and the maximum leverage ratio (net debt to EBITDA). Significant financial covenants are as follows:

| Twelve months ended September 30 | Twelve months ended December 31
| Financial covenant | 2015 | 2014
FINANCIAL COVENANTS |  |  |
Minimum interest coverage ratio (EBITDA to interest) | >3.0 : 1 | 4.6 : 1 | 5.3 : 1
Maximum leverage ratio (net debt to EBITDA) | <3.5 : 1 | 1.9 : 1 | 1.6 : 1

The interest margin on drawings under the Facility ranges from 1.00% to 3.25% over LIBOR, the Prime Rate or the Base Rate, based on the Company’s debt to EBITDA ratio and the currency and type of credit selected by the Company. The standby fees on undrawn amounts under the Facility range from 0.45% to 0.73%, depending on the Company’s net debt to EBITDA ratio. Based on the Company’s net debt to EBITDA ratio, the rate is 0.56% as at September 30, 2015 (2014 – 0.51%). As at September 30, 2015, the Company has not drawn any funds under the Facility; however, the Facility has been used to issue letters of credit of $61.8 million as at September 30, 2015 (at December 31, 2014 - $41.7 million). Letters of credit relate to reclamation bonds, worker’s compensation security and other government agencies.

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10. GOLD STREAM OBLIGATION

On July 20, 2015, the Company entered into a $175.0 million streaming agreement with RGLD Gold AG, a wholly owned subsidiary of Royal Gold. Under the terms of the agreement, the Company agreed to deliver to Royal Gold 6.5% of gold production from the Rainy River Project to Royal Gold up to a total of 230,000 ounces of gold and then 3.25% of the Project’s gold production thereafter. The Company will also deliver 60% of the Project’s silver production to a maximum of 3.1 million ounces and then 30% of silver production thereafter. In consideration, Royal Gold paid $100.0 million concurrent with entering into the agreement and the remaining $75.0 million will be paid when 60% of the estimated project development capital has been spent and other customary conditions precedent are met. Based on the current planned timing of development capital expenditure, the Company expects that 60% of the Project development costs will have been spent by mid-2016.

In addition to the upfront deposit, Royal Gold will pay 25% of the average spot gold or silver price at the time each ounce of gold or silver is delivered under the stream. The difference between the spot price of metal and the cash received from Royal Gold will reduce the $175.0 million deposit until it is paid in full. Upon expiry of the 40-year term of the agreement (which may be extended in certain circumstances), any balance of the $175.0 million upfront deposit remaining unpaid will be refunded to Royal Gold.

The Company assessed the liability at the inception of the agreement and determined that it is a financial liability under the scope of IFRS 9. Accordingly, the Company values the liability at the present value of its expected future cash flows at each reporting period with changes in fair value reflected in the Condensed Consolidated Income Statements and Condensed Consolidated Statements of Comprehensive Income.

The following is a summary of the changes in the Company’s gold streaming agreement:

(in millions of U.S. dollars) |
Change in Stream Obligation |
Balance, December 31, 2014 | -
Deposit received during the period | 100.0
Deposit receivable as at September 30, 2015 | 75.0
| 175.0
Deposit repayments during the period | -
Fair value adjustments related to changes in the Company’s own credit risk(1) | (15.0)
Other fair value adjustments(2) | 3.2
Balance as at September 30, 2015 | 163.2

| 1. | Fair value adjustments related to changes in the Company’s own credit risk are included in other comprehensive income

| 2. | Other fair value adjustments are included in the condensed consolidated income statements

Fair value adjustments represent the net effect on the gold stream obligation of changes in the variables included in the Company’s valuation model between the date of receipt of deposit and the reporting date. These variables include loan accretion, risk free interest rate, future metal prices, company specific credit spread and expected gold ounces to be delivered.

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11. DERIVATIVE INSTRUMENTS

| As at September 30 | As at December 31
(in millions of U.S. dollars) | 2015 | 2014
DERIVATIVE ASSETS |  |
Unsettled provisionally priced concentrate derivatives and swap contracts | (0.6) | (0.4)
DERIVATIVE LIABILITIES |  |
Diesel swap contracts | 1.5 | -
Share purchase warrants | 5.6 | 16.9
| 7.1 | 16.9
Less: current portion of diesel swap contracts | (1.2) | -
Total derivative liabilities | 5.9 | 16.9

(a) Hedging instruments

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
EFFECTIVE PORTION OF CHANGE IN FAIR VALUE OF HEDGING INSTRUMENTS |  |  |  |
Unrealized foreign exchange (loss)/ gain on cash and cash equivalents designated as hedging instruments (i) | (9.9) | - | (9.7) | -
Realized foreign exchange loss on cash and cash equivalents designated as hedging instrument (i) | 2.3 | - | 2.1 | -
Unrealized (loss)/ gain on diesel swap contracts (ii) | (2.2) | - | (2.1) | -
Realized loss on settlement of diesel swap contracts (ii) | 0.4 | - | 0.6 | -
Gold hedging contracts – realized | - | 6.8 | - | 20.5
Deferred income tax related to derivative contracts | 0.6 | - | 0.6 | -
Deferred income tax related to gold contracts | - | (2.8) | - | (8.5)
Total hedging gains in other comprehensive income | (8.8) | 4.0 | (8.5) | 12.0

(i) Cash and cash equivalents designated as hedging instruments

During the nine months ended September 30, 2015, the Company converted $250.0 million into Canadian dollars and designated this cash to fund the construction of Rainy River for the 15-month period beginning April 2015 and ending June 2016. The Company elected to apply hedge accounting to the foreign exchange gains and losses from the date of conversion to the date when costs are incurred by Rainy River. Foreign exchange gains and losses are reclassified from other comprehensive income to mining interests as project costs are incurred.

To determine effectiveness of the hedging relationship, the Company assesses the critical terms between the hedged item and the hedging instrument on a qualitative basis. If disconnect is noted, a quantitative assessment is performed to determine the impact of the potential ineffectiveness.

The Company hedged approximately 64% of all Canadian dollar denominated Rainy River incurred construction costs. For the three and nine months ended September 30, 2015, the Company capitalized a loss of $2.3 million and $2.1 million (2014 – $nil) to mineral interests that was reclassified from other comprehensive income. As forecasted capital expenditures are incurred, the Company reclassifies foreign exchange gains and losses from other comprehensive income to mining interests. As of September 30, 2015, the hedge was fully effective and no ineffective portion was realized in net earnings.

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(ii) Diesel swap contracts

During the nine months ended September 30, 2015, the Company entered into diesel swap contracts to hedge diesel cost at Mesquite. During March 2015, the Company entered into swap contracts which hedged the diesel price exposure of approximately 57% of the monthly consumption for the next 15 months beginning in October 2015 and ending in December 2016, at approximately $2.15 per gallon fully loaded price. During August 2015, the Company entered into additional diesel swap contracts which will hedge the diesel price exposure of an additional 19% for the period October 2015 to December 2016 and 55% for the period January 2017 to June 2017, at approximately $2.05 per gallon fully loaded price. The Company has entered into a pay fixed/receive floating Gulf Coast ultra-low-sulfur-diesel swaps settled at the monthly average price. The total quantity of unsettled gallons that the Company is contractually obligated to settle as at September 30, 2015 is 8.8 million. Gains and losses are reclassified from other comprehensive income to operating expenses as diesel is consumed at the mine site.

To determine effectiveness of the hedging relationship, the Company assesses the critical terms between the hedged item and the hedging instrument on a qualitative basis. If a disconnect is noted, a quantitative assessment is performed to determine the impact of the potential ineffectiveness.

The Company realized a loss of $0.3 million and loss of $0.6 million on settlement of 1.0 million gallons for the three and nine months ended September 30, 2015. As of September 30, 2015, the hedge was fully effective and no ineffective portion was realized.

(b) Share purchase warrants

The following table summarizes information about the Company’s outstanding share purchase warrants (“Warrants”).

Warrant Series | Number of Warrants | Common shares issuable | Exercise price | Expiry date
| (000s) | (000s) | C$ |
OUTSTANDING WARRANTS |  |  |  |
At September 30, 2015 |  |  |  |
New Gold Series A | 27,850 | 27,850 | 15.00 | June 28, 2017
Bayfield warrants Series A | 91 | 91 | 5.35 | May 6, 2016
Bayfield warrants Series B | 90 | 90 | 7.34 | May 12, 2016
Bayfield warrants Series C | 34 | 34 | 5.35 | May 22, 2016
Rainy River warrants | 50 | 50 | 20.00 | February 2, 2017
Total outstanding warrants | 28,115 | 28,115 |  |
At December 31, 2014 |  |  |  |
New Gold Series A | 27,850 | 27,850 | 15.00 | June 28, 2017
Rainy River warrants | 50 | 50 | 20.00 | February 2, 2017
Total outstanding Warrants | 27,900 | 27,900 |  |

The Warrants are classified as a non-hedged derivative liability recorded at fair value through profit or loss (“FVTPL”) liability due to the currency of the Warrants. The Warrants are priced in Canadian dollars, which is not the functional currency of the Company. Therefore, the Warrants are fair valued using the market price with gains or losses recorded in net loss.

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The Bayfield warrants originally entitled warrant holders to receive Bayfield shares on exercise. As consequence of the Bayfield acquisition, as described in Note 7, for each Bayfield warrant held, warrant holders will now be entitled to receive 0.0477 of a New Gold common share in lieu of a Bayfield share.

(c) Provisionally priced contracts

During the period, the Company had provisionally priced sales for which price finalization is outstanding at September 30, 2015. Realized and unrealized non-hedged derivative gains (losses) on the provisional pricing of concentrate sales are classified as revenue, with the unsettled provisionally priced concentrate derivatives included in trade and other receivables. The following tables summarize these realized and unrealized gains (losses):

| Three months ended September 30, 2015 | Nine months ended September 30, 2015
(in millions of U.S. dollars) | Gold | Copper | Total | Gold | Copper | Total
(LOSS) GAINS ON THE PROVISIONAL PRICING OF CONCENTRATE SALES |  |  |  |  |  |
Realized | (2.3) | (8.3) | (10.6) | (0.6) | (12.0) | (12.6)
Unrealized | (0.2) | (1.9) | (2.1) | (0.2) | (3.9) | (4.1)
Total (loss) gains | (2.5) | (10.2) | (12.7) | (0.8) | (15.9) | (16.7)

| Three months ended September 30, 2014 | Nine months ended September 30, 2014
(in millions of U.S. dollars) | Gold | Copper | Total | Gold | Copper | Total
GAINS (LOSSES) ON THE PROVISIONAL PRICING OF CONCENTRATE SALES |  |  |  |  |  |
Realized | (1.3) | (3.3) | (4.6) | 0.7 | (4.2) | (3.5)
Unrealized | (2.1) | (3.0) | (5.1) | (2.1) | (5.3) | (7.4)
Total gains (loss) | (3.4) | (6.3) | (9.7) | (1.4) | (9.5) | (10.9)

The following table summarizes the net exposure to the impact of movements in market commodity prices for provisionally priced sales:

| As at September 30 | As at December 31
| 2015 | 2014
Volumes subject to final pricing net of outstanding swaps |  |
Gold ounces (000’s) | 3.6 | 30.0
Copper pounds (millions) | 11.8 | 2.8

The Company enters into gold and copper swap contracts to reduce exposure to gold and copper prices. Realized and unrealized gains (losses) are recorded in revenue, with the unsettled gold and copper swaps included in trade and other receivables. The following table summarizes these realized and unrealized gains (losses):

Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
GAINS (LOSS) ON SWAP CONTRACTS |  |  |  |
Realized | 11.1 | 2.4 | 11.8 | 0.4
Unrealized | 1.8 | 2.8 | 3.5 | 3.6
Total gains (loss) | 12.9 | 5.2 | 15.3 | 4.0

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12. SHARE CAPITAL

At September 30, 2015, the Company had unlimited authorized common shares and 509.1 million common shares outstanding.

(a) No par value common shares issued

| Number of shares (000’s) |
(in millions of U.S. dollars, except where noted) |  |  |
NO PAR VALUE COMMON SHARES ISSUED |  |  |
Balance at December 31, 2013 |  | 503,437 | 2,815.3
Exercise of options |  | 560 | 2.6
Issuance of shares for land purchases |  | 681 | 3.0
Balance at December 31, 2014 |  | 504,678 | 2,820.9
Exercise of options |  | 125 | 0.3
Issuance of shares under First Nations agreements |  | 580 | 2.1
Acquisition of Bayfield |  | 3,780 | 16.8
Balance at September 30, 2015 |  | 509,163 | 2,840.1

(b) Share-based payment expenses

The following table summarizes share-based payment expenses for the three and nine months ended September 30:

Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
SHARE-BASED PAYMENT EXPENSES |  |  |  |
Stock option expense (i) | 1.2 | 1.3 | 4.0 | 3.8
Performance share unit expense | 0.6 | 0.3 | 1.8 | 1.3
Restricted share unit expense(1) | 0.3 | 0.1 | 0.9 | 0.3
Deferred share unit expense | (0.2) | (0.2) | (0.2) | 0.6
Total share-based payment expense | 1.9 | 1.5 | 6.5 | 6.0

| 1. | For the three and nine months ended September 30, 2015 $0.2 million and $0.8 million of restricted share unit expense were recognized in operating expenses.

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(i) Stock options

The following table presents changes in Company’s Stock Option Plan (the “Plan”):

| Number of options | Weighted average exercise price
| (000s) | C$
CHANGES TO THE PLAN |  |
Balance at December 31, 2013 | 10,314 | 6.72
Granted | 4,673 | 5.41
Exercised | (560) | 3.15
Forfeited | (320) | 9.25
Expired | (177) | 7.40
Balance at December 31, 2014 | 13,930 | 6.35
Granted | 508.2 | 3.90
Exercised | (125) | 1.58
Forfeited | (139) | 8.81
Expired | (218) | 4.74
Balance at September 30, 2015 | 13,956 | 6.31

During the nine months ended September 30, 2015, the Company granted 0.5 million options under the Plan (2014 – 1.8 million options granted).

The Company had the following weighted average assumptions in the Black-Scholes option-pricing model:

| Nine months ended September 30
| 2015 | 2014
Grant price | C$3.90 | C$6.21
Expected dividend yield | 0.0% | 0.0%
Expected volatility | 45.9% | 53.0%
Risk-free interest rate | 1.19% | 1.04%
Expected life of options | 3.7 years | 3.7 years
Fair value | C$1.48 | C$2.52

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(c) Income (loss) per share

The following table sets out the calculation of diluted loss per share:

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars, except where noted) | 2015 | 2014 | 2015 | 2014
CALCULATION OF DILUTED INCOME (LOSS) PER SHARE |  |  |  |
Net loss | (157.8) | (59.6) | (191.9) | (45.2)
Basic weighted average number of shares outstanding (in millions) | 509.1 | 503.9 | 508.9 | 503.7
Dilution of securities: |  |  |  |
Stock options | - | - | - | -
Diluted weighted average number of shares outstanding (in millions) | 509.1 | 503.9 | 508.9 | 503.7
Net (loss) earnings per share: |  |  |  |
Basic | (0.31) | (0.12) | (0.38) | (0.09)
Diluted | (0.31) | (0.12) | (0.38) | (0.09)

The following table lists the equity securities excluded from the calculation of diluted earnings per share. Such equity securities were excluded as their respective exercise prices exceeded the average market price of the Company’s common shares of C$3.02 and C$3.97 for the three and nine months ended September 30, 2015 (2014 – C$6.69 and C$6.32), or the inclusion of such equity securities had an anti-dilutive effect on net loss.

For the periods in which the Company records a loss, diluted loss per share is calculated using the basic weighted average number of shares outstanding, as using the diluted weighted average number of shares outstanding in the calculation would be anti-dilutive.

| Three months ended September 30 | Nine months ended September 30
(in millions of units) | 2015 | 2014 | 2015 | 2014
EQUITY SECURITIES EXCLUDED FROM THE CALCULATION OF DILUTED EARNINGS PER SHARE |  |  |  |
Stock options | 14.0 | 11.5 | 14.0 | 11.5
Warrants | 28.1 | 27.9 | 28.1 | 27.9

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13. INCOME AND MINING TAXES

The following table outlines the composition of income tax expense between current tax and deferred tax:

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
CURRENT INCOME AND MINING TAX EXPENSE (RECOVERY) |  |  |  |
Canada | 0.6 | 1.1 | 2.3 | 3.2
Foreign | (0.2) | 3.7 | 1.9 | 5.9
Adjustment in respect of prior year | (0.4) | 0.1 | (0.4) | 0.1
| - | 4.9 | 3.8 | 9.2
DEFERRED INCOME AND MINING TAX EXPENSE (RECOVERY) |  |  |  |
Canada | (1.7) | 7.5 | 8.7 | 19.2
Foreign | (82.9) | 37.1 | (89.4) | 29.2
Adjustment in respect of prior year | 0.8 | (1.4) | 0.8 | (1.4)
| (83.8) | 43.2 | (79.9) | 47.0
Total income tax expense | (83.8) | 48.1 | (76.1) | 56.2

Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before taxes. The differences result from the following items:

| Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
Earnings (loss) before taxes | (241.6) | (11.5) | (268.0) | 11.0
Canadian federal and provincial income tax rates | 25.9% | 26.0% | 25.9% | 26.0%
Income tax (recovery) / expense based on above rates | (62.6) | (3.0) | (69.4) | 2.9
INCREASE (DECREASE) DUE TO |  |  |  |
Non-taxable income | 0.3 | - | - | -
Different statutory tax rates on earnings of foreign subsidiaries | 49.0 | (2.1) | 47.6 | (4.8)
Foreign exchange on non-monetary assets and liabilities | 10.2 | 6.4 | 19.1 | 5.5
Other foreign exchange differences | 5.3 | (1.7) | 14.6 | 2.3
Prior years adjustments relating to tax provision and tax returns | 0.4 | (1.3) | 0.4 | (1.3)
Canadian mining tax | 0.1 | 1.6 | 1.9 | 5.5
Mexican special duty tax | 0.7 | (0.7) | 1.1 | (0.4)
Withholding tax | 0.1 | 0.2 | 0.4 | 0.5
Impairment on reclassification of asset as held for sale | (81.6) | - | (81.6) | -
Change in unrecognized deferred tax assets | (5.7) | (2.3) | (10.1) | (5.1)
Rate change in the period | - | 51.1 | - | 51.1
Other | - | (0.1) | (0.1) | -
Income tax (recovery) / expense | (83.8) | 48.1 | (76.1) | 56.2

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14. RECLAMATION AND CLOSURE COST OBLIGATIONS

Changes to the reclamation and closure cost obligations are as follows:

(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Rainy River | Blackwater | Total
Changes to reclamation and closure cost obligations |  |  |  |  |  |  |
Balance – December 31, 2013 | 8.2 | 10.6 | 16.0 | 18.7 | - | 9.5 | 63.0
Reclamation expenditures | (0.3) | (0.2) | (0.1) | (0.8) | - | - | (1.4)
Unwinding of discount | 0.2 | 0.2 | 0.6 | 0.5 | - | 0.3 | 1.8
Revisions to expected cash flows | 0.9 | 0.5 | 1.4 | 3.1 | - | 1.0 | 6.9
Foreign exchange movement | (0.7) | - | (1.5) | (2.1) | - | (0.8) | (5.1)
Balance – December 31, 2014 | 8.3 | 11.1 | 16.4 | 19.4 | - | 10.0 | 65.2
Less: current portion of closure costs (Note 5) | (0.2) | (0.7) | (0.5) | (0.3) | - | - | (1.7)
Non-current portion of closure costs | 8.1 | 10.4 | 15.9 | 19.1 | - | 10.0 | 63.5
Balance – December 31, 2014 | 8.3 | 11.1 | 16.4 | 19.4 | - | 10.0 | 65.2
Reclamation expenditures | - | (0.1) | (0.2) | (0.1) | - | - | (0.4)
Unwinding of discount | 0.1 | 0.2 | 0.3 | 0.2 | - | 0.2 | 1.0
Revisions to expected cash flows | 0.2 | 2.1 | (0.2) | (0.8) | 10.2 | 0.1 | 11.6
Foreign exchange movement | (1.1) | - | (2.3) | (2.1) | (0.7) | (1.4) | (7.6)
Balance – September 30, 2015 | 7.5 | 13.3 | 14.0 | 16.6 | 9.5 | 8.9 | 69.8
Less: current portion of closure costs (Note 5) | (0.2) | (0.1) | (0.2) | (0.2) | - | - | (0.7)
Non-current portion of closure costs | 7.3 | 13.2 | 13.8 | 16.4 | 9.5 | 8.9 | 69.1

Each period the Company reviews cost estimates and other assumptions used in the valuation of the obligations at each of its mining properties and development properties to reflect events, changes in circumstances and new information available. Changes in these cost estimates and assumptions have a corresponding impact on the fair value of the obligation. The fair values of the obligations are measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted risk-free rate of interest. The Company prepares estimates of the timing and amount of expected cash flows when an obligation is incurred. Expected cash flows are updated to reflect changes in facts and circumstances.

In June 2015, a reclamation liability was initially recognized at Rainy River. Previously Rainy River had not performed any activities that would require reclamation activities. The total estimated liability relates to the reclamation of the plant site. This will include rehabilitating the surrounding area, recontouring the land and planting vegetation. As well, the Company will be required to maintain ongoing monitoring to fulfill requirements by the Ministry of Northern Development and Mines.

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15. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information (included within operating activities) is as follows:

Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
CHANGE IN NON-CASH OPERATING WORKING CAPITAL |  |  |  |
Trade and other receivables | (8.2) | (4.4) | (0.1) | (17.5)
Inventories | (4.8) | (17.0) | (10.8) | (30.1)
Prepaid expenses and other | 0.5 | 1.1 | 4.6 | 5.8
Trade and other payables | 5.1 | (0.1) | (4.5) | 0.1
Total change in non-cash operating working capital | (7.4) | (20.4) | (10.8) | (41.7)

Three months ended September 30 | Nine months ended September 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014
OTHER NON-CASH ADJUSTMENTS |  |  |  |
Unrealized gains on share purchase warrants | 1.7 | (9.2) | (9.8) | (4.4)
Unrealized losses on concentrate contracts | (1.4) | 4.1 | 0.6 | 3.4
Equity settled share-based payment expense | 1.7 | 1.3 | 5.7 | 4.5
Other | (0.1) | - | (0.5) | -
Total other non-cash adjustments | 1.9 | (3.8) | (4.0) | 3.5

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16. SEGMENTED INFORMATION

(a) Segment revenues and results

The Company manages its reportable operating segments by operating mines, development projects and exploration projects. The results from operations for these reportable operating segments are summarized in the following tables:

Three months ended September 30, 2015
(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Corporate | Other(1) | Total
OPERATING SEGMENT RESULTS |  |  |  |  |  |  |
Gold revenues | 24.0 | 44.8 | 22.9 | 34.4 | - | - | 126.1
Copper revenues | 36.6 | - | 6.6 | - | - | - | 43.2
Silver revenues | 0.7 | - | 0.3 | 7.0 | - | - | 8.0
Total revenues(2) | 61.3 | 44.8 | 29.8 | 41.4 | - | - | 177.3
Operating expenses | 21.9 | 28.3 | 25.7 | 29.5 | - | - | 105.4
Depreciation and depletion | 34.6 | 13.4 | 11.8 | 1.0 | - | - | 60.8
Earnings (loss) from mine operations | 4.8 | 3.1 | (7.7) | 10.9 | - | - | 11.1
Corporate administration | - | - | - | - | 5.2 | - | 5.2
Provision for office consolidation | - | - | - | - | 3.0 | - | 3.0
Share-based payment expenses | - | - | - | - | 1.7 | - | 1.7
Exploration and business development | - | 0.6 | 0.5 | - | - | 1.4 | 2.5
Income (loss) from operations | 4.8 | 2.5 | (8.2) | 10.9 | (9.9) | (1.4) | (1.3)
Finance income | - | - | - | - | 0.4 | - | 0.4
Finance costs | (0.4) | - | (0.2) | - | (8.1) | (1.3) | (10.0)
Other gains (losses) (3) | (22.2) | (0.1) | (7.3) | (3.9) | (0.8) | (196.4) | (230.7)
Earnings (loss) before taxes | (17.8) | 2.4 | (15.7) | 7.0 | (18.4) | (199.1) | (241.6)
Income tax recovery (expense) | 20.3 | 1.2 | 1.5 | 1.4 | (5.0) | 64.4 | 83.8
Net earnings (loss) | 2.5 | 3.6 | (14.2) | 8.4 | (23.4) | (134.7) | (157.8)

| 1. | Other includes balances relating to the development and exploration properties that have no revenues or operating costs.

| 2. | Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the period.

| 3. | Other gains (losses) includes foreign exchange revaluation losses and impairment loss on assets reclassified as held for sale.

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Nine months ended September 30, 2015
(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Corporate | Other(1) | Total
OPERATING SEGMENT RESULTS |  |  |  |  |  |  |
Gold revenues | 77.1 | 104.1 | 62.4 | 94.9 | - | - | 338.5
Copper revenues | 132.1 | - | 22.8 | - | - | - | 154.9
Silver revenues | 2.3 | - | 1.0 | 17.2 | - | - | 20.5
Total revenues(2) | 211.5 | 104.1 | 86.2 | 112.1 | - | - | 513.9
Operating expenses | 72.5 | 70.5 | 74.1 | 86.1 | - | - | 303.2
Depreciation and depletion | 101.7 | 28.1 | 30.4 | 6.4 | - | - | 166.6
Earnings (loss) from mine operations | 37.3 | 5.5 | (18.3) | 19.6 | - | - | 44.1
Corporate administration | - | - | - | - | 16.7 | - | 16.7
Provision for office consolidation | - | - | - | - | 3.0 | - | 3.0
Share-based payment expenses | - | - | - | - | 5.7 | - | 5.7
Exploration and business development | - | 0.6 | 2.1 | - | 0.4 | 1.7 | 4.8
Income (loss) from operations | 37.3 | 4.9 | (20.4) | 19.6 | (25.8) | (1.7) | 13.9
Finance income | - | - | - | - | 1.0 | - | 1.0
Finance costs | (0.7) | (0.2) | (0.5) | (0.2) | (26.5) | (3.3) | (31.4)
Other gains (losses) (3) | (39.8) | (0.3) | (5.6) | (7.8) | (1.7) | (196.3) | (251.5)
Earnings (loss) before taxes | (3.2) | 4.4 | (26.5) | 11.6 | (53.0) | (201.3) | (268.0)
Income tax (expense) recovery | 7.2 | 2.9 | 4.6 | 1.2 | (3.2) | 63.4 | 76.1
Net earnings (loss) | 4.0 | 7.3 | (21.9) | 12.8 | (56.2) | (137.9) | (191.9)

| 1. | Other includes balances relating to the development and exploration properties that have no revenues or operating costs.

| 2. | Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the period.

| 3. | Other gains (losses) includes foreign exchange revaluation losses and impairment loss on assets reclassified as held for sale.

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Three months ended September 30, 2014
(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Corporate | Other(1) | Total
OPERATING SEGMENT RESULTS |  |  |  |  |  |  |
Gold revenues | 26.4 | 26.1 | 32.1 | 14.8 | - | - | 99.4
Copper revenues | 54.4 | - | 11.0 | - | - | - | 65.4
Silver revenues | 1.0 | - | 0.4 | 3.1 | - | - | 4.5
Total revenues(2) | 81.8 | 26.1 | 43.5 | 17.9 | - | - | 169.3
Operating expenses | 22.4 | 24.5 | 25.5 | 21.8 | - | - | 94.2
Depreciation and depletion | 31.4 | 6.7 | 13.6 | 2.0 | - | - | 53.7
Earnings (loss) from mine operations | 28.0 | (5.1) | 4.4 | (5.9) | - | - | 21.4
Corporate administration | - | - | - | - | 6.0 | - | 6.0
Share-based payment expenses | - | - | - | - | 1.5 | - | 1.5
Exploration and business development | 0.1 | - | 1.2 | - | 0.1 | 3.6 | 5.0
Income (loss) from operations | 27.9 | (5.1) | 3.2 | (5.9) | (7.6) | (3.6) | 8.9
Finance income | - | - | 0.1 | - | 0.1 | 0.3 | 0.5
Finance costs | (0.1) | (0.1) | (0.2) | (0.1) | (5.5) | (1.1) | (7.1)
Other gains (losses) | (11.3) | (0.1) | 1.4 | (1.9) | 10.2 | (12.1) | (13.8)
Earnings (loss) before taxes | 16.5 | (5.3) | 4.5 | (7.9) | (2.8) | (16.5) | (11.5)
Income tax recovery (expense) | 34.5 | 5.1 | (1.7) | 4.9 | (23.3) | (67.6) | (48.1)
Net earnings (loss) | 51.0 | (0.2) | 2.8 | (3.0) | (26.1) | (84.1) | (59.6)

| 1. | Other includes balances relating to the development and exploration properties that have no revenues or operating costs.

| 2. | Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the period.

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Nine months ended September 30, 2014
(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Corporate | Other(1) | Total
OPERATING SEGMENT RESULTS |  |  |  |  |  |  |
Gold revenues | 90.1 | 68.0 | 92.7 | 61.8 | - | - | 312.6
Copper revenues | 171.7 | - | 32.7 | - | - | - | 204.4
Silver revenues | 3.1 | - | 1.6 | 16.2 | - | - | 20.9
Total revenues(2) | 264.9 | 68.0 | 127.0 | 78.0 | - | - | 537.9
Operating expenses | 71.1 | 64.3 | 79.4 | 73.2 | - | - | 288.0
Depreciation and depletion | 96.8 | 17.5 | 37.7 | 6.0 | - | - | 158.0
Earnings (loss) from mine operations | 97.0 | (13.8) | 9.9 | (1.2) | - | - | 91.9
Corporate administration | - | - | - | - | 20.2 | - | 20.2
Share-based payment expenses | - | - | - | - | 6.0 | - | 6.0
Exploration and business development | - | 2.9 | 2.7 | - | 0.3 | 6.5 | 12.4
Income (loss) from operations | 97.0 | (16.7) | 7.2 | (1.2) | (26.5) | (6.5) | 53.3
Finance income | - | - | 0.2 | - | 0.4 | 0.4 | 1.0
Finance costs | (0.6) | (0.2) | (0.6) | (0.4) | (16.9) | (3.1) | (21.8)
Other gains (losses) | (11.8) | 0.1 | (0.1) | (3.2) | 5.4 | (11.9) | (21.5)
Earnings (loss) before taxes | 84.6 | (16.8) | 6.7 | (4.8) | (37.6) | (21.1) | 11.0
Income tax recovery (expense) | 12.6 | 11.0 | (1.4) | 4.8 | (16.7) | (66.5) | (56.2)
Net earnings (loss) | 97.2 | (5.8) | 5.3 | - | (54.3) | (87.6) | (45.2)

| 1. | Other includes balances relating to the development and exploration properties that have no revenues or operating costs.

| 2. | Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the period.

(b) Segmented assets and liabilities

The following table presents the segmented assets and liabilities:

| Total assets | Total liabilities | Capital expenditure(1)
| As at September 30 | As at December 31 | As at September 30 | As at December 31 | As at September 30 | As at June 30
(in millions of U.S. dollars) | 2015 | 2014 | 2015 | 2014 | 2015 | 2014
SEGMENTED ASSETS AND LIABILITIES |  |  |  |  |  |
New Afton | 1,111.8 | 1,177.1 | 156.2 | 133.9 | 53.9 | 64.2
Mesquite | 497.2 | 475.8 | 132.1 | 134.3 | 43.1 | 25.3
Peak Mines | 264.7 | 300.4 | 77.9 | 88.9 | 16.7 | 19.0
Cerro San Pedro | 145.0 | 145.1 | 52.8 | 57.8 | 0.9 | 27.7
Rainy River | 712.9 | 507.5 | 163.4 | 76.1 | 100.8 | 44.4
Blackwater | 537.7 | 542.9 | 52.6 | 53.7 | 4.4 | 10.0
El Morro (2) | 259.4 | 438.7 | 167.8 | 247.4 | - | -
Other(3) | 391.1 | 294.3 | 1,011.1 | 818.5 | - | -
Total assets and liabilities | 3,919.8 | 3,881.8 | 1,813.9 | 1,610.6 | 219.8 | 190.6

| 1. | Capital expenditure per consolidated statement of cash flows.

| 2. | El Morro’s total liabilities include $27.4 million of deferred tax related to the disposal of El Morro. Capital expenditure at El Morro is funded by the El Morro funding loan.

| 3. | Other includes corporate balances and exploration properties.

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17. FAIR VALUE MEASUREMENT

Fair value is the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In assessing the fair value of a particular contract, the market participant would consider the credit risk of the counterparty to the contract. Consequently, when it is appropriate to do so, the Company adjusts the valuation models to incorporate a measure of credit risk. Fair value represents management's estimates of the current market value at a given point in time.

The Company has certain financial assets and liabilities that are held at fair value. The investments, Warrants and restricted share units are presented at fair value at each reporting date using appropriate valuation methodology. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

There were no transfers among Levels 1, 2 and 3 during the three and nine months ended September 30, 2015 or the year ended December 31, 2014. The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer.

Valuation methodologies for Level 2 and 3 financial assets and liabilities:

Provisionally priced contracts and gold and copper swap contracts

The fair value of the provisionally priced contracts and the gold and copper swap contracts is calculated using the mark-to-market forward prices of London Metals Exchange gold and copper based on the applicable settlement dates of the outstanding provisionally priced contracts and copper swap contracts.

Diesel swap contracts

The fair value of the diesel swap contracts is calculated using the Gulf Coast ULSD forward prices based on the applicable settlement dates of the contracts.

Gold stream obligation

The fair value of the gold stream obligation is calculated using the risk free interest rate derived from the fifteen year U.S Treasury rate, forward metal prices, company specific credit spread based on the yield on the Company’s 2022 senior unsecured notes, and expected gold ounces to be delivered from the Rainy River life of mine model.

The following table summarizes the Company’s financial assets and liabilities by category and information about financial assets and liabilities measured at fair value on a recurring basis in the statement of financial position categorized by level of significance of the inputs used in making the measurements:

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|  | As at September 30, 2015 | As at December 31, 2014
(in millions of U.S. dollars) | Category | Level |  | Level |
FINANCIAL ASSETS |  |  |  |  |
Cash and cash equivalents | Loans and receivables at amortized cost |  | 384.6 |  | 370.5
Trade and other receivables | Loans and receivables at amortized cost |  | 111.3 |  | 35.2
Provisionally priced contracts | Financial instruments at FVTPL | 2 | (4.1) | 2 | (8.4)
Gold and copper swap contracts | Financial instruments at FVTPL | 2 | 3.5 | 2 | 8.0
Investments | Financial instruments at FVTPL | 1 | 0.3 | 1 | 0.4
FINANCIAL LIABILITIES |  |  |  |  |
Trade and other payables(1) | Financial liabilities at amortized cost |  | 159.3 |  | 95.3
Long-term debt | Financial liabilities at amortized cost |  | 787.1 |  | 874.3
Warrants | Financial Instruments at FVTPL | 1 | 5.6 | 1 | 16.9
Diesel swap contracts | Financial liability at fair value through OCI | 2 | 1.5 | 2 | -
Gold stream obligation | Financial instruments at FVTPL | 3 | 163.2 |  | -
Restricted share units | Financial instruments at FVTPL | 1 | 1.8 | 1 | 1.5

| 1. | Trade and other payables exclude the short term portion of reclamation and closure cost obligations.

The carrying values and fair values of the Company’s financial instruments are as follows:

As at September 30, 2015 | As at December 31, 2014
(in millions of U.S. dollars) | Carrying value | Fair value | Carrying value | Fair value
FINANCIAL ASSETS |  |  |  |
Cash and cash equivalents | 384.6 | 384.6 | 370.5 | 370.5
Trade and other receivables | 110.7 | 110.7 | 34.8 | 34.8
Investments | 0.3 | 0.3 | 0.4 | 0.4
FINANCIAL LIABILITIES |  |  |  |
Trade and other payables(1) | 159.3 | 159.3 | 95.3 | 95.3
Long-term debt | 787.1 | 793.0 | 874.3 | 882.3
Gold stream obligation | 163.2 | 163.2 | - | -
Warrants | 5.6 | 5.6 | 16.9 | 16.9
Restricted share units | 1.8 | 1.8 | 1.5 | 1.5

| 1. | Trade and other payables exclude the short term portion of reclamation and closure cost obligations.

The Company has not offset financial assets with financial liabilities.

18. COMMITMENTS AND CONTINGENCIES

In assessing the loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company and its legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency suggests that a loss is probable, and the amount can easily be estimated, then a loss is recorded. When a contingent loss is not probable but is reasonably possible, or is probable but the amount of the loss cannot be reliably estimated, then details of the contingent loss are disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the Company discloses the nature of the guarantees. Legal fees incurred in connection with pending legal proceedings are expensed as incurred. If the Company is unable to resolve these disputes favorably, it may have a material negative impact on the Company’s financial condition, cash flow and results of operations.

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Contractual commitments

The Company has entered into a number of contractual commitments for capital items relating to operations and development. At September 30, 2015, these commitments totalled $315.7 million, $213.8 million of which are expected to fall due over the next 12 months. This compares to commitments of $243.0 million as at December 31, 2014, $141.4 of which were expected to fall due over the upcoming year. The increase is due to Rainy River entering into additional capital purchase commitments. Certain contractual commitments may contain cancellation clauses, however the Company discloses its commitments based on management’s intent to fulfill the contracts.

Cerro San Pedro

After public consultation, on March 2011, the municipality of Cerro de San Pedro approved a new municipal land use plan, which clearly designates the area of the Cerro San Pedro Mine for mining. New Gold believes this plan resolves any ambiguity regarding the land use in the area in which Cerro San Pedro is located, and which has had a history of ongoing legal challenges related to the environmental authorization (“EIS”) for the mine. In April 2011, a request was filed for a new EIS based on the new Municipal Plan and on August 5, 2011 a new EIS was granted. The new EIS is subject to a number of ongoing conditions that will need to be fulfilled through the continued operation and eventual closure of the mine. In addition, some authorizations necessary for the operation of the Cerro San Pedro Mine have durations of one year or one quarter, or other periods that are shorter than the remaining mine life. In January 2015 the Municipality of Cerro de San Pedro advised that the issue of Cerro San Pedro’s annual license would be subject to numerous inappropriate conditions. On February 3, 2015 the State Contentious and Administrative Tribunal granted Cerro San Pedro an injunction against the Municipality ensuring the continued operation of the mine pending the Tribunal’s ruling on the inappropriate conditions. Prior to the Tribunal making its ruling, the Municipality and Cerro San Pedro reached a settlement which resulted in the removal of the inappropriate conditions and the granting of Cerro San Pedro’s annual operations license in May 2015. While the outstanding issues regarding the 2015 annual operations license have been resolved it is possible that authorizations required in the future, including the annual operation license, may also be subject to inappropriate conditions. This could result in a suspension or termination of operations at the Cerro San Pedro Mine and/or additional costs, any of which could adversely affect the Company’s production, cash flow and profitability.

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