EX-99.1 2 v438223_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Contents |
CONDENSED CONSOLIDATED INCOME STATEMENTS | 3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | 4
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | 5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | 7
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 8
1. Description of business and nature of operations | 8
2. Significant accounting policies | 8
3. Expenses | 9
4. Trade and other receivables | 10
5. Trade and other payables | 10
6. Inventories | 11
7. Mining interests | 12
8. Long-term debt | 13
9. Gold stream obligation | 16
10. Derivative instruments | 17
11. Share capital | 21
12. Income and mining taxes | 23
13. Reclamation and closure cost obligations | 25
14. Supplemental cash flow information | 26
15. Segmented information | 27
16. Fair value measurement | 29
17. Commitments and contingencies | 31

2 |

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited)

|  | Three months ended March 31
(in millions of U.S. dollars, except per share amounts) | Note | 2016 | 2015
Revenue |  | 154.5 | 168.9
Operating expenses | 3 | 81.9 | 99.6
Depreciation and depletion |  | 57.6 | 55.1
Earnings from mine operations |  | 15.0 | 14.2
Corporate administration |  | 5.7 | 6.0
Share-based payment expenses | 11 | 3.0 | 2.1
Exploration and business development |  | 2.5 | 1.1
Income from operations |  | 3.8 | 5.0
Finance income | 3 | 0.3 | 0.2
Finance costs | 3 | (4.6) | (10.8)
Other gains (losses) | 3 | 21.6 | (31.4)
Earnings (loss) before taxes |  | 21.1 | (37.0)
Income tax recovery (expense) | 12 | 5.7 | (6.8)
Net earnings (loss) |  | 26.8 | (43.8)
Net earnings (loss) per share |  |  |
Basic ($) | 11 | 0.05 | (0.09)
Diluted ($) | 11 | 0.05 | (0.09)
Weighted average number of shares outstanding (in millions) |  |  |
Basic | 11 | 509.6 | 508.6
Diluted | 11 | 510.7 | 508.6

See accompanying notes to the consolidated financial statements.

3 |

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(unaudited)

|  | Three months ended March 31
(in millions of U.S. dollars) | Note | 2016 | 2015
Net earnings (loss) |  | 26.8 | (43.8)
Other comprehensive earnings (loss)(1) |  |  |
Unrealized foreign exchange gain (loss) on cash and cash equivalents designated as hedging instruments | 10 | 4.1 | (2.9)
Reclassification of realized foreign exchange loss on cash and cash equivalents designated as hedging instruments | 10 | 4.3 | -
Unrealized loss on mark-to-market of diesel swap contracts | 10 | (0.5) | (0.6)
Reclassification of realized loss on settlement of diesel swap contracts | 10 | 1.0 | -
Loss on revaluation of gold stream obligation | 9 | (6.8) | -
Deferred income tax related to derivative contracts | 10 | 2.0 | -
Total other comprehensive income (loss) |  | 4.1 | (3.5)
Total comprehensive earnings (loss) |  | 30.9 | (47.3)

| 1. | All items recorded in other comprehensive income (“OCI”) will be reclassified in subsequent periods to net earnings or mining interest, as appropriate.

See accompanying notes to the condensed consolidated financial statements.

4 |

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited)

|  | As at March 31 | As at December 31
(in millions of U.S. dollars) | Note | 2016 | 2015
Assets |  |  |
Current assets |  |  |
Cash and cash equivalents |  | 298.3 | 335.5
Trade and other receivables | 4 | 99.0 | 109.0
Inventories | 6 | 160.1 | 145.9
Current income tax receivable |  | 16.0 | 19.2
Prepaid expenses and other |  | 9.5 | 5.0
Total current assets |  | 582.9 | 614.6
Non-current inventories | 6 | 114.4 | 115.4
Mining interests | 7 | 2,868.2 | 2,803.2
Deferred tax assets | 12 | 166.9 | 138.9
Other |  | 3.2 | 3.4
Total assets |  | 3,735.6 | 3,675.5
Liabilities and equity |  |  |
Current liabilities |  |  |
Trade and other payables | 5 | 155.9 | 141.1
Current income tax payable |  | 3.3 | 6.2
Total current liabilities |  | 159.2 | 147.3
Reclamation and closure cost obligations | 13 | 71.4 | 67.5
Provisions |  | 11.4 | 9.2
Gold stream obligation | 9 | 169.5 | 147.6
Derivative liabilities | 10 | 2.4 | 2.1
Long-term debt | 8 | 788.0 | 787.6
Deferred tax liabilities | 12 | 400.0 | 414.4
Other |  | 0.2 | 0.2
Total liabilities |  | 1,602.1 | 1,575.9
Equity |  |  |
Common shares | 11 | 2,842.9 | 2,841.0
Contributed surplus |  | 103.4 | 102.3
Other reserves |  | 6.7 | 2.6
Deficit |  | (819.5) | (846.3)
Total equity |  | 2,133.5 | 2,099.6
Total liabilities and equity |  | 3,735.6 | 3,675.5

See accompanying notes to the consolidated financial statements.

Approved and authorized by the Board of Directors on April 27, 2016

”Robert Gallagher” |  | ”Kay Priestly” |
Robert Gallagher, Director |  | Kay Priestly, Director |

5 |

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

|  | Three months ended March 31
(in millions of U.S. dollars) | Note | 2016 | 2015
COMMON SHARES |  |  |
Balance, beginning of period |  | 2,841.0 | 2,820.9
Acquisition of Bayfield Ventures Corp. |  | - | 16.8
Shares issued for exercise of options, settlement of performance share units, and land purchases |  | 1.9 | 2.2
Balance, end of period |  | 2,842.9 | 2,839.9
CONTRIBUTED SURPLUS |  |  |
Balance, beginning of period |  | 102.3 | 96.7
Exercise of options | 11 | (0.4) | 0.1
Equity settled share-based payments |  | 1.5 | 2.1
Balance, end of period |  | 103.4 | 98.9
OTHER RESERVES |  |  |
Balance, beginning of period |  | 2.6 | (1.5)
Change in fair value of hedging instruments (net of tax recovery) | 10 | 8.7 | (3.5)
Loss on revaluation of financial instruments (net of tax recovery) |  | (4.6) | -
Balance, end of period |  | 6.7 | (5.0)
DEFICIT |  |  |
Balance, beginning of period |  | (846.3) | (644.9)
Net earnings (loss) |  | 26.8 | (43.8)
Balance, end of period |  | (819.5) | (688.7)
Total equity |  | 2,133.5 | 2,245.1

See accompanying notes to the condensed consolidated financial statements.

6 |

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

|  | Three months ended March 31
(in millions of U.S. dollars) | Note | 2016 | 2015
OPERATING ACTIVITIES |  |  |
Net earnings (loss) |  | 26.8 | (43.8)
Adjustments for: |  |  |
Foreign exchange (gains) losses | 3 | (33.9) | 36.0
Reclamation and closure costs paid | 13 | (0.9) | (0.1)
Depreciation and depletion |  | 57.7 | 55.1
Other non-cash adjustments | 14 | (1.2) | (4.6)
Income tax (recovery) expense | 12 | (5.7) | 6.8
Finance income | 3 | (0.3) | (0.2)
Finance costs | 3 | 4.6 | 10.8
Unrealized loss on gold stream liability |  | 15.1 | -
|  | 62.2 | 60.0
Change in non-cash operating working capital | 14 | (0.6) | 2.4
Income taxes (paid) refunded |  | (0.1) | 7.4
Cash generated from operations |  | 61.5 | 69.8
INVESTING ACTIVITIES |  |  |
Mining interests |  | (107.4) | (69.2)
Government grant received |  | - | 0.2
Gold price option contract investment costs |  | (2.1) | -
Proceeds from the sale of assets |  | 0.5 | 0.2
Interest received |  | 0.3 | -
Cash used by investing activities |  | (108.7) | (68.8)
FINANCING ACTIVITIES |  |  |
Proceeds received from exercise of options | 11 | 0.8 | 0.1
Financing initiation costs |  | (0.3) | -
Interest paid |  | (0.8) | -
Cash (used by) generated from financing activities |  | (0.3) | 0.1
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |  | 10.3 | (5.8)
Change in cash and cash equivalents |  | (37.2) | (4.7)
Cash and cash equivalents, beginning of period |  | 335.5 | 370.5
Cash and cash equivalents, end of period |  | 298.3 | 365.8
Cash and cash equivalents are comprised of: |  |  |
Cash |  | 214.4 | 247.4
Short-term money market instruments |  | 83.9 | 118.4
|  | 298.3 | 365.8

See accompanying notes to the consolidated financial statements.

7 |

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2016 and 2015

(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. The Company also owns a 4% stream on future gold production from the El Morro project (“El Morro”) located in Chile. 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, 2015.

These unaudited interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2015 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, 2015, and have been consistently applied in the preparation of these unaudited condensed consolidated interim financial statements.

These unaudited condensed consolidated interim financial statements were approved by the Board of Directors of the Company on April 27th, 2016.

8 |

3. EXPENSES

(a) Operating expenses by nature

| Three months ended March 31
(in millions of U.S. dollars) |  |  | 2016 | 2015
OPERATING EXPENSES BY NATURE |  |  |  |
Raw materials and consumables |  |  | 37.1 | 44.0
Salaries and employee benefits |  |  | 31.8 | 34.8
Contractors |  |  | 12.1 | 12.3
Repairs and maintenance |  |  | 5.9 | 7.6
General and administrative |  |  | 5.0 | 5.7
Operating leases |  |  | 4.6 | 9.4
Royalties |  |  | 2.4 | 3.0
Drilling and analytical |  |  | 1.2 | 1.0
Other |  |  | 0.7 | 0.7
Total operating expenses |  |  | 100.8 | 118.6
Less: operating expenses capitalized |  |  | (11.5) | (23.9)
Less: change in inventories and work-in-progress |  |  | (7.4) | 4.9
Total operating expenses |  |  | 81.9 | 99.6

(b) Finance costs and income

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
FINANCE COSTS |  |
Interest on senior unsecured notes | 13.4 | 13.4
Other interest(1) | - | 1.0
Accretion expense on decommissioning obligations (Note 13) | 0.4 | 0.5
Other finance costs | 1.0 | 0.4
| 14.8 | 15.3
Less: amounts included in cost of qualifying assets | (10.2) | (4.5)
Total finance costs | 4.6 | 10.8
FINANCE INCOME |  |
Interest income | 0.3 | 0.2

| 1. | Other interest relates to El Morro which the Company sold on November 24, 2015.

9 |

(c) Other gains (losses)

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
OTHER GAINS (LOSSES) |  |
Unrealized (loss) gains on share purchase warrants | (0.4) | 4.5
Gain (loss) on foreign exchange | 33.9 | (36.0)
Other (loss) gain on disposal of assets | (0.1) | 0.1
Unrealized (loss) on revaluation of gold stream obligation | (15.1) | -
Gain on revaluation of gold price option contracts | 3.3 | -
Total other gains (losses) | 21.6 | (31.4)

4. TRADE AND OTHER RECEIVABLES

| As at March 31 | As at December 31
(in millions of U.S. dollars) | 2016 | 2015
TRADE AND OTHER RECEIVABLES |  |
Trade receivables | 5.4 | 7.5
Sales tax receivable | 16.9 | 22.2
Unsettled provisionally priced concentrate derivatives and copper swap contracts (Note 10) | 0.9 | 3.5
Gold stream agreement deposit receivable | 75.0 | 75.0
Other | 0.8 | 0.8
Total trade and other receivables | 99.0 | 109.0

5. TRADE AND OTHER PAYABLES

| As at March 31 | As at December 31
(in millions of U.S. dollars) | 2016 | 2015
TRADE AND OTHER PAYABLES |  |
Trade payables | 27.1 | 30.2
Interest payable | 21.4 | 8.3
Accruals | 106.0 | 98.3
Current portion of decommissioning obligations (Note 13) | 1.4 | 1.3
Provision for office consolidation | - | 3.0
Total trade and other payables | 155.9 | 141.1

10 |

6. INVENTORIES

| As at March 31 | As at December 31
(in millions of U.S. dollars) | 2016 | 2015
INVENTORIES |  |
Heap leach ore | 200.7 | 191.6
Work-in-process | 12.2 | 12.4
Finished goods(1) | 12.4 | 11.2
Stockpile ore | 6.6 | 2.7
Supplies | 42.6 | 43.4
| 274.5 | 261.3
Less: non-current inventories(2) | (114.4) | (115.4)
Total current inventories | 160.1 | 145.9

| 1. | The amount of inventories recognized in operating expenses for the three months ended March 31, 2016 was $76.5 million (2015 – $93.6 million).

| 2. | Heap leach inventories of $114.4 million (December 31, 2015 – $115.4 million) are expected to be recovered after one year.

11 |

7. MINING INTERESTS

| Mining Properties |  |  |  |
| Depletable | Non- depletable | Plant & equipment | Construction in progress | Exploration & evaluation | Total
(in millions of U.S. dollars) |  |  |  |  |  |
COST |  |  |  |  |  |
As at December 31, 2014 | 1,425.3 | 1,360.9 | 749.4 | 129.5 | 7.5 | 3,672.6
Additions | 51.7 | 56.7 | 116.3 | 262.8 | - | 487.5
Acquisition of Bayfield Ventures Corp. | - | 19.7 | - | - | - | 19.7
Disposal of El Morro | - | (440.7) | - | - | - | (440.7)
Disposal of other assets | (0.3) | (3.1) | (25.7) | - | - | (29.1)
Impairments | (31.8) | (4.6) | - | - | - | (36.4)
Government grants | - | - | - | (16.4) | - | (16.4)
Acquisition of gold stream asset | - | 32.0 | - | - | - | 32.0
Transfers | 14.6 | - | 35.8 | (50.4) | - | -
As at December 31, 2015 | 1,459.5 | 1,020.9 | 875.8 | 325.5 | 7.5 | 3,689.2
Additions | 15.2 | 31.4 | 5.0 | 81.0 | - | 132.6
Disposals | - | - | (4.2) | - | - | (4.2)
Transfers | 4.2 | - | 5.1 | (9.3) | - | -
As at March 31, 2016 | 1,478.9 | 1,052.3 | 881.7 | 397.2 | 7.5 | 3,817.6
ACCUMULATED DEPRECIATION |  |  |  |  |  |
As at December 31, 2014 | 376.8 | - | 287.1 | - | - | 663.9
Depreciation for the year | 181.6 | - | 79.9 | - | - | 261.5
Disposals | (0.3) | - | (22.8) | - | - | (23.1)
Impairments | (16.3) | - | - | - | - | (16.3)
As at December 31, 2015 | 541.8 | - | 344.2 | - | - | 886.0
Depreciation for the period | 44.7 | - | 22.3 | - | - | 67.0
Disposals | - | - | (3.6) | - | - | (3.6)
As at March 31, 2016 | 586.5 | - | 362.9 | - | - | 949.4
CARRYING AMOUNT |  |  |  |  |  |
As at December 31, 2015 | 917.7 | 1,020.9 | 531.6 | 325.5 | 7.5 | 2,803.2
As at March 31, 2016 | 892.4 | 1,052.3 | 518.8 | 397.2 | 7.5 | 2,868.2

The Company capitalized interest of $10.2 million for the three months ended March 31, 2016 (2015 – $4.5 million) to qualifying development projects. The Company’s annualized capitalization rate is 6.76% (2015 – 6.74%).

12 |

Carrying amount by property as at March 31, 2016:

| As at March 31, 2016
| Mining Properties |  |  |
(in millions of U.S. dollars) | Depletable | Non- depletable | Plant & equipment | Construction in progress | Total
MINING INTEREST BY SITE |  |  |  |  |
New Afton | 633.1 | 8.6 | 266.6 | 23.7 | 932.0
Mesquite | 167.4 | - | 103.6 | 10.3 | 281.3
Peak Mines | 90.7 | 13.0 | 65.6 | 0.1 | 169.4
Cerro San Pedro | 1.2 | - | - | - | 1.2
Rainy River | - | 483.4 | 61.0 | 363.1 | 907.5
Blackwater | - | 515.3 | 15.7 | - | 531.0
El Morro gold stream asset | - | 32.0 | - | - | 32.0
Other(1) | - | 7.5 | 6.3 | - | 13.8
Carrying amount as at March 31, 2016 | 892.4 | 1,059.8 | 518.8 | 397.2 | 2,868.2

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

Carrying amount by property as at December 31, 2015:

| As at December 31, 2015
| Mining Properties |  |  |
(in millions of U.S. dollars) | Depletable | Non- depletable | Plant & equipment | Construction in progress | Total
MINING INTEREST BY SITE |  |  |  |  |
New Afton | 653.2 | 7.6 | 274.8 | 22.5 | 958.1
Mesquite | 167.9 | - | 106.1 | 9.7 | 283.7
Peak Mines | 95.4 | 13.0 | 69.8 | 4.3 | 182.5
Cerro San Pedro | 1.2 | - | - | - | 1.2
Rainy River | - | 455.7 | 58.7 | 289.1 | 803.5
Blackwater | - | 512.5 | 15.8 | - | 528.3
El Morro gold stream asset | - | 32.0 | - | - | 32.0
Other(1) | - | 7.5 | 6.4 | - | 13.9
Carrying amount as at December 31, 2015 | 917.7 | 1,028.3 | 531.6 | 325.6 | 2,803.2

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

8. LONG-TERM DEBT

Long-term debt consists of the following:

| As at March 31 | As at December 31
(in millions of U.S. dollars) | 2016 | 2015
LONG-TERM DEBT |  |
Senior unsecured notes - due April 15, 2020 (a) | 295.3 | 295.1
Senior unsecured notes - due November 15, 2022 (b) | 492.7 | 492.5
Revolving credit facility (c) | - | -
Long-term debt | 788.0 | 787.6

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(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 March 31, 2016 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. There are no maintenance covenants.

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 March 31, 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. There are no maintenance covenants.

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.

14 |

| · | 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%

(c) Revolving credit facility

The Company holds a $300.0 million revolving credit facility (the “Credit Facility”) which expires on August 14, 2019. The Credit 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 Credit Facility contains various covenants customary for a loan facility of this nature, including limits on indebtedness, asset sales and liens. The Credit Facility contains two covenant tests, the minimum interest coverage ratio (EBITDA to interest) and the maximum leverage ratio (net debt to EBITDA), both of which are measured on a rolling four-quarter basis at the end of every quarter. On February 17, 2016, the Company amended the Credit Facility to vary the maximum leverage ratio from 3.5 : 1.0. Specifically, for the quarter ending September 30, 2016, the maximum leverage ratio will increase to 4.0 : 1.0 and for the next three quarters, the maximum leverage ratio will increase to 4.5 : 1.0. Following that period, the maximum leverage ratio will return to 3.5 : 1.0. Significant financial covenants are as follows:

|  | Twelve months ended March 31 | Twelve months ended December 31
| Financial | 2016 | 2015
FINANCIAL COVENANTS |  |  |
Minimum interest coverage ratio (EBITDA to interest) | >3.0 : 1 | 5.0 : 1 | 5.1 : 1
Maximum leverage ratio (net debt to EBITDA) | <3.5 : 1 | 2.3 : 1 | 2.0 : 1

The interest margin on drawings under the Credit Facility ranges from 1.00% to 3.25% over LIBOR, the Prime Rate or the Base Rate, based on the Company’s net debt to EBITDA ratio and the currency and type of credit selected by the Company. The standby fees on undrawn amounts under the Credit 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 0.62% as at March 31, 2016 (December 31, 2015 – 0.62%). As at March 31, 2016, the Company has not drawn any funds under the Credit Facility; however, the Credit Facility has been used to issue letters of credit of $121.7 million as at March 31, 2016 (at December 31, 2015 - $115.9 million). Letters of credit relate to reclamation bonds, worker’s compensation security and other financial assurances required with various government agencies.

15 |

9. GOLD STREAM OBLIGATION

On July 20, 2015 the Company entered into a $175 million streaming transaction with RGLD Gold Ag, a wholly-owned subsidiary of Royal Gold Inc. (“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 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 to Royal Gold 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, which is expected to be in mid-2016, and other customary conditions precedent have been met.

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 over the life of mine. 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 gold stream obligation is accounted for as 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 gold stream obligation contained a maximum leverage ratio covenant (net debt to EBITDA) of 3.5 : 1.0, with the exception that the net leverage covenant limit is permitted to be increased to 4.0 : 1.0 for two consecutive quarters, provided that it thereafter returns to a maximum of 3.5 : 1.0. Furthermore, the leverage ratio contained in the above agreement with Royal Gold has also been adjusted to match the revised maximum leverage ratio under the Credit Facility.

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

(in millions of U.S. dollars) |
CHANGE IN STREAM OBLIGATION |
Balance, December 31, 2015 | 147.6
Deposit repayments during the period | -
Fair value adjustments related to changes in the Company’s own credit risk(1) | 6.8
Other fair value adjustments(2) | 15.1
Balance as at March 31, 2016 | 169.5

| 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 and silver ounces to be delivered.

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10. DERIVATIVE INSTRUMENTS

| As at March 31 | As at December 31
(in millions of U.S. dollars) | 2016 | 2015
DERIVATIVE ASSETS |  |
Gold options contracts (d) | 5.4 | -
Unsettled provisionally priced concentrate derivatives and swap contracts (c) | 0.9 | 3.5
Total derivative assets | 6.3 | 3.5
DERIVATIVE LIABILITIES |  |
Diesel swap contracts (a) | 3.1 | 3.6
Share purchase warrants (b) | 2.1 | 1.5
| 5.2 | 5.1
Less: current portion of diesel swap contracts | (2.8) | (3.0)
Total derivative liabilities | 2.4 | 2.1

(a) Hedging instruments

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
EFFECTIVE PORTION OF CHANGE IN FAIR VALUE OF HEDGING INSTRUMENTS |  |
Unrealized foreign exchange loss on cash and cash equivalents designated as hedging instruments (i) | 4.1 | (2.9)
Reclassification of realized foreign exchange loss on cash and cash equivalents designated as hedging instrument (i) | 4.3 | -
Unrealized loss on diesel swap contracts (ii) | (0.5) | (0.6)
Reclassification of realized loss on settlement of diesel swap contracts (ii) | 1.0 | -
Deferred income tax related to derivative contracts | (0.2) | -
Total hedging gains in other comprehensive income | 8.7 | (3.5)

(i) Cash and cash equivalents designated as hedging instruments

During the year ended December 31, 2015, the Company converted $250.0 million into Canadian dollars and designated this cash to fund the construction of the Rainy River project 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 the Rainy River project. The Company holds the Canadian dollars in bank accounts separate from those used in its other operations. 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 a disconnect is noted, a quantitative assessment is performed to determine the impact of the potential ineffectiveness.

The Company hedged approximately 72% of all Canadian dollar denominated Rainy River project incurred construction costs for the period April 2015 to June 2016. For the three months ended March 31, 2016, the Company capitalized a loss of $4.3 million (2015 – $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 March 31, 2016, the hedge was fully effective and no ineffective portion was realized in net earnings. As at March 31, 2016, C$77.1 million of the hedged cash was remaining (December 31, 2015 – C$102.5 million).

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(ii) Diesel swap contracts

The Company has swap contracts which hedge the diesel price exposure of approximately 55% of the monthly consumption for the next nine months beginning in April 2016 and ending in December 2016, at approximately $2.25 per gallon fully loaded price. As at March 31, 2016, the Company is contractually obligated to settle 3.0 million gallons of diesel associated with these swaps (December 31, 2015 - 4.0 million). During August 2015, the Company entered into additional diesel swap contracts which will hedge the diesel price exposure of an additional 20% for the period April to December 2016 and 55% for the period January 2017 to June 2017, at approximately $2.02 per gallon fully loaded price. As at March 31, 2016, the Company is contractually obligated to settle 3.2 million gallons of diesel associated with these swaps (December 31, 2015 – 3.6 million). The Company has entered into pay fixed/receive floating Gulf Coast ultra-low-sulfur-diesel swaps settled at the monthly average price. 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 $1.0 million on settlement of 1.4 million gallons for the three months ended March 31, 2016 (March 31, 2015 – $nil). As at March 31, 2016, 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 March 31, 2016 |  |  |  |
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, 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 |  |

The Warrants are recorded at FVTPL as 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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(c) Provisionally priced contracts

The Company had provisionally priced sales for which price finalization is outstanding at March 31, 2016. 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 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 tables summarize the realized and unrealized gains (losses) on provisionally priced sales:

| Three months ended March 31, 2016
(in millions of U.S. dollars) | Gold | Copper | Total
GAIN (LOSS) ON THE PROVISIONAL PRICING OF CONCENTRATE SALES |  |  |
Realized | 1.5 | (2.8) | (1.3)
Unrealized | (0.4) | 2.2 | 1.8
Total gain (loss) | 1.1 | (0.6) | 0.5

| Three months ended March 31, 2015
(in millions of U.S. dollars) | Gold | Copper | Total
GAIN (LOSS) ON THE PROVISIONAL PRICING OF CONCENTRATE SALES |  |  |
Realized | 2.1 | 1.0 | 3.1
Unrealized | (0.2) | 1.0 | 0.8
Total gain | 1.9 | 2.0 | 3.9

The following tables summarize the realized and unrealized gains (losses) on gold and copper swap contracts:

| Three months ended March 31, 2016
(in millions of U.S. dollars) | Gold | Copper | Total
(LOSS) ON SWAP CONTRACTS |  |  |
Realized | (2.0) | (0.1) | (2.1)
Unrealized | (0.1) | (0.8) | (0.9)
Total loss | (2.1) | (0.9) | (3.0)

| Three months ended March 31, 2015
(in millions of U.S. dollars) | Gold | Copper | Total
GAIN (LOSS) ON SWAP CONTRACTS |  |  |
Realized | - | (1.6) | (1.6)
Unrealized | - | 0.2 | 0.2
Total loss | - | (1.4) | (1.4)

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

| As at March 31 | As at December 31
| 2016 | 2015
VOLUMES SUBJECT TO FINAL PRICING NET OF OUTSTANDING SWAPS |  |
Gold ounces (000’s) | 5.6 | 5.3
Copper pounds (millions) | 2.2 | 1.3

(d)  Gold options contracts

During the three months ended March 31, 2016, the Company entered into gold price option contracts by purchasing put options at a strike price of $1,200 per ounce and selling call options at a strike price of $1,400 per ounce for 270,000 ounces of gold production between April 2016 and December 2016 (“gold price option contracts”). The price cap and floor, sold calls and purchased puts respectively, are treated as derivative financial instruments and marked to market at each reporting period on the condensed consolidated statement of financial position with changes in fair value recognized in other gains and losses. Realized gains and losses as a result of the exercise of the Company’s call and put options up to an amount not exceeding the Company’s production of gold ounces for the reporting period are recorded as an adjustment to revenue. The exercise of options on gold ounces in excess of the Company’s gold production for the reporting period are recorded as other gains and losses. The Company presents the fair value of its put and call options on a net basis on the condensed consolidated statements of financial position within ‘prepaid expenses and other’. The Company has a legally enforceable right to set off the amounts under its options contracts and intends to settle on a net basis.

The details of the contracts are as follows as at March 31, 2016:

| Quantity outstanding | Remaining term | Exercise price ($) | Fair value - asset (liability) (1)
GOLD OPTION CONTRACTS OUTSTANDING |  |  |  |
Gold call contracts - sold | 270,000 oz | April – December 2016 | 1,400 | (3.1)
Gold put contracts - purchased | 270,000 oz | April – December 2016 | 1,200 | 8.5

| 1. | The Company presents the fair value of its put and call options on a net basis on the condensed consolidated statements of financial position. The Company has a legally enforceable right to set off the amounts under its options contracts and intends to settle on a net basis. The contracts cover 30,000 oz of gold per month.

For the three months ended March 31, 2016, the Company recognized $3.3 million gain on revaluation of its gold option contracts which was recorded as other gains and losses (three months ended March 31, 2015 - $nil).

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11. SHARE CAPITAL

At March 31, 2016, the Company had unlimited authorized common shares and 510.1 million common shares outstanding.

(a) No par value common shares issued

| Number of shares (000s) |
(in millions of U.S. dollars, except where noted) |  |  |
NO PAR VALUE COMMON SHARES ISSUED |  |  |
Balance at December 31, 2014 |  | 504,678 | 2,820.9
Exercise of options & vested performance share units |  | 429 | 1.2
Issuance of shares under First Nations agreements and land purchases |  | 582 | 2.1
Acquisition of Bayfield |  | 3,780 | 16.8
Balance at December 31, 2015 |  | 509,469 | 2,841.0
Exercise of options & vested performance share units |  | 424 | 0.12
Issuance of shares under First Nations agreements and land purchases |  | 164 | 0.7
Balance at March 31, 2016 |  | 510,057 | 2,842.9

(b) Share-based payment expenses

The following table summarizes share-based payment expenses for the three months ended March 31:

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
SHARE-BASED PAYMENT EXPENSES |  |
Stock option expense (i) | 1.1 | 1.5
Performance share unit expense | 1.1 | 0.6
Restricted share unit expense(1) | 1.8 | 0.6
Deferred share unit expense | 0.5 | (0.1)
Total share-based payment expense | 4.5 | 2.6

| 1. | For the three months ended March 31, 2016, $1.5 million of restricted share unit expenses were recognized in operating expenses (2015 - $0.5 million).

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(i) Stock options

The following table presents changes in the Company’s stock option plan:

| Number of options | Weighted average exercise price
|  | (000s) | C$
CHANGES TO THE STOCK OPTION PLAN |  |  |
Balance at December 31, 2014 |  | 13,930 | 6.35
Granted |  | 3,688 | 3.33
Exercised |  | (247) | 2.14
Forfeited |  | (155) | 8.98
Expired |  | (218) | 4.74
Balance at December 31, 2015 |  | 16,998 | 5.76
Exercised |  | (414) | 2.71
Forfeited |  | (4) | 4.78
Balance at March 31, 2016 |  | 16,580 | 5.83

(c) Earnings per share

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

| Three months ended March 31
(in millions of U.S. dollars, except where noted) | 2016 | 2015
CALCULATION OF DILUTED EARNINGS (LOSS) PER SHARE |  |
Net earnings (loss) | 26.8 | (43.8)
Basic weighted average number of shares outstanding (in millions) | 509.6 | 508.6
Dilution of securities: |  |
Stock options (in millions) | 1.1 | -
Diluted weighted average number of shares outstanding (in millions) | 510.7 | 508.6
Net earnings/ (loss) per share: |  |
Basic ($/share) | 0.05 | (0.09)
Diluted ($/share) | 0.05 | (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$4.03 for the three months ended March 31, 2016 (2015 – C$4.89), 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.

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| Three months ended March 31
(in millions of units) | 2016 | 2015
EQUITY SECURITIES EXCLUDED FROM THE CALCULATION OF DILUTED EARNINGS PER SHARE |  |
Stock options | 10.5 | 13.8
Warrants | 28.1 | 28.1

12. INCOME AND MINING TAXES

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

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
CURRENT INCOME AND MINING TAX EXPENSE |  |
Canada | 1.3 | 1.5
Foreign | 2.1 | -
Adjustment in respect of prior year | (2.8) | -
| 0.6 | 1.5
DEFERRED INCOME AND MINING TAX (RECOVERY) EXPENSE |  |
Canada | (4.4) | 7.2
Foreign | (1.9) | (1.9)
Adjustment in respect of prior year | - | -
| (6.3) | 5.3
Total income tax (recovery) expense | (5.7) | 6.8

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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 March 31
(in millions of U.S. dollars) | 2016 | 2015
Earnings (loss) before taxes | 21.1 | (37.0)
Canadian federal and provincial income tax rates | 25.9% | 25.9%
Income tax expense (recovery) based on above rates | 5.5 | (9.6)
INCREASE (DECREASE) DUE TO |  |
Permanent differences | (4.6) | -
Different statutory tax rates on earnings of foreign subsidiaries | (0.2) | (0.5)
Foreign exchange on non-monetary assets and liabilities | (7.2) | 9.7
Prior year adjustments relating to tax provisions and tax returns | (2.8) | -
Other foreign exchange differences | 4.9 | 5.5
Canadian mining tax | (0.4) | 1.3
Mexican special duty tax | 0.3 | 0.1
Withholding tax | 0.1 | 0.1
Change in unrecognized deferred tax assets | (1.2) | 0.2
Other | (0.1) | -
Income tax (recovery) expense | (5.7) | 6.8

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13. 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, 2014 | 8.3 | 11.1 | 16.4 | 19.4 | - | 10.0 | 65.2
Reclamation expenditures | - | (0.1) | (0.3) | (0.1) | - | - | (0.5)
Unwinding of discount | 0.1 | 0.2 | 0.4 | 0.3 | - | 0.2 | 1.2
Revisions to expected cash flows | 0.4 | 2.0 | (0.5) | 0.6 | 9.5 | (0.3) | 11.7
Foreign exchange movement | (1.4) | - | (1.8) | (2.4) | (1.6) | (1.6) | (8.8)
Balance – December 31, 2015 | 7.4 | 13.2 | 14.2 | 17.8 | 7.9 | 8.3 | 68.8
Less: current portion of closure costs (note 5) | - | (0.1) | (0.3) | (0.9) | - | - | (1.3)
Non-current portion of closure costs | 7.4 | 13.1 | 13.9 | 16.9 | 7.9 | 8.3 | 67.5
Balance – December 31, 2015 | 7.4 | 13.2 | 14.2 | 17.8 | 7.9 | 8.3 | 68.8
Reclamation expenditures | - | - | - | (0.9) | - | - | (0.9)
Unwinding of discount | - | 0.1 | 0.1 | 0.2 | - | - | 0.4
Revisions to expected cash flows | - | 0.7 | - | 2.4 | 0.2 | 0.3 | 3.6
Foreign exchange movement | 0.5 | - | 0.8 | (1.5) | 0.5 | 0.6 | 0.9
Balance – March 31, 2016 | 7.9 | 14.0 | 15.1 | 18.0 | 8.6 | 9.2 | 72.8
Less: current portion of closure costs (note 5) | - | - | (0.3) | (1.1) | - | - | (1.4)
Non-current portion of closure costs | 7.9 | 14.0 | 14.8 | 16.9 | 8.6 | 9.2 | 71.4

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 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. The principal factors that can cause expected cash flows to change are: the construction of new processing facilities; changes in the quantities of material in reserves and a corresponding change in the life-of-mine plan; changing ore characteristics that impact required environmental protection measures and related costs; changes in water quality that impact the extent of water treatment required; and changes in laws and regulations governing the protection of the environment. When expected cash flows increase, the revised cash flows are discounted using a current discount factor whereas when expected cash flows decrease, the reduced cash flows are discounted using a historic discount factor, and then in both cases any change in the fair value of the obligation is recorded. The fair value of an obligation is recorded when it is incurred.

For the three months ended March 31, 2016, the Company updated the reclamation and closure cost obligations for each of its mine sites. The impact of these assessments was an increase of $3.6 million (three months ended March 31, 2015 – $2.3 million), which primarily related to Cerro San Pedro. This was a primarily a result of a change in the discount rate.

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14. SUPPLEMENTAL CASH FLOW INFORMATION

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

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
CHANGE IN NON-CASH OPERATING WORKING CAPITAL |  |
Trade and other receivables | 5.5 | 5.4
Inventories | (6.1) | 5.6
Prepaid expenses and other | 1.4 | (0.1)
Trade and other payables | (1.4) | (8.5)
Total change in non-cash operating working capital | (0.6) | 2.4

| Three months ended March 31
(in millions of U.S. dollars) | 2016 | 2015
OTHER NON-CASH ADJUSTMENTS |  |
Unrealized loss (gain) on share purchase warrants | 0.4 | (4.5)
Unrealized gains on concentrate contracts | (0.2) | (2.0)
Equity settled share-based payment expense | 2.2 | 2.1
Loss (gain) on disposal of assets | 0.1 | (0.1)
Gain on revaluation of gold price option contracts | (3.3) | -
Other | (0.4) | (0.1)
Total other non-cash adjustments | (1.2) | (4.6)

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15. SEGMENTED INFORMATION

(a) Segment revenue 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 March 31, 2016
(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Corporate | Other(1) | Total
OPERATING SEGMENT RESULTS |  |  |  |  |  |  |
Gold revenue | 27.2 | 30.0 | 20.8 | 22.3 | - | - | 100.3
Copper revenue | 42.5 | - | 6.6 | - | - | - | 49.1
Silver revenue | 0.9 | - | 0.3 | 3.9 | - | - | 5.1
Total revenue(2) | 70.6 | 30.0 | 27.7 | 26.2 | - | - | 154.5
Operating expenses | 24.4 | 15.3 | 20.2 | 22.0 | - | - | 81.9
Depreciation and depletion | 34.9 | 8.9 | 13.0 | 0.8 | - | - | 57.6
Earnings (loss) from mine operations | 11.3 | 5.8 | (5.5) | 3.4 | - | - | 15.0
Corporate administration | - | - | - | - | 5.7 | - | 5.7
Share-based payment expenses | - | - | - | - | 3.0 | - | 3.0
Exploration and business development | 0.2 | - | 2.1 | - | 0.1 | 0.1 | 2.5
Income (loss) from operations | 11.1 | 5.8 | (7.6) | 3.4 | (8.8) | (0.1) | 3.8
Finance income | - | - | - | - | 0.3 | - | 0.3
Finance costs | (0.1) | (0.2) | (0.2) | (0.2) | (3.8) | (0.1) | (4.6)
Other gains (losses) | 14.9 | 1.2 | 2.4 | 2.4 | (10.6) | 11.3 | 21.6
Earnings (loss) before taxes | 25.9 | 6.8 | (5.4) | 5.6 | (22.9) | 11.1 | 21.1
Income tax (expense) recovery | (11.8) | (0.5) | 2.5 | 0.8 | 15.6 | (0.9) | 5.7
Net earnings (loss) | 14.1 | 6.3 | (2.9) | 6.4 | (7.3) | 10.2 | 26.8

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

| 2. | Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the three months ended March 31, 2016.

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Three months ended March 31, 2015
(in millions of U.S. dollars) | New Afton | Mesquite | Peak Mines | Cerro San Pedro | Corporate | Other(1) | Total
OPERATING SEGMENT RESULTS |  |  |  |  |  |  |
Gold revenue | 26.5 | 33.8 | 23.3 | 26.7 | - | - | 110.3
Copper revenue | 45.3 | - | 7.8 | - | - | - | 53.1
Silver revenue | 0.8 | - | 0.4 | 4.3 | - | - | 5.5
Total revenue(2) | 72.6 | 33.8 | 31.5 | 31.0 | - | - | 168.9
Operating expenses | 24.7 | 24.4 | 24.5 | 26.0 | - | - | 99.6
Depreciation and depletion | 33.3 | 8.1 | 11.0 | 2.7 | - | - | 55.1
Earnings (loss) from mine operations | 14.6 | 1.3 | (4.0) | 2.3 | - | - | 14.2
Corporate administration | - | - | - | - | 6.0 | - | 6.0
Share-based payment expenses | - | - | - | - | 2.1 | - | 2.1
Exploration and business development | - | - | 0.6 | - | 0.1 | 0.4 | 1.1
Income (loss) from operations | 14.6 | 1.3 | (4.6) | 2.3 | (8.2) | (0.4) | 5.0
Finance income | - | - | - | - | 0.2 | - | 0.2
Finance costs | (0.1) | (0.1) | (0.1) | (0.1) | (9.4) | (1.0) | (10.8)
Other gains (losses) | (20.7) | (2.3) | 3.3 | (1.8) | 3.3 | (13.2) | (31.4)
Earnings (loss) before taxes | (6.2) | (1.1) | (1.4) | 0.4 | (14.1) | (14.6) | (37.0)
Income tax recovery (expense) | (7.7) | 0.7 | 0.6 | 0.8 | (0.8) | (0.4) | (6.8)
Net earnings (loss) | (13.9) | (0.4) | (0.8) | 1.2 | (14.9) | (15.0) | (43.8)

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

| 2. | Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales during the three months ended March 31, 2015.

(b) Segmented assets and liabilities

The following table presents the segmented assets and liabilities:

| Total assets | Total liabilities | Capital expenditure(1)
| As at March 31 | As at December 31 | As at March 31 | As at December 31 | Three months ended
(in millions of U.S. dollars) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015
SEGMENTED ASSETS AND LIABILITIES |  |  |  |  |  |
New Afton | 1,045.7 | 1,075.1 | 164.0 | 167.0 | 9.9 | 19.6
Mesquite | 472.9 | 469.0 | 102.7 | 104.3 | 11.5 | 22.5
Peak Mines | 233.5 | 245.0 | 70.6 | 74.5 | 1.7 | 5.8
Cerro San Pedro | 105.6 | 105.9 | 30.9 | 35.5 | 0.2 | 0.3
Rainy River | 1,050.2 | 956.1 | 335.3 | 320.4 | 82.2 | 19.0
Blackwater | 543.7 | 537.3 | 55.0 | 53.5 | 1.8 | 2.0
Other(2) | 284.0 | 287.1 | 843.6 | 820.7 | 0.1 | -
Total assets and liabilities | 3,735.6 | 3,675.5 | 1,602.1 | 1,575.9 | 107.4 | 69.2

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

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

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16. 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 months ended March 31, 2016 or the year ended December 31, 2015. 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 Levels 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 Ultra Low Sulfur Diesel 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 15 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 project life-of-mine model.

Gold price options

The fair value of the gold price put and call options are valued with reference to quoted prices received from counterparties.

Performance share units

The fair value of the performance share units liability is calculated using the quantity of base options subject to cash settlement, the weighted-average three-year achieved performance ratio (calculated using the annualized return of the Company’s share price compared to the annualized return of the S&P Global Gold Index) and the expected share price at the end of the vesting period based on analyst consensus on the future share price.

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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 condensed consolidated statements of financial position categorized by level of significance of the inputs used in making the measurements:

|  | As at March 31, 2016 | As at December 31, 2015
(in millions of U.S. dollars) | Category | Level |  | Level |
FINANCIAL ASSETS |  |  |  |  |
Cash and cash equivalents | Loans and receivables at amortized cost |  | 298.3 |  | 335.5
Trade and other receivables | Loans and receivables at amortized cost |  | 98.1 |  | 105.5
Provisionally priced contracts | Financial instruments at FVTPL | 2 | 1.8 | 2 | (1.7)
Gold and copper swap contracts | Financial instruments at FVTPL | 2 | (0.9) | 2 | 5.2
Investments | Financial instruments at FVTPL | 1 | 0.4 | 1 | 0.3
Gold price options | Financial instruments at FVTPL | 2 | 5.4 |  | -
FINANCIAL LIABILITIES |  |  |  |  |
Trade and other payables(1) | Financial liabilities at amortized cost |  | 154.5 |  | 139.8
Long-term debt | Financial liabilities at amortized cost |  | 788.0 |  | 787.6
Warrants | Financial Instruments at FVTPL | 1 | 2.1 | 1 | 1.5
Diesel swap contracts | Financial liability at fair value through OCI | 2 | 3.1 | 2 | 3.6
Gold stream obligation | Financial instruments at FVTPL | 3 | 169.5 | 3 | 147.6
Performance share units | Financial instruments at FVTPL | 3 | 1.4 | 3 | 0.8
Restricted share units | Financial instruments at FVTPL | 1 | 1.7 | 1 | 0.8

| 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 March 31, 2016 | As at December 31, 2015
(in millions of U.S. dollars) | Carrying value | Fair value | Carrying value | Fair value
FINANCIAL ASSETS |  |  |  |
Cash and cash equivalents | 298.3 | 298.3 | 335.5 | 335.5
Trade and other receivables | 99.0 | 99.0 | 109.0 | 109.0
Investments | 0.4 | 0.4 | 0.3 | 0.3
Gold price options | 5.4 | 5.4 | - | -
FINANCIAL LIABILITIES |  |  |  |
Trade and other payables(1) | 154.5 | 154.5 | 139.8 | 139.8
Long-term debt | 788.0 | 703.0 | 787.6 | 667.5
Gold stream obligation | 169.5 | 169.5 | 147.6 | 147.6
Warrants | 2.1 | 2.1 | 1.5 | 1.5
Performance share units | 1.4 | 1.4 | 0.8 | 0.8
Restricted share units | 1.7 | 1.7 | 0.8 | 0.8

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

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17. 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 favourably, it may have a material negative impact on the Company’s financial condition, cash flow and results of operations.

Cerro San Pedro

After public consultation, in 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 or leach pad life. During 2015 New Gold experienced challenges relating to its annual operations license. While the issues relating to the 2015 annual operations license have been resolved and the 2016 annual operations license has been issued, it is possible that authorizations required in the future may also be subject to challenges or issues. 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.

Rainy River Project

A contractor involved in the construction of the Rainy River project has asserted various claims and potential claims against New Gold. The Company disputes the validity of the claims and potential claims asserted and/or the amount asserted. The Company intends to vigorously defend itself against the claims that have no merit, and has accrued a loss with respect to those asserted claims where the company has determined that a loss is probable and the amount can be easily estimated.

Contractual commitments

The Company has entered into a number of contractual commitments for capital items relating to operations and development. At March 31, 2016, these commitments totalled $288.0 million, $193.6 million of which are expected to fall due over the next 12 months. This compares to commitments of $262.2 million as at December 31, 2015, $184.4 of which were expected to fall due over the upcoming year. The increase is due to the Rainy River project 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.

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