New Gold Inc.: New Afton Cu-Au Project, New Resource Estimation-Confidence Level Increased, Mining Method Study Completed

Market Wire, September, 2006

New Gold Inc. (TSX: NGD)(AMEX: NGD) is pleased to release the new resource estimation, and the results of the Mining Method study for its New Afton Project, located 10 kilometres west of Kamloops, British Columbia, Canada.

The new resource is compliant with National Instrument 43-101. It was independently estimated by qualified person David W. Rennie, P.Eng., of Scott Wilson Roscoe Postle Associates Inc., as an integral part of the ongoing Feasibility Study being performed on the project. The following metal prices were used in the resource estimation - Copper (Cu) US$1.20/lb; Gold (Au) US$450/oz; and Silver (Ag) US$5.25/oz, and the resource is presented at various cut-off values.

The Mining Method study was conducted to determine the optimal mining method(s) for extracting the mineralization from the New Afton Project.

The highlights of this work were:

- The new resource estimation replaces the previous 2004 estimation, and, in conjunction with the chosen mining methods, will be used as the basis to calculate a reserve.

- The new resource estimation has a higher degree of confidence than the 2004 estimation, with approximately 70% of the tonnage being within the Measured category (compared with approximately 15% in the 2004 estimation), and the remainder being in the Indicated category.

- This resource estimation does not include the results of exploration drilling which intersected Cu-Au mineralization at depth, and which were released May 25, 2006. This will be added in a future resource update.

- The Mining Method study has determined that the mineralization would be most effectively mined using a combination of caving techniques, predominantly block caving, with some sublevel caving.

In announcing this information, Chris Bradbrook, President and CEO, commented, "Releasing the new resource is another important milestone for New Gold and the New Afton Project, as it provides us with a greater level of confidence in the mineralization, resulting from the underground exploration work which was completed in 2005. In addition, the choice of the mining method will allow us to determine a reserve within the new resource, and to proceed with development of a final mine plan, and economic model, with which we can determine the potential to develop the New Afton Project into a new underground Cu-Au mine."

2006 RESOURCE ESTIMATION

TABLE 1

Measured and Indicated Resource
At $1.20 Cu, $450 Au, and $5.25 Ag

-----------------------------------------------------------------------
Cut-Off      Tonnage        Grades        Contained Metal  Dollar Value
(CDN$/T)                                                      Per Tonne
                                                               (CDN$)(i)
                        --------------------------------
                        Cu    Au    Ag        Cu      Au
                        (%) (g/t) (g/t)  (m. lbs) (m. oz)
-----------------------------------------------------------------------
$30       35,700,000  1.39  1.03  3.21     1,090   1.177          46.08
-----------------------------------------------------------------------
$25       43,240,000  1.29  0.96  3.03     1,230   1.331          42.84
-----------------------------------------------------------------------
$20       50,500,000  1.20  0.89  2.87     1,330   1.449          39.91
-----------------------------------------------------------------------
$15       58,640,000  1.10  0.83  2.73     1,420   1.555          36.79
-----------------------------------------------------------------------
$10       65,660,000  1.02  0.77  2.59     1,480   1.630          34.22
-----------------------------------------------------------------------
(i) Recovered value, assuming metallurgical recoveries of 90% for Cu
    and Au, and 75% for Ag, and a CDN$:US$ Exchange Rate of 0.88

At the end of the press release, Table 2 provides a detailed breakdown of the resource into Measured and Indicated categories. Table 3 illustrates the sensitivity of the resource tonnage to increased metal prices.

The new resource was estimated by Ordinary Kriging. The previous practice of reporting an overall Cu equivalent grade has been discontinued in favour of reporting a CDN dollar value per tonne approach, which is believed to be a more meaningful indicator of the relative significance of the mineralization. Palladium (Pd) grades are no longer reported as the metal will not have any economic significance to the project.

The current resource estimation used the information from drilling completed at the project since 2000. This included 90 surface holes, totaling 42,450 metres (m), drilled during the period 2000 to 2003, and 65 underground holes, totaling 25,805m, completed from the exploration decline in 2005. The 2004 resource estimate used only the results of the surface drilling. The underground program was designed to complete systematic drilling of the mineralization on 40m-spaced sections in order to provide a more accurate understanding of, and an increased confidence in, the geometry, distribution, magnitude, and grade of the mineralization. Sectional and Plan views of the 2006 resource model are attached.