New Gold and Western Goldfields, two separate gold mining companies, have entered into a definitive agreement in which New Gold will acquire by way of a plan of arrangement all of the outstanding common shares of Western Goldfields in exchange for one New Gold common share and C$0.0001 in cash for each common share of Western Goldfields. Upon completion of the transaction, existing New Gold and Western Goldfields shareholders will own around 58% and 42% of the combined company, respectively.

Highlights of the Transaction include:

• Diversified gold production base from three gold mines in established jurisdictions with forecasted gold production of about 335,000 oz in 2009, expected to grow to over 400,000 oz in 2012
• Strong cash flow to fully fund the development at the New Afton gold-copper project in British Columbia
• Delivers on industry consolidation in a rising gold price environment
• Combines experienced management teams and boards of directors
• Enhances market presence
• Increases mineable reserves totalling 7.6 Moz gold within a Measured and Indicated resource of 12.2 Moz gold.

Upon completion of the transaction, the executive management will consist of Randall Oliphant, Executive Chairman; Robert Gallagher, President and Chief Executive Officer; Brian Penny, Executive Vice President and Chief Financial Officer; and James Currie, Executive Vice President and Chief Operating Officer. The board of directors will be a combination of six current directors of New Gold and four current directors of Western Goldfields, the composition of which will be determined prior to the meetings of the shareholders of both companies to approve the transaction.

Robert Gallagher, President and Chief Executive Officer of New Gold said: “We are delighted with the announcement of the business combination with Western Goldfields. This is in line with our growth strategy and vision of becoming a Moz gold producer by 2012. This represents significant value for New Gold and Western Goldfields shareholders with greater leverage to gold in a larger intermediate gold mining company, diversified production in mining-friendly jurisdictions, and strengthened financial position.”

Randall Oliphant, Chairman of Western Goldfields adds, “The combination of these two companies presents a great opportunity for both Western Goldfields and New Gold shareholders. It provides both groups with exposure to a very exciting development project in New Afton and cash flow sufficient to fund its development.”