NEWS RELEASE: New Gold Agrees to Acquire Rainy River Resources Growing Gold Reserves by Over 40 Percent per Share

May 31, 2013

(All figures are in Canadian dollars unless otherwise indicated)

TORONTO, May 31, 2013 /CNW/ – New Gold Inc. (“New Gold”) (TSX and NYSE MKT:NGD) and Rainy River Resources Ltd. (“Rainy River”) (TSX: RR) today jointly announce that they have entered into a definitive acquisition agreement (the “Agreement”), whereby New Gold will offer to acquire all of the outstanding common shares of Rainy River through a friendly take-over bid. Under the terms of the Agreement, New Gold will offer, at the election of each holder of Rainy River common shares, 0.5 of a common share of New Gold or $3.83 in cash, in each case subject to pro ration (the “Offer”). The Offer represents a premium of 42% over the closing price of the Rainy River shares on the Toronto Stock Exchange on May 30, 2013, the last day of trading prior to announcement of the Offer, and a 67% premium to Rainy River’s 20-day volume weighted average trading price. The maximum number of New Gold shares to be issued will be approximately 25.8 million and the maximum cash consideration will be approximately $198 million. The Offer values the fully-diluted in-the-money share capital of Rainy River, net of Rainy River’s current cash balance, at approximately $310 million.

Transaction Highlights – New Gold

• Accretive on all key per share metrics – gold reserves, net asset value, future production and cash flow
• Adds 4.0 million ounce gold reserve in Ontario, further growing New Gold’s Canadian presence
o Asset located in great mining jurisdiction, near infrastructure
• Enhances pipeline by adding asset with annual average production potential of over 225,000 ounces over the life of the mine, at below industry average total cash costs(1)
• Modest transaction size with minimal equity dilution to New Gold shareholders
• Further strengthens New Gold technical development team, who have a track record of delivering on projects
“The acquisition of Rainy River is consistent with our strategy of identifying opportunities to create shareholder value,” stated Randall Oliphant, New Gold Executive Chairman. “We have followed Rainy River for some time and see this as an opportune time to add this great asset to our portfolio. We view the combination of Rainy River’s ideal location, sizeable reserve, robust production potential and experienced team as presenting a truly compelling opportunity.”

Transaction Highlights – Rainy River

• Significant and immediate premium of 42% to current share price and 67% to 20-day volume weighted average share price
• Flexibility to elect form of consideration in either cash or highly liquid New Gold shares
• Opportunity to gain exposure to New Gold’s current operating cash flow and attractive growth portfolio
• Access to New Gold’s strong balance sheet and current and future operating cash flow to develop the Rainy River project
• Ability to partner with New Gold’s experienced management and operating teams

“This is a great outcome for Rainy River shareholders,” stated Dale Peniuk, Chair of the Special Committee of the Board of Directors of Rainy River. “To be able to realize a meaningful premium, while gaining the ability to combine with a well-established mine builder in New Gold, is a win-win scenario for our shareholders. New Gold’s offer is a testament to both the quality of the Rainy River management team and their efforts to advance the Rainy River project to this point.”
Rainy River Gold Project

The Rainy River Gold project is an advanced-stage gold project situated in the Richardson Township, approximately sixty-five kilometres northwest of Fort Frances in Northwestern Ontario. The property has excellent infrastructure, with year-round road access and powerlines in close proximity, as well as a railway located 21 kilometres to the south of the property. The Fort Frances area has a population of approximately 10,000 people from which a workforce could be sourced for future development.

On April 10, 2013, Rainy River announced the results of a Feasibility Study for the project, with 4.0 million ounces in Proven and Probable gold reserves and 6.2 million ounces in Measured and Indicated gold resources, inclusive of reserves. The Feasibility Study contemplates a 21,000 tonne per day processing rate from a combination of open pit, underground and stockpiled ore. The project has the potential to produce over 225,000 ounces of gold annually, at below industry average cash costs(1), for an initial mine life of 16 years. The Feasibility Study also highlights the potential to process higher grade ounces in the project’s early years, while stockpiling lower grades for processing towards the end of the mine life. This should help drive higher production and lower costs at the beginning of the mine life, enhancing both cash flow and the overall economics of the project.

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