s3-us-west-2.amazonaws.com · 1 TSX:NGD NYSE MKT:NGD 570 717 627 737 630 - 670 825 - 865 630 - 670 760 - 800 Q2 2016 Q2 2017 Ini?al 2017 Guidance Revised 2017 Guidance All-in sustaining

Q2SECOND QUARTER

REPORT 2017 FOR THE QUARTER ENDED JUNE 30, 2017

1 WWW.NEWGOLD.COMTSX:NGDNYSEMKT:NGD

570717

627737

630-670825-865

630-670760-800

Q22016

Q22017

Ini?al2017Guidance

Revised2017GuidanceAll-insustainingcosts

Opera?ngexpenses

OPERATINGANDFINANCIALHIGHLIGHTSOPERATINGHIGHLIGHTSAlldollarfiguresareinUnitedStatesdollarsandtabulardollaramountsareinmillions,unlessotherwisenoted.

NewGoldInc.(“NewGold”orthe“Company”)isanintermediategoldproducerwithoperatingminesinCanada,theUnitedStates,AustraliaandMexico,anddevelopmentprojectsinCanada.ForthethreemonthsendedJune30,2017,theNewAftonMineinCanada(“NewAfton”),theMesquiteMineintheUnitedStates(“Mesquite”),thePeakMines inAustralia(“PeakMines”)andtheCerroSanPedroMineinMexico(“CerroSanPedro”),whichtransitionedfrom activemining to residual leaching in June 2016, combined to produce 105,064 gold ounces, 26.4million pounds of copper and 0.3million silverounces.ForthesixmonthsendedJune30,2017,theCompany’soperatingminescombinedtoproduce194,391goldounces,50.3millionpoundsofcopperand0.6millionsilverounces.

1. TheCompanyusescertainnon-GAAPfinancialperformancemeasuresthroughoutthisManagement’sDiscussionandAnalysis(“MD&A”).Foradetaileddescriptionofeachofthenon-GAAPmeasuresusedinthisMD&Aandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

2. Pleaserefertothe“Outlookfor2017”sectionofthisMD&AforfurtherinformationontheCompany’srevised2017guidance.

NewGold’sproductioncostsremainedverycompetitivecomparedtothebroadergoldminingspaceasNewGoldhadoperatingexpenses(1)of$627pergoldouncesoldandall-insustainingcosts(1)of$737pergoldouncesoldinthesecondquarterof2017.WebelieveNewGoldcontinuestobealowcostproducerwithintheindustry.

ALL-INSUSTAINING(1)COSTS($PERGOLDOUNCESOLD)

COPPERPRODUCTION(MILLIONSOFPOUNDS)

SILVERPRODUCTION(MILLIONSOFOUNCES)

GOLDPRODUCTION(THOUSANDSOFOUNCES)

86

99105

0

50

100

Q22015 Q22016 Q22017

24 26 26

0

15

30

Q22015 Q22016 Q22017

0.4

0.3 0.3

0.0

0.2

0.4

Q22015 Q22016 Q22017

20%

46%

25%

9% NewAZon

Mesquite

PeakMines

CerroSanPedro

105,064OUNCES

OPERATINGEXPENSESANDALL-INSUSTAININGCOSTS(1)($PERGOLDOUNCESOLD)

(2)

Q22017GOLDPRODUCTIONBYOPERATINGMINE


FINANCIALHIGHLIGHTS

ThreemonthsendedJune30

SixmonthsendedJune30

2017 2016 2017 2016OPERATINGINFORMATION Goldproduction(ounces) 105,064 99,423 194,391 190,234Goldsales(ounces) 99,235 101,820 186,538 187,851Goldrevenue($/ounce)(1) 1,250 1,232 1,251 1,201Goldaveragerealizedprice($/ounce)(1) 1,279 1,267 1,282 1,239Operatingexpensespergoldouncesold($/ounce)(1) 627 570 616 587Totalcashcostspergoldouncesold($/ounce)(1) 360 334 330 343All-insustainingcostspergoldouncesold($/ounce)(1) 737 717 671 736

FINANCIALINFORMATION Revenue 185.6 180.3 355.1 334.8Netearnings(loss) 23.1 (13.9) 60.7 11.7Adjustednetearnings(loss)(1) 13.3 8.6 22.8 7.1Cashgeneratedfromoperations 80.0 79.2 156.8 140.7Cashgeneratedfromoperationsbeforechangesinnon-cashoperatingworkingcapital(2) 76.1 82.4 145.5 144.5

Cashandcashequivalents 198.8 219.5 198.8 219.5Capitalexpenditures(sustainingcapital)(1) 24.0 27.1 38.2 49.5Capitalexpenditures(growthcapital)(1) 164.1 111.1 293.6 196.1

SHAREDATA Earningsperbasicshare($) 0.04 (0.03) 0.11 0.02Adjustednetearnings(loss)perbasicshare(1)($) 0.02 0.02 0.04 0.01

1. TheCompanyusescertainnon-GAAPfinancialperformancemeasuresthroughoutthisManagement’sDiscussionandAnalysis(“MD&A”).Foradetaileddescriptionofeachofthenon-GAAPmeasuresusedinthisMD&Aandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

2. Ofthe$400millioncreditfacility,$100millionhasbeendrawnand$126millionhasbeenutilizedforlettersofcredit,bothasatJune30,2017.

OPERATINGCASHFLOW(MILLIONSOFU.S.DOLLARS)

REVENUEANDAVERAGEREALIZEDPRICE($PERGOLDOUNCESOLD)

$199

$174

CashandCashEquivalents

UndrawnCreditFacilityatJune30,2017

(2)

$373MILLION

New Gold has total available liquidity of $373 million, comprised of

$199million in cash and cash equivalents and $174 million available for

drawdownunder theCompany’s$400million revolving credit facility, eachasatJune30,2017.

79 808276

20

40

60

80

Q22016 Q22017Cashgeneratedfromopera?ons

Cashgeneratedfromopera?onsbeforechangesinnon-cashopera?ngworkingcapital

1,206

1,286

1,165

1,252

1,000

1,100

1,200

1,300

Q12016 Q12017Goldaveragerealizedprice

Goldrevenue

(1)

(1)


Contents

OPERATINGHIGHLIGHTS....................................................................................................................................................1

FINANCIALHIGHLIGHTS......................................................................................................................................................2

OURBUSINESS....................................................................................................................................................................4

OPERATING,DEVELOPMENTANDFINANCIALHIGHLIGHTS...............................................................................................5

CORPORATEDEVELOPMENTS.............................................................................................................................................9

CORPORATESOCIALRESPONSIBILITY.................................................................................................................................9

OUTLOOKFOR2017.........................................................................................................................................................10

KEYPERFORMANCEDRIVERS...........................................................................................................................................10

FINANCIALRESULTS..........................................................................................................................................................14

REVIEWOFOPERATINGMINES........................................................................................................................................23

DEVELOPMENTANDEXPLORATIONREVIEW....................................................................................................................33

FINANCIALCONDITIONREVIEW.......................................................................................................................................37

NON-GAAPFINANCIALPERFORMANCEMEASURES.........................................................................................................45

ENTERPRISERISKMANAGEMENTANDRISKFACTORS.....................................................................................................68

CRITICALJUDGMENTSANDESTIMATIONUNCERTAINTIES..............................................................................................70

ACCOUNTINGPOLICIES.....................................................................................................................................................70

CONTROLSANDPROCEDURES..........................................................................................................................................71

CAUTIONARYNOTES.........................................................................................................................................................72


MANAGEMENT’SDISCUSSIONANDANALYSISForthethreeandsixmonthsendedJune30,2017

The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes isrelevanttoanassessmentandunderstandingoftheconsolidatedfinancialconditionandresultsofoperationsofNewGoldInc. and its subsidiaries (“New Gold” or the “Company”). This MD&A should be read in conjunction with New Gold’sunaudited condensed consolidated interim financial statements for the sixmonths ended June 30, 2017 and 2016 andNewGold’sauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2016and2015andrelatednoteswhicharepreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccounting Standards Board (“IASB”). This MD&A contains forward-looking statements that are subject to risks anduncertainties, as discussed in the cautionary note contained in thisMD&A. The reader is cautioned not to place unduerelianceon forward-looking statements.All dollar figuresare inUnited States dollars and tabulardollar amountsare inmillions,unlessotherwisenoted.ThisMD&AhasbeenpreparedasatJuly26,2017.AdditionalinformationrelatingtotheCompany,includingtheCompany’sAnnualInformationForm,isavailableonSEDARatwww.sedar.com.

OURBUSINESSNew Gold is an intermediate gold producer with operating mines in Canada, the United States and Australia, anddevelopment projects in Canada. The Company’s operating properties consist of the New Afton gold-copper mine inCanada (“NewAfton”), theMesquitegoldmine in theUnitedStates (“Mesquite”)andthePeakMinesgold-coppermineinAustralia(“PeakMines”).TheCompany’sCerroSanPedromineinMexico(“CerroSanPedro”)transitionedfromactiveminingtoresidualleachingin2016.NewGold’sdevelopmentprojectsareits100%-ownedRainyRiver(“RainyRiver”)andBlackwater(“Blackwater”)projects,bothinCanada.OnFebruary17,2017,theCompanysoldits4%streamonfuturegoldproductionfromtheElMorropropertylocatedinChile(“ElMorro”)toanaffiliateofGoldcorpInc.for$65millioncash.

NewGold’s operating portfolio is diverse both geographically and in the range of commodities it produces. The assetsproducegoldwithcopperandsilverby-productsattotalcashcostsandall-insustainingcostsbelowtheindustryaverage.TheCompanybelievesithasasolidplatformtocontinuetoexecuteitsgrowthstrategy,bothorganicallyandthroughvalue-enhancingaccretiveacquisitions,tofurtherestablishitselfasanindustry-leadingintermediategoldproducer.

RainyRiver

NewAfton

Blackwater

CerroSanPedroMesquite

PeakMines

• DEVELOPMENT• OPERATING


OPERATING,DEVELOPMENTANDFINANCIALHIGHLIGHTSOPERATING AND DEVELOPMENT HIGHLIGHTS

ThreemonthsendedJune30 SixmonthsendedJune30

2017 2016 2017 2016

OPERATINGINFORMATION

Gold(ounces): Produced(1) 105,064 99,423 194,391 190,234Sold(1) 99,235 101,820 186,538 187,851Copper(millionsofpounds): Produced(1) 26.4 25.7 50.3 51.1Sold(1) 24.1 25.2 47.1 50.4Silver(millionsofounces): Produced(1) 0.3 0.3 0.6 0.7Sold(1) 0.3 0.3 0.5 0.7Revenue(1): Gold($/ounce) 1,250 1,232 1,251 1,201Copper($/pound) 2.33 1.97 2.34 1.96

Silver($/ounce) 16.34 17.05 16.62 15.66Averagerealizedprice(1)(2): Gold($/ounce) 1,279 1,267 1,282 1,239Copper($/pound) 2.57 2.14 2.58 2.14Silver($/ounce) 16.96 17.39 17.24 15.96Operatingexpensespergoldouncesold($/ounce)(3) 627 570 616 587Operatingexpensespercopperpoundsold($/pound)(3) 1.26 0.96 1.24 1.01Operatingexpensespersilverouncesold($/ounce)(3) 8.31 7.81 8.29 7.56Totalcashcostspergoldouncesold($/ounce)(2)(4) 360 334 330 343All-insustainingcostspergoldouncesold($/ounce)(2)(4) 737 717 671 736Totalcashcostspergoldouncesoldonaco-productbasis($/ounce)(2)(4) 654 609 647 625

All-insustainingcostspergoldouncesoldonaco-productbasis($/ounce)(2)(4) 901 871 867 885

1. Production is shown on a total contained basiswhile sales are shown on a net payable basis, including final product inventory and smelter payable adjustments,whereapplicable.

2. TheCompanyusescertainnon-GAAPfinancialperformancemeasuresthroughoutthisMD&A.Averagerealizedprice,totalcashcostsandall-insustainingcostspergoldounce soldand total cash costs andall-in sustaining costs ona co-product basis arenon-GAAP financial performancemeasureswithno standardmeaningunder IFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

3. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.4. Thecalculationoftotalcashcostsandall-insustainingcostspergoldouncesoldisnetofby-productsilverandcopperrevenue.Totalcashcostsandall-insustainingcostson

aco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productoftheCompany’sgoldproductionandapportionsthecashcoststoeachmetalproducedonapercentageofrevenuebasis.Ifsilverandcopperrevenueweretreatedasco-products,co-producttotalcashcostsforthethreemonthsendedJune30,2017wouldbe$8.90persilverouncesold(2016-$8.21)and$1.50percopperpoundsold(2016-$1.15)andco-productall-insustainingcostsforthethreemonthsendedJune30,2017wouldbe$12.16persilverouncesold(2016-$11.81)and$2.00percopperpoundsold(2016-$1.59).Co-producttotalcashcostsforthesixmonthsendedJune30,2017wouldbe$8.90persilverouncesold(2016-$7.85)and$1.47percopperpoundsold(2016-$1.20)andco-productall-insustainingcostsforthesixmonthsendedJune30,2017wouldbe$11.86persilverouncesold(2016-$11.20)and$1.92percopperpoundsold(2016-$1.65).

Gold production of 105,064 ounces for the three months ended June 30, 2017 was higher when compared to the99,423ouncesintheprior-yearperiod.HigherproductionfromtheMesquitemineoffsetplannedlowerproductionfromNewAfton, Peak and Cerro San Pedro. Cerro San Pedro’s production decreased as themine has now transitioned intoresidualleaching.


ForthesixmonthsendedJune30,2017,NewGold’sgoldproductionof194,391ounceswasabovetheprioryearperiodashigherproductionfromthecompany’sMesquiteandPeakMinespartiallyoffsetlowerproductionfromNewAftonandCerroSanPedro.

Goldsaleswere99,235ouncesforthethreemonthsendedJune30,2017,comparedto101,820ouncesintheprior-yearperiod.Timingofsalesattheendoftheperiodresultedinadifferencebetweenouncessoldandouncesproduced.Goldsaleswere186,538forthesixmonthsendedJune30,2017,comparedto187,851intheprior-yearperiod.

CopperproductionforthethreemonthsendedJune30,2017was26.4millionpounds,comparedto25.7millionpoundsintheprior-yearperiod.HighercopperproductionwasduetohigherthroughputatNewAfton.CopperproductionforthesixmonthsendedJune30,2017was50.3millionpounds,comparedto51.1millionpoundsintheprior-yearperiod.

CoppersalesforthethreemonthsendedJune30,2017were24.1millionpounds,comparedto25.2millionpoundsintheprior-yearperiod.Coppersalesvolumeswerelowerthanintheprior-yearperiodduetotimingofsalesattheendoftheperiod.CoppersalesforthesixmonthsendedJune30,2017were47.1millionpounds,comparedto50.4millionpoundsintheprior-yearperiod.

OperatingexpensespergoldounceforthethreeandsixmonthsendedJune30,2017were$627and$616,respectively.Thiscomparedto$570and$587fortheprior-yearthreeandsixmonthperiods.Theincrease inthesecondquarterandthesixmonthswasprimarilyaresultofahigherproportionoftheCompany’ssalescomingfromitsMesquiteoperation.

Totalcashcostspergoldouncesold,netofby-productsales,were$360perounceforthethreemonthsendedJune30,2017comparedto$334perounceintheprior-yearperiod.Theslightincreaseincashcostsrelativetotheprior-yearperiodwasprimarilydrivenby the impactof a greaterproportionof the company’s sales coming from itsMesquiteoperation,partiallyoffsetbytheeffectofhighercopperprices.

Totalcashcostspergoldouncesold,netofby-productsales,were$330perounceforthesixmonthsendedJune30,2017,adecreasecomparedto$343perounceintheprior-yearperiod,drivenbyhighercopperprices.

All-insustainingcostspergoldouncesoldwere$737forthethreemonthsendedJune30,2017,comparedto$717intheprior-year period. The slight increase in all-in sustaining costs relative to the prior-year quarter was attributable to a$26perounceincreaseintotalcashcoststo$360perouncepartiallyoffsetbya$2million,or$6perounce,decreaseinthecompany’sconsolidatedsustainingcosts,whichincludeNewGold’scumulativesustainingcapital,exploration,generalandadministrative,andamortizationofreclamationexpenditures.

All-insustainingcostspergoldouncesoldwere$671 for thesixmonthsendedJune30,2017,comparedto$736 in theprior-year period. The decrease in all-in sustaining costs relative to the prior-year periodwas driven by the decrease intotalcashcostsnotedaboveandlowersustainingcapitalexpenditures.

ForadetailedreviewoftheCompany’soperatingmines,refertothe“ReviewofOperatingMines”sectionsofthisMD&A.

For the three months ended June 30, 2017, capital expenditures at Rainy River totalled $160.1 million, compared to$107.6millionintheprior-yearperiod.Theincreasedactivityduringthequarterresultedintheprojectteamcontinuingtoachieve many project advancements: notably, achieving a quarterly average mining rate of 115,000 tonnes per day,commissioningofprimarycrusherandconveyorsystem,withfirstcrushcompleted,mechanicalcompletionoftheballandSAGmillandadvancementofthesettingofmechanicalequipmentandinstallationofpiping,electricalandinstrumentationservicesto97%completion.


FINANCIAL HIGHLIGHTS ThreemonthsendedJune30 SixmonthsendedJune30

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016

FINANCIALINFORMATION Revenue 185.6 180.3 355.1 334.8Operatingmargin(1) 90.9 95.6 177.5 168.2Revenuelesscostofgoodssold(2) 27.3 29.2 56.5 40.8Netearnings(loss)(2) 23.1 (13.9) 60.7 11.7Adjustednetearnings(loss)(1)(2) 13.3 8.6 22.8 7.1Cashgeneratedfromoperations 80.0 79.2 156.8 140.7

Cashgeneratedfromoperationsbeforechangesinnon-cashoperatingworkingcapital(1) 76.1 82.4 145.5 144.5

Capitalexpenditures(sustainingcapital)(1) 24.0 27.1 38.2 49.5Capitalexpenditures(growthcapital)(1) 164.1 111.1 293.6 196.1Totalassets(2) 4,143.4 3,766.2 4,143.4 3,766.2Cashandcashequivalents 198.8 219.5 198.8 219.5Long-termdebt 880.1 788.5 880.1 788.5 SHAREDATA Earningspershare(2): Basic($) 0.04 (0.03) 0.11 0.02Diluted($) 0.04 (0.03) 0.11 0.02Adjustednetearnings(loss)perbasicshare($)(1)(2) 0.02 0.02 0.04 0.01SharepriceasatJune30(TSX–Canadiandollars) 4.12 5.65 4.12 5.65Weightedaverageoutstandingshares(basic)(millions) 575.8 511.2 552.1 510.8

1. The Company uses certain non-GAAP financial performance measures throughout this MD&A. Operating margin, adjusted net loss, adjusted net loss per basic share,

capital expenditures (sustaining and growth) and cash generated from operations before changes in non-cash operating working capital are non-GAAP financialperformancemeasureswithnostandardmeaningunderIFRS.Forfurther informationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.

Revenuewas$185.6million for the threemonthsended June30,2017, compared to$180.3million in theprior-yearperiod.Revenuewas$355.1millionforthesixmonthsendedJune30,2017,comparedto$334.8millionintheprior-yearperiod.Thebenefitfromhighermetalpriceswasonlypartiallyoffsetbyslightlylowercopperandsilversalesvolumes.

Revenuelesscostofgoodssoldwas$27.3millionforthethreemonthsendedJune30,2017,comparedto$29.2millionintheprior-yearperiod.Decreaseduetohigheroperatingcosts,offsetbylowerdepreciationandanincreaseinrevenue.Revenuelesscostofgoodssoldwas$56.5millionforthesixmonthsendedJune30,2017,comparedto$40.8millionintheprior-yearperiodwiththeincreaseprimarilyattributabletotheincreaseinrevenue.

Netearningswere$23.1millionor$0.04perbasicshareforthethreemonthsendedJune30,2017,comparedtoalossof $13.9million or $0.03 per basic share in the prior-year period. Net earnings included a foreign exchange gain of$17.7million,comparedtoalossof$5.0millionintheprior-yearperiodandacombined$14.7millionreductioninthelossonrevaluationofgoldpriceoptioncontractsandthegoldstreamobligationwhencomparedtothepriorperiod.


Net earnings were $60.7 million or $0.11 per basic share for the six months ended June 30, 2017, compared to$11.7millionor$0.02perbasicshareintheprior-yearperiod.Netearningsincludedagainondisposalofthe4%streamonfuturegoldproductionfromElMorro(the“ElMorrostream”)of$33.0millionandacombined$9.1millionreductioninthelossonrevaluationofgoldpriceoptioncontractsandthegoldstreamobligation.

AdjustednetearningsforthethreemonthsendedJune30,2017was$13.3millionor$0.02perbasicshare,comparedto$8.6millionor$0.03perbasicshareintheprior-yearperiod.AdjustednetearningsbenefittedfromreducedfinancecostsastheCompanyhascapitalizedmore interestto itsqualifyingdevelopmentpropertythan intheprior-yearperiodoffsetbytheslightreductioninrevenuelesscostofgoodssold.

AdjustednetearningsforthesixmonthsendedJune30,2017was$22.8millionor$0.04perbasicshare,comparedtoanadjustednetearningsof$7.1millionor$0.01perbasicshareintheprior-yearperiodastheincreaseinrevenuelesscostofgoodssoldandreductioninfinancecostswereonlypartiallyoffsetbyanincreaseinadjustedtaxexpense.

CashgeneratedfromoperationsforthethreemonthsendedJune30,2017was$80.0million,consistentwith$79.2millionin the prior-year period. Cash generated from operations for the sixmonths ended June 30, 2017 was $156.8million,compared to $140.7million in the prior-year period. The increase in cash generated from operations in the six-monthperiodwasprimarily due tohigher revenueas described above. Favourableworking capitalmovementsweredrivenbythecollectionofanoutstandingconcentratereceivableatNewAfton in January2017,whichwasonlypartiallyoffsetbyanincreaseinincometaxespaid.

Cashandcashequivalentswere$198.8millionasatJune30,2017,comparedto$349.5millionasatMarch31,2017and$185.9 million as at December 31, 2016. For the three and six months ended June 30, 2017, cash generated fromoperationswasmorethanoffsetbycashusedininvestingactivitiesduetogrowthcapitalexpendituresonRainyRiver.DuringthesixmonthsendedJune30,2017,theCompanysoldtheElMorrostreamfor$65.0millionandissuedcommonshares through a bought deal financing arrangement for proceeds of $164.7million. This was partially offset by therefinancingofthe2020seniorsecurednotesfornetcashoutflowof$10.2million.

ForfurtherinformationontheCompany’sliquidityandcashflowposition,pleaserefertothe“LiquidityandCashFlow”sectionofthisMD&A.ForfurtherinformationontheCompany’sfinancialresults,pleaserefertothe“FinancialResults”sectionofthisMD&A.


CORPORATEDEVELOPMENTSNewGold’sstrategyinvolvesstrongoperationalexecutionatitscurrentassetsanddisciplinedgrowthboththroughorganicinitiativesandvalue-enhancingmergersandacquisitions.Since themiddleof2009,NewGoldhas focusedonenhancingthevalueofitsportfolioofassets,whilealsocontinuallylookingforcompellingexternalgrowthopportunities.NewGold’sobjectiveistopursuecorporatedevelopmentinitiativesthatwillmaximizelong-termshareholdervalue.

OnFebruary17,2017,NewGoldsoldits4%streamonfuturegoldproductionfromElMorrotoanaffiliateofGoldcorpInc.for $65 million cash. This transaction provided the Company with additional liquidity as the Company advances theconstructionofRainyRiver.

OnFebruary22,2017,NewGoldannouncedthattheCompanyenteredintoanagreementwithasyndicateofunderwriterstopurchase,onaboughtdealbasis,53,600,000commonsharesofNewGold(plusanover-allotmentoption)atapriceofUS$2.80pershare.OnMarch10,2017,NewGoldclosedtheboughtdealfinancingof61,640,000commonshares(includingtheover-allotment)fornetproceedstoNewGoldofapproximately$165million(grossproceedsof$173millionlessequityissuancecosts).

OnJune27,2017,NewGoldenteredintogoldpriceoptioncontractscovering120,000ouncesofNewGold’ssecondhalf2017goldproduction.NewGoldpurchasedputoptionswithastrikepriceof$1,250perouncecovering120,000ouncesofgoldandsimultaneouslysoldcalloptionswithastrikepriceof$1,400perouncecoveringanequivalent120,000ounces.Thecontractswillcover20,000ouncesofgoldpermonthforsixmonthsbeginninginJuly2017.Thenetcostofenteringintotheoptioncontractswaslessthan$1million.

Inaddition,thecompanyhasinitiatedaprocesstodivestthePeakMines,locatedinNewSouthWales,Australia.ThesaleofPeak Mines will further enable the company to focus on its America’s centric portfolio of operating mining anddevelopment projectswhile offering a prospective buyer an opportunity to fully leverage Peak’s strong track record ofperformance,andunlockitslongertermpotential.

CORPORATESOCIALRESPONSIBILITY

NewGoldiscommittedtoexcellenceincorporatesocialresponsibility.TheCompanyconsidersitsabilitytomakealastingandpositivecontributiontowardsustainabledevelopmentakeydrivertoachievingaproductiveandprofitablebusiness.New Gold aims to achieve this objective through the protection of the health and well-being of its people and hostcommunities aswell as employing industry-leadingpractices in the areas of environmental stewardship and communityengagementanddevelopment.

CORPORATESOCIALRESPONSIBILITYHIGHLIGHTSFORQ22017• CerroSanPedrowasrecertifiedbytheInternationalCyanideManagementInstitute.• NewAfton’sSafetyInitiativeCommitteereceivedtheBCChiefInspector’sRecognitionAward.• New Afton held Health & Career Fairs at local First Nations communities and held a fundraiser for the

KamloopsFoodbank.• PeakparticipatedinCleanUpAustraliaDayandtheCobarShireFestivaloftheMinersGhost.• CerroSanPedroheldaBiodiversityDayeventatlocalschoolsandbuiltapotablewatertankforthe local

community.


AsaparticipantoftheUnitedNationsGlobalCompact,NewGold’spoliciesandpracticesareguidedbyitsprincipleswithregard tohuman rights, labour,environmental stewardshipandanti-corruption.Asamemberof theMiningAssociationofCanada(“MAC”),NewGold’soperationsadopttheMAC’sTowardsSustainableMiningprotocols.

NewGold’sobjectivesincludeprotectingthewelfareofitsemployeesandcontractorsthroughsafety-firstworkpractices,upholdingfairemploymentpracticesandencouragingadiverseworkforce,wherepeoplearetreatedwithrespectandaresupportedtorealizetheirfullpotential.TheCompanystrivestocreateacultureofinclusivenessandtolerancethatbeginsatthetopandisreflectedinitshiring,promotionandoverallhumanresourcespractices.Ineachofitshostcommunities,theCompanystrivestobeanemployerofchoicethroughtheprovisionofcompetitivewagesandbenefits,andthroughtheimplementationofpoliciesofrecognizingandrewardingemployeeperformanceandpromotingfromwithinwhereverpossible.

The Company is committed to preserving the long-term health and viability of the natural environments that host itsoperations. Wherever New Gold operates – in all stages of mining activity, from early exploration and planning, tocommercialminingoperations through toeventual closure– theCompany is committed toexcellence inenvironmentalmanagement. From the earliest site investigations, New Gold carries out comprehensive environmental studies toestablish baselinemeasurements for flora, fauna, earth, air and water. During operations, the Company promotes theefficientuseofrawmaterialsandresourcesandworkstominimizeenvironmentalimpactsandmaintainrobustmonitoringprograms.Afterminingactivitiesarecomplete,NewGold’sobjectiveistorestorethelandtoasustainableendlanduse.

OnJuly13,2017,NewGoldwaschargedwithfivebreachesoftheEnvironmentalProtectionAct (Ontario) inconnectionwith allegedeffluentdischarges at theRainyRiverproject in July 2016 in excessof permit limits. IfNewGold is foundguilty,certainof thechargesaresubject toaminimumpenaltyofC$25,000perday. NewGold takesallenvironmentalincidentsseriouslyandisintheprocessofevaluatingthismatter.

New Gold is committed to establishing relationships based on mutual benefit and active participation with its hostcommunities to contribute to healthy and sustainable communities.Wherever the Company’s operations interact withIndigenous peoples, New Gold promotes understanding of and respect for traditional values, customs and culture andtakesmeaningfulactiontoconsidertheir intereststhroughcollaborativeagreementsaimedatcreating jobs,trainingandother lastingsocio-economicbenefits.NewGoldaimstofosteropencommunicationwithlocalresidentsandcommunityleaders and strives to partner in the long-term sustainability of those communities. The Company believes that bythoroughlyunderstandingthepeople,theirhistories,andtheirneedsandaspirations,wecanengageinameaningfulandsustainabledevelopmentprocess.

OUTLOOKFOR2017As a result of the company’s strong first half operational results, New Gold reiterates is guidance for full-year goldproductionof380,000to430,000ouncesandoperatingexpensepergoldouncesoldof$630to$670.Assumingcurrentcommoditypricesandforeignexchangerates,NewGoldisalsopleasedtoreiterateitsalreadyloweredguidanceforall-insustainingcostsof$760to$800perounce.TheCompanyexpectsall-insustainingcostsforthesecondhalfoftheyeartobe higher than the first half due to timing of sustaining capital expenditures and Rainy River commencing production,whichisexpectedtohavehighercostsduringthestart-upphase.

KEYPERFORMANCEDRIVERSThereisarangeofkeyperformancedriversthatarecriticaltothesuccessfulimplementationofNewGold’sstrategyandtheachievementofitsgoals.Thekeyinternaldriversareproductionvolumesandcosts.Thekeyexternaldriversaremarketpricesofgold,copperandsilver,aswellasforeignexchangerates.


$10

$15

$20

$25

Jun-15 Jun-16 Jun-17Quarterlyaveragerealizedprice

Quarterlyaveragespotprice

$2.00

$2.50

$3.00



Production Volumes and Costs NewGold’sportfolioofoperatingminesproduced105,064goldouncesforthethreemonthsendedJune30,2017and194,391goldouncesforthesixmonthsendedJune30,2017.

Operatingexpensespergoldouncesold for the threemonthsended June30,2017was$627,compared to$570 in theprior-year period. Operating expenses per copper pound sold for the three months ended June 30, 2017 was $1.26,comparedto$0.96intheprior-yearperiod.OperatingexpensespersilverouncesoldforthethreemonthsendedJune30,2017was$8.31,comparedto$7.81intheprior-yearperiod.

ForthethreemonthsendedJune30,2017totalcashcostsandall-insustainingcosts,netofby-productsales,were$360and$737pergoldouncesold,respectively.Comparedto$334totalcashcostsand$717all-insustainingcostsintheprioryearperiods.

ForthesixmonthsendedJune30,2017totalcashcostsandall-insustainingcosts,netofby-productsales,were$330and$671pergoldouncesold,respectively.Comparedto$343totalcashcostsand$736all-insustainingcostsintheprioryearperiods.

Commodity Prices

GoldpricesThepriceofgoldisthesinglelargestfactoraffectingNewGold’sprofitabilityandoperatingcashflows.Assuch,thecurrentandfuture financialperformanceof theCompany isexpectedtobecloselyrelatedtotheprevailingpriceofgold. In thethirdquarterof2016,theCompanyenteredintogoldpriceoptioncontractsrelatedto itsproductionforthefirsthalfof2017. New Gold purchased put options with a strike price of $1,300 per ounce covering 120,000 ounces of gold andsimultaneously sold call optionswitha strikepriceof$1,400perounce coveringanequivalent120,000ounces. For thethreeandsixmonthsendedJune30,2017,theCompanyrecognized$2.5millionand$7.2millioninrevenuerespectivelyrelatedtothesegoldpriceoptioncontracts.

InJune2017theCompanyenteredintofurthergoldoptioncontractsfortheperiodsJuly2017toDecember2017withastrikepriceof$1,250perouncecovering120,000ouncesofgoldandsimultaneouslysoldcalloptionswithastrikepriceof$1,400perouncecoveringanequivalent120,000ounces

GOLDPRICES(U.S.dollarsperounce)

SILVERPRICES(U.S.dollarsperounce)

COPPERPRICES(U.S.dollarsperpound)

$1,100

$1,200

$1,300

$1,400




ForthethreemonthsendedJune30,2017,NewGold’sgoldrevenueperounceandaveragerealizedgoldpriceperouncewere$1,250and$1,279,respectively,comparedtotheLBMAp.m.averagegoldpriceof$1,257perounce.ThedifferencebetweenNewGold’s average realized goldprice and the LBMAp.m. average goldprice is primarily a result of the goldpriceoptioncontractsdescribedabove.ForthesixmonthsendedJune30,2017,NewGold’sgoldrevenueperounceandaverage realized gold price per ouncewere $1,251 and $1,282, respectively, compared to the LBMAp.m. average goldpriceof$1,238perounce.

CopperpricesInNovember2016,theCompanyenteredcopperswapcontractsfor5.3millionpoundsofcopperpermonthfromJanuarythroughJune2017,atafixedpriceof$2.52perpoundsettlingagainsttheLMEmonthlyaverageprice.InFebruary2017,the Company entered into further copper swap contracts for 7.3 million pounds of copper per month from July 2017through December 2017 at a fixed price of $2.73 per pound. The copper forward contracts are treated as derivativefinancial instrumentsandmarkedtomarketateachreportingperiodontheconsolidatedstatementof financialpositionwithchangesinfairvaluerecognizedinothergainsandlosses.

ForthethreemonthsendedJune30,2017,NewGold’scopperrevenueperpoundandaveragerealizedcopperpriceperpound were $2.33 and $2.57, respectively, compared to the average LME copper price of $2.57 per pound. For thesixmonthsendedJune30,2017,NewGold’scopperrevenueperpoundandaveragerealizedcopperpriceperpoundwere$2.34and$2.58,respectively,comparedtotheaverageLMEcopperpriceof$2.61perpound.

SilverpricesFor the threemonths ended June 30, 2017, NewGold’s silver revenue per ounce and average realized silver price perouncewere$16.34and$16.96,respectively,comparedtotheLBMAp.m.averagesilverpriceof$17.25perounce.Forthesixmonthsended June30,2017,NewGold’s silver revenueperounceandaverage realizedsilverpriceperouncewere$16.62and$17.24,respectively,comparedtotheLBMAp.m.averagesilverpriceof$16.83perounce.

Foreign Exchange Rates TheCompanyoperates inCanada,theUnitedStates,AustraliaandMexico,whilerevenueisgeneratedinU.S.dollars.Asa result, theCompanyhas foreign currencyexposurewith respect to costsnotdenominated inU.S.dollars.NewGold’soperatingresultsandcashflowsareinfluencedbychangesinvariousexchangeratesagainsttheU.S.dollar.TheCompanyhas exposure to the Canadian dollar through New Afton, Rainy River and Blackwater, as well as through corporateadministration costs. The Company also has exposure to theAustralian dollar through PeakMines, and to theMexicanpesothroughCerroSanPedro.

TheCanadiandollarstrengthenedagainsttheU.S.dollarbyapproximately3%fromMarch31,2017toJune30,2017.Theaverage Canadian dollar against the average U.S. dollar for the three months ended June 30, 2017 weakened byapproximately 4% when compared to the prior-year period. The strengthening or weakening of the Canadian dollarimpactscostsinU.S.dollartermsattheCompany’sCanadianoperations,aswellascapitalcostsattheCompany’sCanadiandevelopmentpropertiesasasignificantportionofoperatingandcapitalcostsaredenominatedinCanadiandollars.

TheAustraliandollarstrengthenedagainsttheU.S.dollarbyapproximately1%fromMarch31,2017toJune30,2017.Theaverage Australian dollar against the average U.S. dollar for the three months ended June 30, 2017 strengthened byapproximately 1% when compared to the prior-year period. The strengthening or weakening of the Australian dollarimpactscostsinU.S.dollartermsattheCompany’sAustralianoperation,PeakMines,asasignificantportionofoperatingcostsaredenominatedinAustraliandollars.


TheMexicanpesostrengthenedagainsttheU.S.dollarbyapproximately4%fromMarch31,2017toJune30,2017.Theaverage Mexican peso against the average U.S. dollar for the three months ended June 30, 2017 strengthened byapproximately2%whencomparedtotheprior-yearperiod.ThestrengtheningorweakeningoftheMexicanpesoimpactscosts in U.S. dollar terms at the Company’s Mexican operation, Cerro San Pedro, as a portion of operating costs aredenominatedinMexicanpesos.

For an analysis of the impact of foreign exchange fluctuations on operating costs for the threemonths ended June 30,2017 relative to prior-year periods, refer to the “Review of OperatingMines” sections for New Afton, PeakMines andCerroSanPedro.

Economic Outlook The LBMAp.m. gold price increasedby 8% since the start of 2017, andwas flat during the secondquarter. The Trumppresidency continues to generate considerable uncertainty and unpredictability, and U.S. economic data has beendistinctlymixed.WhiletheFederalReserveisstillexpectedtoraise interestrates,thepaceof increaseshasbecomelessclearasthestrengthoftheeconomyisdebatedandinflationremainslow.Thisuncertaintyhashelpedtounderpingoldinrecentweeksinthefaceofacertainamountofvolatility.

Prospectsforgoldareencouragedbyseveralstructuralfactors.Minesupplyhasbeenplateauingashighqualitydepositsbecomemoredifficulttofindandmoreexpensivetodevelopandmine.Explorationbudgetshavebeencutinrecentyears,increasingthelikelihoodthatsupplywillremainmuted,eveninthefaceofincreasinggoldprices.Goldheldinexchange-tradedproductsisdown30%fromthepeakin2012,suggestingthatthebroadinvestmentcommunityhascapacitytoaddlengthtopositionsassentimentimproves.Asalowall-insustainingcostproducerwithapipelineofdevelopmentprojects,NewGoldbelievesitisparticularlywellpositionedbothtooperateinalowergoldpriceenvironmentandtotakeadvantageofhigherpricesinthegoldmarket.

Economiceventscanhavesignificanteffectsonthepriceofgold,throughcurrencyratefluctuations,therelativestrengthoftheU.S.dollar,goldsupplyanddemand,andmacroeconomicfactorssuchas interestratesandinflationexpectations.Management anticipates that the long-termeconomic environment should provide support for preciousmetals and forgoldinparticular,andbelievestheprospectsforthebusinessarefavourable.NewGold’sgrowthplanisfocusedonorganicandacquisition-ledgrowth,andtheCompanyplanstoremainflexibleinthecurrentenvironmenttobeabletorespondtoopportunitiesastheyarise.

AVERAGEMONTHLYUSDTOAUDEXCHANGERATES

AVERAGEMONTHLY USD TOMXNEXCHANGERATES

AVERAGEMONTHLYUSDTOCADEXCHANGERATES

1.00

1.10

1.20

1.30

1.40

1.50

Jun-15 Jun-16 Jun-171.00

1.10

1.20

1.30

1.40

1.50

Jun-15 Jun-16 Jun-1712.00

16.00

20.00

24.00

Jun-15 Jun-16 Jun-17


FINANCIALRESULTSSummary of Quarterly and Year-to-Date Financial Results


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016FINANCIALRESULTS Revenue 185.6 180.3 355.1 334.8

Operatingexpenses 94.7 84.7 177.6 166.6

Depreciationanddepletion(2) 63.6 66.4 121.0 127.4

Revenuelesscostofgoodssold(2) 27.3 29.2 56.5 40.8

Corporateadministration 5.9 5.9 13.4 11.6

Share-basedpaymentexpenses 2.6 2.8 3.8 5.8

Explorationandbusinessdevelopment 3.2 2.0 6.4 4.5

Earningsfromoperations(2) 15.6 18.5 32.9 18.9

Financeincome 0.4 0.2 0.6 0.5

Financecosts (1.3) (3.1) (2.7) (7.7)

Othergainsandlosses

Unrealizedgain(loss)onsharepurchasewarrants 0.1 (0.1) 1.2 (0.5)

Gainonforeignexchange 17.7 (4.9) 23.9 29.0

Othergain(loss)ondisposalofassets - (0.2) 0.2 (0.3)Unrealizedlossonrevaluationofgoldstreamobligation (2.0) (10.4) (5.0) (25.5)

GainondisposalofElMorrostream - - 33.0 -

(Loss)gainonrevaluationofgoldpriceoptioncontracts (1.3) (7.6) (15.7) (4.3)

Gainonrevaluationofinvestments (0.2) 0.7 - 0.7

Other 1.4 (0.2) 1.9 (0.1)

Incomebeforetaxes(2) 30.4 (7.1) 70.3 10.7Incometax(expense)recovery(2) (7.3) (6.8) (9.6) 1.0Netearnings(2)

23.1 (13.9) 60.7 11.7

Adjustednetearnings(loss)(1)(2) 13.3 8.6 22.8 7.11. The Company uses certain non-GAAP financial performancemeasures throughout thisManagement’s Discussion and Analysis (“MD&A”). For a detailed description of

eachofthenon-GAAPmeasuresusedinthisMD&Aandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.

RevenueForthethreemonthsandsixmonthsendedJune30,2017,the$5.3and$20.3million increase inrevenuewasprimarilydrivenbyhighermetalprices,partiallyoffsetbymetalsalesvolumes.Adetaileddiscussionofproductionisincludedinthe“ReviewofOperatingMines”sectionofthisMD&A.

OperatingexpensesForthethreeandsixmonthsendedJune30,2017,operatingexpensesincreasedcomparedwiththeprior-yearperiod.HigheroperatingcostsatMesquitewasduetoincreasedprocessingcostswhichdrovehigherproduction,werepartiallyoffsetbyloweroperatingcostsatCerroSanPedroastheminehasbeeninresidualleachingsinceJune2016.


DepreciationanddepletionFor the three and sixmonths ended June 30, 2017, depreciation and depletion decreased comparedwith prior-yearperiods,duetolowergoldsalescomparedtopriorperiods.

RevenuelesscostofgoodssoldForthethreemonthsendedJune30,2017,revenuelesscostofgoodssolddecreasedprimarilyduetohigheroperatingexpenses,partiallyoffsetbyhigherrevenues.

ForthesixmonthsendedJune30,2017,revenuelesscostofgoodssoldincreasedprimarilyduetohigherrevenues.

Corporateadministrationandshare-basedpaymentexpensesForthethreemonthsendedJune30,2017,corporateadministrationremainedconsistentwiththeprior-yearperiod.Forthe sixmonths ended June 30, 2017 the increase in corporate administration costswas primarily attributable to theseveranceexpensesincurredintheperiod.

For the three and six months ended June 30, 2017, the decrease in share-based payment expenses was primarilyattributable to thedecreaseof theCompany’sshareprice in thecurrentperiod,which resulted in lowercosts for theCompany’scash-settledshare-basedpaymentarrangements.

ExplorationandbusinessdevelopmentExpensedexploration in thecurrentyearwasprimarily incurredatPeakMinesandRainyRiver.Theprior-yearperiodincludedexpensedexplorationcostsprimarilyatPeakMines.

Capitalizedexplorationcostswere$1.3millionforthethreemonthsendedJune30,2017consistentwiththeprior-yearperiod.Capitalizedexplorationcostswereprimarily incurredatNewAftonC-ZoneandPeakMines.Forthesixmonthsendedcapitalizedexplorationcostswere$3.2millioncomparedwith$2.1millionintheprior-yearperiod.ExpenditureswereprimarilyatNewAftonC-zone,PeakMines,andRainyRiver.

Please refer to the“DevelopmentandExploration review”sectionof thisMD&Afor furtherdetailson theCompany’sexplorationandbusinessdevelopmentactivities.

FinanceincomeandfinancecostsForthethreeandsixmonthsendedJune30,2017,financecostsdecreasedastheCompanyhascapitalizedmoreinteresttoitsqualifyingdevelopmentpropertythanintheprior-yearperiod.

OthergainsandlossesThefollowingothergainsandlossesareaddedbackforthepurposesofadjustednetearnings:

SharepurchasewarrantsForthethreeandsixmonthsendedJune30,2017,theCompanyrecordedagainonsharepurchasewarrants,comparedtoalossintheprior-yearperiods.AsthetradedvalueoftheNewGoldsharepurchasewarrantsincreasesordecreases,arelated loss or gain on themark-to-market of the liability is reflected in earnings. On June 28, 2017 all share purchasewarrantsexpired,unexercised.


GoldstreamobligationFor the three and sixmonths ended June 30, 2017, the unrealized loss on revaluation of the gold stream obligationderivativeinstrumentwasrelatedtotheincreaseingoldpricesandaccretion.Thegainorlossontherevaluationofthegoldstreamobligationasa resultof thechange in theCompany’sowncredit risk is recorded inothercomprehensiveincome.

Goldpriceoptioncontracts

In theprioryear, theCompanyentered intogoldpriceoptioncontractswhereby it solda seriesof calloptioncontractsandpurchasedaseriesofputoptioncontracts.Thesegoldpriceoptioncontractscover120,000ouncesofNewGold’sfirsthalf2017goldproduction.InJune2017theCompanyenteredintofurthergoldoptioncontractsfortheperiodsJuly2017toDecember2017withastrikepriceof$1,250perouncecovering120,000ouncesofgoldandsimultaneouslysoldcalloptionswithastrikepriceof$1,400perouncecoveringanequivalent120,000ounces

These derivative instruments are fair valued at the end of each reporting period. For the three and sixmonths endedJune30,2017,theCompanyrecognizedalossontherevaluationofthegoldpriceoptioncontractsresultingfromCompanyexercising its put option contracts during the period. For the three and sixmonths ended June 30, 2017, the Companyrecognized$2.5millionand$7.2millioninrevenuerelatedtothesegoldpriceoptioncontracts,respectively.

GainondisposalofElMorrogoldstreamDuringthefirstquarterof2017,theCompanysoldits4%streamonfuturegoldproductionfromElMorrofor$65millioncash.Asaresult,theCompanyrecordedagainondisposalof$33.0millionrepresentingthedifferencebetweenthenetproceedsreceivedandthecarryingvalueoftheasset.Pleaserefertothe“CorporateDevelopments”sectionofthisMD&Aformoreinformationonthistransaction.

ForeignexchangeMovementsinforeignexchangeareduetotherevaluationofthenon-monetaryassetsandliabilitiesatthebalancesheetdateandtheappreciationordepreciationoftheCanadianandAustraliandollarscomparedtotheU.S.dollarinthecurrentperiod.

IncometaxIncome taxexpense for the sixmonthsended June30,2017was$9.6millioncompared toan income taxexpenseof$1.0 million in the prior-year period, reflecting an effective tax rate of 13.7% for the period ended June 30, 2017comparedto9.3%intheprior-yearperiod.Theprimaryreasonforthechangeintheunadjustedeffectivetaxrateistheimpact of lower tax rate applicable on the disposal of the El Morro stream and the impact of foreign exchangemovementsonthedeferredtaxrelatedtononmonetaryassetsandliabilities.ForthesixmonthsendedJune30,2017,theCompanyrecordedaforeignexchangegainof$24.4milliononnon-monetaryassetsand liabilities,comparedtoagainof$29.0millionintheprior-yearperiod.

Onanadjustednet(loss)earningsbasis,theadjustedtaxexpenseforthesixmonthsendedJune30,2017was$7.5million,comparedtoanadjustedtaxexpenseof$4.6millionintheprior-yearperiod.Theadjustedtaxexpenseexcludestheimpactofforeignexchange,disposaloftheElMorrogoldstream,thelossonrevaluationofthegoldstreamobligationandthegainonrevaluationofthegoldpriceoptioncontracts.Pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.


NetearningsForthethreemonthsendedJune30,2017netearningswerepositivelyimpactedbyagainonforeignexchange,andareductionoftheunrealizedlossontherevaluationofthegoldstreamobligation.

PleaseseebelowforareconciliationofnetearningsforthethreemonthsendedJune30,2017fromtheprior-yearperiod.

RECONCILIATIONOFNETEARNINGS(LOSS)–Q22016TOQ22017(inmillionsofU.S.dollars)

(14)

5 (10)

3 (1)

38 2 (1) 23

(30)

(20)

(10)

0

10

20

30

Q220

16NETLOSS

REVE

NUE

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

EXPLORA

TIONANDBU

SINESS

DEVE

LOPM

ENT

OTH

ERGAINSAN

DLO

SSES

FINAN

CECOSTS,NETOFFINAN

CE

INCO

ME

INCO

META

XEXPENSE

Q22017NETEAR

NINGS


ForthesixmonthsendedJune30,2017netearningswerepositivelyimpactedbyanincreaseinrevenuelesscostofgoodssold,andareductionoftheunrealizedlossontherevaluationofthegoldstreamobligation.

PleaseseebelowforareconciliationofnetearningsforthesixmonthsendedJune30,2017fromtheprior-yearperiod.

RECONCILIATIONOFNETEARNINGS(LOSS)–Q22016YTDTOQ22017YTD(inmillionsofU.S.dollars)

12

20 (11)6 (2)

8

335 (11)

61

(20)

0

20

40

60

80

Q22016YTD

NETEAR

NINGS

REVE

NUE

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

EXPLORA

TIONANDBU

SINESS

DEVE

LOPM

ENT

OTH

ERGAINSAN

DLO

SSES,

EXCLUDINGGA

INONDISPO

SALOF

ELM

ORR

OSTR

EAM

GAINONDISPO

SALOFELM

ORR

O

STRE

AM

FINAN

CECOSTS,NETOFFINAN

CE

INCO

ME

INCO

META

XEXPENSE

Q22017YTD

NETEAR

NINGS


Adjustednetearnings(loss)Thenetearningshavebeenadjusted, including theassociated tax impact, for inventorywrite-downs,asset impairmentsandcostsin“Othergainsandlosses”ontheunauditedcondensedconsolidatedinterimincomestatement.Keyentriesinthisgroupingare:thefairvaluechangesforthegoldstreamobligation;sharepurchasewarrantsandthefairvaluechangesfor gold option contracts; foreign exchange gain or loss; and loss on disposal of assets. The adjusted entries are alsoimpactedfortaxtotheextentthattheunderlyingentriesareimpactedfortaxintheunadjustednetearnings.Pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

PleaseseebelowforareconciliationofadjustednetearningsforthethreemonthsendedJune30,2017fromtheprior-yearperiod.

9

5 (10)

3 (1) 2

5 13

(10)

0

10

20

Q22016ADJUSTED

NETEAR

NINGS

REVE

NUE

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

EXPLORA

TIONANDBU

SINESS

DEVE

LOPM

ENT

FINAN

CECOSTS,NETOFFINAN

CE

INCO

ME

ADJUSTED

INCO

META

XEXPENSE

Q22017ADJUSTED

NETEAR

NINGS

RECONCILIATIONOFADJUSTEDNETEARNINGS(LOSS)–Q22016TOQ22017(inmillionsofU.S.dollars)


PleaseseebelowforareconciliationofadjustednetearningsforthesixmonthsendedJune30,2017fromtheprior-yearperiod.

RECONCILIATIONOFADJUSTEDNET(LOSS)EARNINGS–Q22016YTDTOQ22017YTD(inmillionsofU.S.dollars)

7

20 (11)6 (2)

5 (3)23

(20)

0

20

40

Q220

16YTD

ADJUSTED

NET

EARN

INGS

REVE

NUE

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

EXPLORA

TIONANDBU

SINESS

DEVE

LOPM

ENT

FINAN

CECOSTS,NETOFFINAN

CE

INCO

ME

ADJUSTED

INCO

META

XEXPENSE

Q220

17YTD

ADJUSTED

NET

EARN

INGS


Key Quarterly Operating and Financial Information Selectedfinancialandoperatinginformationforthecurrentandpreviousquartersisasfollows:

(inmillionsofU.S.dollars,exceptwherenoted)

Q22017

Q12017

Q42016

Q32016

Q22016

Q12016

Q42015

Q32015

Q22015

OPERATINGINFORMATION

Goldproduction(ounces) 105,064 89,327 95,883 95,546 99,423 90,811 131,719 122,580 86,442

Goldsales(ounces) 99,235 87,304 93,936 96,452 101,820 86,031 133,005 115,695 87,754 Revenue 185.6 169.5 170.3 178.7 180.3 154.5 199.0 177.3 167.7 Netearnings(loss)(1) 23.1 37.5 (22.3) 4.1 (13.9) 25.6 (9.5) (157.8) 9.4pershare: Basic($)(1) 0.04 0.07 (0.04) 0.01 (0.03) 0.05 (0.02) (0.31) 0.02Diluted($)(1) 0.04 0.07 (0.04) 0.01 (0.03) 0.05 (0.02) (0.31) 0.02 Adjustednetearnings(loss)pershare:

13.3 9.4 (4.7) 12.4 8.6 (1.5) 2.6 (8.5) (1.3)

Basic($)(1) 0.02 0.02 (0.01) 0.02 0.02 $nil 0.01 (0.02) $nilDiluted($)(1) 0.02 0.02 (0.01) 0.02 0.02 $nil 0.01 (0.02) $nil

Adetaileddiscussionofproductionisincludedinthe“OperatingHighlights”sectionofthisMD&A.


In the firstquarterof2017 theCompany identifiedan immaterial error relating todepletionof itsNewAftonmininginterestfortheyearendedDecember31,2016resultinginareductionin2016netearningsof$9.7million.

Thequarterlyimpactonthecomparativecondensedconsolidatedincomestatementisoutlinedinthetablebelow.Theresulting overstatement of the mining interests balance of $15.4 million, overstatement of deferred tax liability of$5.3millionandunderstatementofinventoriestotalling$0.4millionasatDecember31,2016hasalsobeenrevisedinthe comparative condensed consolidated statement of financial position and the associated notes to the unauditedcondensed consolidated interim financial statements. There has been no change to the cash flows from operating,investingandfinancingactivitiesinthecomparativecondensedconsolidatedstatementofcashflow.

1. FortheperiodsinwhichtheCompanyrecordsaloss,dilutedlosspershareiscalculatedusingthebasicweightedaveragenumberofsharesoutstanding,asusingthedilutedweightedaveragenumberofsharesoutstandinginthecalculationwouldbeanti-dilutive.

Threemonths

endedThreemonths

endedThreemonths

endedThreemonths

endedYearended

(inmillionsofU.S.dollars)March31,

2016June30,

2016September30,

2016December31,

2016December31,

2016

IMPACTONNETEARNINGS(LOSS) Netearnings(loss)beforerevision 26.8 (8.8) 5.1 (19.9) 2.7

Depreciationanddepletion (3.4) (4.1) (3.4) (4.1) (15.0)

Incometaxrecovery 2.2 (1.0) 2.4 1.7 5.3

Revisiontonetearnings(loss) (1.2) (5.1) (1.0) (2.4) (9.7)

Revisednetearnings(loss) 25.6 (13.9) 4.1 (22.3) (7.0)Basicweightedaveragenumberofsharesoutstanding(inmillions) 509.6 511.2 513.0 513.3 511.8

Dilutionofsecurities:

Stockoptions 1.1 - 2.8 - -Dilutedweightedaveragenumberofsharesoutstanding(inmillions) 510.7 511.2 515.8 513.3 511.8

Netearnings(loss)persharebeforerevision:

Basic 0.05 (0.02) 0.01 (0.04) 0.01

Diluted(1) 0.05 (0.02) 0.01 (0.04) 0.01Impactofrevisiontonetearnings(loss)pershare:

Basic - (0.01) - - (0.02)

Diluted(1) - (0.01) - - (0.02)

Revisednetearnings(loss)pershare:

Basic 0.05 (0.03) 0.01 (0.04) (0.01)

Diluted(1) 0.05 (0.03) 0.01 (0.04) (0.01)


REVIEWOFOPERATINGMINESNew Afton Mine, British Columbia, Canada TheNewAftonMineislocatednearKamloops,BritishColumbia,gold mine. At December 31, 2016, the mine had 1.2 millionounces of Proven and Probable gold Mineral Reserves and1.0 billion pounds of Proven and Probable copper MineralReserves, with 1.2 million ounces of Measured and Indicatedgold Mineral Resources, exclusive of Mineral Reserves, and950millionpoundsofMeasuredand Indicated copperMineralResources, exclusive of Mineral Reserves. A summary ofNewAfton’soperatingresultsisprovidedbelow.



OPERATINGINFORMATION Oremined(thousandsoftonnes) 1,436 1,363 3,043 2,917Oreprocessed(thousandsoftonnes) 1,531 1,394 2,971 2,782Averagegrade: Gold(grams/tonne) 0.54 0.68 0.55 0.68Copper(%) 0.83 0.84 0.82 0.85Recoveryrate(%): Gold 80.4 82.8 80.1 82.3Copper 81.6 86.1 81.0 85.4Gold(ounces): Produced(1) 21,273 25,287 42,210 50,355Sold(1) 19,573 26,302 40,289 51,433Copper(millionsofpounds): Produced(1) 22.8 22.1 43.3 44.5Sold(1) 20.8 22.6 40.7 44.6Silver(millionsofounces): Produced(1) 0.1 0.1 0.2 0.1Sold(1) 0.1 0.1 0.1 0.1Revenue Gold($/ounce) 1,170 1,171 1,170 1,127Copper($/pound) 2.32 1.96 2.33 1.95Silver($/ounce) 15.92 17.07 16.01 15.23Averagerealizedprice(1)(2): Gold($/ounce) 1,291 1,280 1,286 1,239Copper($/pound) 2.56 2.15 2.56 2.14Silver($/ounce) 17.56 18.67 17.60 16.73

AT-A-GLANCE2017GUIDANCE:GOLD:70,000-80,000OUNCESCOPPER:85-95MILLIONPOUNDSOPERATINGEXPENSE/GOLDOZ:$405-$445ALL-INSUSTAININGCOSTS/OZ:($520)-($480)Q2YTD2017PRODUCTION:GOLD:40,210OUNCESCOPPER:43.3MILLIONPOUNDSOPERATINGEXPENSE/GOLDOZ:$442ALL-INSUSTAININGCOSTS/OZ:($434)



(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016OPERATINGINFORMATION

Operatingexpensespergoldouncesold($/ounce)(4) 426 434 442 404Operatingexpensespercopperpoundsold($/pound)(4) 0.85 0.73 0.88 0.70Totalcashcostspergoldouncesold($/ounce)(2)(3) (1,059) (547) (941) (593)All-insustainingcostspergoldouncesold($/ounce)(2)(3) (358) (131) (434) (198)Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 547 543 558 516Copper($/pound) 1.09 0.91 1.11 0.89All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 769 711 724 672Copper($/pound) 1.53 1.19 1.44 1.16


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016FINANCIALINFORMATION Revenue 72.4 76.3 144.2 146.9Operatingmargin(2) 46.2 48.0 89.8 94.2Revenuelesscostofgoodssold(5) 11.8 11.0 21.5 14.8Capitalexpenditures(sustainingcapital)(2) 12.8 10.3 19.3 19.1Capitalexpenditures(growthcapital)(2) 1.1 1.0 2.3 2.01. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryandsmelterpayableadjustments,where

applicable.2. Weusecertainnon-GAAPfinancialperformancemeasuresthroughoutourMD&A.Totalcashcostsandall-insustainingcostspergoldouncesold,totalcashcostsand

all-insustainingcostsonaco-productbasis,averagerealizedprice,operatingmargin,andcapitalexpenditures(sustainingcapitalandgrowthcapital)arenon-GAAPfinancialperformancemeasureswithnostandardmeaningunderIFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

3. Thecalculationoftotalcashcostspergoldounceisnetofby-productrevenuewhiletotalcashcostsandall-insustainingcostsonaco-productbasisremovestheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcoststoeachmetalproducedonapercentageofrevenuebasis.

4. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

5. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.

Operatingresults

ProductionForthethreemonthsandsixmonthsendedJune30,2017,thedecreaseingoldproductionrelativetotheprior-periodwasduetoanexpecteddecreaseingoldgradeandgoldrecovery,partiallyoffsetbyanincreaseinmillthroughput.

For the threemonthsended June30, 2017, copperproductionwas slightlyhigher compared to thepriorperioddue tohigherthroughput,whichoffsetthedecreaseinrecovery.ForthesixmonthsendedJune30,2017thedecreaseincopperproductionwasduetoanexpecteddecreaseincoppergradeandrecovery.

RevenueFor the three and sixmonths ended June 30, 2017, revenue slightly decreased comparedwith prior period due to adecreaseinmetalsold,onlypartiallyoffsetbyanincreaseinaveragerealizedprices.

Attheendoftheperiod,NewAfton’sexposuretotheimpactofmovementsinmarketmetalpricesforprovisionallypricedcontractswas21,493ouncesofgoldand25.4millionpoundsof copper.Exposure to thesemovements inmarketmetalpricesisreducedby19,930ouncesofgoldswapsand23.6millionpoundsofcopperswapsoutstandingasatJune30,2017,withsettlementperiodsrangingfromJuly2017toDecember2017.


RevenuelesscostofgoodssoldForthethreeandsixmonthsendedJune30,2017,theincreaseinrevenuelesscostofgoodssoldwasprimarilydrivenbylowerdepreciationanddepletionresultingfromlowerproduction.

Operatingexpenses,totalcashcostsandall-insustainingcostspergoldouncesoldFor the threemonthsended June30,2017operatingexpenseswere in linewith thepriorperiod.All-in sustainingcostsdecreased as the benefit of higher by-product revenueswas only partially offset by higher sustaining costs. By-productrevenues benefitted from an increase in the realized copper pricewhichmore than offset lower copper sales volumes.NewAfton’squarterlysustainingcostsincreasedby$3millionto$13millionwhencomparedtothepriorperiodend.

ForthesixmonthsendedJune30,2017operatingexpenses increasedduetohigheroretonnesminedandprocessedatlower grades.All-in sustaining costsdecreasedas thebenefit ofhigherby-product revenueswasonlypartiallyoffsetbythe increase inoperatingexpenses.By-product revenuesbenefitted froman increase in the realizedcopperpricewhichmorethanoffsetlowercoppersalesvolumes.NewAfton’squarterlysustainingcostswereinlinewiththeprioryearperiod.

CapitalexpendituresInboththecurrentandprior-yearperiod,sustainingcapitalexpenditureswereprimarilyrelatedtominedevelopmentcosts,andgrowthcapitalexpenditureswereprimarilyrelatedtocapitalizedexplorationattheNewAftonC-zone.

ImpactofforeignexchangeonoperationsNewAfton’soperationscontinuetobeimpactedbyfluctuationsinthevaluationoftheU.S.dollaragainsttheCanadiandollar.ForthethreemonthsendedJune30,2017,thevalueoftheU.S.dollaraveraged$1.34againsttheCanadiandollarcomparedto$1.29intheprior-yearperiod,resultinginapositiveimpactontotalcashcostsof$75pergoldouncesold.

ForthesixmonthsendedJune30,2017,thevalueoftheU.S.dollarwasconsistentwiththeprioryearaveraging$1.33againsttheCanadiandollar.

ExplorationactivitiesDuringthesecondquarterof2017,afinalcampaignofinfilldrillingtofurtherupgradeconfidenceintheC-zoneblockcavemineral reservewascompleted.Thedata fromthiscampaignwillbe incorporated intoanupdatedresourceestimatetoprovide further support for futureminedevelopmentandproductionplanning. Additionally,a surfacedrillingcampaigntotestseveralsatellitetargetsidentifiedwithinthegreatermineleaseareacommencedduringthesecondquarter.


Mesquite Mine, California, USA The Company’s Mesquite Mine is located in ImperialCounty,California,approximately70kilometresnorthwestof Yuma, Arizona and 230 kilometres east of San Diego,California. It is an open pit, run-of-mine heap leach goldmining operation. Theminewas operated between 1985and 2001 byGoldfieldsMining Corporation, subsequentlySanta Fe Minerals Corporation, and finally NewmontMiningCorporationwithWesternGoldfields Inc.acquiringthemine in2003.Themine resumedproduction in2008.New Gold acquired Mesquite as part of the businesscombination with Western Goldfields in mid-2009. AtDecember31,2016,theminehad1.2millionouncesofProvenandProbablegoldMineralReservesand1.0millionouncesofMeasured and Indicated goldMineral Resources, exclusive ofMineral Reserves. A summary ofMesquite’s operatingresultsisprovidedbelow.



OPERATINGINFORMATION Oreminedandplacedonleachpad(thousandsoftonnes) 5,422 4,274 9,910 9,506Wastemined(thousandsoftonnes) 10,626 10,864 21,211 21,226Ratioofwastetoore 1.96 2.54 2.14 2.23Averagegrade: Gold(grams/tonne) 0.32 0.41 0.34 0.39Gold(ounces): Produced(1)(2) 48,183 25,564 78,586 52,935Sold(1) 46,462 31,115 75,615 56,043Revenue Gold($/ounce) 1,271 1,262 1,273 1,235Averagerealizedprice(3): Gold($/ounce) 1,271 1,262 1,273 1,235Operatingexpensespergoldouncesold($/ounce)(4) 703 602 700 608Totalcashcostspergoldouncesold($/ounce)(3) 703 611 700 618All-insustainingcostspergoldouncesold($/ounce)(3) 789 999 779 1,044 FINANCIALINFORMATION Revenue 59.0 39.2 96.2 69.2Operatingmargin(3) 26.3 20.4 43.3 35.1Revenuelesscostofgoodssold 9.5 10.5 15.8 16.3Capitalexpenditures(sustainingcapital)(3) 3.3 11.8 4.9 23.31. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventory,whereapplicable.2. Tonnesoforeprocessedeachperioddoesnotnecessarilycorrespondtoouncesproducedduringtheperiod,asthereisatimedelaybetweenplacingtonnesontheleach

padandpouringgoldounces.3. Weusecertainnon-GAAPfinancialperformancemeasuresthroughoutourMD&A.Totalcashcostsandall-insustainingcostspergoldouncesold,averagerealizedprice,

operating margin and capital expenditures (sustaining capital) are non-GAAP financial performance measures with no standard meaning under IFRS. For furtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.


AT-A-GLANCE2017GUIDANCE:GOLD:140,000-150,000OUNCESOPERATINGEXPENSES/OZ:$675-$715ALL-INSUSTAININGCOSTS/OZ:$805-$845Q2YTD2017PRODUCTION:GOLD:78,586OUNCESOPERATINGEXPENSES/OZ:$700ALL-INSUSTAININGCOSTS/OZ:$779


Operatingresults

ProductionForthethreemonthsendedJune30,2017,theincreaseingoldproductionatMesquiterelativetothesecondquarterof2016wasduetohigherrecoveriesastotaloretonnesminedandplacedincludedlesstransitionalmaterialthanwasminedin2016,andthecompanyincreasingtheprocesssolutionflowontheleachpad.

ForthesixmonthsendedJune30,2017,Mesquite’sgoldproductionincreasedby48%relativetotheprior-yearperiodduetoincreasedoretonnesandgoldrecovery,andthecompanyincreasingtheprocesssolutionflowontheleachpad.

RevenueForthethreeandsixmonthsendedJune30,2017,theincreaseinrevenuewasattributablehighergoldsalesvolumesandhighergoldprices.

RevenuelesscostofgoodssoldForthethreeandsixmonthsendedJune30,2017,revenue lesscostofgoodssoldwasconsistentwiththeprior-yearperiod.Theincreaseinrevenuedescribedabovewasoffsetbyhigheroperatingexpensesanddepreciationanddepletioncomparedtoprior-yearperiod.

Operatingexpenses,totalcashcostsandall-insustainingcostspergoldouncesoldForthethreemonthsendedJune30,2017,operatingexpensesincreasedwhencomparedtotheprior-yearquarterduetoincreasedoretonnesminedandprocessed.All-insustainingcostsduringthequarterdecreasedduetoa$8million,or$302perounce,decrease insustainingcostsprimarilyduetonocapitalizedwastestripping inthecurrentperiod, thebenefitofwhichwasonlypartiallyoffsetbyhigheroperatingexpenses.

ForthesixmonthsendedJune30,2017,theoperatingexpensesincreasedwhencomparedtotheprior-yearduetohigherore tonnes mined and processed. All-in sustaining costs decreased due to a $18 million decrease in sustaining costsprimarilyduetonocapitalizedwastestripping,thebenefitwhichwasonlypartiallyoffsetbyhigheroperatingexpenses.

CapitalexpendituresForthethreeandsixmonthsendedJune30,2017,thedecreaseincapitalexpenditureswasaresultofwastestrippingexpendituresbeingcapitalizedintheprior-yearperiod.Capitalexpendituresinthecurrentperiodrelateprimarilytothepurchaseofcomponentpartsforthemobilefleet.


Peak Mines, New South Wales, Australia TheCompany’sPeakMinesgold-copperminingoperationis an underground mine/mill operation located in theCobar Mineral Field near Cobar, New South Wales,Australia.PeakMineswasoriginallybuiltbyRioTintoPlcand commenced production in 1992. At December 31,2016, the mine had 251,000 ounces of Proven andProbablegoldMineralReservesand80millionpoundsofProven and Probable copper Mineral Reserves, with378,000ouncesofMeasuredand IndicatedgoldMineralResources,exclusiveofMineralReserves,and171millionpounds of Measured and Indicated copper MineralResources, exclusive ofMineral Reserves. A summary ofPeakMines’operatingresultsisprovidedbelow:



OPERATINGINFORMATION Oremined(thousandsoftonnes) 160 191 275 360Oreprocessed(thousandsoftonnes) 159 163 325 327Averagegrade: Gold(grams/tonne) 4.91 7.01 5.70 5.37Copper(%) 1.14 1.11 1.09 1.01Recoveryrate(%): Gold 95.5 94.5 93.1 94.4Copper 91.4 89.2 89.8 90.5Gold(ounces): Produced(1) 26,039 31,285 54,386 50,881Sold(1) 25,528 27,784 52,919 44,934Copper(millionsofpounds): Produced(1) 3.6 3.6 7.0 6.6Sold(1) 3.3 2.5 6.4 5.8Revenue Gold($/ounce) 1,262 1,246 1,274 1,229Copper($/pound) 2.37 2.02 2.39 2.04Averagerealizedprice(2): Gold($/ounce) 1,283 1,272 1,295 1,264Copper($/pound) 2.63 2.12 2.65 2.16Operatingexpensespergoldouncesold($/ounce)(4) 715 581 654 700Operatingexpensespercopperpoundsold($/pound)(4) 1.46 0.97 1.34 1.20Totalcashcostspergoldouncesold(2)(3) 563 521 493 620All-insustainingcostspergoldouncesold(2)(3) 945 706 805 827Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 735 623 681 736Copper($/pound) 1.72 1.10 1.61 1.32All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 1,032 782 928 904Copper($/pound) 2.33 1.36 2.11 1.61

AT-A-GLANCE2017GUIDANCE:GOLD:85,000-95,000OUNCESCOPPER:~15MILLIONPOUNDSOPERATINGEXPENSES/GOLDOZ:$780-$820ALL-INSUSTAININGCOSTS/OZ:$975-$1,015Q2YTD2017PRODUCTIONGOLD:54,386OUNCESCOPPER:7.0MILLIONPOUNDSOPERATINGEXPENSES/GOLDOZ:$654ALL-INSUSTAININGCOSTS/OZ:$805



(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016FINANCIALINFORMATION Revenue 41.8 40.2 86.8 67.9Operatingmargin(2) 18.4 21.4 42.9 28.9Revenuelesscostofgoodssold 8.0 6.7 20.9 1.2Capitalexpenditures(sustainingcapital)(2) 7.8 3.1 12.9 4.9Capitalexpenditures(growthcapital)(2) 0.7 - 0.9 -1. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryandsmelterpayableadjustments,where

applicable.2. Weusecertainnon-GAAPfinancialperformancemeasuresthroughoutourMD&A.Totalcashcostsandall-insustainingcostspergoldouncesold,totalcashcostsand

all-insustainingcostsonaco-productbasis,averagerealizedprice,operatingmarginandcapitalexpenditures(sustainingcapital)arenon-GAAPfinancialperformancemeasureswithnostandardmeaningunderIFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

3. Thecalculationoftotalcashcostspergoldounceisnetofby-productcopperrevenue.Totalcashcostsandall-insustainingcostsonaco-productbasisremovestheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcoststoeachmetalproducedonapercentageofrevenuebasis.


Operatingresults

ProductionForthethreemonthsendedJune30,2017,thedecreaseingoldproductionatPeakMinesrelativetothesecondquarterof2016wasduetoanexpecteddecreaseingoldgrade,asalowerproportionofthehighgradeChronosorebodymaterialwasprocessed.Thiswaspartiallyoffsetbyhighergoldrecovery.Quarterlycopperproductionwasinlinewiththesecondquarterof2016.

ForthesixmonthsendedJune30,2017PeakMinesgoldproductionincreasedby7%relativetotheprior-yearperiodduehighergoldgrade.

RevenueForthethreemonthsendedJune30,2017,theincreaseinrevenuewasattributabletohighermetalprices.

ForthesixmonthsendedJune30,2017,the increase inrevenuewasattributable increasedmetalssalesvolumesandhighermetalprices.

Attheendoftheperiod,PeakMines’exposuretotheimpactofmovementsinmarketmetalpricesforprovisionallypricedcontractswas2,682ouncesofgoldand1.4millionpoundsofcopper.Exposuretothesemovementsinmarketmetalpriceswasreducedby1.2millionpoundsofcopperswapsoutstandingattheendoftheperiod,withsettlementperiodsrangingfromJuly2017toDecember2017.

RevenuelesscostofgoodssoldForthethreeandsixmonthsendedJune30,2017,theincreaseinrevenuelesscostofgoodssoldwasprimarilyattributabletohigherrevenueasdescribedaboveandlowerdepreciationduetheincreaseinreservesatDecember31,2016,offsettingtheincreaseinoperatingexpenses.


Operatingexpenses,totalcashcostsandall-insustainingcostsFor the threemonths ended June 30, 2017 operating expenses increased when compared to the prior-year quarterprimarilyduetolowergoldsalesvolumes.All-insustainingcostsincreasedduringthequarterasthebenefitofincreasedby-product revenueswere offset by higher sustaining costs and lower gold sales volumes. For the sixmonths endedJune30,2017operatingexpensesremainedinlinewiththeprior-yearperiod.Firsthalfall-insustainingcostsdecreasedas higher by-product revenues and gold sales volumeswere only partially offset by a $6million, or $105 per ounce,increaseinsustainingcosts.

CapitalexpendituresForthethreeandsixmonthsendedJune30,2017,theincreaseincapitalexpenditureswasaresultofincreasesincapitaldevelopment and increased capitalized exploration activities. Capital development is related tomine and infrastructuredevelopment.

ImpactofForeignExchangeonOperationsPeakMines’operationscontinuetobe impactedby fluctuations inthevaluationof theU.S.dollaragainst theAustraliandollar.ForthethreemonthsendedJune30,2017,thevalueoftheU.S.dollaraveraged$1.33againsttheAustraliandollarcomparedto$1.34 intheprior-yearperiod,resulting inanegative impactontotalcashcostsof$6pergoldouncesold.ForthesixmonthsendedJune30,2017,thevalueoftheU.S.dollaraveraged$1.30againsttheAustraliandollarcomparedto$1.35intheprior-yearperiod,resultinginanegativeimpactontotalcashcostsof$22pergoldouncesold.

ExplorationActivitiesDuringthesecondquarterof2017,explorationinvolvedthecontinuationofsurfaceandundergrounddrillingprogramstotestprospectivegoldandcopper-goldtargetsidentifiedalongthePeakMineCorridorandthecontinuedadvancementofreconnaissancetargetingworkonseveralprospectivetargetswithinPeakMine’sgreaterregionalexplorationtenements.TheseprogramscomprisepartofPeakMine’sbroaderstrategyofdiscoveryandsustainedreservesreplacement.

PeaksalesprocessInaddition,thecompanyhasinitiatedaprocesstodivestthePeakMines,locatedinNewSouthWales,Australia.Thesaleof Peak Mines will further enable the company to focus on its America’s centric portfolio of operating mining anddevelopment projectswhile offering a prospective buyer an opportunity to fully leverage Peak’s strong track record ofperformance,andunlockitslongertermpotential.


Cerro San Pedro Mine, San Luis Potosí, Mexico The Cerro San PedroMine is located in the state ofSan Luis Potosí in central Mexico, approximately20 kilometres east of the city of San Luis Potosí. Themineisagold-silver,openpit,run-of-mineheapleachoperation.CerroSanPedrofinishedactivemininglatein the second quarter of 2016 and has nowtransitioned into residual leaching. A summary ofCerroSanPedro’soperatingresultsisprovidedbelow:


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016OPERATINGINFORMATION Oreminedandplacedonleachpad(thousandsoftonnes) - 1,531 - 3,221Wastemined(thousandsoftonnes) - 617 - 2,721Ratioofwastetoore - 0.40 - 0.84Averagegrade: Gold(grams/tonne) - 0.61 - 0.49Silver(grams/tonne) - 17.84 - 14.38Gold(ounces) Produced(1)(2) 9,569 17,287 19,209 36,063Sold(1) 7,672 16,619 17,716 35,441Silver(millionsofounces) Produced(1)(2) 0.2 0.2 0.3 0.5Sold(1) 0.2 0.2 0.3 0.5Revenue Gold($/ounce) 1,283 1,251 1,275 1,216Silver($/ounce) 17.07 16.77 17.27 15.67Averagerealizedprice(3): Gold($/ounce) 1,283 1,251 1,275 1,216Silver($/ounce) 17.07 16.77 17.27 15.67Operatingexpensespergoldouncesold($/ounce)(5) 1,269 961 1,203 978.1Operatingexpensespersilverouncesold($/ounce)(5) 16.88 12.88 16.30 12.61Totalcashcostspergoldouncesold($/ounce)(3)(4) 1,222 898 1,152 917All-insustainingcostspergoldouncesold($/ounce)(3)(4) 1,414 941 1,325 947Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 1,235 952 1,176 962Silver($/ounce) 16.43 12.76 15.93 12.40All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 1,387 988 1,316 987Silver($/ounce) 18.45 13.25 17.83 12.72 FINANCIALINFORMATION Revenue 12.4 24.6 27.9 50.8Operatingmargin(3) - 5.8 1.5 10.0Revenuelesscostofgoodssold (2.0) 5.1 (1.7) 8.5Capitalexpenditures(sustainingcapital)(3) - 0.5 0.7 0.71. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryadjustments,whereapplicable.2. Tonnesoforeprocessedeachperioddoesnotnecessarilycorrespondtoouncesproducedduringtheperiod,asthereisatimedelaybetweenplacingtonnesontheleach

padandpouringgoldounces.3. Weusecertainnon-GAAPfinancialperformancemeasuresthroughoutourMD&A.Totalcashcostsandall-insustainingcostspergoldouncesold,totalcashcostsandall-

in sustainingcostsonaco-productbasis,average realizedprice,operatingmarginandcapitalexpenditures (sustainingandgrowth)arenon-GAAP financialperformance

AT-A-GLANCE2017GUIDANCE:GOLD:35,000-45,000OUNCESOPERATINGEXPENSES/GOLDOZ:$1,080-$1,120ALL-INSUSTAININGCOSTS/OZ:$1,090-$1,130Q2YTD2017PRODUCTIONGOLD:19,209OUNCESSILVER:0.3MILLIONOUNCESOPERATINGEXPENSES/GOLDOZ:$1,203ALL-INSUSTAININGCOSTS/OZ:$1,316


measureswithno standardmeaningunder IFRS. For further informationandadetailed reconciliation,please refer to the “Non-GAAPPerformanceMeasures” sectionofthisMD&A.

4. Thecalculationoftotalcashcostspergoldouncesoldandall-insustainingcostspergoldouncesoldisnetofby-productsilverrevenue.Totalcashcostsandall-insustainingcostsonaco-productbasisremovestheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcoststoeachmetalproducedonapercentageofrevenuebasis.

5. Operatingexpensesareapportioned to eachmetal producedonapercentageof revenuebasis. For further informationandadetailed reconciliation, please refer to the“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

Operatingresults

ProductionCerroSanPedrofinishedactivemininglateinthesecondquarterof2016andhasnowtransitionedintoresidualleaching.Asaresult,andconsistentwithexpectations,forthethreemonthsandsixmonthsendedJune30,2017,goldandsilverproductionwaslowerthanintheprior-yearperiod.

RevenueForthethreeandsixmonthsendedJune30,2017,thedecreaseinrevenuewasattributabletothedecreaseinmetalsalesvolumesasCerroSanPedrohasenteredintotheresidualleachperiod,whichwaspartiallyoffsetbyhighermetalprices.

RevenuelesscostofgoodssoldFor the three and six months ended June 30, 2017, the decrease in revenue less cost of goods sold was primarilyattributabletothedecreaseinrevenuedescribedabove,partiallyoffsetbyloweroperatingexpenses.

Operatingexpenses,totalcashcostsandall-insustainingcostsForthethreeandsixmonthsendedJune30,2017,theincreaseinoperatingexpensesandall-insustainingcostswhencomparedtotheprior-yearperiodswasdueto lowergoldsalesvolumes.AstheCompany isdrawingdown leachpadinventoryduringtheresidualleachperiod,$417perounceinthesecondquarter,and$405perounceinthefirsthalf,ofthereportedall-insustainingcostsarerelatedtominingcoststhatwereincurredinpriorperiods.

ImpactofForeignExchangeonOperationsCerroSanPedrowasimpactedbychangesinthevalueoftheMexicanpesoagainsttheU.S.dollar.ForthethreemonthsendedJune30,2017,thevalueoftheMexicanpesoaveragedMXN18.5againsttheU.S.dollarcomparedtoMXN18.1intheprior-yearperiod.Thishadapositiveimpactontotalcashcostsof$9pergoldouncesold.

ForthesixmonthsendedJune30,2017,thevalueoftheMexicanpesoaveragedMXN18.1againsttheU.S.dollarcomparedtoMXN18.5intheprior-yearperiod.Thishadanegativeimpactontotalcashcostsof$42pergoldouncesold.


DEVELOPMENTANDEXPLORATIONREVIEWRainy River Project, Ontario, Canada RainyRiver isagoldproject locatedapproximately50kilometresnorthwestofFortFrances,atownofapproximately8,000people,innorthwesternOntario,Canada.Theprojectpropertyis locatednearinfrastructureandiscomprisedofapproximately192squarekilometresoffreeholdandleaseholdpatentedsurfacerightsandminingrights,propertiesandunpatentedminingclaims.

Rainy River enhances New Gold’s growth pipeline through itssignificantproductionscaleandexcitinglonger-termexplorationpotential in a great mining jurisdiction. The Company looksforward to the commencement of commercial production atRainyRiverwhichisexpectedtobeinthefourthquarterof2017.

Projectadvancement

DevelopmentactivitiesatNewGold’sRainyRiverproject,locatedinnorthwesternOntario,continuetoadvanceandtheprojectisscheduledtotransitionfromconstructiontooperationinthethirdquarterof2017.BoththeprojectscheduleandcapitalcostestimateremaininlinewithNewGold’supdatedplanannouncedonJanuary30,2017.

MiningactivitiesatRainyRiverprogressedwellduringthesecondquarter.Thecompany’sminingrateduringthequarteraveraged approximately 115,000 tonnes per day, which was in line with New Gold’s updated plan announced onJanuary30,2017.More importantly, themining rate in Juneaveragedapproximately125,000 tonnesperdayandthecompanyexpectstobuildmomentumthroughthesummermonths.

AT-A-GLANCEASATDECEMBER31,2016

2017GUIDANCE:GOLD:50,000-60,000OUNCESOPERATINGEXPENSES/OZ:$905-$945ALL-INSUSTAININGCOSTS/OZ:$1,200-$1,240PROVENANDPROBABLERESERVESGOLD:3.9MILLIONOUNCESSILVER:10.0MILLIONOUNCES

RAINYRIVER–Q22017KEYPROJECTUPDATES• Projectspendingduringthesecondquartertotalled$160million,withestimated

remainingcapitaltoachieveNovembercommercialproductionof$229million• Miningrateduringthequarteraveragedapproximately115,000tonnesperdaydespite

impactofspringthawo Miningrateaveragedapproximately125,000tonnesperdayinthemonthofJune

• PubliccommentperiodforSchedule2amendmentconcludedonJune12,2017;timelineforexpectedamendmentacceleratedtofourthquarterof2017

• Commissioningofprimarycrusherandconveyorsystemcomplete,withfirstcrushcompletedonMay11,2017asplanned

• TailingsmanagementareacorridorpipelinecompletedonJune15,2017,withfirstwatermovedtoandfromthewatermanagementpondonJune20,2017

• Installationofmechanical,piping,electricalandinstrumentationinprocessingfacilitiesapproximately97%complete

• BallandSAGmillachievedmechanicalcompletionandhandovertooperationsforcommissioning

• Energizationofallkeysitepowerlinescompletedonschedule• Overallearthworksover85%complete


Overallearthworksareover85%completeandaretrackinginlinewithNewGold’supdatedplan.ThroughJune30,2017,over1.1millioncubicmetresofconstructionmaterialhasbeenplacedatthetailingsmanagementstartercell.Startercellrock deliveries are scheduled for completion in late August 2017. Energization of all key site overhead power lines,constructionofthetailingspipelinecorridorandconstructionofthetailingsmanagementareacorridorpipelinehavebeencompleted.

Allofthekeystructuralcomponentsoftheprocessfacilitieshavebeenfinalizedandthesettingofmechanicalequipmentandinstallationofpiping,electricalandinstrumentationservicesisclosetocompletion.Theprimarycrusherandconveyorsystemwassuccessfullycommissionedonschedule,andthefirstcrushoccurredonMay11,2017.CommissioningoftheballmillandSAGmillhasstartedandisscheduledtobecompletedinAugust2017.CommissioningoftherefiningportionoftheprocesscircuithascommencedwithdryandwetcommissioningofthefullcircuitscheduledforAugust2017.

PermittingactivitiesThecompanyrequiresanamendmenttoSchedule2oftheMetalMiningEffluentRegulationstoclosetwosmallcreeksanddeposit tailings. The proposed amendment was published in Canada Gazette I onMay 13, 2017 and was followed bya30-daypubliccommentperiodwhichconcludedonJune12,2017.Itisthecompany’sunderstandingthatthecommentsreceived during the comment periodwere all in support of the project proceeding as proposed. In light of the positivecomments, thecompanyhasrevisitedtheproposedtimelinewithEnvironmentandClimateChangeCanadaandexpectsthatadoptionoftheSchedule2amendmentwillbeacceleratedtothefourthquarterof2017.

As previously disclosed, New Gold is presently constructing a starter tailings cell, located within the broader tailingsmanagement area, that does not require a Schedule 2 amendment. Thiswill allowNewGold to commence operationspriortocompletionoftheSchedule2amendment.Basedonitslocationandscale,thestartercellwouldprovidecapacityforapproximatelysixmonthsofproductiontailingswhenthemillisoperatingatfullcapacity.

Inaddition,NewGoldhasfinalizedtheengineeringdesigntoconstructthecreekclosuresusingsheetpileatthecentreoftheportionofthedamwhichwillcoverthecreeks.ThepurposeofthisapproachisbothtoreducetheconstructiontimeafterreceiptoftheSchedule2amendment,andmostimportantly,tobeabletocompletetheworkregardlessofweatherconditions.NewGoldhasmetwiththeOntarioMinistryofNaturalResourcesandForestry (MNRF)toreviewthedesignandhasalsofileditsapplicationfortherequiredpermitamendmentinsupportofthedesign.ItisexpectedthattheOntarioMNRFwillcompleteitsreviewoftheapplicationduringthethirdquarterof2017.

ExplorationDuringthefirsthalfof2017,explorationeffortsatRainyRiverweredirectedtowardcompletingtheinfilldrillingprogramtofurtherupgradereservesintheODMstarterpitareaandcommencingwithexplorationdrillingtotestthepotentialtoexpand and further confirm the mineral resource classification of the planned ODM underground mine area. Oncecompleted,resultsofthesedrillingcampaignswillbeincorporatedintotheRainyRiverlife-of-mineoperationalplan.


Environmentalandcommunityactivities

NewGoldhasentered intoParticipationAgreementsor ImpactBenefitAgreementswith theNaicatcheweninandRainyRiverFirstNations,BigGrassyFirstNation,NaotkamegwanningFirstNation, fourofthecommunitiesoftheFortFrancesChiefsSecretariatandtheMétísNationofOntario.TheParticipationAgreementsandImpactBenefitAgreementsprovideforhowtheFirstNationandMétiscommunitieswillbenefitfromthedevelopmentofRainyRiverandthroughoutthelifeof themine. NewGold continues tomeetwith other local Indigenous communities aswell. NewGold also sends outregular newsletters onRainyRiver to all communities in theRainyRiverDistrict andparts of the KenoraDistrict.Otherengagementactivitiesincludecommunityvisits,publicsitetour,communicationandtourswithneighboursthatarecloseto the project area and regular communication with the local municipality. New Gold continues to engage localcommunitiesinkeyareasofemployment,contractingandprocurementwheneverpossible.

ProjectcostsandoutlookProjectspendingatRainyRiverduringthesecondquartertotalled$160million.TheremainingcapitalcosttothetargetedNovember commercial production is estimated to be approximately $229 million. Of the remaining expenditure,approximately45%isrelatedtominingandowner’scosts,45%isrelatedtoearthworks,includingcompletionofthestartertailingscell,with thebalanceof the remainingexpenditure related to thecompletionandcommissioningof theprocessplant.

NewGoldcontinuestolookforwardtotheexpectedgrowthinthecompany’sproductionandcashflowonceRainyRivertransitionsintooperationlaterthisyear.RainyRiverhasmultipleimportantassetqualitiesincludingitsgreatjurisdiction,significant annual production potential, long estimated reserve life and continued exploration potential New Goldcontinuestolookforwardtotheexpectedgrowthinthecompany’sproductionandcashflowonceRainyRivertransitionsintooperation laterthisyear.RainyRiverhasmultiple importantassetqualities including itsgreat jurisdiction,significantannualproductionpotential,longestimatedreservelifeandcontinuedexplorationpotential

Blackwater Project, British Columbia, Canada Blackwater is a bulk-tonnage gold-silver project locatedapproximately 160 kilometres southwest of Prince George, acityofapproximately80,000people,incentralBritishColumbia,Canada.Theprojectpropertypositioncoversover1,000squarekilometresandislocatednearinfrastructure.

Exploration

During, and subsequent to, the second quarter of 2017, thecompanyexpandeditspropertyholdingsatBlackwaterwiththeacquisition of 445km2 of exploration tenements from ParlaneResource Corp. and RJK Explorations Ltd for approximatelyC$3.5million.WiththeacquisitionofthesemineralrightstheBlackwater property position has increased by 42%, now comprising 1,492 square kilometres of ground futureexplorationanddevelopment.ExplorationactivityatBlackwaterremainedsuspendedwhiletheCompanycontinueditsdevelopmentfocusatRainyRiver.


PROVENANDPROBABLERESERVESGOLD:8.2MILLIONOUNCESSILVER:60.8MILLIONOUNCESMEASUREDANDINDICATEDRESOURCES(ExclusiveofReserves)

GOLD:1.3MILLIONOUNCESSILVER:8.2MILLIONOUNCES


EnvironmentalandpermittingactivitiesThefollowingenvironmentalandpermittingrelatedactivitiesoccurredatBlackwaterduringthesecondquarterof2017:

• The Provincial and Federal environmental assessment technical review stage continued, with approvalsanticipatedinlate2017orearly2018.

• Continuedkeyengineeringstudiesforadvancementofpost-environmentalassessmentapprovalpermits.• ContinueddiscussionswithkeyFirstNationsonParticipationAgreements.• Continuedprojectoptimizationstudies.

ProjectcostsandoutlookFor the threemonthsended June30,2017, capitalexpenditures totaled$2.0million, comparedwith$2.5million in theprior-year quarter. Expenditures in the current period related to the continued advancement of the environmentalassessmentprocessincludingworktoresolveremainingregulatoryandFirstNationscommentsandrelatedenvironmentalandengineeringstudies,aswellasdiscussionswithFirstNationsonParticipationAgreements.

Blackwater’s 2017 non-sustaining capital expenditures are expected to be approximately $10 million related to thecontinuedadvancementoftheEnvironmentalAssessmentprocess.

New Afton C-zone, British Columbia, Canada TheC-zoneisthedownplungeextensionoftheB-zoneblockcavecurrentlybeingminedatNewAfton.

In the firstquarterof2016,NewGoldcompleteda feasibilitystudywhichconfirmedtheviabilityandpositiveeconomicsfortheC-zonedeposit.ThefeasibilitystudyrelatestotheC-zoneMineralReserveswhichhavedemonstratedeconomicviabilityat theNewAftonproperty and is notpart of, and shouldbedistinguished from, the currentmining of the B-zone reserves.Work completed in 2016 includes additional explorationdrilling,mineoptimizationsandplanningreviews,anddevelopmentofaProjectImplementationPlan.Thedetailedresultsfrom the feasibility study can be found in the Company’s Management’s Discussion and Analysis for the year endedDecember31,2015.

Projectupdateandcosts

Duringthesecondquarterof2017,workontheC-zonefocusedontailingsmanagementoptimizationstudies.Workonthepermit application to commence decline development was advanced and will be submitted to the Stk’emlupemc teSecwepemcNationinthethirdquarterof2017foradvancereviewasrequiredundertheParticipationagreement.Miningstudiestoadvancedesignoftheconveyorsystemwere initiatedduringthesecondquarterof2017aswellasstudiestoevaluate sub-level cavingasaminingmethod for thedeposit. Workonanupdatedblockmodelbasedon2017drillingresults inongoing. For the threemonthsended June30,2017,project capitalexpenditures totalled$1.1million,whichincludes exploration drilling expenditures of $0.6 million and project development expenditures of $0.5 million. Year-to-dateprojectcapitalexpenditurestotalled$2.3million.

ExplorationactivitiesDuringthesecondquarterof2017,afinalcampaignofinfilldrillingtofurtherupgradeconfidenceintheC-zoneblockcavemineral reservewascompleted.Thedata fromthiscampaignwillbe incorporated intoanupdatedresourceestimatetoprovide further support for futureminedevelopmentandproductionplanning. Additionally,a surfacedrillingcampaigntotestseveralsatellitetargetsidentifiedwithinthegreatermineleaseareacommencedduringthesecondquarter.


MEASUREDANDINDICATEDRESOURCES(IncludedinNewAftonMeasuredandIndicatedResources)

GOLD:483,000OUNCESCOPPER:385MILLIONPOUNDS


FINANCIALCONDITIONREVIEWBalance Sheet Review

AsatJune30 AsatDecember31

(inmillionsofU.S.dollars) 2017 2016

BALANCESHEETINFORMATION Cashandcashequivalents 198.8 185.9Othercurrentassets 224.3 224.1Non-currentassets 3,720.3 3,523.0Totalassets 4,143.4 3,933.0 Currentliabilities 176.9 175.4Non-currentliabilitiesexcludinglong-termdebt 778.0 794.9Long-termdebt 880.1 889.5Totalliabilities 1,835.0 1,859.8Totalequity 2,308.4 2,073.2Totalliabilitiesandequity 4,143.4 3,933.0

AssetsTheincreaseintotalassetsisprimarilyattributabletogrowthcapitalexpendituresatRainyRiver.

CashandcashequivalentsTheincreaseincashandcashequivalentswasprimarilydrivenbytheCompany’sboughtdealfinancingofcommonsharesresultinginnetproceedsof$165.7million,thesaleoftheElMorrostreamfor$65.0million,andtheCompany’soperatingcashflowsgeneratedduringthecurrentperiod.ThiswaspartiallyoffsetbygrowthcapitalexpendituresatRainyRiver,as$285.7millionwasspentinthefirsthalfof2017,andothercapitalexpenditure.Pleaseseethe“CorporateDevelopments”sectionofthisMD&Aforfurther informationontheCompany’sboughtdealfinancingofcommonsharesandthesaleoftheElMorrostream.

OthercurrentassetsOthercurrentassetsprimarilyconsistoftradeandotherreceivables,inventoriesandprepaidexpenses.TheincreaseinothercurrentassetsisprimarilyattributabletoanincreaseinsalestaxreceivablerelatedtotheRainyRiverProject.

Non-currentassetsNon-current assets primarily consist of mining interests which include the Company’s mining properties, developmentprojectsandproperty,plantandequipment.Theincreaseinnon-currentassetsisprimarilyattributabletotheCompany’sinvestmentsinitsmininginterestslessdepreciationanddepletion.ForthesixmonthsendedJune30,2017,theCompanyspent $331.8 million, primarily focused on continued project advancement at Rainy River, and sustaining capitalexpendituresattheCompany’soperatingsites.

Liabilities

CurrentliabilitiesAsatJune30,2017,current liabilities increasedcomparedtotheprioryearasaportionofthegoldstreamobligationbecamecurrent.Currentliabilitiesprimarilyconsistoftradeandotherpayables.


Non-currentliabilitiesexcludinglong-termdebtNon-currentliabilitiesconsistprimarilyofreclamationandclosurecostobligations,thegoldstreamobligation,long-termdebtanddeferredtaxliabilities.

TheCompany’sassetretirementobligationsconsistofreclamationandclosurecostsforNewAfton,Mesquite,PeakMines,Cerro San Pedro, Blackwater and Rainy River. Significant reclamation and closure activities include land rehabilitation,demolitionofbuildingsandminefacilities,ongoingmonitoringandothercosts.

The long-termdiscountedportionof the liability as at June30, 2017was$97.7million compared to$81.0million as atDecember31,2016.ForthethreemonthsendedJune30,2017,theCompanyupdatedthereclamationandclosurecostobligationsforeachofitsminesites.Theimpactoftheseassessmentswasanincreasetothelong-termdiscountedvalueof the liability primarily related toNewAfton andRainy River.NewAfton’s increasewas a result of an acquisition of ahistorical tailings facility adjacent to the site, andadecrease in thediscount rate.Keydriversof theRainyRiver liabilityincrease includes additional obligations related to the continued project advancement. The Company intends to spend$1.1millioninthenextyearonreclamationactivities,andtheremainderinfutureperiods.

Thenetdeferred income tax liabilitydecreased from$230.3millionatDecember31,2016 to$191.9millionat June30,2017. Thedecrease ismainlydrivenby the impactof foreignexchangemovementson thedeferred tax related tonon-monetaryassetsandliabilities.ForthesixmonthsendedJune30,2017,theCompanyrecordedaforeignexchangegainof$24.4 million on non-monetary assets and liabilities. This was primarily due to the deferred tax liabilities beingdenominatedincurrenciesotherthantheU.S.dollarandhasnotaximpact.

Long-termdebtandotherfinancialliabilitiescontainingfinancialcovenantsThemajorityoftheCompany’scontractualobligationsconsistoflong-termdebtandinterestpayable.Long-termdebtasatJune30,2017includesseniorunsecurednotesandtheamountsdrawnontheCompany’srevolvingcreditfacility.

On July 20, 2015 the Company entered into a $175million streaming transactionwith RGLDGold AG, awholly-ownedsubsidiaryofRoyalGold Inc. (“RoyalGold”).Thegoldstreamobligation isaccounted forasa financial liabilityunder thescopeofIFRS9.Accordingly,theCompanyvaluestheliabilityatthepresentvalueofitsexpectedfuturecashflowsattheendofeachreportingperiod,withthechangesinfairvaluerelatedtothechangeintherisk-freediscountrateandchangesingoldpricesreflectedintheconsolidatedincomestatementsandthechangesinfairvaluerelatedtotheCompany’sowncreditriskreflectedintheconsolidatedstatementsofcomprehensiveincome.OnJuly20,2015theCompanyenteredintoa$175millionstreamingtransactionwithRGLDGoldAG,awholly-ownedsubsidiaryofRoyalGoldInc.(“RoyalGold”).Thegoldstreamobligationisaccountedforasafinancial liabilityunderthescopeofIFRS9.Accordingly,theCompanyvaluestheliabilityatthepresentvalueofitsexpectedfuturecashflowsattheendofeachreportingperiod,withthechangesinfair value related to the change in the risk-free discount rate and changes in gold prices reflected in the consolidatedincomestatementsand thechanges in fair value related to theCompany’sowncredit risk reflected in the consolidatedstatementsofcomprehensiveincome.Thegoldstreamobligationcontainsamaximumleverageratiocovenant(netdebtto earnings before interest, taxes, depreciation, amortization, exploration, impairment and other non-cash adjustments“AdjustedEBITDA”)of3.5:1.0,withtheexceptionthatthenetleveragecovenantlimitmayincreaseto4.0:1.0fortwoconsecutivequarters,providedthatitthereafterreturnstoamaximumof3.5:1.0.However,inordertoprovideadditionalflexibility, Royal Gold has agreed to adjust this leverage ratio tomatch the revisedmaximum leverage ratio under therevolvingcreditfacilityforthequartersendingMarch31,2018.


OnNovember15,2012,theCompanyissued$500.0millionofseniorunsecurednotes(“2022UnsecuredNotes”).AsatJune30,2017thefacevaluewas$500.0million.The2022UnsecuredNotesaredenominatedinU.S.dollars,matureandbecomedueandpayableonNovember15,2022,andbearinterestattherateof6.25%perannum.Interestispayableinarrearsinequalsemi-annualinstalmentsonMay15andNovember15ofeachyear.

OnMay18,2017, theCompany issued$300.0millionof seniorunsecurednotes (“2025UnsecuredNotes”) fornetcashproceeds of $295.1 million after a banker’s fee and other transaction costs. The proceeds were used to redeem andpurchaseforcancellationthe$300.0millionprincipalamountofthepreviouslyoutstandingseniorunsecurednotes(“2020UnsecuredNotes”) forwhichtheCompanywasrequiredtopayaredemptionpremiumof$5.3million.Asaresult, totaltransaction costs paid relating to this refinancing were $10.2 million. Additionally, the Company was required to pay$2.8millionofaccruedinterestonthe2020UnsecuredNotesonredemptionandcancellation.

The2025UnsecuredNotesbear interest at the rateof 6.375%per annum. Interest is payable in arrears in equal semi-annualinstallmentsonMay15andNovember15ofeachyear.AsatJune30,2017thefacevaluewas$300.0million

The2022and2025UnsecuredNotesare subject toaminimum interest coverage incurrence covenant (earningsbeforeinteresttaxesdepreciation,amortization,impairmentandothernon-cashadjustmentstointerest)of2.0:1.0.Thetestisapplied on a pro-forma basis prior to the Company incurring additional debt, entering into business combinations oracquiringsignificantassets,orcertainothercorporateactions.

InJune2017,theCompanyamendedits$400.0millionrevolvingcreditfacility(the“CreditFacility”)toextendthematuritydateoftheagreementbyoneyeartoAugust2020.

Net debt is used to calculate leverage for the purpose of covenant tests and pricing levels. The Credit Facility containsvariouscovenantscustomaryfora loanfacilityofthisnature, including limitson indebtedness,assetsalesand liens.TheCredit Facility contains two covenant tests, the minimum interest coverage ratio, earnings before interest, taxes,depreciation,amortization,exploration,impairment,andothernon-cashadjustments(“AdjustedEBITDA”)tointerestandthemaximumleverageratio(netdebttoAdjustedEBITDA),bothofwhicharemeasuredonarollingfour-quarterbasisattheendofeveryquarter.

In June 2017, the Company amended the Credit Facility’sNetDebt toAdjusted EBITDA ("Leverage Ratio") covenant, toincreasethemaximumLeverageRatioto4.5to1.0fromJuly1,2017toSeptember30,2017(previously4.0to1.0)and4.0to1.0fromJanuary1,2018toMarch31,2018(previously3.5to1.0).Followingthatperiod,themaximumleverageratiowillbe3.5:1.0.ThemaximumLeverageRatiofromOctober1,2017toDecember31,2017remainsat4.0to1.0.

Significantfinancialcovenantsareasfollows:

TwelvemonthsendedJune30

TwelvemonthsendedDecember31

Financialcovenant

2017 2016FINANCIALCOVENANTS Minimuminterestcoverageratio(EBITDAtointerest) >3.0:1 5.5:1 5.7:1

Maximumleverageratio(netdebttoEBITDA) <4.5:1 2.5:1 2.6:1


TheinterestmarginondrawingsundertheCreditFacilityrangesfrom1.00%to3.25%overLIBOR,thePrimeRateortheBaseRate,basedontheCompany’snetdebttoadjustedEBITDAratioandthecurrencyandtypeofcreditselectedbytheCompany.Basedon theCompany’snetdebt toadjustedEBITDAratio, the rate is3.25%overLIBORasat June30,2017(December31,2016–3.25%).ThestandbyfeesonundrawnamountsundertheCreditFacilityrangefrom0.45%to0.73%,depending on theCompany’s net debt to adjusted EBITDA ratio. Basedon theCompany’s net debt to adjusted EBITDAratio,therateis0.73%asatJune30,2017(December31,2016–0.73%).

AsatJune30,2017,theCompanyhasdrawn$100.0millionundertheCreditFacilityandtheCreditFacilityhasbeenusedto issue letters of credit of $126.0 million (December 31, 2016 - $122.1 million). The increase is primarily due to theappreciationoftheCanadianandAustraliandollarsrelativetotheU.S.dollar.Lettersofcreditrelatetoreclamationbonds,worker’scompensationsecurityandotherfinancialassurancesrequiredwithvariousgovernmentagencies.AsatJune30,2017,$174.0millionremainsundrawnfromtheCreditFacility.

Liquidity and Cash Flow As at June 30, 2017, the Company had cash and cash equivalents of $198.8 million compared to $185.9 million atDecember31,2016.TheCompany’sinvestmentpolicyistoinvestitssurplusfundsinpermittedinvestmentsconsistingoftreasurybills,bonds,notesandotherevidencesofindebtednessofCanada,theU.S.oranyoftheCanadianprovinceswithaminimumcreditratingofR-1midfromtheDBRSoranequivalentratingfromStandard&Poor’sorMoody’sandwithmaturitiesof12monthsorlessattheoriginaldateofacquisition.Inaddition,theCompanyispermittedtoinvestinbankers’acceptancesandotherevidencesofindebtednessofcertainfinancial institutions.Surpluscorporatefundsareonlyinvestedwithapprovedgovernmentorbankcounterparties.

TheCompany’sliquidityisimpactedbyseveralfactorswhichinclude,butarenotlimitedto,goldandcoppermarketprices,capitalexpendituresparticularlyassociatedwiththeRainyRiverdevelopmentproject,operatingcosts, interestratesandforeignexchangerates.ThesefactorsaremonitoredbytheCompanyonaregularbasisandwillcontinuetobereviewed.

The Company’s cash flows from operating, investing and financing activities, as presented in the unaudited condensedconsolidatedinterimstatementsofcashflows,aresummarizedinthefollowingtableforthethreemonthsendedJune30,2017:


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016CASHFLOWINFORMATION Cashgeneratedfromoperations 80.0 79.2 156.8 140.7

Cashusedbyinvestingactivities(capitalexpenditures) (188.7) (137.4) (266.9) (246.1)Cashgeneratedfrom(usedby)investingactivities(saleofElMorrostreamandother) - - 65.0 -

Cashgeneratedfrom(usedby)financingactivities (42.0) (20.3) 122.3 (20.6)

Effectofexchangeratechangesoncashandcashequivalents - (0.3) 0.7 10.0

Changeincashandcashequivalents (150.7) (78.8) 12.9 (116.0)

OperationsForthethreemonthsendedJune30,2017,theincreaseincashgeneratedfromoperationswasprimarilyduetohigherrevenue resulting from higher metal prices. Additionally, at December 31 2016, the Company held an outstandingconcentratereceivableatNewAftonwhichwascollectedinJanuary2017,benefitingworkingcapital.Theincreasewaspartiallyoffsetbyanincreaseintaxespaidintheperiod.


InvestingActivitiesCashused in investingactivities isprimarily for the continuedcapital investment in theCompany’soperatingminesanddevelopmentprojects. Spendingwashigher than in theprior-yearperiod,with theCompany spending$188.1million inthesecondquarterof2017comparedto$138.2millionintheprior-yearperiod.Inboththecurrentandprior-yearperiod,investing activities primarily focused on continued project advancement at Rainy River. In addition to growth capitalspendingatRainyRivertheCompanyreceived$65.0millionnetproceedsfromthesaleoftheElMorrostreamduringthesixmonthsendinginJune30,2017.

The following table summarizes the capital expenditures (mining interests per theunaudited condensed consolidatedinterimstatementsofcashflows)forthethreemonthsendedJune30,2017and2016:


(inmillionsofU.S.dollars) 2017 2016 2017 2016CAPITALEXPENDITURESBYSITE NewAfton 13.9 11.3 21.6 21.1Mesquite 3.3 11.7 4.9 23.3PeakMines 8.5 3.2 13.9 4.9CerroSanPedro - 0.5 0.7 0.7RainyRiver 160.1 107.6 286.4 189.8Blackwater 2.3 2.5 4.1 4.3Corporate - 1.4 0.2 1.5TotalCapitalExpenditures 188.1 138.2 331.8 245.6

FinancingActivitiesCashgeneratedfromfinancingactivitieswasprimarilyrelatedtotheboughtdealfinancingofcommonsharesinMarch2017fornetproceedsof$165.7million,partiallyoffsetbyinterestpaid.Pleaserefertothe“CorporateDevelopments”sectionofthisMD&Aforfurtherinformationontheboughtdealfinancingtransaction.

The Company’s June 30, 2017 cash balance of $198.8million, togetherwith the $174.0million available for drawdownunder the Credit Facility at June 30, 2017 provide the Companywith $372.8million of, in addition to the net cash theCompany’s operatingmines are expected to generate,whichwill be used to fund the Rainy River capital expenditures.BasedonaC$1.30/US$exchangerate,theremainingcapitalcostfromJuly1,2017tothetargetedNovembercommercialproduction is estimated tobe approximately $229million.Asdiscussedunder theheading “Balance SheetReview”, theCompanyhasincreasedthemaximumleverageratioinitsCreditFacilityin2017toprovideadditionalflexibilityduringtheRainyRiverconstructionperiod.

The net cash generated by operations is highly dependent onmetal prices, including gold and copper, aswell as otherfactors,includingtheCanadian/U.S.dollarexchangerate.Tomitigateaportionofthisrisk,inparticularduringtheRainyRiver construction period, New Gold entered into gold price option contracts covering 120,000 ounces of New Gold’ssecondhalfof2017production. Specifically,NewGoldpurchasedputoptionsatastrikepriceof$1,250perounceandselling call optionsat a strikepriceof$1,400perounce for120,000ouncesof goldproductionbetween June2017andDecember2017.TheCompanyincurredinvestmentcostsof$0.9millioninJune2017relatingtothisthirdtrancheofgoldpriceoptioncontracts.

In February 2017, the Company entered into copper swap contracts for 7.3million pounds of copper permonth fromJuly2017throughDecember2017atafixedpriceof$2.73perpound.AdecreaseingoldorcopperpricesordepreciationoftheU.S.dollarrelativetotheCanadiandollar,or,toalesserextent,theAustraliandollarorMexicanpeso,couldnegativelyimpacttheCompany’sliquidity.


Since theCompany’s January30,2017news release, inwhichNewGoldestimateda liquidity shortfallof approximately$100million required topay for theCompany’snormaloperating requirements and tobringRainyRiver to commercialproductiononthecurrentschedule,theCompanyhasmadesolidprogressinenhancingitsliquidityposition.Withthesaleof the El Morro stream for $65 million and successful completion of a bought deal financing for net proceeds ofapproximately$165million,bothofwhichoccurredinthefirstquarter,NewGoldhasenhanceditsfinancialflexibilityandiswell positioned to complete the development of Rainy River. In the opinion ofmanagement, the Company’s liquiditypositionasat June30,2017, togetherwith cash flows fromoperations, are sufficient to support theCompany’snormaloperatingrequirementsonanongoingbasisandtheremainingdevelopmentcapitalexpendituresatRainyRiver.

TheCompanyhasoutstandingnotesintheprincipalamountof$500millionmaturingin2022and$300millionmaturingin2025.TheCompanyalsohas$100millionoutstandingunderthecreditfacility,excludinglettersofcredit.Assumingthecontinuation of prevailing commodity prices and exchange rates, operations performing in accordancewithmine plans,and successful constructionofRainyRiveron scheduleandonbudget, theCompanywillbeable to repay indebtednessfrominternallygeneratedcashflowduringtheprojectedlifeoftheoperatingmines.

TakingintoconsiderationtheCompany’scurrentcashposition,volatileequitymarketsandforeignexchangerates,globaluncertaintyinthecapitalmarketsandincreasingcostpressures,theCompanyregularlyreviewsexpendituresandassessesbusiness opportunities to enhance liquidity in order to ensure adequate liquidity and flexibility to support its growthstrategy, includingthedevelopmentof itsprojects,whilecontinuingproductionat itscurrentoperations. Inaddition,theCompany regularly evaluates the magnitude and timing of its capital commitments at Rainy River in relation to theCompany’scurrentandprojected future financial resources,whilealso taking intoaccountanypotential implications fortheproject’sdevelopmentschedule.

Inaddition,thecompanyhasinitiatedaprocesstodivestthePeakMines,locatedinNewSouthWales,Australia.Thesaleof Peak Mines will further enable the company to focus on its America’s centric portfolio of operating mining anddevelopment projectswhile offering a prospective buyer an opportunity to fully leverage Peak’s strong track record ofperformance,andunlockitslongertermpotential.

Commitments The Company has entered into a number of contractual commitments for capital items relating to operations anddevelopment.At June30,2017 these commitments totalled$280.0million,$259.2millionofwhichareexpected to falldueoverthenext12months.Thiscomparestocommitmentsof$130.2millionasatDecember31,2016,allofwhichareexpectedtofallduein2017.TheincreaseisduetoRainyRiverhavinghighercapitalpurchasecommitmentsattheendofthe currentperiodasa resultofprojectadvancementwhencompared to theendof theprior year.Certain contractualcommitmentsmaycontaincancellationclauses;however,theCompanydisclosesitscommitmentsbasedonmanagement’sintenttofulfillthecontracts.


Contingencies InassessingthelosscontingenciesrelatedtolegalproceedingsthatarependingagainsttheCompanyorunassertedclaimsthat may result in such proceedings, the Company and its legal counsel evaluate the perceived merits of any legalproceedingsorunassertedclaimsaswellastheperceivedmeritsoftheamountofreliefsoughtorexpectedtobesought.Iftheassessmentofacontingencysuggeststhatalossisprobable,andtheamountcaneasilybeestimated,thenalossisrecorded.Whena contingent loss is not probablebut is reasonably possible, or is probablebut the amountof the losscannotbereliablyestimated,thendetailsofthecontingent lossaredisclosed.Losscontingenciesconsideredremotearegenerallynotdisclosedunlesstheyinvolveguarantees,inwhichcasetheCompanydisclosesthenatureoftheguarantees.Legal fees incurred in connectionwithpending legalproceedingsareexpensedas incurred. If theCompany isunable toresolvethesedisputesfavourably,itmayhaveamaterialadverseimpactonourfinancialcondition,cashflowandresultsofoperations.


Contractual Obligations ThefollowingisasummaryoftheCompany’spaymentsdueundercontractualobligations:

Asat

June30Asat

December31

<1year 1-3Years 4-5YearsAfter5Years

2017Total

2016Total

CONTRACTUALOBLIGATIONS(1)

Long-termdebt - 100.0 - 800.0 900.0 900.0

Interestpayableonlong-termdebt 44.3 100.8 100.8 82.6 328.5 252.5

Operatingleasecommitments 3.3 0.1 - - 3.4 2.6

Capitalexpenditurecommitments 259.2 20.8 - - 280.0 130.2

Reclamationandclosurecostobligations 1.2 6.3 4.8 116.0 128.3 105.9

Goldstreamobligation 15.3 49.0 45.0 168.8 278.1 277.7

Totalcontractualobligations 323.3 277.0 150.6 1,167.4 1,918.3 1,668.91. ThemajorityoftheCompany’scontractualobligationsconsistoflong-termdebtandinterestpayable.Long-termdebtobligationsarecomprisedofseniorunsecured

notesissuedonApril5,2012andNovember15,2012.Refertothesection“FinancialConditionReview–BalanceSheetReview–Long-termdebt”forfurtherdetails.

Related Party Transactions TheCompanydidnotenterintoanyrelatedpartytransactionsduringthesixmonthsendedJune30,2017.

Off-Balance Sheet Arrangements TheCompanyhasnooff-balancesheetarrangements.

Outstanding Shares AsatJuly26,2017,therewere576,178,298commonsharesoftheCompanyoutstanding.TheCompanyhad11,871,535stockoptionsoutstandingunderitsshareoptionplan,exercisableforupto11,871,535commonshares.


NON-GAAPFINANCIALPERFORMANCEMEASURESTotal Cash Costs per Gold Ounce “Total cash costsper goldounce” is anon-GAAPmeasure that is a common financial performancemeasure in the goldminingindustrybutwithnostandardmeaningunderIFRS.NewGoldreportstotalcashcostsonasalesbasis.TheCompanybelieves that, in addition to conventional measures prepared in accordance with IFRS, certain investors use thisinformationtoevaluatetheCompany’sperformanceandabilitytogenerateliquiditythroughoperatingcashflowtofundfuture capital expenditures andworking capital needs. NewGold believes that thismeasure, alongwith sales, is a keyindicatorofacompany’sabilitytogenerateoperatingearningsandcashflowfromitsminingoperations.

Total cash cost figures are calculated in accordance with a standard developed by The Gold Institute, a worldwideassociationof suppliersofgoldandgoldproducts thatceasedoperations in2002.Adoptionof thestandard isvoluntaryandthecostmeasurespresentedmaynotbecomparabletoothersimilarlytitledmeasuresofothercompanies.Totalcashcosts includemine site operating costs such asmining, processing and administration costs, royalties, production taxesandrealizedgainsandlossesonfuelcontracts,butareexclusiveofamortization,reclamation,capitalandexplorationcostsandnetofby-productsales.Totalcashcostsarethendividedbygoldouncessoldtoarriveatthetotalcashcostsperouncesold.

TheCompanyproducescopperandsilverasby-productsofitsgoldproduction.ThecalculationoftotalcashcostspergoldounceforCerroSanPedroisnetofby-productsilversalesrevenue,andthecalculationoftotalcashcostspergoldouncesoldforPeakMinesandNewAftonisnetofby-productsilverandcoppersalesrevenue.NewGoldnotesthatinconnectionwithNewAfton,thecopperby-productrevenueissufficientlylargetoresultinanegativetotalcashcostonasingleminebasis.Notwithstandingthisby-productcontribution,asacompanyfocusedongoldproduction,NewGoldaimstoassesstheeconomic resultsof itsoperations in relation togold,which is theprimarydriverofNewGold’sbusiness.NewGoldbelieves this metric is of interest to its investors, who invest in the Company primarily as a gold mining company. Todeterminetherelevantcostsassociatedwithgoldonly,NewGoldbelieves it isappropriatetoreflectalloperatingcosts,aswellasanyrevenuerelatedtometalsotherthangoldthatareextractedinitsoperations.

Toprovideadditionalinformationtoinvestors,NewGoldhasalsocalculatedtotalcashcostsonaco-productbasis,whichremoves the impactofothermetal sales thatareproducedasaby-productofgoldproductionandapportions thecashcosts toeachmetalproducedonapercentageof revenuebasis,andsubsequentlydivides theamountby the totalgoldounces, silverouncesorpoundsofcoppersold,as thecasemaybe, toarriveatperounceorperpound figures.Unlessindicatedotherwise,alltotalcashcostinformationinthisMD&Aisnetofby-productsales.

TotalcashcostsareintendedtoprovideadditionalinformationonlyanddonothaveanystandardizedmeaningunderIFRSandmaynotbecomparabletosimilarmeasurespresentedbyotherminingcompanies.TheyshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.ThemeasureisnotnecessarilyindicativeofcashflowfromoperationsunderIFRSoroperatingcostspresentedunderIFRS.


All-in Sustaining Costs per Gold Ounce “All-insustainingcostspergoldounce”isanon-GAAPmeasurebasedonguidanceannouncedbytheWorldGoldCouncil(“WGC”) in June2013.TheWGC is anon-profit associationof theworld’s leadinggoldmining companiesestablished in1987 topromote theuseofgold to industry, consumersand investors.TheWGC isnota regulatorybodyanddoesnothave the authority to develop accounting standards or disclosure requirements. TheWGChasworkedwith itsmembercompanies, includingNewGold, to develop ameasure that expands on IFRSmeasures such as operating expenses andnon-GAAPmeasurestoprovidevisibilityintotheeconomicsofagoldminingcompany.CurrentIFRSmeasuresusedinthegoldindustry,suchasoperatingexpenses,donotcapturealloftheexpendituresincurredtodiscover,developandsustaingoldproduction.NewGoldbelievestheall-insustainingcostsmeasureprovidesfurthertransparencyintocostsassociatedwithproducing gold andwill assist analysts, investors andother stakeholdersof theCompany in assessing its operatingperformance,itsabilitytogeneratefreecashflowfromcurrentoperationsanditsoverallvalue.

All-in sustaining costs per gold ounce is intended to provide additional information only and does not have anystandardizedmeaningunderIFRSandmaynotbecomparabletosimilarmeasurespresentedbyotherminingcompanies.ItshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.ThemeasureisnotnecessarilyindicativeofcashflowfromoperationsunderIFRSoroperatingcostspresentedunderIFRS.

New Gold defines all-in sustaining costs per ounce as the sum of total cash costs, net capital expenditures that aresustaininginnature,corporategeneralandadministrativecosts,capitalizedandexpensedexplorationthatissustaininginnature,andenvironmentalreclamationcosts,alldividedbythetotalgoldouncessoldtoarriveataperouncefigure.Todeterminesustainingcapitalexpenditures,NewGoldusescashflowrelatedtomininginterestsfromitsstatementofcashflowsanddeductsanyexpenditures thatarenon-sustaining. Capital expenditures todevelopnewoperationsor capitalexpendituresrelatedtomajorprojectsatexistingoperationswheretheseprojectswillmateriallyincreaseproductionareclassified as non-sustaining and are excluded. The table “Sustaining Capital Expenditure Reconciliation” reconcilesNewGold’s sustaining capital to its cash flow statement. The definition of sustaining versus non-sustaining is similarlyappliedtocapitalizedandexpensedexplorationcosts.Explorationcoststodevelopnewoperationsorthatrelatetomajorprojects at existing operations where these projects are expected to materially increase production are classified asnon-sustainingandareexcluded.

Costsexcluded fromall-insustainingcostsarenon-sustainingcapitalexpendituresandexplorationcosts, financingcosts,taxexpense,transactioncostsassociatedwithmergersandacquisitions,andanyitemsthataredeductedforthepurposesofadjustedearnings.

Byincludingtotalcashcostsasacomponentofall-insustainingcosts,themeasuredeductsby-productrevenuefromgrosscash costs. Refer to the discussion above regarding total cash costs per gold ounce for the discussion of deduction ofby-productrevenue.


Cash Costs and All-in Sustaining Costs (“AISC”) per Ounce Reconciliation Tables Thefollowingtablesreconcilethesenon-GAAPmeasurestothemostdirectlycomparableIFRSmeasureonanaggregateandmine-by-minebasis.

ThreemonthsendedJune30,2017

(inmillionsofU.S.dollars,exceptwherenoted) Gold Copper Silver TotalCONSOLIDATEDOPEX,CASHCOSTANDAISCRECONCILIATION

Operatingexpenses(1) 62.2 30.4 2.1 94.7

Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 99,235 24.1 0.3 Operatingexpensesperunitofmetalsold($/ounceorpound) 627 1.26 8.31 Operatingexpenses(1) 62.2 30.4 2.1 94.7

Treatmentandrefiningchargesonconcentratesales 2.9 5.8 0.2 8.9

Adjustments(2) (0.2) (0.1) - (0.3)Totalcashcosts 64.9 36.1 2.3 103.3

By-productsilverandcoppersales (67.6)

Totalcashcostsnetofby-productrevenue 35.7

Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 99,235 24.1 0.3

Totalcashcostsonaco-productbasis(3)($/ounceorpound) 654 1.50 8.91

Totalcashcostspergoldouncesold($/ounce) 360

Totalco-productcashcosts 64.9 36.1 2.3


Sustainingcapitalexpenditures(4) 15.8 7.7 0.5 24.0

Sustainingexploration-expensed 1.4 0.7 - 2.1

CorporateG&Aincludingshare-basedcompensation(5) 5.6 2.7 0.2 8.5

Reclamationexpenses 1.9 0.9 0.1 2.9

Totalco-productall-insustainingcosts 89.4 48.2 3.1

Totalall-insustainingcostsnetofby-productrevenue 73.1All-insustainingcostsonaco-productbasis(3)($/ounceorpound) 901 2.00 12.19

All-insustainingcostspergoldouncesold($/ounce) 7371. Operatingexpenses(“Opex”)areapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversalsandsocialclosurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.4. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.5. Includesthesumofcorporateadministrationcostsandshare-basedpaymentexpensepertheincomestatement,netofanynon-cashdepreciationwithinthosefigures.


SixmonthsendedJune30,2017

(inmillionsofU.S.dollars,exceptwherenoted) Gold Copper Silver TotalCONSOLIDATEDOPEX,CASHCOSTANDAISCRECONCILIATION



Operatingexpensesperunitofmetalsold($/ounceorpound) 616 1.24 8.29



Adjustments(2) (0.1) - - (0.1)Totalcashcosts 120.7 69.4 4.6 194.7





Totalcashcostspergoldouncesold($/ounce) 330Totalco-productcashcosts 120.6 69.4 4.6

Totalcashcostsnetofby-productrevenue 61.6Sustainingcapitalexpenditures(4) 24.8 12.5 0.9 38.2

Sustainingexploration-expensed 2.5 1.3 0.1 3.9


Reclamationexpenses 3.1 1.6 0.1 4.8



All-insustainingcostspergoldouncesold($/ounce) 6711. Operatingexpenses(“Opex”)areapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversalsandsocialclosurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts




(inmillionsofU.S.dollars,exceptwherenoted) Gold Copper Silver Total

CONSOLIDATEDOPEX,CASHCOSTANDAISCRECONCILIATION






Adjustments(2) 0.4 0.2 - 0.6

Totalcashcosts 62.1 28.8 2.5 93.4





Totalcashcostspergoldouncesold($/ounce) 334Totalco-productcashcosts 62.0 28.8 2.6





Reclamationexpenses 0.9 0.4 - 1.3



All-insustainingcostspergoldouncesold($/ounce) 7171. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs,theamortizationofMesquite’sPurchasePriceAllocation(“PPA”)associatedwithroyaltiesandsocial

closurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts





CONSOLIDATEDOPEX,CASHCOSTANDAISCRECONCILIATION



















Totalall-insustainingcostsnetofby-productrevenue 137.9

All-insustainingcostsonaco-productbasis(3)($/ounceorpound) 885 1.65 11.20

All-insustainingcostspergoldouncesold($/ounce) 7361. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs,theamortizationofMesquite’sPurchasePriceAllocation(“PPA”)associatedwithroyaltiesandsocial

closurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts





NEWAFTONOPEX,CASHCOSTSANDAISCRECONCILIATION








Totalcashcostsnetofby-productrevenue (20.8)



Totalcashcostspergoldouncesold($/ounce) (1,059)Totalco-productcashcosts 10.7 22.6 0.5



Sustainingexplorationexpense 0.1 0.2 - 0.3



Totalall-insustainingcostsnetofby-productrevenue (7.1)


All-insustainingcostspergoldouncesold($/ounce) (358)1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.3. See“NewAftonSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.















Totalcashcostspergoldouncesold($/ounce) (941)




Sustainingexplorationexpense 0.1 0.3 - 0.4



























































(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016MESQUITEOPEX,CASHCOSTSANDAISCRECONCILIATION

Operatingexpenses 32.7 18.8

Goldouncessold 46,462 31,115

Operatingexpensespergoldouncesold 703 602


Adjustments(1) - 0.3

Totalcashcosts 32.7 19.1


Totalcashcostspergoldouncesold($/ounce) 703 611


Sustainingcapitalexpenditures(2) 3.3 11.7

Reclamationexpenses 0.6 0.3

Totalall-insustainingcosts 36.6 31.1

All-insustainingcostspergoldouncesold($/ounce) 789 9991. AdjustmentsincludetheamortizationofMesquite’sPurchasePriceAllocation(“PPA”)associatedwithroyalties.2. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016MESQUITEOPEX,CASHCOSTSANDAISCRECONCILIATION



Operatingexpensespergoldouncesold 700 608


Adjustments(1) - 0.5



Totalcashcostspergoldouncesold($/ounce) 700 618


Sustainingcapitalexpenditures(2) 4.9 23.3

Sustainingexploration-expensed - -

Reclamationexpenses 1.1 0.7

Totalall-insustainingcosts 58.9 58.6

All-insustainingcostspergoldouncesold($/ounce) 779 1,0441. AdjustmentsincludetheamortizationofMesquite’sPurchasePriceAllocation(“PPA”)associatedwithroyalties.2. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.




PEAKMINESOPEX,CASHCOSTSANDAISCRECONCILIATION


Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 25,528 3.3 -



Treatmentandrefiningchargesonconcentratesales 0.5 0.8 - 1.4




Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 25,528 3.3 -










All-insustainingcostsonaco-productbasis(3)($/ounceorpound) 1,032 2.33 13.51

All-insustainingcostspergoldouncesold($/ounce) 9451. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversals.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.4. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.










Adjustments(2) 0.4 0.1 - 0.5















All-insustainingcostspergoldouncesold($/ounce) 8051. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversals.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts








Operatingexpensesperunitofmetalsold($/ounceorpound) 581 1 9



Adjustments(2) 0.4 0.1 - 0.5









Sustainingcapitalexpenditures(4) 2.7 0.4 - 3.1






All-insustainingcostspergoldouncesold($/ounce) 7061. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts











Adjustments(2) 0.1 - - 0.1









Sustainingcapitalexpenditures(4) 3.9 0.9 - 4.9






All-insustainingcostspergoldouncesold($/ounce) 8271. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts



ThreemonthsendedJune30,2017 ThreemonthsendedJune30,2016

(inmillionsofU.S.dollars,exceptwherenoted) Gold Silver Total Gold Silver TotalCERROSANPEDROOPEX,CASHCOSTSANDAISCRECONCILIATION

Operatingexpenses(1) 9.7 2.7 12.4 16.0 2.8 18.8

Unitsofmetalsold(ounces/millionsofounces) 7,672 0.2 16,619 0.2 Operatingexpensesperunitofmetalsold($/ounce) 1,269 17 961 13


Adjustments(2) (0.3) - (0.3) (0.2) - (0.2)

Totalcashcosts 9.3 2.5 12.1 15.8 2.8 18.6

By-productsilverandcoppersales (2.6) (3.6)

Totalcashcostsnetofby-productrevenue 9.5 14.8

Unitsofmetalsold(ounces/millionsofounces) 7,672 0.2 16,619 0.2 Totalcashcostsonaco-productbasis(3)($/ounce) 1,235 16.43 952 12.76

Totalcashcostspergoldouncesold($/ounce) 1,222 898

Totalco-productcashcosts 9.7 2.7 15.8 2.8


Sustainingcapitalexpenditures(4) - - - 0.4 0.1 0.5

Reclamationexpenses 1.2 0.3 1.5 0.2 - 0.2

Totalco-productall-insustainingcosts 10.6 2.8 16.4 2.9 Totalall-insustainingcostsnetofby-productrevenue 10.9 15.5

All-insustainingcostsonaco-productbasis(3)($/ounce) 1,387 18.45 988 13.25

All-insustainingcostspergoldouncesold($/ounce) 1,414 941

1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludesocialclosurecoststhatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.4. See“CerroSanPedroSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


SixmonthsendedJune30,2017 SixmonthsendedJune30,2016

(inmillionsofU.S.dollars,exceptwherenoted) Gold Silver Total Gold Silver TotalCERROSANPEDROOPEX,CASHCOSTSANDAISCRECONCILIATION


Unitsofmetalsold(ounces/millionsofounces) 17,716 311,181 35,441 0.5 Operatingexpensesperunitofmetalsold($/ounce) 1,203 16 978 12.63


Adjustments(2) (0.5) (0.1) (0.6) (0.6) (0.1) (0.7)

Totalcashcosts 20.8 5.0 25.8 34.1 6.1 40.2

By-productsilverandcoppersales (5.4) (7.6)


Unitsofmetalsold(ounces/millionsofounces) 17,716 311,181 35,441 0.5 Totalcashcostsonaco-productbasis(3)($/ounce) 1,176 15.93 962 12.40

Totalcashcostspergoldouncesold($/ounce) 1,152 917

Totalco-productcashcosts 20.8 5.0 34.1 6.1


Sustainingcapitalexpenditures(4) 0.6 0.1 0.7 0.6 0.1 0.7

Reclamationexpenses 1.9 0.5 2.4 0.3 - 0.2

Totalco-productall-insustainingcosts 23.3 5.6 35.0 6.2 Totalall-insustainingcostsnetofby-productrevenue 23.5 33.3

All-insustainingcostsonaco-productbasis(3)($/ounce) 1,316 17.83 987 12.72

All-insustainingcostspergoldouncesold($/ounce) 1,325 947

1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludesocialclosurecoststhatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.4. See“CerroSanPedroSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


Sustaining Capital Expenditures Reconciliation Tables ThreemonthsendedJune30

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016

TOTALSUSTAININGCAPITALEXPENDITURES

Mininginterestsperstatementofcashflows 188.1 138.2NewAftongrowthcapitalexpenditure(1) (1.2) (1.0)Peakgrowthcapitalexpenditure(1) (0.7) -RainyRivergrowthcapitalexpenditure (160.1) (107.6)Blackwatergrowthcapitalexpenditure (2.2) (2.5)

Totalsustainingcapitalexpenditures 23.9 27.11. GrowthcapitalexpendituresatNewAftoninthecurrentperiodandprior-yearperiodrelatetoexplorationfortheC-zone.GrowthcapitalexpendituresatPeakMines

inthecurrentperiodrelatetocapitalizedexplorationactivitiesatGreatCobar.



TOTALSUSTAININGCAPITALEXPENDITURES

Mininginterestsperstatementofcashflows 331.8 245.6NewAftongrowthcapitalexpenditure(1) (2.3) (2.0)Peakgrowthcapitalexpenditure(1) (1.0) -RainyRivergrowthcapitalexpenditure (286.4) (189.8)Blackwatergrowthcapitalexpenditure (4.1) (4.3)

Totalsustainingcapitalexpenditures 38.0 49.51. GrowthcapitalexpendituresatNewAftoninthecurrentperiodandprior-yearperiodrelatetoexplorationfortheC-zone.GrowthcapitalexpendituresatPeakMinesin

thecurrentperiodrelatetocapitalizedexplorationactivitiesatGreatCobar


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016NEWAFTONSUSTAININGCAPITALEXPENDITURES Capitalexpenditurepersegmentedinformation 13.9 11.3NewAftongrowthcapitalexpenditure(1) (1.1) (1.0)

NewAftonsustainingcapitalexpenditures 12.8 10.31. GrowthcapitalexpendituresatNewAftoninthecurrentperiodandprior-yearperiodrelatetoexplorationfortheC-zone.


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016NEWAFTONSUSTAININGCAPITALEXPENDITURES Capitalexpenditurepersegmentedinformation 21.6 21.1NewAftongrowthcapitalexpenditure(1) (2.3) (2.0)

NewAftonsustainingcapitalexpenditures 19.3 19.1



(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016PEAKSUSTAININGCAPITALEXPENDITURES Capitalexpenditurepersegmentedinformation 8.5 3.1Peakgrowthcapitalexpenditure(1) (0.7) -

Peaksustainingcapitalexpenditures 7.8 3.11. GrowthcapitalexpendituresatPeakMinesinthecurrentperiodrelatetocapitalizedexplorationactivitiesatGreatCobar.


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016PEAKSUSTAININGCAPITALEXPENDITURES Capitalexpenditurepersegmentedinformation 13.9 4.9Peakgrowthcapitalexpenditure(1) (0.9) -

Peaksustainingcapitalexpenditures 13.0 4.9

Adjusted Net Earnings and Adjusted Net Earnings per Share “Adjustednetearnings”and“adjustednetearningspershare”arenon-GAAPfinancialmeasureswithnostandardmeaningunderIFRSwhichexcludethefollowingfromnetearnings:

• Impairmentlosses;• Inventorywrite-downs;• Itemsincludedin“Othergainsandlosses”asperNote3oftheCompany’sunauditedcondensed

consolidatedinterimfinancialstatements;and• Certainnon-recurringitems.

Netearningshavebeenadjusted, including theassociatedtax impact, for thegroupofcosts in“Othergainsand losses”ontheauditedconsolidatedincomestatements.Keyentriesinthisgroupingare:thefairvaluechangesforthegoldstreamobligation;sharepurchasewarrantsandthegoldoptioncontracts; foreignexchangegainor loss;and lossondisposalofassets.Otheradjustmentstonetearningsalsoincludeinventorywritedowns.Theadjustedentriesarealsoimpactedfortaxtotheextentthattheunderlyingentriesareimpactedfortaxintheunadjustednetearnings.

TheCompanyusesadjustednetearningsforitsowninternalpurposes.Management’sinternalbudgetsandforecastsandpublic guidance do not reflect the items which have been excluded from the determination of adjusted net earnings.Consequently, the presentation of adjusted net earnings enables shareholders to better understand the underlyingoperatingperformanceofourcoreminingbusinessthroughtheeyesofmanagement.Managementperiodicallyevaluatesthecomponentsofadjustednetearningsbasedonan internalassessmentofperformancemeasures thatareuseful forevaluating theoperatingperformanceofourbusinessanda reviewof thenon-GAAPmeasuresusedbymining industryanalystsandotherminingcompanies.

Adjusted net earnings is intended to provide additional information only and does not have any standardizedmeaningunderIFRSandmaynotbecomparabletosimilarmeasurespresentedbyothercompanies.ItshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.ThemeasureisnotnecessarilyindicativeofoperatingprofitorcashflowsfromoperationsasdeterminedunderIFRS.Thefollowingtablereconcilesthisnon-GAAPmeasuretothemostdirectlycomparableIFRSmeasure.




ADJUSTEDNETEARNINGSRECONCILIATION

Netearningsbeforetaxes(2) 30.4 (7.1)

Other(gains)losses(1) (15.7) 22.7

Inventorywrite-down - (0.7)

Adjustednetearnings(loss)beforetaxes(2) 14.7 14.9

Incometax(expense)recovery(2) (7.3) (6.8)

Incometaxadjustments 5.9 0.5

Adjustedincometax(expense)recovery(2) (1.4) (6.3)

Adjustednetearnings(loss)(2) 13.3 8.6

Adjustedearnings(loss)pershare(basicanddiluted)(2) 0.02 0.02

Adjustedeffectivetaxrate(2) 9.5% 42.3%1. PleaserefertoNote3oftheCompany’sunauditedcondensedconsolidatedinterimfinancialstatementsforadetailedbreakdownofothergainsandlosses.2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.



ADJUSTEDNETEARNINGSRECONCILIATION

Netearningsbeforetaxes(2) 70.3 10.7

Other(gains)losses(1) (39.5) 1.0

Inventorywrite-down (0.5) -

Adjustednetearnings(loss)beforetaxes(2) 30.3 11.7

Incometax(expense)recovery(2) (9.6) 1.0

Incometaxadjustments 2.1 (5.6)

Adjustedincometax(expense)recovery(2) (7.5) (4.6)

Adjustednetearnings(loss)(2) 22.8 7.1

Adjustedearnings(loss)pershare(basicanddiluted)(2) 0.04 0.01

Adjustedeffectivetaxrate(2) 24.9% 39.3%1. PleaserefertoNote3oftheCompany’sunauditedcondensedconsolidatedinterimfinancialstatementsforadetailedbreakdownofothergainsandlosses.2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.

Cash Generated from Operations, before Changes in Non-Cash Operating Working Capital “Cashgeneratedfromoperations,beforechangesinnon-cashoperatingworkingcapital”isanon-GAAPfinancialmeasurewithnostandardmeaningunder IFRS,whichexcludeschanges innon-cashoperatingworkingcapital.Managementusesthismeasure to evaluate the Company’s ability to generate cash from its operations before temporaryworking capitalchanges.

Cashgeneratedfromoperations,beforenon-cashchangesinworkingcapitalisintendedtoprovideadditionalinformationonlyanddoesnothaveanystandardizedmeaningunder IFRS; itshouldnotbeconsidered in isolationorasasubstituteformeasuresofperformanceprepared inaccordancewith IFRS.Othercompaniesmaycalculatethismeasuredifferentlyandthismeasureisunlikelytobecomparabletosimilarmeasurespresentedbyothercompanies.



(inmillionsofU.S.dollars) 2017 2016 2017 2016

CASHRECONCILIATION

Cashgeneratedfromoperations 80.0 79.2 156.8 140.7

Addback(deduct):Changeinnon-cashoperatingworkingcapital (3.9) 3.2 (11.3) 3.8Cashgeneratedfromoperationsbeforechangesinnon-cashoperatingworkingcapital 76.1 82.4 145.5 144.5

Operating Margin “Operatingmargin” is anon-GAAP financialmeasurewithno standardmeaningunder IFRS,whichmanagementuses toevaluate the Company’s aggregated and mine-by-mine contribution to net earnings before non-cash depreciation anddepletion charges. Operating margin is calculated as revenue less operating expenses and therefore does not includedepreciationanddepletion.Operatingmargin is intended toprovideadditional informationonlyanddoesnothaveanystandardizedmeaningunderIFRS;itshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.Othercompaniesmaycalculatethismeasuredifferentlyandthismeasureisunlikelytobecomparabletosimilarmeasurespresentedbyothercompanies.Thefollowingtablesreconcilethisnon-GAAPmeasuretothemostdirectlycomparableIFRSmeasureonanaggregatedandmine-by-minebasis.

Operating Margin Reconciliation Tables


(inmillionsofU.S.dollars) 2017 2016 2017 2016TOTALOPERATINGMARGIN Revenue 185.6 180.3 355.1 334.8

Less:Operatingexpenses (94.7) (84.7) (177.6) (166.6)

Totaloperatingmargin 90.9 95.6 177.5 168.2


(inmillionsofU.S.dollars) 2017 2016 2017 2016NEWAFTONOPERATINGMARGIN Revenue 72.4 76.3 144.2 146.9


NewAftonoperatingmargin 46.2 48.0 89.8 94.2


(inmillionsofU.S.dollars) 2017 2016 2017 2016MESQUITEOPERATINGMARGIN Revenue 59.0 39.2 96.2 69.2


Mesquiteoperatingmargin 26.3 20.4 43.3 35.1



(inmillionsofU.S.dollars) 2017 2016 2017 2016PEAKMINESOPERATINGMARGIN Revenue 41.8 40.2 86.8 67.9


PeakMinesoperatingmargin 18.4 21.4 42.9 28.9


(inmillionsofU.S.dollars) 2017 2016 2017 2016CERROSANPEDROOPERATINGMARGIN Revenue 12.4 24.6 27.9 50.8


CerroSanPedrooperatingmargin - 5.8 1.5 10.0

Average Realized Price “Average realizedpriceperounceof gold sold” is anon-GAAP financialmeasurewithno standardmeaningunder IFRS.Managementuses thismeasure tobetterunderstand theprice realized ineach reportingperiod forgold sales.AveragerealizedpriceisintendedtoprovideadditionalinformationonlyanddoesnothaveanystandardizedmeaningunderIFRS;itshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.Othercompaniesmaycalculatethismeasuredifferentlyandthismeasureisunlikelytobecomparabletosimilarmeasurespresented by other companies. The following tables reconcile this non-GAAPmeasure to themost directly comparableIFRSmeasureonanaggregateandmine-by-minebasis.


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016TOTALAVERAGEREALIZEDPRICE

Revenuefromgoldsales 123.0 125.2 232.1 225.5

Treatmentandrefiningchargesongoldconcentratesales 2.9 3.8 5.8 7.3

Grossrevenuefromgoldsales 125.9 129.0 237.9 232.8

Goldouncessold 99,235 101,820 186,538 187,851

Totalaveragerealizedpricepergoldouncesold($/ounce) 1,279 1,267 1,282 1,239



(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016NEWAFTONAVERAGEREALIZEDPRICE




Goldouncessold 19,573 26,302 40,289 51,433

NewAftonaveragerealizedpricepergoldouncesold($/ounce) 1,291 1,280 1,286 1,239


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016MESQUITEAVERAGEREALIZEDPRICE


Goldouncessold 46,462 31,115 75,615 56,043

Mesquiteaveragerealizedpricepergoldouncesold($/ounce) 1,271 1,262 1,273 1,235


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016PEAKMINESAVERAGEREALIZEDPRICE




Goldouncessold 25,528 27,784 52,919 44,934

PeakMinesaveragerealizedpricepergoldouncesold($/ounce) 1,283 1,272 1,295 1,264


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016CERROSANPEDROAVERAGEREALIZEDPRICE


Goldouncessold 7,672 16,619 17,716 35,441

CerroSanPedroaveragerealizedpricepergoldouncesold($/ounce) 1,283 1,251 1,275 1,216


ENTERPRISERISKMANAGEMENTANDRISKFACTORSTheCompany is subject to various financial and other risks that couldmaterially adversely affect the Company’s futurebusiness,operationsandfinancialcondition.Thefollowing isasummaryofcertainrisksfacingtheCompany.Foramorecomprehensivediscussionof theseandother risks facingCompany,please refer to thesectionentitled“RiskFactors” inthe Company’s most recent Annual Information Form and the section entitled “Enterprise Risk Management” in theCompany’s Management’s Discussion and Analysis for the year ended December 31, 2016, both filed on SEDAR atwww.sedar.com.TherewerenosignificantchangestothoserisksortotheCompany’smanagementofexposuretothoserisksduringthethreemonthsendedJune30,2017,exceptasnotedbelow:

MetalpriceriskTheCompany’searnings,cashflowsandfinancialconditionaresubjecttoriskduetofluctuationsinthemarketpriceofgold,copperandsilver.

ForthethreemonthsendedJune30,2017,theCompany’srevenuesandcashflowswereimpactedbygoldpricesintherangeof$1,220 to$1,294perounce,andby copperprices in the rangeof$2.49 to$2.79perpound. Lowmetalpricescouldcausecontinueddevelopmentof,andcommercialproductionfrom,theCompany’spropertiestobeuneconomic.Inaddition,thereisatimelagbetweentheshipmentofgoldandcopperandfinalpricing,andchangesinpricingcanimpactthe Company’s revenue and working capital position. As at June 30, 2017, working capital includes unpriced gold andcopperconcentratereceivablestotalling6,400ouncesofgoldand2.5millionpoundsofcopperrelatingtothePeakMinesandNewAftonnotoffsetbycopperswapcontracts.

TheCompany’sexposuretochanges ingoldpriceshasbeensignificantlyreducedduringthecurrentyearandduringthefirstsixmonthsof2017astheCompanyhasenteredintogoldpriceoptioncontracts(wherebyitsoldaseriesofcalloptioncontractsandpurchasedaseriesofputoptioncontracts)toreduceexposuretochangesingoldprices.

ThedetailsoftheremainingcontractsareasfollowsasatJune30,2017:

Quantity

outstandingRemainingterm

Exerciseprice($)

Fairvalue-asset(liability)

(1)GOLDOPTIONCONTRACTSOUTSTANDING Goldcallcontracts-sold 120,000oz July2017–December2017 1,400 (0.3)

Goldputcontracts-purchased 120,000oz July2017–December2017 1,250 3.21. TheCompanypresentsthefairvalueofitsputandcalloptionsonanetbasisonthecondensedconsolidatedstatementsoffinancialposition.TheCompanyhasalegally

enforceablerighttosetofftheamountsunderitsoptionscontractsandintendstosettleonanetbasis.Thecontractscover20,000ouncesofgoldpermonth.

A$100changeinthegoldpriceperouncewouldhaveanimpactof$0.6millionontheCompany’sworkingcapitalposition.A $0.10 change in the copper priceper poundwouldhave an impact of $0.3millionon theCompany’sworking capitalposition.


Anincreaseingold,copperandsilverpriceswouldincreasetheCompany’snetearningswhereasanincreaseinfuelorshareunitvestingpriceswoulddecreasetheCompany’snetearnings.A10%changeincommoditypriceswouldimpacttheCompany’snetearnings(loss)beforetaxesandothercomprehensiveincome(loss)beforetaxesasfollows:

ThreemonthsendedJune30 ThreemonthsendedJune30


2017NetEarnings

(Loss)

2017Other

ComprehensiveIncome(Loss)

2016NetEarnings

(Loss)

2016Other


IMPACTOF10%CHANGEINCOMMODITYPRICES Goldprice 12.7 - 12.9

Copperprice 2.1 - 5.4 -Silverprice 0.3 - 0.4 -

SixmonthsendedJune30 SixmonthsendedJune30


2017NetEarnings

(Loss)

2017Other


2016NetEarnings

(Loss)

2016Other


IMPACTOF10%CHANGEINCOMMODITYPRICES Goldprice 23.9 - 23.3 Copperprice 4.0 - 10.8 -Silverprice 0.6 - 0.8 -

InNovember2016,theCompanyenteredcopperswapcontractsfor5.3millionpoundsofcopperpermonthfromJanuarythroughJune2017atafixedpriceof$2.52perpound.InFebruary2017,theCompanyenteredintofurthercopperswapcontractsfor7.3millionpoundsofcopperpermonthfromJuly2017throughDecember2017atafixedpriceof$2.73perpound.CopperswapssettleagainsttheLondonMetalsExchangemonthlyaverageprice.Thecopperforwardcontractsaretreatedasderivativefinancialinstrumentsandmarkedtomarketateachreportingperiodontheconsolidatedstatementoffinancialpositionwithchangesinfairvaluerecognizedinothergainsandlosses.RealizedgainsandlossesonsettlementoftheCompany’scopperforwardcontractsuptoanamountnotexceedingtheCompany’sproductionofcopperpoundsfor the reporting period are recorded as an adjustment to revenue. The settlement on copper pounds in excess of theCompany’scopperproductionforthereportingperiodarerecordedasothergainsandlosses.TheCompanypresentsthefairvalueofitscopperforwardcontractsontheconsolidatedstatementsoffinancialpositionwithin‘derivativeassets’.


Quantity

outstanding(oz) RemainingtermExerciseprice($)

Fairvalue-asset(liability)

Copperforwardcontractsoutstanding 43.7million July–December2017 2.73 $3.2million


CRITICALJUDGMENTSANDESTIMATIONUNCERTAINTIESThe preparation of the Company’s consolidated financial statements in conformity with IFRS requires the Company’smanagementtomakejudgments,estimatesandassumptionsaboutthefutureeventsthataffecttheamountsreportedinthe consolidated financial statements and related notes to the financial statements. Estimates and assumptions arecontinually evaluated and are based on management’s experience and other facts and circumstances. Revisions toestimates and the resulting effects on the carrying amounts of the Company’s assets and liabilities are accounted forprospectively.

Theareaswhichrequiremanagementtomakesignificantjudgments,estimatesandassumptionsindeterminingcarryingvaluesaredescribedintheCompany’sauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2016and have been consistently applied in the preparation of the unaudited condensed consolidated interim financialstatements.

ACCOUNTINGPOLICIESTheCompany's significant accounting policies and future changes in accounting policies are presented in the auditedconsolidated financial statements for the year ended December 31, 2016 and have been consistently applied in thepreparationoftheunauditedcondensedconsolidatedinterimfinancialstatements.


CONTROLSANDPROCEDURESDisclosure Controls and Procedures TheCompany’smanagement,withtheparticipationofandunderthesupervisionof itsChiefExecutiveOfficerandChiefFinancialOfficer,hasevaluatedtheeffectivenessoftheCompany’sdisclosurecontrolsandproceduresasdefinedinRules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) and in NationalInstrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, as at and for the year endedDecember 31, 2016. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer haveconcludedthat,asatandfortheyearendedDecember31,2016,theCompany’sdisclosurecontrolsandprocedureswereeffectivetoprovidereasonableassurancethattheinformationrequiredtobedisclosedbytheCompanyinreportsitfilesisrecorded,processed,summarizedandreported,withintheappropriatetimeperiods.

Internal Controls over Financial Reporting NewGold’smanagement,withtheparticipationofitsChiefExecutiveOfficerandChiefFinancialOfficer,isresponsibleforestablishingandmaintainingadequate internalcontrolsoverfinancialreporting. Internalcontrolsoverfinancialreportingisaprocessdesignedby,orunderthesupervisionof,theCompany’sprincipalexecutiveandprincipalfinancialofficersandeffected by the Company’s Board of Directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordancewith International FinancialReportingStandards.NewGold’smanagementassessed theeffectivenessof theCompany’s internalcontrolsoverfinancialreportingasatandfortheyearendedDecember31,2016basedonthe2013updatedCommitteeofSponsoringOrganizationoftheTreadwayCommission(“COSO”)andhasconcludedthatNewGold’sinternalcontrolsoverfinancialreportingareeffectiveasatandfortheyearendedDecember31,2016.

TheeffectivenessoftheCompany’sinternalcontroloverfinancialreportingasofDecember31,2016hasbeenauditedbyDeloitteLLP,theCompany’sindependentregisteredpublicaccountingfirm,asstatedintheirreportimmediatelyprecedingtheCompany’sauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2016.

Limitations of Controls and Procedures The Company’s management, including its Chief Executive Officer and Chief Financial Officer, believe that any internalcontrolsandproceduresforfinancialreporting,nomatterhowwellconceivedandoperated,canprovideonlyreasonable,not absolute, assurance that theobjectivesof the control systemaremet. Furthermore, thedesignof a control systemmustreflectthefactthatthereareresourceconstraintsandthebenefitsofcontrolsmustbeconsideredrelativetotheircosts.Duetotheinherentlimitationsofallcontrolsystems,theycannotprovideabsoluteassurancethatallcontrolissuesand instances of fraud, if any, within the Company have been prevented and/or detected. These inherent limitationsinclude therealities that judgments indecision-makingcanbe faultyandbreakdownscanoccurbecauseof simpleerrorormistake.Additionally,controlscanbecircumventedbytheindividualactsofsomepersons,bycollusionoftwoormorepeople, or by unauthorized override control. The design of any system of controls is also based in part upon certainassumptionsaboutthelikelihoodoffutureevents,andtherecanbenoassurancethatanydesignwillsucceedinachievingits stated goals under all potential future conditions. Accordingly, becauseof the inherent limitations in a cost-effectivecontrolsystem,misstatementsduetoerrororfraudmayoccurandnotbedetected.

Changes in Internal Controls over Financial Reporting TherehasbeennochangeintheCompany’sdesignofinternalcontrolsandproceduresoverfinancialreportingthathasmateriallyaffected,or isreasonably likelytomateriallyaffect,theCompany’s internalcontrolsoverfinancialreportingduringtheperiodcoveredbythisMD&A.


CAUTIONARYNOTESCautionary Note to U.S. Readers Concerning Estimates of Mineral Reserves and Mineral Resources Information concerning the properties and operations of New Gold has been prepared in accordance with CanadianstandardsunderapplicableCanadiansecuritieslaws,andmaynotbecomparabletosimilarinformationforUnitedStatescompanies. The terms “Mineral Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource” and “InferredMineralResource”used inthisMD&AareCanadianminingtermsasdefined intheCIMDefinitionStandardsforMineralResourcesandMineralReservesadoptedbytheCIMCouncilonMay10,2014andincorporatedbyreferenceinNationalInstrument43-101(“NI43-101”).Whiletheterms“MineralResource”,“MeasuredMineralResource”,“IndicatedMineralResource”and“InferredMineralResource”arerecognizedandrequiredbyCanadiansecurities regulations, theyarenotdefined terms under standards of theUnited States Securities and Exchange Commission. As such, certain informationcontained in this MD&A concerning descriptions of mineralization and resources under Canadian standards is notcomparable to similar information made public by United States companies subject to the reporting and disclosurerequirementsoftheUnitedStatesSecuritiesandExchangeCommission.

An “InferredMineral Resource” has a great amount of uncertainty as to its existence and as to its economic and legalfeasibility. Under Canadian rules, estimates of InferredMineral Resourcesmay not form the basis of feasibility or pre-feasibilitystudies.Itcannotbeassumedthatalloranypartofan“InferredMineralResource”willeverbeupgradedtoahigherconfidencecategorythroughadditionalexplorationdrillingandtechnicalevaluation.Readersarecautionednottoassumethatalloranypartofan“InferredMineralResource”existsoriseconomicallyorlegallymineable.

Under United States standards,mineralizationmay not be classified as a “Reserve” unless the determination has beenmadethatthemineralizationcouldbeeconomicallyandlegallyproducedorextractedatthetimetheReserveestimationismade. Readersarecautionednot toassumethatalloranypartof theMeasuredor IndicatedMineralResourceswilleverbeconvertedintoMineralReserves.Inaddition,thedefinitionsof“ProvenMineralReserves”and“ProbableMineralReserves”underCIMstandardsdifferincertainrespectsfromthestandardsoftheUnitedStatesSecuritiesandExchangeCommission.

Cautionary Note Regarding Forward-Looking Statements CertaininformationcontainedinthisMD&A,includinganyinformationrelatingtoNewGold’sfuturefinancialoroperatingperformanceare“forward looking”.Allstatements inthisMD&A,otherthanstatementsofhistorical fact,whichaddressevents, results, outcomesordevelopments thatNewGoldexpects tooccur are “forward-looking statements”. Forward-lookingstatementsarestatementsthatarenothistoricalfactsandaregenerally,butnotalways, identifiedbytheuseofforward-looking terminology such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “targeted”, “estimates”,“forecasts”, “intends”, “anticipates”, “projects”, “potential”, “believes” or variations of such words and phrases orstatements thatcertainactions,eventsor results “may”, “could”, “would”, “should”, “might”or “willbe taken”, “occur”or“beachieved”orthenegativeconnotationofsuchterms.Forward-lookingstatementsinthisMD&Aincludethoseunderthe heading “Outlook for 2017” and “Development and Exploration Review” include, among others, statements withrespect to:guidance forproduction,operatingexpensespergoldouncesold, total cashcostsandall-in sustainingcosts,and the factors contributing to those expected results, as well as expected capital expenditures; Mineral Reserve andMineralResourceestimates;gradesexpectedtobeminedat theCompany’soperations; theexpectedproduction,costs,economics andoperatingparametersofRainyRiver, Blackwater andNewAftonC-zone; plannedactivities for 2017andbeyond at the Company’s operations and projects, as well as planned exploration activities and expenses; expectedpermittinganddevelopmentactivitiesforBlackwaterandtheNewAftonC-zone;plannedpreparationsforoperationsattheRainy River project, including the mining rate, removal of overburden and waste and storage of water prior tocommissioning; theexpected capital costs and contingencyamounts aswell asproduction, costs, economics, gradeand


otheroperatingparametersoftheRainyRiverproject;thecapacityofthestarterdamattheRainyRiverproject;targetedtimingforpermits, includingtheamendmenttoSchedule2oftheMetalMiningEffluentRegulations;targetedtimingfordevelopmentactivities,commissioning,start-upandproductionfortheRainyRiverproject.

Allforward-lookingstatementsinthisMD&Aarebasedontheopinionsandestimatesofmanagementasofthedatesuchstatementsaremadeandaresubjectto importantrisk factorsanduncertainties,manyofwhicharebeyondNewGold’sabilitytocontrolorpredict.Certainmaterialassumptionsregardingsuchforward-lookingstatementsarediscussedinthisMD&A,NewGold’sAnnualInformationFormanditsTechnicalReportsfiledonSEDARatwww.sedar.com.Inadditionto,and subject to, suchassumptionsdiscussed inmoredetail elsewhere, the forward-looking statements in thisMD&Aarealso subject to the following assumptions: (1) there being no significant disruptions affecting New Gold’s operations;(2) political and legal developments in jurisdictions where New Gold operates, or may in the future operate, beingconsistent with New Gold’s current expectations; (3) the accuracy of New Gold’s currentMineral Reserve andMineralResourceestimates; (4) theexchange ratebetween theCanadiandollar,Australiandollar,MexicanpesoandU.S. dollarbeing approximately consistent with current levels; (5) prices for diesel, natural gas, fuel oil, electricity and other keysuppliesbeingapproximatelyconsistentwithcurrentlevels;(6)equipment,labourandmaterialcostsincreasingonabasisconsistentwithNewGold’scurrentexpectations;(7)arrangementswithFirstNationsandotherAboriginalgroupsinrespectofRainyRiverandBlackwaterbeingconsistentwithNewGold’scurrentexpectations;(8)allrequiredpermits,licensesandauthorizations being obtained from the relevant governments and other relevant stakeholders within the expectedtimelines;(9)theresultsofthefeasibilitystudiesforRainyRiver,theNewAftonC-zoneandBlackwaterbeingrealized;and(10)inthecaseofproduction,costandexpenditureoutlooksatoperatingminesfor2017,commoditypricesandexchangeratesbeingconsistentwiththoseestimatedforthepurposesof2017guidance.

Forward-lookingstatementsarenecessarilybasedonestimatesandassumptionsthatareinherentlysubjecttoknownandunknown risks, uncertainties and other factors that may cause actual results, level of activity, performance orachievementstobemateriallydifferentfromthoseexpressedorimpliedbysuchforward-lookingstatements.Suchfactorsinclude, without limitation: significant capital requirements and the availability and management of capital resources;additional funding requirements; price volatility in the spot and forward markets for metals and other commodities;fluctuations in the international currencymarkets and in the ratesof exchangeof the currencies of Canada, theUnitedStates, Australia and Mexico; discrepancies between actual and estimated production, between actual and estimatedMineralReservesandMineralResourcesandbetweenactualandestimatedmetallurgicalrecoveries;changes innationalandlocalgovernmentlegislationinCanada,theUnitedStates,AustraliaandMexicooranyothercountryinwhichNewGoldcurrentlyormayinthefuturecarryonbusiness;taxation;controls,regulationsandpoliticaloreconomicdevelopmentsinthe countries in which New Gold does or may carry on business; the speculative nature of mineral exploration anddevelopment,includingtherisksofobtainingandmaintainingthevalidityandenforceabilityofthenecessarylicensesandpermitsandcomplyingwiththepermittingrequirementsofeachjurisdictioninwhichNewGoldoperates,including,butnotlimitedto: inCanada,obtainingthenecessarypermitsforRainyRiver,NewAftonC-zoneandBlackwater;andinMexico,whereCerroSanPedrohasahistoryofongoing legal challenges related toourenvironmentalauthorization; the lackofcertainty with respect to foreign legal systems, which may not be immune from the influence of political pressure,corruptionorotherfactorsthatareinconsistentwiththeruleoflaw;theuncertaintiesinherenttocurrentandfuturelegalchallenges New Gold is or may become a party to; diminishing quantities or grades of Mineral Reserves and MineralResources;competition;lossofkeyemployees;risingcostsoflabour,supplies,fuelandequipment;actualresultsofcurrentexplorationorreclamationactivities;uncertaintiesinherenttominingeconomicstudiesincludingthefeasibilitystudiesforRainyRiver,NewAftonC-zoneandBlackwater;theuncertaintywithrespecttoprevailingmarketconditionsnecessaryforapositivedevelopmentorconstructiondecisionatBlackwater;changesinprojectparametersasplanscontinuetoberefined;accidents; labour disputes; defective title to mineral claims or property or contests over claims to mineral properties;unexpecteddelaysandcostsinherenttoconsultingandaccommodatingrightsofFirstNationsandotherAboriginalgroups;uncertainties and unanticipated delays associated with obtaining and maintaining necessary licenses, permits and


authorizationsandcomplyingwithpermittingrequirements,includingthoseassociatedwiththeenvironmentalassessmentprocess for Blackwater. In addition, there are risks and hazards associated with the business of mineral exploration,development and mining, including environmental events and hazards, industrial accidents, unusual or unexpectedformations,pressures,cave-ins,floodingandgoldbullionlosses(andtheriskofinadequateinsuranceorinabilitytoobtaininsurancetocovertheserisks)aswellas“RiskFactors”includedinNewGold’sdisclosuredocumentsfiledonandavailableonSEDARatwww.sedar.com.Forward-looking statementsarenotguaranteesof futureperformance,andactual resultsandfutureeventscouldmateriallydifferfromthoseanticipatedinsuchstatements.Alloftheforward-lookingstatementscontained in this MD&A are qualified by these cautionary statements. New Gold expressly disclaims any intention orobligationtoupdateorreviseanyforward-lookingstatementswhetherasaresultofnewinformation,eventsorotherwise,exceptinaccordancewithapplicablesecuritieslaws.

Technical Information ThescientificandtechnicalinformationrelatingtotheconstructionofandexpectedoperationsatNewGold’sRainyRiverprojectcontainedhereinhasbeenreviewedandapprovedbyBinsarSirait,Director,MineEngineeringofNewGold.Thescientific and technical information relating toMineral Resources and exploration contained herein has been reviewedandapprovedbyMarkA. Petersen,VicePresident, ExplorationofNewGold.Mr. Sirait is a Professional Engineer andaSMERegisteredMember.Mr.PetersenisaSMERegisteredMember,AIPGCertifiedProfessionalGeologist.Mr.SiraitandMr.Petersenare"QualifiedPersons"forthepurposesofNI43-101.

The estimates of Mineral Reserves and Mineral Resources discussed in this MD&A may be materially affected byenvironmental, permitting, legal, title, taxation, sociopolitical, marketing and other relevant issues. New Gold’s currentAnnual Information Form and the NI 43-101 Technical Reports for its mineral properties, all of which are available onSEDAR at www.sedar.com, contain further details regarding Mineral Reserve and Mineral Resource estimates,classificationandreportingparameters,keyassumptionsandassociatedrisks foreachofNewGold'smineralproperties,includingabreakdownbycategory.

)


ContentsCONDENSEDCONSOLIDATEDINCOMESTATEMENTS..........................................................................................................76

CONDENSEDCONSOLIDATEDSTATEMENTSOFCOMPREHENSIVELOSS.............................................................................77

CONDENSEDCONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION.................................................................................78

CONDENSEDCONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY.................................................................................79

CONDENSEDCONSOLIDATEDSTATEMENTSOFCASHFLOW...............................................................................................80

NOTESTOTHECONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS..............................................................................81

1.Descriptionofbusinessandnatureofoperations........................................................................................................81

2.Significantaccountingpolicies......................................................................................................................................81

3.Expenses.......................................................................................................................................................................83

4.Tradeandotherreceivables.........................................................................................................................................84

5.Tradeandotherpayables.............................................................................................................................................84

6.Inventories....................................................................................................................................................................85

7.Mininginterests............................................................................................................................................................86

8.Long-termdebt.............................................................................................................................................................88

9.Goldstreamobligation.................................................................................................................................................90

10.Derivativeinstruments...............................................................................................................................................92

11.Sharecapital...............................................................................................................................................................96

12.Incomeandminingtaxes............................................................................................................................................98

13.Reclamationandclosurecostobligations................................................................................................................100

14.Supplementalcashflowinformation........................................................................................................................101

15.Segmentedinformation............................................................................................................................................102

16.Fairvaluemeasurement...........................................................................................................................................106

17.Commitmentsandcontingencies.............................................................................................................................108

18.Subsequentevents………………………………………………………………………………………………………………………………………………108

76 WWW.NEWGOLD.COMTSX:NGDNYSEAmerican:NGD

CONDENSEDCONSOLIDATEDINCOMESTATEMENTS(unaudited)


(inmillionsofU.S.dollars,exceptpershareamounts) Note 2017 2016(Note2)

2017 2016(Note2)

Revenues 185.6 180.3 355.1 334.8Operatingexpenses 3 94.7 84.7 177.6 166.6

Depreciationanddepletion 63.6 66.4 121.0 127.4

Revenuelesscostofgoodssold 27.3 29.2 56.5 40.8

Corporateadministration 5.9 5.9 13.4 11.6

Share-basedpaymentexpenses 11 2.6 2.8 3.8 5.8

Explorationandbusinessdevelopment 3.2 2.0 6.4 4.5

Earningsfromoperations 15.6 18.5 32.9 18.9

Financeincome 3 0.4 0.2 0.6 0.5

Financecosts 3 (1.3) (3.1) (2.7) (7.7)

Othergains(losses) 3 15.7 (22.7) 39.5 (1.0)

Earnings(loss)beforetaxes 30.4 (7.1) 70.3 10.7Incometax(expense)recovery 12 (7.3) (6.8) (9.6) 1.0Netearnings(loss)

23.1 (13.9) 60.7 11.7

Earnings(loss)pershare Basic 11 0.04 (0.03) 0.11 0.02

Diluted 11 0.04 (0.03) 0.11 0.02

Weightedaveragenumberofsharesoutstanding(inmillions)

Basic 11 575.8 511.2 552.1 510.4

Diluted 11 576.3 511.2 552.7 511.6

Seeaccompanyingnotestothecondensedconsolidatedfinancialstatements.


CONDENSEDCONSOLIDATEDSTATEMENTSOFCOMPREHENSIVELOSS(unaudited)



(inmillionsofU.S.dollars) Note 2017 2016(Note2)

2017 2016(Note2)

Netearnings(loss) 23.1 (13.9) 60.7 11.7

Othercomprehensive(loss)income(1)

Unrealizedforeignexchangegainoncashandcashequivalentsdesignatedashedginginstruments 10 - 0.8 - 4.9

Reclassificationofrealizedforeignexchange(loss)gainoncashandcashequivalentsdesignatedashedginginstruments 10 - (1.1) - 3.2

Unrealizedgain(loss)onmark-to-marketofdieselswapcontracts 10 - 1.5 (0.4) 1.0

Reclassificationofrealizedlossonsettlementofdieselswapcontracts 10 0.2 0.6 0.3 1.6

(Loss)gainonrevaluationofgoldstreamobligation 9 (11.7) (27.4) 5.5 (34.2)

Deferredincometaxrelatedtoderivativecontractsandgoldstreamobligation 9,10 3.6 8.1 (1.8) 10.2

Totalothercomprehensive(loss)income (7.9) (17.5) 3.6 (13.3)

Totalcomprehensiveincome(loss) 15.2 (31.4) 64.3 (1.6)1. Allitemsrecordedinothercomprehensiveincome(“OCI”)willbereclassifiedinsubsequentperiodstonetearningsormininginterest,asappropriate.



CONDENSEDCONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION(unaudited)

AsatJune30

AsatDecember31


ASSETS Currentassets

Cashandcashequivalents 198.8 185.9

Tradeandotherreceivables 4 43.2 37.1

Inventories 6 165.1 150.4

Currentincometaxreceivable 6.5 12.5

Derivativeassets 10 4.4 18.0

Prepaidexpensesandother 5.1 6.1

Totalcurrentassets 423.1 410.0Non-currentinventories 6 91.9 103.3

Mininginterests 7 3,383.7 3,191.3

Deferredtaxassets 12 241.4 224.9

Other 3.3 3.5Totalassets

4,143.4 3,933.0

LIABILITIESANDEQUITY Currentliabilities

Tradeandotherpayables 5 165.2 169.2

Currentincometaxpayable 11.7 6.2

Totalcurrentliabilities 176.9 175.4Reclamationandclosurecostobligations 13 97.7 81.0Goldstreamobligation 9 230.9 246.5Provisions 14.1 12.0Long-termdebt 8 880.1 889.5Deferredtaxliabilities 12

433.3 455.2

Other 2.0 0.2

Totalliabilities 1,835.0 1,859.8

Equity

Commonshares 11 3,027.7 2,859.0

Contributedsurplus 102.7 100.5

Otherreserves (29.4) (33.0)

Deficit (792.6) (853.3)

Totalequity 2,308.4 2,073.2

Totalliabilitiesandequity 4,143.4 3,933.0



CONDENSEDCONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY(unaudited)



COMMONSHARES Balance,beginningofperiod 2,859.0 2,841.0

Commonshareissuance 167.9 12.8

Sharesissuedforexerciseofoptions 0.8 0.4

Balance,endofperiod 3,027.7 2,854.2

CONTRIBUTEDSURPLUS Balance,beginningofperiod 100.5 102.3

Exerciseofoptions 11 (0.2) (4.6)

Equitysettledshare-basedpayments 2.4 3.1

Balance,endofperiod 102.7 100.8

OTHERRESERVES Balance,beginningofperiod (33.0) 2.6

Changeinfairvalueofhedginginstruments(netoftax) 10 (0.2) 9.8Gain(loss)onrevaluationofgoldstreamobligation(netoftax) 3.8 (23.1)

Balance,endofperiod (29.4) (10.7)

DEFICIT Balance,beginningofperiod (853.3) (846.3)

Netearnings 60.7 11.7

Balance,endofperiod (792.6) (834.6)

Totalequity 2,308.4 2,109.7



CONDENSEDCONSOLIDATEDSTATEMENTSOFCASHFLOW(unaudited)



2017 2016(Note2)

OPERATINGACTIVITIES Net(loss)earnings 23.1 (13.9) 60.7 11.7Adjustmentsfor: Foreignexchangelosses(gains) 3 (17.7) 4.9 (23.9) (29.0)Reclamationandclosurecostspaid 13 (0.2) - (0.6) (0.9)GainondisposalofElMorrostream - - (33.0) -Depreciationanddepletion 63.7 66.7 121.5 127.7Othernon-cashadjustments 14 4.0 16.4 18.9 30.3Incometaxexpense(recovery) 12 7.3 6.8 9.6 (1.0)Financeincome 3 (0.4) (0.2) (0.6) (0.5)Financecosts 3 1.3 3.1 2.7 7.7

81.1 83.8 155.3 146.0Changeinnon-cashoperatingworkingcapital 14 3.9 (3.2) 11.3 (3.8)Incometaxespaid (5.0) (1.4) (9.8) (1.5)

Cashgeneratedfromoperations 80.0 79.2 156.8 140.7

INVESTINGACTIVITIES Mininginterests (188.1) (138.2) (331.8) (245.6)Goldpriceoptioncontractinvestmentcosts (0.9) - (0.9) (2.1)Proceedsfromthesaleofassets - 0.6 65.3 1.1Interestreceived 0.3 0.2 0.5 0.5

Cashusedbyinvestingactivities (188.7) (137.4) (266.9) (246.1)

FINANCINGACTIVITIES Proceedsreceivedfromexerciseofoptions 11 0.5 6.4 0.6 7.2Netproceedsreceivedfromissuanceofcommonshares (1.0) - 164.7 -

Financinginitiationcosts - - - (0.3)Issuanceofseniorunsecurednotes,netoftransactioncosts 8 295.1 - 295.1 -

Repaymentofseniorunsecurednotes 8 (305.3) - (305.3) -Interestpaid (31.3) (26.7) (32.8) (27.5)

Cash(usedby)generatedbyfinancingactivities (42.0) (20.3) 122.3 (20.6)EFFECTOFEXCHANGERATECHANGESONCASHANDCASHEQUIVALENTS - (0.3) 0.7 10.0

Changeincashandcashequivalents (150.7) (78.8) 12.9 (116.0)Cashandcashequivalents,beginningofperiod 349.5 298.3 185.9 335.5 Cashandcashequivalents,endofperiod 198.8 219.5 198.8 219.5

Cashandcashequivalentsarecomprisedof: Cash 145.4 154.2 145.4 154.2Short-termmoneymarketinstruments 53.4 65.3 53.4 65.3

198.8 219.5 198.8 219.5



NOTESTOTHECONDENSEDCONSOLIDATEDFINANCIALSTATEMENTSForthesixmonthsendedJune30,2017and2016(AmountsexpressedinmillionsofU.S.dollars,exceptpershareamountsandunlessotherwisenoted)

1.DESCRIPTIONOFBUSINESSANDNATUREOFOPERATIONSNewGoldInc.(“NewGold”orthe“Company”)isanintermediategoldminingcompanyengagedinthedevelopmentandoperationofmineralproperties.Theassetsof theCompany,directlyor through its subsidiaries, are comprisedof theNew AftonMine in Canada (“New Afton”), theMesquiteMine in the United States (“Mesquite”), the PeakMines inAustralia (“PeakMines”)andtheCerroSanPedroMine inMexico(“CerroSanPedro”).Significantprojects includetheRainyRiver(“RainyRiver”)andBlackwater(“Blackwater”)projects,bothinCanada.

TheCompanyisacorporationgovernedbytheBusinessCorporationsAct(BritishColumbia).TheCompany’ssharesarelistedontheTorontoStockExchangeandtheNewYorkStockExchangeMKTunderthesymbolNGD.

TheCompany’sregisteredofficeislocatedat1800–555BurrardStreet,Vancouver,BritishColumbia,V7X1M9,Canada.

2.SIGNIFICANTACCOUNTINGPOLICIES(a) Statement of compliance These unaudited condensed consolidated interim financial statements have been prepared in accordance withInternational Accounting Standard (“IAS”) 34, Interim Financial Reporting, on a basis consistent with the accountingpoliciesdisclosedintheCompany’sauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2016.

Theseunaudited interim financial statements shouldbe read inconjunctionwith theCompany’sauditedconsolidatedfinancial statements for the year ended December 31, 2016 which includes information necessary or useful tounderstanding the Company's business and financial statement presentation. In particular, the Company's significantaccounting policies are presented as Note 2 in the audited consolidated financial statements for the year endedDecember31,2016,andhavebeenconsistentlyappliedinthepreparationoftheseunauditedcondensedconsolidatedinterimfinancialstatements.

Theseunauditedcondensedconsolidated interimfinancialstatementswereapprovedbytheBoardofDirectorsoftheCompanyonJuly26th,2017.

(b) Future changes in accounting policies

RevenueOnMay28,2014theIASBissuedIFRS15,RevenuefromContractswithCustomers(“IFRS15”).Thisstandardoutlinesasingle comprehensive model with prescriptive guidance for entities to use in accounting for revenue arising fromcontractswithitscustomers.IFRS15usesacontrolbasedapproachtorecognizerevenuewhichisachangefromtheriskandrewardapproachunderthecurrentstandard.ThisstandardreplacesIAS18Revenue,IAS11ConstructionContractsandrelatedinterpretations.TheeffectivedateisforreportingperiodsbeginningonorafterJanuary1,2018withearlyapplicationpermitted.TheCompanyiscurrentlyevaluatingthepotentialimpactofapplyingIFRS15,primarilyanalyzingits concentrate sale agreements. TheCompanydoesnot anticipate any changes in the gross amountsof the revenuerecognizedorasignificantchangeinthetimingofrevenuerecognitionunderthenewstandard.

LeasesOnJanuary6,2016,theIASB issuedIFRS16,Leases(“IFRS16”).Thisstandardspecifiesthemethodologytorecognize,measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to


recognizeassetsandliabilitiesforallleasesunlesstheleasetermis12monthsorlessortheunderlyingassethasalowvalue.ThisstandardreplacesIAS17Leases.TheeffectivedateisforreportingperiodsbeginningonorafterJanuary1,2019with early adoption permitted. The Company is assessing the effect of adoption of IFRS 16 on its consolidatedfinancialstatementshowever,asminingatitsCerroSanPedroMineceasedduring2016,theCompanynolongerholdssignificant operating leases on mining equipment and therefore the adoption of IFRS 16 is not expected to have asignificantimpactontheCompany'sconsolidatedfinancialstatements.

(c) Revisions to prior period comparatives In the firstquarterof2017 theCompany identifiedan immaterial error relating todepletionof itsNewAftonmininginterestfortheyearendedDecember31,2016resultinginareductionin2016netearningsof$9.7million.

Thequarterlyimpactonthecomparativecondensedconsolidatedincomestatementisoutlinedinthetablebelow.Theresulting overstatement of the mining interests balance of $15.4 million, overstatement of deferred tax liability of$5.3million,andunderstatementof inventoriestotaling$0.4millionasatDecember31,2016hasbeenrevised inthecomparative condensed consolidated statement of financial position, and the associated notes to the condensedconsolidatedfinancialstatements.Therehasbeennochangetothecashflowsfromoperating,investing,andfinancingactivitiesinthecomparativecondensedconsolidatedstatementofcashflow.

1. FortheperiodsinwhichtheCompanyrecordsaloss,dilutedlosspershareiscalculatedusingthebasicweightedaveragenumberofsharesoutstanding,asusingthedilutedweightedaveragenumberofsharesoutstandinginthecalculationwouldbeanti-dilutive.

Threemonthsended

Threemonthsended

Threemonthsended

Threemonthsended Yearended

(inmillionsofU.S.dollars)March31,

2016June30,

2016September30,

2016December31,

2016December31,

2016

IMPACTONNETEARNINGS(LOSS) Netearnings(loss)beforerevision 26.8 (8.8) 5.1 (19.9) 2.7

Revisiontodepreciationanddepletion (3.4) (4.1) (3.4) (4.1) (15.0)

Revisiontoincometaxrecovery(expense) 2.2 (1.0) 2.4 1.7 5.3

Revisiontonetearnings(loss) (1.2) (5.1) (1.0) (2.4) (9.7)

Revisednetearnings(loss) 25.6 (13.9) 4.1 (22.3) (7.0)Basic weighted average number of sharesoutstanding(inmillions) 509.6 511.2 513.0 513.3 511.8


Stockoptions 1.1 - 2.8 - -Dilutedweightedaveragenumberofsharesoutstanding(inmillions) 510.7 511.2 515.8 513.3 511.8

Netearnings(loss)persharebeforerevision:

Basic 0.05 (0.02) 0.01 (0.04) 0.01

Diluted(1) 0.05 (0.02) 0.01 (0.04) 0.01Impactofrevisiontonetearnings(loss)pershare:

Basic - (0.01) - - (0.02)

Diluted(1) - (0.01) - - (0.02)

Revisednetearnings(loss)pershare:

Basic 0.05 (0.03) 0.01 (0.04) (0.01)

Diluted(1) 0.05 (0.03) 0.01 (0.04) (0.01)


3.EXPENSES(a) Operatingexpensesbynature


(inmillionsofU.S.dollars) 2017 2016 2017 2016OPERATINGEXPENSESBYNATURE Rawmaterialsandconsumables 38.3 38.8 75.7 75.9

Salariesandemployeebenefits 31.1 31.7 62.1 63.5

Contractors 12.1 12.7 25.3 24.8

Repairsandmaintenance 7.3 7.2 14.3 13.1

Generalandadministrative 5.1 4.0 10.5 9.0

Operatingleases 0.8 3.5 2.0 8.1

Royalties 3.5 3.4 6.6 5.8

Drillingandanalytical 0.6 0.6 0.9 1.8

Other 0.7 0.3 1.1 1.0

Totalproductionexpenses 99.5 102.2 198.5 203.0

Less:Productionexpensescapitalized (9.6) (14.0) (19.4) (25.5)

Less:Changeininventoriesandwork-in-progress 4.8 (3.5) (1.5) (10.9)

Totaloperatingexpenses 94.7 84.7 177.6 166.6

(b) Financecostsandincome


(inmillionsofU.S.dollars) 2017 2016 2017 2016FINANCECOSTS

Interestonseniorunsecurednotes 14.2 13.4 27.7 26.8

InterestonCreditFacility 1.0 - 1.9 -

Accretionexpenseondecommissioningobligations(Note13) 0.2 0.4 0.6 0.8

Otherfinancecosts 1.5 0.9 2.9 1.9

16.9 14.7 33.1 29.5

Less:amountsincludedincostofqualifyingassets (15.6) (11.6) (30.4) (21.8)

Totalfinancecosts 1.3 3.1 2.7 7.7

FINANCEINCOME

Interestincome 0.4 0.2 0.6 0.5


(c) Othergains(losses)


(inmillionsofU.S.dollars) 2017 2016 2017 2016OTHERGAINS(LOSSES) Unrealizedgains(loss)onsharepurchasewarrants 0.1 (0.1) 1.2 (0.5)

Gain(loss)onforeignexchange 17.7 (4.9) 23.9 29.0

GainondisposalofElMorrostream - - 33.0 -

Other(loss)gainondisposalofassets (0.1) (0.2) 0.1 (0.3)

(Loss)gainonrevaluationofinvestments (0.2) 0.7 (0.1) 0.7

Unrealizedlossonrevaluationofgoldstreamobligation (2.0) (10.4) (5.0) (25.5)Settlement and loss on revaluation of gold price optioncontracts (1.3) (7.6) (15.7) (4.3)

Gainonrevaluationofcopperforwardcontracts 0.2 - 1.2 -

Other 1.3 (0.2) 0.9 (0.1)Totalothergains(losses) 15.7 (22.7) 39.5 (1.0)4.TRADEANDOTHERRECEIVABLES

Asat

June30Asat

December31

(inmillionsofU.S.dollars) 2017 2016TRADEANDOTHERRECEIVABLES Tradereceivables 11.4 27.4

Salestaxreceivable 28.9 11.8

Unsettledprovisionallypricedconcentratederivativesandcopperswapcontracts(Note10) 1.1 (4.5)

Other 1.8 2.4

Totaltradeandotherreceivables 43.2 37.15.TRADEANDOTHERPAYABLES

Asat

June30Asat

December31

(inmillionsofU.S.dollars) 2017 2016TRADEANDOTHERPAYABLES Tradepayables 42.6 32.0

Interestpayable 6.4 8.6

Accruals 99.8 125.4

Currentportionofdecommissioningobligations(Note13) 1.1 0.9

Currentportionofgoldstreamobligation(Note9) 15.1 -

Provisionforofficeconsolidation 0.2 1.0

Derivativeliabilities - 1.3

Totaltradeandotherpayables 165.2 169.2


6.INVENTORIES

Asat

June30Asat

December31

(inmillionsofU.S.dollars) 2017 2016(Note2)

INVENTORIES Heapleachore 179.3 185.9

Work-in-process 10.0 8.7

Finishedgoods(1)(3) 16.0 11.5

Stockpileore 8.5 6.7

Supplies 43.2 40.9

257.0 253.7

Less:non-currentinventories(2) (91.9) (103.3)

Totalcurrentinventories 165.1 150.41. The amount of inventories recognized in operating expenses for the three and six months ended June 30, 2017 was $94.7 million and $154.7 million

(2016–$78.3millionand$154.8million).2. Heapleachinventoriesof$91.9million(December31,2016–$103.3million)areexpectedtoberecoveredafteroneyear.3. Priorperiodcomparativeshavebeenrevisedaspernote2(c).


7.MININGINTERESTS

DepletableNon-

depletablePlant&

equipmentConstructioninprogress

Exploration&evaluation Total

(inmillionsofU.S.dollars)

COST

AsatDecember31,2015 1,459.5 1,020.9 875.8 325.5 7.5 3,689.2

Additions 57.0 90.2 32.6 509.9 - 689.7

Disposals - - (13.6) - - (13.6)

Impairments - - - - (6.4) (6.4)

Transfers 23.7 6.0 64.3 (94.0) - -

AsatDecember31,2016 1,540.2 1,117.1 959.1 741.4 1.1 4,358.9

Additions 20.6 46.4 17.9 270.0 - 354.9

DisposalofElMorrostream - (32.0) - - - (32.0)

Disposals - - (4.0) - - (4.0)

Transfers 1.5 - (1.2) (0.3) - -

AsatJune30,2017 1,562.3 1,131.5 971.8 1,011.1 1.1 4,677.8

ACCUMULATEDDEPRECIATION

AsatDecember31,2015 541.8 - 344.2 - - 886.0

Depreciationfortheyear 193.1 - 100.7 - - 293.8

Disposals - - (12.2) - - (12.2)

AsatDecember31,2016(1) 734.9 - 432.7 - - 1,167.6Depreciationfortheperiod 80.6 - 49.7 - - 130.3

Disposals - - (3.8) - - (3.8)

AsatJune30,2017 815.5 - 478.6 - - 1,294.1

CARRYINGAMOUNT AsatDecember31,2016(1) 805.3 1,117.1 526.4 741.4 1.1 3,191.3

AsatJune30,2017 746.8 1,131.5 493.2 1,011.1 1.1 3,383.7

1. Prior-yearperiodcomparativeshavebeenrevisedaspernote2(c).

TheCompanycapitalizedinterestof$15.6millionand$30.4millionforthethreeandsixmonthsendedJune30,2017(2016–$11.6millionand$21.8million)toqualifyingdevelopmentprojects.TheCompany’sannualizedcapitalizationrateis6.60%(2016–6.70%).

DisposalofElMorrogoldstreamasset

InFebruary2017theCompanydisposedofitsElMorrogoldstreamassetforproceedsof$65.0millionwhichresultedinanetgainof$33.0million.


CarryingamountbypropertyasatJune30,2017:

AsatJune30,2017

(inmillionsofU.S.dollars) DepletableNon-

depletablePlant&

equipmentConstructioninprogress Total

MININGINTERESTBYSITE NewAfton 535.8 22.1 236.9 11.9 806.7

Mesquite 158.0 - 87.9 3.8 249.7

PeakMines 51.7 9.8 49.6 2.1 113.2

CerroSanPedro 1.3 - - - 1.3

RainyRiver - 569.2 100.4 993.3 1,662.9

Blackwater - 530.4 14.9 - 545.3

Other(1) - 1.1 3.5 - 4.6

CarryingamountasatJune30,2017 746.8 1,132.6 493.2 1,011.1 3,383.71. Otherincludescorporatebalancesandexplorationproperties.

CarryingamountbypropertyasatDecember31,2016:

AsatDecember31,2016

(inmillionsofU.S.dollars) DepletableNon-

depletablePlant&

equipmentConstructioninprogress Total

MININGINTERESTBYSITE NewAfton 574.4 20.0 247.1 5.2 846.7

Mesquite 170.3 - 98.2 3.1 271.6

PeakMines 58.6 9.8 52.5 0.3 121.2

CerroSanPedro 2.0 - - - 2.0

RainyRiver - 531.0 109.6 732.8 1,373.4

Blackwater - 524.3 15.2 - 539.5

ElMorrogoldstreamasset - 32.0 - - 32.0

Other(1) - 1.1 3.8 - 4.9

CarryingamountasatDecember31,2016(2) 805.3 1,118.2 526.4 741.4 3,191.31. Otherincludescorporatebalancesandexplorationproperties.2. Prior-yearperiodcomparativeshavebeenrevisedaspernote2(c).


8.LONG-TERMDEBTLong-termdebtconsistsofthefollowing:


(inmillionsofU.S.dollars) 2017 2016LONG-TERMDEBT Seniorunsecurednotes-dueApril15,2020(b) - 296.1

Seniorunsecurednotes-dueNovember15,2022(a) 493.8 493.4

Seniorunsecurednotes-dueNovember15,2025(b) 286.3 -

Revolvingcreditfacility(c) 100.0 100.0

Totallong-termdebt 880.1 889.5

(a) SeniorUnsecuredNotes–dueNovember15,2022OnNovember15,2012, theCompany issued$500.0millionof seniorunsecurednotes (“2022UnsecuredNotes”).AsatJune30,2017thefacevaluewas$500.0million.The2022UnsecuredNotesaredenominatedinU.S.dollars,matureandbecomedueandpayableonNovember15,2022,andbearinterestattherateof6.25%perannum.Interestispayableinarrearsinequalsemi-annualinstallmentsonMay15andNovember15ofeachyear.

TheCompanyincurredtransactioncostsof$9.9millionwhichhavebeenoffsetagainstthecarryingamountofthe2022UnsecuredNotesandarebeingamortizedtonetearningsusingtheeffectiveinterestmethod.

The2022UnsecuredNotesaresubjecttoaminimuminterestcoverageincurrencecovenantofearningsbeforeinterest,taxes,depreciation,amortization,impairment,andothernon-cashadjustmentstointerestof2:1.Thetestisappliedonapro-forma basis prior to the Company incurring additional debt, entering into business combinations or acquiringsignificantassets,orcertainothercorporateactions.Therearenomaintenancecovenants.

The2022UnsecuredNotesareredeemablebytheCompanyinwholeorinpart:

• AtanytimepriortoNovember15,2017ataredemptionpriceof100%oftheaggregateprincipalamountofthe2022UnsecuredNotes,plusamake-wholepremium(consistingof future interestthatwouldhavebeenpaidhadthebondsremainedoutstandinguntil2022),plusaccruedandunpaidinterest,ifany,totheredemptiondate.

• During the 12-monthperiodbeginningonNovember 15of the years indicated at the redemptionpricesbelow,expressedasapercentageoftheprincipalamountofthe2022UnsecuredNotestoberedeemed,plusaccruedandunpaidinterest,ifany,totheredemptiondate:

Date Redemptionprices(%)2017 103.13%2018 102.08%2019 101.04%2020andthereafter 100.00%

(b) SeniorUnsecuredNotes–dueNovember15,2025andSeniorUnsecuredNotes–dueApril15,2020OnMay18,2017, theCompany issued$300.0millionof seniorunsecurednotes (“2025UnsecuredNotes”) fornetcashproceedsof$295.1millionaftertransactioncosts.Theproceedswereusedtoredeemandpurchaseforcancellationthe$300.0millionprincipalamountofthepreviouslyoutstandingseniorunsecurednotes(“2020UnsecuredNotes”)forwhichtheCompanywasrequiredtopayaredemptionpremiumof$5.3million.Asaresult,totaltransactioncostspaidrelatingto


thisrefinancingwere$10.2million.Additionally,theCompanywasrequiredtopay$2.8millionofaccruedinterestonthe2020UnsecuredNotesonredemptionandcancellation.

This refinancing transactiondidnotmeet thecriteriaassociatedwithanextinguishmentunder IFRS9as thediscountedpresentvalueofthecashflowsofthe2025UnsecuredNoteswerelessthan10%differentfromthepresentvalueoftheremainingcashflowsofthe2020UnsecuredNotes.Asaresult,alltransactioncostsassociatedwiththisrefinancingwerecapitalizedtothecarryingvalueoftheoutstandingdebt.TheCompanyincurredtransactioncostsof$10.5million(includingtheredemptionpremiumandothertransactioncosts)relatingtothisrefinancing,ofwhich$0.3millionwereunpaidandincluded in accruals as at June 30, 2017. Transaction costs have been offset against the carrying amount of the 2025UnsecuredNotesandarebeingamortizedtonetearningsusingtheeffectiveinterestmethod.

The2025UnsecuredNotesbear interest at the rateof 6.375%per annum. Interest is payable in arrears in equal semi-annualinstallmentsonMay15andNovember15ofeachyear.The2025UnsecuredNotesaresubject toaminimuminterestcoverage incurrencecovenantofearningsbefore interest,taxes,depreciation,amortization,impairment,andothernon-cashadjustmentstointerestof2:1.Thetestisappliedonapro-formabasispriortotheCompanyincurringadditionaldebt,enteringintobusinesscombinationsoracquiringsignificantassets,orcertainothercorporateactions.Therearenomaintenancecovenants.The2025UnsecuredNotesareredeemablebytheCompanyinwholeorinpart:

• AtanytimepriortoMay15,2020ataredemptionpriceof100%oftheaggregateprincipalamountofthe2025UnsecuredNotes, plus amake-wholepremium (consistingof future interest thatwouldhavebeenpaiduptothefirstcalldateofMay15,2020),plusaccruedandunpaidinterest,ifany,totheredemptiondate.

• Duringthe12-monthperiodbeginningonMay15oftheyears indicatedattheredemptionpricesbelow,expressed as a percentage of the principal amount of the 2025 Unsecured Notes to be redeemed, plusaccruedandunpaidinterest,ifany,totheredemptiondate:

Date Redemptionprices(%)2020 104.78%2021 103.19%2022 101.59%2023andthereafter 100.00%

(c) RevolvingcreditfacilityIn June 2017, the Company amended its $400.0 million revolving credit facility (the “Credit Facility”) to extend thematuritydateoftheagreementbyoneyeartoAugust2020.

Netdebt isusedtocalculate leverageforthepurposeofcovenanttestsandpricing levels.TheCreditFacilitycontainsvariouscovenantscustomaryforaloanfacilityofthisnature,includinglimitsonindebtedness,assetsalesandliens.TheCredit Facility contains two covenant tests, the minimum interest coverage ratio, earnings before interest, taxes,depreciation, amortization, exploration, impairment, and other non-cash adjustments (“Adjusted EBITDA”) to interestandthemaximumleverageratio (netdebttoAdjustedEBITDA),bothofwhicharemeasuredonarolling four-quarterbasisattheendofeveryquarter.


InJune2017,theCompanyamendedtheCreditFacility’sNetDebttoAdjustedEBITDA("LeverageRatio")covenant,toincreasethemaximumLeverageRatioto4.5to1.0fromJuly1,2017toSeptember30,2017(previously4.0to1.0)and4.0to1.0fromJanuary1,2018toMarch31,2018(previously3.5to1.0).Followingthatperiod,themaximumleverageratiowillbe3.5:1.0.ThemaximumLeverageRatiofromOctober1,2017toDecember31,2017remainsat4.0to1.0.

Significantfinancialcovenantsareasfollows:

TwelvemonthsendedJune30

TwelvemonthsendedDecember31

Financialcovenant

2017 2016FINANCIALCOVENANTS Minimuminterestcoverageratio(EBITDAtointerest) >3.0:1 5.5:1 5.7:1

Maximumleverageratio(netdebttoEBITDA) <4.5:1 2.5:1 2.6:1

TheinterestmarginondrawingsundertheCreditFacilityrangesfrom1.00%to3.25%overLIBOR,thePrimeRateortheBaseRate,basedontheCompany’snetdebttoadjustedEBITDAratioandthecurrencyandtypeofcreditselectedbytheCompany.BasedontheCompany’snetdebttoadjustedEBITDAratio,therateis3.25%overLIBORasatJune30,2017(December 31, 2016 – 3.25%). The standby fees on undrawn amounts under the Credit Facility range from 0.45% to0.73%,dependingontheCompany’snetdebttoadjustedEBITDAratio.BasedontheCompany’snetdebttoadjustedEBITDAratio,therateis0.73%asatJune30,2017(December31,2016–0.73%).

AsatJune30,2017,theCompanyhasdrawn$100millionundertheCreditFacilityandtheCreditFacilityhasbeenusedto issue lettersof creditof$126.0millionasat June30,2017 (December31,2016 -$122.1million). Lettersof creditrelate to reclamation bonds, worker’s compensation security and other financial assurances required with variousgovernmentagencies.

9.GOLDSTREAMOBLIGATIONIn2015theCompanyenteredintoa$175millionstreamingtransactionwithRGLDGoldAG,awholly-ownedsubsidiaryofRoyalGoldInc.(“RoyalGold”).Underthetermsoftheagreement,theCompanywilldelivertoRoyalGold6.5%ofgoldproduction fromtheRainyRiverprojectup toa totalof230,000ouncesofgoldand then3.25%of theproject’sgoldproductionthereafter.TheCompanywillalsodelivertoRoyalGold60%oftheproject’ssilverproductiontoamaximumof3.1millionouncesandthen30%ofsilverproductionthereafter.RoyalGoldpaid$175.0millioninconsiderationofthistransaction.

Inadditiontotheupfrontdeposit,RoyalGoldwillpay25%oftheaveragespotgoldorsilverpriceatthetimeeachounceofgoldor silver isdeliveredunder thestream.Thedifferencebetween thespotpriceofmetaland thecash receivedfromRoyalGoldwillreducethe$175.0milliondepositoverthelifeofthemine.Uponexpiryofthe40-yeartermoftheagreement (which may be extended in certain circumstances), any balance of the $175.0 million upfront depositremainingunpaidwillberefundedtoRoyalGold.


The gold stream obligation is accounted for as a financial liability under the scope of IFRS 9 (2013). Accordingly, theCompanyvaluestheliabilityatthepresentvalueofitsexpectedfuturecashflowsateachreportingperiodwithchangesin fair value reflected in the condensed consolidated income statements and condensed consolidated statements ofcomprehensiveloss.Thegoldstreamobligationcontainedamaximumleverageratiocovenant(netdebttoEBITDA)of3.5 : 1.0, with the exception that the net leverage covenant limit is permitted to be increased to 4.0 : 1.0 for twoconsecutive quarters, provided that it thereafter returns to amaximum of 3.5 : 1.0. Furthermore, the leverage ratiocontainedintheaboveagreementwithRoyalGoldhasalsobeenadjustedtomatchtherevisedmaximumleverageratioundertheCreditFacility,uptoMarch31,2018.

ThefollowingisasummaryofthechangesintheCompany’sgoldstreamingobligation:

(inmillionsofU.S.dollars) CHANGEINSTREAMOBLIGATION

Balance,December31,2015 147.6

FairvalueadjustmentsrelatedtochangesintheCompany’sowncreditrisk(1) 67.8

Otherfairvalueadjustments(2) 31.1

Balance,December31,2016 246.5

Paymentsduringtheperiod -

FairvalueadjustmentsrelatedtochangesintheCompany’sowncreditrisk(1) (5.5)

Otherfairvalueadjustments(2) 5.0

Balance,June30,2017 246.0

Less:currentportionofgoldstreamobligation (15.1)

Non-currentportionofgoldstreamobligation 230.91. FairvalueadjustmentsrelatedtochangesintheCompany’sowncreditriskareincludedinothercomprehensiveincome.2. Otherfairvalueadjustmentsareincludedinthecondensedconsolidatedincomestatements.

FairvalueadjustmentsrepresenttheneteffectonthegoldstreamobligationofchangesinthevariablesincludedintheCompany’svaluationmodelbetweenthedateofreceiptofdepositandthereportingdate.Thesevariablesincludeloanaccretion, risk-free interest rate, future metal prices, Company-specific credit spread and expected gold and silverouncestobedelivered.


10.DERIVATIVEINSTRUMENTS

Asat

June30Asat

December31

(inmillionsofU.S.dollars) 2017 2016DERIVATIVEASSETS Goldoptionscontracts 2.9 17.6

Dieselswapcontracts - 0.1

Unsettledprovisionallypricedconcentratederivatives,andswapcontracts(2) 1.1 (4.5)

Copperforwardcontracts 1.5 0.3

Totalderivativeassets 5.5 13.5

DERIVATIVELIABILITIES

Sharepurchasewarrants(1) - 1.3

- 1.3

Less:currentportionofsharepurchasewarrants - (1.3)

Totalderivativeliabilities - -1. OnJune28,2017,NewGold’ssharepurchasewarrantsexpired,unexercised.2. Unsettledprovisionallypricedconcentratederivativesareincludedwithintradeandotherreceivablesinthestatementoffinancialposition.

(a) Hedginginstruments


(inmillionsofU.S.dollars) 2017 2016 2017 2016EFFECTIVEPORTIONOFCHANGEINFAIRVALUEOFHEDGINGINSTRUMENTS

Foreign exchange (loss) gain on cash and cash equivalentsdesignatedashedginginstruments - 0.8 - 4.9

Reclassification of realized foreign exchange gain on cash andcashequivalentsdesignatedashedginginstrument - (1.1) - 3.2

Unrealizedgain(loss)ondieselswapcontracts(i) - 1.5 (0.4) 1.0Realizedlossonsettlementofdieselswapcontracts(i) 0.2 0.6 0.3 1.6

Deferredincometaxrelatedtohedginginstruments (0.2) (0.7) (0.1) (0.9)

Totalhedginggains(losses)inothercomprehensiveincome - 1.1 (0.2) 9.8

(i)Dieselswapcontracts

In2015,theCompanyenteredintodieselswapcontractstohedgedieselcostatMesquite.Realizedgainsandlossesarereclassifiedfromothercomprehensiveincometooperatingexpensesasdieselisconsumedattheminesite.

TheCompanyrealizedalossof$0.3milliononsettlementof1.0milliongallonsforthesixmonthsendedJune30,2017(2016–lossof$1.6millionon2.8milliongallons).AsatJune30,2017,thehedgewasfullysettled.(b) ProvisionallypricedcontractsTheCompanyhadprovisionally priced sales forwhich price finalization is outstanding at June 30, 2017. Realized andunrealizednon-hedgedderivativegains(losses)ontheprovisionalpricingofconcentratesalesareclassifiedasrevenue,with theunsettledprovisionally priced concentratederivatives included in trade andother receivables. TheCompanyentersintogoldandcopperswapcontractstoreduceexposuretogoldandcopperprices.Realizedandunrealizedgains(losses)arerecordedinrevenue,withtheunsettledgoldandcopperswapsincludedintradeandotherreceivables.


Thefollowingtablessummarizetherealizedandunrealized(losses)gainsonprovisionallypricedsales:

ThreemonthsendedJune30,2017 SixmonthsendedJune30,2017

(inmillionsofU.S.dollars) Gold Copper Total Gold Copper Total(LOSS)GAINONTHEPROVISIONALPRICINGOFCONCENTRATESALESRealized - (0.8) (0.8) 2.9 3.8 6.7

Unrealized (0.4) 1.9 1.5 (0.4) 3.3 2.9

Total(loss)gain (0.4) 1.1 0.7 2.5 7.1 9.6


(inmillionsofU.S.dollars) Gold Copper Total Gold Copper Total(LOSS)GAINONTHEPROVISIONALPRICINGOFCONCENTRATESALESRealized 0.1 (3.2) (3.1) 1.2 (4.2) (3.0)

Unrealized 2.2 4.8 7.0 2.2 5.2 7.4

Total(loss)gain 2.3 1.6 3.9 3.4 1.0 4.4

Thefollowingtablessummarizetherealizedandunrealizedgains(losses)ongoldandcopperswapcontracts:


(inmillionsofU.S.dollars) Gold Copper Total Gold Copper Total(LOSS)GAINONSWAPCONTRACTSRealized (0.1) 0.6 0.5 (2.5) (6.7) (9.2)

Unrealized 0.3 (1.6) (1.3) 0.3 (2.1) (1.8)

Total(loss)gain 0.2 (1.0) (0.8) (2.2) (8.8) (11.0)


(inmillionsofU.S.dollars) Gold Copper Total Gold Copper Total(LOSS)GAINONSWAPCONTRACTSRealized (0.6) 2.3 1.7 (2.7) 1.9 (0.8)

Unrealized (1.6) (3.1) (4.7) (1.6) (3.6) (5.2)

Total(loss)gain (2.2) (0.8) (3.0) (4.3) (1.7) (6.0)


The following table summarizes the net exposure to the impact of movements in market commodity prices forprovisionallypricedsales:


2017 2016Volumessubjecttofinalpricingnetofoutstandingswaps

Goldounces(000s) 4.2 4.0

Copperpounds(millions) 1.9 3.0

(c) Goldpriceoptioncontracts

InMarch 2016, the Company entered into gold price option contracts by purchasing put options at a strike price of$1,200perounceandsellingcalloptionsata strikepriceof$1,400perounce for270,000ouncesofgoldproductionbetween April 2016 and December 2016 (“gold option contracts”). In September 2016, the Company entered into asecondtrancheofgoldpriceoptioncontractsbypurchasingputoptionsatastrikepriceof$1,300perounceandsellingcalloptionsatastrikepriceof$1,400perouncefor120,000ouncesofgoldproductionbetweenJanuary2017andJune2017.InJune2017,theCompanyenteredintoathirdtrancheofgoldpriceoptioncontractsbypurchasingputoptionsatastrikepriceof$1,250perounceandsellingcalloptionsatastrikepriceof$1,400perouncefor120,000ouncesofgold production between July 2017 and December 2017. The Company incurred investment costs of $1.0 million inJune2017relatingtothisthirdtrancheofgoldpriceoptioncontracts.

Thecalloptionssoldandputoptionspurchasedaretreatedasderivativefinancialinstrumentsandmarkedtomarketateach reporting period on the condensed consolidated statement of financial position with changes in fair valuerecognizedinothergainsandlosses.RealizedgainsandlossesasaresultoftheexerciseoftheCompany’scallandputoptionsuptoanamountnotexceedingtheCompany’sproductionofgoldouncesforthereportingperiodarerecordedasanadjustmenttorevenue.TheexerciseofoptionsongoldouncesinexcessoftheCompany’sgoldproductionforthereportingperiodarerecordedasothergainsandlosses.TheCompanypresentsthefairvalueofitsputandcalloptionsonanetbasisonthecondensedconsolidatedstatementsof financialpositionwithin ‘derivativeassets’.TheCompanyhasalegallyenforceablerighttosetofftheamountsunderitsoptionscontractsandintendstosettleonanetbasis.

For the six months ended June 30, 2017 the Company exercised put options for 120,000 ounces and recognized$7.2millionwithin revenue. For the sixmonths ended June 30, 2017, the Company recognized a loss of $8.5millionrelatingtothegoldpriceoptioncontracts,whichincludesthesettlementandlossonrevaluationofthegoldpriceoptioncontractsof$15.7millionaspernote3(c)netoftheamountincludedinrevenue.


Quantityoutstanding

RemainingtermExercise

price($/oz)

Fairvalue-asset(liability)(inmillions)

(1)GOLDOPTIONCONTRACTSOUTSTANDING Goldcallcontracts-sold 120,000oz July2017–December2017 1,400 $(0.3)

Goldputcontracts-purchased 120,000oz July2017–December2017 1,250 $3.21. TheCompanypresents the fairvalueof itsputandcalloptionsonanetbasison thecondensedconsolidatedstatementsof financialposition.TheCompanyhasa

legallyenforceablerighttosetofftheamountsunderitsoptionscontractsandintendstosettleonanetbasis.Thecontractscover20,000ouncesofgoldpermonth.


(d) Copperforwardcontracts

In November 2016, the Company entered copper swap contracts for 5.3 million pounds of copper per month fromJanuary through June 2017 at a fixed price of $2.52 per pound. In February 2017, the Company entered into furthercopper swapcontracts for7.3millionpoundsofcopperpermonth fromJuly2017 throughDecember2017ata fixedpriceof$2.73perpound.CopperswapssettleagainsttheLondonMetalsExchangemonthlyaverageprice.Thecopperforwardcontractsaretreatedasderivativefinancialinstrumentsandmarkedtomarketateachreportingperiodontheconsolidated statement of financial positionwith changes in fair value recognized in other gains and losses. Realizedgains and losses on settlement of the Company’s copper forward contracts up to an amount not exceeding theCompany’s production of copper pounds for the reporting period are recorded as an adjustment to revenue. Thesettlementoncopperpounds inexcessof theCompany’s copperproduction for the reportingperiodare recordedasother gains and losses. The Company presents the fair value of its copper forward contracts on the consolidatedstatementsoffinancialpositionwithin‘derivativeassets’.


Quantity

outstanding(oz)

RemainingtermExercise

price($/lb)

Fairvalue-asset(liability)(inmillions)

COPPERFORWARDCONTRACTSOUTSTANDING CopperforwardcontractsforH22017 43.7million July2017–December2017 2.73 $1.5


11.SHARECAPITALAtJune30,2017,theCompanyhadunlimitedauthorizedcommonsharesand576.2millioncommonsharesoutstanding.

(a) No par value common shares issued Numberofshares

(inmillionsofU.S.dollars,exceptwherenoted) (000s) $NOPARVALUECOMMONSHARESISSUED BalanceatDecember31,2015 509,469 2,841.0

Exerciseofoptions&vestedperformanceshareunits 3,827 16.3Issuance of shares under First Nations agreements and landpurchases 329 1.3

AcquisitionofBayfieldVenturesCorp. 84 0.4

BalanceatDecember31,2016 513,709 2,859.0Issuanceofcommonsharesonequityoffering(1) 61,740 166.4Issuance of common shares under First Nations agreementsandlandpurchases 500 1.5

Exerciseofoptionsandvestedperformanceshareunits(i) 229 0.8

BalanceatJune30,2017 576,178 3,027.71. OnMarch10,2017 theCompanyclosedaboughtdeal financingand relatedagreementsand issued61.7million commonsharesatapriceofUS$2.80per share.

Proceeds of $172.9million are includedwithin equity net of equity issuance costs of $8.4million ($0.2million ofwhich are unpaid and included in accruals as atJune30,2017)andtheassociateddeferredtaxrecoveryof$1.9million.

(b) Share-based payment expenses Thefollowingtablesummarizesshare-basedpaymentexpenses:


(inmillionsofU.S.dollars) 2017 2016 2017 2016SHARE-BASEDPAYMENTEXPENSES Stockoptionexpense(i) 0.7 0.9 1.5 2.0

Performanceshareunitexpense 0.7 1.4 1.3 2.5

Restrictedshareunitexpense(1) 2.0 1.9 1.5 3.7

Deferredshareunitexpense 1.1 0.4 0.9 0.9

Totalshare-basedpaymentexpense 4.5 4.6 5.2 9.11. ForthethreeandsixmonthsendedJune30,2017$1.9millionand$1.4million(2016-$1.8millionand$3.3million)ofrestrictedshareunitexpensewasrecognizedin

operatingexpenses.


(i)StockoptionsThefollowingtablepresentschangesinCompany’sstockoptionplan(the“Plan”):

Numberofoptions

Weightedaverageexercise

price

(000s) C$/shareCHANGESTOTHEPLAN

BalanceatDecember31,2015 16,998 5.76

Granted 2,676 4.42

Exercised (3,626) 3.49

Forfeited (1,014) 8.16

Expired (179) 10.74

BalanceatDecember31,2016 14,855 5.84

Granted 265 3.87

Exercised (229) 3.32

Forfeited (650) 5.36

Expired (2,334) 8.86

BalanceatJune30,2017 11,907 5.29

(c) Earnings per share Thefollowingtablesetsoutthecalculationofdilutedlosspershare:


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016CALCULATIONOFDILUTED(LOSS)INCOMEPERSHARE Netearnings(loss) 23.1 (13.9) 60.7 11.7

Basicweightedaveragenumberofsharesoutstanding(inmillions) 575.8 511.2 552.1 510.4


Stockoptions 0.5 - 0.6 1.2

Dilutedweightedaveragenumberofsharesoutstanding(inmillions) 576.3 511.2 552.7 511.6

Netearnings(loss)pershare:

Basic 0.04 (0.03) 0.11 0.02

Diluted 0.04 (0.03) 0.11 0.02

The following table lists theequity securitiesexcluded fromthecalculationofdilutedearningsper share. Suchequitysecurities were excluded as their respective exercise prices exceeded the average market price of the Company’scommonsharesofC$4.02andC$4.16forthethreeandsixmonthsendedJune30,2017(2016–C$5.42andC$4.74).



(inmillionsofunits) 2017 2016 2017 2016

EQUITYSECURITIESEXCLUDEDFROMTHECALCULATIONOFDILUTEDEARNINGSPERSHARE

Stockoptions 8.6 14.3 8.6 4.6

Warrants(1) - 27.9 - 27.91. OnJune28,2017,NewGold’ssharepurchasewarrantsexpired,unexercised.

12.INCOMEANDMININGTAXESThefollowingtableoutlinesthecompositionofincometaxexpensebetweencurrenttaxanddeferredtax:


(inmillionsofU.S.dollars) 2017 2016 2017 2016CURRENTINCOMEANDMININGTAXEXPENSE

Canada 0.7 2.5 1.5 1.6

Foreign 10.2 2.0 20.3 4.1

Adjustmentsinrespectofprioryear - - - (2.8)

10.9 4.5 21.8 2.9

DEFERREDINCOMEANDMININGTAXEXPENSE(RECOVERY)

Canada 1.6 0.6 (0.4) (3.7)

Foreign (5.2) 1.7 (11.8) (0.2)

(3.6) 2.3 (12.2) (3.9)

Totalincometaxexpense(recovery) 7.3 6.8 9.6 (1.0)


IncometaxexpensediffersfromtheamountthatwouldresultfromapplyingtheCanadianfederalandprovincialincometaxratestoearningsbeforetaxes.Thedifferencesresultfromthefollowingitems:


(inmillionsofU.S.dollars) 2017 2016 2017 2016Earnings(loss)beforetaxes 30.4 (7.1) 70.3 10.7

Canadianfederalandprovincialincometaxrates 25.8% 25.9% 25.8% 25.9%

Incometax(recovery)expensebasedonaboverates 7.8 (1.8) 18.1 2.8

INCREASE(DECREASE)DUETO

Permanentdifferences 4.9 10.8 5.0 4.9

Differentstatutorytaxratesonearningsofforeignsubsidiaries (9.4) 1.6 (12.6) 1.4

Foreignexchangeonnon-monetaryassetsandliabilities (4.9) 1.3 (6.3) (5.9)

Otherforeignexchangedifferences (1.8) (1.1) (1.3) 3.8

Prioryears’adjustmentsrelatingtotaxprovisionandtaxreturns - - (2.8)

Canadianminingtax 1.1 0.3 0.8 (0.1)

Mexicanspecialdutytax (0.2) 0.2 (0.3) 0.5

Withholdingtax - 0.1 - 0.2

Changeinunrecognizeddeferredtaxassets 9.9 (4.6) 14.6 (5.8)

DisposalofElMorrogoldstreamasset (0.1) - (8.4) -

Incometaxexpense(recovery) 7.3 6.8 9.6 (1.0)


13.RECLAMATIONANDCLOSURECOSTOBLIGATIONSChangestothereclamationandclosurecostobligationsareasfollows:


NewAfton Mesquite

PeakMines

CerroSanPedro

RainyRiver Blackwater Total

CHANGESTORECLAMATIONANDCLOSURECOSTOBLIGATIONS Balance–December31,2015 7.4 13.2 14.2 17.8 7.9 8.3 68.8

Reclamationexpenditures - - - (2.5) - - (2.5)

Unwindingofdiscount 0.1 0.2 0.3 0.7 0.2 0.2 1.7

Revisionstoexpectedcashflows (0.1) 0.2 (0.7) 4.2 11.8 0.1 15.5

Foreignexchangemovement 0.2 - (0.1) (2.1) 0.1 0.3 (1.6)

Balance–December31,2016 7.6 13.6 13.7 18.1 20.0 8.9 81.9Less: current portion of closure costs(Note5) - - (0.1) (0.8) - - (0.9)

Non-currentportionofclosurecosts 7.6 13.6 13.6 17.3 20.0 8.9 81.0

Balance–December31,2016 7.6 13.6 13.7 18.1 20.0 8.9 81.9

Reclamationexpenditures (0.3) - - (0.3) - - (0.6)

Unwindingofdiscount - 0.1 0.1 0.1 0.2 0.1 0.6

Revisionstoexpectedcashflows 3.7 0.3 0.2 1.6 6.4 0.3 12.5

Foreignexchangemovement 0.5 - 0.9 1.9 0.8 0.3 4.4

Balance–June30,2017 11.5 14.0 14.9 21.4 27.4 9.6 98.8Less: current portion of closure costs(Note5) - (0.1) (0.1) (0.9) - - (1.1)

Non-currentportionofclosurecosts 11.5 13.9 14.8 20.5 27.4 9.6 97.7

EachperiodtheCompanyreviewscostestimatesandotherassumptionsusedinthevaluationoftheobligationsateachof itsminingpropertiesanddevelopmentproperties to reflectevents, changes incircumstancesandnew informationavailable. Changes in these cost estimates and assumptions have a corresponding impact on the fair value of theobligation.Thefairvaluesoftheobligationsaremeasuredbydiscountingtheexpectedcashflowsusingadiscountfactorthatreflectstherisk-freerateofinterest.TheCompanypreparesestimatesofthetimingandamountofexpectedcashflowswhenanobligationisincurred.Expectedcashflowsareupdatedtoreflectchangesinfactsandcircumstances.Theprincipal factors that can cause expected cash flows to change are: the construction of new processing facilities;obligations realized through additional ore bodies mined; changes in the quantities of material in reserves and acorrespondingchangeintheLOM;changingorecharacteristicsthatimpactrequiredenvironmentalprotectionmeasuresandrelatedcosts;changesinwaterqualitythatimpacttheextentofwatertreatmentrequired;andchangesinlawsandregulationsgoverningtheprotectionoftheenvironment.Thefairvalueofanobligationisrecordedwhenitisincurred.

ForthesixmonthsendedJune30,2017,theCompanyupdatedthereclamationandclosurecostobligationsforeachofitsmine sites. The impact of these assessmentswas an increase of $12.5million (sixmonths ended June 30, 2016 –$5.8million),whichprimarilyrelatedtoNewAftonandtheRainyRiverproject.NewAfton’sincreaseof$3.7millionwasa result of an acquisition of a historical tailings facility adjacent to the site, and a decrease in the discount rate. KeydriversoftheRainyRiverliabilityincreaseof$6.4millionincludeadditionalobligationsrelatedtothecontinuedprojectadvancement.


14.SUPPLEMENTALCASHFLOWINFORMATIONSupplementalcashflowinformation(includedwithinoperatingactivities)isasfollows:



CHANGEINNON-CASHOPERATINGWORKINGCAPITAL

Tradeandotherreceivables (7.8) (4.8) 10.2 0.7

Inventories 4.0 (3.4) (0.9) (9.5)

Prepaidexpensesandother 1.4 2.1 1.7 3.5

Tradeandotherpayables 6.3 2.9 0.3 1.5

Totalchangeinnon-cashoperatingworkingcapital 3.9 (3.2) 11.3 (3.8)



OTHERNON-CASHADJUSTMENTS

Unrealized(gain)lossonsharepurchasewarrants (0.1) 0.1 (1.2) 0.5

Unrealized(gain)lossonconcentratecontracts (0.3) (1.8) (1.1) (2.0)

Equitysettledshare-basedpaymentexpense 1.1 0.9 2.4 3.1

Loss(gain)ondisposalofassets 0.1 0.2 (0.1) 0.3Settlement and loss on revaluation of gold price optioncontracts 1.3 7.6 15.7 4.3

Reversalofinventorywrite-down - - (0.5) -

Unrealizedlossongoldstreamobligation 2.0 10.4 5.0 25.5

Other (0.1) (1.0) (1.3) (1.4)

Totalothernon-cashadjustments 4.0 16.4 18.9 30.3


15.SEGMENTEDINFORMATION(a) Segment revenues and results The Companymanages its reportable operating segments by operatingmines, development projects and explorationprojects.Theresultsfromoperationsforthesereportableoperatingsegmentsaresummarizedinthefollowingtables:



NewAfton Mesquite

PeakMines

CerroSanPedro Corporate Other(1) Total

OPERATINGSEGMENTRESULTS

Goldrevenues 22.9 59.0 31.2 9.9 - - 123.0

Copperrevenues 48.4 - 8.9 - - - 57.3

Silverrevenues 1.1 - 1.7 2.5 - - 5.3

Totalrevenues(2) 72.4 59.0 41.8 12.4 - - 185.6

Operatingexpenses 26.2 32.7 23.4 12.4 - - 94.7

Depreciationanddepletion 34.4 16.8 10.4 2.0 - - 63.6

Earningsfrommineoperations 11.8 9.5 8.0 (2.0) - - 27.3

Corporateadministration - - - - 5.9 - 5.9

Share-basedpaymentexpenses - - - - 2.6 - 2.6Explorationandbusinessdevelopment 0.4 - 1.7 - - 1.1 3.2

Income(loss)fromoperations 11.4 9.5 6.3 (2.0) (8.5) (1.1) 15.6

Financeincome - - - - 0.4 - 0.4

Financecosts (0.2) (0.1) (0.2) (0.2) (0.6) - (1.3)

Othergains(losses) 6.6 0.1 1.0 - 0.3 7.7 15.7

Earnings(loss)beforetaxes 17.8 9.5 7.1 (2.2) (8.4) 6.6 30.4

Incometaxrecovery(expense) 9.2 (2.8) (1.8) 2.9 (9.3) (5.5) (7.3)

Netearnings(loss) 27.0 6.7 5.3 0.7 (17.7) 1.1 23.11. Otherincludesbalancesrelatingtothedevelopmentandexplorationpropertiesthathavenorevenuesoroperatingcosts.2. Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the three months ended

June30,2017.




NewAfton Mesquite

PeakMines



Goldrevenues 47.1 96.2 66.2 22.6 - - 232.1

Copperrevenues 95.0 - 16.5 - - - 111.5

Silverrevenues 2.1 - 4.1 5.3 - - 11.5

Totalrevenues(2) 144.2 96.2 86.8 27.9 - - 355.1



Earningsfrommineoperations 21.5 15.8 20.9 (1.7) - - 56.5


Share-basedpaymentexpenses - - - - 3.8 - 3.8Explorationandbusinessdevelopment 0.4 - 3.2 - 0.2 2.6 6.4

Income(loss)fromoperations 21.1 15.8 17.7 (1.7) (17.4) (2.6) 32.9


Financecosts (0.5) (0.2) (0.4) (0.3) (1.2) (0.1) (2.7)

Othergains(losses)(3) 8.8 (5.2) (0.9) (1.7) (5.4) 43.9 39.5

Earnings(loss)beforetaxes 29.4 10.4 16.4 (3.7) (23.4) 41.2 70.3

Incometaxrecovery(expense) 4.1 (3.9) (4.5) 0.4 (4.7) (1.0) (9.6)

Netearnings(loss) 33.5 6.5 11.9 (3.3) (28.1) 40.2 60.71. Otherincludesbalancesrelatingtothedevelopmentandexplorationpropertiesthathavenorevenuesoroperatingcosts.2. Segmentedrevenuereportedaboverepresentsrevenuegeneratedfromexternalcustomers.Therewerenointer-segmentsalesinthesixmonthsendedJune30,2017.3. Othergains(losses)includeforeignexchangerevaluation,anda$33.0milliongainonthedisposaloftheElMorrostream.


ThreemonthsendedJune30,2016(3)

(inmillionsofU.S.dollars) NewAfton Mesquite Peak

MinesCerroSan

Pedro Corporate Other(1) Total

Operatingsegmentresults

Goldrevenues 26.5 33.8 23.3 26.7 - - 110.3

Copperrevenues 45.3 - 7.8 - - - 53.1

Silverrevenues 0.8 - 0.4 4.3 - - 5.5

Totalrevenues(2) 72.6 33.8 31.5 31.0 - - 168.9


Depreciationanddepletion 33.3 8.1 11.0 2.7 - - 55.1Earnings(loss)frommineoperations 14.6 1.3 (4.0) 2.3 - - 14.2


Share-basedpaymentexpenses - - - - 2.1 - 2.1Explorationandbusinessdevelopment - - 0.6 - 0.1 0.4 1.1

Income(loss)fromoperations 14.6 1.3 (4.6) 2.3 (8.2) (0.4) 5.0


Financecosts (0.1) (0.1) (0.1) (0.1) (9.4) (1.0) (10.8)

Othergains(losses) (20.7) (2.3) 3.3 (1.8) 3.3 (13.2) (31.4)

Earnings(loss)beforetaxes (6.2) (1.1) (1.4) 0.4 (14.1) (14.6) (37.0)

Incometaxrecovery(expense) (7.7) 0.7 0.6 0.8 (0.8) (0.4) (6.8)

Netearnings(loss) (13.9) (0.4) (0.8) 1.2 (14.9) (15.0) (43.8)ThreemonthsendedJune30,2014


NewAfton Mesquite

PeakMines



Goldrevenues 30.8 39.2 34.4 20.8 - - 125.2

Copperrevenues 44.4 - 5.2 - - - 49.6

Silverrevenues 1.1 - 0.6 3.8 - - 5.5

Revenues(2) 76.3 39.2 40.2 24.6 - - 180.3


Depreciationanddepletion 41.1 9.9 14.7 0.7 - - 66.4Earnings(loss)frommineoperations 6.9 10.5 6.7 5.1 - - 29.2


Share-basedpaymentexpenses - - - - 2.8 - 2.8Explorationandbusinessdevelopment 0.4 - 1.5 - - 0.1 2.0

Income(loss)fromoperations 6.5 10.5 5.2 5.1 (8.7) (0.1) 18.5


Financecosts (0.3) (0.1) (0.1) (0.1) (2.5) - (3.1)

Other(losses)gains (3.1) (2.5) (2.6) (5.1) (9.3) (0.1) (22.7)

Earnings(loss)beforetaxes 3.1 7.9 2.5 (0.1) (20.3) (0.2) (7.1)

Incometaxrecovery(expense) 4.8 (2.0) (2.3) (2.2) (7.5) 2.4 (6.8)

Netearnings(loss) 7.9 5.9 0.2 (2.3) (27.8) 2.2 (13.9)1. Otherincludesbalancesrelatingtothedevelopmentandexplorationpropertiesthathavenorevenuesoroperatingcosts.2. Segmented revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the three months ended

June30,2016.3. Priorperiodcomparativeshavebeenrevisedaspernote2(c).


SixmonthsendedJune30,2016(3)

(inmillionsofU.S.dollars) NewAfton Mesquite PeakMinesCerroSan

PedroCorporate Other(1) Total

Operatingsegmentresults

Goldrevenues 26.5 33.8 23.3 26.7 - - 110.3

Copperrevenues 45.3 - 7.8 - - - 53.1

Silverrevenues 0.8 - 0.4 4.3 - - 5.5

Totalrevenues(2) 72.6 33.8 31.5 31.0 - - 168.9



Earnings(loss)frommineoperations

14.6 1.3 (4.0) 2.3 - - 14.2


Share-basedpaymentexpenses - - - - 2.1 - 2.1Explorationandbusinessdevelopment

- - 0.6 - 0.1 0.4 1.1



Financecosts (0.1) (0.1) (0.1) (0.1) (9.4) (1.0) (10.8)

Othergains(losses) (20.7) (2.3) 3.3 (1.8) 3.3 (13.2) (31.4)

Earnings(loss)beforetaxes (6.2) (1.1) (1.4) 0.4 (14.1) (14.6) (37.0)

Incometaxrecovery(expense) (7.7) 0.7 0.6 0.8 (0.8) (0.4) (6.8)

Netearnings(loss) (13.9) (0.4) (0.8) 1.2 (14.9) (15.0) (43.8)


(inmillionsofU.S.dollars)NewAfton

Mesquite PeakMines

CerroSanPedro

Corporate Other(1) Total


Goldrevenues 58.0 69.2 55.2 43.1 - - 225.5

Copperrevenues 86.9 - 11.8 - - - 98.7

Silverrevenues 2.0 - 0.9 7.7 - - 10.6

Revenues(2) 146.9 69.2 67.9 50.8 - - 334.8


Depreciationanddepletion 79.4 18.8 27.7 1.5 - - 127.4Earnings(loss)frommineoperations 14.8 16.3 1.2 8.5 - - 40.8


Share-basedpaymentexpenses - - - - 5.8 - 5.8Explorationandbusinessdevelopment 0.6 - 3.6 - 0.1 0.2 4.5



Financecosts (0.4) (0.3) (0.3) (0.3) (6.3) (0.1) (7.7)

Othergains(losses) 11.8 (1.3) (0.2) (2.7) (19.9) 11.3 (1.0)

Earnings(loss)beforetaxes 25.6 14.7 (2.9) 5.5 (43.2) 11.0 10.7

Incometax(expense)recovery (4.8) (2.5) 0.2 (1.4) 8.1 1.4 1.0

Netearnings(loss) 20.8 12.2 (2.7) 4.1 (35.1) 12.4 11.71. Otherincludesbalancesrelatingtothedevelopmentandexplorationpropertiesthathavenorevenuesoroperatingcosts.2. Segmentedrevenuereportedaboverepresentsrevenuegeneratedfromexternalcustomers.Therewerenointer-segmentsalesinthesixmonthsendedJune30,2016.3. Priorperiodcomparativeshavebeenrevisedaspernote2(c).

(b) Segmented assets and liabilities Thefollowingtablepresentsthesegmentedassetsandliabilities:

Totalassets Totalliabilities Capitalexpenditure(1)

Asat

June30Asat

December31Asat

June30Asat

December31

SixmonthsendedJune30(inmillionsofU.S.dollars) 2017 2016(3) 2017 2016(3) 2017 2016(3)SEGMENTEDASSETSANDLIABILITIES NewAfton 914.6 961.5 121.9 128.4 21.6 21.1

Mesquite 509.7 513.3 132.4 139.9 4.9 23.3

PeakMines 182.0 171.0 69.7 64.4 13.9 4.9

CerroSanPedro 54.5 60.5 32.3 29.8 0.7 0.7

RainyRiver 1,818.1 1,505.1 533.8 545.6 286.4 189.8

Blackwater 555.2 547.9 56.5 55.6 4.1 4.3

Other(2) 109.3 173.9 888.4 896.0 0.2 1.5

Totalassetsandliabilities 4,143.4 3,933.0 1,835.0 1,859.8 331.8 245.61. Capitalexpenditureperconsolidatedstatementofcashflows.2. Otherincludescorporatebalances,explorationpropertiesandtheElMorrogoldstreamasset.3. Prior-yearperiodcomparativeshavebeenrevisedaspernote2(c).


16.FAIRVALUEMEASUREMENTFairvalueisthepricethatwouldbereceivedwhensellinganassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsat themeasurementdate. Inassessingthefairvalueofaparticularcontract, themarketparticipantwouldconsiderthecreditriskofthecounterpartytothecontract.Consequently,whenitisappropriatetodoso, the Company adjusts the valuation models to incorporate a measure of credit risk. Fair value representsmanagement'sestimatesofthecurrentmarketvalueatagivenpointintime.

TheCompanyhascertain financialassetsand liabilities thatareheldat fairvalue.The fairvaluehierarchyestablishesthree levels toclassify the inputs tovaluationtechniquesusedtomeasure fairvalue.Level1 inputsarequotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.Level2inputsarequotedpricesinmarketsthatarenotactive,quotedpricesforsimilarassetsorliabilitiesinactivemarkets,inputsotherthanquotedpricesthatareobservablefortheassetor liability(forexample, interestrateandyieldcurvesobservableatcommonlyquotedintervals, forwardpricing curves used to value currency and commodity contracts), or inputs that are derived principally from orcorroborated by observablemarket data or othermeans. Level 3 inputs are unobservable (supported by little or nomarketactivity).The fairvaluehierarchygives thehighestpriority toLevel1 inputsand the lowestpriority toLevel3inputs.

There were no transfers among Levels 1, 2 and 3 during the six months ended June 30, 2017 or the year endedDecember31,2016.TheCompany’spolicyistorecognizetransfersintoandtransfersoutoffairvaluehierarchylevelsasofthedateoftheeventorchangeincircumstancesthatcausedthetransfer.

ValuationmethodologiesforLevel2and3financialassetsandliabilities:

ProvisionallypricedcontractsandgoldandcopperswapcontractsThefairvalueoftheprovisionallypricedcontractsandthegoldandcopperswapcontractsiscalculatedusingthemark-to-marketforwardpricesofLondonMetalsExchangegoldandcopperbasedontheapplicablesettlementdatesoftheoutstandingprovisionallypricedcontractsandcopperswapcontracts.

GoldoptioncontractsandcopperforwardcontractsThe fair value of the gold option contracts and copper forward contracts are calculated using the mark-to-marketmethodbasedon fair valuepricesobtained fromthecounterpartiesof thegoldoptioncontractsandcopper forwardcontracts.

Goldstreamobligation

Thefairvalueofthegoldstreamobligationiscalculatedusingtherisk-freeinterestratederivedfromthefifteen-yearU.S.Treasury rate, forwardmetal prices, company specific credit spread based on the yield on the Company’s 2025 SeniorUnsecuredNotes,andexpectedgoldandsilverouncestobedeliveredfromtheRainyRiverprojectlifeofminemodel.

Performanceshareunits(PSU)The fair value of the PSU liability is calculated using the quantity of base options subject to cash settlement, theweighted-averagethree-yearachievedperformanceratio(calculatedusingtheannualizedreturnoftheCompany’ssharepricecomparedtotheannualizedreturnoftheS&PGlobalGoldIndex)andtheexpectedsharepriceattheendofthevestingperiodbasedonanalystconsensusonthefutureshareprice.

ThefollowingtablesummarizestheCompany’sfinancialassetsandliabilitiesbycategoryandinformationaboutfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisinthestatementoffinancialpositioncategorizedbylevelofsignificanceoftheinputsusedinmakingthemeasurements:


AsatJune30,2017 AsatDecember31,2016

(inmillionsofU.S.dollars) Category Level Level

FINANCIALASSETS Cashandcashequivalents Loansandreceivablesatamortizedcost 198.8 185.9Tradeandotherreceivables Loansandreceivablesatamortizedcost 42.1 41.6Provisionallypricedcontracts FinancialinstrumentsatFVTPL 2 2.9 2 4.5

Goldandcopperswapcontracts FinancialinstrumentsatFVTPL 2 (1.8) 2 (9.0)Goldpriceoptions FinancialInstrumentsatFVTPL 2 2.9 2 17.6Investments FinancialinstrumentsatFVTPL 1 1.1 1 1.1Copperforwardcontracts FinancialinstrumentsatFVTPL 2 1.5 2 0.3

FINANCIALLIABILITIES Tradeandotherpayables(1) Financialliabilitiesatamortizedcost 149.0 168.3Long-termdebt Financialliabilitiesatamortizedcost 880.1 889.5

Warrants FinancialInstrumentsatFVTPL 1 - 1 1.3Goldstreamobligation FinancialInstrumentsatFVTPL 3 246.0 3 246.5Dieselswapcontracts FinancialliabilityatfairvaluethroughOCI 2 - 2 0.1Performanceshareunits FinancialInstrumentsatFVTPL 3 2.7 3 2.1Restrictedshareunits FinancialinstrumentsatFVTPL 1 1.8 1 0.91. Tradeandotherpayablesexcludetheshorttermportionofreclamationandclosurecostobligationsandtheshorttermportionofthegoldstreamobligation.


ThecarryingvaluesandfairvaluesoftheCompany’sfinancialinstrumentsareasfollows:

AsatJune30,2017 AsatDecember31,2016


Carryingvalue Fairvalue

Carryingvalue Fairvalue

FINANCIALASSETS

Cashandcashequivalents 198.8 198.8 185.9 185.9

Tradeandotherreceivables 42.2 42.2 41.6 41.6

Provisionallypricedcontracts 2.9 2.9 4.5 4.5

Goldandcopperswapcontracts (1.9) (1.9) (9.0) (9.0)

Investments 1.1 1.1 1.1 1.1

Goldpriceoptions 2.9 2.9 17.6 17.6

Copperforwardcontracts 1.5 1.5 0.3 0.3

FINANCIALLIABILITIES

Tradeandotherpayables(1) 149.0 149.0 168.3 168.3

Long-termdebt 880.1 922.8 889.5 920.0

Goldstreamobligation 246.0 246.0 246.5 246.5

Sharepurchasewarrants - - 1.3 1.3

Dieselswapcontracts - - 0.1 0.1

Performanceshareunits 2.7 2.7 2.1 2.1

Restrictedshareunits 1.8 1.8 0.9 0.91. Tradeandotherpayablesexcludetheshorttermportionofreclamationandclosurecostobligationandtheshorttermportionofthegoldstreamobligation.

17.COMMITMENTSANDCONTINGENCIESThe Company has entered into a number of contractual commitments for capital items relating to operations anddevelopment.AtJune30,2017,thesecommitmentstotaled$280.0million,$259.2millionofwhichareexpectedtofalldueoverthenext12months.Thiscomparestocommitmentsof$130.2millionasatDecember31,2016,$103.2millionofwhichwasexpectedtofalldueovertheupcomingyear.Certaincontractualcommitmentsmaycontaincancellationclauses;however,theCompanydisclosesitscommitmentsbasedonmanagement’sintenttofulfillthecontracts.

18.SUBSEQUENTEVENTSSubsequenttoJune30,2017theCompanybeganaprocessforthesaleofPeakMines,itsgold-copperminelocatedinAustralia.Potentialbuyershaveexpressed interest inacquiringthemine.TheCompanyexpectsasalewithinthenext12monthsanduponcommencementoftheprocessmetthecriteriaasheldforsaleunderIFRS5.

DIRECTORS

David Emerson (1), (3) Corporate Director, Public Policy Advisor

James Estey (2) Corporate Director

Vahan Kololian (3), (4) Managing Partner, TerraNova Partners LP

Martyn Konig (1), (3) Chief Investment Officer, T Wealth Management SA

Randall Oliphant Corporate Director

Ian Pearce (2), (4) Chair of the Board, New Gold

Hannes Portmann President and Chief Executive Officer

Kay Priestly (1), (2) Corporate Director

Marilyn Schonberner Chief Financial Officer and Senior Vice President, and Executive Director, Nexen Energy ULC

Raymond Threlkeld (4) Interim Chief Operating Officer; Corporate Director and Consultant

Board Committees(1) Audit Committee(2) Compensation Committee(3) Corporate Governance and Nominating Committee(4) Health, Safety, Environment and Corporate Social Responsibility Committee

OFFICERS

Hannes Portmann President and Chief Executive Officer

Brian Penny Executive Vice President and Chief Financial Officer

Raymond Threlkeld Interim Chief Operating Officer

Cory Atiyeh Vice President, Operations

Lisa Damiani Vice President, General Counsel and Corporate Secretary

Brett Gagnon Vice President, Information Technology

Barry O’Shea Vice President, Business Development

Armando Ortega Vice President, Latin America

Mark Petersen Vice President, Exploration

Martin Wallace Vice President, Treasurer

COMPANY INFORMATION

Toronto Office

Brookfield Place

181 Bay Street, Suite 3510, Toronto, ON M5J 2T3

t: +1.416.324.6000 • f: +1.416.324.9494 • tf: +1.888.315.9715

www.newgold.com

Investor Relations

tf: +1.888.315.9715 • f: +1.416.324.9494 • e: [email protected]

Media Inquiries

t: +1.416.324.6015 • f: +1.416.324.9494 • e: [email protected]

Transfer Agent

Computershare Investor Services Inc.

tf: +1.800.564.6253 (North America)

t: +1.514.982.7555 (International)

f: +1.604.661.9401

Additional Information

New Gold encourages the electronic delivery of correspondence

and supports responsible use of forest resources. For any inquiries,

or to request printed or electronic delivery of correspondence,

please email us at [email protected].

Corporate Information(As of July 26, 2017)

TORONTO OFFICE

Brookfield Place

181 Bay Street, Suite 3510

Toronto, ON M5J 2T3

t: +1.416.324.6000

f: +1.416.324.9494

INVESTOR RELATIONS

tf: +1.888.315.9715

f: +1.416.324.9494

e: [email protected]

www.newgold.com

TSX/NYSE MKT: NGD

PORTFOLIO OF ASSETS IN TOP-RATED JURISDICTIONS

INVESTED AND EXPERIENCED TEAM

AMONG LOWEST-COST PRODUCERS WITH ESTABLISHED TRACK RECORD

STRONG GROWTH PIPELINE

A HISTORY OF VALUE CREATION

WHY INVEST IN NEW GOLD?

Outside Back Cover

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