2017 FINANCIAL REVIEW€¦ · FINANCIAL REVIEW. Inside Front Cover. 1 TSX:NGD NYSE American:NGD...

Outside Front Cover

2017 FINANCIAL REVIEW

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1 WWW.NEWGOLD.COMTSX:NGDNYSEAmerican:NGD

OPERATINGANDFINANCIALHIGHLIGHTS

OPERATINGHIGHLIGHTSAlldollarfiguresareinUnitedStatesdollarsandtabulardollaramountsareinmillions,unlessotherwisenoted.

NewGoldInc.(“NewGold”orthe“Company”)isanintermediategoldproducerwithoperatingminesinCanada,theUnitedStates,AustraliaandMexico,andadevelopmentproject inCanada. For theyearendedDecember31,2017, theRainyRiverMine inCanada (“RainyRiver”), theNewAftonMine inCanada(“NewAfton”),theMesquiteMine intheUnitedStates(“Mesquite”),thePeakMines inAustralia(“PeakMines”),whichhasbeenclassifiedasadiscontinuedoperationduring2017,andtheCerroSanPedroMineinMexico(“CerroSanPedro”),whichhasbeenisinresidualleachingsinceJune2016,combinedtoproduce422,411goldounces (430,949goldounces inclusiveof theRainyRiverprecommercialproductionperiod),104.3millionpoundsofcopperand1.2millionsilverounces.ForthethreemonthsendedDecember31,2017,theCompany’soperatingminescombinedtoproduce145,992goldounces(154,530goldounces inclusiveoftheRainyRiverprecommercialproductionperiod),28.1millionpoundsofcopperand0.3millionsilverounces.NewGold’sRainyRiverMinecommencedcommercialproductionduringthefourthquarterof2017.

1. AmountspresentedincludeproductionfromPeakMines,whichhasbeenclassifiedasadiscontinuedoperationfortheyearendedDecember31,2017.2. TheCompanyusescertainnon-GAAPfinancialperformancemeasuresthroughoutthisManagement’sDiscussionandAnalysis(“MD&A”).Foradetaileddescriptionofeach

ofthenon-GAAPmeasuresusedinthisMD&Aandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

NewGold’sproductioncostsremainedverycompetitivecomparedtothebroadergoldminingindustryasNewGoldhadoperatingexpenses(2)of$646pergoldouncesold,all-insustainingcostsfromcontinuingoperations(2)of$668pergoldouncesold,andall-insustainingcosts(2)of$727pergoldouncesoldin2017.

ALL-INSUSTAINING(1)COSTS($PERGOLDOUNCESOLD)

COPPERPRODUCTION(1)

(MILLIONSOFPOUNDS)

GOLDPRODUCTION(1)

(THOUSANDSOFOUNCES)

436 382

422

525-595

0

100

200

300

400

500

600

2015 2016 2017 2018GUIDANCE

100 102 104

75-85

0

50

100

150

2015 2016 2017 2018GUIDANCE

7%

20%

40%

8%

25% RainyRiver

NewANon

Mesquite

CerroSanPedro

PeakMines

422,411OUNCES

2017GOLDPRODUCTIONBYOPERATINGMINE

1.9

1.3 1.2 0.8-1.0

0.0

0.5

1.0

1.5

2.0

2015 2016 2017 2018GUIDANCE

SILVERPRODUCTION(1)(MILLIONSOFOUNCES)


FINANCIALHIGHLIGHTS

2017 2016 2015OPERATINGINFORMATION(4) Goldproductionfromcontinuingoperations(ounces) 317,898 274,214 345,866Goldproduction(ounces) 422,411 381,663 435,718Goldsalesfromcontinuingoperations(ounces) 309,454 274,843 339,587

Goldsales(ounces) 410,086 378,239 428,852Goldrevenuefromcontinuingoperations($/ounce)(1) 1,247 1,207 1,122Goldaveragerealizedpricefromcontinuingoperations($/ounce)(1) 1,278 1,246 1,152

Operatingexpensespergoldouncesoldfromcontinuingoperations($/ounce)(1)

646

623

606

All-insustainingcostspergoldouncesoldfromcontinuingoperations($/ounce)(1)

668

675

867

All-insustainingcostspergoldouncesold($/ounce)(1) 727 692 903

FINANCIALINFORMATION Revenue 604.4 522.8 582.9

(Loss)earningsfromcontinuingoperations (101.7) 5.5 (168.3)Net(loss) (108.0) (7.0) (201.4)Adjustednetearningsfromcontinuingoperations(1) 21.3 19.4 1.8Adjustednetearnings(loss)(1) 49.3 14.6 (10.9)

Operatingcashflowsgeneratedfromcontinuingoperations 275.0 225.0 245.8Cashgeneratedfromoperations 342.2 282.2 262.6Cashgeneratedfromoperationsbeforechangesinnon-cashoperatingworkingcapital(3)

299.2

301.8

276.4

Cashandcashequivalents 216.2 185.9 335.5

Totalcapitalexpenditures(sustainingcapital)(1) 88.4 87.4 121.5Totalcapitalexpenditures(growthcapital)(1) 513.4 479.6 268.0

SHAREDATA (Loss)earningspersharefromcontinuingoperations($) (0.18) (0.02) (0.33)(Loss)earningsperbasicshare($) (0.19) (0.01) (0.40)Adjustednetearningsperbasicsharefromcontinuingoperations(1)($) 0.04 0.04 0.00Adjustednetearnings(loss)perbasicshare(1)($) 0.09 0.03 (0.02)

1. TheCompanyusescertainnon-GAAPfinancialperformancemeasuresthroughoutthisMD&A.Foradetaileddescriptionofeachofthenon-GAAPmeasuresusedinthisMD&Aandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

2. Ofthe$400millioncreditfacility,$230millionhasbeendrawnand$139millionhasbeenutilizedforlettersofcredit,bothasatDecember31,2017.3. AmountspresentedincludeoperatingcashflowsfromPeakMines,whichhasbeenclassifiedasadiscontinuedoperationfortheyearendedDecember31,2017.4. Goldproductionexcludes8,538goldouncesproducedduringRainyRiver’sprecommercialproductionperiod.

OPERATINGCASHFLOW

(MILLIONSOFU.S.DOLLARS)

NewGoldhastotalavailableliquidityof$247million,comprisedof$216millionincashandcashequivalentsand$31millionavailablefordrawdownunderthe

Company’s$400millionrevolvingcreditfacility,eachasatDecember31,2017.

263 282342

276 302 299

0

100

200

300

400

2015 2016 2017Cashgeneratedfromoperacons

Cashgeneratedfromoperaconsbeforechangesinnon-cashoperacngworkingcapital(1)(3)

(3)

$216

$31(2)

CashandCashEquivalents

UndrawnCreditFacilityatDecember31,2017

$247MILLION


Contents

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

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

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

OPERATINGANDFINANCIALHIGHLIGHTS..........................................................................................................................5

CORPORATEDEVELOPMENTS...........................................................................................................................................11

CORPORATESOCIALRESPONSIBILITY...............................................................................................................................12

NEWGOLD’SINVESTMENTTHESIS...................................................................................................................................15

OUTLOOKFOR2018.........................................................................................................................................................16

KEYPERFORMANCEDRIVERS...........................................................................................................................................17

FINANCIALRESULTS..........................................................................................................................................................21

REVIEWOFOPERATINGMINES........................................................................................................................................34

DISCONTINUEDOPERATIONS...........................................................................................................................................45

MINERALRESERVESANDRESOURCESUPDATE(1).............................................................................................................51

FINANCIALCONDITIONREVIEW.......................................................................................................................................54

NON-GAAPFINANCIALPERFORMANCEMEASURES.........................................................................................................61

ENTERPRISERISKMANAGEMENTANDRISKFACTORS.....................................................................................................91

CRITICALJUDGMENTSANDESTIMATIONUNCERTAINTIES............................................................................................107

ACCOUNTINGPOLICIES...................................................................................................................................................107

CONTROLSANDPROCEDURES........................................................................................................................................108

MINERALRESERVESANDMINERALRESOURCES............................................................................................................109

CAUTIONARYNOTES.......................................................................................................................................................114


MANAGEMENT’SDISCUSSIONANDANALYSISFortheyearendedDecember31,2017

ThefollowingManagement’sDiscussionandAnalysis(“MD&A”)providesinformationthatmanagementbelievesisrelevantto an assessment and understanding of the consolidated financial condition and results of operations ofNewGold Inc.and itssubsidiaries (“NewGold”or the“Company”).ThisMD&Ashouldberead inconjunctionwithNewGold’sauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2017and2016andrelatednotes,whicharepreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”).ThisMD&Acontainsforward-lookingstatementsthataresubjecttorisksanduncertainties,asdiscussedinthe cautionary note contained in this MD&A. The reader is cautioned not to place undue reliance on forward-lookingstatements.AlldollarfiguresareinUnitedStatesdollarsandtabulardollaramountsareinmillions,unlessotherwisenoted.ThisMD&A has been prepared as at February 20, 2018. Additional information relating to the Company, including theCompany’sAnnualInformationForm,isavailableonSEDARatwww.sedar.com.

OURBUSINESSNew Gold is an intermediate gold producer with operating mines in Canada, the United States and Australia, and adevelopmentprojectinCanada.TheCompany’soperatingpropertiesconsistoftheRainyRivergoldmineinCanada(“RainyRiver”),NewAftongold-coppermineinCanada(“NewAfton”),theMesquitegoldmineintheUnitedStates(“Mesquite”),and thePeakMinesgold-coppermine inAustralia (“PeakMines”)whichhasbeenclassifiedasadiscontinuedoperationduring2017.TheCompany’sCerroSanPedrogold-silvermineinMexico(“CerroSanPedro”)hasbeeninresidualleachingsinceJune2016.NewGold’sdevelopmentprojectisits100%-ownedBlackwatergold-silverproject(“Blackwater”),locatedinCanada.OnFebruary17,2017,theCompanysoldits4%streamonfuturegoldproductionfromtheElMorropropertylocatedinChile(“ElMorro”)toanaffiliateofGoldcorpInc.for$65millioncash.

NewGold’soperatingportfolioisdiverseintherangeofcommoditiesitproduces.Theassetsproducegold,withcopperand silver by-products, at low costs. The Company believes it has a solid platform to continue to execute its growthstrategy,bothorganicallyandthroughvalue-enhancingaccretiveacquisitions,tofurtherestablish itselfasan industry-leadingintermediategoldproducer.

RainyRiver

NewAfton

Blackwater

CerroSanPedroMesquite

PeakMines(classifiedasadiscontinuedoperation)

• DEVELOPMENT• OPERATING


OPERATINGANDFINANCIALHIGHLIGHTSOPERATING HIGHLIGHTS

ThreemonthsendedDecember31 YearendedDecember31

2017 2016 2017 2016 2015

OPERATINGINFORMATION

Gold(ounces):

Producedfromcontinuingoperations(1) 110,240 77,296 317,898 274,214 345,866

Produced(1) 145,992 95,883 422,411 381,663 435,718Soldfromcontinuingoperations(1) 108,782 75,887 309,454 274,843 339,587

Sold(1) 143,644 93,936 410,086 378,239 428,852Copper(millionsofpounds): Producedfromcontinuingoperations(1) 24.6 21.4 90.6 87.3 85.9Produced(1) 28.1 25.6 104.4 102.3 100.0Soldfromcontinuingoperations(1) 22.0 21.1 84.5 84.9 79.7Sold(1) 24.9 24.6 96.6 99.2 92.9Silver(millionsofounces): Producedfromcontinuingoperations(1) 0.3 0.3 1.0 1.1 1.7Produced(1) 0.3 0.3 1.2 1.3 1.9Soldfromcontinuingoperations(1) 0.2 0.2 0.9 1.1 1.7Sold(1) 0.3 0.3 1.1 1.3 1.8Revenuefromcontinuingoperations(1):

Gold($/ounce) 1,252 1,181 1,247 1,207 1,122

Copper($/pound) 2.44 2.24 2.41 2.03 2.21

Silver($/ounce) 15.84 16.35 16.41 16.71 15.20

Averagerealizedpricefromcontinuingoperations(1)(2):

Gold($/ounce) 1,274 1,199 1,278 1,242 1,152

Copper($/pound) 2.70 2.47 2.66 2.23 2.42

Silver($/ounce) 16.29 16.78 16.88 17.09 15.38Operatingexpensespergoldouncesoldfromcontinuingoperations($/ounce)(3)

738

771

646

623

606

Operatingexpensespercopperpoundsoldfromcontinuingoperations($/pound)(3)

1.56

1.57

1.34

1.11

1.27

Operatingexpensespersilverouncesoldfromcontinuingoperations($/ounce)(3)

9.44

10.66

8.54

8.55

8.66

Totalcashcostspergoldouncesoldfromcontinuingoperations($/ounce)(2)(4)

572

288

360

259

618

Totalcashcostspergoldouncesold($/ounce)(2)(4) 533 360 403 349 443All-insustainingcostspergoldouncesoldfromcontinuingoperations($/ounce)(2)(4)

774

590

668

675

867

All-insustainingcostspergoldouncesold($/ounce)(2)(4) 771 619 727 692 809Totalcashcostspergoldouncesoldonaco-productbasis($/ounce)(2)(4)

746

647

697

634

661

All-insustainingcostspergoldouncesoldonaco-productbasis($/ounce)(2)(4)

916

812

909

861

903

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-insustainingcostsonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productoftheCompany’sgoldproductionandapportionsthecashcoststoeachmetalproducedonapercentageofrevenuebasis.Ifsilverandcopperrevenueweretreatedasco-products,co-producttotalcashcostsfortheyearendedDecember31,2017 from continuing operationswould be $8.98 per silver ounce sold (2016 - $8.19) and $1.58 per copper pound sold (2016 - $1.22) and co-product all-in sustainingcostsfortheyearendedDecember31,2017wouldbe$11.52persilverouncesold(2016-$11.74)and$1.98percopperpoundsold(2016-$1.66).Co-producttotalcashcosts for the threemonthsendedDecember31,2017 fromcontinuingoperationswouldbe$9.90per silverouncesold (2016 -$8.80)and$1.83percopperpoundsold(2016-$1.41)andco-productall-insustainingcosts fortheyearendedDecember31,2017wouldbe$11.67persilverouncesold(2016-$11.39)and$2.13percopperpoundsold(2016-$1.79).

TheCompanybeganaprocessforthesaleofPeakMinesandenteredintoabindingagreementwithAureliaMetalsLimited(“Aurelia”) in2017;closingofthesaleoftheasset isexpectedinthefirstquarterof2018.AssuchPeakMineshasbeenclassified as a discontinued operation. Operating highlights are disclosed on a continuing and total basis, whereappropriate.

RainyRiverreachedcommercialproductioninthefourthquarterof2017.Fromanaccountingperspective,theCompanyrecognizedcommercialproductioneffectiveNovember1,2017,beingthefirstdayofthemonthfollowingsatisfactionofthecommercialproductioncriteria.Priortothecommercialproductiondatethemineproduced8,538goldounces,withtheassociatedproceedsreducingthecapitalcostsoftheproject.GoldouncesproducedfortheyearendedDecember31,2017areshownexclusiveoftheprecommercialperiod,unlessotherwisenoted.Otheroperatingandfinancialinformationrepresentthepostcommercialproductionperiod.

Goldproductionfromcontinuingoperationsof317,898ouncesfortheyearendedDecember31,2017washigherthanthe274,214ouncesintheprior-yearperiod.HigherproductionatMesquiteandadditionalouncesfromRainyRiver’sstart-upwere partially offset by planned lower production at New Afton and Cerro San Pedro. Cerro San Pedro’s productiondecreased as the mine is in the residual leaching phase. Gold production from total operations of 422,411 ounces(430,949 ounces including the Rainy River pre commercial production period) was above the prior-year period. ThecombinationofRainyRiver’sstartup,Mesquite’sverystrongyearandsolidoperatingresultsatNewAftonandPeakMines,enabledtheCompanytoachieveitsguidancerangeof380,000to430,000ounces.

ForthethreemonthsendedDecember31,2017,goldproductionfromcontinuingoperationswas110,240comparedwith77,926 in theprior-yearperiod.Higherproductionwasattributable toMesquite’s strong fourthquartergoldproductionand the additional ounces from Rainy River’s start-up. In the fourth quarter of 2017, the Company delivered recordquarterlygoldproductionof145,992ounces(includingPeakMines).

Goldsalesfromtotaloperationswere410,086ouncesfortheyearendedDecember31,2017,comparedto378,239ouncesintheprior-yearperiod.Timingofsalesattheendoftheperiodresultedinadifferencebetweenouncessoldandouncesproduced.Goldsaleswere143,644ouncesforthethreemonthsendedDecember31,2017,comparedto93,936ouncesintheprior-yearperiod.

Copper production from continuing operations and total operations for the year ended December 31, 2017 increasedcompared to the prior-year period due to higher grades and higher ore tonnes processed at New Afton. Total copperproduction of 104.4 million pounds achieved the Company’s guidance range of 100 to 110 million pounds. CopperproductionforthequarterendedDecember31,2017washigherthantheprior-yearquarter.

Copper sales from total operations were 96.6 million pounds for the year ended December 31, 2017, compared to99.2million pounds in the prior-year period. Timing of sales at the end of the period resulted in a difference betweenpoundssoldandpoundsproduced.ForthethreemonthsendedDecember31,2017,coppersaleswere24.9millionpoundsconsistentwiththeprior-periodof24.6millionpounds.


Operating expenses from continuing operations per gold ounce for the year ended December 31, 2017 was $646, anincreasefromtheprior-yearof$623duetoincreasedprocessflowsolutionatMesquiteoperationsandhigheroperatingexpensesatRainyRiverwhichcommencedcommercialproduction inthefourthquarterof2017.Operatingexpenseperounceofgoldsoldachieved theguidance rangeof$630 to$670perounce. For the threemonthsendedDecember31,2017,operatingexpensesfromcontinuingoperationspergoldouncesoldwas$738comparedwith$771intheprior-yearperiodduetotheprior-yearperiodbeingnegativelyimpactedbyaheapleachsilverinventorywrite-downof$24.0millionatCerroSanPedro.

Totalcashcostspergoldouncesoldfromcontinuingoperations,netofby-productsales,were$360perouncefortheyearendedDecember31,2017compared to$259perounce in theprioryear.The increase in totalcashcostswasprimarilydrivenbyhigheroperatingexpensespartiallyoffsetbytheeffectofby-productrevenueswhichbenefittedfromanincreaseintherealizedcopperprice.

Total cash costs per gold ounce sold from continuing operations, net of by-product sales,were $572per ounce for thethreemonthsendedDecember31,2017comparedto$288perounce in theprioryear.The increase in totalcashcostswasprimarilydrivenbyhigheroperatingexpensespartiallyoffsetby theeffectofby-product revenueswhichbenefittedfromanincreaseintherealizedcopperprice.

All-insustainingcostspergoldouncesoldfromcontinuingoperationswere$668fortheyearendedDecember31,2017,compared to $675 in the prior year. In addition to the Company’s strong operating performance, all-in sustaining costsbenefittedfromthetimingofsustainingcapitalexpenditurepaymentsatRainyRiver.All-insustainingcostspergoldouncesoldfromcontinuingoperationswaspositivelyimpactedbytheexclusionofPeakMinesconsolidatedsustainingcosts.All-insustainingcostsfromalloperationswere$727perouncefortheyearendedDecember31,2017,comparedto$692perounce in theprior-yearperiodand came inbelow theguidance rangeof $760 to$800perouncewhichhadpreviouslybeenloweredby$65perounceinthesecondquarterof2017.

All-insustainingcostspergoldouncesoldfromcontinuingoperationswere$774forthethreemonthsendedDecember31,2017,comparedto$590intheprior-yearperiod.All-insustainingcostsfromalloperationswere$771forthethreemonthsendedDecember31,2017,comparedto$619intheprior-yearperiod.Thisincreasewasduetothestart-upofRainyRiverandslightlyhighersustainingcostsatMesquiteandlowergoldandsilversalevolumesatCerroSanPedro.

RainyRiverachievedcommercialproductioninthefourthquarterof2017withminingandmillingactivitiescontinuingtoprogress well during the quarter. Rainy River produced 37,047 ounces during the fourth quarter including the pre-commercialperiod,withanadditional8,607ouncesofgoldinventoryincircuitattheendoftheperiod.ThemillingrateforDecember averaged 21,000 tonnes per day,which is the nameplate capacity for the facility. Gold production for 2017,including gold inventory in circuit, totalled 45,654ounces. Thiswas slightly lower than the guidance rangeof 50,000 to60,000ounces,asthemillramp-upbeganhittingnameplatethroughputslightlylaterinthefourthquarterthanplanned,resulting in lower total tonnes milled. Consistent with the Company’s plans, during the two month initial commercialproduction period, the gold grade averaged 0.94 gram per tonne with recoveries of 86%. With the mill operating atnameplatecapacity,RainyRiveriswellpositionedtodeliverstrongproductionin2018.All-insustainingcostsfortheyearended December 31, 2017were above the guidance range of $1,400 to $1,440 per ounce primarily due to lower goldsalesvolumes.

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


FINANCIAL HIGHLIGHTS


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015

FINANCIALINFORMATION(3)

Revenue 193.5 140.7 604.4 522.8 582.9Operatingmargin(1) 76.5 46.5 283.4 247.3 261.9Revenuelesscostofgoodssold(2) 6.0 (10.6) 63.1 47.2 68.0(Loss)earningsfromcontinuingoperations(2) (179.6) (23.3) (101.7) (8.6) 34.2Netloss(2) (195.6) (22.3) (108.0) (7.0) (201.4)Adjustednetearningsfromcontinuingoperations(1)(2) 6.2 1.5 21.3 19.4 1.8Adjustednetearnings(loss)(1)(2) 32.5 (4.9) 49.3 14.6 (10.9)Operatingcashflowsgeneratedfromcontinuingoperations 91.2 49.1 275.0 225.0 245.8

Cashgeneratedfromcontinuingoperationsbeforechangesinnon-cashoperatingworkingcapital(1)

64.8

64.6

234.1

245.3

265.1

Capitalexpenditures(sustainingcapital)(1) 27.4 15.7 88.3 87.4 121.5Capitalexpenditures(growthcapital)(1) 84.2 149.1 513.4 479.6 268.0Totalassets(2) 4,017.3 3,933.0

3,831.54,017.3 3,933.0

3,831.53,675.5

Cashandcashequivalents 216.2 185.9 216.2 185.9 335.5

Long-termdebt 1,007.7 889.5 1,007.7 889.5 787.6

SHAREDATA

(Loss)earningspersharefromcontinuingoperations(2): Basic($) (0.31) (0.05) (0.18) (0.02) (0.33)Diluted($) (0.31) (0.05) (0.18) (0.02) (0.33)(Loss)earningspershare(2): Basic($) (0.34) (0.04) (0.19) (0.01) (0.40)Diluted($) (0.34) (0.04) (0.19) (0.01) (0.40)Adjustednetearnings(loss)perbasicshare($)(1)(2) 0.06 (0.01) 0.09 0.03 (0.02)Adjustednetearningsperbasicsharefromcontinuingoperations($)(1)(2)

0.01

-

0.04

0.04

-

SharepriceasatDecember31(TSX–Canadiandollars) 4.13 4.71 4.13 4.71 3.22Weightedaverageoutstandingshares(basic)(millions) 578.1 513.0 564.7 511.8 509.0

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.3. AstheCompanyhasenteredintoabindingagreementtosellthePeakMinesandtheCompanyexpectstoclosethesaleinthefirstquarterof2018,PeakMineshasbeen

classifiedasadiscontinuedoperation.Financialhighlightsaredisclosedonacontinuingandtotalbasis,whereappropriate.

Revenuewas$604.4millionfortheyearendedDecember31,2017,comparedto$522.8millionintheprioryear.Revenuebenefittedfromthehighergoldsalesvolumesandhighergoldandcopperpriceswhencomparedtotheprioryear.Relativetotheprioryear,theaveragerealizedpriceincreasedby$36(3%)perounceofgoldand$0.43(19%)perpoundofcopper.

Revenuewas$193.5millionforthethreemonthsendedDecember31,2017,comparedto$140.7millionintheprior-yearperiod.Theincreaseisduetohighermetalsalesvolumesandhighergoldandcopperprices.Relativetotheprior-yearperiod,goldsalesincreasedby53%,mainlyattributabletothestartupofRainyRiverandMesquite’sstrongquarter.Averagerealizedgoldprice increasedby$75 (6%)perounceandthecopperprice increasedby$0.23 (9%)perpoundcomparedtotheprior-yearperiod.


RevenuelesscostofgoodssoldfortheyearendedDecember31,2017was$63.1millioncomparedto$47.2millionintheprioryear.Revenuelesscostofgoodssoldwas$6.0millionforthethreemonthsendedDecember31,2017,comparedtoalossof$10.6millionintheprioryearperiod.ThisincreaseinthethreemonthsandyearendedDecember31,2017wasdrivenbythehighergoldsalesandhighermetalprices.

For the year ended December 31, 2017, the loss from continuing operations was $101.7 million compared to an$8.6millionlossintheprioryear.Thenetlossincludesthenetimpactofanafter-taximpairmentchargeinthecurrentyearof$181.0millionrelatingtoRainyRiver,a$43.8millionnon-cashforeignexchangegain,a$33.0millionpre-taxgainon thedisposalof theElMorro stream,a$21.8millionpre-tax losson the revaluationof theCompany’sgold streamobligation, a $18.3million pre-tax loss on the revaluation of Company’s gold and copper price option contracts andcopper forward contracts, and a $3.3 million gain on the modification of long-term debt. The prior year included a$31.1millionpre-taxlossontherevaluationoftheCompany’sgoldstreamobligation,anon-cash$27.3millioninventorywrite-down at Cerro San Pedro, a $12.0 million non-cash foreign exchange gain, and a $10.5 million gain on therevaluationof goldpriceoption contracts. Thenet losswashigher than the loss fromcontinuingoperationsdue toanon-cash loss of $49.0million from the sale of PeakMines, partially offset by strong earnings from operations fromPeakMinesfortheyearendedDecember31,2017.The loss from continuing operationswas $179.6million for the threemonths endedDecember 31, 2017, compared to$23.3millionintheprior-yearperiod.Thefourthquarterlossfromcontinuingoperationsincludedanetimpactofanafter-taximpairmentchargeof$181.0millionrelatingtoRainyRiver,a$17.0millionlossontherevaluationofthegoldstreamobligation, and a $8.8million pre-tax foreign exchange loss, finance costs of $12.7million, and a $4.2million expenserelating to the Company’s restructuring of its corporate office workforce. The prior-year period included a non-cash$27.3millioninventorywrite-downatCerroSanPedro,a$5.1millionpre-taxforeignexchangeloss,an$11.4milliongainontherevaluationoftheCompany’sgoldoptioncontracts,andapre-taxgainof$3.3millionontherevaluationofthegoldstream obligation. The net loss was higher than the loss from continuing operations due to due to a non-cash loss of$49.0 million from the sale of Peak Mines, which was only partially offset by strong earnings from operations fromPeakMinesforthethreemonthsendedDecember31,2017.

AdjustednetearningsfromcontinuingoperationsfortheyearendedDecember31,2017were$21.3million,or$0.04perbasicshare,comparedto$19.4millionor$0.04perbasicshare in theprioryear.Adjustednetearnings fromcontinuingoperationswereprimarily impactedbyhigheroperatingexpenses,netof inventorywrite-downs,of$69.5million,higherdepreciation and depletion, net of inventory write-downs, of $23.5 million, higher net finance costs of $6.9 million(excluding gains on debt modification), partially offset by higher revenue of $81.6 million. Adjusted net earnings fromcontinuingoperationsbenefitted fromanadjusted tax recoveryof$8.8million.For theyearendedDecember31,2017,adjustednetearningswere$49.3millionor $0.09per sharewhen compared to$14.6millionor $0.03per share in theprioryear.Adjustedearnings for theyearendedDecember31,2017positivelybenefitted fromhigheradjustedearningsfromdiscontinuedoperations,resultingfromthecessationofdepreciationanddepletionatPeakMinesuponclassificationtodiscontinuedoperations.


Adjustednetearnings fromcontinuingoperations for the threemonthsendedDecember31,2017were$6.2millionor$0.01perbasicshare,comparedtoadjustednetearningsfromcontinuingoperationsof$1.5millionor$nilperbasicshareintheprior-yearperiod.Adjustednetearningsfromcontinuingoperationswerepositivelyimpactedbyhigherrevenueof$52.8 million, lower corporate administration (including share-based payment expenses) of $3.8 million and lowerexploration and business development expenses of $1.2 million. Additionally, adjusted earnings from continuingoperations benefitted from an adjusted tax recovery of $17.1 million. This was partially offset by higher operatingexpenses,netofinventorywrite-downs,of$46.8million,higherdepreciationanddepletion,netofinventorywrite-downs,of$16.9million,andhighernetfinancecostsof$11.8million.ForthethreemonthsendedDecember31,2017,adjustednetearningswere$32.5millionor$0.06per sharewhencompared toanadjustednet lossof$4.9millionor$0.01pershare in the prior-year period. Adjusted earnings for the threemonths endedDecember 31, 2017 positively benefittedfrom higher adjusted earnings from discontinued operations, resulting from increased revenues at PeakMines and thecessationofdepreciationanddepletionatPeakMinesuponclassificationtodiscontinuedoperations.

For the year ended December 31, 2017, cash generated from continuing operations was $275.0 million, compared to$225.0million in theprior year.Cashgenerated fromcontinuingoperationsbefore changes innon-cashworking capitalfor the year ended December 31, 2017 was $234.1 million compared with $245.3 million in the prior year as higheroperating margins, were offset by higher income taxes paid and a $4.2 million expense relating to the Company’srestructuring of its corporate office workforce. Cash generated from continuing operations for the year endedDecember 31, 2017was higher than the prior-year period, benefitting from an increase in trade and other payables atRainy River and the collection of a concentrate receivable of $21.2 million at New Afton which was outstanding atDecember31,2016.

FortheyearendedDecember31,2017,cashgeneratedfromoperationswas$342.2million,comparedto$282.2millionin the prior-year period, benefitting from the cash generated from continuing operations working capital movementsnotedabove.

CashgeneratedfromcontinuingoperationsforthethreemonthsendedDecember31,2017was$91.2million,comparedwith$49.1millionintheprior-yearperiod.Cashgeneratedfromcontinuingoperationsbeforechangesinnon-cashworkingcapital for the threemonthsendedDecember31, 2017of$64.8was in linewith theprior-yearperiod.Cashgeneratedfromcontinuingoperationsbenefittedfroman increase intradeandotherpayablesatRainyRiver,whiletheprioryear-periodincludedanoutstandingconcentratereceivableof$21.2millionatNewAfton.

For the three months ended December 31, 2017, cash generated from operations was $118.9 million, compared to$51.9million in the prior-year period, benefitting from the cash generated from continuing operations,working capitalmovementsnotedaboveandhighergoldsalesvolumesatPeakMines.

For further informationon theCompany’s liquidityandcash flowposition,please refer to the“LiquidityandCashFlow”sectionof thisMD&A.For further informationon theCompany’s financial results,please refer to the“FinancialResults”sectionofthisMD&A.


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

OnFebruary17,2017,NewGoldsoldits4%streamonfuturegoldproductionfromElMorrotoanaffiliateofGoldcorpInc.for $65.0 million cash. This transaction provided the Company with additional liquidity as the Company advanced theconstructionofRainyRiver.

In 2017, New Gold entered into an agreement with a syndicate of underwriters to purchase, on a bought deal basis,53,600,000commonsharesofNewGold(plusanover-allotmentoption)atapriceof$2.80pershare.OnMarch10,2017,NewGoldclosedtheboughtdealfinancingof61,640,000commonshares(includingtheover-allotment)fornetproceedstoNewGoldofapproximately$164.7million(grossproceedsof$172.9millionlessequityissuancecostsof$8.2million).

OnJune27,2017,NewGoldenteredintogoldpriceoptioncontractscovering120,000ouncesofNewGold’ssecondhalf2017goldproduction.NewGoldpurchasedputoptionswithastrikepriceof$1,250perouncecovering120,000ouncesofgoldandsimultaneouslysoldcalloptionswithastrikepriceof$1,400perouncecoveringanequivalent120,000ounces.Thecontracts covered20,000ouncesofgoldpermonth for sixmonthsbeginning in July2017.Thenet costofenteringintotheoptioncontractswasapproximately$1million.

InOctober2017, theCompanyentered intocopperpriceoptioncontractsbypurchasingputoptionsata strikepriceof$3.00perpoundandsellingcalloptionsatastrikepriceof$3.37perpoundfor27,600tonnes(approximately60millionpounds)ofcopperproductionduring2018(“copperoptioncontracts”).

OnNovember20,2017,NewGoldannouncedthattheCompanyhadenteredintoabindingagreementwithAureliatosellthePeakMinesforcashconsiderationof$58.0millionsubjecttoaclosingadjustment.Aureliapaida$3.0milliondeposit,whichwillberetainedbyNewGoldincertaincircumstancesifthetransactionisnotcompleted.Thetransactionissubjectto customary closing conditions, including consent from the New SouthWalesMinister responsible for theMining Act1992forthetransferofcontrolofcertainexplorationlicenses,andisexpectedtocloseinthefirstquarterof2018.


CORPORATESOCIALRESPONSIBILITY

CORPORATESOCIALRESPONSIBILITYHIGHLIGHTSFOR2017

• Forthefourthtime,NewGoldwasrecognizedasthetoprankingminingcompany,andninthoverallintheFuture40MostResponsibleCorporateLeaders inCanadabyCorporateKnights,which identifiesCanada’semergingsustainabilityleadersfromsmalltomid-capcorporations.

• ANewGoldIndigenousrelationsstrategywasdevelopedtoaddressfivekeypillars:engagement,capacitybuilding,economicdevelopment,inclusionandenvironmentalstewardship.

• A New Gold local procurement standard was established to optimize local procurement and businessopportunitiesandsupportsustainableeconomicdevelopmentinthecommunitieswhereweoperate.

• IndependentTailingsReviewBoardconductedmeetingsatNewAftonandRainyRivertoensurethatbestNewGoldpracticesareadoptedinTailingsManagement.

• NewAftonreceivedthe2016TowardsSustainableMiningLeadershipAward from theMiningAssociationof Canada and the 2016 J.T, Ryan Safety Award for Metal Mines for the lowest accident frequency inBritishColumbiaandYukon.

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

KamloopsFoodbank.• NewAftonunderwentanexternalauditofitsEnvironmentalManagementSystem.Thisresultedinonlyminor

findingsandthesitewillbecertifiedunderISO14001:2015.• TheNewAftoncommunityandminerescueteamsprovidedcriticalsupporttoalocalIndigenouscommunity

toprepareforandprotectfromtheBCwildfires.• CerroSanPedroachievedlevelAorgreaterforallprotocolsinTowardsSustainableMininginitiativeincluding

AAAratingforallperformanceindicatorsintheCommunityandAboriginalOutreachprotocol.• CerroSanPedrowasrecertifiedbytheInternationalCyanideManagementInstitute.• CerroSanPedroheldaBiodiversityDayeventatlocalschoolsandbuiltapotablewatertankforthe local

community• TheTodosparCerrodeSanPedrofoundationlaunchedamicrofinancingprogramandprovidedamicroloan

toitsfirstlocalsmallbusinessowner.• CerroSanPedroMinecontinuedtoreclaimandrevegetatewastepilesaspartofitsclosureandreclamation

planaswellascompletethefencingoffoftheopenpitarea.• PeakMinesparticipatedinCleanUpAustraliaDayandtheCobarShireFestivaloftheMinersGhost.• Continued working toward Environmental Assessment Approval and Participation Agreements with first

NationsatBlackwater.

CORPORATESOCIALRESPONSIBILITYTARGETSFOR2018• AchieveaminimumofAArankingattheMiningAssociationofCanada’sTowardsSustainableMiningAboriginal

andCommunityRelationsProtocolatCanadianoperations.• Reducereportableenvironmentalincidentsacrossalloperations.• ReducetheTotalReportableInjuryFrequencyRate(TRIFR).• Establishguidanceforworkforcewithregardtohigh-riskactivitiessuchasworkingatheights,confinedspace,

lock-out/tag-outandhazardoussubstances.


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.

AsaparticipantoftheUnitedNationsGlobalCompact,NewGold’spoliciesandpracticesareguidedbyitsprincipleswithregardtohumanrights,labour,environmentalstewardshipandanti-corruption.AsamemberoftheMiningAssociationofCanada(“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.

TheNewGold environmentalmanagement standards are based on internationally recognized standards. The standardsserve to guide site-level management systems to ensure that site operations identify and appropriately manage theirenvironmental aspects, adopt a consistent approach to identifying and controlling environmental risks, report progressthroughauditsandassessments,andadoptahigh levelofenvironmental stewardship.All sitesareexpected tohaveanexternalaudit,peerauditorself-assessmentannuallybasedonourauditschedule.

Aspartoftheimplementationprocess,eachoperationhasalsocompiledaregisterofsignificantenvironmentalrisks.Thisregister contains the main environmental risks for each operation and allows corporate representatives to test theadequacyandeffectivenessofcontrolsaswellasemergencypreparednessandmitigationmeasuresassociatedwiththesegreatestpotentialrisks.

In2017,NewGoldwassubjecttochargesinrelationtotwoincidentsfrom2016.Specifically,onJuly13,2017,NewGoldwas charged with five breaches of the Environmental Protection Act (Ontario) in connection with alleged effluentdischargesattheRainyRiverprojectinJuly2016inexcessofpermitlimits.OnNovember9,2017,NewGoldpleadguiltytodischargingun-ionizedammoniaabovetheECAlimitonJuly27,2016andfailingtoreportaJuly20,2016dischargeabovethestandardforun-ionizedammonia.Thethreeremainingchargeswerewithdrawn.NewGoldwassentencedtoafineofC$100,000fortheJuly27,2016dischargeandC$50,000forthefailuretoreporttheJuly20,2016discharge.Amandatoryvictimsurchargeof25%appliestothefines,foratotalamountowingofC$187,500.Inaddition,onJuly24,2017,NewGoldwaschargedwithtwobreachesoftheLakesandRiversImprovementAct(Ontario)inconnectionwithwaterallegedlyovertoppingadamontheRainyRiverconstructionsitepriortocompletionofconstructionofthedam.NewGoldtakesallenvironmentalincidentsseriouslyandisintheprocessofevaluatingthismatter.


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, NewGold promotes understanding of, and respect for traditional values, customs and culture andtakesmeaningfulactiontoconsidertheir intereststhroughcollaborativeagreementsaimedatcreating jobs,trainingandotherlastingsocio-economicbenefits.

The New Gold community engagement and development standards provide guidance to our sites to identify ourcommunitiesofinterest,andeffectivelyengageandsustaindialogue,andtofindopportunitiestocontributetolong-termdevelopment within our host communities. They also drive us to monitor and continually improve our processes andperformance. The standards are based on several internationally recognized principles and values. At each site, thestandards are being progressively implemented to guide site-levelmanagement systems to ensure that site operationsappropriately identify and engage with local communities of interest, respect human rights, identify opportunities forsustainablecommunityinvestments,andmakescommerciallyreasonableeffortstomaximizelocalhiringandcontracting.

Ourstandardsalsoguideouroperations toadoptaconsistentapproachto identifyingandcontrollingsocial risksandtoreport progress through audits and assessments. All sites are expected to have an external audit, peer audit or self-assessmentannuallybasedonanauditschedule.


NEWGOLD’SINVESTMENTTHESISOurprimaryfocus istheexploration,developmentandoperationofourportfolioofgoldproducingassets.Wecurrentlyhaveanestablishedfoundation,withourfourproducingassetsprovidinguswiththecashflowthatshouldpositionustogrowthebusinessaswefurtherexploreanddevelopourexcitingdevelopmentprojects.Aswedeliveronwhatwebelieveisanindustry-leadingorganicgrowthprofile,weintendtoremainfocusedonthefollowingkeystrengthsthathavehelpedNewGoldbecomealeadingintermediateproducer.

New Gold has a diverse portfolio of assets. Operating assets consist of Rainy River andNewAftoninCanada,MesquiteintheUnitedStates,PeakMinesinAustralia(classifiedasadiscontinuedoperation) andCerro San Pedro inMexico,which transitioned into residualleachinginthesecondhalfof2016.OursignificantdevelopmentprojectistheBlackwaterproject inCanada.Allassetsare located in jurisdictions thathavebeenranked in thetopfiveminingjurisdictionsbasedontheBehreDolbearReport“2015RankingofCountriesforMiningInvestment”. In2017,43%ofourrevenuewasgeneratedfromCanada,22%fromAustralia, 28% from the United States and 7% fromMexico, and over 92% of our goldreservesarelocatedinCanada.

NewGoldhasan investedandexperiencedexecutivemanagement teamandBoardofDirectorswithextensiveminingsectorknowledge,asuccessfultrackrecordofidentifyinganddevelopingminesandsignificantexperienceinleadingsuccessfulminingcompanies.Our Board of Directors provides valuable stewardship and includes individuals with abreadth of knowledge across the mining sector that the Company believes providesNewGoldwithadistinctcompetitiveadvantage.

New Gold has a portfolio of mines that have a history of delivering on consolidatedCompany guidance. In 2017, NewGold achieved its production guidance at low costswhichenabledustogeneraterobustmargins.NewGoldproduced422,411goldouncesatoperatingexpensespergoldouncesoldof$664andall-insustainingcostsof$727pergoldouncesoldnetofby-productsales.

In addition to our operating mines, we have development potential that significantlyenhances our production base and growth profile. As at December 31, 2017, the RainyRiverminecontainsProvenandProbableMineralReservesof4.4milliongoldouncesand12.8millionsilverounces.TheBlackwaterprojectcontainsProvenandProbableMineralReserves of 8.2 million gold ounces and 61 million silver ounces. Please refer to the“MineralReservesandMineralResources”sectionofthisMD&Aforfurtherdetails.

Sincethemiddleof2008,NewGoldhasgrownthroughtheacquisitionoflargelysingleasset companieswhich has further strengthened theCompany. The experienceof ourmanagementteamandBoardofDirectorshasallowedtheCompanytobeopportunisticin its corporate development initiatives. In addition, New Gold continues to look foropportunitiestoorganicallyincreasethevalueofeachofitsoperations.

PORTFOLIOOFASSETSINTOP-RATED

JURISDICTIONS

INVESTEDANDEXPERIENCEDTEAM

PEER-LEADINGGROWTHPIPELINE

ESTABLISHEDTRACKRECORD

AHISTORYOFVALUECREATION


OUTLOOKFOR2018

Gold

Production(1)Copper

Production(1)OperatingExpense(2)(4)

OperatingExpense(2)(4)

All-inSustainingCosts(3)(4)

(thousandsofounces) (millionsofpounds) (pergoldouncesold)

(percopperpoundsold)

(pergoldouncesold)

RainyRiver 310-350 - $430-$470 - $990-$1,090

NewAfton 55-65 75-85 $455-$495 $1.10-$1.30 ($1,020)-($980)

Mesquite 140-150 - $890-$930 - $1,005-$1,045

CerroSanPedro 20-30 - $1,255-$1,295 - $1,330-$1,370

Total 525-595 75-85 $555-$595 $1.35-$1.55 $860-$9001. Consolidatedsilverproductionisestimatedtobeapproximately0.9millionouncesin2018.2. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.3. Netofby-productsilverandcopperrevenues.4. Fordetailsonthekeyassumptions,whichapplytoall2017and2018productionandcostguidancecontainedinthisMD&A,referto“TotalOperatingExpenseandAll-in

SustainingCostsperGoldOunceSold”below.

Production NewGold’s2018consolidatedgoldproductionisexpectedtoincreasebyapproximately30%relativetotheprioryeardueto the benefit of the first full year of operations at Rainy River more than offsetting the planned decreases in goldproductionatNewAfton,MesquiteandCerroSanPedro,andthesaleofPeakMines.Consolidatedcopperproductionfor2018 is expected to decrease relative to the prior year primarily due to the sale of PeakMines andplanned lowermillthroughput at New Afton. Consolidated silver production is scheduled to remain in line with 2017 at approximately0.9millionounces.

Consistentwithpreviousyears,NewGold’s2018full-yeargoldproductionisnotscheduledtobeevenlydistributedacrossthe fourquarters.Approximately60%of theCompany’sconsolidatedgoldproduction isexpectedtooccurevenly in thesecondandfourthquarters.

Total Operating Expense and All-in Sustaining Costs per Gold Ounce Sold NewGold’sby-productpricingassumptionsfor2018are$3.20percopperpound,whichwasinlinewithspotpricesandapproximatesthemid-pointoftheCompany’scoppercollarpricing,and$17.00persilverouncewhichisinlinewithspotprices.The2018assumptionsfortheCanadiandollarandMexicanpesoexchangeratesof$1.25and$18.00totheU.S.dollarwereinlinewithspotexchangeratesatthetimeguidancewasset.

TheCompany’soperatingexpensepergoldounceisexpectedtodecreasein2018,asahigherproportionofgoldsaleswillbefromtheloweroperatingexpenseperounceRainyRiverMine.Operatingexpensepercopperpoundin2018isexpectedtoincreaserelativetotheprioryearduetolowermillthroughputandcoppergradesatNewAfton.

New Gold’s 2018 all-in sustaining costs are expected to increase relative to the prior year. The Company’s 2018consolidated total cash costs,which form a component of all-in sustaining costs, are expected to be $360 to $400 perounce.Sustainingcostsfor2018, includingsustainingcapital,exploration,generalandadministrativeandamortizationorreclamationexpenditures,areexpectedtoincreasebyapproximately$145millionrelativetotheprioryearprimarilyduetoan increase insustainingcapitalexpendituresduringRainyRiver’sfirstfullyearofoperation.This increase isexpectedtobepartiallyoffsetbylowercapitalandexplorationexpendituresatNewAfton,MesquiteandCerroSanPedro,aswellasasustainablereductionincorporategeneralandadministrationexpenditures.


Consistentwithpreviousyears,NewGold’s2018full-yeargoldproductionisnotscheduledtobeevenlydistributedacrossthe fourquarters.Approximately60%of theCompany’sconsolidatedgoldproduction isexpectedtooccurevenly in thesecondandfourthquarters.TheCompany’ssustainingcapitalprofileisalsonotscheduledtobeevenlydistributedacrossthefourquarters.Approximately40%ofthesustainingcapitalisexpectedtooccurinthefirstquarterwiththeremaining60%tooccurevenlyoverthesecond,thirdandfourthquarters.Asaresultofthecombinedimpactofplannedlowerfirstquarterproductionandhighersustainingcapitalspendprofile,thefirstquarterisexpectedtohaveahigherall-insustainingcostrelativetothefull-yearguidancerange.

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

Production Volumes and Costs NewGold’sportfolioofcontinuingoperatingminesproduced317,898goldouncesfortheyearendedDecember31,2017and110,240goldouncesforthethreemonthsendedDecember31,2017.

Operating expenses per gold ounce sold from continuing operations for the year endedDecember 31, 2017was $646,comparedto$623intheprior-yearperiod.OperatingexpensespercopperpoundsoldfromcontinuingoperationsfortheyearendedDecember31,2017was$1.34,comparedto$1.11intheprior-yearperiod.Operatingexpensespersilverouncesold fromcontinuingoperations for theyearendedDecember31,2017was$8.54, compared to$8.55 in theprior-yearperiod.

OperatingexpensespergoldouncesoldfromcontinuingoperationsforthethreemonthsendedDecember31,2017were$738,comparedto$771intheprior-yearperiod.Operatingexpensespercopperpoundsoldfromcontinuingoperationsfor the three months ended December 31, 2017 were $1.56, compared to $1.57 in the prior-year period. Operatingexpensesper silverounce sold fromcontinuingoperations for the threemonths endedDecember31, 2017were$9.44comparedto$10.66intheprior-yearperiod.

FortheyearendedDecember31,2017,totalcashcostsandall-insustainingcostsfromcontinuingoperations,netofby-productsales,were$360and$668pergoldouncesold,respectively. Intheprior-yearperiods,totalcashcostsandall-insustainingcostswere$259and$675pergoldouncesold,respectively.

For the threemonthsendedDecember31,2017, total cashcostsandall-in sustainingcosts fromcontinuingoperations,netofby-productsales,were$572and$774pergoldouncesold,respectively. Intheprior-yearperiods,totalcashcostsandall-insustainingcostswere$288and$590pergoldouncesold,respectively.

ForananalysisoftheimpactofproductionvolumesandcostsfortheyearendedDecember31,2017relativetoprior-yearperiods,refertothe“OperatingHighlights”sectionofthisMD&A.


Commodity Prices

GoldpricesThepriceofgoldisthesinglelargestfactoraffectingNewGold’sprofitabilityandoperatingcashflows.Assuch,thecurrentandfuture financialperformanceof theCompany isexpectedtobeclosely relatedtotheprevailingpriceofgold. In thethirdquarterof2016,theCompanyenteredintogoldpriceoptioncontractsrelatedto itsproductionforthefirsthalfof2017. New Gold purchased put options with a strike price of $1,300 per ounce covering 120,000 ounces of gold andsimultaneouslysoldcalloptionswithastrikepriceof$1,400perouncecoveringanequivalent120,000ounces.

InJune2017,theCompanyenteredintofurthergoldoptioncontractsfortheperiodsJuly2017toDecember2017withastrikepriceof$1,250perouncecovering120,000ouncesofgoldandsimultaneouslysoldcalloptionswithastrikepriceof $1,400 per ounce covering an equivalent 120,000 ounces. For the year ended December 31, 2017, the Companyrecognized$7.4millioninrevenuerelatedtothesegoldpriceoptioncontracts.AtDecember31,2017,thecontractshaveexpired.Nofurthergoldpriceoptioncontractshavebeenenteredintofor2018.FortheyearendedDecember31,2017,NewGold’s gold revenueperounceandaverage realizedgoldprice fromcontinuingoperationsperouncewere$1,247and$1,278respectively,comparedtotheLBMAp.m.averagegoldpriceof$1,257perounce.ForthethreemonthsendedDecember 31, 2017, New Gold’s gold revenue per ounce and average realized gold price per ounce were $1,252 and$1,274, respectively, compared to the LBMA p.m. average gold price of $1,274 per ounce. The difference betweenNewGold’saveragerealizedgoldpriceandtheLBMAp.m.averagegoldpriceisprimarilyaresultofthegoldpriceoptioncontractsdescribedabove.

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 instruments andmark-to-market at each reporting period on the consolidated statement of financial positionwithchangesinfairvaluerecognizedinothergainsandlosses.AsatDecember31,2017,alloftheaforementionedcopperforwardcontractshaveexpired.

GOLDPRICES(U.S.dollarsperounce)

SILVERPRICES(U.S.dollarsperounce)

COPPERPRICES(U.S.dollarsperpound)

$1,100

$1,200

$1,300

$1,400

Dec-15 Dec-16 Dec-17

QuarterlyaveragerealizedpriceQuarterlyaveragespotprice

$10

$15

$20

$25


Quarterlyaveragerealizedprice

Quarterlyaveragespotprice

$2.00

$2.50

$3.00

$3.50


Quarterlyaveragerealizedprice

Quarterlyaveragespotprice


For the year ended December 31, 2017, NewGold’s copper revenue per pound and average realized copper price perpound fromcontinuingoperationsperpoundwere$2.41and$2.66, respectively, compared to theaverageLMEcopperpriceof$2.79perpound. For the threemonthsendedDecember31,2017,NewGold’s copper revenueperpoundandaveragerealizedcopperpriceperpoundwere$2.44and$2.70,respectively,comparedtotheaverageLMEcopperpriceof$3.09perpound.ThedifferencebetweenNewGold’saveragerealizedcopperpriceandtheLMEaveragecopperpriceisprimarilyaresultofthecopperforwardcontractsdescribedabove.

OnOctober18,2017,NewGoldentered intocopperpriceoptioncontractscoveringapproximately60millionpoundsofits2018production,withputoptionsata strikepriceof$3.00perpoundandcalloptionsata strikepriceof$3.37perpound,atanominalcosttotheCompany.Calloptionssoldandputoptionspurchasedaretreatedasderivativefinancialinstrumentsandmark-to-marketateachreportingperiodontheconsolidatedstatementoffinancialpositionwithchangesinfairvaluerecognizedinothergainsandlosses.

SilverpricesFortheyearendedDecember31,2017,NewGold’ssilverrevenueperounceandaveragerealizedsilverpriceperouncefrom continuing operations were $16.41 and $16.88, respectively, compared to the LBMA p.m. average silver price of$16.80 per ounce. For the threemonths endedDecember 31, 2017,NewGold’s silver revenue per ounce and averagerealizedsilverpriceperouncewere$15.84and$16.29 respectively, compared to theLBMAp.m.averagesilverpriceof$16.70perounce.ThedifferencebetweenNewGold’saveragerealizedsilverpriceandtheLBMAp.m.averagesilverpriceisasaresultoftimingofspotsales.

ForeignexchangeratesTheCompanyoperatesinCanada,theUnitedStates,AustraliaandMexico,whilerevenueisgeneratedinU.S.dollars.Asaresult, the Company has foreign currency exposure with respect to costs not denominated in U.S. dollars. New Gold’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.

The average Canadian dollar against the average U.S. dollar for the year ended December 31, 2017 strengthened byapproximately 2% when compared to the prior year. The Canadian dollar weakened against the U.S. dollar byapproximately1%fromSeptember30,2017toDecember31,2017.ThestrengtheningorweakeningoftheCanadiandollarimpactscostsinU.S.dollartermsattheCompany’sCanadianoperations,aswellascapitalcostsattheCompany’sCanadiandevelopmentproperty,asasignificantportionofoperatingandcapitalcostsaredenominatedinCanadiandollars.

TheaverageAustraliandollar against theaverageU.S. dollar for the year endedDecember31, 2017 strengthenedbyapproximately 3% when compared to the prior year. The Australian dollar weakened against the U.S. dollar byapproximately0.3%fromSeptember30,2017toDecember31,2017.ThestrengtheningorweakeningoftheAustraliandollar impactscosts inU.S.dollartermsattheCompany’sAustralianoperation,PeakMines,asasignificantportionofoperatingcostsaredenominatedinAustraliandollars.

The average Mexican peso against the average U.S. dollar for the year ended December 31, 2017 weakened byapproximately1%whencomparedtotheprioryear.TheMexicanpesoweakenedagainsttheU.S.dollarbyapproximately8%fromSeptember30,2017toDecember31,2017.ThestrengtheningorweakeningoftheMexicanpesoimpactscostsinU.S.dollartermsattheCompany’sMexicanoperation,CerroSanPedro,asaportionofoperatingcostsaredenominatedinMexicanpesos.


ForananalysisoftheimpactofforeignexchangefluctuationsonoperatingcostsfortheyearendedDecember31,2017relativetoprior-yearperiods,refertothe“ReviewofOperatingMinesandDiscontinuedOperations”sectionsforRainyRiver,NewAfton,PeakMinesandCerroSanPedro.

Economic Outlook TheLBMAp.m.goldpriceincreasedby6%sincethestartof2017,decliningby4%duringthefourthquarter.ThecurrentU.Sadministrationcontinuestogenerateconsiderableuncertaintyandunpredictability,andU.S.economicdatahasbeenmixed.AlthoughtheFederalReserveisexpectedtoincreasethepaceofinterestratehikesin2018andmostassetmarketscontinuetosetnewhighs,therearenumerousU.Slegislativehurdlesonthehorizon,aswellascontinuingchallengeswithBrexitandongoinggeopoliticalconcerns.Againstthisbackdrop,goldhasstarted2018well.

Prospectsforgoldareencouragedbyseveralstructuralfactors.Minesupplyhasbeenplateauingashighqualitydepositsbecomemoredifficulttofindandmoreexpensivetodevelopandmine.Explorationbudgetshavebeencutinrecentyears,increasingthelikelihoodthatsupplywillremainmuted,eveninthefaceofincreasinggoldprices.Goldheldinexchange-tradedproducts issignificantlybelowthepeakin2012,suggestingthatthebroadinvestmentcommunityhascapacitytoadd length to positions as sentiment improves. As a low all-in sustaining cost producerwith a pipeline of developmentprojects,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

1.20

1.30

1.40

1.50

Dec-15 Dec-16 Dec-1716.00

18.00

20.00

22.00

Dec-15 Dec-16 Dec-171.20

1.30

1.40

1.50



FINANCIALRESULTSSummary of Quarterly and Year-to-Date Financial Results


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015FINANCIALRESULTS(3) Revenue 193.5 140.7 604.4 522.8 582.9

Operatingexpenses 117.0 94.2 321.0 275.5 321.0

Depreciationanddepletion(2) 70.5 57.1 220.3 200.1 193.9

Revenuelesscostofgoodssold(2) 6.0 (10.6) 63.1 47.2 68.0

Corporateadministration 4.9 6.4 23.7 22.9 20.4

Corporaterestructuring 4.2 - 4.2 - 3.0

Share-basedpaymentexpenses (1.8) 0.5 5.1 8.3 7.3

Assetimpairment 268.4 6.4 268.4 6.4 (13.6)

Explorationandbusinessdevelopment 1.3 2.5 6.4 4.1 16.7

(Loss)earningsfromoperations(2) (271.0) (26.4) (244.7) 5.5 37.2

Financeincome 0.2 0.7 1.1 1.4 1.3

Financecosts (12.7) (1.4) (13.2) (9.9) (37.9)

Othergainsandlosses

Unrealizedgainonsharepurchasewarrants --

1.5 1.2 0.2 14.2

(Loss)gainonforeignexchange (8.8) (5.1) 43.8 12.0 (98.2)

LossondisposalofElMorroproject - - - - (180.3)

GainondisposalofElMorrostream -

- 33.0 - -

Othergain(loss)ondisposalofassets 0.2 (0.1) 0.3 0.1 (4.4)

RevaluationofAFSsecurities (0.1) (0.2) (0.2) 0.5 (0.2)Gain(loss)oncopperforwardcontractsandcopperoptioncontracts

0.3

-

(4.4)

-

-

Unrealized(loss)gainonrevaluationofgoldstreamobligation

(17.0)

3.3

(21.8)

(31.1)

6.2

Gain(loss)onrevaluationofgoldpriceoption 0.3 11.4 (13.9) 10.5 6.0Financialinstrumenttransactioncosts - - - - (2.4)

Company’sshareofthenetlossofElMorro - - - - (0.8)

Other 0.1 (0.2) 1.2 0.1 (0.2)

Lossbeforetaxes(2) (308.5) (16.5) (217.6) (10.7) (262.4)Incometaxrecovery(expense)(2) 128.9 (6.8) 115.9 2.1 94.1

Netlossfromcontinuingoperations(2) (179.6) (23.3) (101.7) (8.6) (168.3)

(Loss)earningsfromdiscontinuedoperations (16.0) 1.0 (6.3) 1.6 (33.1)

Netloss (195.6) (22.3) (108.0) (7.0) (201.4)

Adjustedearningsfromcontinuingoperations(1)(2) 6.2 1.5 21.3 19.4 1.8

Adjustednetearnings(loss)(1)(2) 32.5 (4.9) 49.3 14.6 (10.9)1. TheCompanyusescertainnon-GAAPfinancialperformancemeasuresthroughoutthisMD&A.Foradetaileddescriptionofeachofthenon-GAAPmeasuresusedinthis

MD&Aandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.3. AstheCompanybeganaprocessforthesaleofPeakMinesandtheCompanyexpectstoclosethesaleinthefirstquarterof2018,PeakMineshasbeenclassifiedasa

discontinuedoperation.Financialhighlightsaredisclosedonacontinuingandtotalbasis,whereappropriate.


RevenueThe$81.6million,or16%,increaseinrevenuefortheyearendedDecember31,2017wasduetothecombinedimpactofa$45.0millionincreasedrivenbyhighergoldandcopperpricesanda$36.6millionincreaseinmetalsalesvolumes.Theaverage realizedprices for theyearendedDecember31,2017were$1,278pergoldounce,$2.66perpoundof copperand$16.88persilverounce,comparedto$1,242pergoldounce,$2.33perpoundofcopperand$17.09persilverounceintheprioryear.

ForthethreemonthsendedDecember31,2017,the$52.8millionincreaseinrevenuewasattributabletohighergoldandcopperprices.The38% increase in revenuewasdueto thecombined impactofa$9.8million increasedrivenbyhighergoldandcopperpricesanda$43.0millionincreaseinmetalsalesvolumes.Theaveragerealizedpricesforthethreemonthsended December 31, 2017 were $1,274 per gold ounce, $2.70 per pound of copper and $16.29 per silver ounce.Thiscomparedto$1,199pergoldounce,$2.47perpoundofcopperand$16.78persilverounceintheprior-yearperiod.

Adetaileddiscussionofproductionisincludedinthe“ReviewofOperatingMines”sectionofthisMD&A.

OperatingexpensesFor the year and threemonths endedDecember 31, 2017, operating expenses increased comparedwith the prior-yearperiods.HigheroperatingcostsatMesquitewereduetohigherprocesssolutionflowwhichdrovehigherproduction.Theincrease in operating costswas also attributable to Rainy River as themine commenced commercial production in thefourth quarter of 2017. Thiswas partially offset by lower operating costs at Cerro San Pedro, as themine has been inresidual leaching since June 2016. The prior-year period operating expenses included a non-cash heap leach inventorywrite-downof$24.0millionatCerroSanPedro.

DepreciationanddepletionForthethreemonthsandyearendedDecember31,2017,depreciationanddepletionincreasedcomparedwithprior-yearperiodsduetohigherproductionfromtheMesquiteoperationscomparedtopriorperiods,anddepreciationanddepletionbeingrecognizedatRainyRiverastheminecommencedcommercialproductioninthefourthquarter.

RevenuelesscostofgoodssoldForthethreemonthsandyearendedDecember31,2017,revenuelesscostofgoodssoldincreasedprimarilyduetohigherrevenues,partiallyoffsetbyhigheroperatingexpensesanddepreciationanddepletion.

Corporateadministrationandshare-basedpaymentexpensesFortheyearendedDecember31,2017,corporateadministrationwasconsistentwiththeprior-yearperiod.ForthethreemonthsendedDecember31,2017,thedecreaseincorporateadministrationcostswasduetoareductioninsalariesandbenefitsexpensesastheCompanyinitiatedarestructuringplanthatimpacteditscorporateofficeworkforce.Asaresult,theCompanyincurred$4.2millioninseveranceandterminationrelatedchargesinthequarter.

ForthethreemonthsandyearendedDecember31,2017,thedecreaseinshare-basedpaymentexpenseswasaresultofaloweramountofshareunitsduetotheabove-notedrestructuringandadecreaseinsharepriceusedtovalueshare-basedcompensationwhencomparedtotheprior-yearperiod.


AssetimpairmentInaccordancewiththeCompany’saccountingpolicies,therecoverableamountofanassetisestimatedwhenanindicationof impairmentexists.AsatDecember31,2017, indicatorsof impairmentexistedat theRainyRivercashgeneratingunit(‘CGU’).

InJanuary2018,theCompanyannouncedhigherestimatedoperatingexpensesandcapitalexpendituresoverRainyRiver’sfirstnineyearsofoperations.TheCompanyhasidentifiedtherevisedoperatingexpenseandcapitalexpenditureestimatesatRainyRiverasanindicatorofimpairment.

FortheyearendedDecember31,2017,theCompanyrecordedanafter-taximpairmentlossof$181.0millionwithinnetloss,asnotedbelow:

YearendedDecember31,2017

(inmillionsofU.S.dollars) RainyRiverIMPAIRMENTCHARGEINCLUDEDWITHINNETLOSS

RainyRiverdepletableminingproperties 268.4

Taxrecovery (87.4)

Totalimpairmentchargeaftertax 181.0

In theprioryear, indicatorsof impairmentexistedat theRainyRiverCGUandfor theCompany’s3%NSRroyaltyontheproduction of the Rio Figueroa property (“Rio FigueroaNSR”). The Company had identified the revised capital cost andthree-monthdelayattheRainyRiverprojectandthelackofactivityontheRioFigueroaprojectasindicatorsofimpairmentin the prior year and performed an impairment assessment to determine the recoverable amount of these CGUs atDecember31,2016. In theprioryear,an impairment lossof$6.4millionwas recordedrelating toRioFigueroaNSR.Noimpairment losswasrecordedatRainyRiver intheprioryearasthecarryingvalueexceededtherecoverableamountasatDecember31,2016.

FortheyearendedDecember31,2016,theCompanyrecordedanimpairmentchargeof$6.4millionwithinnetloss,asnotedbelow:


(inmillionsofU.S.dollars) RioFigueroaNSRIMPAIRMENTCHARGEINCLUDEDNETLOSS

Explorationandevaluationassets 6.4

(i)MethodologyandkeyassumptionsImpairment is recognized when the carrying amount of a CGU exceeds its recoverable amount. A CGU is the smallestidentifiablegroupofassetsthatgeneratescashinflowsthatarelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets.EachoperatingmineanddevelopmentprojectrepresentsaseparateCGUaseachminesiteorprojecthastheabilityto,orthepotentialto,generatecashinflowsthatareseparatelyidentifiableandindependentofeachother.TheCompanyhas the followingCGUs:NewAfton,Mesquite,PeakMines,CerroSanPedro,RainyRiver,andBlackwater.Otherassetsconsistofcorporateassetsandexplorationproperties.


As outlined in the accounting policies, the Company uses fair value less cost of disposal to determine the recoverableamountofanassetasitbelievesthatthiswillgenerallyresultinavaluegreaterthanorequaltothevalueinuse.Whenthere isnobindingsalesagreement, fairvalue lesscostsofdisposal isestimatedas thediscounted futureafter-taxcashflowsexpectedtobederivedfromaminesite,lessanamountforcoststosellestimatedbasedonsimilarpasttransactions.TheinputsusedinthefairvaluemeasurementconstituteLevel3inputsunderthefairvaluehierarchy.

(a)RainyRiverCGU:Key estimates and judgements include production levels, operating costs, project costs and other capital expendituresreflectedintheCompany’slife-of-mine(‘LOM’)plans,thevalueofin-situounces,explorationpotentialandlandholdings,aswellaseconomicfactorsbeyondmanagement’scontrol,suchasgold,andsilverprices,discountratesandforeignexchangerates.TheCompanyconsidersthisapproachtobeconsistentwiththevaluationapproachtakenbymarketparticipants.

Life-of-MineplansEstimated cash flows arebasedon LOMplanswhichestimateexpected futureproduction, commodityprices, exchangeassumptions,operatingcostsandcapitalcosts.ThecurrentRainyRiverLOMplan is13years.LOMplansuseprovenandprobablemineralreservesonlyanddonotutilizemineralresourceestimatesforaCGU.Whenoptionsexistforthefutureextractionandprocessingoftheseresources,anestimateofthevalueoftheunminedmineralresources(alsoreferredtoasin-situounces)isincludedinthedeterminationoffairvalue.

In-situouncesIn-situ ounces are excluded from the LOMplans due to the need to continually reassess the economic returns on andtimingofspecificproductionoptionsinthecurrenteconomicenvironment.Thevalueofin-situounceshasbeenestimatedbasedonanenterprisevalueperequivalentresourceounce,withtheenterprisevaluebasedonthemarketcapitalizationofasubsetofpubliclytradedcompanies.

DiscountratesWhen discounting estimated future cash flows, the Company uses a real, after-tax discount rate that is designed toapproximatewhatmarketparticipantswouldassign.ThisdiscountrateiscalculatedusingtheCapitalAssetsPricingModel(‘CAPM’).TheCAPMincludesmarketparticipant’sestimates forequityriskpremium,costofdebt, targetdebttoequity,risk-free rates and inflation. For the December 31, 2017 impairment analysis, a real discount rate of 4.00% was used(2016 - real discount rates of 5.50%). The decrease in the real discount rate was due to the removal of the projectdevelopmentriskpremiumandstrongerbondmarkets.

CommoditypricesandexchangeratesCommoditypricesandexchangeratesareestimatedwithreferencetoexternalmarketforecasts.Theratesappliedhavebeenestimatedusingconsensuscommoditypricesandexchangerateforecasts.Forimpairmentanalysis,thefollowingcommoditypricesandexchangerateassumptionswereused:

AsatDecember31,2017 AsatDecember31,2016

(inU.S.dollars,exceptwherenoted)

2018-2022Average

Long-term

2017-2021Average

Long-term

COMMODITYPRICES

Gold($/ounce) 1,300 1,300 1,325 1,300

Silver($/ounce) 19.16 19.25 19.66 20.00

EXCHANGERATES

CAD:USD 1.24 1.24 1.31 1.30


Significant judgments and assumptions are required in making estimates of fair value. It should be noted that CGUvaluations are subject to variability in key assumptions including, but not limited to, long-term gold prices, currencyexchange rates, discount rates, production, operating and capital costs. An adverse change in one or more of theassumptionsusedtoestimatefairvaluecouldresultinareductioninaCGU’sfairvalue.

(b)RioFigueroaNSR:Key estimates and judgments used in the fair value less cost of disposal calculation are estimates of production levels,probabilityoftheprojectbeingdevelopedandeconomicfactorsbeyondmanagement’scontrol,suchascopperpricesanddiscountrates.

(ii)ImpactofimpairmenttestsTheCompanycalculatedtherecoverableamountoftheRainyRiverCGUusingthefairvaluelesscostofdisposalmethodas noted above. For the year ended December 31, 2017, the Company recorded pre-tax impairment losses of$268.4million,$181.0millionnetoftax,withinnetloss.ThefairvalueoftheRainyRiverCGUwasnegativelyimpactedbythehigherdevelopmentcapitalcostsincurredtodateaswellashigherexpectedall-insustainingcostsovertheLOM.

For the year ended December 31, 2016, the Company recorded impairment losses of $6.4 million related to theRioFigueroaNSR,withinnetloss,asnotedabove.

(iii)SensitivityanalysisAftereffectingtheimpairmentfortheRainyRiverCGU,thefairvalueofthisCGUisassessedasbeingequaltoitsrespectivecarryingamountasatDecember31,2017.Anyvariationinthekeyassumptionsusedtodeterminefairvaluewouldresultin a change of the assessed fair value. It is estimated that changes in the key assumptions would have the followingapproximateimpactonthefairvalueoftheRainyRiverCGUatDecember31,2017:

AsatDecember31,2017

(inmillionsofU.S.dollars) RainyRiver

IMPACTOFCHANGESINTHEKEYASSUMPTIONSUSEDTODETERMINEFAIRVALUE $100perouncechangeingoldprice 235.1

0.5%changeindiscountrate 25.9

5%changeinexchangerate 106.5

5%changeinoperatingcosts 90.3

5%changeinin-situounces 20.2


ExplorationandbusinessdevelopmentFortheyearendedDecember31,2017,expensedexplorationwasprimarilyincurredatRainyRiverandtheFifieldproject,locatedincentralNewSouthWales,Australia.Theprior-yearincludedexpensedexplorationcostsprimarilyatNewAftonandMesquite.Capitalizedexplorationcostswere$2.0million for theyearendedDecember31,2017andwere incurredatRainyRiverandNewAfton.

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

Financeincomeandfinancecosts

ForthethreemonthsandyearendedDecember31,2017,financecostsincreasedastheCompanycapitalizedlessinteresttoitsqualifyingdevelopmentpropertyduetothecommencementofcommercialproductionatRainyRiver,andadditionalinterestwasincurredontheadditionaldrawnportionoftheCompany’srevolvingcreditfacility.

OthergainsandlossesOthergainsandlossesconsistofthefollowingitems:

SharepurchasewarrantsFortheyearendedDecember31,2017,theCompanyrecordedagainonsharepurchasewarrants.AsthetradedvalueoftheNewGoldsharepurchasewarrantsincreasesordecreases,arelatedlossorgainonthemark-to-marketoftheliabilityisreflectedinearnings.InJune2017allsharepurchasewarrantsexpiredunexercised,thustherewasnolossforthethreemonthsendedDecember31,2017.

GoldstreamobligationFor the year ended December 31, 2017, the unrealized loss on revaluation of the gold stream obligation derivativeinstrumentwasrelatedtothedecreaseinthediscountrate,increaseinexpectedgoldounceproduction,andtheperiodicrecognitionoftheaccretionexpense.ThelossontherevaluationofthegoldstreamobligationisaresultofthechangeintheCompany’sowncreditrisknarrowing.

GoldpriceoptioncontractsIn theprioryear, theCompanyentered intogoldpriceoptioncontractswhereby it solda seriesof calloptioncontractsandpurchasedaseriesofputoptioncontracts.Thesegoldpriceoptioncontractscoveredof120,000ouncesofNewGold’sfirst half 2017 gold production. In June 2017, the Company entered into further gold option contracts for the periodJuly2017toDecember2017withastrikepriceof$1,250perouncecovering120,000ouncesofgoldandsimultaneouslysoldcalloptionswithastrikepriceof$1,400perouncecoveringanequivalent120,000ounces.

Thesederivativeinstrumentswerefairvaluedattheendofeachreportingperiod.FortheyearendedDecember31,2017,theCompanyrecognized$7.5millionincreaseinrevenuerelatedtothesegoldpriceoptioncontracts.

AsatDecember31,2017,theseoptionshaveexpiredandnofurthergoldpriceoptioncontractshavebeenenteredintoin2018.

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


ForeignexchangeMovementsinforeignexchangeareduetotherevaluationofthenon-monetaryassetsandliabilitiesatthebalancesheetdateandtheappreciationordepreciationoftheCanadianandAustraliandollarscomparedtotheU.S.dollarinthecurrentperiod.

IncometaxIncometaxrecoveryfromcontinuingoperationsfortheyearendedDecember31,2017was$115.9milliononlossbeforetaxesof$217.6millioncomparedto$2.1millionona lossof10.7million inprior-year,reflectinganeffectivetaxrateof53.3%in2017comparedto19.6%in2016.Theprimaryreasonforthechangeintheunadjustedeffectivetaxrate istheimpactofUStaxratechange, lowertaxrateapplicableonthedisposaloftheElMorrostreamandtheimpactofforeignexchangemovementsonthedeferredtaxrelatedtonon-monetaryassetsandliabilities.OnDecember22,2017,theTaxCutsand JobsAct (“tax reform”)was signed into law in theU.S. Tax reform lowered theU.S Federal corporate tax ratefrom35%to21%andmadenumerousothertaxlawchanges.ThechangeintaxlawrequiredtheCompanytoremeasureexistingnetdeferred tax liabilitiesusing the lower rate in theperiodofenactment resulting inan income taxbenefitofapproximately $32.6 million to reflect these changes in the year ended December 31, 2017. For the year endedDecember31,2017,theCompanyrecordedaforeignexchangegainof$7.4milliononnonmonetaryassetsandliabilities,comparedtoagainof$10.1millionintheprioryearwithnoassociatedtaximpact.FortheyearendedDecember31,2017theunadjustedeffectivetaxratewasimpactedduetohigherincometaxrateintheprovinceofBritishColumbia.

TheCompanyhadunrecognizeddeferred taxassets inMexicoof$20.1millionasatDecember31,2017compared to$18.4million in the prior year. The Company had $1.6million of unrecognized deferred tax asset in the U.S. as atDecember31,2017relatingtodecommissioningobligationscomparedto$1.2millionrelatingtoalternativeminimumtax credits in the prior year. In addition, the Company had unrecognized deferred tax assets of $43.6 million forinvestmenttaxcreditsinCanadaasatDecember31,2017.ThedeferredtaxassetwerenotrecognizedastheCompanydidnotmeetmorelikelythannotcriteriaforrecognizingtheseassets.

DuringtheyeartheCompanypaidincometaxesof$17.6millioncomparedtorefundof$2.4millionintheprioryear.TheincreaseisprimarilyduetohigherincometaxespaidintheU.S.

On an adjusted net earnings (loss) basis, the adjusted tax recovery from continuing operations for the year endedDecember31,2017was$8.8million,comparedtoanadjustedtaxexpenseof$11.3millionintheprioryear.TheadjustedtaxrecoveryexcludestheimpactofassetimpairmentatRainyRiver,foreignexchange,disposaloftheElMorrogoldstream,revaluationofthegoldstreamobligationandthegainonrevaluationofthegoldpriceoptioncontracts.Pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

(Loss)earningsfromdiscontinuedoperationsForthethreemonthsandyearendedDecember31,2017earningsfromdiscontinuedoperationsdecreasedduetotheimpairmentlossonheld-for-saleassets,partiallyoffsetbyanincreaseinrevenuesandthecessationofdepreciationanddepletionuponclassificationofPeakMinestoadiscontinuedoperation.


Netearnings(loss)PleaseseebelowforareconciliationofnetearningsfortheyearendedDecember31,2017.

RECONCILIATIONOFNETEARNINGS(LOSS)–2016TO2017(inmillionsofU.S.dollars)

(8)

(7)

82 (46)

(20) 2 (4) (262)

(2)47 (4)

114

(108)

(300)

(200)

(100)

0

100

200

2016NETLOSS

REVE

NUES

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

CORP

ORA

TEADM

INISTR

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LOPM

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DLO

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CE

INCO

ME

INCO

META

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LOSSFRO

MDISCO

NTINUED

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TIONS,NETOFTA

X

2017NETLOSS


Pleaseseebelowforareconciliationofnetearnings(loss)forthequarterendedDecember31,2017.

RECONCILIATIONOFNETEARNINGS(LOSS)–Q42016TOQ42017(inmillionsofU.S.dollars)

(22)53 (23)

(13) 4 (4) (262)

1 (36)(12)

(136) (17)

(196)

(400)

(300)

(200)

(100)

0

100

Q420

16NETLOSS

REVE

NUES

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

CORP

ORA

TEADM

INISTR

ATIONAND

SHAR

EBA

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CORP

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PAIRMEN

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DEVE

LOPM

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FINAN

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MDISCO

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Q420

17NETLOSS


Adjustednetearnings(loss)Thenetearningshavebeenadjusted, includingtheassociatedtax impact, forasset impairments, inventorywrite-downs,gainsonthemodificationoflong-termdebt,and“Othergainsandlosses”ontheauditedconsolidatedincomestatement.Keyentriesinthisgroupingare:thefairvaluechangesforthegoldstreamobligation;sharepurchasewarrantsandthefairvaluechangesforgoldoptioncontracts;foreignexchangegainorloss;andlossondisposalofassets.Theadjustedentriesarealso impacted for tax to theextent that theunderlyingentriesare impacted for tax in theunadjustednetearnings.Pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

PleaseseebelowforareconciliationofadjustednetearningsfortheyearendedDecember31,2017.

RECONCILIATIONOFADJUSTEDNETEARNINGS(LOSS)–2016TO2017(inmillionsofU.S.dollars)

15

82 (70)

(22)

2 (4) (2) (4)

52 49

(20)

0

20

40

60

80

100

120

2016YTD

ADJUSTED

NETEAR

NINGS

REVE

NUES

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

CORP

ORA

TEADM

INISTR

ATIONAND

SHAR

EBA

SEDPA

YMEN

TEXPENSES

CORP

ORA

TERESTR

UCT

URING

EXPLORA

TIONANDBU

SINESS

DEVE

LOPM

ENT

FINAN

CECOSTS,NETOFFINAN

CE

INCO

MEAN

DGA

INONDEB

TMODIFICA

TION

ADJUSTED

INCO

META

XEXPENSE

ADJUSTED

EAR

NINGS

FRO

M

DISCONTINUED

OPERA

TIONS,NETOF

TAX

2017YTD

ADJUSTED

NETEAR

NINGS


Pleaseseebelowforareconciliationofadjustednetearnings(loss)forthequarterendedDecember31,2017fromtheprior-yearperiod.

RECONCILIATIONOFADJUSTEDNETEARNINGS(LOSS)–Q42016TOQ42017(inmillionsofU.S.dollars)

(5)

53 (23)

(13)

4 (4) 1 (12)17

15 33

(10)

0

10

20

30

40

50

60

Q420

16ADJUSTED

NETLOSS

REVE

NUES

OPERA

TINGEXPENSES

DEPR

ECIATIONANDDE

PLETION

CORP

ORA

TEADM

INISTR

ATIONANDSH

ARE

BASEDPA

YMEN

TEXPENSES

CORP

ORA

TERESTR

UCT

URING

EXPLORA

TIONANDBU

SINESS

DEVE

LOPM

ENT

FINAN

CECOSTS,NETOFFINAN

CEIN

COME

ANDGA

INONDEB

TMODIFICA

TION

ADJUSTED

INCO

META

XEXPENSE

ADJUSTED

EAR

NINGS

FRO

MDISCO

NTINUED

OPERA

TIONS,NETOFTA

X

Q42017ADJUSTED

NETEAR

NINGS


Key Quarterly Operating and Financial Information Selectedfinancialandoperatinginformationforthecurrentandpreviousquartersisasfollows:

(inmillionsofU.S.dollars,exceptwherenoted)

Q42017

Q32017

Q22017

Q12017

Q42016

Q32016

Q22016

Q12016

Q42015


Totalgoldproduction

(ounces)(1)

145,992

82,027

105,064

89,327

95,883

95,546

99,423

90,811

131,719Goldproductionfromcontinuingoperations(ounces)(1)

110,240

67,653

79,025

60,980

77,026

57,565

68,138

71,215

96,921

Totalgoldsales(ounces)(1) 143,644 79,904 99,235 87,304 93,936 96,452 101,820 86,031 133,005

Goldsalesfromcontinuingoperations(ounces)(1)

108,782

67,052

73,707

59,913

75,887

56,038

74,036

68,882

98,315

Revenue 193.5 142.5 143.8 124.5 140.7 125.2 140.1 126.8 155.2 (Loss)earningsfromcontinuingoperations

(179.6)

29.2

17.8

30.9

(23.3)

0.8

(14.1)

28.5

1.7

pershare: Basic($) (0.31) 0.05 0.03 0.06 (0.05) $nil (0.03) 0.06 $nilDiluted($) (0.31) 0.05 0.03 0.06 (0.05) $nil (0.03) 0.06 $nil(Loss)earningsfromdiscontinuedoperations,netoftax

(16.0)

(2.2)

5.3

6.6

1.0

3.3

0.2

(2.9)

(11.2)Net(loss)earnings (195.6) 27.0 23.1 37.5 (22.3) 4.1 (13.9) 25.6 (9.5)pershare: Basic($) (0.34) 0.05 0.04 0.07 (0.04) 0.01 (0.03) 0.05 (0.02)Diluted($) (0.34) 0.05 0.04 0.07 (0.04) 0.01 (0.03) 0.05 (0.02)

Adetaileddiscussionofproductionisincludedinthe“OperatingHighlights”sectionofthisMD&A.


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

The quarterly impact on the comparative consolidated income statement is outlined in the table below. The resultingoverstatementofthemininginterest’sbalanceof$15.4million,overstatementofdeferredtaxliabilityof$5.3millionandunderstatement of inventories totalling $0.4million as atDecember 31, 2016has also been revised in the comparativeconsolidated statement of financial position and the associated notes to the audited consolidated financial statements.There has been no change to the cash flows from operating, investing and financing activities in the comparativeconsolidatedstatementofcashflow.

1. FortheperiodsinwhichtheCompanyrecordsaloss,dilutedlosspershareiscalculatedusingthebasicweightedaveragenumberofsharesoutstanding,asusingthedilutedweightedaveragenumberofsharesoutstandinginthecalculationwouldbeanti-dilutive.

Threemonths

endedThreemonths

endedThreemonths

endedThreemonths

ended

Yearended

(inmillionsofU.S.dollars)

March31,2016

September30,2016

September30,2016

December31,2016

December31,2016

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)


REVIEWOFOPERATINGMINES Rainy River Mine, Ontario, Canada Rainy River is a gold mine located approximately50 kilometres northwest of Fort Frances, a town ofapproximately 8,000 people, in northwestern Ontario,Canada.Theproperty is locatednear infrastructureand iscomprised of approximately 192 square kilometres offreeholdandleaseholdpatentedsurfacerightsandminingrights,propertiesandunpatentedminingclaims.

AtDecember31,2017,theminehad4.4millionouncesofProven and Probable Gold Mineral Reserves, with1.8 million ounces of Measured and Indicated GoldMineral Resources, exclusive of Mineral Reserves. RainyRiverenhancesNewGold’sgrowthpipelinethroughitssignificantproductionscaleandexcitinglonger-termexplorationpotentialinagreatminingjurisdiction.

ThreemonthsendedDecember31

YearendedDecember31



Oremined(thousandsoftonnes) 1,808 - 1,808 - -Wastemined(thousandsoftonnes) 6,821 - 6,821 - -Oreprocessed(thousandsoftonnes) 977 - 977 - -Averagegrade: Gold(grams/tonne) 0.94 - 0.94 - -Silver(grams/tonne) 2.20 - 2.20 - -Recoveryrate(%): Gold 86.1 - 86.1 - -Silver 55.6 - 55.6 - -Gold(ounces): Produced(inclusiveofpre-commercialounces) 37,047 - 37,047 - -Produced(1) 28,509 - 28,509 - -Sold(1) 26,359 - 26,359 - -Silver(millionsofounces): Produced(1) 0.04 - 0.04 - -Sold(1) 0.04 - 0.04 - -Revenue Gold($/ounce) 1,276 - 1,276 - -Silver($/ounce) 16.50 - 16.50 - -Averagerealizedprice(2): Gold($/ounce) 1,276 - 1,276 - -Silver($/ounce) 16.50 - 16.50 - -Operatingexpensespergoldouncesold($/ounce)(4) 1,432 - 1,432 - -Operatingexpensespersilverouncesold($/ounce)(4) 18.52 - 18.52 - -Totalcashcostspergoldouncesold(2)(3) 1,436 - 1,436 - -All-insustainingcostspergoldouncesold(2)(3) 1,549 - 1,549 - -Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 1,432 - 1,432 - -Silver($/ounce) 18.52 - 18.52 - -

AT-A-GLANCEASATDECEMBER31,2017

2018GUIDANCE:GOLD:310,000-350,000OUNCESOPERATINGEXPENSES/OZ:$430-$470ALL-INSUSTAININGCOSTS/OZ:$990-$1,0902017PRODUCTION:GOLD:28,509OUNCESSILVER:0.04MILLIONOUNCESALL-INSUSTAININGCOSTS/OZ:$1,549



YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 1,543 - 1,543 - -Silver($/ounce) 19.96 - 19.96 - - FINANCIALINFORMATION Revenue 34.3 - 34.3 - -Operatingmargin(2) (4.2) - (4.2) - -Revenuelesscostofgoodssold (18.3) - (18.3) - -Capitalexpenditures(sustainingcapital)(2) 2.6 - 2.6 - -Capitalexpenditures(growthcapital)(2) 80.7 145.9 496.7 - -

1. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryadjustments,whereapplicable.2. Weusecertainnon-GAAP financialperformancemeasures throughoutourMD&A.Total cashcostsandall-in sustainingcostspergoldounce sold, total cashcostsand

all-in sustaining costs on a co-product basis, average realized price, and operating margin and capital expenditures (sustaining capital) are non-GAAP financialperformancemeasureswithnostandardmeaningunderIFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

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

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

OperatingresultsRainyRiverreachedcommercialproductioninthefourthquarterof2017.Fromanaccountingperspective,theCompanyrecognizedcommercialproductioneffectiveNovember1,2017,beingthefirstdayofthemonthfollowingsatisfactionofthecommercialproductioncriteria.Priortothecommercialproductiondatethemineproduced8,538goldounces,withtheassociatedproceedsreducingthecapitalcostsoftheproject.GoldouncesproducedfortheyearendedDecember31,2017areshownexclusiveoftheprecommercialperiod,unlessotherwisenoted.Otheroperatingandfinancialinformationrepresentthepostcommercialproductionperiod.

ProductionRainyRivercommencedprocessingoreonSeptember14,2017andcompleted its firstgoldpouronOctober5,2017.Commercialproductionwasachievedaheadofplaninmid-October.Miningandmillingactivitiescontinuedtoprogresswell during the fourth quarter of 2017. For the year and threemonths ended December 31, 2017, post-commercialproductiongoldproductionatRainyRiverwas28,509ounces.Totalgoldproduction, inclusiveofpre-commercialgoldproductionwas37,047ouncesand8,607ouncesofgoldinventoryincircuitattheendoftheperiod,was45,654ounces.

Thiswasslightlylowerthantheguidancerangeof50,000to60,000ounces,asthemillramp-upbeganhittingnameplatethroughputslightlylaterinthefourthquarterthanplanned,resultinginlowertotaltonnesmilled.

RevenueandRevenuelesscostofgoodssoldFortheyearendedDecember31,2017,revenuewas$34.3million,andrevenues lesscostofgoodssoldwasa lossof$18.3million,astheoperationrampeduptonameplatecapacityduringtheoperatingperiod.

Operatingexpenses,totalcashcostsandall-insustainingcostsFortheyearandthreemonthsendedDecember31,2017,operatingexpensepergoldouncesoldwas$1,432.FortheyearandthreemonthsendedDecember31,2017,totalcashcostsandall-insustainingcostspergoldouncesoldwere$1,436and$1,549respectively,astheoperationrampeduptonameplatecapacityduringtheoperatingperiod.


CapitalexpendituresFortheyearandthreemonthsendedDecember31,2017,totalcapitalexpenditureswere$499.3millionand$83.3millionrespectively,whichrelatedprimarilytoprojectdevelopmentspending.Subsequenttothestartofcommercialproduction,the Company paid $52 million in payables associated with the project development in the fourth quarter, withapproximately $15 million in payables remaining at the end of 2017. Including the remaining project developmentpayables,thetotal2017developmentcostwas$512million,whichwasin linewiththecompany’sestimatefortheyearof$515million.

ExplorationactivitiesDuring 2017, exploration efforts at Rainy River primarily involved infill drilling to further upgrade mineral resourceclassification in the open pit and deeper underground portions of the ODM deposit. Results of this work have beenincorporatedintotheCompany’supdatedmineralresourceandreserveestimatesforyear-end2017.Additionally,duringthethreemonthsendedDecember31,2017,theCompanycompletedahigh-resolution,airbornegeophysicalsurveyoveraportionof theOff Lake claimblock located to theeastof theRainyRiverMine.Resultsof this surveywill beused tosupportfutureexplorationplans.

Outlookfor2018AsRainyRiver enters its first full year of operations, gold and silver production are expected to increase significantlyrelativetothepartialoperatingyearin2017.Thefocusfor2018willbeonoptimizingthroughputatthemill,whichhasa21,000tonneperdaynameplatecapacity,aswellasadvancinginitiativestopotentiallyincreaseproduction.

Bothoperatingexpensesandall-insustainingcostsfor2018areexpectedtodecreaserelativeto2017duetohighergoldsalesvolumes.Aspreviouslynoted,RainyRiver’s2018sustainingcapitalexpenditureswillbehigherthanthelife-of-mineaverage as themine completes construction of the full tailings dam footprint. In addition, approximately $45million of2018waste stripping is scheduled tobe capitalized. The remainderof the sustaining capital expenditures are related toopenpitsustainingcostsaswellaspropertyandequipment.The$20millionofgrowthcapitalexpendituresarerelatedtoundergrounddevelopmentwhichisscheduledtobegininthesecondhalfof2018.

The company has incorporated the insights gained from the first two months of operation in Rainy River’s long-termoutlook. Based on the Company’s current estimates, annual gold production for the first nine years of the mine life(including 2018) should average between 275,000 to 375,000 ounces. At the same time, based on current input costestimates, silverpricesand foreignexchange rates, all-in sustaining costsoverRainyRiver’s firstnineyearsofoperation(including2018)areexpectedtoaverageapproximately$875perounce.Costsareexpectedtobehigherthanthisaveragein thenext three years as a result of sustaining capital expenditures associatedwith completionof the full tailingsdamfootprintin2018aswellastheconstructionofthefirsttailingsliftlaterin2018into2019.

YearendedDecember31

2017Actuals 2018Guidance

2017ACTUALSAND2018GUIDANCE Gold(ounces) 28,509 310,000–350,000Operatingexpensespergoldouncesold($/ounce) 1,432 430–470All-insustainingcosts($/ounce) 1,549 990–1,090Capitalexpenditures(sustainingcapital) 2.6 195Capitalexpenditures(growthcapital) 496.7 20

Pleaserefertothe“Outlookfor2018”sectionofthisMD&Afordetailsoftherelevantkeyassumptions.


New Afton Mine, British Columbia, Canada The New Afton Mine is located near Kamloops, BritishColumbia. At December 31, 2017, the mine had 1.0 millionounces of Proven and Probable Gold Mineral Reserves and941million pounds of Proven and Probable CopperMineralReserves,with1.2millionouncesofMeasuredandIndicatedGold Mineral Resources, exclusive of Mineral Reserves, and968 million pounds of Measured and Indicated CopperMineralResources,exclusiveofMineralReserves.AsummaryofNewAfton’soperatingresultsisprovidedbelow.


YearendedDecember31



Oremined(thousandsoftonnes) 1,728 1,628 6,325 6,113 5,255Oreprocessed(thousandsoftonnes) 1,483 1,522 5,993 5,773 5,097Averagegrade: Gold(grams/tonne) 0.58 0.60 0.56 0.65 0.78Copper(%) 0.93 0.78 0.85 0.81 0.90Recoveryrate(%): Gold 80.8 80.9 80.1 81.9 82.5Copper 80.9 81.5 80.8 84.4 84.9Gold(ounces): Produced(1) 22,384 23,879 86,163 98,098 105,487Sold(1) 20,132 24,171 81,067 96,851 99,458Copper(millionsofpounds): Produced(1) 24.6 21.4 90.6 87.3 85.9Sold(1) 22.0 21.1 84.5 84.9 79.7Silver(millionsofounces): Produced(1) 0.1 0.1 0.3 0.3 0.3Sold(1) 0.1 0.1 0.3 0.3 0.3Revenue Gold($/ounce) 1,132 1,102 1,162 1,140 1,061Copper($/pound) 2.44 2.24 2.41 2.03 2.21Silver($/ounce) 13.92 14.97 15.11 16.52 13.60Averagerealizedprice(1)(2): Gold($/ounce) 1,254 1,212 1,280 1,251 1,164Copper($/pound) 2.70 2.47 2.66 2.23 2.42Silver($/ounce) 15.43 16.47 16.64 18.14 14.94

AT-A-GLANCE2018GUIDANCE:GOLD:55,000-65,000OUNCESCOPPER:75-85MILLIONPOUNDSOPERATINGEXPENSE/GOLDOZ:$455-$495ALL-INSUSTAININGCOSTS/OZ:($1,020)-($980)2017PRODUCTION:GOLD:86,163OUNCESCOPPER:90.6MILLIONPOUNDSOPERATINGEXPENSE/GOLDOZ:$412ALL-INSUSTAININGCOSTS/OZ:($605)



YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015OPERATINGINFORMATION

Operatingexpensespergoldouncesold($/ounce)(4) 362 415 412 415 364Operatingexpensespercopperpoundsold($/pound)(4) 0.78 0.84 0.85 0.74 0.76Totalcashcostspergoldouncesold($/ounce)(2)(3) (1,363) (720) (1,126) (634) (724)All-insustainingcostspergoldouncesold($/ounce)(2)(3) (909) (253) (605) (218) (242)Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 484 525 530 527 464Copper($/pound) 1.04 1.07 1.10 0.94 0.96All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 617 691 692 686 646Copper($/pound) 1.33 1.41 1.44 1.22 1.34

FINANCIALINFORMATION:

Revenue 77.3 74.9 302.0 287.2 284.6Operatingmargin(2) 52.5 46.6 194.8 182.4 186.9Revenuelesscostofgoodssold(5) 16.8 7.3 55.6 30.1 44.7Capitalexpenditures(sustainingcapital)(2) 8.3 10.2 39.3 37.7 46.7Capitalexpenditures(growthcapital)(2) 0.3 0.2 2.9 3.2 15.4

1. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryandsmelterpayableadjustments,whereapplicable.

2. Weusecertainnon-GAAPfinancialperformancemeasuresthroughoutourMD&A.Totalcashcostsandall-insustainingcostspergoldouncesold,totalcashcostsandall-insustainingcostsonaco-productbasis,averagerealizedprice,operatingmargin,andcapitalexpenditures(sustainingcapitalandgrowthcapital)arenon-GAAPfinancialperformancemeasureswithnostandardmeaningunderIFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

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


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

Operatingresults

ProductionFortheyearendedDecember31,2017,thedecreaseingoldproductionatNewAftonrelativetotheprioryearwasduetoanexpecteddecreaseingoldgradeandgoldrecovery.Copperproductionwashigherthantheprior-yearduetohigherthroughput andhigher copper grades.NewAfton’s full-year gold production exceeded the guidance rangeof 70,000 to80,000ouncesby8%.

For the threemonths endedDecember 31, 2017, gold productionwas below the prior-year period due to an expecteddecreaseingoldgradeandgoldrecovery.Copperproductionwashigherthantheprior-yearquarterduetohighercoppergrades.

RevenueFortheyearendedDecember31,2017,revenueincreasedcomparedwiththepriorperiodsduetoincreasesintherealizedgoldandcopperprices.Attheendoftheperiod,NewAfton’sexposuretotheimpactofmovementsinmarketmetalpricesfor provisionally priced contracts was 13,872 ounces of gold and 24.5 million pounds of copper. Exposure to thesemovementsinmarketmetalpriceswasreducedby11,900ouncesofgoldswapsand22.9millionpoundsofcopperswapsoutstandingasatDecember31,2017.ForthethreemonthsendedDecember31,2017,revenuewashigherthantheprioryearperiodduetoanincreaseingoldandcopperpricesinadditiontohighercoppersalesvolumes.


RevenuelesscostofgoodssoldFor theyearandthreemonthsendedDecember31,2017, the increase in revenue lesscostofgoodssoldwasprimarilydrivenbyanincreaseinrealizedgoldandcopperprices,andlowerdepreciationanddepletioncomparedtotheprior-yearperiods,partiallyoffsetbyoperatingexpenses(describedbelow).

Operatingexpenses,totalcashcostsandall-insustainingcostspergoldouncesoldFor theyearendedDecember31,2017,operatingexpensewas in linewith theprioryear.For the threemonthsendedDecember31,2017,operatingexpenseperouncewaslowerthantheprior-yearquarterduetogoldrevenuerepresentingalowerportionoftotalsalesintheprior-yearquarter.

All-insustainingcostsdecreasedcomparedtotheprior-yearperioddueto lowersustainingcostsandhigherby-productrevenues.By-productrevenuesbenefittedfromanincreaseintherealizedcopperpriceandhighercoppersalesvolumes.NewAfton’sfullyearsustainingcostsincreasedby$2millionto$42millionwhencomparedtotheprioryear.

New Afton’s 2017 operating expense per gold ounce and per copper pound both achieved their respective guidancerangesof$405to$445pergoldounceand$0.80to$1.00percopperpound.2017all-insustainingcostswerebelowtheguidance range of $520 to $480 per ounce, primarily due to an increase in the realized copper price relative to theassumptionusedwhensetting2017guidance.

CapitalexpendituresInboththecurrentandprior-yearperiods,sustainingcapitalexpenditureswereprimarilyrelatedtominedevelopment,andgrowthcapitalexpenditureswereprimarilyrelatedtocapitalizedexplorationattheNewAftonC-zone.

ImpactofforeignexchangeonoperationsNewAfton’soperationsisimpactedbyfluctuationsinthevaluationoftheU.S.dollaragainsttheCanadiandollar.FortheyearendedDecember31,2017,thevalueoftheU.S.dollaraveraged$1.29againsttheCanadiandollar,comparedto$1.32intheprior-yearperiod,resultinginanegativeimpactontotalcashcostsof$16pergoldouncesold.

For the threemonths endedDecember 31, 2017, the value of theU.S. dollarwas $1.27 against the Canadian dollar,comparedto$1.33intheprioryear,resultinginanegativeimpactontotalcashcostsof$37pergoldounce.

Outlookfor2018GoldproductionatNewAftonisexpectedtodecreaserelativeto2017duetoascheduleddecreaseingoldgrade,andaplanneddecreaseinmillthroughputfromapproximately16,400tonnesperdayin2017to14,400tonnesperdayin2018.TheCompanyhadpreviouslyincreasedthethroughputrateatNewAftoninordertomaximizecashflowinsupportofthedevelopment of Rainy River. New Gold has elected to decrease New Afton’s throughput from 2017 levels in order toachievehigher copper recoveries.Copperproduction is expected todecreaseas the impactof lower throughput isonlypartiallyoffsetbythetargetedhigherrecoveries.

NewAfton’s2018operatingexpensepergoldounceisexpectedtoincreaserelativeto2017duetolowergrades.Atthesametime,all-insustainingcostsareexpectedtodecreaseduetoanincreaseinby-productrevenuesresultingfromthe2018copperpriceassumptionof$3.20perpoundbeinghigherthanthe2017realizedprice.


ConsistentwiththeCompany’scommitmenttomaximizingfreecashflow,NewGoldhaselectedtodeferdevelopmentoftheC-zone in2018.While the2016Feasibility Study for theproject includes solidproject economics at spotprices, theCompanyintendstodeferthecommencementofcapitalspendingwhileevaluatingopportunitiesthathavethepotentialto further optimize the C-zone project. Some of the opportunities identified, and not included in the original feasibilitystudy, thatarebeing investigated includedifferent tailingsoptions (suchasdry stackor thickened/amended tailings),aswell asmining approaches based on operating experience in the B-zone (including reassessing the amount of requiredundergrounddevelopmentinthecaveaswellasoptimizingdrawbellandpillardesigns).

YearendedDecember31

2017Actuals 2018Guidance2017ACTUALSAND2018GUIDANCE Gold(ounces) 86,163 55,000–65,000Copper(millionsofpounds) 90.6 75–85Operatingexpensespergoldouncesold($/ounce) 412 455–495Operatingexpensespercopperpoundsold($/pound) 0.85 1.10–1.30All-insustainingcosts($/ounce) (605) (1,020)–(980)Capitalexpenditures(sustainingcapital) 39.3 40Capitalexpenditures(growthcapital) 2.9 5



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 goldminingoperation.Theminewasoperatedbetween1985and2001byGoldfieldsMiningCorporation,subsequentlySanta Fe Minerals Corporation, and finally NewmontMiningCorporationwithWesternGoldfieldsInc.acquiringtheminein2003.Themineresumedproductionin2008.New Gold acquired Mesquite as part of the businesscombination with Western Goldfields in mid-2009. AtDecember31,2017,theminehad1.1millionouncesofProvenandProbableGoldMineralReservesand1.2millionouncesofMeasured and IndicatedGoldMineral Resources, exclusive ofMineral Reserves. A summary ofMesquite’s operatingresultsisprovidedbelow.


YYearendedDecember31



Oreminedandplacedonleachpad(thousandsoftonnes)

5,868

5,762

20,828

18,969

19,987

Wastemined(thousandsoftonnes) 5,818 5,021 38,023 39,782 38,791Ratioofwaste-to-ore 0.99 0.87 1.83 2.10 1.94Averagegrade: Gold(grams/tonne) 0.29 0.31 0.32 0.38 0.34Gold(ounces): Produced(1)(2) 52,170 39,353 168,889 111,123 134,868Sold(1) 54,612 38,366 168,800 113,843 133,712Revenue Gold($/ounce) 1,281 1,217 1,278 1,244 1,144Averagerealizedprice(3): Gold($/ounce) 1,281 1,217 1,278 1,244 1144

Operatingexpensespergoldouncesold($/ounce)(4) 749 660 727 628 734Totalcashcostspergoldouncesold($/ounce)(3) 749 670 727 638 743All-insustainingcostspergoldouncesold($/ounce)(3) 833 771 817 979 1,156 FINANCIALINFORMATION Revenue 70.0 46.7 215.7 141.7152.9Operatingmargin(3) 29.1 21.4 93.0 70.2 54.8Revenuelesscostofgoodssold 10.1 7.9 32.8 31.3 12.1Capitalexpenditures(sustainingcapital)(3) 3.9 1.9 12.8 35.6 53.2

1. 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-GLANCE2018GUIDANCE:GOLD:140,000-150,000OUNCESOPERATINGEXPENSES/OZ:$890-$930ALL-INSUSTAININGCOSTS/OZ:$1005-$10452017PRODUCTION:GOLD:168,889OUNCESOPERATINGEXPENSES/OZ:$727ALL-INSUSTAININGCOSTS/OZ:$817


Operatingresults

ProductionFortheyearandthreemonthsendedDecember31,2017,theincreaseingoldproductionatMesquiterelativetotheprioryearwasduetoincreasedoretonnesminedandacceleratedinventorydrawdownduetotheincreaseofprocesssolutionflow on the leach pad. Mesquite’s full-year production significantly exceeded the 2017 guidance range of 140,000 to150,000ounces.

Revenue

FortheyearendedDecember31,2017,theincreaseinrevenuewasattributabletohighergoldpricesandsalesvolumes.

RevenuelesscostofgoodssoldFortheyearandthreemonthsendedDecember31,2017,theincreaseinrevenuelesscostofgoodssoldwasprimarilydrivenbyanincreaseingoldrevenuecomparedtotheprioryear.Theincreaseinrevenuedescribedabovewaspartiallyoffsetbyhigheroperatingexpensesanddepreciationanddepletioncomparedtotheprioryear.

Operatingexpenses,totalcashcostsandall-insustainingcostspergoldouncesoldFortheyearendedDecember31,2017,operatingexpensesincreasedwhencomparedtotheprioryearduetohigherprocesssolutionflowandthedrawdownofleachpadinventory.Full-year2017all-insustainingcostsdecreasedduetotheincreaseingoldouncessoldandlowersustainingcosts,primarilyduetonocapitalizedwastestripping,whichwereonlypartiallyoffsetbyhigheroperatingexpenses.Operatingexpenseperouncefor2017wasabovetheguidancerangeof$675to$715perounce.All-insustainingcostsachievedtheguidancerangeof$805to$845perounce.ForthethreemonthsendedDecember31,2017,all-insustainingcosts increasedduetoan increase inoperatingcostsandslightlyhighersustainingcosts.

CapitalexpendituresFortheyearendedDecember31,2017,thedecreaseinsustainingcapitalexpenditureswasduetonocapitalizedwastestrippingintheyear.ForthreemonthsendedDecember31,2017,capitalexpendituresincreasedwhencomparedwiththeprior-yearperiodduetomajorcomponentreplacementsforexistingequipment.

Outlookfor2018Asplanned,productionatMesquiteisexpectedtodecreaserelativeto2017astheimpactofloweroretonnesminedandplacedisonlypartiallyoffsetbyhighergoldgrade.

Bothoperatingexpensesandall-insustainingcostsin2018areexpectedtoincreaserelativeto2017duetolowergoldsalesvolumes.

YearendedDecember31

2017Actuals 2018Guidance2017ACTUALSAND2018GUIDANCE Gold(ounces) 168,889 140,000-150,000Operatingexpensespergoldouncesold($/ounce) 727 890-930All-insustainingcosts($/ounce) 817 1,005-1,045Capitalexpenditures(sustainingcapital) 12.8 10



Cerro San Pedro Mine, San Luis Potosí, México The Cerro San PedroMine is located in the state ofSan Luis Potosí in central México, approximately20 kilometres east of the city of San Luis Potosí. Themineisagold-silver,openpit,run-of-mineheapleachoperation.CerroSanPedrofinishedactivemininglatein the secondquarter of 2016 and is now in residualleaching. A summaryof Cerro SanPedro’s operatingresultsisprovidedbelow:


YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015OPERATINGINFORMATION Gold(ounces) Produced(1)(2) 7,177 14,064 34,337 64,993 105,512Sold(1) 7,679 13,351 33,228 64,149 106,417Silver(millionsofounces) Produced(1)(2) 0.12 0.18 0.61 0.87 1.47Sold(1) 0.13 0.17 0.58 0.85 1.47Revenue Gold($/ounce) 1,279 1,219 1,278 1,243 1,152Silver($/ounce) 16.71 16.91 17.02 16.76 15.40Averagerealizedprice(3): Gold($/ounce) 1,279 1,219 1,278 1,243 1,152Silver($/ounce) 16.71 16.91 17.02 16.76 15.44Operatingexpensespergoldouncesold($/ounce)(5) 1,380 2,586 1,287 1,311 991Operatingexpensespersilverouncesold($/ounce)(5) 18.03 35.87 17.14 17.68 13.38Totalcashcostspergoldouncesold($/ounce)(3)(4) 1,414 1,014 1,264 933 865All-insustainingcostspergoldouncesold($/ounce)(3)(4) 1,545 1,045 1,425 959 879Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 1,390 1,045 1,267 980 910Silver($/ounce) 18.16 14.49 16.87 13.22 12.19All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 1,498 1,071 1,397 1,002 922Silver($/ounce) 19.56 14.86 18.61 13.52 12.36 FINANCIALINFORMATION Revenue 11.9 19.1 52.4 93.9 145.4Operatingmargin(3) (1.0) (21.5) (0.3) (5.3) 20.2Revenuelesscostofgoodssold (2.6) (25.8) (7.0) (14.2) 11.2Capitalexpenditures(sustainingcapital)(3) - 0.2 0.7 1.0 1.3

1. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryadjustments,whereapplicable.2. Tonnesoforeprocessedeachperioddoesnotnecessarilycorrespondtoouncesproducedduringtheperiod,asthereisatimedelaybetweenplacingtonnesontheleach

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

sustaining costs on a co-product basis, average realized price, and operating margin and capital expenditures (sustaining and growth) are non-GAAP financialperformancemeasureswithnostandardmeaningunderIFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPPerformanceMeasures”sectionofthisMD&A.

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


AT-A-GLANCE2018GUIDANCE:GOLD:20,000-30,000OUNCESOPERATINGEXPENSES/GOLDOZ:$1,255-$1,295ALL-INSUSTAININGCOSTS/OZ:$1,330-$1,3702017PRODUCTIONGOLD:34,337OUNCESOPERATINGEXPENSES/GOLDOZ:$1,264ALL-INSUSTAININGCOSTS/OZ:$1,425


Operatingresults

Production

CerroSanPedrofinishedactivemining late inthesecondquarterof2016andhastransitionedtoresidual leaching.Asaresult, and consistent with expectations, for the year and three months ended December 31, 2017, gold and silverproductiondecreasedcomparedtotheprior-yearperiods.2017full-yeargoldproductionwasslightlybelowtheguidancerangeof35,000to45,000ounces.

RevenueFortheyearendedDecember31,2017,thedecreaseinrevenuewasattributabletothedecreaseinmetalsalesvolumesasCerroSanPedroisdrawingdownleachpadinventoryduringtheresidualleachperiod.

RevenuelesscostofgoodssoldFortheyearendedDecember31,2017,theincreaseinrevenuelesscostofgoodssoldwasprimarilyattributabletoloweroperating expenses. The prior-year period was negatively impacted by a heap leach silver inventory write-down of$24.0million.

Operatingexpenses,totalcashcostsandall-insustainingcosts

For theyearandthreemonthsendedDecember31,2017,operatingexpensesdecreasedwhencomparedto theprior-year periods as prior-year periods included the impact of a heap leach inventory write-down of $24.0 million. All-insustainingcosts increasedwhencompared to theprior-yearperiodsdue to lowergoldandsilver salesvolumes.As theCompanyisdrawingdownleachpadinventoryduringtheresidualleachperiod,$400operatingexpensepergoldounceinthefourthquarter,and$404operatingexpensepergoldounceintheyear,ofthereportedoperatingexpensepergoldounceandall-insustainingcostsarerelatedtominingcoststhatwereincurredinpriorperiods.CerroSanPedro’s2017costswereabovetheguidancerangesof$1,080to$1,120perounceforoperatingcosts,and$1,090to$1,130perounceforall-insustainingcosts,primarilyduetolowergoldsalesandhighersustainingcosts.

ImpactofForeignExchangeonOperationsCerroSanPedrowasimpactedbychangesinthevalueoftheMexicanpesoagainsttheU.S.dollar.FortheyearendedDecember31,2017,thevalueoftheMexicanpesoaveragedMXN18.91againsttheU.S.dollarcomparedtoMXN18.67intheprior-yearperiod.Thishadapositiveimpactontotalcashcostsof$4pergoldouncesold.

ForthethreemonthsendedDecember31,2017,thevalueoftheMexicanpesoaveragedMXN18.95againsttheU.S.dollarcomparedtoMXN19.81intheprior-yearperiod.Thishadanegativeimpactontotalcashcostsof$15pergoldouncesold.

Outlookfor2018As Cerro San Pedro enters its second full-year of residual leaching in 2018, gold and silver production are expected todecline while costs should remain in line with 2017. As the Company is drawing down leach pad inventory during theresidualleachperiod,approximately$380perounceoftheestimatedall-insustainingcostsfor2018arerelatedtominingcoststhatwereincurredinpriorperiods.


YearendedDecember31

2017Actuals 2018Guidance2017ACTUALSAND2018GUIDANCE Gold(ounces) 34,337 20,000–30,000Operatingexpensespergoldouncesold($/ounce) 1,287 1,255–1,295All-insustainingcosts($/ounce) 1,425 1,330–1,370Capitalexpenditures(sustainingcapital) 0.7 -


DISCONTINUEDOPERATIONSInJuly2017,theCompanyannouncedaprocessforthesaleofPeakMines,itsgold-copperminelocatedinAustralia,anduponcommencementof theprocessmet the criteria as adiscontinuedoperationunder IFRS5. InNovember2017, theCompanyenteredintoabindingagreementtosellPeakMinesandexpectsasaletobecompletedwithinthefirstquarterof2018. Inconjunctionwiththeagreement,theCompanyhasreceiveda$3.0millionprepaymentfromthebuyerwhichhasbeenrecordedasadeferredbenefitwithincurrentliabilitiesontheconsolidatedstatementoffinancialposition.

For theyearendedDecember31,2017, thenetearnings fromPeakMines is reportedasearnings fromdiscontinuedoperations.TotalassetsandliabilitiesofPeakMines(excludinganyassetsandliabilitieswhichdonotformpartofthenetassetsbeingsold)arereportedasassetsandliabilitiesheld-for-sale,respectively,asatDecember31,2017withoutrestatement of the prior-year period comparative amounts. Upon classification of Peak Mines as held-for-sale, theCompanyceasedrecognizingdepreciationanddepletionatPeakMinesfortheyearendedDecember31,2017.

AsatDecember31,2017,theCompanyhasmeasuredtheassetgroupatthelowerofcarryingvalueandfairvaluelesscoststosell(“FVLCS”).Theexpectedpurchaseconsiderationwasusedasthebasisfordeterminingthefairvalue,andanestimateof thedisposalcostswasusedasthebasis for thecosts tosell. Inperformingthisassessment, theCompanyconcludedthattheexpectedfairvaluelesscoststosellofPeakMineswaslowerthanthecarryingvalue.Asaresult,theCompanyrecognizedanimpairmentlossof$49.0millionfortheyearendedDecember31,2017,inclusiveof$0.4millioninincurredtransactioncoststodate.ThisimpairmentlosswasentirelyallocatedtoPeakMinesmininginterests.


Peak Mines, New South Wales, Australia TheCompany’s PeakMines gold-copperminingoperationisanundergroundmine/milloperationlocatedintheCobarMineral Field near Cobar, New SouthWales, Australia. AtDecember 31, 2017, the mine had 246,000 ounces ofProvenandProbableGoldMineralReservesand84millionpoundsofProvenandProbableCopperMineralReserves,with 380,000 ounces of Measured and Indicated GoldMineral Resources, exclusive of Mineral Reserves, and 183 million pounds of Measured and Indicated CopperMineralResources,exclusiveofMineralReserves.During2017,theCompanyenteredintoabindingagreementtosellPeakMinesandexpects the sale to close in the firstquarterof2018.Accordingly,PeakMineshasbeenclassifiedasadiscontinuedoperation.AsummaryofPeakMines’operatingresultsisprovidedbelow:


YearendedDecember31

YearendedDecember31



Oremined(thousandsoftonnes) 165 219 574 755 693Oreprocessed(thousandsoftonnes) 167 191 634 736 723Averagegrade: Gold(grams/tonne) 7.20 3.16 5.49 4.82 4.19Copper(%) 1.07 1.10 1.10 1.03 1.00Recoveryrate(%): Gold 97.6 91.9 94.8 93.3 93.00Copper 94.0 90.8 89.4 90.1 88.32Gold(ounces): Produced(1) 35,753 18,587 104,512 107,449 89,852Sold(1) 34,861 18,049 100,632 103,396 89,265Copper(millionsofpounds): Produced(1) 3.6 4.2 13.8 15.0 14.0Sold(1) 2.9 3.5 12.0 14.3 13.2Revenue Gold($/ounce) 1,233 1,157 1,245 1,249 1,137Copper($/pound) 3.07 2.09 2.73 2.02 2.42Averagerealizedprice(2): Gold($/ounce) 1,271 1,191 1,289 1,278 1,137Copper($/pound) 3.18 2.36 2.85 2.21 2.42Totalcashcostspergoldouncesold(2)(3) 412 662 535 590 791All-insustainingcostspergoldouncesold(2)(3) 762 742 909 736 1,071Totalcashcostsonaco-productbasis(2)(3) Gold($/ounce) 688 816 776 720 858Copper($/pound) 1.74 1.82 1.73 1.38 2.00All-insustainingcostsonaco-productbasis(2)(3) Gold($/ounce) 972 872 1,067 837 1,067Copper($/pound) 2.45 1.93 2.37 1.58 2.45

AT-A-GLANCE2017PRODUCTIONGOLD:104,512OUNCESCOPPER:13.8MILLIONPOUNDSALL-INSUSTAININGCOSTS/OZ:$909



YearendedDecember31

YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015FINANCIALINFORMATION

Revenue 57.7 29.6 170.5 161.0 130.0Operatingmargin(2) 30.0 9.1 76.1 70.7 31.4Revenuelesscostofgoodssold 30.9 (5.4) 51.5 0.4 (15.4)Capitalexpenditures(sustainingcapital)(2) 12.3 3.1 32.2 11.1 20.2Capitalexpenditures(growthcapital)(2) 0.8 - 2.5 - -

1. Productionisshownonatotalcontainedbasiswhilesalesareshownonanetpayablebasis,includingfinalproductinventoryandsmelterpayableadjustments,whereapplicable.

2. Weusecertainnon-GAAP financialperformancemeasures throughoutourMD&A.Total cashcostsandall-in sustainingcostspergoldounce sold, total cashcostsandall-in sustaining costs on a co-product basis, average realized price, and operating margin and capital expenditures (sustaining capital) are non-GAAP financialperformancemeasureswithnostandardmeaningunderIFRS.Forfurtherinformationandadetailedreconciliation,pleaserefertothe“Non-GAAPFinancialPerformanceMeasures”sectionofthisMD&A.

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


Operatingresults

ProductionFortheyearendedDecember31,2017,goldproductionatPeakMineswasinlinewiththeprioryear.Copperproductiondecreasedcomparedtotheprior-yearperiodduetoanexpecteddecreaseincoppergradesandtonnesprocessed.

Full-year2017goldproductionexceededtheguidancerangeof85,000to95,000ouncesandcopperproductionwasinlinewiththeguidancerangeofapproximately15millionpounds.

ForthethreemonthsendedDecember31,2017,goldproductionincreasedatPeakMineswhencomparedtotheprior-yearperiodduetoanincreaseingoldgradeandgoldrecovery.Quarterlycopperproductiondecreasedcomparedtotheprior-yearperiodduetoadecreaseincoppergradeandtonnesprocessed.

Revenue

For the year endedDecember 31, 2017, revenue increased compared to the prior year due to higher gold and copperrealizedpricesoffsettingthedecreaseingoldandcoppersalesfortheyear.Revenuewasalsoimpactedbythesignificantincreaseingoldsalesvolumesduringthefourthquarterwhencomparedtotheprior-yearperiod.

Revenuelesscostofgoodssold

FortheyearandthreemonthsendedDecember31,2017,theincreaseinrevenuelesscostofgoodssoldcomparedtotheprior-yearperiodswasduetohighergoldandcopperprices,asignificantincreaseingoldsalesduringthefourthquarterof2017andthecessationofdepreciationanddepletionuponclassificationtodiscontinuedoperations.

Operatingexpensesandall-insustainingcosts

AsthePeakMineshasbeenclassifiedasadiscontinuedoperationandispresentedseparatelyontheconsolidatedincomestatement for the year ended December 31, 2017, the asset’s operating expenses per ounce of gold sold is no longerdisclosed.


FortheyearendedDecember31,2017,all-insustainingcostsincreasedwhencomparedtotheprior-yearperiodduetohigheroperatingcostsandsustainingcapital.PeakMines’2017all-insustainingcostswerebelowtheguidancerangeof$975to$1,015perounce.ForthethreemonthsendedDecember31,2017,all-insustainingcosts increasedrelativetotheprior-yearperiodduehigheroperatingcostsandsustainingcapital,whichwerepartiallyoffsetbyanincreaseingoldsalesvolumes.

CapitalexpendituresFor the year ended December 31, 2017, the increase in capital expenditures was a result of increases in capitaldevelopment on Chronus, Jubilee, and Perseverance deposits, and increased capitalized exploration activities. Capitaldevelopmentisrelatedtomineandinfrastructuredevelopment.

ImpactofForeignExchangeonOperationsPeakMines’operationsareimpactedbyfluctuationsinthevaluationoftheU.S.dollaragainsttheAustraliandollar.FortheyearendedDecember31,2017,thevalueoftheU.S.dollaraveraged$1.30againsttheAustraliandollarcomparedto$1.34intheprior-yearperiod,resultinginanegativeimpactontotalcashcostsof$22pergoldounce.

ForthethreemonthsendedDecember31,2017,thevalueoftheU.S.dollaraveraged$1.30againsttheAustraliandollarcomparedto$1.33intheprior-yearperiod,resultinginanegativeimpactontotalcashcostsof$16pergoldouncesold.

ExplorationActivitiesDuring2017,explorationattheCompany’sPeakMinesoperationfocusedonthedelineationofadditionalgoldandcopperresources extending from the Perseverance ZoneD, Jubilee andGreat Cobar deposits located along the nine kilometretrendthatdefinesthePeakMinesCorridor.Additionally,thesurfacedrillingandreconnaissanceworktotestprospectivetargets identified along theCompany’s greater regional tenementholdings continued to returnencouraging results thatmeritfurtherfollowupgoingforward.


Blackwater Project, British Columbia, Canada Blackwater is a bulk-tonnage, gold-silver project locatedapproximately 160 kilometres southwest of PrinceGeorge, acity of approximately 80,000 people, in central BritishColumbia, Canada. Theproject propertyposition coversover1,000squarekilometresandislocatednearinfrastructure.

Exploration

During2017, a reconnaissancemappingand sampling surveywas conducted over the 445 km2 of mineral claims recentlyacquired from Parlane Resource Corp. and RJK ExplorationsLtd. Results of this survey will be used to support plans forfollow-upexplorationwork.ExplorationactivityatBlackwaterremainedotherwisesuspendedwhiletheCompanymaintaineditsfocusondevelopmentandcommercialstart-upatRainyRiver.

EnvironmentalandpermittingactivitiesThefollowingenvironmentalandpermittingrelatedactivitiesoccurredatBlackwaterduring2017:

• The Provincial and Federal environmental assessment technical review stage continued, with approvalsanticipatedinmid-2018.

• Performedkeyengineeringstudiesforadvancementofpost-environmentalassessmentapprovalpermits.• AdvanceddiscussionswithkeyFirstNationsonParticipationAgreements.• Advancedprojecttrade-offstudies.

ProjectcostsandoutlookFortheyearendedDecember31,2017,capitalexpenditurestotalled$11.3millioncomparedto$10.0millionintheprioryear. For the three months ended December 31, 2017, capital expenditures totalled $2.4 million, compared with$2.1 million in the prior-year period. Expenditures in the current period related to continued advancement of theenvironmental assessment process, including work to resolve remaining regulatory and First Nations comments andrelatedenvironmentalandengineeringstudies,aswellasdiscussionswithFirstNationsonParticipationAgreements.

TheCompanyiscurrentlyworkingoninternaltrade-offstudiesfortheBlackwaterproject.Theobjectiveofthesestudiesisto further enhance project economics andmaximize free cash flow by reducing the project strip ratio,maximizing thefeedgradeandloweringbothdevelopmentcapitalandoperatingcosts.Aspectsoftheprojectbeingevaluatedincludethescaleoftheoperation,oresortingandflowsheetconfigurations.Theinternalstudiesareexpectedtobecompletedinthesecondhalfof2018.

Blackwater’s2018non-sustainingcapitalexpendituresareexpectedtobeapproximately$10millionandrelate to thecontinuedadvancementoftheEnvironmentalAssessmentprocessandcompletionoftheinternaltrade-offstudies.


PROVENANDPROBABLERESERVESGOLD:8.2MILLIONOUNCESSILVER:60.8MILLIONOUNCESMEASUREDANDINDICATEDRESOURCES(ExclusiveofReserves)

GOLD:1.4MILLIONOUNCESSILVER:8.9MILLIONOUNCES


New Afton C-zone, British Columbia, Canada TheC-zoneisthedown-plungeextensionoftheB-zoneblockcave currently being mined at New Afton. In early 2016NewGoldcompletedafeasibilitystudywhichconfirmedtheviability andpositive economics for theC-zonedeposit. Thefeasibility study relates to the C-zone Mineral Reserveswhich have demonstrated economic viability at theNew Afton property and is not part of, and should bedistinguished from, the current mining of the B-zonereserves. Work completed in 2016 included additionalexplorationdrilling,mineoptimizationsandplanningreviews,and development of a Project Implementation Plan. ThedetailedresultsfromthefeasibilitystudycanbefoundintheCompany’sManagement’sDiscussionandAnalysisfortheyearendedDecember31,2015.

Projectupdateandcosts

During2017,workontheC-zonefocusedontailingsmanagementoptimizationstudies.Studiesontheuseofthickenedandamendedtailingswereinitiatedbasedonanevaluationofthepotentialforsignificantcostsavingscomparedwitheitherfilteredtailingsortheconstructionofanewconventionaltailingsstoragefacility.DiscussionswiththeMinistryofEnergyandMinesconfirmedthatdeclinedevelopmentcouldbeinitiatedbyaddingittotheNewAftonfive-yearMinePlanandwouldnotrequireseparatepermitting.

Miningstudiestoadvancethedesignoftheconveyorsystemwerecompletedduring2017,aswellasstudiestoevaluatesub-levelcavingasaminingmethodforaportionofthedeposit. Geotechnicalstudiesarecurrentlyalsounderwaytobetter understand stresses at depth. For the three months and year ended December 31, 2017, project capitalexpenditurestotalled$0.3millionand$2.9million,respectively.

ConsistentwiththeCompany’scommitmenttomaximizingfreecashflow,NewGoldhaselectedtodeferdevelopmentoftheC-zone in2018.While the2016Feasibility Study for theproject includes solidproject economics at spotprices, theCompany intends to defer the commencement of capital spendingwhile evaluating the above-noted opportunities thathavethepotentialtofurtheroptimizetheC-zoneproject.

ExplorationactivitiesDuring2017,afinalcampaignofundergroundinfilldrillingontheplannedC-zoneblockcavewascompletedandtheresultswereincorporatedintoupdatedmineralresourceandreserveestimatesandtheirlife-of-mineoperationalplan.Resultsofthisworkhavealsobeen incorporated intotheCompany’supdatedmineralresourceandreserveestimatesforyear-end2017.Additionally,surfacereconnaissancewithintheAftonmineleaseandgreatermineraltenementswascompletedtosupportplansforfutureexplorationprograms.


PROVENANDPROBABLERESERVESGOLD:616,000OUNCESCOPPER:453MILLIONPOUNDSMEASUREDANDINDICATEDRESOURCES(IncludedinNewAftonMeasuredandIndicatedResources)

GOLD:472,000OUNCESCOPPER:383MILLIONPOUNDS


MINERALRESERVESANDRESOURCESUPDATE(1)NewGold’sproductionprofileisunderpinnedbytheCompany’smineralreserveandresourcebasecombinedwithorganicgrowth from its existing portfolio of mines and development projects. Consistent with previous years, metal pricingassumptions for the Company’s year-end 2017 mineral reserve estimates are determined based on an assessment ofdifferentfactorsthat includecurrentspotprices,three-yeartrailingaveragepricesandstreetconsensuspricingforecastsforgold,silverandcopper. FortheCompany’syear-end2017mineralreserveupdates,pricingassumptionsincreasedby$25perounceto$1,275perounceforgold,$2.00perounceto$17.00perounceforsilverandremainedunchangedforcopper.Detailsofthesepricingassumptionsareprovidedinthenotestotheconsolidatedmineralreservesandresourceestimatesprovidedonpages110to114ofthisManagementdiscussionandanalysis.

Onaconsolidatedbasis,andexcludingthePeakMinesoperation,theCompany’stotalgoldreservesof14.8millionouncesremainedmateriallyunchangedcomparedtoyear-end2016.Thiswasduetotheconversiontoreservesofapproximately0.7millionouncesofgoldatRainyRiver,NewAfton,andMesquiteoffsettingapproximately0.4millionouncesofminingdepletion at the three operations during 2017. Excluding Peak Mines, New Gold’s consolidated 2017 year-end copperreservesof941millionpoundsdecreasedby92millionpoundsdueminingdepletionatNewAftonin2017.


2017 YEAR-END MINERAL RESERVES AND RESOURCE OVERVIEW RainyRiver:ProvenandProbableMineralReservesincreasedby475,000ouncesofgoldand2.8millionouncesofsilvercomparedtoyear-end2016.Thisincrease isdueprimarilytoacombinationofhighergoldandsilverpricingassumptionsand anupdatedmineral resourcemodel,whichwere partiallyoffset by increases to operating costandcapitalassumptionsontheopenpitandundergroundminedesignsandconsolidatedlife-of-mineplan.Fortheupdatedopenpitdesign,agoldpriceof$1,275perouncegoldwasappliedcomparedtothe$800perouncepriceusedforopenpitdesignsinpreviousyears.Asaresult,totalopenpitreservesincreasedby377,000ouncesofgoldand1.9millionouncesofsilver.Fortheupdatedundergroundminedesign,a lowergradecut-offof2.2g/t gold-equivalenthasbeenappliedtoimproveconfidenceandreduceriskassociatedwithminingselectivityanddilutionathighercut-off gradethresholds. This changehasresulted inhigherundergroundore tonnesat lowergrade foranoverall increase inunderground reservesof96,000ouncesof goldand0.8millionouncesof silver.Measuredandindicatedresourcescorrespondinglydecreasedby478,000ouncesofgoldand1.8millionouncesofsilverduetotheconversionofresourcestoreserves.Inferredresourcesdecreasedby429,000ouncesofgoldand0.3millionouncesofsilverasaresultofrevisedmineralresourceestimationcriteria. New Afton: Probable mineral reserves decreased by 83,000 ounces of gold and 92 million pounds of coppercompared to theprior yearasa resultof2017mine depletion.Totalmeasured, indicatedand inferredgoldandcopperresourcesremainedmateriallyunchangedcomparedtoyear-end2016.Mesquite:Provenandprobablemineralreservesdecreasedby50,000ouncesofgoldas2017minedepletion,waslargelyoffsetbyanupdatedopenpitplanandhighergoldpricingassumptions.Measuredandindicatedresourcesincreasedby141,000ouncesofgold,dueprimarilytoanupdatedopenpitdesignandrevised lowercut-offgradecriteria.Inferredmineralresourcesremainmateriallyunchangedcomparedtoyear-end2016.Blackwater:Provenandprobablemineralreservesremainunchangedcomparedtoyear-end2016.Measuredandindicatedresourcesincreasedby79,000ouncesofgoldand0.7millionouncesofsilverlargelyasaresultofhighermetalpricingassumptions.CerroSanPedro:Provenandprobablemineralreserveshavebeenexpendedandminingoperationshaveceasedasthemineisinresidualleaching.


1. For a detailed breakdown of mineral reserves and mineral resources by category and additional information relating to key estimation assumptions and

parameters,pleaserefertothe“MineralReservesandMineralResources”sectionofthisMD&A.2. PeakMineshasbeenclassifiedasadiscontinuedoperationandthechartspresentedaboveexcludemineralreservesandresourcesforthePeakMinesoperation.

PROVENANDPROBABLEGOLDRESERVES(2)(MILLIONSOFOUNCES)

PROVENANDPROBABLEGOLDRESERVESBYSITE(MILLIONSOFOUNCES)

0 2 4 6 8 10

Blackwater

Mesquite

NewANon

RainyRiver

2016 2017

1.31.5

1.1

0

1

2

3

4

2015 2016 2017

0 0.5 1

Blackwater

Mesquite

NewANon

RainyRiver

2016 2017

0 1 2 3

Blackwater

Mesquite

NewANon

RainyRiver

2016 2017

5.9 5.8 5.6

0

2

4

6

8

10

2015 2016 2017

14.7 14.5 14.8

0

5

10

15

20

2015 2016 2017

MEASUREDANDINDICATEDGOLDRESOURCES(EXCLUSIVEOFGOLDRESERVES)(2)(MILLIONSOFOUNCES)

MEASUREDANDINDICATEDGOLDRESOURCESBYSITE(EXCLUSIVEOFGOLDRESERVES)(MILLIONSOFOUNCES)

INFERREDGOLDRESOURCES(2)(MILLIONSOFOUNCES)

INFERREDGOLDRESOURCESBYSITE(MILLIONSOFOUNCES)


FINANCIALCONDITIONREVIEWBalance Sheet Review

AsatDecember31 AsatDecember31

(inmillionsofU.S.dollars) 2017 2016

BALANCESHEETINFORMATION Cashandcashequivalents 216.2 185.9Othercurrentassets 238.8 224.1Non-currentassets 3,453.3 3,523.0Assetsheldforsale 109.0 -Totalassets 4,017.3 3,933.0 Currentliabilities 181.2 175.4Non-currentliabilitiesexcludinglong-termdebt 626.1 794.9Long-termdebt 1,007.7 889.5Liabilitiesheldforsale 62.8 -Totalliabilities 1,877.8 1,859.8Totalequity 2,139.5 2,073.2Totalliabilitiesandequity 4,017.3 3,933.0

Assets

CashandcashequivalentsTheincreaseincashandcashequivalentswasprimarilydrivenbytheCompany’sboughtdealfinancingofcommonsharesresultinginnetproceedsof$165.7million,thesaleoftheElMorrostreamfor$65.0million,drawdownof$100.0millionfrom the Company’s revolving credit facility in August 2017 and $30.0 million in November 2017, and the Company’soperatingcashflowsgeneratedduringthecurrentperiod.ThiswaspartiallyoffsetbygrowthcapitalexpendituresatRainyRiver, of $496.7million was spent during the year ended December 31, 2017, other capital expenditure and financingpayments. Please see the “Corporate Developments” section of this MD&A for further information on the Company’sboughtdealfinancingofcommonsharesandthesaleoftheElMorrostream.

OthercurrentassetsOthercurrentassetsprimarilyconsistoftradeandotherreceivables,inventories,prepaidexpenses,andderivativeassets.The increase inother current assets is attributable toan increase in inventories atRainyRiver as themine commencedcommercialproductiononNovember1,2017.This increaseisoffsetbyadecreaseinderivativeassetsonthesettlementofthegoldpriceoptioncontracts.

Non-currentassetsNon-current assets primarily consist of mining interests which include the Company’s mining properties, developmentprojects and property, plant and equipment and long-term inventory. Themovement in non-current assets is primarilyattributabletotheCompany’sinvestmentsinitsmininginterestslessdepreciationanddepletion,offsetbytheimpairmentchargeatRainyRiver. For the year endedDecember31, 2017, theCompany spent$567.0million, primarily focusedoncompletingthedevelopmentofRainyRiver,andsustainingcapitalexpendituresattheCompany’soperatingsites.


Liabilities

CurrentliabilitiesCurrent liabilities consistsof tradeandotherpayablesandderivative liabilities.Current liabilities increasedcompared totheprioryearasa largerportionofthegoldstreamobligationbecamecurrent,andan increasewasalsoaresultof themark-to-marketoncopperoptioncontracts.Inaddition,theCompanyreceiveda$3.0millionprepaymentfromthebuyerofPeakMines,whichhasbeenrecordedasacurrentliability.

Non-currentliabilitiesexcludinglong-termdebtNon-current liabilities consist primarily of reclamation and closure cost obligations, the gold stream obligation anddeferredtaxliabilities.

TheCompany’sassetretirementobligationsconsistofreclamationandclosurecostsforRainyRiver,NewAfton,Mesquite,Cerro San Pedro and Blackwater. Significant reclamation and closure activities include land rehabilitation, demolition ofbuildingsandminefacilities,ongoingmonitoringandothercosts.

Thelong-termdiscountedportionoftheliabilityasatDecember31,2017was$181.3millioncomparedto$109.5millionasatDecember31,2016.For theyearendedDecember31,2017, theCompanyupdated the reclamationandclosurecostobligations for each of its mine sites. The impact of these assessments was an increase of $52.3 million (year endedDecember31,2016–$15.5million),whichprimarily related toRainyRiverandMesquite.Keydriversof theRainyRiverliability increase of $41.4 million include advancement of the processing plant site area, construction of tailingsmanagement area, placement ofmine rock and other additional obligations related to significant project advancementachievedduringtheperiodastheprojectreachedcommercialproduction.ThekeydriveroftheMesquiteliabilityincreaseof $6.6 million was an increase in the requirements for reclamation sloping on waste rock, increasing the amount ofearthworksrequired.

The net deferred income tax liability decreased from $230.3 million as at December 31, 2016 to $78.7 million atDecember31,2017.FortheyearendedDecember31,2017,theCompanyrecordedadecreaseindeferredtaxliabilityof$87.4 million as a result of asset impairment at Rainy River and $43.6 million as a result of a derecognition of thedeferredtaxrelatedtotheinvestmenttaxcreditsinCanada.

Long-termdebtandotherfinancialliabilitiescontainingfinancialcovenantsThemajorityof theCompany’scontractualobligationsconsistof long-termdebtand interestpayable.Long-termdebtincludesseniorunsecurednotesandtheamountsdrawnontheCompany’srevolvingcreditfacility.

In2015,theCompanyenteredintoa$175millionstreamingtransactionwithRGLDGoldAG,awhollyownedsubsidiaryofRoyalGold Inc. (“RoyalGold”). TheCompanyhasdesignated thegold streamobligationas a financial liabilityunder thescopeofIFRS9.Accordingly,theCompanyvaluestheliabilityatthepresentvalueofitsexpectedfuturecashflowsattheend of each reporting period, with the changes in fair value reflected in the consolidated income statements and theconsolidated statements of comprehensive income. The gold stream obligation contains a maximum leverage ratiocovenant(netdebttoearningsbeforeinterest,taxes,depreciation,amortization,exploration,impairmentandothernon-cashadjustments“AdjustedEBITDA”)of3.5:1.0,withtheexceptionthatthenetleveragecovenantlimitmayincreaseto4.0:1.0fortwoconsecutivequarters,providedthat itthereafterreturnstoamaximumof3.5:1.0.However, inordertoprovideadditional flexibility,RoyalGoldhasagreedtoadjustthis leverageratiotomatchtherevisedmaximumleverageratio under the revolving credit facility for the quarters ending March 31, 2018. New Gold currently estimates thatapproximately 22,600ounces of gold and203,100ounces of silverwill be delivered to RGLDGoldAG (“RoyalGold”) in2018, inaccordancewithastreamingagreement,andwillbeaccountedforasfinancingactivities intheCompany’scashflowstatement.


OnNovember15,2012, theCompany issued$500.0millionof seniorunsecurednotes (“2022UnsecuredNotes”).AsatDecember31,2017,thefacevaluewas$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, totalcostspaid relating to this refinancingwere$10.2million.Additionally, theCompanywas required topay$2.8millionofaccruedinterestonthe2020UnsecuredNotesonredemptionandcancellation.

The2025UnsecuredNotesbear interest at the rateof 6.375%per annum. Interest is payable in arrears in equal semi-annualinstalmentsonMay15andNovember15ofeachyear.AsatDecember31,2017,thefacevaluewas$300.0million.

The2022and2025UnsecuredNotesaresubjecttoaminimuminterestcoverageincurrencecovenant(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.

InJune2017,theCompanyamendedtheCreditFacility’sNetDebttoAdjustedEBITDA("LeverageRatio")covenant,toincrease themaximum Leverage Ratio to 4.0 to 1.0 from January 1, 2018 toMarch 31, 2018 (previously 3.5 to 1.0).Followingthatperiod,themaximumleverageratiowillbe3.5to1.0.ThemaximumLeverageRatiofromOctober1,2017toDecember31,2017is4.0to1.0.

Significantfinancialcovenantsareasfollows:

TwelvemonthsendedDecember31

TwelvemonthsendedDecember31

Financialcovenant

2017 2016FINANCIALCOVENANTS Minimuminterestcoverageratio(EBITDAtointerest) >3.0:1 4.7:1 5.7:1

Maximumleverageratio(netdebttoEBITDA) <4.0:1 3.1:1 2.6:1


TheinterestmarginondrawingsundertheCreditFacilityrangesfrom1.00%to3.25%overLIBOR,thePrimeRateortheBaseRate,basedontheCompany’snetdebttoadjustedEBITDAratioandthecurrencyandtypeofcreditselectedbytheCompany.BasedontheCompany’snetdebttoadjustedEBITDAratio,therateis3.25%overLIBORasatDecember31,2017(December31,2016–3.25%).ThestandbyfeesonundrawnamountsundertheCreditFacilityrangefrom0.45%to0.73%,dependingontheCompany’snetdebttoadjustedEBITDAratio.BasedontheCompany’snetdebttoadjustedEBITDAratio,therateis0.73%asatDecember31,2017(December31,2016–0.73%).

AsatDecember31,2017,theCompanyhaddrawn$230.0millionundertheCreditFacilityandtheCreditFacilityhasbeenused to issue letters of credit of $138.8million as atDecember 31, 2017 (December 31, 2016– $122.1million).Of theissued letters of credit, $16.6 million relate to Peak Mines. Letters of credit relate to reclamation bonds, worker’scompensationsecurityandotherfinancialassurancesrequiredwithvariousgovernmentagencies.

Liquidity and Cash Flow AsatDecember31,2017, theCompanyhadcashandcashequivalentsof$216.2million compared to$185.9millionatDecember31,2016.TheCompany’sinvestmentpolicyistoinvestitssurplusfundsinpermittedinvestmentsconsistingoftreasurybills,bonds,notesandotherevidencesofindebtednessofCanada,theU.S.oranyoftheCanadianprovinceswithaminimumcredit ratingofR-1midfromtheDBRSoranequivalentrating fromStandard&Poor’sorMoody’sandwithmaturities of 12months or less at the original date of acquisition. In addition, the Company is permitted to invest inbankers’ acceptances and other evidences of indebtedness of certain financial institutions. Surplus corporate funds areonlyinvestedwithapprovedgovernmentorbankcounterparties.

TheCompany’sliquidityisimpactedbyseveralfactorswhichinclude,butarenotlimitedto,goldandcoppermarketprices,capital expenditures, operating costs, interest rates and foreign exchange rates. These factors are monitored by theCompanyonaregularbasisandwillcontinuetobereviewed.

The Company’s cash flows from operating, investing and financing activities, as presented in the audited consolidatedstatementsofcashflows,aresummarizedinthefollowingtableforthethreemonthsandyearendedDecember31,2017and2016:


YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015CASHFLOWINFORMATION Cashgeneratedfromoperations 119.0 51.9 342.2 282.2 262.6Cashusedbyinvestingactivities(capitalexpendituresandother)

(108.6)

(164.8)

(598.6)

(568.6)

(386.9)

Cashgeneratedfrominvestingactivities(saleofElMorrostreamandsaleoftheCompany’s30%interestinEIMorro) - - 65.0 - 62.4

Cashgeneratedfromfinancingactivities - 148.5 219.8 128.4 45.7Effectofexchangeratechangesoncashandcashequivalents

(1.3)

(0.9)

1.9

8.4

(18.8)

Changeincashandcashequivalents 9.1 34.7 30.3 (149.6) (35.0)

OperationsFortheyearendedDecember31,2017,theincreaseincashgeneratedfromoperationswasprimarilyduetoanincreaseintotaloperatingmargin.


InvestingActivitiesCashused in investingactivities isprimarily for the continuedcapital investment in theCompany’soperatingminesanddevelopmentprojects.Spendingwas$598.6millionfortheyearendedDecember31,2017comparedto$568.6millionintheprior-yearperiod.Inboththecurrentandprior-yearperiods,investingactivitiesprimarilyfocusedoncontinuedprojectadvancementatRainyRiver.InadditiontogrowthcapitalspendingatRainyRiver,theCompanyreceived$65.0millionofnetproceedsfromthesaleoftheElMorrostreamduringthefirstquarterof2017.

Thefollowingtablesummarizesthetotalgrowthandsustainingcapitalexpenditures (mining interestspertheauditedconsolidatedstatementsofcashflows)fortheyearsendedDecember31,2017and2016:


YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016 2017 2016 2015

CAPITALEXPENDITURESBYSITE

RainyRiver 83.4 145.9 499.3 466.4 245.5NewAfton 8.6 10.4 42.2 40.9 62.1Mesquite 3.9 1.9 12.8 35.6 53.2CerroSanPedro - 0.2 0.7 1.0 1.3Blackwater 2.4 3.0 11.3 10.0 7.1Corporate 0.2 0.3 0.6 2.0 0.1Capitalexpendituresfromcontinuingoperations 98.5 161.8 567.0 555.9 369.5PeakMines 13.1 3.1 34.7 11.1 20.2Totalcapitalexpenditures 111.7 164.8 601.7 567.0 389.5

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

TheCompany’sDecember31,2017cashbalanceof$216.2million,togetherwiththe$30.8millionavailablefordrawdownundertheCreditFacilityatDecember31,2017providetheCompanywith$247.0millionofliquidity,inadditiontothenetcash the Company’s operating mines are expected to generate and the enhanced liquidity resulting from the sale ofPeakMines.

AdecreaseingoldorcopperpricesordepreciationoftheU.S.dollarrelativetotheCanadiandollar,or,toalesserextent,theAustraliandollarorMexicanpeso,couldnegativelyimpacttheCompany’sliquidity.

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$1,250perounceandsold call options at a strike price of $1,400 per ounce for 120,000 ounces of gold production between July 2017 andDecember 2017. At December 31, 2017, the contracts have expired. No further gold price option contracts have beenenteredfor2018.

InFebruary2017,theCompanyenteredintocopperswapcontractsfor7.3millionpoundsofcopperpermonthfromJuly2017throughDecember2017atafixedpriceof$2.73perpound.AsatDecember31,2017,allcopperforwardcontractshaveexpired.


InOctober2017,theCompanyenteredintocopperpriceoptioncontractsbypurchasingputoptionsatastrikepriceof$3.00perpoundandsellingcalloptionsatastrikepriceof$3.37perpoundfor27,600tonnes(approximately60millionpounds)ofcopperproductionduring2018.

TheCompanyhasoutstandingnotesintheprincipalamountof$500millionmaturingin2022and$300millionmaturingin2025.TheCompanyalsohas$230millionoutstandingunderthecredit facility,excluding lettersofcredit.Assumingthecontinuationofprevailingcommoditypricesandexchangerates,andoperationsperforminginaccordancewithmineplans,theCompanywillbeabletorepayindebtednessfrominternallygeneratedcashflowduringtheprojectedlifeoftheoperatingmines.

TakingintoconsiderationtheCompany’scurrentcashposition,volatileequitymarketsandforeignexchangerates,globaluncertaintyinthecapitalmarketsandincreasingcostpressures,theCompanyregularlyreviewsexpendituresandassessesbusiness opportunities to enhance liquidity in order to ensure adequate liquidity and flexibility to support its growthstrategy,includingthedevelopmentofitsprojects,whilecontinuingproductionatitscurrentoperations.

Inaddition,theCompanyenteredintoabindingagreementtosellthePeakMines.NewGoldexpectsthetransactiontoclose in the first quarter of 2018. The transaction will provide the Company enhanced liquidity and an opportunity todevelopandgrowitscoreassets.ThesaleofPeakMineswillfurtherenabletheCompanytofocusonitsAmerica’scentricportfolioofoperatingmininganddevelopmentprojects.

Commitments The Company has entered into a number of contractual commitments for capital items relating to operations anddevelopment.AtDecember31,2017, these commitments totalled$51.4million,$48.5millionofwhichareexpected tofalldueoverthenext12months.Thiscomparestocommitmentsof$130.2millionasatDecember31,2016,$103.2millionofwhichwasexpectedtofalldueovertheupcomingyear. Inaddition,thedecreasewhencomparedtotheprioryear isduetoRainyRiverachievingcommercialproductioninthefourthquarterof2017.Certaincontractualcommitmentsmaycontain cancellation clauses; however, the Company discloses its commitments based onmanagement’s intent to fulfillthecontracts.

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:

AsatDecember31

AsatDecember31

<1year

1-3Years

4-5YearsAfter5Years

2017Total

2016Total

CONTRACTUALOBLIGATIONS(1)

Long-termdebt - 230.0 500.0 300.0 1,030.0 900.0Interestpayableonlong-termdebt 43.5 100.8 100.8 47.8 292.9 252.5

Operatingleasecommitments 2.1 2.8 2.2 3.2 10.3 2.6Capitalexpenditurecommitments 48.5 2.7 0.2 - 51.4 130.2

Reclamationandclosurecostobligations 3.4 14.7 17.7 151.0 187.1 105.9Goldstreamobligation 24.7 52.4 54.8 158.6 290.5 277.7

Totalcontractualobligations 122.2 403.4 675.7 660.6 1,862.2 1,668.9

1. ThemajorityoftheCompany’scontractualobligationsconsistoflong-termdebtandinterestpayable.Long-termdebtobligationsarecomprisedofseniorunsecurednotes.

Related Party Transactions TheCompanydidnotenterintoanyrelatedpartytransactionsduringthethreemonthsoryearendedDecember31,2017.

Off-Balance Sheet Arrangements TheCompanyhasnooff-balancesheetarrangements.

Outstanding Shares As at February 20, 2018, there were 578,635,838 common shares of the Company outstanding. The Company had12,282,466stockoptionsoutstandingunderitsshareoptionplan,exercisableforupto12,282,466commonshares.


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.Inaddition,theCompensation Committee of the Board of Directors uses all-in sustaining costs, together with other measures, in itscompanyscorecardtosetincentivecompensationgoalsandassessperformance.

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.ThecalculationoftotalcashcostspergoldounceforRainyRiverandCerroSanPedroisnetofby-productsilversalesrevenue,andthecalculationoftotalcashcostspergoldouncesoldforPeakMinesandNewAftonisnetofby-productsilverandcoppersalesrevenue.NewGoldnotesthatinconnectionwithNewAfton,thecopperby-productrevenueissufficientlylargetoresultinanegativetotalcashcostonasingleminebasis.Notwithstandingthisby-productcontribution,asaCompanyfocusedongoldproduction,NewGoldaimstoassesstheeconomicresultsofitsoperationsinrelationtogold,whichistheprimarydriverofNewGold’sbusiness.NewGoldbelievesthismetricisofinteresttoitsinvestors,whoinvestintheCompanyprimarilyasagoldminingCompany.Todeterminetherelevantcostsassociatedwithgoldonly,NewGoldbelievesitisappropriatetoreflectalloperatingcosts,aswellasanyrevenuerelatedtometalsotherthangoldthatareextractedinitsoperations.

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

TotalcashcostsareintendedtoprovideadditionalinformationonlyanddonothaveanystandardizedmeaningunderIFRSandmaynotbecomparabletosimilarmeasurespresentedbyotherminingcompanies.TheyshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.ThemeasureisnotnecessarilyindicativeofcashflowfromoperationsunderIFRSoroperatingcostspresentedunderIFRS.

AstheCompanyhasclassifiedthePeakMinesasadiscontinuedoperationduring2017,totalcashcostspergoldouncehavebeendisclosedonacontinuing(notincludingPeakMines)andtotalbasis(includingPeakMines).


All-in Sustaining Costs per Gold Ounce “All-insustainingcostspergoldounce”isanon-GAAPmeasurebasedonguidanceannouncedbytheWorldGoldCouncil(“WGC”)inSeptember2013.TheWGCisanon-profitassociationoftheworld’sleadinggoldminingcompaniesestablishedin1987topromotetheuseofgoldtoindustry,consumersandinvestors.TheWGCisnotaregulatorybodyanddoesnothave 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,NewGoldusescashflowrelatedtomininginterestsfromitsstatementofcashflows and deducts any expenditures that are non-sustaining. Capital expenditures to develop new operations or capitalexpendituresrelatedtomajorprojectsatexistingoperationswheretheseprojectswillmateriallyincreaseproductionareclassified as non-sustaining and are excluded. The table “Sustaining Capital Expenditure Reconciliation” reconcilesNew Gold’s sustaining capital to its cash flow statement. The definition of sustaining versus non-sustaining is similarlyappliedtocapitalizedandexpensedexplorationcosts.Explorationcoststodevelopnewoperationsorthatrelatetomajorprojectsatexistingoperationswheretheseprojectsareexpectedtomaterially increaseproductionareclassifiedasnon-sustainingandareexcluded.

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

Byincludingtotalcashcostsasacomponentofall-insustainingcosts,themeasuredeductsby-productrevenuefromgrosscashcosts.Refertothediscussionaboveregardingtotalcashcostspergoldounceforthediscussionofdeductionofby-productrevenueastheCompanyhasclassifiedthePeakMinesasadiscontinuedoperation.


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

ThreemonthsendedDecember31,2017

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

Operatingexpenses(1) 80.3 34.5 2.2 117.0Unitsofmetalsoldfromcontinuingoperations(ounces/millionsofpounds/millionsofounces)

108,782

22.0

0.2

Operatingexpensesperunitofmetalsold($/ounceorpound) 738 1.56 9.44

Operatingexpenses(1) 80.3 34.5 2.2 117.0

Treatmentandrefiningchargesonconcentratesales 2.5 5.8 0.1 8.4

Adjustments(2) 0.1 - - 0.1

Totalcashcostsfromcontinuingoperations 82.9 40.3 2.3 125.5

By-productsilverandcoppersalesfromcontinuingoperations (63.3)

Totalcashcostsnetofby-productrevenuefromcontinuingoperations 62.2Unitsofmetalsoldfromcontinuingoperations(ounces/millionsofpounds/millionsofounces)

108,782

22.0

0.2

Totalcashcostsonaco-productbasisfromcontinuingoperations(3)($/ounceorpound)

762

1.83

9.90

Totalcashcostspergoldouncesoldfromcontinuingoperations($/ounce) 572

Totalcashcostsonaco-productbasis(6) 107.2 44.9 2.9

Totalcashcostsnetofby-productrevenue(6) 76.5Unitsofmetalsold(ounces/millionsofpounds/millionsofounces)(6) 143,644 24.9 0.3 Totalcashcostsonaco-productbasis(3)($/ounceorpound)(4) 746 1.80 9.73

Totalcashcostspergoldouncesold($/ounce)(4) 533

Totalco-productcashcostsfromcontinuingoperations(6) 82.9 40.3 2.3

Totalcashcostsnetofby-productrevenuefromcontinuingoperations(6) 62.2

Sustainingcapitalexpenditures(4) 10.4 4.5 0.3 15.2

Sustainingexploration-expensed 0.4 0.2 - 0.6

CorporateG&Aincludingshare-basedcompensation(5) 2.6 1.1 0.1 3.8

Reclamationexpenses 1.8 0.8 - 2.5

Totalco-productall-insustainingcostsfromcontinuingoperations(6) 98.0 46.8 2.8 Totalall-insustainingcostsnetofby-productrevenuefromcontinuingoperations(6)

84.3All-insustainingcostsonaco-productbasisfromcontinuingoperations(3)($/ounceorpound)

901

2.12

11.67

All-insustainingcostspergoldouncesoldfromcontinuingoperations($/ounce)

774Totalco-productall-insustainingcosts(6) 131.6 54.4 3.6

Totalall-insustainingcostsnetofby-productrevenue(6) 110.8

All-insustainingcostsonaco-productbasis(3)($/ounceorpound)(4) 916 2.17 11.91

All-insustainingcostspergoldouncesold($/ounce)(4) 771

1. Operatingexpenses(“Opex”)areapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversalsandsocialclosurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.4. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


5. Includesthesumofcorporateadministrationcostsandshare-basedpaymentexpensepertheincomestatement,netofanynon-cashdepreciationwithinthosefigures.6. IncludestheimpactofPeakMine,whichhasbeenclassifiedasadiscontinuedoperationasatandfortheyearendedDecember31,2017.PleaserefertoPeakMine’sOpex,

CashCostandAISCReconciliationtablesforamoredetailedreconciliationofthetotalcashcostsandall-insustainingcostsfromdiscontinuedoperations.




309,454

84.5

0.9




Adjustments(2) (0.5) (0.3) - (0.8)




309,454

84.5

0.9


675

1.58

8.98





Totalco-productcashcostsfromcontinuingoperations(6) 209.0 133.9 8.0 111.3

Totalcashcostsnetofby-productrevenuefromcontinuingoperations(6)

Sustainingcapitalexpenditures(4)(7) 34.8 19.7 1.3 55.8

Sustainingexploration-expensed 1.3 0.8 0.1 2.1


Reclamationexpenses 5.6 3.2 0.2 9.0



867

1.98

11.52






1. Operatingexpenses(“Opex”)areapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversalsandsocialclosurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

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


6. IncludestheimpactofPeakMines,whichhasbeenclassifiedasadiscontinuedoperationasatandfortheyearendedDecember31,2017.PleaserefertoPeakMinesOpex,CashCostandAISCReconciliationtablesforamoredetailedreconciliationofthetotalcashcostsandall-insustainingcostsfromdiscontinuedoperations.

7. FortheyearendedDecember31,2017,sustainingcapitalexpendituresarenetof$0.3millioninproceedsfromdisposalofassets.




75,887

21.1

0.2




Adjustments(2) (15.1) (8.1) (0.6) (23.8)




75,887

21.1

0.2


607

1.41

8.80













795

1.79

11.39






1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs,theamortizationofMesquite’sPurchasePriceAllocation(“PPA”)associatedwithroyaltiesandsocial

closurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

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


6. IncludestheimpactofPeakMine,whichhasbeenclassifiedasadiscontinuedoperationasatandfortheyearendedDecember31,2017.PleaserefertoPeakMinesOpex,CashCostandAISCReconciliationtablesforamoredetailedreconciliationofthetotalcashcostsandall-insustainingcostsfromdiscontinuedoperations.

7. ForthethreemonthsendedDecember31,2017,sustainingcapitalexpendituresarenetof$0.1millioninproceedsfromdisposalofassets.




274,843

84.9

1.1




Adjustments(2) (14.9) (8.2) (0.8) (23.9)




274,843

84.9

1.1


608

1.22

8.19













861

1.66

11.74

All-insustainingcostspergoldouncesoldfromcontinuingoperations($/ounce) 675

Totalco-productall-insustainingcosts(4) 325.7 164.5 14.6





closurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.


4. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.5. Includesthesumofcorporateadministrationcostsandshare-basedpaymentexpensepertheincomestatement,netofanynon-cashdepreciationwithinthosefigures.6. IncludestheimpactofPeakMine,whichhasbeenclassifiedasadiscontinuedoperationasatandfortheyearendedDecember31,2017.PleaserefertoPeakMine’sOpex,

CashCostandAISCReconciliationtablesforamoredetailedreconciliationofthetotalcashcostsandall-insustainingcostsfromdiscontinuedoperations.7. FortheyearendedDecember31,2017,sustainingcapitalexpendituresarenetof$0.7millioninproceedsfromdisposalofassets.


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

CONSOLIDATEDOPEX,CASHCOSTANDAISCRECONCILIATION


Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 428,852 92.9 1.8




Adjustments(2) (6.0) (3.0) (0.4) (9.4)

Totalcashcosts 283.8 143.6 15.7 443.1

By-productsilverandcoppersales (253.0)

Totalcashcostsnetofby-productrevenue 190.1


Totalcashcostsonaco-productbasis(3)($/ounceorpound) 661 1.54 8.70

Totalcashcostspergoldouncesold($/ounce) 443

Totalco-productcashcosts 283.8 143.6 15.7






Totalco-productall-insustainingcosts 387.5 190.9 21.5

Totalall-insustainingcostsnetofby-productrevenue 346.9

All-insustainingcostsonaco-productbasis(3)($/ounceorpound) 903 2.06 11.94

All-insustainingcostspergoldouncesold($/ounce) 809


closurecostsincurredatCerroSanPedrothatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecash

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


ThreemonthsandyearendedDecember31,2017

(inmillionsofU.S.dollars,exceptwherenoted) Gold Silver TotalRAINYRIVEROPEX,CASHCOSTSANDAISCRECONCILIATION Operatingexpenses(1) 37.8 0.7 38.5Unitsofmetalsold(ounces/millionsofounces) 26,359 39,739 Operatingexpensesperunitofmetalsold($/ounce) 1,432 18.52 Operatingexpenses(1) 37.8 0.7 38.5By-productsilverandcoppersales (0.7)Totalcashcostsnetofby-productrevenue 37.8Unitsofmetalsold(ounces/millionsofounces) 26,359 39,739 Totalcashcostsonaco-productbasis(3)($/ounce) 1,432 18.5 Totalcashcostspergoldouncesold($/ounce) 1,436Totalco-productcashcosts 37.8 0.7 Totalcashcostsnetofby-productrevenue 37.8Sustainingcapitalexpenditures(4) 2.6 0.1 2.6Reclamationexpenses 0.3 - 0.3Totalco-productall-insustainingcosts 40.7 0.8 Totalall-insustainingcostsnetofby-productrevenue 40.8All-insustainingcostsonaco-productbasis(3)($/ounce) 1,543 19.96 All-insustainingcostspergoldouncesold($/ounce) 1,549

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

toeachmetalproducedonapercentageofrevenuebasis.4. See“RainyRiverSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.




NEWAFTONOPEX,CASHCOSTSANDAISCRECONCILIATION




Operatingexpenses 7.3 17.1 0.3 24.7


Totalcashcosts 9.8 23.0 0.5 33.1


Totalcashcostsnetofby-productrevenue (27.4)



Totalcashcostspergoldouncesold($/ounce) (1,363)




Sustainingexplorationexpense 0.1 0.2 - 0.3



Totalall-insustainingcostsnetofby-productrevenue (18.2)


All-insustainingcostspergoldouncesold($/ounce) (909)

1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.3. See“NewAftonSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.





Operatingexpenses(1) 33.4 72.3 1.4 107.1Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 81,067 84.5 0.3 81,067Operatingexpensesperunitofmetalsold($/ounceorpound) 412 0.85 5.36 1,321Operatingexpenses 33.4 72.3 1.4 107.1







Totalcashcostspergoldouncesold($/ounce) (1,126)Totalco-productcashcosts 43.0 92.9 1.9



Sustainingexplorationexpense 0.3 1.0 - 1.3







toeachmetalproducedonapercentageofrevenuebasis.3. See“NewAftonSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.4. FortheyearendedDecember31,2017,sustainingcapitalexpendituresarenetof$0.3Minproceedsfromdisposalofassets.






Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 24,171 21.1 -









Totalcashcostspergoldouncesold($/ounce) (720)











toeachmetalproducedonapercentageofrevenuebasis.3. See“NewAftonSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.4. ForyearendedDecember31,2016,sustainingcapitalexpendituresarenetof$0.7Minproceedsfromdisposalofassets.


























toeachmetalproducedonapercentageofrevenuebasis.3. See“NewAftonSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.4. ForyearendedDecember31,2016,sustainingcapitalexpendituresarenetof$0.7Minproceedsfromdisposalofassets.










Adjustments(2) (0.4) (0.5) - (0.9)















1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtosuppliesinventorywrite-downs.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcoststo

eachmetalproducedonapercentageofrevenuebasis.4. See“NewAftonSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


Threemonthsended

December31 Yearended

December31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015MESQUITEOPEX,CASHCOSTSANDAISCRECONCILIATION

Operatingexpenses 40.9 25.3 122.7 71.5 98.1Goldouncessold 54,612 38,366 168,800 113,843 133,712Operatingexpensespergoldouncesold

749

660

727

628

733.7

Operatingexpenses 40.9 25.3 122.7 71.5 98.1Adjustments(1) - 0.4 - 1.1 1.3

Totalcashcosts 40.9 25.7 122.7 72.6 99.4Goldouncessold 54,612 38,366 168,800 113,843 133,712Totalcashcostspergoldouncesold($/ounce)

749

670

727

638

743

Totalcashcosts 40.9 25.7 122.7 72.6 99.4Sustainingcapitalexpenditures(2) 3.9 1.9 12.7 35.6 53.2Sustainingexploration-expensed - 1.5 - 1.9 0.6Reclamationexpenses 0.7 0.5 2.3 1.4 1.5

Totalall-insustainingcosts 45.5 29.6 137.9 111.5 154.7All-insustainingcostspergoldouncesold($/ounce)

833

771

817

979

1,156

1. AdjustmentsincludetheamortizationofMesquite’sPurchasePriceAllocation(“PPA”)associatedwithroyalties.2. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


ThreemonthsendedDecember31,2017 ThreemonthsendedDecember31,2016

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

Operatingexpenses(1) 10.6 2.3 12.9 34.5 6.1 40.6

Unitsofmetalsold(ounces/millionsofounces) 7,679 0.1 13,351 0.2 Operatingexpensesperunitofmetalsold($/ounce)

1,380

18.03

2,586

35.87


Adjustments(2) 0.1 - 0.1 (20.6) (3.7) (24.3)

Totalcashcosts 10.7 2.3 13.0 13.9 2.4 16.3

By-productsilverandcoppersales (2.1) (2.9)

Totalcashcostsnetofby-productrevenue 10.9 13.4

Unitsofmetalsold(ounces/millionsofounces) 7,679 0.1 13,351 0.2 Totalcashcostsonaco-productbasis(3)($/ounce)

1,390

18.16

1,045

14.49

Totalcashcostspergoldouncesold($/ounce) 1,414 1,014

Totalco-productcashcosts 10.7 2.3 13.9 2.4


Sustainingcapitalexpenditures(4) - - - 0.2 - 0.2

Reclamationexpenses 0.8 0.2 1.0 0.1 - 0.1

Totalco-productall-insustainingcosts 11.5 2.5 14.2 2.4 Totalall-insustainingcostsnetofby-productrevenue

11.9 13.7

All-insustainingcostsonaco-productbasis(3)($/ounce)

1,498

19.56

1,071

14.86

All-insustainingcostspergoldouncesold($/ounce)

1,545 1,045


toeachmetalproducedonapercentageofrevenuebasis.4. See“CerroSanPedroSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


YearendedDecember31,2017 YearendedDecember31,2016

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


Unitsofmetalsold(ounces/millionsofounces) 33,228 0.6 64,149 0.9 Operatingexpensesperunitofmetalsold($/ounce)

1,287

17.14

1,311

17.68


Adjustments(2) (0.7) (0.1) (0.8) (21.2) (3.8) (25.0)

Totalcashcosts 42.1 9.8 51.9 62.9 11.3 74.2

By-productsilverandcoppersales (9.9) (14.3)


Unitsofmetalsold(ounces/millionsofounces) 33,228 0.6 64,149 0.9 Totalcashcostsonaco-productbasis(3)($/ounce)

1,267

16.87

980

13.22

Totalcashcostspergoldouncesold($/ounce) 1,264 933

Totalco-productcashcosts 42.1 9.8 62.9 11.3


Sustainingcapitalexpenditures(4) 0.6 0.1 0.7 0.8 0.2 1.0

Reclamationexpenses 3.8 0.9 4.6 0.6 0.1 0.7

Totalco-productall-insustainingcosts 46.4 10.8 64.3 11.6 Totalall-insustainingcostsnetofby-productrevenue

47.3 61.6

All-insustainingcostsonaco-productbasis(3)($/ounce)

1,397

18.61

1,002

13.52

All-insustainingcostspergoldouncesold($/ounce)

1,425 959


toeachmetalproducedonapercentageofrevenuebasis.4. See“CerroSanPedroSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


Yearended

December31,2015

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

Operatingexpenses(1) 105.5 19.7 125.2

Unitsofmetalsold(ounces/millionsofounces) 106,417 1.5

Operatingexpensesperunitofmetalsold($/ounce) 991 13.38

Operatingexpenses(1) 105.5 19.7 125.2

Adjustments(2) (8.7) (1.7) (10.4)

Totalcashcosts 96.8 18.0 114.8



Unitsofmetalsold(ounces/millionsofounces) 106,417 1.5

Totalcashcostsonaco-productbasis(3)($/ounce) 910 12.19


Totalco-productcashcosts 96.8 18.0


Sustainingcapitalexpenditures(4) 1.1 0.2 1.3

Reclamationexpenses 0.2 - 0.2

Totalco-productall-insustainingcosts 98.1 18.2


All-insustainingcostsonaco-productbasis(3)($/ounce) 922 12.36


1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtosilverinventorywrite-downandsocialclosurecoststhatareincludedinoperatingexpenses.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcoststo

eachmetalproducedonapercentageofrevenuebasis.4. See“CerroSanPedroSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.




PEAKMINESOPEX,CASHCOSTSANDAISCRECONCILIATION(5)

Operatingexpensesfromdiscontinuedoperation(1) 22.6 4.7 0.6 27.8




Treatmentandrefiningchargesonconcentratesales 1.3 0.3 - 1.7

Adjustments 0.1 - - 0.1

Totalcashcosts 24.0 5.0 0.6 29.6By-productsilverandcoppersales (15.2)


Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 34,861 2.9 0.1 Totalcashcostsonaco-productbasis(3)($/ounceorpound) 688 1.74 9.07





Sustainingexploration-expensed (0.2) - - (0.2)

Reclamationexpenses 0.2 - - 0.2





1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversals.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts

toeachmetalproducedonapercentageofrevenuebasis.4. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.5. During2017,PeakMineshasbeenclassifiedasadiscontinuedoperation.










Adjustments(2) 0.3 - - 0.3














All-insustainingcostsonaco-productbasis(3)($/ounceorpound) 1,067 2.37 13.90


1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downreversals.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts











Adjustments (0.6) (0.2) - (0.8)


By-productsilverandcoppersales - (9.7)








Sustainingexploration-expensed (1.1) (0.4) - (1.5)






1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts











Adjustments (0.4) (0.1) - (0.5)
















1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcosts





PEAKMINESOPEX,CASHCOSTSANDAISCRECONCILIATION






Adjustments(2) 0.4 0.1 - 0.5




Unitsofmetalsold(ounces/millionsofpounds/millionsofounces) 89,265 13.2 0.1 89,265










All-insustainingcostsonaco-productbasis(3)($/ounceorpound) 1,067 2.45 15.81

All-insustainingcostspergoldouncesold($/ounce) 1,071

1. Operatingexpensesareapportionedtoeachmetalproducedonapercentageofrevenuebasis.2. Adjustmentsincludenon-cashitemsrelatedtoinventorywrite-downs.3. Amountspresentedonaco-productbasisremovetheimpactofothermetalsalesthatareproducedasaby-productofourgoldproductionandapportionsthecashcoststo

eachmetalproducedonapercentageofrevenuebasis.4. See“TotalSustainingCapitalExpenditureReconciliation”belowtoreconcilesustainingcapitalexpenditurestomininginterestsperthestatementofcashflows.


Sustaining Capital Expenditures Reconciliation Tables ThreemonthsendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016

TOTALSUSTAININGCAPITALEXPENDITURES

Mininginterestsperstatementofcashflows 98.5 161.7NewAftongrowthcapitalexpenditure(1) (0.3) (0.2)RainyRivergrowthcapitalexpenditure (80.7) (145.9)Blackwatergrowthcapitalexpenditure (2.4) (3.0)

Sustainingcapitalexpendituresfromcontinuingoperations 15.1 12.6

Sustainingcapitalfromdiscontinuedoperations:PeakMines 12.3 3.1

Totalsustainingcapitalexpenditures 27.4 15.71. GrowthcapitalexpendituresatNewAftoninthecurrentperiodandprior-yearperiodrelatetoexplorationfortheC-zone.GrowthcapitalexpendituresatPeakMines

inthecurrentperiodrelatetocapitalizedexplorationactivitiesatGreatCobar.

YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2015

TOTALSUSTAININGCAPITALEXPENDITURES

Mininginterestsperstatementofcashflows 567.0 555.9 369.3NewAftongrowthcapitalexpenditure(1) (2.9) (3.2) (15.4)RainyRivergrowthcapitalexpenditure (496.7) (466.4) (245.5)Blackwatergrowthcapitalexpenditure (11.3) (10.0) (7.1)

Sustainingcapitalexpendituresfromcontinuingoperations 56.1 76.3 101.3

Sustainingcapitalfromdiscontinuedoperations:PeakMines 32.2 11.1 20.2

Totalsustainingcapitalexpenditures 88.3 87.4 121.51. GrowthcapitalexpendituresatNewAftoninthecurrentperiodandprior-yearperiodrelatetoexplorationfortheC-zone.GrowthcapitalexpendituresatPeakMinesin

thecurrentperiodrelatetocapitalizedexplorationactivitiesatGreatCobar.


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015RAINYRIVERSUSTAININGCAPITALEXPENDITURES

Capitalexpenditurepersegmentedinformation

83.4

145.9

499.3

466.4

245.5

RainyRivergrowthcapitalexpenditure(1) (80.7) (145.9) (496.7) (466.4) (245.5)RainyRiversustainingcapitalexpenditures 2.6 - 2.6 - -1. GrowthcapitalexpendituresatRainyRiverrelatetoprojectdevelopment.

ThreemonthsendedDecember31 YearendedDecember31(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015NEWAFTONSUSTAININGCAPITALEXPENDITURES

Capitalexpenditurepersegmentedinformation

8.6

10.4

42.2

40.9

62.1

NewAftongrowthcapitalexpenditure(1) (0.3) (0.2) (2.9) (3.2) (15.4)NewAftonsustainingcapitalexpenditures 8.3 10.2 39.3 37.7 46.71. GrowthcapitalexpendituresatNewAftoninthecurrentperiodandprior-yearperiodrelatetoexplorationfortheC-zone.GrowthcapitalexpendituresatNewAftonin

theprior-yearperiodrelatetothemillexpansionandscopingstudy/preliminaryeconomicassessmentandexplorationfortheC-zone.

ThreemonthsendedDecember31 YearendedDecember31(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015PEAKMINESSUSTAININGCAPITALEXPENDITURES

Capitalexpenditureperdiscountedoperationsnote

13.1

3.1

34.7

11.1

20.2

PeakMinesgrowthcapitalexpenditure(1) (0.8) - (2.5) - 0PeakMinessustainingcapitalexpenditures 12.3 3.1 32.2 11.1 20.21. GrowthcapitalexpendituresatPeakMinesinthecurrentperiodrelatetocapitalizedexplorationactivitiesatGreatCobar.


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

• Impairmentlosses;

• Inventorywrite-downs;

• Itemsincludedin“Othergainsandlosses”asperNote6oftheCompany’sauditedconsolidatedfinancialstatements;and

• Certainnon-recurringitems.

As theCompanyhas classified thePeakMinesasadiscontinuedoperationduring2017,adjustedearningsandadjustedearningsper sharehavebeendisclosedona continuingand total basis.Net earningshavebeenadjusted, including theassociatedtaximpact,forthegroupofcostsin“Othergainsandlosses”ontheauditedconsolidatedincomestatements.Keyentries in this groupingare: the fair value changes for thegold streamobligation; sharepurchasewarrantsand thegold and copper option contracts and copper forward contracts; foreign exchange gain or loss; and loss on disposal ofassets. Other adjustments to net earnings also include impairment losses, inventory write-downs, and a gain on theissuance and settlement of senior unsecured notes and corporate restricting charges. The adjusted entries are alsoimpactedfortaxtotheextentthattheunderlyingentriesareimpactedfortaxintheunadjustednetearnings.

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.

Adjustednetearnings is intendedtoprovideadditional informationonlyanddoesnothaveanystandardizedmeaningunderIFRSandmaynotbecomparabletosimilarmeasurespresentedbyothercompanies.ItshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.ThemeasureisnotnecessarilyindicativeofoperatingprofitorcashflowsfromoperationsasdeterminedunderIFRS.Thefollowingtablereconcilesthisnon-GAAPmeasuretothemostdirectlycomparableIFRSmeasure.


Threemonthsended

December31Yearended

December31(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015ADJUSTEDEARNINGSFROMCONTINUINGOPERATIONSRECONCILIATION

Lossbeforetaxesfromcontinuingoperations(2) (308.5) (16.5) (217.6) (10.7) (262.4)

Otherlosses(gains)(1) 25.0 (10.6) (39.2) 7.7 259.2

Assetimpairmentandinventorywrite-down 268.4 33.7 268.4 33.7 11.8

Gainonmodificationoflong-termdebt - - (3.3) -

Corporaterestructuring 4.2 - 4.2 -

Provisionforofficeconsolidation - - - - 3.0

Adjustednet(loss)earningsbeforetaxes(2) (10.9) 6.6 12.5 30.7 11.6

Incometaxrecovery(expense)(2) 128.9 (6.8) 115.9 2.1 94.1

Incometaxadjustments (111.8) 1.7 (107.1) (13.4) (103.9)

Adjustedincometaxrecovery(expense)(2) 17.1 (5.1) 8.8 (11.3) (9.8)

Adjustednetearningsfromcontinuingoperations(2) 6.2 1.5 21.3 19.4 1.8

Adjustedearningspershare(basicanddiluted)(2) 0.01 - 0.04 0.04 -

Adjustedeffectivetaxrate(2) 157% 77% 70% 37% 84%1. PleaserefertoNote6oftheCompany’sauditedconsolidatedfinancialstatementsforadetailedbreakdownofothergainsandlosses.2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.

Threemonthsended

December31YearendedDecember31


ADJUSTEDEARNINGSRECONCILIATION

Lossbeforetaxesfromcontinuingoperations(2) (308.5) (16.6) (217.6) (10.7) (262.4)

Lossbeforetaxesfromdiscontinuingoperations(2) (19.5) (4.5) (6.0) (2.3) (45.9)

Otherlosses(gains)(1) 25.0 (10.6) (39.2) 7.7 259.2

Otherlosses(gains)fromdiscontinuingoperations(2) 1.3 (2.4) 2.9 (3.9) 6.5

Assetimpairmentandinventorywrite-down 268.6 33.7 268.4 33.7 31.9

Gainonmodificationoflong-termdebt - - (3.3) - -

Corporaterestructuring 4.2 - 4.2 - -

Provisionforofficeconsolidation - - - - 3.0

Impairmentlossonheld-for-saleassets 49.0 - 49.0 - -

Adjustednetearnings(loss)beforetaxes(2) 20.1 (0.4) 58.4 24.5 (7.7)

Incometaxrecovery(expense)(2) 132.3 (1.4) 115.6 6.0 106.9

Incometaxadjustments (119.9) (3.1) (124.7) (15.9) (110.1)

Adjustedincometaxrecovery(expense)(2) 12.4 (4.5) (9.1) (9.9) (3.2)

Adjustednetearnings(loss) 32.5 (4.9) 49.3 14.6 (10.9)

Adjustedearnings(loss)pershare(basicanddiluted)(2) 0.06 (0.01) 0.09 0.03 (0.02)

Adjustedeffectivetaxrate(2) 62% 1,125% 16% 40% 42%1. PleaserefertoNote6oftheCompany’sauditedconsolidatedfinancialstatementsforadetailedbreakdownofothergainsandlosses.2. Prior-yearperiodcomparativeshavebeenrevised.Pleaserefertothe“KeyQuarterlyOperatingandFinancialInformation”sectionofthisMD&Aforfurtherinformation.3. PleaserefertoNote16oftheCompany’sauditedconsolidatedfinancialstatementsforadetailedbreakdownoftheearnings(loss)fromPeakMines,whichhasbeen

classifiedasadiscontinuedoperationin2017.


Cash Generated from Operations, before Changes in Non-Cash Operating Working Capital “Cash generated from operations, before changes in non-cash operating working capital” is a non-GAAP financialmeasure with no standard meaning under IFRS, which excludes changes in non-cash operating working capital.ManagementusesthismeasuretoevaluatetheCompany’sabilitytogeneratecashfromitsoperationsbeforetemporaryworkingcapitalchanges.

Cash generated from operations, before non-cash changes in working capital is intended to provide additionalinformationonlyanddoesnothaveanystandardizedmeaningunderIFRS;itshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.Othercompaniesmaycalculatethismeasuredifferentlyandthismeasureisunlikelytobecomparabletosimilarmeasurespresentedbyothercompanies.

Threemonthsended

December31Yearended

December31

(inmillionsofU.S.dollars) 2017 2016 2017 2016 2015

CASHRECONCILIATION

Operatingcashflowgeneratedfromcontinuingoperations

91.2

49.1

275.0

225.0

256.1

Addback(deduct):Changeinnon-cashoperatingworkingcapitalfromcontinuingoperations

(26.4)

15.5

(40.9)

20.3

15.1

Operatingcashflowsgeneratedfromcontinuingoperationsbeforechangesinnon-cashoperatingworkingcapital

64.8

64.6

234.1

245.3

271.2Operatingcashflowsgeneratedfromdiscontinuedoperations(1)

27.7

2.8

67.2

57.2

6.5

Addback(deduct):Changeinnon-cashoperatingworkingcapitalfromdiscontinuedoperations(1)

0.5

1.1

(2.1)

(0.7)

(1.3)

Cashgeneratedfromoperationsbeforechangesinnon-cashoperatingworkingcapital

93.0

68.5

299.2

301.8

276.4

1. PleaserefertoNote12oftheCompany’sauditedconsolidatedfinancialstatementsforadetailedbreakdownofthecashflowsfromPeakMines,whichhasbeenclassifiedasadiscontinuedoperation.


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 Three months ended

December 31Year ended

December 31

(inmillionsofU.S.dollars) 2017 2016 2017 2016 2015TOTALOPERATINGMARGIN

Revenue(1) 193.5 140.7 604.4 522.8 284.6Less:Operatingexpenses (117.0) (94.2) (321.0) 275.5 (97.7)Totaloperatingmargin 76.5 46.5 283.4 247.3 186.9

1. AstheCompanyhasenteredintoabindingagreementtosellthePeakMinesandtheCompanyexpectstoclosethesaleinthefirstquarterof2018,PeakMineshasbeenclassifiedasadiscontinuedoperation.Totaloperatingmarginsaredisclosedonacontinuingandtotalbasis,whereappropriate.

Three months ended December 31

Year ended December 31

(inmillionsofU.S.dollars) 2017 2016 2017 2016 2015RAINYRIVEROPERATINGMARGIN

Revenue 34.3 - 34.3 - -Less:Operatingexpenses (38.5) - (38.5) - -RainyRiveroperatingmargin (4.2) - (4.2) - -

Three months ended

December 31Year ended

December 31

(inmillionsofU.S.dollars) 2017 2016 2017 2016 2015NEWAFTONOPERATINGMARGIN

Revenue 77.3 74.9 302.0 287.2 284.6Less:Operatingexpenses (24.8) (28.3) (107.2) (104.8) (97.7)NewAftonoperatingmargin 52.5 46.6 194.8 182.4 186.9

Three months ended

December 31 Year ended

December 31

(inmillionsofU.S.dollars) 2017 2016 2017 20162016

2015MESQUITEOPERATINGMARGIN Revenue 70.0 46.7 215.7 141.7 152.9

Less:Operatingexpenses (40.9) (25.3) (122.7) (71.5) (98.1)

Mesquiteoperatingmargin 29.1 21.4 93.0 70.2 54.8



Year ended December 31 31(inmillionsofU.S.dollars) 2017 2016 2017 2016

20162015

CERROSANPEDROOPERATINGMARGIN Revenue 11.9 19.1 52.4 93.9 145.4

Less:Operatingexpenses (12.9) (40.6) (52.7) (99.2) (125.2)

CerroSanPedrooperatingmargin (1.0) (21.5) (0.3) (5.3) 20.2


Year ended December 31

(inmillionsofU.S.dollars) 2017 2016 2017 2016 2015PEAKMINESOPERATINGMARGIN Revenue(1) 57.7 29.6 170.5 161.0 130.0

Less:Operatingexpenses(1) (27.7) (20.5) (94.4) (90.3) (98.6)

PeakMinesoperatingmargin(1) 30.0 9.1 76.1 70.7 31.4

1. PleaserefertoNote12oftheCompany’sauditedconsolidatedinterimfinancialstatementsforadetailedbreakdownoftheearnings(loss)fromPeakMines,whichhasbeenclassifiedasadiscontinuedoperation.


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 2016 2015TOTALAVERAGEREALIZEDPRICE

Revenuefromgoldsales 136.4 89.6 385.9 331.8 381.0

Treatmentandrefiningchargesongoldconcentratesales 2.5 2.8 9.6 10.8 10.2

Grossrevenuefromgoldsales 138.9 92.4 395.5 342.6 391.2

Goldouncessold 108,782 75,887 309,454 274,843 339,587

Totalaveragerealizedpricepergoldouncesold($/ounce) 1,274 1,199 1,278 1,242 1152


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015RAINYRIVERAVERAGEREALIZEDPRICE

Revenuefromgoldsales 33.6 - 33.6 - -

Goldouncessold 26,359 - 26,359 - -RainyRiveraveragerealizedpricepergoldouncesold($/ounce)

1,276

-

1,276

-

-


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015NEWAFTONAVERAGEREALIZEDPRICE




Goldouncessold 20,132 24,171 81,067 96,851 99,458NewAftonaveragerealizedpricepergoldouncesold($/ounce)

1,254

1,212

1,280

1,251

1,164


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015MESQUITEAVERAGEREALIZEDPRICE


Goldouncessold 54,612 38,366 168,800 113,843 133,712Mesquiteaveragerealizedpricepergoldouncesold($/ounce)

1,281

1,217

1,278

1,244

1,144



(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015CERROSANPEDROAVERAGEREALIZEDPRICE


Goldouncessold 7,679 13,351 33,228 64,149 106,417CerroSanPedrorealizedpricepergoldouncesold($/ounce)

1,279

1,219

1,278

1,243

1,152


(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016 2017 2016 2015PEAKMINESAVERAGEREALIZEDPRICE




Goldouncessold 34,861 18,049 100,632 103,396 89,265PeakMinesaveragerealizedpricepergoldouncesold($/ounce)

1,271

1,191

1,289

1,278

1,137

1. PleaserefertoNote12oftheCompany’sauditedconsolidatedfinancialstatementsforadetailedbreakdownoftheearnings(loss)fromPeakMines,whichhasbeenclassifiedasadiscontinuedoperation.


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, 2017, both filed on SEDAR atwww.sedar.com.TherewerenosignificantchangestothoserisksortotheCompany’smanagementofexposuretothoserisksfortheyearendedDecember31,2017,exceptasnotedbelow:

Financial Risk Management TheCompanyholdsamixtureoffinancialinstruments,whichareclassifiedandmeasuredasfollows.Foradiscussionofthemethodsusedtovaluefinancial instruments,aswellasanysignificantassumptions,refertoNote2toourauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2017and2016.


(inmillionsofU.S.dollars) Category Level Level FINANCIALASSETS Cashandcashequivalents Loansandreceivablesatamortizedcost 216.2 185.9Tradeandotherreceivables Loansandreceivablesatamortizedcost 29.0 41.6

Provisionallypricedcontracts FinancialinstrumentsatFVTPL 2 4.2 2 4.5Goldandcopperswapcontracts FinancialinstrumentsatFVTPL 2 (6.1) 2 (9.0)Goldpriceoptioncontracts FinancialinstrumentsatFVTPL 2 - 2 17.6

Investments FinancialinstrumentsatFVTPL 1 1.0 1 1.1Copperforwardcontracts FinancialinstrumentsatFVTPL 2 - 2 0.3FINANCIALLIABILITIES

Tradeandotherpayables(1) Financialliabilitiesatamortizedcost 146.0 168.3Long-termdebt Financialliabilitiesatamortizedcost 1,007.7 889.5Warrants FinancialInstrumentsatFVTPL 1 - 1 1.3

Goldstreamobligation FinancialinstrumentsatFVTPL 3 273.5 3 246.5Dieselswapcontracts FinancialliabilityatfairvaluethroughOCI 2 - 2 0.1Performanceshareunits FinancialinstrumentsatFVTPL 3 1.8 3 2.1Restrictedshareunits FinancialinstrumentsatFVTPL 1 0.9 1 0.9Copperoptioncontracts FinancialinstrumentsatFVTPL 2 4.1 2 -

1. Tradeandotherpayablesexcludetheshort-termportionofreclamationandclosurecostobligations.

TheCompanyexaminesthevariousfinancialinstrumentriskstowhichitisexposedandassessestheimpactandlikelihoodof those risks. These risksmay include credit risk, liquidity risk,market risk andotherprice risks.Wherematerial, theserisksarereviewedandmonitoredbytheBoardofDirectors.

CreditRiskCreditrisk istheriskofanunexpectedloss ifapartytotheCompany’sfinancial instrumentsfailstomeet itscontractualobligations.TheCompany’s financialassetsareprimarilycomposedofcashandcashequivalents, investmentsand tradeand other receivables. Credit risk is primarily associatedwith trade and other receivables, investments, options, swaps,and forward contracts; however, it also arises on cash and cash equivalents. To mitigate exposure to credit risk, theCompanyhasestablishedpoliciestolimittheconcentrationofcreditrisk,toensurecounterpartiesdemonstrateminimumacceptablecreditworthiness,andtoensureliquidityofavailablefunds.


The Company closely monitors its financial assets and does not have any significant concentration of credit risk. TheCompany sells its gold exclusively to large international organizations with strong credit ratings. The historical level ofcustomerdefaultsisminimaland,asaresult,thecreditriskassociatedwithgoldandcopperconcentratetradereceivablesatDecember31,2017isnotconsideredtobehigh.

TheCompany’smaximumexposuretocreditriskatDecember31,2017andDecember31,2016isasfollows:

AsatDecember31 AsatDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016CREDITRISKEXPOSURE Cashandcashequivalents 216.2 185.9Tradeandotherreceivables 27.1 37.1Goldpriceoptions - 17.6Copperforwardcontracts - 0.3

Totalfinancialinstrumentexposuretocreditrisk 243.3 240.9

AsignificantportionoftheCompany’scashandcashequivalents isheld in largeCanadianfinancial institutions.Short-terminvestments(includingthosepresentedaspartofcashandcashequivalents)arecomposedoffinancialinstrumentsissuedbyCanadianbankswithhighinvestment-graderatingsandthegovernmentsofCanadaandtheU.S.TheCompanyemploysarestrictiveinvestmentpolicy,whichisdescribedinNote20toourauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2017and2016.

TheagingoftradeandotherreceivablesatDecember31,2017andDecember31,2016isasfollows:

AsatDecember31


0-30days

31-60days

61-90days

91-120days

Over120days

2017Total

2016Total

AGINGTRADEANDOTHERRECEIVABLES

RainyRiver 6.0 4.8 6.1 - 0.4 17.3 5.2

NewAfton (2.3) 3.7 - - - 1.4 22.5Mesquite 0.2 - - - 0.5 0.7 0.2

PeakMines - - - - - - 1.3CerroSanPedro 4.3 0.5 0.5 0.5 0.5 6.3 5.5

Blackwater 0.4 - - - - 0.4 0.3Corporate 1.0 - - - - 1.0 2.1

Totaltradeandotherreceivables 9.6 9.0 6.6 0.5 1.4 27.1 37.1

TheCompanysellsitsgoldandcopperconcentrateproductionfromNewAftontofourdifferentcustomersunderoff-takecontracts.TheCompanysellsitsgoldandcopperconcentrateproductionfromPeakMinestoonecustomerunderanoff-takecontract.

TheCompanyisnoteconomicallydependentonalimitednumberofcustomersforthesaleofitsgoldbecausegoldcanbesoldthroughnumerouscommoditymarkettradersworldwide.


LiquidityRiskLiquidityriskistheriskthattheCompanywillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheCompanymanagesliquidityriskthroughthemanagementofitscapitalstructureandfinancialleverage,asoutlinedinNote20toourauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2017and2016.

Thefollowingarethecontractualmaturitiesofdebtcommitmentsandcertainotherobligations.Theamountspresentedrepresentthefutureundiscountedcashflows,andtherefore,donotequatetothecarryingamountsontheconsolidatedstatementsoffinancialposition.

AsatDecember31

AsatDecember31


<1year

1-3years

4-5years

After5years

2017Total

2016Total

DEBTCOMMITMENTS Tradeandotherpayables 153.7 - - - 153.7 169.2Long-termdebt - 230.0 500.0 300.0 1,030.0 900.0

Interestpayableonlong-termdebt 43.5 100.8 100.8 47.8 292.9 252.5

Goldstreamobligation 24.7 52.4 54.8 158.6 290.5 277.7

Totaldebtcommitments 221.9 383.2 655.6 506.4 1,767.1 1,599.5

TheCompany’sfutureoperatingcashflowandcashpositionarehighlydependentonmetalprices,includinggold,copperandsilver,aswellasotherfactors.TakingintoconsiderationtheCompany’scurrentcashposition,volatileequitymarkets,globaluncertaintyinthecapitalmarketsandincreasingcostpressures,theCompanyiscontinuallyreviewingexpendituresandassessingbusinessopportunities toenhance liquidity inorder toensureadequate liquidityand flexibility to supportits growth strategy, including the development of its projects, while continuing production at its current operations. Aperiodofcontinuous lowgoldandcopperpricesmaynecessitate thedeferralofcapitalexpenditureswhichmay impactproductionfromminingoperations.Inaddition,insuchapriceenvironment,theCompanymayberequiredtoadoptoneormorealternativestoincreaseliquidity.

CurrencyRiskTheCompanyoperatesinCanada,theUnitedStates,AustraliaandMexico.Asaresult,theCompanyhasforeigncurrencyexposurewith respect to items not denominated inU.S. dollars. The threemain types of foreign exchange risk for theCompanycanbecategorizedasfollows:

TransactionexposureThe Company’s operations sell commodities and incur costs in different currencies. This creates exposure at theoperationallevel,whichmayaffecttheCompany’sprofitabilityasexchangeratesfluctuate.

ExposuretocurrencyriskTheCompanyisexposedtocurrencyriskthroughthefollowingassetsandliabilitiesdenominatedincurrenciesotherthantheU.S.dollar: cashandcashequivalents, investments,accounts receivable,accountspayableandaccruals, reclamationandclosurecostobligations,andlong-termdebt.ThecurrenciesoftheCompany’sfinancialinstrumentsandotherforeigncurrencydenominatedliabilities,basedonnotionalamounts,wereasfollows:



(inmillionsofU.S.dollars,exceptwherenoted) CAD AUD MXNEXPOSURETOCURRENCYRISK Cashandcashequivalents 16.6 5.9 1.5Tradeandotherreceivables 19.5 - 6.2Incometax(payable)receivable 0.4 - 4.2Deferredtaxasset 130.5 - -Tradeandotherpayables (141.6) - (11.5)Deferredtaxliability (183.9) - (0.1)Reclamationandclosurecostobligations (84.6) - (11.7)Performanceshareunitsandrestrictedshareunits (2.6) - -

Totalexposuretocurrencyrisk (245.7) 5.9 (11.4)


(inmillionsofU.S.dollars,exceptwherenoted) CAD AUD MXNEXPOSURETOCURRENCYRISK Cashandcashequivalents 95.3 4.6 1.2Tradeandotherreceivables 8.0 0.5 5.5Incometaxreceivable/(payable) (1.1) (4.5) (3.1)

Deferredtaxasset 173.3 14.0 0.9Tradeandotherpayables (118.3) (12.0) (16.2)Deferredtaxliability (321.1) (26.1) (0.5)

Reclamationandclosurecostobligations (36.5) (13.6) (12.2)Warrants (1.3) - -Employeebenefits (1.1) (7.9) -

PerformanceshareunitsandRestrictedshareunits (2.8) - -

Totalexposuretocurrencyrisk (205.6) (45.0) (18.2)

TranslationexposureThe Company’s functional and reporting currency is U.S. dollars. The Company’s operations translate their operatingresults from the host currency to U.S. dollars. Therefore, exchange rate movements in the Canadian dollar, Australiandollar and Mexican peso can have a significant impact on the Company’s consolidated operating results. A 10%strengthening (weakening) of the U.S. dollar against the following currencies would have decreased (increased) theCompany’snetearnings(loss)fromthefinancialinstrumentspresentedbytheamountsshownbelow.

YearendedDecember31 YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016IMPACTOF10%CHANGEINFOREIGNEXCHANGERATES Canadiandollar 24.6 20.5Australiandollar (0.6) 4.6Mexicanpeso 1.1 1.8

InterestRateRiskInterestrateriskistheriskthatthefairvalueorthefuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.ThemajorityoftheCompany’soutstandingdebtobligationsarefixedandarethereforenotexposedtochangesinmarketinterestrates.TheCreditFacilityinterestisvariableanda1%changeininterestrateswouldresultinadifferenceofapproximately$1.4millionininterestpaidfortheyearendedDecember31,2017.


TheCompanyisexposedtointerestrateriskonitscashandcashequivalents.Interestearnedoncashandcashequivalentsisbasedonprevailingmoneymarketandbankaccountinterestrateswhichmayfluctuate.A1.0%changeintheinterestrate would result in a difference of approximately $2.0million in interest earned by the Company for the year endedDecember31,2017.TheCompanyhasnotenteredintoanyderivativecontractstomanagethisrisk.

MetalpriceriskTheCompany’searnings,cashflowsandfinancialconditionaresubjecttoriskduetofluctuationsinthemarketpriceofgold,copperandsilver.Worldgoldpriceshavehistoricallyfluctuatedwidely.WorldgoldpricesareaffectedbynumerousfactorsbeyondtheCompany’scontrol,including:

• thestrengthoftheU.S.economyandtheeconomiesofotherindustrializedanddevelopingnations;• globalorregionalpoliticaloreconomicconditions;• therelativestrengthoftheU.S.dollarandothercurrencies;• expectationswithrespecttotherateofinflation;• interestrates;• purchasesandsalesofgoldbycentralbanksandotherlargeholders,includingspeculators;• demandforjewellerycontaininggold;• investmentactivity,includingspeculation,ingoldasacommodity

FortheyearendedDecember31,2017,theCompany’srevenueandcashflowswereimpactedbygoldpricesintherangeof$1,151to$1,346perounce,andbycopperpricesintherangeof$2.49to$3.27perpound.Metalpricedeclinescouldcausecontinueddevelopmentof,andcommercialproductionfrom,theCompany’spropertiestobeuneconomic.Thereisatime lagbetweentheshipmentofgoldandcopperandfinalpricing,andchanges inpricingcan impacttheCompany’srevenue and working capital position. As at December 31, 2017, working capital includes unpriced gold and copperconcentratereceivablestotalling1,972ouncesofgoldand1.6millionpoundsofcoppernotoffsetbycopperswapcontracts.A$100changeinthegoldpriceperouncewouldhaveanimpactof$0.2millionontheCompany’sworkingcapital.A$0.10changeinthecopperpriceperpoundwouldhaveanimpactof$0.2millionontheCompany’sworkingcapitalposition.TheCompany’sexposuretochangesingoldpriceshasbeensignificantlyreducedduringtheyearendedDecember31,2017astheCompanyhasenteredintogoldpriceoptioncontractstoreduceexposuretochangesingoldprices.Furthermore,theCompany’sexposuretochangesincopperpriceshasbeensignificantlyreducedduring2018astheCompanyhasenteredintocopperpriceoptioncontracts (whereby itsoldaseriesofcalloptioncontractsandpurchasedaseriesofputoptioncontracts)toreduceexposuretochangesincopperprices:

Quantity

outstanding

RemainingtermExerciseprice

($/lb)

Fairvalue-asset(liability)

1)COPPEROPTIONCONTRACTSOUTSTANDING Coppercallcontracts-sold 27,600tonnes(1) January–December2018 3.37 (7.8)

Copperputcontracts-purchased 27,600tonnes(1) January–December2018 3.00 3.7

1. Approximates60millionpoundsofcopper.


An increase in gold, copper and silver prices would decrease the Company’s net loss whereas an increase in fuel orrestrictedshareunitvestedpriceswouldincreasetheCompany’snetloss.A10%changeincommoditypriceswouldimpacttheCompany’snetearningsbeforetaxesandothercomprehensiveincomebeforetaxesasfollows:

YearendedDecember31 YearendedDecember31


2017NetEarnings

2017Other

ComprehensiveIncome

2016NetEarnings

2016Other

ComprehensiveIncome

IMPACTOF10%CHANGEINCOMMODITYPRICES Goldprice 52.5 - 47.4 -

Copperprice 9.0 - 22.1 -Silverprice 1.1 - 1.4 -Fuelprice 4.6 0.3 3.5 0.1

Reserve calculations andmine plans using significantly lower gold, silver, copper and othermetal prices could result insignificantreductionsinMineralReserveandResourceestimatesandrevisionsintheCompany’slife-of-mineplans,whichinturncouldresult inmaterialwrite-downsof its investments inminingpropertiesand increaseddepletion,reclamationandclosurecharges.Dependingonthepriceofgoldorothermetals,theCompanymaydeterminethatitisimpracticaltocommenceor,ifcommenced,tocontinuecommercialproductionataparticularsite.Metalpricefluctuationsalsocreateadjustmentstotheprovisionalpricesofsalesmadeinpreviousperiodsthathavenotyetbeensubjecttofinalpricing,andtheseadjustments couldhaveanadverse impacton theCompany’s financial resultsand financial condition. Inaddition,cashcostsandall-insustainingcostsofgoldproductionarecalculatednetofby-productcredits,andthereforemayalsobe impactedbydownward fluctuations in thepriceofby-productmetals.Anyof these factorscould result inamaterialadverseeffectontheCompany’sresultsofoperationsandfinancialcondition.

The Company is also subject to price risk for fluctuations in the cost of energy, principally electricity and purchasedpetroleumproducts.TheCompany’scostsareaffectedbythepricesofcommoditiesandotherinputsitconsumesorusesinitsoperations,suchaslime,sodiumcyanideandexplosives.Thepricesofsuchcommoditiesandinputsareinfluencedbysupplyanddemandtrendsaffectingthemining industry ingeneralandotherfactorsoutsideourcontrol. Increases intheprice formaterials consumed in theCompany’sminingandproductionactivities couldmateriallyadverselyaffect itsresultsofoperationsandfinancialcondition.

TheCompanyisalsosubjecttopriceriskforchangesintheCompany’scommonstockpricepershare.TheCompanyhasgranted, under its long-term incentive plan, restricted share units that the Company is required to satisfy in cash uponvesting.TheamountofcashtheCompanywillberequiredtoexpendisdependentuponthepricepercommonshareatthetimeofvesting.TheCompanyconsidersthisplana financial liabilityand is requiredtofairvaluetheoutstanding liabilitywiththeresultingchangesincludedincompensationexpenseeachperiod.


Other Risks ProductionEstimatesForecastsoffutureproductionareestimatesbasedoninterpretationandassumptions,andactualproductionmaybelessthanestimated.TheCompany’sproductionforecastsarebasedonfullproductionbeingachievedatallof itsmines.TheCompany’s ability to achieve and maintain full production rates at these mines is subject to a number of risks anduncertainties. The Company’s production estimates are dependent on, among other things, the accuracy of MineralReserve andMineral Resource estimates, the accuracy of assumptions regarding ore grades and recovery rates, groundconditions, physical characteristics of ores, such as hardness and the presence or absence of particular metallurgicalcharacteristics,andtheaccuracyofestimatedratesandcostsofminingandprocessing,andthereceiptandmaintenanceof permits. The Company’s actual production may vary from its estimates for a variety of reasons, including, thoseidentified under the heading “Operating Risks” below. The failure of the Company to achieve its production estimatescouldhaveamaterialadverseeffectontheCompany’sprospects,resultsofoperationsandfinancialcondition.

CostEstimatesTheCompanypreparesestimatesofoperatingcostsand/orcapitalcostsforeachoperationandproject.TheCompany’sactualcostsaredependentonanumberoffactors,includingtheexchangeratebetweentheUnitedStatesdollarandtheCanadiandollar,AustraliandollarandMexicanpeso, smeltingand refiningcharges,penaltyelements in concentrates,royalties,thepriceofgoldandbyproductmetals, thecostof inputsused inminingoperationsandeventsthat impactproductionlevels.

NewGold’sactualcostsmayvaryfromestimatesforavarietyofreasons,includingchangingwaste-to-oreratios,oregrademetallurgy, labourandother input costs, commodityprices, general inflationarypressuresand currencyexchange rates,as well as those identified under the heading “Operating Risks” below. Failure to achieve cost estimates or materialincreases incostscouldhaveanadverse impactonNewGold’s futurecash flows,profitability, resultsofoperationsandfinancialcondition.

GovernmentRegulationThe mining, processing, development and exploration activities of the Company are subject to various laws governingprospecting,development,production,exports,imports,taxes,labourstandardsandoccupationalhealthandsafety,minesafety, toxic substances, waste disposal, environmental protection and remediation, protection of endangered andprotectedspecies,landuse,wateruse,landclaimsoflocalpeopleandothermatters.Noassurancecanbegiventhatnewrulesandregulationswillnotbeenactedorthatexistingrulesandregulationswillnotbeappliedinamannerwhichcouldhave an adverse effect on the Company’s financial position and results of operations. Amendments to current laws,regulations and permits governing operations or development activities and activities of mining and explorationcompanies,ormorestringentordifferentimplementation,couldhaveamaterialadverseimpactontheCompany’sresultsofoperationsorfinancialposition,orcouldrequireabandonmentordelaysinthedevelopmentofnewminingpropertiesorthesuspensionorcurtailmentofoperationsatexistingmines. Failuretocomplywithanyapplicable laws,regulationsorpermittingrequirementsmayresultinenforcementactionsagainsttheCompany,includingordersissuedbyregulatoryorjudicialauthoritiescausingoperationsordevelopmentactivitiestoceaseorbecurtailedorsuspended,andmayincludecorrective measures requiring capital expenditures, installation of additional equipment or remedial actions (see also“Permitting”below).TheCompanycouldbeforcedtocompensatethosesufferinglossordamagebyreasonofitsminingoperationsorexplorationordevelopmentactivitiesandcouldfacecivilorcriminalfinesorpenaltiesimposedforviolationsofapplicablelawsorregulations.AnysuchregulatoryorjudicialactioncouldmateriallyincreasetheCompany’soperatingcostsanddelayorcurtailorotherwisenegativelyimpacttheCompany’soperationsandotheractivities.


PermittingThe Company’s operations, development projects and exploration activities are subject to receiving and maintaininglicenses, permits and approvals (collectively, “permits”) from appropriate governmental authorities. Before anydevelopment on any of its properties the Company must receive numerous permits, and continued operations at theCompany’sminesisalsodependentonmaintainingandrenewingrequiredpermitsorobtainingadditionalpermits.

NewGoldmaybeunable toobtainona timelybasisormaintain in the futureallnecessarypermits requiredtoexploreanddevelopitsproperties,commenceconstructionoroperationofminingfacilitiesandpropertiesormaintaincontinuedoperations. Delays may occur in connection with obtaining necessary renewals of permits for the Company’s existingoperationsandactivities,additionalpermitsforexistingorfutureoperationsoractivities,oradditionalpermitsassociatedwith new legislation. It is possible that previously issued permits may become suspended or revoked for a variety ofreasons,includingthroughgovernmentorcourtaction.

In October 2016, the federal and provincial governments entered into amemorandum of understanding regarding theenvironmental assessment process for the Blackwater Project with the Ulkatcho First Nation and the Lhoosk’uz DenéNation to facilitate government-to-government collaboration in such process. In addition, in April 2015, the provincialgovernmententered intoanagreementwiththeNadlehWhutenFirstNation,Saik’uzFirstNation,Stellat’enFirstNationandotherFirstNationsincludedintheCarrierSekaniTribalCounciltofacilitateagovernment-to-governmentrelationshipbasedoncollaborationinconnectionwithnaturalresourcedevelopmentcarriedonintheirtraditionalterritories,includingtheBlackwaterProject. NewGold continues toengage indigenousgroupswhohave interests in theBlackwaterProjectarea. NewGold anticipates receiving environmental assessment approval for the Blackwater Project in 2018, however,therecanbenoassurancethatsuchapprovalwillbeobtainedonsuchtimelineoratall.

InthepasttherehavebeenchallengestotheCompany’spermitsthatweretemporarilysuccessfulaswellasdelaysintherenewal of certain permits or receiving additional required permits. There can be no assurance that the Company willreceiveorcontinuetoholdallpermitsnecessarytodeveloporcontinueoperatingatanyparticularpropertyortopursuetheCompany’sexplorationactivities.Totheextentthatrequiredpermitscannotbeobtainedormaintained,theCompanymay be curtailed or prohibited from continuing its mining operations or from proceeding with planned exploration ordevelopment of mineral properties. Even if permits or renewals are available, the terms of such permits may beunattractive to the Company and result in the applicable operations or activities being financially unattractive oruneconomic. An inability to obtain ormaintain permits or to conductmining operations pursuant to applicable permitswouldmateriallyreducetheCompany’sproductionandcashflowandcouldundermineitsprofitability.

DependenceontheRainyRiverandNewAftonminesTheCompany’soperationsattheRainyRiverandNewAftonMinesareexpectedtoaccountfor70%oftheCompany’sgoldproductionand100%ofitscopperproductionin2018.AnyadverseconditionaffectingminingormillingconditionsattheRainyRiverMineorNewAftonMinecouldhaveamaterialadverseeffectontheCompany’sfinancialperformanceandresultsofoperations.

Unless the Company acquires or develops other significant gold-producing assets, the Company will continue to bedependentonitsoperationsattheRainyRiverandNewAftonMinesforasubstantialportionofitscashflowprovidedbyoperatingactivities.


OperatingRisksMining operations generally involve a high degree of risk. The Company’s operations are subject to all the hazards andrisksnormallyencountered in theexploration,developmentandproductionofgold, copperandsilver includingunusualandunexpectedgeologicformations,seismicactivity,rockbursts,rockslides,cave-ins,slopeorpitwallfailures,flooding,fire,metallosses,periodicinterruptionduetoinclementorhazardousweatherconditionsandotherconditionsthatwouldimpact thedrilling and removal ofmaterial. Block caving activities, including at theNewAftonMine, generally result insurface subsidence. The configurationof subsidencepresently occurring above thewest cave at theNewAftonMine isslightlyoffsetfromtheoriginalmodel,whichisthoughttobedrivenlargelybytheweakerrockmasslocatedsouthofthecave footprint. The subsidence isbeingmonitoredandevaluatedonanongoingbasis. Surface subsidenceoranyof theabove hazards and risks could result in reduced production, damage to, or destruction of, mines and other producingfacilities, damage to life or property, environmental damage and possible legal liability. In addition, productionmay beadversely impacted by operational problems such as a failure of a production hoist, filter press, SAG mill or otherequipment, or industrial accidents, aswell asotherpotential issues suchas actual oremined varying fromestimatesofgrade or tonnage, dilution, block cave performance andmetallurgical or other characteristics, interruptions in electricalpower or water, shortages of required inputs, labour shortages or strikes, restrictions or regulations imposed bygovernmentagenciesorchangesintheregulatoryenvironment.TheCompany’smillingoperationsaresubjecttohazardssuchasequipment failureor failureof retainingdamsaround tailingsdisposalareas,whichmay result inenvironmentalpollutionandconsequent liability. Inaddition,short-termoperatingfactors,suchastheneedfororderlydevelopmentoftheorebodiesortheprocessingofnewordifferentoregrades,maycauseaminingoperationtobeunprofitable inanyparticularaccountingperiod.Theoccurrenceofoneormoreoftheseeventsmayresultinthedeathof,orpersonalinjuryto, employees, other personnel or third parties, the loss of mining equipment, damage to or destruction of mineralproperties or production facilities, monetary losses, deferral or unanticipated fluctuations in production, suspension,curtailmentorterminationofoperations,environmentaldamageandpotentiallegalliabilities,anyofwhichmayadverselyaffecttheCompany’sbusiness,reputation,prospects,resultsofoperationsandfinancialcondition.

ExplorationandDevelopmentRisksTheexploration for anddevelopmentofmineral deposits involves significant risks,whichevena combinationof carefulevaluation, experience and knowledge cannot eliminate.While the discovery of an ore body may result in substantialrewards,fewpropertiesthatareexploredareultimatelydevelopedintoproducingmines.Onceasitewithmineralizationisdiscovered,itmaytakeseveralyearsfromtheinitialphasesofdrillinguntilproductionispossible,duringwhichtimetheeconomicfeasibilityofproductionmaychange.MajorexpensesmayberequiredtolocateandestablishMineralReserves,todevelopmetallurgicalprocessesandtoconstructminingandprocessingfacilitiesataparticularsite. It is impossibletoensure that the exploration or development programs planned by the Company or any of its partners will result in aprofitablecommercialminingoperation.

Whetheramineraldepositwillbecommerciallyviabledependsonanumberoffactors,includingbutnotlimitedto:theparticularattributesofthedeposit,suchasaccuracyofestimatedsize,continuityofmineralization,averagegradeandmetallurgical characteristics (see “Uncertainty in the Estimation ofMineral Reserves andMineral Resources” below);proximity to infrastructure;metal prices,which are highly cyclical; and government regulations, including regulationsrelating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmentalprotection.Theexacteffectofthesefactorscannotbeaccuratelypredicted,butthecombinationofthesefactorsmayresultintheCompanybeingunabletoreceiveanadequatereturnoninvestedcapital.


Development projects are uncertain and capital cost estimates, projected operating costs, production rates, recoveryrates,minelifeandotheroperatingparametersandeconomicreturnsmaydiffersignificantlyfromthoseestimatedforaproject.Developmentprojectsrelyontheaccuracyofpredictedfactorsincludingcapitalandoperatingcosts,metallurgicalrecoveries, reserveestimatesand futuremetalprices. Inaddition, there canbenoassurance thatgold, silveror copperrecoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or duringproduction.

TheCompanyhasoneprojectcurrentlyinthedevelopmentphase:theBlackwaterproject,whichisinthepermittingstage.Inaddition,theCompanymayengageinexpansionactivitiesatitsoperatingminesfromtimetotime.Expansionprojects,includingexpansionsoffacilitiesandextensionstoneworebodiesornewportionsofexistingorebodies,canhaverisksanduncertaintiessimilartodevelopmentprojects.

Aprojectissubjecttonumerousrisksduringdevelopmentincluding,butnotlimitedto,theaccuracyoffeasibilitystudies,obtaining and complyingwith requiredpermits, changes in environmental orother government regulations, securingallnecessary surfaceand land tenure rights, consultingandaccommodatingFirstNationsandother indigenousgroupsandfinancing risks. In particular, the Company is actively engaged in consultation with various First Nations and otherindigenous groups in connectionwith the Blackwater Project. Unforeseen circumstances, including those related to theamountandnatureofthemineralizationatthedevelopmentsite,technologicalimpedimentstoextractionandprocessing,legalchallengesorrestrictionsorgovernmental intervention, infrastructurelimitations,environmental issues,unexpectedground conditions or other unforeseen development challenges, commodity prices, disputes with local communities orotherevents, could result inoneormoreofNewGold’splanneddevelopmentsbecoming impracticaloruneconomic tocomplete. Any such occurrence could have an adverse impact onNewGold’s growth, financial condition and results ofoperations. There can be no assurance that the development of either of the Rainy River underground mine or theBlackwaterProjectwillcontinueinaccordancewithcurrentexpectationsoratall.Seealso“Permitting”above.

RisksrelatedtoRainyRiver’sfirstyearofproductionThefirstyearofproductionfortheRainyRiverMineissubjecttoanumberofinherentrisks.Itisnotunusualintheminingindustry for newmining operations to experience unexpected problems leading up to and during beginning period ofproduction,includingfailureofequipment,machinery,theprocessingcircuitorotherprocessestoperformasdesignedorintended, inadequatewater, insufficientorestockpileorgrade,andfailuretodeliveradequatetonnesoforetothemill,any of which could result in delays, slowdowns or suspensions and require more capital than anticipated. In addition,mineral reserves and mineral resources projected by the Feasibility Study, and anticipated costs, including, withoutlimitation, operating expenses, cash costs and all-in sustaining costs, anticipated mine life, projected production,anticipatedproductionratesandotherprojectedeconomicandoperatingparametersmaynotberealized,andthe leveloffuturemetalpricesneededtoensurecommercialviabilitymaydeteriorate.Consequently,thereisariskthatRainyRivermayencounterproblems,besubject todelaysorhaveothermaterialadverseconsequences for theCompanyduring itsfirstyearofproduction,includingitsoperatingresults,cashflowandfinancialcondition.

FinancingRisksThe Company’smining, processing, development and exploration activitiesmay require additional external financing.Therecanbenoassurancethatadditionalcapitalorothertypesof financingwillbeavailablewhenneededor that, ifavailable,thetermsofsuchfinancingwillbeacceptabletotheCompany,and, ifraisedbyofferingequitysecuritiesorsecurities convertible into equity securities, any additional financing may involve substantial dilution to existingshareholders.Failuretoobtainsufficientfinancingcouldresultinthedelayorindefinitepostponementofexploration,development,constructionorproductiononanyoralloftheCompany’smineralproperties.Thecostandtermsofsuchfinancing may significantly reduce the expected benefits from new developments and/or render such developmentsuneconomic.


NeedforAdditionalMineralReservesandMineralResourcesBecause mines have limited lives based on Proven and Probable Mineral Reserves, the Company continually seeks toreplaceandexpanditsMineralReservesandMineralResources.TheCompany’sabilitytomaintainorincreaseitsannualproductionofgold,copperandsilverdependsinsignificantpartonitsabilitytofindoracquirenewMineralReservesandMineralResourcesandbringnewminesintoproduction,andtoexpandMineralReservesandMineralResourcesatexistingmines. Exploration is inherently speculative. New Gold’s exploration projects involve many risks and exploration isfrequently unsuccessful. See “Exploration andDevelopment Risks” above. There is a risk that depletion of Reserveswillnot be offset by discoveries or acquisitions. Themineral base of NewGoldmay decline if Reserves areminedwithoutadequatereplacement.

UncertaintyintheEstimationofMineralReservesandMineralResourcesMineralReservesandMineralResourcesareestimatesonly,andnoassurancecanbegiventhattheanticipatedtonnagesandgradeswillbeachieved,thattheindicatedlevelofrecoverywillberealizedorthatMineralReservescanbeminedorprocessed profitably. Mineral Reserve and Mineral Resource estimates may be materially affected by environmental,permitting, legal, title, taxation, socio-political, marketing and other risks and relevant issues. There are numerousuncertainties inherent in estimating Mineral Reserves and Mineral Resources, including many factors beyond theCompany’scontrol.Suchestimationisasubjectiveprocess,andtheaccuracyofanyMineralReserveorMineralResourceestimate is a functionof thequantity andquality of available data, thenatureof theorebody andof the assumptionsmade and judgments used in engineering and geological interpretation. These estimates may require adjustments ordownwardrevisionsbaseduponfurtherexplorationordevelopmentwork,drillingoractualproductionexperience.

Fluctuations in gold, copper and silver prices, results of drilling,metallurgical testing and production, the evaluation ofmineplansafterthedateofanyestimate,permittingrequirementsorunforeseentechnicaloroperationaldifficultiesmayrequire revisionofMineralReserveandMineralResourceestimates. Prolongeddeclines in themarketpriceofgold (orapplicableby-productmetalprices)mayrenderMineralReservesandMineralResourcescontainingrelativelylowergradesof mineralization uneconomical to recover and could materially reduce the Company’s Mineral Reserves and MineralResources.MineralResourceestimatesforpropertiesthathavenotcommencedproductionoratdepositsthathavenotyet been exploited are based, inmost instances, on very limited andwidely spaced drill hole information,which is notnecessarilyindicativeofconditionsbetweenandaroundthedrillholes.Accordingly,suchMineralResourceestimatesmayrequirerevisionasmoregeologicanddrillinginformationbecomesavailableandasactualproductionexperienceisgained.ShouldreductionsinMineralResourcesorMineralReservesoccur,theCompanymayberequiredtotakeamaterialwrite-downofitsinvestmentinminingproperties,reducethecarryingvalueofoneormoreofitsassetsordelayordiscontinueproductionorthedevelopmentofnewprojects,resultinginreducednetincomeorincreasednetlossesandreducedcashflow.MineralResourcesandMineralReservesshouldnotbeinterpretedasassurancesofminelifeoroftheprofitabilityofcurrentorfutureoperations.ThereisadegreeofuncertaintyattributabletothecalculationandestimationofMineralResourcesandMineralReservesandcorrespondinggradesbeingminedand,asaresult,thevolumeandgradeofReservesmined and processed and recovery rates may not be the same as currently anticipated. Any material reductions inestimatesofMineralReservesandMineralResources,oroftheCompany’sabilitytoextracttheseMineralReservesandMineral Resources, could have amaterial adverse effect on the Company’s projects, results of operations and financialcondition.

MineralResourcesarenotMineralReservesandhaveagreaterdegreeofuncertaintyastotheirexistenceandfeasibility.ThereisnoassurancethatMineralResourceswillbeupgradedtoProvenorProbableMineralReserves.


ImpairmentOn a quarterly basis, the Company reviews and evaluates itsmining interests for indicators of impairment. Impairmentassessments are conducted at the level of CGUs.ACGU is the smallest identifiable groupof assets that generates cashinflows that are largely independent of the cash inflows from other assets or groups of assets. Each operating mine,development and exploration project represents a separate CGU. If an indication of impairment exists, the recoverableamountoftheCGUisestimated.AnimpairmentlossisrecognizedwhenthecarryingamountoftheCGUisinexcessofitsrecoverable amount. The assessment for impairment is subjective and requires management to make significantjudgments and assumptions in respect of a number of factors, including estimates of production levels, operating costsandcapitalexpendituresreflectedinNewGold’s life-of-mineplans,thevalueof insituounces,explorationpotentialandlandholdings,aswellaseconomicfactorsbeyondmanagement’scontrol,suchasgold,copperandsilverprices,discountrates, foreignexchange rates, andobservablenet asset valuemultiples. It is possible that theactual fair value couldbesignificantly different from those estimates. In addition, shouldmanagement’s estimate of the future not reflect actualevents,furtherimpairmentchargesmaymaterialize,andthetimingandamountofsuchimpairmentchargesisdifficulttopredict.

TitleClaimsandRightsofIndigenousPeoplesCertainofNewGold’spropertiesmaybesubject to therightsor theassertedrightsofvariouscommunitystakeholders,includingFirstNationsandotherAboriginalpeoples.ThepresenceofcommunitystakeholdersmayimpacttheCompany’sability to develop or operate itsmining properties and its projects or to conduct exploration activities. Accordingly, theCompanyissubjecttotheriskthatoneormoregroupsmayopposethecontinuedoperation,furtherdevelopmentornewdevelopmentorexplorationof theCompany’scurrentor futureminingpropertiesandprojects.Suchoppositionmaybedirected through legal or administrative proceedings, or through protests or other campaigns against the Company’sactivities.

Governments inmany jurisdictionsmust consultwith,or require theCompany to consultwith, indigenouspeopleswithrespecttograntsofmineralrightsandtheissuanceoramendmentofprojectauthorizations.Consultationandotherrightsof Indigenouspeoplesmayrequireaccommodation includingundertakingsregardingemployment, royaltypaymentsandothermatters. Thismayaffect theCompany’sability toacquirewithina reasonable time frameeffectivemineral titles,permitsor licenses in these jurisdictions, including in somepartsofCanada, theUnited States,Australia, andMexico inwhichtitleorotherrightsareclaimedbyindigenouspeoples,andmayaffectthetimetableandcostsofdevelopmentandoperationofmineralpropertiesinthesejurisdictions.Theriskofunforeseentitleclaimsbyindigenouspeoplesalsocouldaffectexistingoperationsaswellasdevelopmentprojects.TheselegalrequirementsmayalsoaffecttheCompany’sabilitytoexpandortransferexistingoperationsortodevelopnewprojects.

EnvironmentalRiskTheCompanyissubjecttoenvironmentalregulationinCanada,theUnitedStates,AustraliaandMexicowhereitoperatesorhasexplorationordevelopmentactivities.Inaddition,theCompanywillbesubjecttoenvironmentalregulationinanyother jurisdictions in which it may operate or have exploration or development properties. These regulations address,amongother things, endangered andprotected species, emissions, noise, air andwater quality standards, landuse andreclamation. They also set out limitations on the generation, transportation, storage and disposal of solid, liquid andhazardouswaste.


Environmental legislation is evolving in a manner which will involve, in certain jurisdictions, stricter standards andenforcement, increased fines andpenalties fornon-compliance,more stringentenvironmental assessmentsofproposedprojectsandaheighteneddegreeofresponsibilityforcompaniesandtheirofficers,directorsandemployees.Nocertaintyexists that future changes in environmental regulation, or the application of such regulations, if any,will not adverselyaffect the Company’s operations or development properties or exploration activities. The Company cannot give anyassurance that, notwithstanding its precautions, breaches of environmental laws (whether inadvertent or not) orenvironmental pollution will not materially and adversely affect its financial condition and results from operations.EnvironmentalhazardsmayexistontheCompany’spropertieswhichareunknowntomanagementatpresentandwhichhavebeencausedbypreviousownersoroperatorsoftheproperties.Inaddition,measurestakentoaddressandmitigateknownenvironmentalhazardsorrisksmaynotbefullysuccessful,andsuchhazardsorrisksmaymaterialize.

New Goldmay also acquire properties with known or undiscovered environmental risks. Any indemnification from theentity fromwhich theCompany acquires suchpropertiesmaynot be adequate to pay all the fines, penalties and costs(suchasclean-upandrestorationcosts)incurredrelatedtosuchproperties.SomeofNewGold’spropertieshavealsobeenusedforminingandrelatedoperationsformanyyearsbeforetheCompanyacquiredthemandwereacquiredasisorwithassumed environmental liabilities from previous owners or operators. The Company has been required to addresscontamination at its properties in the past and may need to continue to do so in the future, either for existingenvironmental conditions or for leaks, discharges or contamination thatmay arise from its ongoingoperations or othercontingencies. The cost of addressing environmental conditions or risks, and liabilities associated with environmentaldamage, may be significant, and could have a material adverse effect the Company’s business, prospects, results ofoperationsandfinancialcondition.ProductionatNewGold’sminesinvolvestheuseofvariouschemicals,includingcertainchemicals that are designated as hazardous substances. Contamination from hazardous substances, either at theCompany’sownpropertiesorotherlocationsforwhichitmayberesponsible,maysubjecttheCompanytoliabilityfortheinvestigation or remediation of contamination, as well as for claims seeking to recover for related property damage,personal injury or damage to natural resources. The occurrence of any of these adverse events could have amaterialadverseeffectontheCompany’sprospects,resultsofoperationsandfinancialposition.

ProductionatcertainoftheCompany’sminesinvolvestheuseofsodiumcyanidewhichisatoxicmaterial.Shouldsodiumcyanide leakorotherwisebedischargedfromthecontainmentsystem,theCompanymaybecomesubjectto liability forcleanupworkthatmaynotbeinsured,inadditiontoliabilityforanydamagecaused.Suchliabilitycouldbematerial.

InsuranceandUninsuredRisksNewGold’s business is subject to a number of risks and hazards generally including adverse environmental conditions,industrialaccidents, labourdisputes,unusualorunexpectedgeologicalconditions,groundorslopeorwall failures,cave-ins,metallurgical or other processingproblems, fires, operational problems, changes in the regulatory environment andnaturalphenomena, suchas inclementweatherconditions, floods,hurricanesandearthquakes. Suchoccurrencescouldresult indamagetomineralpropertiesorproductionfacilitiesorotherproperty,personal injuryordeath,environmentaldamagetoitspropertiesorthepropertiesofothers,delaysinmining,monetarylossesandpossiblelegalliability.

Although the Companymaintains insurance to protect against certain risks in such amounts as it considers reasonable,such insurancewill not cover all the potential risks associatedwith amining company’s operations. The Companymayalsobeunabletomaintaininsurancetocovertheserisksateconomicallyfeasiblepremiums.Insurancecoveragemaynotcontinuetobeavailableonacceptabletermsormaynotbeadequatetocoveranyresultingliability.Moreover,insuranceagainstriskssuchaslossoftitletomineralproperty,environmentalpollution,orotherhazardsasaresultofexploration,developmentandproduction isnotgenerallyavailable to theCompanyor toothercompanies in themining industryonacceptableterms.NewGoldmayalsobecomesubjecttoliabilityforpollutionorotherhazardswhichmaynotbeinsuredagainstorwhichtheCompanymayelectnot to insureagainstbecauseofpremiumcostsorotherreasons. Losses from


these eventsmay cause the Company to incur significant costs that could have amaterial adverse effect on results ofoperationsandfinancialcondition.

ReclamationCostsThe Company’s operations are subject to reclamation plans that establish its obligations to reclaim properties aftermineralshavebeenminedfromasite.TheseobligationsrepresentsignificantfuturecostsfortheCompany.Reclamationbonds or other forms of financial assurance are often required to secure reclamation activities. Governing authoritiesrequire companies to periodically recalculate the amount of a reclamation bond andmay require bond amounts to beincreased.Itmaybenecessarytorevisetheplannedreclamationexpendituresandtheoperatingplanforamineinordertofundanincreasetoareclamationbond.Inaddition,reclamationbondsaregenerallyissuedundertheCompany’screditfacilities;increasesintheamountofreclamationbondswilldecreasetheamountoftheCreditFacilityavailableforotherpurposes.Reclamationbondsmayrepresentonlyaportionofthetotalamountofmoneythatwillbespentonreclamationover the lifeofamineoperation.Theactual costsof reclamationsetout inmineplansareestimatesonlyandmaynotrepresent the actual amounts that will be required to complete all reclamation activity. If actual costs are significantlyhigher than theCompany’s estimates, then its results of operations and financial position could bematerially adverselyaffected.

DebtandLiquidityRiskAsofDecember31,2017, theCompanyhad long-termdebtcomprisingof twoseriesofnoteshavinganaggregate facevalueof$800million.Inaddition,theCompanyhasa$400millionCreditFacility.TheCompany’sabilitytomakescheduledpayments of the principal of, to pay interest on or to refinance its indebtedness depends on the Company’s futureperformance, which is subject to economic, financial, competitive and other factors many of which are not under thecontrolofNewGold. TheCompany isexposedto interestrateriskonvariableratedebt, ifany. Liquidityrisk istheriskthat the Companywill not be able tomeet its financial obligations as they becomedue, including, among others, debtrepayments,interestpaymentsandcontractualcommitments.

TheCompanymaynotcontinuetogeneratecashflowfromoperationsinthefuturesufficienttoserviceitsdebtandmakenecessaryorplannedcapital expenditures. If theCompany isunable togenerate such cash flow, itmaybe required toadopt one or more alternatives, such as selling assets, borrowing additional funds, restructuring debt or obtainingadditionalequitycapitalontermsthatmaybeonerousorhighlydilutive.TheCompany’sabilitytoborrowadditionalfundsor refinance its indebtednesswilldependon thecapitalmarketsand its financial conditionat such time. TheCompanymaynotbeabletoengageinanyoftheseactivitiesorengageintheseactivitiesondesirableterms,whichcouldresultina default on its debtobligations. In addition, ifNewGold is unable tomaintain its indebtedness and financial ratios atlevelsacceptable to itscredit ratingagencies,orshouldNewGold’sbusinessprospectsdeteriorate, theratingscurrentlyassignedtoNewGoldbyMoody’s InvestorServicesandStandard&Poor’sRatingsServicescouldbedowngraded,whichcould adversely affect the value of New Gold’s outstanding securities and existing debt and its ability to obtain newfinancingonfavourableterms,andincreaseNewGold’sborrowingcosts.

IftheCompany’scashflowandothersourcesofliquidityarenotsufficienttocontinueoperationsandmakenecessaryandplannedcapitalexpenditures,theCompanymaycancelordefercapitalexpendituresand/orsuspendorcurtailoperations.Suchanactionmay impactproductionatminingoperationsand/or the timelinesandcostassociatedwithdevelopmentprojects,which could have amaterial adverse effect on theCompany’s prospects, results fromoperations and financialcondition.


ThetermsoftheCompany’sCreditFacilityandstreamagreementwithRoyalGoldrequiretheCompanytosatisfyvariousaffirmativeandnegativecovenantsandtomeetcertainfinancialratiosandtests.Inaddition,thetermsoftheCompany’s2022Notesand2025NotesrequiretheCompanytosatisfyvariousaffirmativeandnegativecovenants.Thesecovenantslimit,amongotherthings,theCompany’sabilitytoincurindebtedness,createcertainliensonassetsorengageincertaintypesof transactions. Therearenoassurances that in future, theCompanywill not, as a result of these covenants, belimitedinitsabilitytorespondtochangesinitsbusinessorcompetitiveactivitiesorberestrictedinitsabilitytoengageinmergers, acquisitionsordispositionsof assets. Furthermore, a failure to complywith these covenants, including, in thecaseoftheCreditFacilityandstreamagreementwithRoyalGold,afailuretomeetthefinancialtestsorratios,wouldlikelyresult in an event of default under the Credit Facility and/or the 2022 Notes and/or the 2025 Notes and/or streamagreement and would allow the lenders or noteholders or other contractual counterparty, as the case may be, toacceleratethedebtorotherobligationsasthecasemaybe.

LitigationandDisputeResolutionFromtime to timeNewGold is subject to legal claims,withandwithoutmerit. Theseclaimsmaycommence informallyandreachacommercialsettlementormayprogresstoamoreformaldisputeresolutionprocess.Thecausesofpotentialfutureclaimscannotbeknownandmayarisefrom,amongotherthings,businessactivities,environmentallaws,volatilityin stock price or failure to comply with disclosure obligations. In particular, the complex activities and significantexpendituresassociatedwithconstructionactivitiesmayleadtovariousclaims,someofwhichmaybematerial.Defenseandsettlementcostsmaybesubstantial,evenwithrespecttoclaimsthathavenomerit.Duetotheinherentuncertaintyof the litigation and dispute resolution process, there can be no assurance that the resolution of any particular legalproceedingordisputewillnothaveamaterialadverseeffectontheCompany’sfuturecashflows,resultsofoperationsorfinancialcondition.See“LegalProceedingsandRegulatoryActions”.

TitleRisksTheacquisitionoftitletomineralpropertiesisaverydetailedandtime-consumingprocess.Titletomineralconcessionsmay be disputed. Although the Company believes it has taken reasonable measures to ensure proper title to itsproperties,thereisnoguaranteethattitletoanyofsuchpropertieswillnotbechallengedorimpaired.Thirdpartiesmayhavevalidclaimsunderlyingportionsofourinterest,includingpriorunregisteredliens,agreements,transfers,royaltiesor claims, includingAboriginal land claims, and titlemaybe affectedby, amongother things, undetecteddefects. Insomecases,titletomineralrightsandsurfacerightshasbeendivided,andtheCompanymayholdonlysurfacerightsoronlymineralrightsoveraparticularproperty,whichcanleadtopotentialconflictwiththeholderoftheotherrights.Asaresultoftheseissues,theCompanymaybeconstrainedinitsabilitytooperateitspropertiesorunabletoenforceitsrightswithrespectto itspropertiesortheeconomicsof ismineralpropertiesmaybe impacted. An impairmenttoordefect in the Company’s title to its properties or a dispute regarding property or other related rights could have amaterialadverseeffectontheCompany’sbusiness,financialconditionorresultsofoperations.

HedgingRisksFromtimetotimetheCompanyusesormayusecertainderivativeproductstohedgeormanagetherisksassociatedwithchanges ingoldprices,silverprices,copperprices, interestrates,foreigncurrencyexchangeratesandenergyprices.Theuseofderivative instruments involvescertain inherent risks including,amongother things: (i) credit risk – the riskofanunexpectedlossarisingifacounterpartywithwhichtheCompanyhasenteredintotransactionsfailstomeetitscontractualobligations;(ii)marketliquidityrisk–theriskthattheCompanyhasenteredintoaderivativepositionthatcannotbeclosedoutquickly, by either liquidating suchderivative instrumentorby establishing anoffsettingposition; and (iii) unrealizedmark-to-market risk – the risk that, in respect of certain derivative products, an adverse change in market prices forcommodities,currenciesorinterestrateswillresultintheCompanyincurringanunrealizedmark-to-marketlossinrespectofsuchderivativeproducts.


ThereisnoassurancethatanyhedgingprogramortransactionswhichmaybeadoptedorutilizedbyNewGolddesignedto reduce the risk associated with changes in gold prices, silver prices, copper prices, interest rates, foreign currencyexchangeratesorenergypriceswillbesuccessful.AlthoughhedgingmayprotectNewGoldfromanadversepricechange,itmayalsopreventNewGoldfrombenefittingfullyfromapositivepricechange.

ClimateChangeRisksChangesinclimateconditionscouldadverselyaffecttheCompany’sbusinessandoperationsthroughtheimpactof(i)moreextremetemperatures,precipitationlevelsandotherweatherevents;(ii)changestolawsandregulationsrelatedtoclimatechange;and(iii)changesinthepriceoravailabilityofgoodsandservicesrequiredbyourbusiness.

Climatechangemay leadtomoreextremeintemperatures,precipitation levelsandotherweatherevents.ExtremehighorlowtemperaturescouldimpacttheoperationofequipmentandthesafetyofpersonnelattheCompany’ssites,whichcouldresultindamagetoequipment,injurytopersonnelandproductiondisruptions.Changesinprecipitationlevelsmayimpact the availability ofwater at the Company’s operations,which themills require to operate, potentially leading toproduction disruptions. Low precipitation also increases the risk of large forest fires, as occurred in proximity to theCompany’soperations inBritishColumbia in the summerof 2017,which could causeproductiondisruptionsordamagesite infrastructure. Increases in precipitation levels could also lead to watermanagement challenges. Extremeweatherevents,suchasforestfires,severestormsorfloods,allofwhichmaybemoreprobableandmoreextremeduetoclimatechange, may negatively impact operations and disrupt production. Significant capital investment may be required toaddress these occurrences and to adapt to changes in average operating conditions caused by these changes to theclimate.

Climate change may lead to new laws and regulations that affect the Company’s business and operations. Manygovernments aremoving to enact climate change legislation and treaties at the international, national, state, provincialandlocallevels.Wherelegislationalreadyexists,regulationsrelatingtoemissionlevelsandenergyefficiencyarebecomingmorestringent.Someofthecostsassociatedwithmeetingmorestringentregulationscanbeoffsetby increasedenergyefficiency and technological innovation. However, if the current regulatory trend continues, meeting more stringentregulationsisanticipatedtoresultinincreasedcosts.

Climate change may lead to changes in the price and availability of goods and services required for the Company’soperations,which require the regular supply of consumables such as diesel, electricity, and sodium cyanide to operateefficiently.TheCompany’soperationsalsodependonserviceproviderstotransporttheseconsumablesandothergoodsto theoperations and to transport doré and concentrateproducedby theCompany to refiners. Theeffects of extremeweatherdescribedaboveandchanges in legislationand regulationon theCompany’s suppliersand their industriesmaycause limited availability or higher price for these goods and services, which could result in higher costs or productiondisruptions.

WecanprovidenoassurancethateffortstomitigatetherisksofclimatechangeswillbeeffectiveandthatthephysicalrisksofclimatechangewillnothaveanadverseeffectontheCompany’soperationsandprofitability.


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.

Theareaswhich requiremanagement tomakesignificant judgments,estimatesandassumptionsaredescribed in theCompany’sauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2017and2016.

ACCOUNTINGPOLICIESTheCompany'ssignificantaccountingpoliciesarepresentedintheauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2017and2016andhavebeen consistently applied in thepreparationof theaudited consolidatedfinancialstatements.

Future changes in accounting policy RevenueOnMay28,2014, the IASB issued IFRS15,RevenuefromContractswithCustomers (“IFRS15”).Thisstandardoutlinesasinglecomprehensivemodelwithprescriptiveguidanceforentitiestouseinaccountingforrevenuearisingfromcontractswithitscustomers.IFRS15usesacontrol-basedapproachtorecognizerevenuewhichisachangefromtheriskandrewardapproachunder thecurrent standard.This standard replaces IAS18Revenue, IAS11ConstructionContractsand relatedinterpretations. The effective date is for reporting periods beginning on or after January 1, 2018with early applicationpermitted.TheCompanywilladoptIFRS15effectiveJanuary1,2018applyingtheretrospectivemethodoftransition.

TheCompanyhasevaluatedthepotentialimpactofapplyingIFRS15,analyzingitssaleagreements.Thestandardrequiresentities to apportion revenue earned from contracts to individual promises or performance obligations, on a relativestandalonesellingpricebasis.FortheCompany'sconcentratesales,thesellermaycontractforandpaytheshippingandinsurancecostsnecessarytobringthegoodstothenameddestination.Therefore,wherematerial,aportionoftherevenueearnedunder these contracts, representing theobligation to fulfill the shipping and insurance services,will bedeferredand recognized over time as the obligations are fulfilled, along with the associated costs. Based on the Company’sassessment,theimpactofthischangeontheamountofrevenuerecognizedinayearisnotexpectedtobesignificant.Asaresult,theCompanydoesnotanticipateanychangesintheamountsoftherevenuerecognizedorasignificantchangeinthetimingofrevenuerecognitionunderthenewstandard.

LeasesOn January 6, 2016, the IASB issued IFRS 16, Leases (“IFRS 16”). This standard specifies themethodology to recognize,measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees torecognizeassetsand liabilities forall leasesunless the leaseterm is12monthsor lessor theunderlyingassethasa lowvalue.This standard replaces IAS17Leases. Theeffectivedate is for reportingperiodsbeginningonorafter January1,2019withearlyadoptionpermitted.TheCompanyisassessingtheeffectofadoptionofIFRS16onitsconsolidatedfinancialstatements.


CONTROLSANDPROCEDURESDisclosure Controls and Procedures TheCompany’smanagement,withtheparticipationofandunderthesupervisionofitsPresident&ChiefExecutiveOfficer,and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures asdefinedinRules13a-15(e)and15d-15(e)undertheSecuritiesExchangeActof1934,asamended(“ExchangeAct”)andinNationalInstrument52-109CertificationofDisclosureinIssuers’AnnualandInterimFilings,asatandfortheyearendedDecember 31, 2017. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer haveconcludedthat,asatandfortheyearendedDecember31,2017,theCompany’sdisclosurecontrolsandprocedureswereeffectivetoprovidereasonableassurancethattheinformationrequiredtobedisclosedbytheCompanyinreportsitfilesisrecorded,processed,summarizedandreported,withintheappropriatetimeperiods.

Internal Controls over Financial Reporting NewGold’smanagement,withtheparticipationof itsPresidentandChiefExecutiveOfficerandChiefFinancialOfficer, isresponsible for establishing and maintaining adequate internal controls over financial reporting. Internal controls overfinancialreporting isaprocessdesignedby,orunderthesupervisionof, theCompany’sprincipalexecutiveandprincipalfinancial officers and effected by the Company’s Board of Directors, management and other personnel, to providereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposes in accordance with International Financial Reporting Standards as issued by the International AccountingStandards Board. NewGold’smanagement assessed the effectiveness of the Company’s internal controls over financialreporting as at and for the year ended December 31, 2017 based on the 2013 updated Committee of SponsoringOrganizationof the TreadwayCommission (“COSO”) andhas concluded thatNewGold’s internal controls over financialreportingareeffectiveasatandfortheyearendedDecember31,2017.

TheeffectivenessoftheCompany’sinternalcontroloverfinancialreportingasofDecember31,2017hasbeenauditedbyDeloitteLLP,theCompany’sindependentregisteredpublicaccountingfirm,asstatedintheirreportimmediatelyprecedingtheCompany’sauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2017.

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’sinternalcontrolsandproceduresoverfinancialreportingthathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theCompany’sinternalcontrolsoverfinancialreportingduringtheperiodcoveredbythisMD&A.


MINERALRESERVESANDMINERALRESOURCESMineral Reserves NewGold’sMineralReserveestimatesasatDecember31,2017,exclusiveofPeakMines,ispresentedinthefollowingtable.

MINERAL RESERVES Metalgrade Containedmetal

Tonnes000s

Goldg/t

Silverg/t

Copper%

GoldKoz

SilverKoz

CopperMlbs

RAINYRIVER Directprocessingreserves OpenPit Proven 23,472 1.31 2.6 - 992 1,968 -Probable 50,314 1.20 3.2 - 1,946 5,252 -OpenPitP&P(directproc.) 73,786 1.24 3.0 - 2,937 7,221 -Underground Proven - - - - - - -Probable 9,056 3.52 9.6 - 1,025 2,807 -UndergroundP&P(directproc.) 9,056 3.52 9.6 - 1,025 2,807 -TotalDirectProcessingReserves 82,842 1.49 3.7 - 3,962 10,028 -

Lowgradereserves OpenPit Proven 8,063 0.39 2.0 - 101 525 -Probable 26,960 0.37 2.5 - 324 2,175 -OpenPitP&P(lowgrade) 35,023 0.38 2.4 - 425 2,699 -Stockpile Proven 1,851 0.51 0.8 - 30 48 -Stockpilereserves 1,851 0.51 0.8 - 30 48 -

CombinedP&P Proven 33,386 1.04 2.3 - 1,123 2,541 -Probable 86,330 1.18 3.7 - 3,295 10,234 -

TotalRainyRiverP&P 119,716 1.15 3.3 - 4,418 12,775 -NEWAFTON A&BZones Proven - - - - - - -Probable 28,126 0.51 2.2 0.79 462 1,961 488

C-zone Proven - - - - - - -Probable 26,741 0.72 1.8 0.77 616 1,571 453

TotalNewAftonP&P 54,867 0.61 2.0 0.78 1,078 3,533 941MESQUITE Proven 5,627 0.49 - - 89 - -Probable 59,491 0.54 - - 1,040 - -

TotalMesquiteP&P 65,119 0.54 - - 1,129 - -BLACKWATER Directprocessingreserves Proven 124,500 0.95 5.5 - 3,790 22,100 -Probable 169,700 0.68 4.1 - 3,730 22,300 -P&P(directproc.) 294,200 0.79 4.7 - 7,520 44,400 -

Lowgradereserves Proven 20,100 0.50 3.6 - 325 2,300 -Probable 30,100 0.34 14.6 - 325 14,100 -P&P(lowgrade) 50,200 0.40 10.2 - 650 16,400 -

TotalBlackwaterP&P 344,400 0.74 5.5 - 8,170 60,800 -TOTALPROVEN&PROBABLERESERVES 14,795 77,108 941

NotestotheMineralReserveandMineralResourceestimatesareprovidedbelow.


Mineral Resources MineralResourceestimatesasatDecember31,2017,exclusiveofPeakMines,arepresentedinthefollowingtables:

MEASURED & INDICATED MINERAL RESOURCES (EXCLUSIVE OF MINERAL RESERVES) Metalgrade Containedmetal

Tonnes000s

Goldg/t

Silverg/t

Copper%

GoldKoz

SilverKoz

CopperMlbs

RAINYRIVER Directprocessingresources OpenPit Measured 2,556 1.11 3.2 - 91 266 -Indicated 24,995 1.10 3.4 - 884 2,711 -OpenPitM&I(directproc.) 27,551 1.10 3.4 - 975 2,977 -Underground Measured - - - - - - -Indicated 6,223 2.93 9.0 - 587 1,808 -UndergroundM&I(directproc.) 6,223 2.93 9.0 - 587 1,808 -

Lowgraderesources OpenPit Measured 2,023 0.36 2.3 - 23 150 -Indicated 22,290 0.36 2.3 - 258 1,634 -OpenPitM&I(lowgrade) 24,313 0.36 2.3 - 282 1,784 -

CombinedM&I Measured 4,579 0.78 2.8 - 115 417 -Indicated 53,508 1.00 3.6 - 1,729 6,152 -

TotalRainyRiverM&I 58,087 0.99 3.5 - 1,844 6,569 -NEWAFTON A&BZones Measured 17,155 0.63 2.0 0.83 348 1,090 313Indicated 10,689 0.46 2.4 0.68 159 824 159A&BZoneM&I 27,844 0.57 2.1 0.77 507 1,909 473

C-zone Measured 6,424 0.91 2.3 1.07 188 471 152Indicated 11,918 0.74 2.1 0.88 284 816 231C-zoneM&I 18,342 0.80 2.2 0.95 472 1,284 383

HWLens Measured - - - - - - -Indicated 11,841 0.50 2.0 0.43 191 750 111HWLensM&I 11,841 0.50 2.0 0.43 191 750 111

TotalNewAftonM&I 58,038 0.63 2.1 0.76 1,170 3,970 968MESQUITE Measured 4,297 0.43 - - 59 - -Indicated 75,859 0.46 - - 1,122 - -

TotalMesquiteM&I 80,156 0.46 - - 1,181 - -BLACKWATER Directprocessingresources Measured 288 1.39 6.6 - 13 61 -Indicated 45,440 0.84 4.7 - 1,227 6,866 -M&I(directproc.) 45,728 0.84 4.7 - 1,240 6,927 -

Lowgraderesources Measured 11 0.29 7.4 - - 3 -Indicated 15,831 0.32 3.9 - 162 1,985 -M&I(lowgrade) 15,842 0.32 3.9 - 162 1,988 -

TotalBlackwaterM&I 61,570 0.71 4.5 - 1,402 8,915 -TOTALM&IEXCLUSIVEOFRESERVESCONTINUINGOPERATIONS

5,597

19,454

968

NotestotheMineralReserveandMineralResourceestimatesareprovidedbelow.


Inferred Mineral Resources INFERRED MINERAL RESOURCES

Metalgrade Containedmetal

Tonnes000s

Goldg/t

Silverg/t

Copper%

GoldKoz

SilverKoz

CopperMlbs

RAINYRIVER Directprocessing OpenPit 6,016 1.20 3.4 - 232 650 -Underground 1,271 3.68 3.8 - 150 156 -TotalDirectProcessing 7,286 1.63 3.4 - 382 806 -

Lowgraderesources OpenPit 6,219 0.37 1.6 - 74 318 -

RainyRiverInferred 13,505 1.05 2.6 - 456 1,124 -NEWAFTON A&BZones 7,564 0.35 1.3 0.35 85 322 58C-zone 7,688 0.43 1.3 0.48 106 325 72HWLens - - - - - - -

NewAftonInferred 15,253 0.39 1.3 0.41 192 647 131MESQUITE 8,871 0.38 - - 107 - -BLACKWATER Directprocessing 13,933 0.76 4.0 - 341 1,792 -Lowgraderesources 4,225 0.32 3.5 - 44 475 -

BlackwaterInferred 18,159 0.66 3.9 - 385 2,267 -TOTALINFERRED 1,140 4,038 131

Notestothemineralreserveandmineralresourceestimatesareprovidedbelow.PeakMinesisclassifiedasadiscontinuedoperation.Aspreviouslydisclosed,NewGoldenteredintoabindingagreementtosellthePeakMinesforcashconsiderationof$58million.NewGoldcontinuestoexpectthetransactiontocloseinthefirstquarterof2018.

PEAK MINES MINERAL RESERVES & RESOURCES Metalgrade Containedmetal

Tonnes000s

Goldg/t

Silverg/t

Copper%

GoldKoz

SilverKoz

CopperMlbs

MINERALRESERVES Proven 1,460 2.94 9.9 1.42 138 464 46Probable 1,400 2.41 8.6 1.24 107 381 38TotalPeakMinesP&P 2,860 2.68 9.2 1.33 246 845 84MEASUREDANDINDICATEDRESOURCESEXCLUSIVEOFRESERVESMeasured 1,500 3.11 7.8 1.01 150 370 33Indicated 4,100 1.74 6.4 1.70 230 850 150TotalPeakMinesM&I 5,600 2.10 6.8 1.52 380 1,200 190

Metalgrade Containedmetal

INFERREDRESOURCES Tonnes000s

Goldg/t

Silverg/t

Copper%

Lead%

Zinc%

GoldKoz

SilverKoz

CopperMlbs

LeadMlbs

ZincMlbs

Gold-Copperresources 2,620 1.32 6.4 1.94 NA NA 113 553 115 NA NASilver-Lead-Zincresources 2,300 1.95 29.4 0.29 4.73 5.76 140 2,200 15 240 290TotalPeakInferred

Notestothemineralreserveandmineralresourceestimatesareprovidedbelow


Notes to Mineral Reserve and Resource Estimates

1. NewGold’sMineralReservesandResourceshavebeenestimatedinaccordancewiththeCIMStandards,whichareincorporatedbyreferenceinNI43-101.

2. All Mineral Resource and Mineral Reserve estimates for New Gold’s properties and projects are effectiveDecember31,2017.

3. NewGold’s year-end2017MineralReserves andMineralResourceshavebeenestimatedbasedon the followingmetalpricesandforeignexchangeratecriteria:

Gold

$/ounceSilver

$/ounceCopper

$/poundLead

$/poundZinc

$/pound

CAD

AUD

MXN

MineralReserves $1,275 $17.00 $2.75 N/A N/A 1.30 1.30 18.00

MineralResources $1,375 $19.00 $3.00 $1.00 $1.20 1.30 1.30 18.00

4. Lowercut-offsfortheCompany’sMineralReservesandMineralResourcesareoutlinedinthefollowingtable:

MineralPropertyMineralReservesLOWERcut-off

MineralResourcesLOWERCut-off

RainyRiver O/Pdirectprocessing: 0.30–0.50g/tAuEq 0.30–0.50g/tAuEq O/Plowgradematerial: 0.30g/tAuEq 0.30g/tAuEq U/Gdirectprocessing: 2.20g/tAuEq 2.00g/tAuEqNewAfton MainZone–B1&B2Blocks: C$17.00/t

AllResources:0.40%CuEq B3Block&C-zone: C$24.00/tMesquite Oxide: 0.14g/tAu(0.0045oz/tAu) 0.12g/tAu(0.0038oz/tAu) Transitional&Non-ox: 0.28g/tAu(0.0090oz/tAu) 0.25g/tAu(0.0081oz/tAu)PeakMines Alloretypes: A$80/ttoA$140/t A$85/ttoA$150/tBlackwater O/Pdirectprocessing: 0.26–0.38g/tAuEq

AllResources:0.40g/tAuEq O/Plowgradematerial: 0.32g/tAuEq

5. NewGoldreportsitsmeasuredandindicatedmineralresourcesexclusiveofmineralreserves.Measuredandindicatedmineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred MineralResources have a greater amount of uncertainty as to their existence, economic and legal feasibility, do not havedemonstrated economic viability, and are likewise exclusive of mineral reserves. Numbers may not add due torounding.


6. Mineral resources are classified asmeasured, indicated and inferred based on relative levels of confidence in theirestimationandon technicalandeconomicparameters consistentwith themethodsmost suitable to theirpotentialcommercialextraction.Wheredifferentminingand/orprocessingmethodsmightbeappliedtodifferentportionsofamineralresource,thedesignators‘openpit’and‘underground’areusedtoindicatetheenvisionedminingmethod.The designators ‘oxide’, ‘transitional’, ‘non-oxide’ and ‘sulphide’ have likewise been applied to indicate the type ofmineralizationasitrelatestotheappropriatemineralprocessingmethodandexpectedpayablemetalrecoveries,andthedesignators ‘directprocessing’and ‘lowergradematerial’havebeenappliedtodifferentiatematerialenvisionedtobeminedandprocesseddirectly frommaterial tobeminedandstoredseparately for futureprocessing.Mineralreserves and mineral resources may be materially affected by environmental, permitting, legal, title, taxation,sociopolitical,marketingandotherrisksandrelevantissues.Additionaldetailsregardingmineralreserveandmineralresourceestimation,classification,reportingparameters,keyassumptionsandassociatedrisksforeachofNewGold’smaterialpropertiesareprovidedintherespectiveNI43-101TechnicalReports,whichareavailableatwww.sedar.com.

7. Rainy River: In addition to the criteria described above,mineral reserves andmineral resources for Rainy River arereported according to the following additional criteria: Underground mineral reserves are reported peripheral toand/orbelow theopenpitmineral reservepit shell,whichhasbeendesignedandoptimizedbasedona$1,275/ozgold price. Undergroundmineral resources are reported below a largermineral resource pit shell, which has beendefined based on a $1,375/oz gold price. Approximately forty percent (40%) of the goldmetal content defined asundergroundmineralreservesisderivedfrommateriallocatedbetweenthemineralreservepitshellandthemineralresourcepitshell;theremainingsixtypercent(60%)ofthemetalcontentdefinedasundergroundmineralreservesisderived from material located below the mineral resource pit shell. Open pit mineral resources exclude materialreportedasundergroundMineralReserves.

8. QualifiedPerson:ThepreparationofNewGold'smineralreserveandmineralresourceestimateshasbeencompletedbyQualifiedPersonsasdefinedunderNI43-101,undertheoversightandreviewofMr.MarkA.Petersen,aQualifiedPersonunderNI43-101.


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“InferredMineralResource”hasagreatamountofuncertaintyasto itsexistenceandasto itseconomicand legalfeasibility. UnderCanadianrules,estimatesofInferredMineralResourcesmaynotformthebasisoffeasibilityorpre-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 2018” and includes, among others, statements with respect to: guidance for production,operatingexpensespergoldouncesold,totalcashcostsandall-insustainingcosts,andthefactorscontributingtothoseexpected results, as well as expected capital expenditures; Mineral Reserve and Mineral Resource estimates; gradesexpectedtobeminedattheCompany’soperations;plannedactivitiesfor2018andbeyondattheCompany’soperationsandprojects;andexpectedpermittinganddevelopmentactivitiesforBlackwaterandtheNewAftonC-zone.


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)theexchangeratebetweentheCanadiandollar,MexicanpesoandU.S.dollarbeingapproximatelyconsistent with current levels; (5) prices for diesel, natural gas, fuel oil, electricity and other key supplies beingapproximatelyconsistentwithcurrentlevels;(6)equipment,labourandmaterialcostsincreasingonabasisconsistentwithNewGold’scurrentexpectations;(7)arrangementswithFirstNationsandotherAboriginalgroupsinrespectofRainyRiverandBlackwaterbeingconsistentwithNewGold’scurrentexpectations;(8)allrequiredpermits,licensesandauthorizationsbeing obtained from the relevant governments and other relevant stakeholders within the expected timelines; (9) theresultsofthefeasibilitystudiesforNewAftonC-zoneandBlackwaterbeingrealized;and(10)inthecaseofproduction,costandexpenditureoutlooksatoperatingminesfor2018,commoditypricesandexchangeratesbeingconsistentwiththoseestimatedforthepurposesof2018guidance.

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 and Mexico; discrepancies between actual and estimated production, between actual and estimated MineralReservesandMineralResourcesandbetweenactualandestimatedmetallurgicalrecoveries;changesinnationalandlocalgovernmentlegislationinCanada,theUnitedStatesandMexicooranyothercountryinwhichNewGoldcurrentlyormayinthefuturecarryonbusiness;taxation;controls,regulationsandpoliticaloreconomicdevelopmentsinthecountriesinwhichNewGolddoesormaycarryonbusiness;thespeculativenatureofmineralexplorationanddevelopment,includingtherisksofobtainingandmaintainingthevalidityandenforceabilityofthenecessarylicensesandpermitsandcomplyingwiththepermittingrequirementsofeachjurisdictioninwhichNewGoldoperates,including,butnotlimitedto:inCanada,obtaining thenecessarypermits forNewAftonC-zoneandBlackwater.Theuncertainties inherent tocurrentand futurelegalchallengesNewGoldisormaybecomeapartyto;diminishingquantitiesorgradesofMineralReservesandMineralResources; competition; loss of key employees; rising costs of labour, supplies, fuel and equipment; actual results ofcurrent exploration or reclamation activities; uncertainties inherent tomining economic studies including the feasibilitystudiesforNewAftonC-zoneandBlackwater;theuncertaintywithrespecttoprevailingmarketconditionsnecessaryforapositivedevelopmentorconstructiondecisionforNewAftonC-zoneandBlackwater;changes inprojectparametersasplans continue to be refined; accidents; labour disputes; defective title to mineral claims or property or contests overclaims to mineral properties; unexpected delays and costs inherent to consulting and accommodating rights of FirstNations and other Aboriginal groups; uncertainties and unanticipated delays associatedwith obtaining andmaintainingnecessary licenses, permits and authorizations and complying with permitting requirements, including those associatedwith the environmental assessmentprocess for Blackwater. In addition, there are risks andhazards associatedwith thebusiness of mineral exploration, development and mining, including environmental events and hazards, industrialaccidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion losses (and the risk ofinadequateinsuranceorinabilitytoobtaininsurancetocovertheserisks)aswellas“RiskFactors”includedinNewGold’sdisclosuredocumentsfiledonandavailableonSEDARatwww.sedar.com.Forward-lookingstatementsarenotguarantees


of future performance, and actual results and future events could materially differ from those anticipated in suchstatements.Allof the forward-lookingstatementscontained in thisMD&Aarequalifiedby thesecautionarystatements.NewGoldexpresslydisclaimsanyintentionorobligationtoupdateorreviseanyforward-lookingstatementswhetherasaresultofnewinformation,eventsorotherwise,exceptinaccordancewithapplicablesecuritieslaws.

Technical Information The scientific and technical information relating to the operation of New Gold’s operatingmines contained herein hasbeen reviewed and approved byMr. Nicholas Kwong, Director, Business Improvement of New Gold. The scientific andtechnicalinformationrelatingtoMineralResourcesandexplorationcontainedhereinhasbeenreviewedandapprovedbyMr.MarkA.Petersen,VicePresident,ExplorationofNewGold.Mr.KwongisaProfessionalEngineerandmemberoftheAssociation of Professional Engineers andGeoscientists of British Columbia.Mr. Petersen is a SMERegisteredMember,AIPGCertifiedProfessionalGeologist.Mr.KwongandPetersenare"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.


ContentsMANAGEMENT’SRESPONSIBILITYFORFINANCIALSTATEMENTS......................................................................................118MANAGEMENT’SREPORTONINTERNALCONTROLOVERFINANCIALREPORTING...........................................................119REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM................................................................................120REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM................................................................................122CONSOLIDATEDINCOMESTATEMENTS..............................................................................................................................124CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVELOSS.................................................................................................125CONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION....................................................................................................126CONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY.....................................................................................................127CONSOLIDATEDSTATEMENTSOFCASHFLOW...................................................................................................................128NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS.................................................................................................129

1.Descriptionofbusinessandnatureofoperations......................................................................................................1292.Significantaccountingpolicies....................................................................................................................................1293.Criticaljudgmentsandestimationuncertainties........................................................................................................1404.Futurechangesinaccountingpolicies........................................................................................................................1435.Revisiontoprior-yearcomparatives...........................................................................................................................1446.Expenses.....................................................................................................................................................................1457.Tradeandotherreceivables.......................................................................................................................................1468.Tradeandotherpayables...........................................................................................................................................1469.Inventories..................................................................................................................................................................14710.Mininginterests........................................................................................................................................................14811.Impairment...............................................................................................................................................................15012.Long-termdebt.........................................................................................................................................................15313.Goldstreamobligation.............................................................................................................................................15614.Derivativeinstruments.............................................................................................................................................15715.Sharecapital.............................................................................................................................................................16116.Discontinuedoperations...........................................................................................................................................16617.Incomeandminingtaxes..........................................................................................................................................16818.Reclamationandclosurecostobligations..............................................................................................................171219.Supplementalcashflowinformation........................................................................................................................17320.Segmentedinformation............................................................................................................................................17421.Capitalriskmanagement..........................................................................................................................................17722.Financialriskmanagement.......................................................................................................................................17823.Fairvaluemeasurement...........................................................................................................................................18324.Provisions..................................................................................................................................................................18525.Operatingleases.......................................................................................................................................................18626.Compensationofkeymanagementpersonnel.........................................................................................................18627.Commitmentsandcontingencies.............................................................................................................................186


MANAGEMENT’SRESPONSIBILITYFORFINANCIALSTATEMENTSTheconsolidatedfinancialstatements,thenotestheretoandotherfinancialinformationcontainedintheManagement’sDiscussionandAnalysishavebeenpreparedinaccordancewithInternationalFinancialReportingStandardsasissuedbythe International Accounting Standards Board and are the responsibility of the management of New Gold Inc. Thefinancial information presented in the Management’s Discussion and Analysis is consistent with the data that iscontained in the consolidated financial statements. The consolidated financial statements, where necessary, includeamountswhicharebasedonthebestestimatesandjudgmentofmanagement.

Inordertodischargemanagement’sresponsibilityfortheintegrityofthefinancialstatements,theCompanymaintainsasystemofinternalaccountingcontrols.ThesecontrolsaredesignedtoprovidereasonableassurancethattheCompany’sassetsaresafeguarded,transactionsareexecutedandrecordedinaccordancewithmanagement’sauthorization,properrecordsaremaintainedandrelevantandreliablefinancial informationisproduced.Thesecontrols includemaintainingqualitystandardsinhiringandtrainingofemployees,policiesandproceduresmanuals,acorporatecodeofconductandensuringthatthereisproperaccountabilityforperformancewithinappropriateandwell-definedareasofresponsibility.Thesystemofinternalcontrolsisfurthersupportedbyacompliancefunction,whichisdesignedtoensurethatweandouremployeescomplywithsecuritieslegislationandconflictofinterestrules.

The Board of Directors is responsible for overseeing management’s performance of its responsibilities for financialreporting and internal control. The Audit Committee, which is composed of non-executive directors, meets withmanagement as well as the external auditors to ensure thatmanagement is properly fulfilling its financial reportingresponsibilitiestotheDirectorswhoapprovetheconsolidatedfinancialstatements.TheexternalauditorshavefullandunrestrictedaccesstotheAuditCommitteetodiscussthescopeoftheiraudits,theadequacyofthesystemofinternalcontrolsandreviewfinancialreportingissues.

TheconsolidatedfinancialstatementshavebeenauditedbyDeloitteLLP,theCompany’sindependentregisteredpublicaccounting firm, in accordance with Canadian generally accepted auditing standards and standards of the PublicCompanyAccountingOversightBoard(UnitedStates).

(Signed)HannesPortmann (Signed)PaulaMyson

HannesPortmann PaulaMysonPresidentand ExecutiveVicePresidentandChiefExecutiveOfficer ChiefFinancialOfficerToronto,CanadaFebruary20,2018


MANAGEMENT’SREPORTONINTERNALCONTROLOVERFINANCIALREPORTINGThe Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, isresponsible for establishing andmaintaining adequate internal control over financial reporting. Internal control overfinancial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Securities Exchange Act of1934,asamended(the“ExchangeAct”)asaprocessdesignedby,orunderthesupervisionof,theCompany’sprincipalexecutive and principal financial officers and effected by the Company’s Board of Directors, management and otherpersonnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancialstatements forexternalpurposes inaccordancewith InternationalFinancialReportingStandardsas issuedbythe International Accounting Standards Board. TheCompany’s internal control over financial reporting includes thosepoliciesandproceduresthat:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactionsanddispositionsoftheassetsoftheCompany;

• providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatements in accordance with generally accepted accounting principles, and that receipts andexpendituresoftheCompanyarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsoftheCompany;and

• providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,useordispositionoftheCompany’sassetsthatcouldhaveamaterialeffectonthefinancialstatements.

TheCompany’smanagement,underthesupervisionofthePresidentandChiefExecutiveOfficerandtheChiefFinancialOfficer,assessedtheeffectivenessoftheCompany’sinternalcontroloverfinancialreportingasdefinedinRule13a-15(f)andRule15d—15(f)undertheExchangeActasofDecember31,2017.Inmakingthisassessment,itusedthecriteriasetforthintheInternalControl-IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommission (COSO).Basedon thisassessment,managementhasconcludedthat,asofDecember31,2017,the Company’s internal control over financial reporting is effective based on those criteria. There are no materialweaknessesthathavebeenidentifiedbymanagement.

TheeffectivenessoftheCompany’sinternalcontroloverfinancialreportingasofDecember31,2017hasbeenauditedby Deloitte LLP, the Company’s independent registered public accounting firm, as stated in their report immediatelyprecedingtheCompany’sauditedconsolidatedfinancialstatementsfortheyearendedDecember31,2017.

(Signed)HannesPortmann (Signed)PaulaMyson

HannesPortmann PaulaMysonPresidentand ExecutiveVicePresidentandChiefExecutiveOfficer ChiefFinancialOfficerToronto,CanadaFebruary20,2018


REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMTotheBoardofDirectorsandShareholdersofNewGoldInc.

OpinionontheConsolidatedFinancialStatementsWe have audited the accompanying consolidated financial statements of New Gold Inc. and subsidiaries (the“Company”),whichcomprisetheconsolidatedstatementsoffinancialpositionasatDecember31,2017andDecember31,2016, theconsolidated incomestatements,consolidatedstatementsofcomprehensive income(loss),consolidatedstatements of changes in equity and consolidated statements of cash flow for the years thenended, and the relatednotes,includingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation(collectivelyreferredtoasthe“financialstatements”).

Inouropinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheCompanyasatDecember31,2017andDecember31,2016,anditsfinancialperformanceanditscashflowsfortheyearsthenendedinaccordancewithInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandardsBoard.

ReportonInternalControloverFinancialReportingWe have also audited, in accordancewith the standards of the Public Company Accounting Oversight Board (UnitedStates) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteriaestablishedin InternalControl- IntegratedFramework(2013) issuedbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommissionandourreportdatedFebruary20,2018expressedanunqualifiedopinionontheCompany’sinternalcontroloverfinancialreporting.

BasisforOpinionManagement’sResponsibilityfortheFinancialStatementsManagement is responsible forthepreparationandfairpresentationof thesefinancialstatements inaccordancewithInternational Financial Reporting Standards as issued by the International Accounting Standards Board, and for suchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’sResponsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.Weconductedourauditsinaccordance with Canadian generally accepted auditing standards and the standards of the PCAOB. Those standardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefree frommaterial misstatement, whether due to fraud or error. Those standards also require that we comply withethical requirements.Weareapublicaccounting firmregisteredwiththePCAOBandarerequiredtobe independentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.Further,wearerequiredtobeindependentoftheCompanyinaccordancewiththeethicalrequirementsthatarerelevanttoourauditofthefinancialstatementsinCanadaandtofulfillourotherethicalresponsibilitiesinaccordancewiththeserequirements.


An audit includes performing procedures to assess the risks of material misstatement of the financial statements,whether due to fraud or error, and performing procedures that respond to those risks. Such procedures includeexamining,onatestbasis,evidenceregardingtheamountsanddisclosuresinthefinancialstatements.Theproceduresselected depend on our judgment, including the assessment of the risks of material misstatement of the financialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheCompany’spreparationand fair presentationof the financial statements inorder todesignauditprocedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies andprinciplesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedinourauditsissufficientandappropriatetoprovideareasonablebasisforourauditopinion.

(Signed)DeloitteLLP

CharteredProfessionalAccountantsLicensedPublicAccountantsToronto,CanadaFebruary20,2018

WehaveservedastheCompany'sauditorsince2007.


REPORTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRMTotheBoardofDirectorsandShareholdersofNewGoldInc.OpiniononInternalControloverFinancialReportingWehaveauditedthe internalcontroloverfinancialreportingofNewGold Inc.andsubsidiaries(the“Company”)asofDecember 31, 2017 based on criteria established in Internal Control—Integrated Framework (2013) issued by theCommitteeofSponsoringOrganizationsoftheTreadwayCommission(COSO).Inouropinion,theCompanymaintained,in allmaterial respects, effective internal control over financial reporting as ofDecember 31, 2017, based on criteriaestablishedinInternalControl—IntegratedFramework(2013)issuedbyCOSO.

We have also audited, in accordancewith the standards of the Public Company Accounting Oversight Board (UnitedStates)(PCAOB)andCanadiangenerallyacceptedauditingstandards,theconsolidatedfinancialstatementsasofandforthe year ended December 31, 2017 of the Company and our report dated February 20, 2018, expressed anunmodified/unqualifiedopiniononthosefinancialstatements.

BasisforOpinionTheCompany’smanagementisresponsibleformaintainingeffectiveinternalcontroloverfinancialreportingandforitsassessmentoftheeffectivenessofinternalcontroloverfinancialreporting,includedintheaccompanyingManagement’sReport on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’sinternalcontroloverfinancialreportingbasedonouraudit.WeareapublicaccountingfirmregisteredwiththePCAOBandarerequiredtobeindependentwithrespecttotheCompanyinaccordancewiththeU.S.federalsecuritieslawsandtheapplicablerulesandregulationsoftheSecuritiesandExchangeCommissionandthePCAOB.

We conducted our audit in accordancewith the standards of the PCAOB. Those standards require thatwe plan andperformtheaudittoobtainreasonableassuranceaboutwhethereffectiveinternalcontroloverfinancialreportingwasmaintained in all material respects. Our audit included obtaining an understanding of internal control over financialreporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control basedon the assessed risk, andperforming suchother procedures aswe considerednecessaryinthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.

DefinitionandLimitationsofInternalControloverFinancialReportingAcompany’s internalcontrolover financial reporting isaprocessdesigned toprovide reasonableassurance regardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithInternational Financial Reporting Standards as issued by the International Accounting Standards Board. A company’sinternalcontrolover financial reporting includes thosepoliciesandprocedures that (1)pertain to themaintenanceofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2)provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancialstatementsinaccordanceInternationalFinancialReportingStandardsasissuedbytheInternationalAccountingStandards Board, and that receipts and expenditures of the company are being made only in accordance withauthorizationsofmanagementanddirectorsofthecompany;and(3)providereasonableassuranceregardingpreventionortimelydetectionofunauthorizedacquisition,use,ordispositionofthecompany’sassetsthatcouldhaveamaterialeffectonthefinancialstatements.


Becauseof its inherent limitations, internal controlover financial reportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequate because of changes in conditions, or that the degree of compliancewith the policies or proceduresmaydeteriorate.

(Signed)DeloitteLLP

CharteredProfessionalAccountantsLicensedPublicAccountantsToronto,CanadaFebruary20,2018


CONSOLIDATEDINCOMESTATEMENTS

YearendedDecember31

(inmillionsofU.S.dollars,exceptpershareamounts) Note 20172016

(Note5)

Revenues 604.4 522.8Operatingexpenses 6 321.0 275.5

Depreciationanddepletion 220.3 200.1

Revenuelesscostofgoodssold 63.1 47.2

Corporateadministration 23.7 22.9

Corporaterestructuring(1) 4.2 -

Share-basedpaymentexpenses 15 5.1 8.3

Assetimpairment 11 268.4 6.4

Explorationandbusinessdevelopment 6.4 4.1

(Loss)earningsfromoperations (244.7) 5.5

Financeincome 6 1.1 1.4

Financecosts 6 (13.2) (9.9)

Othergains(losses) 6 39.2 (7.7)

Lossbeforetaxes (217.6) (10.7)Incometaxrecovery 17 115.9 2.1

Lossfromcontinuingoperations(2) (101.7) (8.6)

(Loss)earningsfromdiscontinuedoperations,netoftax 16 (6.3) 1.6

Netloss (108.0) (7.0)

Lossfromcontinuingoperationspershare Basic 15 (0.18) (0.02)

Diluted 15 (0.18) (0.02)

Losspershare

Basic 15 (0.19) (0.01)

Diluted 15 (0.19) (0.01)

Weightedaveragenumberofsharesoutstanding(inmillions)

Basic 15 564.7 511.8

Diluted 15 564.7 511.81. Throughout2017,theCompanyinitiatedarestructuringplanthatimpacteditscorporateofficeworkforce.Asaresult,theCompanyrecognizedarestructuringcharge

ofapproximately$4.2millionrelatedtoseveranceandotherterminationbenefits.2. FortheyearendedDecember31,2017andcomparativeperiods,PeakMineshasbeenclassifiedasadiscontinuedoperationandaccordinglyearningsandcashflows

fromcontinuingoperationsarepresentedexclusiveofPeakMines.RefertoNote16forfurtherdetails.

Seeaccompanyingnotestotheconsolidatedfinancialstatements.


CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVELOSS

YearendedDecember31

(inmillionsofU.S.dollars) Note 20172016

(Note5)

Netloss (108.0) (7.0)

Othercomprehensiveloss

Unrealizedforeignexchangegainoncashandcashequivalentsdesignatedashedginginstruments 14 - 4.9

Reclassificationofrealizedforeignexchangegainoncashandcashequivalentsdesignatedashedginginstruments 14 - 3.2

Unrealized(loss)gainonmark-to-marketofdieselswapcontracts 14 (0.4) 1.2

Reclassificationofrealizedlossonsettlementofdieselswapcontracts 14 0.3 2.5

Lossonrevaluationofgoldstreamobligation 13 (7.6) (67.8)

Deferredincometaxrelatedtoderivativecontractsandgoldstreamobligation 13,14 1.8 20.4

Totalothercomprehensiveloss (5.9) (35.6)

Totalcomprehensiveloss (113.9) (42.6)



CONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION

Asat

December31Asat

December31


(Note5)ASSETS Currentassets Cashandcashequivalents 216.2 185.9Tradeandotherreceivables 7 27.1 37.1Inventories 9 193.2 150.4Currentincometaxreceivable 12.9 12.5Derivativeassets 14 - 18.0Prepaidexpensesandother 5.6 6.1Totalcurrentassets 455.0 410.0Non-currentinventories 9 78.7 103.3Mininginterests 10 3,200.4 3,191.3Deferredtaxassets 17 171.6 224.9Other 2.6 3.5

3,908.3 3,933.0

Assetsheldforsale 16 109.0 -

Totalassets 4,017.3 3,933.0

LIABILITIESANDEQUITY

Currentliabilities Tradeandotherpayables 8 178.2 169.2Currentincometaxpayable - 6.2Deferredbenefit–Peaksaleprepayment 16 3.0 -

Totalcurrentliabilities 181.2 175.4

Reclamationandclosurecostobligations 18 121.5 81.0Goldstreamobligation 13 249.0 246.5Provisions 24 2.6 12.0Long-termdebt 12 1,007.7 889.5Deferredtaxliabilities 17 250.3 455.2Other 2.7 0.2

1,815.0 1,859.8

Liabilitiesheldforsale 16 62.8 -

Totalliabilities 1,877.8 1,859.8

Equity Commonshares 15 3,036.5 2,859.0Contributedsurplus 103.2 100.5Otherreserves (38.9) (33.0)Deficit (961.3) (853.3)Totalequity 2,139.5 2,073.2

Totalliabilitiesandequity 4,017.3 3,933.0


ApprovedandauthorizedbytheBoardofDirectorsonFebruary20,2018

“IanPearce” “KayPriestlyIanPearce,Director KayPriestly,Director


CONSOLIDATEDSTATEMENTSOFCHANGESINEQUITY

YearendedDecember31


(Note5)COMMONSHARES Balance,beginningofperiod 2,859.0 2,841.0

Commonshareissuance 15 176.1 17.6

SharesissuedforexerciseofoptionsandvestedPSUs 1.4 0.4

Balance,endofperiod 3,036.5 2,859.0

CONTRIBUTEDSURPLUS

Balance,beginningofperiod 100.5 102.3

ExerciseofoptionsandvestedPSUs 15 (0.8) (6.9)

Equitysettledshare-basedpayments 3.5 5.4

Reclassificationofshare-basedpayments - (0.3)

Balance,endofperiod 103.2 100.5

OTHERRESERVES

Balance,beginningofperiod (33.0) 2.6

Changeinfairvalueofhedginginstruments(netoftax) 14 (0.1) 10.3

Gain(loss)onrevaluationofgoldstreamobligation(netoftax) (5.8) (45.9)

Balance,endofperiod (38.9) (33.0)

DEFICIT Balance,beginningofperiod (853.3) (846.3)

Netearnings (108.0) (7.0)

Balance,endofperiod (961.3) (853.3)

Totalequity 2,139.5 2,073.2



CONSOLIDATEDSTATEMENTSOFCASHFLOW

YearendedDecember31


(Note5)OPERATINGACTIVITIES Lossfromcontinuingoperations (101.7) (8.6)Adjustmentsfor: Foreignexchangegains 6 (43.8) (12.0)Reclamationandclosurecostspaid 18 (1.4) (2.4)GainondisposalofElMorrostream (33.0) -Impairmentofassetsandinventorywrite-down 9,11 268.4 30.9Depreciationanddepletion 220.6 200.3Othernon-cashadjustments 19 46.4 28.3Incometaxrecovery 17 (115.9) (2.1)Financeincome 6 (1.1) (1.4)Financecosts 6 13.2 9.9 251.7 242.9Changeinnon-cashoperatingworkingcapital 19 40.9 (20.3)Incometaxespaid (17.6) 2.4Operatingcashflowsgeneratedfromcontinuingoperations(1) 275.0 225.0Operatingcashflowsgeneratedfromdiscontinuedoperations 16 67.2 57.2Cashgeneratedfromoperations 342.2 282.2INVESTINGACTIVITIES Mininginterests (567.0) (555.9)Goldpriceoptioncontractinvestmentcosts (0.9) (3.5)Proceedsfromthesaleofassets 65.3 0.7PrepaymentreceivedonPeaksale,netoftransactioncosts 2.6 -TaxonproceedsfromdisposalofElMorro - (0.9)Interestreceived 1.0 1.4Investingcashflowsusedbycontinuingoperations(1) (499.0) (558.2)Investingcashflowsusedbydiscontinuedoperations 16 (34.6) (10.4)Cashusedbyinvestingactivities (533.6) (568.6)FINANCINGACTIVITIES Proceedsreceivedfromexerciseofoptions 15 0.6 9.7Netproceedsreceivedfromissuanceofcommonshares 164.7 -Financinginitiationcosts - (1.0)Issuanceofseniorunsecurednotes,netoftransactioncosts 12 294.6 -Repaymentofseniorunsecurednotes 12 (305.3) -DrawdownofCreditFacility 12 130.0 100.0Cashsettlementofgoldstreamobligation 13 (1.1) -Interestpaid (63.7) (55.3)Proceedsfromgoldstreamagreement 13 - 75.0Cashgeneratedbyfinancingactivities 219.8 128.4Effectofexchangeratechangesoncashandcashequivalents 1.9 8.4Changeincashandcashequivalents 30.3 (149.6)Cashandcashequivalents,beginningofperiod 185.9 335.5 Cashandcashequivalents,endofperiod 216.2 185.9Cashandcashequivalentsarecomprisedof: Cash 161.3 135.7Short-termmoneymarketinstruments 54.9 50.2 216.2 185.9

1. FortheyearendedDecember31,2017andcomparativeperiods,PeakMineshasbeenclassifiedasadiscontinuedoperationandaccordinglyearningsandcashflowsfromcontinuingoperationsarepresentedexclusiveofPeakMines.RefertoNote16forfurtherdetails.



NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTSFortheyearsendedDecember31,2017and2016(AmountsexpressedinmillionsofU.S.dollars,exceptpershareamountsandunlessotherwisenoted)

1.DESCRIPTIONOFBUSINESSANDNATUREOFOPERATIONSNewGoldInc.(“NewGold”orthe“Company”)isanintermediategoldminingcompanyengagedinthedevelopmentandoperationofmineralproperties.Theassetsof theCompany,directlyor through its subsidiaries, are comprisedof theRainyRiverMineinCanada(“RainyRiver”),whichachievedcommercialproductiononNovember1,2017,theNewAftonMine in Canada (“New Afton”), theMesquiteMine in the United States (“Mesquite”), the Cerro San PedroMine inMexico(“CerroSanPedro”)andthePeakMinesinAustralia(“PeakMines”)whichhasbeenclassifiedasadiscontinuedoperationasatandfortheyearendedDecember31,2017.TheCompanyalsoownstheBlackwaterproject inCanada(“Blackwater”).

TheCompanyisacorporationgovernedbytheBusinessCorporationsAct(BritishColumbia).TheCompany’ssharesarelistedontheTorontoStockExchangeandtheNewYorkStockExchangeAmericanunderthesymbolNGD.

The Company’s registered office is located at 1100Melville Street, Suite 610, Vancouver, British Columbia, V6E 4A6,Canada.

2.SIGNIFICANTACCOUNTINGPOLICIES(a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial ReportingStandards,asissuedbytheInternationalAccountingStandardsBoard(“IASB”),referredtoas“IFRS”.

TheseconsolidatedfinancialstatementswereapprovedbytheBoardofDirectorsoftheCompanyonFebruary20,2018.

(b) Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for those assets andliabilitiesthataremeasuredatfairvaluesattheendofeachreportingperiod.Additionally,theseconsolidatedfinancialstatementshavebeenpreparedusingtheaccrualbasisofaccounting,exceptforcashflowinformation.

(c) Basis of consolidation SubsidiariesTheseconsolidatedfinancialstatementsincorporatethefinancialstatementsoftheCompanyandentitiescontrolledbytheCompany (“Subsidiaries”).Controlexistswhen theCompany isexposed,orhas rights, tovariable returns from itsinvolvementwiththeSubsidiaryandhastheabilitytoaffectthosereturnsthroughitspowerovertheSubsidiary.

AssociatesAssociatesarethoseentitiesinwhichtheCompanyhassignificantinfluenceoverthefinancialandoperatingpoliciesbutnot control and that is not a Subsidiary (“Associates”). Significant influence is normally presumed to exist when theCompanyholdsbetween20and50percentof thevotingpowerofanotherentity.TheCompany’sshareofnetassetsandnetearningsorlossisaccountedforintheconsolidatedfinancialstatementsusingtheequitymethod.


THE PRINCIPAL SUBSIDIARIES OF THE COMPANY ARE AS FOLLOWS:

Nameofsubsidiary/associate PrincipalactivityMethodofaccounting

Countryofincorporationand

operation

InterestasatDecember31,

2017

InterestasatDecember31,

2016

MineraSanXavierS.A.deC.V. Mining Consolidated Mexico 100% 100%

PeakGoldMinesPtyLtd.(1) Mining Consolidated Australia 100% 100%

WesternMesquiteMinesInc. Mining Consolidated USA 100% 100%

1. TheCompanyhasenteredintoanagreementtosellPeakGoldMinesPtyLtd.Asaresult,theassetsandliabilitiesassociatedwiththissubsidiaryhavebeenclassifiedandpresentedasheld-for-saleasatDecember31,2017.

(d) Business combinations and asset acquisitionsAbusinesscombinationisanacquisitionofassetsandliabilitiesthatconstituteabusiness.Abusinessisanintegratedsetof activities andassets that is capableofbeing conductedandmanaged for thepurposeofproviding a return to thecompanyanditsshareholdersintheformofimprovedearnings,lowercostsorothereconomicbenefits.

Business combinations are accounted for using the acquisition method whereby identifiable assets acquired andliabilities assumed, including contingent liabilities, are recorded at 100% of their acquisition-date fair values. Theacquisition date is the date the Company obtains control over the acquiree, which is generally the date thatconsideration is transferred and the Company acquires the assets and assumes the liabilities of the acquiree. TheCompanyconsidersallrelevantfactsandcircumstancesindeterminingtheacquisitiondate.

Theconsiderationtransferredinabusinesscombinationismeasuredatfairvalue,whichiscalculatedasthesumoftheacquisition-datefairvaluesoftheassetstransferredbytheCompany,theliabilities,includingcontingentconsideration,incurredandpayablebytheCompanytoformerownersoftheacquireeandtheequityinterestsissuedbytheCompany.ThemeasurementdateforequityinterestsissuedbytheCompanyistheacquisitiondate.

Acquisition-related costs, other than costs to issue debt or equity securities, of the Company, including investmentbanking fees, legal fees, accounting fees, valuation fees, and other professional or consulting fees are expensed asincurred.ThecoststoissueequitysecuritiesoftheCompanyasconsiderationfortheacquisitionarereducedfromsharecapitalasshareissuecosts.

TheCompanyaccountsforthepurchaseofassetsandassumptionofliabilitiesasanacquisitionofnetassetswhenthetransactionsdonotqualifyasabusinesscombinationunderIFRS3,BusinessCombinations,asthesignificantinputsandprocessesthatconstituteabusinessarenot identified.Thepurchaseconsiderationisallocatedtothefairvalueoftheassetsacquiredandliabilitiesassumedbasedonmanagement’sbestestimatesandavailableinformationatthetimeoftheacquisition.Acquisition-relatedcosts,otherthancoststoissuedebtorequitysecurities,oftheCompany,includinginvestment banking fees, legal fees, accounting fees, valuation fees, and other professional or consulting fees arecapitalizedaspartoftheassetacquisition.

(e) Cash and cash equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date ofacquisitiontobecashequivalents.Thesehighlyliquidinvestmentsonlycompriseshort-termCanadianandUnitedStatesgovernment treasury bills and other evidences of indebtedness and treasury bills of the Canadian provinces with aminimumcreditratingofR-1midfromtheDominionBondRatingServiceoranequivalentratingfromStandard&Poor’sandMoody’s.Inaddition,theCompanyinvestsinbankers’acceptancesandotherevidencesofindebtednessofcertainfinancialinstitutions,includingCanadianbanks.


(f) Inventories Finished goods, work-in-process, heap leach ore and stockpiled ore are valued at the lower of weighted averageproduction cost or net realizable value. Production costs include the cost of raw materials, direct labour, mine-siteoverhead expenses and depreciation and depletion of mining interests. Net realizable value is calculated as theestimatedpriceatthetimeofsalebasedonprevailingandlong-termmetalpriceslessestimatedfutureproductioncoststoconverttheinventoriesintosaleableform.Atoperationswhereoreextractedcontainssignificantamountofmetalsotherthangold,primarilycopperorsilver,costisallocatedbetweenthejointproductsonaproratabasis.

Therecoveryofgoldandsilverfromcertainoresisachievedthroughtheheapleachingprocess.Underthismethod,oreis placed on leach pads where it is treated with a chemical solution which dissolves the gold contained in ore. Theresulting“pregnant”solutionisfurtherprocessedinaplantwherethegoldisrecovered.Foraccountingpurposes,costsareaddedtooreonleachpadsforcurrentminingandleachingcosts, includingapplicabledepreciation,depletionandamortization relating tomining interests. Costs are removed fromoreon leachpads asouncesof gold and silver arerecoveredbasedontheaveragecostperrecoverableounceontheleachpad.

Estimatesofrecoverablegoldandsilverontheleachpadsarecalculatedfromthequantitiesoforeplacedontheleachpads(measuredtonnesaddedtotheleachpads),thegradeoforeplacedontheleachpads(basedonassaydata),andarecoverypercentage (basedonore type).Although thequantitiesof recoverablegoldandsilverplacedoneach leachpad are reconciled by comparing the grades of ore placedon the leachpad to the quantities actually recovered, thenatureoftheleachingprocessinherentlylimitstheabilitytopreciselymonitorinventorylevels.Therecoveryofgoldandsilver from the leach pad is not known until the leaching process has concluded. In the event that the Companydetermines,basedonengineeringestimates, that aquantityof goldorothermetal (silver) contained inoreon leachpadsistoberecoveredoveraperiodexceeding12months,thatportionisclassifiedaslong-term.

Work-in-processinventoryrepresentsmaterialsthatarecurrentlyintheprocessofbeingconvertedintofinishedgoods.Theaverageproductioncostoffinishedgoodsrepresentstheaveragecostofwork-in-processinventoriesincurredpriortotherefiningprocess,plusapplicablerefining,selling,shippingcostsandassociatedroyalties.

Suppliesarevaluedatthelowerofweightedaveragecostandnetrealizablevalue.

(g) Mining interests Mining interests includes mining properties and related plant and equipment. Capitalized costs are depreciated anddepletedusingeitheraunit-of-productionmethodovertheestimatedeconomiclifeoftheminetowhichtheyrelate,orforplantandequipment,usingthestraight-linemethodovertheirestimatedusefullives,ifshorterthantheminelife.

MiningpropertiesThe costs associatedwithmining properties are separately allocated tomineral reserves andmineral resources, andincludeacquiredinterestsinproduction,developmentandexplorationstagepropertiesrepresentingthefairvalueatthetimetheywereacquired.

Mining properties include costs directly attributable to bringing amineral asset into the statewhere it is capable ofoperatinginthemannerintendedbymanagement.Thedeterminationofdevelopmentcoststobecapitalizedduringtheproductionstageofamineoperationrequirestheuseofjudgmentsandestimates.

Thevalueassociatedwithmineralresourcesandexplorationpotentialisthevaluebeyondprovenandprobablemineralreservesassignedthroughacquisition.Themineralresourcevaluerepresentsthepropertyintereststhatarebelievedtopotentially contain economicmineralizedmaterial such asmeasured, indicated, and inferredmineral resources with


insufficient drill spacing to qualify as proven and probablemineral reserves, and inferredmineral resources in closeproximitytoprovenandprobablemineralreserves.Explorationpotentialrepresentstheestimatedmineralizedmaterialcontained within (i)areas adjacent to existing reserves and mineralization located within the immediate mine area;(ii)areas outside of immediate mine areas that are not part of measured, indicated, or inferred resources; and(iii)Greenfieldsexplorationpotentialthatisnotassociatedwithanyotherproduction,development,orexplorationstageproperty, as described above. At least annually or when otherwise appropriate, and subsequent to its review andevaluationforimpairment,valuefromthenon-depletablecategoryistransferredtothedepletablecategoryasaresultofananalysisoftheconversionofmineralresourcesorexplorationpotentialintomineralreserves.

The Company estimates its mineral reserves andmineral resources based on information compiled by appropriatelyqualified persons. The estimation of recoverable reserves will be impacted by forecast commodity prices, exchangerates,productioncostsandrecoveriesamongstotherfactors.Changesinthereserveorresourceestimatesmayimpactthecarryingvalueofassetsanddepreciationandimpairmentchargesrecordedintheconsolidatedincomestatement.

Aminingpropertyisconsideredtobecapableofoperatinginamannerintendedbymanagementwhenitcommencescommercial production. The critical judgments included in the determination of the commencement of commercialproductionaredescribedinNote3(a)(i).Uponcommencementofcommercialproduction,aminingpropertyisdepletedonaunit-of-productionmethod.Unit-of-productiondepletionratesaredeterminedbasedontheestimatedrecoverableprovenandprobablemineralreservesatthemine.

Costs related to property acquisitions are capitalized until the viability of themineral property is determined.Wheneitherexternalorinternaltriggeringeventsdeterminedthatapropertyisnoteconomicallyrecoverable,thecapitalizedcostsarewrittenoff.

Thecostsassociatedwiththeacquisitionoflandholdingsareincludedwithinmininginterestandarenotdepleted.

ExplorationandevaluationExplorationandevaluationcostsareexpenseduntiltheprobabilitythatfutureeconomicbenefitswillflowtotheentityandtheassetcostorvaluecanbemeasuredreliably.Managementusesthefollowingcriteriatodeterminetheeconomicrecoverabilityandprobabilityoffutureeconomicbenefits:

• TheCompanycontrolsaccesstothebenefit;• InternalprojecteconomicsarebeneficialtotheCompany;• Theprojectistechnicallyfeasible;and• Costscanbereliablymeasured.

Furtherdevelopmentexpendituresarecapitalizedtotheproperty.

Drilling and related costs incurred on siteswithout an existingmine and on areas outside the boundary of a knownmineraldepositwhichcontainsprovenandprobablereservesareexplorationexpendituresandareexpensedasincurredto the date of establishing that property costs are economically recoverable. Further development expenditures,subsequenttotheestablishmentofeconomicrecoverability,arecapitalizedtotheproperty.

Property,plantandequipmentPlantandequipmentconsistsofbuildingsandfixtures,andsurfaceandundergroundfixedandmobileequipment.


DepreciationanddepletionratesofmajorcategoriesofassetcostsMining assets are depleted using a unit-of-production method based on the estimated economically recoverablereserves, towhich they relate.Management reviews the estimated total recoverable ounces contained in depletablereservesateach financial yearend,andwheneventsandcircumstances indicate that sucha reviewshouldbemade.Plantandequipmentisdepreciatedusingthestraight-linemethodovertheirestimatedusefullives,ortheremaininglifeofthemineifshorter.

Assetclass Estimatedusefullife(years)

Building 15–17

Plantandmachinery 3–17

Officeequipment 5–10

Vehicles 5–7

Computerequipment 3–5

CapitalizedborrowingcostsBorrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofaqualifyingassetthatnecessarilytakes a substantial period of time to get ready for its intended use are capitalized until such time as the assets aresubstantially ready for their intendeduse.Otherborrowingcostsare recognizedasanexpense in theperiod inwhichtheyareincurred.

Wherefundsareborrowedspecificallytofinanceaproject,theamountcapitalizedrepresentstheactualborrowingcostsincurred. Where the funds used to finance a project form part of general borrowings, the amount capitalized iscalculatedusingaweightedaverageofinterestratesapplicabletorelevantgeneralborrowingsoftheCompanyduringtheperiod, toamaximumofactualborrowingcosts incurred.Capitalizationof interest is suspendedduringextendedperiodsinwhichactivedevelopmentisinterrupted.

StrippingcostsinsurfaceminingAspartofitsoperations,theCompanyincursstrippingcostsbothduringthedevelopmentphaseandproductionphaseof itsoperations.Strippingcosts incurredaspartofdevelopmentstageminingactivities incurredbytheCompanyaredeferredandcapitalizedaspartofminingproperties.

Strippingcostsincurredduringtheproductionstageareincurredinordertoproduceinventoryortoimproveaccesstoorewhichwillbeminedinthefuture.Wherethecostsareincurredtoproduceinventory,theproductionstrippingcostsareaccountedforasacostofproducingthoseinventories.Wherethecostsareincurredtoimproveaccesstoorewhichwillbeminedinthefuture,thecostsaredeferredandcapitalizedtotheStatementofFinancialPositionasastrippingactivityasset(includedinmininginterest)ifthefollowingcriteriaaremet:improvedaccesstotheorebodyisprobable;thecomponentof theorebodycanbeaccurately identified;andthecosts relatingtothestrippingactivityassociatedwiththecomponentcanbereliablymeasured.Ifthesecriteriaarenotmet,thecostsareexpensedintheperiodinwhichtheyareincurred.

Thestrippingactivityassetissubsequentlydepletedusingtheunits-of-productiondepletionmethodoverthelifeoftheidentifiedcomponentoftheorebodytowhichaccesshasbeenimprovedasaresultofthestrippingactivity.

DerecognitionUponsaleorabandonment,thecostoftheassetandrelatedaccumulateddepreciationordepletionareremovedfromtheaccountsandanygainsorlossesthereonarerecognizedinnetearnings.


(h) Impairment of long-lived assets TheCompanyreviewsandevaluatesitsmininginterestsforindicatorsofimpairmentattheendofeachreportingperiod.Impairmentassessmentsareconductedatthelevelofcash-generatingunits(“CGU”).ACGUisthesmallestidentifiablegroupofassetsthatgeneratescashinflowsthatarelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets.EachoperatingmineanddevelopmentprojectrepresentsaseparateCGUaseachminesiteordevelopmentprojecthastheabilityorthepotentialtogeneratecashinflowsthatareseparatelyidentifiableandindependentofeachother. If an indication of impairment exists, the recoverable amount of the CGU is estimated. An impairment loss isrecognizedwhenthecarryingamountoftheCGUisinexcessofitsrecoverableamount.

Therecoverableamountofaminesiteisthegreaterofitsfairvaluelesscoststodisposeandvalueinuse.IndeterminingtherecoverableamountsoftheCompany’sminesites,theCompanyusesthefairvaluelesscoststodisposeasthiswillgenerallybegreaterthanorequaltothevalueinuse.Whenthereisnobindingsalesagreement,fairvaluelesscoststodispose is estimated as the discounted future after-tax cash flows expected to be derived from amine site, less anamountforcoststodisposeestimatedbasedonsimilarpasttransactions.Theinputsusedinthefairvaluemeasurementconstitute Level3 inputsunder the fair valuehierarchy.Whendiscountingestimated future cash flows, theCompanyusesanafter-taxdiscountratethatwouldapproximatewhatmarketparticipantswouldassign.Estimatedcashflowsarebasedonexpectedfutureproduction,metalsellingprices,operatingcostsandcapitalcosts.Iftherecoverableamountofaminesiteisestimatedtobelessthanitscarryingamount,thecarryingamountisreducedtoitsrecoverableamount.Thecarryingamountofeachminesite includes thecarryingamountsofminingproperties,plantandequipment,andcertain deferred tax balances. Impairment losses are recognized as expenses in the period they are incurred. Theallocationofan impairment loss, ifany, foraparticularminesite to itsminingpropertiesandplantandequipment isbasedontherelativebookvaluesoftheseassetsatthedateofimpairment.

The Company assesses at the end of each reporting period whether there is any indication that an impairment lossrecognizedinpriorperiodsforalong-livedassetmaynolongerexistormayhavedecreased.Ifanysuchindicationexists,theCompanyestimatestherecoverableamountofthatCGU.Areversalofan impairment loss isrecognizeduptothelesser of the recoverable amount or the carrying amount that would have been determined (net of amortization ordepreciation)hadno impairment lossbeen recognized for theCGU inprior years.Reversalsof impairment lossesarerecognizedinnetearningsintheperiodthereversalsoccur.

(i) Reclamation and closure cost obligations TheCompany’sminingandexplorationactivitiesaresubjecttovariousgovernmentallawsandregulationsrelatingtotheprotectionoftheenvironment.TheCompanyhasmade,andintendstomakeinthefuture,expenditurestocomplywithsuchlawsandregulations.TheCompanyhasrecordedaliabilityandcorrespondingassetfortheestimatedfuturecostofreclamation and closure, including site rehabilitation and long-term treatment and monitoring costs These costsrepresent management’s best estimates which incorporate assumptions on the effects of inflation, movements inforeignexchangeratesandtheeffectsofcountryandotherspecificrisksassociatedwiththerelatedliabilities.Thecostsarediscountedtonetpresentvalueusingtheriskfreerateapplicabletothefuturecashoutflows.Suchestimatesare,however, subject to change based on negotiations with regulatory authorities, changes in laws and regulations orchangestomarketinputstothedecommissioningmodel.

The present value of estimated costs is recorded in the period in which the asset is installed or the environment isdisturbedandareasonableestimateoffuturecostsanddiscountratescanbemade.Theprovisionisdiscountedusingarisk-freerateandestimatesoffuturecashflowsareadjustedtoreflectrisk.

After the initialmeasurement, theobligation is adjusted to reflect thepassageof time and changes in the estimatedfuture cash flowsunderlying theobligation. The increase in theprovisiondue to thepassageof time is recognized in


finance costs, whereas increases and decreases due to changes in the estimated future cash flows are included ininventoryor capitalizedanddepreciatedover the lifeof the relatedassetunless theamountdeducted from the costexceedsthecarryingvalueoftheasset,inwhichcasetheexcessisrecordedinnetearnings.Actualcostsincurreduponsettlement of the site restoration obligation are charged against the provision to the extent the provision wasestablishedforthosecosts.Uponsettlementoftheliability,againorlossmayberecordedinnetearnings.

(j) Income taxes Theincometaxexpenseorbenefitfortheperiodconsistsoftwocomponents:currentanddeferred.

CurrenttaxThetaxcurrentlypayableisbasedontaxableearningsfortheyear.Taxableearningsdifferfromearningsbeforetaxesdue to itemsof incomeor expense that are taxableor deductible inother years and items that arenever taxableordeductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at theStatement of Financial Position date in each of the jurisdictions and includes any adjustments for taxes payable orrecoveryinrespectofpriorperiods.

DeferredtaxDeferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in theconsolidated statement of financial position and the corresponding tax bases used in the computationof taxable netearnings.Deferredtaxiscalculatedbasedontheexpectedmannerofrealizationorsettlementofthecarryingamountofassetsandliabilities,usingtaxratesthatareexpectedtoapplyintheyearofrealizationorsettlementbasedontaxratesandlawsenactedorsubstantivelyenactedattheStatementofFinancialPositiondate.

Deferredtaxliabilitiesaregenerallyrecordedforalltaxabletemporarydifferences.DeferredtaxliabilitiesarerecognizedfortaxabletemporarydifferencesarisingoninvestmentsinSubsidiariesandAssociatesexceptwherethereversalofthetemporarydifferencecanbecontrolledanditisprobablethatthedifferencewillnotreverseintheforeseeablefuture.

Deferredtaxassetsaregenerallyrecognizedforalldeductibletemporarydifferencestotheextentthatitisprobablethattaxable earningswill be available against which those deductible temporary differences can be utilized. The carryingamountof thedeferred tax assets are reviewedat each Statementof Financial Positiondate andare reduced to theextentthat it isno longerprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartoftheassettoberecovered.

Deferredtaxassetsandliabilitiesarenotrecognizedifthetemporarydifferencearisesfromgoodwillorfromtheinitialrecognition(otherthaninabusinesscombination)ofotherassetsandliabilitiesinatransactionthataffectsneitherthetaxableprofitnortheaccountingprofit.

TheCompany records foreignexchangegains and losses representing the impactsofmovements in foreignexchangerates on the tax bases of non-monetary assets and liabilities which are denominated in foreign currencies. Foreignexchange gains and losses relating to deferred income taxes are included within foreign exchange gains in theconsolidatedincomestatement.

CurrentanddeferredtaxfortheyearCurrentanddeferredtaxarerecognizedinnetearningsexceptwhentheyariseasaresultofitemsrecognizedinothercomprehensive income or directly in equity in the current or prior periods, in which case the related current anddeferredincometaxesarealsorecognizedinothercomprehensiveincomeordirectlyinequity,respectively.


GovernmentassistanceandtaxcreditsAny federal or provincial tax credits received by the Company, with respect to exploration or development workconductedonanyofitsproperties,arecreditedasareductiontothecarryingcostsofthepropertytowhichthecreditsrelated. The Company records these tax credits when there is reasonable assurance with regard to collections andassessmentsaswellasreasonableassurancethattheCompanywillcomplywiththeconditionsassociatedtothemandthatthegrantswillbereceived.

(k) Foreign currency translation The individual financial statements of each Subsidiary are presented in the currency of the primary economicenvironment inwhich that entity operates (its functional currency). The functional currency of the Company and thepresentationcurrencyoftheconsolidatedfinancialstatementsistheUnitedStatesdollar(“U.S.dollar”).

Management determines the functional currency by examining theprimary economic environment of eachoperatingmine,developmentandexplorationproject.TheCompanyconsidersthefollowingfactors indetermining itsfunctionalcurrency:

• Themain influencesof sales prices for goods and the countrywhose competitive forces and regulationsmainlydeterminethesalesprice;

• Thecurrencythatmainlyinfluenceslabour,materialandothercostsofprovidinggoods;• Thecurrencyinwhichfundsfromfinancingactivitiesaregenerated;and• Thecurrencyinwhichreceiptsfromoperatingactivitiesareusuallyretained.

WhenpreparingtheconsolidatedfinancialstatementsoftheCompany,theCompanytranslatesnon-U.S.dollarbalancesintoU.S.dollarsasfollows:

• Mininginterestandequitymethodinvestmentsusinghistoricalexchangerates;• Financialinstrumentsmeasuredatfairvaluethroughprofitorlossusingtheclosingexchangerateasatthe

StatementofFinancialPositiondatewithtranslationgainsandlossesrecordedinnetearnings;• DeferredtaxassetsandliabilitiesusingtheclosingexchangerateasattheStatementofFinancialPosition

datewithtranslationgainsandlossesrecordedinnetearnings;• Otherassetsand liabilitiesusing theclosingexchange rateasat theStatementofFinancialPositiondate

withtranslationgainsandlossesrecordedinnetearnings;and• Incomeandexpensesusing theaverageexchange rate for theperiod,except forexpenses that relate to

non-monetary assets and liabilities measured at historical rates, which are translated using the samehistoricalrateastheassociatednon-monetaryassetsandliabilities.

(l) Earnings (loss) per share Earnings(loss)persharecalculationsarebasedontheweightedaveragenumberofcommonsharesandcommonshareequivalents issuedandoutstandingduringtheyear.Dilutedearningspersharearecalculatedusingthetreasurystockmethod.Thisrequiresthecalculationofdilutedearningspersharebyassumingthatoutstandingstockoptionsandsharepurchasewarrants (“Warrants”)withanaveragemarketprice thatexceeds theaverageexercisepricesof theoptionsandwarrantsfortheyear,areexercisedandtheassumedproceedsareusedtorepurchasesharesoftheCompanyattheaveragemarketpriceofthecommonsharefortheyear.


(m) Revenue recognition Revenuefromthesaleofmetalsandmetalsinconcentrateisrecognizedwhenallthefollowingconditionsaresatisfied:

• TheCompanyhastransferredtothebuyerthesignificantrisksandrewardsofownership;• The Company retains neither continuing managerial involvement to the degree usually associated with

ownershipnoreffectivecontroloverthegoodssold;• Theamountofrevenuecanbemeasuredreliably;• Itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheentity;and• Thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.

Revenuefromthesaleofmetalsinconcentratemaybesubjecttoadjustmentuponfinalsettlementofestimatedmetalprices,weightsandassays.Revenueisrecognizedbasedontheestimatedfairvalueofthetotalconsiderationreceivable.Adjustmentstorevenueformetalpricesandotheradjustmentsarerecordedateachperiodendandonfinalsettlement.Refiningandtreatmentchargesarenettedagainstrevenueforsalesofmetalconcentrate.

(n) Share-based payments TheCompanymaintainsaRestrictedShareUnit(“RSU”)plan,aPerformanceShareUnit(“PSU”)planandastockoptionplanforemployeesaswellasaDeferredShareUnit(“DSU”)planfordirectors.

Cash-settledtransactionswhich includeRSUs,DSUsandthecashsettledportionofthePSUs,are initiallymeasuredatfairvalueandrecognizedasanobligationatthegrantdate.Theliabilitiesarere-measuredtofairvalueateachreportingdateuptoandincludingthesettlementdate,withchangesinfairvaluerecognizedinnetearningsorcapitalizedtotheCompany’s development projects as appropriate. The fair value of RSUs and PSUs determined at the grant date isrecognized over the vesting period in accordance with the vesting terms and conditions. The Company values theliabilitiesbasedon theCompany’s shareprice and in addition forPSUs, the correlationbetween theCompany’s totalreturnperformancerelativetotheS&P/TSXGlobalGoldIndexTotalReturnIndexValue.Thenon-currentportionofRSU,DSUandPSUliabilitiesareincludedinprovisionsontheconsolidatedstatementoffinancialposition.

Equity-settledtransactionswhichincludetheequitysettledportionofthePSUsandthestockoptionplanaremeasuredbyreferencetothefairvalueoftheawardsthatareexpectedtovestatthegrantdate.Fairvalueforstockoptions isdeterminedusingaBlack-Scholesoption-pricingmodel,which reliesonestimatesof the future risk-free interest rate,futuredividendpayments, futuresharepricevolatilityandtheexpectedaverage lifeof theoptions.Fairvalue for theequitysettledportionofthePSUsisdeterminedusingaMonteCarlooptionspricingmodel,whichreliesonestimatesofthefuturerisk-freeinterestrate,futuredividendpayments,futuresharepricevolatilityandthecorrelationbetweentheCompany’stotalreturnperformancerelativetotheS&P/TSXGlobalGoldIndexTotalReturnIndexValue.TheCompanybelievesthesemodelsadequatelycapturethesubstantivefeaturesoftheoptionawardsandPSUs,andareappropriatetocalculatetheirfairvalues.Thefairvaluedeterminedatgrantdateisrecognizedoverthevestingperiodinaccordancewith vesting terms and conditions, with a corresponding increase to contributed surplus. Changes to the estimatednumberofawardsthatwilleventuallyvestareaccountedforprospectively.

(o) Financial assets Financialassetsareinitiallymeasuredatfairvalueandaresubsequentlymeasuredateitheramortizedcostorfairvalue,dependingontheclassificationof the financialassets.Theclassificationofassets isdrivenby theCompany’sbusinessmodelformanagingfinancialassetsandtheircontractualcashflowcharacteristics.


The fair value of financial instruments traded in activemarkets is based on quotedmarket prices at the date of thestatementof financialposition. ThequotedmarketpriceusedforfinancialassetsheldbytheCompany isthe lastbidpriceoftheday.

TheCompanyhascategorizeditsfinancialassetsinaccordancewithInternationalFinancialReportingStandard9(2013),FinancialInstruments(“IFRS9”)intooneofthefollowingtwocategories:

CategoryunderIFRS9 Description

Fairvaluethroughprofitorloss

Includes equity investments, gold and copper price contract assets, gold and copperswapcontracts,copperforwardcontracts,andotherfinancialassetsdesignatedtothiscategoryunder the fairvalueoption.TheCompanyhasassessed thecontractual cashflowsof itsprovisionallypricedcontracts inaccordancewith IFRS9andhas classifiedthesecontractsasfairvaluethroughprofitorloss(“FVTPL”).Loansandreceivablesatamortizedcost Includescashandcashequivalents,andtradereceivablesatamortizedcost.

(p) Financial liabilities FinancialliabilitiesareaccountedforasamortizedcostexceptforthoseatFVTPLwhichincludesliabilitiesdesignatedasFVTPLandderivatives.FinancialliabilitiesclassifiedasFVTPLorthosewhicharedesignatedasFVTPLunderthefairvalueoptionaremeasuredatfairvaluewithunrealizedgainsandlossesrecognizedinnetearnings. IncaseswherefinancialliabilitiesaredesignatedasFVTPL,thepartofafairvaluechangeduetoanentity'sowncreditriskisrecordedinothercomprehensive income rather than the statements of operations. Financial liabilities at amortized cost are initiallymeasuredatfairvaluenetoftransactioncosts,andsubsequentlymeasuredatamortizedcost.

TheCompanyhasclassifieditsfinancialliabilitiesinaccordancewithIFRS9intooneofthefollowingtwocategories:

CategoryunderIFRS9 Description

FairvaluethroughprofitorlossIncludesprovisionsrelatedtotheRSUplans,DSUplansandthecashsettledportionofthePSUplans,sharepurchasewarrants,goldandcopperpriceoptioncontractliabilitiesandgoldstreamobligation.

Financialliabilitiesatamortizedcost Includestradeandotherpayablesandlong-termdebt.

(q) Derivative instruments, including hedge accounting Derivative instruments, including embedded derivatives, are recorded at fair value on initial recognition and at eachsubsequentreportingperiod.Anygainsorlossesarisingfromchangesinfairvalueonderivativesthatdonotqualifyforhedgeaccountingarerecordedinnetearnings.

HedgeaccountingGainsandlossesfortheeffectiveportionofhedginginstrumentsareincludedinothercomprehensiveincome.Gainsandlossesforanyineffectiveportionofhedginginstrumentsareincludedinnetearnings.Amountspreviouslyrecognizedinother comprehensive income and accumulated in equity are reclassified to net earnings or mineral interest, asappropriate in the period when the hedged item is recognized in net earnings in the same line of the consolidatedincomestatement.

The Company previously held diesel fuel swap contracts and Canadian dollars and designated this cash to fund theconstruction of Rainy River. The Company has designated these instruments as a cash-flow hedge under IFRS 9. TheimpactofapplyinghedgeaccountingisdisclosedinNote14.


GoldStreamObligationTheCompanyhasagoldstreamagreementwithRGLDGoldAG,awhollyownedsubsidiaryofRoyalGold Inc. (“RoyalGold”). Foraccountingpurposes, theCompanyhasdetermined that thegold streamobligation representsa financingcontractwithembeddedderivatives.Thevalueof theembeddedderivativeschanges in response tochanges inmetalpricesandinthenumberofouncesexpectedtobedelivered.AsthegoldstreamobligationhasembeddedderivativesthatwouldotherwiseneedtobeaccountedforseparatelyatFVTPL,theCompanyhasdesignatedthedepositreceivedfromRoyalGold as a financial liability at FVTPL,with initial and subsequentmeasurement at fair value, as permittedunderIFRS9.Transactioncostsdirectlyattributabletothegoldstreamobligationwereexpensedthroughprofitandloss.

Fair value of the gold stream obligation on initial recognition was determined by the amount of the cash advancereceived.Subsequentfairvalueiscalculatedoneachreportingdatewithgainsandlossesrecordedinnetearnings.Fairvalue adjustments as a result of the Company’s own credit risk will be recorded in the Consolidated Statement ofComprehensive Loss, as required by IFRS 9 (2013) for financial liabilities designated as at FVTPL. Components of theadjustmenttofairvalueateachreportingdateinclude:

• Accretionexpenseduetopassageoftime• Changeintherisk-freeinterestrate• ChangeintheCompanyspecificcreditspread• Changeinanyexpectedouncestobedelivered• Changeinfuturemetalprices

ProvisionalpricingCertainproductsare“provisionallypriced”wherebythesellingpriceissubjecttofinaladjustmentupto150daysafterdeliverytothecustomer.Thefinalprice isbasedonthemarketpriceattherelevantquotationpointstipulated inthecontract.Asiscustomaryintheindustry,revenueonprovisionallypricedsalesisrecognizedbasedonestimatesofthefairvalueoftheconsiderationreceivablebasedonrelevantforwardmarketprices.Ateachreportingdate,provisionallypricedmetalismarkedtomarketbasedontheforwardsellingpriceforthequotationalperiodstipulatedinthecontract.Forthispurpose,thesellingpricecanbemeasuredreliablyforthoseproducts,suchasgoldandcopper,forwhichthereexists active and freely traded commodity markets. The marking to market of provisionally priced sales contracts isrecordedasanadjustmenttorevenue.

Goldandcopperpriceoptioncontracts

Inordertoincreasecashflowcertainty,theCompanyholdscopperpriceoptioncontractsandpreviouslyheldgoldpriceoptioncontracts,purchasingputoptionsandsellingcalloptions.Theseare treatedasderivative financial instrumentsandmarkedtomarketateachreportingperiodontheconsolidatedstatementoffinancialpositionwithchangesinfairvaluerecognizedinothergainsandlosses.RealizedgainsandlossesasaresultoftheexerciseoftheCompany’scallandputoptionsuptoanamountnotexceedingtheCompany’sproductionofgoldouncesorcopperpoundsforthereportingperiodarerecordedasanadjustmenttorevenue.TheexerciseofoptionsongoldouncesorcopperpoundsinexcessoftheCompany’sproductionforthereportingperiodarerecordedasothergainsandlosses.

GoldandcopperswapsInordertomitigateaportionofthemetalpriceexposureassociatedwiththetimelagbetweentheprovisionalandfinaldeterminationofconcentratesales,theCompanyhasenteredintocashsettledderivativegoldandcoppercontractstoswap future contractedmonthly averagemetal prices for fixedmetal prices. At each reporting date, these gold andcopperswapagreementsaremarkedtomarketbasedoncorrespondingforwardgoldandcopperprices.Themarkingtomarketofgoldandcopperswapagreementsisrecordedasanadjustmenttorevenue.


Copperforwardcontracts

The Company previously held copper swap contracts at a fixed price, settling against the London Metals Exchange(“LME”)monthly average price. These are treated as derivative financial instruments andmarked tomarket at eachreportingperiodontheconsolidatedstatementoffinancialpositionwithchangesinfairvaluerecognizedinothergainsand losses. Realized gains and losses as a result of the exercise of theCompany’s copper forward contracts up to anamount not exceeding the Company’s production of copper pounds for the reporting period are recorded as anadjustment to revenue. Gains and losses in excess of the Company’s copper production for the reporting period arerecordedasothergainsandlosses.

SharepurchasewarrantsTheCompany’swarrantswithCanadiandollarexercisepricesareclassifiedasderivativeliabilitiesandaccordingly,theyarerecordedatfairvalueateachreportingperiod,withthegainsorlossesrecordedinnetearningsfortheperiod.Inthesecondquarterof2017,theCompany’swarrantsexpired,unexercised.

(r) Trade and other receivables Tradeandotherreceivablesarecarriedatamortizedcost lessimpairment.Tradeandotherreceivablesareimpairediftheyaredeterminedtobeuncollectible.

(s) Leases Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewardsincidentaltoownershipoftheleasedassettothelessee.Allotherleasesareclassifiedasoperatingleases.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except whereanothersystematicbasis ismorerepresentativeof thetimepattern inwhicheconomicbenefits fromthe leasedassetareconsumed.

3.CRITICALJUDGMENTSANDESTIMATIONUNCERTAINTIESThe preparation of the Company’s consolidated financial statements in conformitywith IFRS requires the Company’smanagementtomakejudgments,estimatesandassumptionsaboutthefutureeventsthataffecttheamountsreportedin theconsolidated financial statementsandrelatednotes to the financial statements.Estimatesandassumptionsarecontinually evaluated and are based on management’s experience and other facts and circumstances. Revisions toestimates and the resultingeffectson the carryingamountsof theCompany’s assets and liabilities are accounted forprospectively.

Theareaswhichrequiremanagementtomakesignificantjudgments,estimatesandassumptionsindeterminingcarryingvaluesinclude,butarenotlimitedto:

(a) Critical judgments in the application of accounting policies

(i)CommencementofcommercialproductionPrior to the periodwhen amine has reachedmanagement’s intended operating levels, costs incurred as part of thedevelopmentoftherelatedminingpropertyarecapitalizedandanymineralsalesduringthecommissioningperiodareoffsetagainstthecostscapitalized.TheCompanydefinesthecommencementofcommercialproductionasthedatethataminehasachievedaconsistent levelofproduction.Depletionofcapitalizedcostsforminingpropertiesbeginswhenoperatinglevelsintendedbymanagementhavebeenreached.


ThereareanumberoffactorstheCompanyconsiderswhendetermining ifconditionsexist forthecommencementofcommercialproductionofanoperatingmine.Managementexaminesthefollowingwhenmakingthatjudgment:

• Allmajorcapitalexpenditurestobringtheminetotheconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagementhavebeencompleted;

• Thecompletionofareasonableperiodoftestingofthemineplantandequipmenthasbeencompleted;• Themineormillhasreachedapre-determinedpercentageofdesigncapacity;and• Theabilitytosustainongoingproductionoforehasbeenachieved.

Thelistisnotexhaustiveandeachspecificcircumstanceistakenintoaccountbeforemakingthedecision.

(ii)FunctionalcurrencyThefunctionalcurrencyforeachoftheCompany’sSubsidiariesandAssociatesisthecurrencyoftheprimaryeconomicenvironment inwhichtheentityoperates.TheCompanyhasdeterminedthefunctionalcurrencyofeachentityastheU.S.dollar.Determinationofthefunctionalcurrencymayinvolvecertainjudgmentstodeterminetheprimaryeconomicenvironment and the Company reconsiders the functional currency of its entities if there is a change in events andconditionswhichdeterminestheprimaryeconomicenvironment.

(iii)DeterminationofeconomicviabilityManagement has determined that exploratory drilling, evaluation, development and related costs incurred on theBlackwaterproject,andNewAftonC-zoneprojecthavefutureeconomicbenefitsandareeconomicallyrecoverable.Inmaking this judgment, management has assessed various criteria including, but not limited to, the geologic andmetallurgic information,historyofconversionofmineraldeposits toprovenandprobablemineral reserves,operatingmanagementexpertise,existingpermits,theexpectationofreceivingadditionalpermitsandlife-of-mine(“LOM”)plans.

(iv)Carryingvalueoflong-livedassetsandimpairmentchargesIn determiningwhether the impairment of the carrying value of an asset is necessary,management first determineswhether there are external or internal indicators thatwould signal theneed to test for impairment. These indicatorsconsistofbutarenotlimitedtotheprolongedsignificantdeclineincommodityprices,perouncemultiples,unfavourablechangestothelegalenvironmentinwhichtheentityoperates,significantadversechangetoLOMplansandthefactorswhich lead to the carrying amount of theCompany’s net assets exceeding itsmarket capitalization. If an impairmentindicator is identified, the Company compares the carrying value of the asset against the recoverable amount. Thesedeterminationsandtheirindividualassumptionsrequirethatmanagementmakeadecisionbasedonthebestavailableinformationateachreportingperiod.

AsatDecember31,2017,indicatorsofimpairmentexistedforRainyRiverastheCompanyannouncedhigherexpectedoperating expenses and capital expenditures over the first nine years of operations. The results of the impairmentassessment,includingthesignificantestimatesandassumptionsused,aresetoutinNote11.

(v)DeterminationofCGUIndeterminingaCGU,managementhadtoexaminethesmallestidentifiablegroupofassetsthatgeneratescashinflowsthatare largely independentofcash inflowsfromotherassetsorgroupsofassets.TheCompanyhasdeterminedthateachminesiteanddevelopmentprojectqualifiesasanindividualCGU.Eachoftheseassetsgeneratesorwillhavetheabilitytogeneratecashinflowsthatareindependentoftheotherassetsandthereforequalifiesasanindividualassetforimpairmenttestingpurposes.


(vi)ClassificationofGoldStreamInstrumentsThe Company holds gold stream agreements with counterparties for the purchase and delivery of gold and silver.ManagementhasassessedthesegoldstreamagreementsunderthescopeofIFRS9,FinancialInstrumentsastowhetherornot theagreementsconstitutea financial instrument.As thegoldstreamobligationhasembeddedderivatives thatwouldotherwiseneedtobeaccountedforseparatelyatFVTPL,ManagementhasdesignatedthedepositreceivedfromRoyalGoldasa financial liabilityatFVTPL,with initialandsubsequentmeasurementat fairvalue,aspermittedunderIFRS9.

(b) Key sources of estimation uncertainty in the application of accounting policies

(i) RevenuerecognitionRevenuefromsalesofconcentrateisrecordedwhentherightsandrewardsofownershippasstothebuyer.Variationsbetweenthepricessetinthecontractsandfinalsettlementpricesmaybecausedbychangesinthemarketpricesandresult in an embedded derivative in the accounts receivable. The embedded derivative is recorded at fair value eachreportingperioduntilfinalsettlementoccurs,withchangesinthefairvaluebeingrecordedasrevenue.Forchangesinmetalquantitiesuponreceiptofnewinformationandassays,theprovisionalsalesquantitiesareadjustedaswell.

(ii) InventoryvaluationManagement values inventory at the weighted average production costs or net realizable value (“NRV”). Weightedaverage production costs include expenditures incurred and depreciation and depletion of assets used inmining andprocessing activities that are deferred and accumulated as the cost of ore in stockpiles, ore on leach pad, work-in-processand finishedmetals inventories. Theallocationof costs toore in stockpiles,oreon leachpadsand in-processinventoriesandthedeterminationofNRVinvolvetheuseofestimates.Costsareremovedfromtheleachpadbasedontheaveragecostperrecoverableounceofgoldandsilverontheleachpadasgoldandsilverarerecovered.Estimatesofrecoverablegoldandsilverontheleachpadsarecalculatedfromthequantitiesoforeplacedonthepads,thegradeoforeplacedontheleachpadsandanestimatedpercentageofrecovery.Timingandultimaterecoveryofgoldandsilvercontainedonleachpadscanvarysignificantlyfromtheestimates.

(iii) MineralreservesandresourcesThefiguresformineralreservesandmineralresourcesaredeterminedinaccordancewithNationalInstrument43-101,“StandardsofDisclosure forMineral Projects”, issuedby theCanadianSecuritiesAdministrators. Therearenumerousestimatesindeterminingthemineralreservesandestimates.Suchestimationisasubjectiveprocess,andtheaccuracyofany mineral reserve or resource estimate is a function of the quantity and quality of available data and of theassumptions made and judgments used in engineering and geological interpretation. Differences betweenmanagement’sassumptionsincludingeconomicassumptions,suchasmetalpricesandmarketconditions,couldhaveamaterialeffectinthefutureontheCompany’sfinancialpositionandresultsofoperations.

(iv) EstimatedrecoverableouncesThe carrying amounts of the Company’s mining properties are depleted based on recoverable ounces. Changes toestimatesofrecoverableouncesanddepletablecostsincludingchangesresultingfromrevisionstotheCompany’smineplansandchangesinmetalpriceforecastscanresultinachangetofuturedepletionrates.

(v) DeferredincometaxesIn assessing the probability of realizing income tax assets recognized, management makes estimates related toexpectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existingtemporarydifferencesandthelikelihoodthattaxpositionstakenwillbesustaineduponexaminationbyapplicabletaxauthorities.Inmakingitsassessments,managementgivesadditionalweighttopositiveandnegativeevidencethatcan


beobjectivelyverified.Estimatesoffuturetaxableincomearebasedonforecastedcashflowsfromoperationsandtheapplicationofexistingtaxlawsineachjurisdiction.ForecastedcashflowsfromoperationsarebasedonLOMprojectionsinternallydevelopedandreviewedbymanagement.TheCompanyconsiderstaxplanningopportunitiesthatarewithinthe Company’s control, are feasible and implementable without significant obstacles. Examination by applicable taxauthoritiesissupportedbasedonindividualfactsandcircumstancesoftherelevanttaxpositionexaminedinlightofallavailable evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varyinginterpretations,itispossiblethatchangesintheseestimatescanoccurthatmateriallyaffecttheamountsofincometaxassetrecognized.Attheendofeachreportingperiod,theCompanyreassessesunrecognizedincometaxassets.

(vi) ReclamationandclosurecostobligationsTheCompany’s provision for reclamation and closure cost obligations representsmanagement’s best estimate of thepresentvalueofthefuturecashoutflowsrequiredtosettletheliabilitywhichreflectsestimatesoffuturecosts,inflation,movements in foreign exchange rates and assumptions of risks associated with the future cash outflows, and theapplicablerisk-freeinterestratesfordiscountingthefuturecashoutflows.ChangesintheabovefactorscanresultinachangetotheprovisionrecognizedbytheCompany.

4.FUTURECHANGESINACCOUNTINGPOLICIESRevenueOnMay28,2014,theIASBissuedIFRS15,RevenuefromContractswithCustomers(“IFRS15”).Thisstandardoutlinesasingle comprehensive model with prescriptive guidance for entities to use in accounting for revenue arising fromcontractswithitscustomers.IFRS15usesacontrol-basedapproachtorecognizerevenuewhichisachangefromtheriskandrewardapproachunderthecurrentstandard.ThisstandardreplacesIAS18Revenue,IAS11ConstructionContractsandrelatedinterpretations.TheeffectivedateisforreportingperiodsbeginningonorafterJanuary1,2018withearlyapplicationpermitted.TheCompanywilladoptIFRS15effectiveJanuary1,2018applyingtheretrospectivemethodoftransition.

The Company has evaluated the potential impact of applying IFRS 15, analyzing its sale agreements. The standardrequiresentities toapportion revenueearned fromcontracts to individualpromisesorperformanceobligations,onarelative standalone selling price basis. For the Company’s concentrate sales, the sellermay contract for and pay theshipping and insurance costs necessary to bring the goods to the named destination. Therefore, where material, aportionof the revenueearnedunder thesecontracts, representing theobligation to fulfill the shippingand insuranceservices,willbedeferredandrecognizedovertimeastheobligationsarefulfilled,alongwiththeassociatedcosts.BasedontheCompany’sassessment,theimpactofthischangeontheamountofrevenuerecognizedinayearisnotexpectedtobesignificant.Asaresult,theCompanydoesnotanticipateanychangesintheamountsoftherevenuerecognizedorasignificantchangeinthetimingofrevenuerecognitionunderthenewstandard.

LeasesOnJanuary6,2016,theIASB issuedIFRS16,Leases(“IFRS16”).Thisstandardspecifiesthemethodologytorecognize,measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees torecognizeassetsandliabilitiesforallleasesunlesstheleasetermis12monthsorlessortheunderlyingassethasalowvalue.ThisstandardreplacesIAS17Leases.TheeffectivedateisforreportingperiodsbeginningonorafterJanuary1,2019with early adoption permitted. The Company is assessing the effect of adoption of IFRS 16 on its consolidatedfinancialstatements.


5.REVISIONTOPRIOR-YEARCOMPARATIVESIn the firstquarterof2017, theCompany identifiedan immaterialerror relating todepletionof itsNewAftonmininginterestfortheyearendedDecember31,2016resultinginareductionin2016netearningsof$9.7million.

Thequarterly impacton thecomparativeconsolidated incomestatement isoutlined in the tablebelow.The resultingoverstatementof themining interestsbalanceof$15.4million,overstatementofdeferred tax liabilityof$5.3million,andunderstatementofinventoriestotalling$0.4millionasatDecember31,2016hasbeenrevisedinthecomparativeconsolidated statements of financial position and changes in equity, and the associated notes to the consolidatedfinancialstatements.Therehasbeennochangetothecashflowsfromoperating, investing,andfinancingactivities inthecomparativeconsolidatedstatementsofcashflow.

1. FortheperiodsinwhichtheCompanyrecordsaloss,dilutedlosspershareiscalculatedusingthebasicweightedaveragenumberofsharesoutstanding,asusingthedilutedweightedaveragenumberofsharesoutstandinginthecalculationwouldbeanti-dilutive.

Threemonths

endedThreemonths

endedThreemonths

endedThreemonths

ended

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)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)


6.EXPENSES(a) Operatingexpensesbynature

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016OPERATINGEXPENSESBYNATURE Rawmaterialsandconsumables 143.0 127.6

Salariesandemployeebenefits 93.3 84.9

Contractors 43.6 35.0

Repairsandmaintenance 23.9 21.1

Generalandadministrative 20.2 14.8

Operatingleases 2.9 7.7

Royalties 8.4 6.3

Drillingandanalytical 1.3 1.3

Other 3.3 4.3

Totalproductionexpenses 339.9 303.0

Less:Productionexpensescapitalized (23.0) (39.7)

Less:Changeininventoriesandwork-in-progress 4.1 12.2

Totaloperatingexpenses 321.0 275.5

(b) Financecostsandincome

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016FINANCECOSTS

Interestonseniorunsecurednotes 54.4 54.0

InterestonCreditFacility 5.9 0.6

Accretionexpenseondecommissioningobligations(Note18) 1.3 1.4

Gainonmodificationoflong-termdebt(Note12) (3.3) -

Otherfinancecosts 6.2 3.3

64.5 59.3

Less:amountsincludedincostofqualifyingassets (51.3) (49.4)

Totalfinancecosts 13.2 9.9

FINANCEINCOME Interestincome 1.1 1.4


(c) Othergains(losses)

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016OTHERGAINS(LOSSES) Unrealizedgainonsharepurchasewarrants 1.2 0.2

Gainonforeignexchange 43.8 12.0

GainondisposalofElMorrostream 33.0 -

Othergainondisposalofassets 0.3 0.1

(Loss)gainonrevaluationofinvestments (0.2) 0.5

Unrealizedlossonrevaluationofgoldstreamobligation(Note13) (21.8) (31.1)

Settlementand(loss)gainonrevaluationofgoldpriceoptioncontracts (13.9) 10.5

Lossonrevaluationofcopperforwardcontractsandcopperpriceoptioncontracts (4.4) 0.3

Other 1.2 (0.2)Totalothergains(losses) 39.2 (7.7)7.TRADEANDOTHERRECEIVABLES

AsatDecember31

(inmillionsofU.S.dollars) 2017 2016TRADEANDOTHERRECEIVABLES Tradereceivables 3.8 27.4

Salestaxreceivable 22.7 11.8

Unsettledprovisionallypricedconcentratederivativesandcopperswapcontracts(Note14) (1.9) (4.5)

Other 2.5 2.4

Totaltradeandotherreceivables 27.1 37.18.TRADEANDOTHERPAYABLES

AsatDecember31

(inmillionsofU.S.dollars) 2017 2016TRADEANDOTHERPAYABLES Tradepayables 60.9 32.0

Interestpayable 6.9 8.6

Accruals 79.2 126.4

Currentportionofreclamationandclosurecostobligations(Note18) 2.6 0.9

Currentportionofgoldstreamobligation(Note13) 24.5 -

Derivativeliabilities(Note14) 4.1 1.3

Totaltradeandotherpayables 178.2 169.2


9.INVENTORIES AsatDecember31

(inmillionsofU.S.dollars) 20172016

(Note5)INVENTORIES Heapleachore(4) 163.1 185.9

Work-in-process(3) 18.5 8.7

Finishedgoods(1)(3) 16.1 11.5

Stockpileore(3) 23.8 6.7

Supplies(3) 50.4 40.9

271.9 253.7

Less:non-currentinventories(2) (78.7) (103.3)

Totalcurrentinventories 193.2 150.4

1. TheamountofinventoriesrecognizedinoperatingexpensesfortheyearendedDecember31,2017was$302.8million(2016-$259.1million).2. Non-currentinventories,whichincludeheapleachinventoriesatMesquiteandlow-gradestockpiledinventoriesatRainyRiver,of$78.7million(December31,2016–

$103.3million)areexpectedtoberecoveredafteroneyear.3. RainyRiverachievedcommercialproductiononNovember1,2017,resultinginRainyRiverrecognizinginventoriesasatDecember31,2017.4. DuringtheyearendedDecember31,2016theCompanywrotedown$26.6millionofinventoryatCerroSanPedroofwhich$24.0millionwasincludedinoperating

expensesand$2.6millionwasincludedindepreciationanddepletion.


10.MININGINTERESTS MiningProperties

DepletableNon-

depletablePlant&

equipmentConstructioninprogress

Exploration&evaluation Total


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)

Transfers 23.7 6.0 64.3 (94.0) - -

Impairments - - - - (6.4) (6.4)

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

Additions 88.8 65.8 44.5 529.7 - 728.8

DisposalofElMorrostream - (32.0) - - - (32.0)

Disposals - - (17.0) - - (17.0)Impairmentlossonheld-for-saleassets(2)

(48.6)

-

-

-

-

(48.6)

Assetsreclassifiedasheld-for-sale(2) (178.5) (9.8) (161.4) (0.3) - (350.0)

Transfers(3) 1,219.5 (580.2) 554.1 (1,213.8) - (20.4)

Impairments(4) (268.4) - - - - (268.4)

AsatDecember31,2017 2,353.0 560.9 1,379.3 57.0 1.1 4,351.3

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 161.7 - 102.5 - - 264.2

Disposals - - (16.2) - - (16.2)

Reclassifiedasheldforsale(2) (159.3) - (105.4) - - (264.7)

AsatDecember31,2017 737.3 - 413.6 - - 1,150.9

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

AsatDecember31,2017 1,615.7 560.9 965.7 57.0 1.1 3,200.4

1. Prior-yearperiodcomparativeshavebeenrevisedaspernote5.2. RefertoNote16forfurtherinformationontheassetsheldforsale.3. EffectiveNovember1, 2017,RainyRiverachieved commercial production.Asa result, theCompany transferredamounts capitalized to construction inprogress to

depletableminingproperties andplant&equipment andassets capitalizedas non-depletableminingpropertieswere transferred to depletableminingproperties.Additionally,onNovember1,2017,theCompanytransferred$20.4millionrelatedtoinventoriesfromconstructioninprogresstocurrentassets.

4. Refertonote11forfurtherinformationonimpairment.

TheCompanycapitalizedinterestof$51.3millionfortheyearendedDecember31,2017(2016-$49.4million)toqualifyingdevelopmentprojects.TheCompany’sannualizedcapitalizationrateis5.44%(2016–6.70%).


DisposalofElMorrogoldstreamasset

InFebruary2017,theCompanydisposedofitsElMorrogoldstreamassetforproceedsof$65.0millionwhichresultedinanetgainof$33.0million.

CarryingamountbypropertyasatDecember31,2017:

AsatDecember31,2017

(inmillionsofU.S.dollars) DepletableNon-

depletablePlant&

equipmentConstructioninprogress Total

MININGINTERESTBYSITE NewAfton 521.8 22.9 225.7 15.1 785.5

Mesquite 150.0 - 83.5 2.7 236.2

CerroSanPedro 0.6 - - - 0.6

RainyRiver 948.1 0.5 633.6 39.2 1,621.4

Blackwater - 537.5 14.6 - 552.1

Other(1) - 1.1 3.5 - 4.6

CarryingamountasatDecember31,2017 1,620.5 562.0 960.9 57.0 3,200.4

1. 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 3,191.3

1. Otherincludescorporatebalancesandexplorationproperties.2. Prior-yearperiodcomparativeshavebeenrevisedaspernote5.


11.IMPAIRMENTInaccordancewiththeCompany’saccountingpolicies,therecoverableamountofanassetorCGUisestimatedwhenanindicationofimpairmentexists.AsatDecember31,2017,indicatorsofimpairmentexistedattheRainyRiverCGU.

In January 2018, the Company announced higher expected operating expenses and capital expenditures over RainyRiver’sfirstnineyearsofoperations.TheCompanyhasidentifiedtherevisedoperatingexpenseandcapitalexpenditureestimatesatRainyRiverasanindicatorofimpairmentasatDecember31,2017.

FortheyearendedDecember31,2017,theCompanyrecordedanafter-taximpairmentlossof$181.0millionwithinnetloss,asnotedbelow:


(inmillionsofU.S.dollars) RainyRiverIMPAIRMENTCHARGEINCLUDEDWITHINNETLOSS

RainyRiverdepletableminingproperties 268.4

Taxrecovery (87.4)

Totalimpairmentchargeaftertax 181.0

Intheprioryear,indicatorsofimpairmentexistedattheRainyRiverCGUandfortheCompany’s3%NSRroyaltyontheproductionoftheRioFigueroaproperty(“RioFigueroaNSR”).TheCompanyhadidentifiedtherevisedcapitalcostandthree-month delay at the Rainy River project and the lack of activity on the Rio Figueroa project as indicators ofimpairmentintheprioryearandperformedanimpairmentassessmenttodeterminetherecoverableamountoftheseCGUsatDecember31,2016.Intheprioryear,animpairmentlossof$6.4millionwasrecordedrelatingtoRioFigueroaNSR.Noimpairment losswasrecordedatRainyRiver intheprioryearasthecarryingvalueexceededtherecoverableamountasatDecember31,2016.

FortheyearendedDecember31,2016,theCompanyrecordedanimpairmentchargeof$6.4millionwithinnetloss,asnotedbelow:


(inmillionsofU.S.dollars) RioFigueroaNSRIMPAIRMENTCHARGEINCLUDEDWITHINNETLOSS

Explorationandevaluationassets 6.4

(i)MethodologyandkeyassumptionsImpairment is recognizedwhen thecarryingamountofaCGUexceeds its recoverableamount.ACGU is the smallestidentifiable group of assets that generates cash inflows that are largely independent of the cash inflows from otherassetsorgroupsofassets.EachoperatingmineanddevelopmentprojectrepresentsaseparateCGUaseachminesiteorprojecthastheabilityto,orthepotentialto,generatecashinflowsthatareseparatelyidentifiableandindependentofeachother.TheCompanyhasthefollowingCGUs:NewAfton,Mesquite,PeakMines,CerroSanPedro,RainyRiver,andBlackwater.Otherassetsconsistofcorporateassetsandexplorationproperties.

AsoutlinedinNote2,theCompanyusesfairvaluelesscostofdisposaltodeterminetherecoverableamountofanassetasitbelievesthatthiswillgenerallyresultinavaluegreaterthanorequaltothevalueinuse.Whenthereisnobindingsalesagreement,fairvaluelesscostsofdisposalisestimatedasthediscountedfutureafter-taxcashflowsexpectedtobederived fromaminesite, lessanamount forcosts tosellestimatedbasedonsimilarpast transactions.The inputsusedinthefairvaluemeasurementconstituteLevel3inputsunderthefairvaluehierarchy.


(a)RainyRiverCGU:Keyestimatesandjudgmentsincludeproductionlevels,operatingcostsandothercapitalexpendituresreflectedintheCompany’sLOMplans,thevalueofin-situouncesandlandholdings,aswellaseconomicfactorsbeyondmanagement’scontrol,suchasgoldandsilverprices,discountratesandforeignexchangerates.TheCompanyconsidersthisapproachtobeconsistentwiththevaluationapproachtakenbymarketparticipants.

Life-of-MineplansEstimatedcashflowsarebasedonLOMplanswhichestimateexpectedfutureproduction,commodityprices,exchangeassumptions,operatingcostsandcapitalcosts.ThecurrentLOMplanis14years.LOMplansuseprovenandprobablemineral reserves only and do not utilize mineral resource estimates for a CGU. When options exist for the futureextractionandprocessingoftheseresources,anestimateofthevalueoftheunminedmineralresources(alsoreferredtoasin-situounces)isincludedinthedeterminationoffairvalue.

In-situouncesIn-situouncesareexcludedfromtheLOMplansduetotheneedtocontinuallyreassesstheeconomicreturnsonandtiming of specific production options in the current economic environment. The value of in-situ ounces has beenestimatedbasedonanenterprisevalueperequivalentresourceounce,withtheenterprisevaluebasedonthemarketcapitalizationofasubsetofpubliclytradedcompanies.

DiscountratesWhen discounting estimated future cash flows, the Company uses a real after-tax discount rate that is designed toapproximate what market participants would assign. This discount rate is calculated using the Capital Assets PricingModel(“CAPM”).TheCAPMincludesmarketparticipants’estimatesforequityriskpremium,costofdebt,targetdebttoequity,risk-freeratesandinflation.FortheDecember31,2017impairmentanalysis,arealdiscountrateof4.00%wasused(2016-realdiscountrateof5.50%).

CommoditypricesandexchangeratesCommoditypricesandexchangeratesareestimatedwithreferencetoexternalmarketforecasts.Theratesappliedhavebeenestimatedusingconsensuscommoditypricesandexchangerateforecasts.Forimpairmentanalysis,thefollowingcommoditypricesandexchangerateassumptionswereused:


(inU.S.dollars,exceptwherenoted)

2018-2022Average Longterm

2017-2021Average Longterm

COMMODITYPRICES

Gold($/ounce) 1,300 1,300 1,325 1,300

Silver($/ounce) 19.16 19.25 19.66 20.00

EXCHANGERATES

CAD:USD 1.24 1.24 1.31 1.30

Significant judgments and assumptions are required in making estimates of fair value. It should be noted that CGUvaluations are subject to variability in key assumptions including, but not limited to, long-term gold prices, currencyexchangerates,discountrates,production,operatingandcapitalcosts.AnyvariationinoneormoreoftheassumptionsusedtoestimatefairvaluecouldresultinachangeinaCGU’sfairvalue.


(b)RioFigueroaNSR:Keyestimatesandjudgmentsused inthefairvalue lesscostofdisposalcalculationareestimatesofproduction levels,probabilityoftheprojectbeingdevelopedandeconomicfactorsbeyondmanagement’scontrol,suchascopperpricesanddiscountrates.

(ii)ImpactofimpairmenttestsTheCompanycalculatedtherecoverableamountoftheRainyRiverCGUusingthefairvaluelesscostofdisposalmethodas noted above. For the year ended December 31, 2017, the Company recorded pre-tax impairment losses of$268.4million,$181.0millionnetoftax,withinnetloss.ThefairvalueoftheRainyRiverCGUwasnegativelyimpactedbyhigherexpectedoperatingexpensesandcapitalexpendituresovertheLOM.

For the year ended December 31, 2016, the Company recorded impairment losses of $6.4million related to the RioFigueroaNSR,withinnetloss.

(iii)SensitivityanalysisAfter effecting the impairment for the Rainy River CGU, the fair value of this CGU is assessed as being equal to itsrespectivecarryingamountasatDecember31,2017.Anyvariationinthekeyassumptionsusedtodeterminefairvaluewouldresultinachangeoftheassessedfairvalue.ItisestimatedthatchangesinthekeyassumptionswouldhavethefollowingapproximateimpactonthefairvalueoftheRainyRiverCGUatDecember31,2017:

AsatDecember31,2017

(inmillionsofU.S.dollars) RainyRiverIMPACTOFCHANGESINTHEKEYASSUMPTIONSUSEDTODETERMINEFAIRVALUE $100perouncechangeingoldprice 235.1

0.5%changeindiscountrate 25.9

5%changeinexchangerate 106.5

5%changeinoperatingcosts 90.3

5%changeinin-situounces 20.2


12.LONG-TERMDEBTLong-termdebtconsistsofthefollowing:

AsatDecember31

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

Seniorunsecurednotes-dueNovember15,2022(a) 494.3 493.4

Seniorunsecurednotes-dueNovember15,2025(b) 283.4 -

CreditFacility(c) 230.0 100.0

Totallong-termdebt 1,007.7 889.5

(a) SeniorUnsecuredNotes–dueNovember15,2022In2012,theCompanyissued$500.0millionofseniorunsecurednotes(“2022UnsecuredNotes”).AsatDecember31,2017,thefacevaluewas$500.0million.The2022UnsecuredNotesaredenominatedinU.S.dollars,matureandbecomedueandpayableonNovember15,2022,andbearinterestattherateof6.25%perannum.Interestispayableinarrearsinequalsemi-annualinstalmentsonMay15andNovember15ofeachyear.

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:

• 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–dueMay15,2025andSeniorUnsecuredNotes–dueApril15,2020OnMay18,2017, theCompany issued$300.0millionof seniorunsecurednotes (“2025UnsecuredNotes”) fornetcashproceedsof$294.6millionaftertransactioncosts.Theproceedswereusedtoredeemandpurchaseforcancellationthe$300.0millionprincipalamountofthepreviouslyoutstandingseniorunsecurednotes(“2020UnsecuredNotes”)forwhichthe Company was required to pay a redemption premium of $5.3 million. As a result, total costs paid relating to thisrefinancingwere$10.7million.Additionally,theCompanywasrequiredtopay$2.8millionofaccruedinterestonthe2020UnsecuredNotesonredemptionandcancellation.


This refinancing transactiondidnotmeet thecriteriaassociatedwithanextinguishmentunder IFRS9as thediscountedpresentvalueof thecashflowsof the2025UnsecuredNoteswas less than10%different fromthepresentvalueof theremainingcashflowsofthe2020UnsecuredNotes.Asaresult,theCompanyrecognizedagainonthemodificationofitsfinancialliability.Transactioncostsrelatingtothe2025UnsecuredNoteshavebeenoffsetagainstthecarryingamountandarebeingamortizedtonetearningsusingtheeffectiveinterestmethod.

The2025UnsecuredNotesbear interest at the rateof 6.375%per annum. Interest is payable in arrears in equal semi-annualinstalmentsonMay15andNovember15ofeachyear.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) CreditFacilityTheCompanyholdsa$400.0millionrevolvingcreditfacility(the“CreditFacility”)withamaturitydateofAugust2020.

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),bothofwhicharemeasuredonarollingfour-quarterbasisattheendofeveryquarter.

InJune2017,theCompanyamendedtheCreditFacility’snetdebttoAdjustedEBITDA(“LeverageRatio”)covenant,toincrease themaximum Leverage Ratio to 4.0 to 1.0 from January 1, 2018 toMarch 31, 2018 (previously 3.5 to 1.0).Followingthatperiod,themaximumleverageratiowillbe3.5 :1.0.AsatDecember31,2017,themaximumLeverageRatiois4.0:1.0.


Significantfinancialcovenantsareasfollows:

Twelvemonthsended

December31Twelvemonthsended

December31

Financialcovenant

2017 2016FINANCIALCOVENANTS Minimuminterestcoverageratio(AdjustedEBITDAtointerest) >3.0:1 4.7:1 5.7:1

Maximumleverageratio(netdebttoAdjustedEBITDA) <4.0:1 3.1:1 2.6:1

TheinterestmarginondrawingsundertheCreditFacilityrangesfrom1.00%to3.25%overLIBOR,thePrimeRateortheBaseRate,basedontheCompany’snetdebttoAdjustedEBITDAratioandthecurrencyandtypeofcreditselectedbytheCompany.BasedontheCompany’snetdebttoAdjustedEBITDAratio,therateis3.25%overLIBORasatDecember31, 2017 (December 31, 2016 – 3.25%). The standby fees on undrawn amounts under the Credit Facility range from0.45%to0.73%,dependingontheCompany’snetdebttoAdjustedEBITDAratio.BasedontheCompany’snetdebttoadjustedEBITDAratio,therateis0.73%asatDecember31,2017(December31,2016–0.73%).

AsatDecember31,2017,theCompanyhasdrawn$230millionundertheCreditFacilityandtheCreditFacilityhasbeenusedto issue lettersofcreditof$138.8millionasatDecember31,2017(December31,2016-$122.1million).Oftheissued letters of credit, $16.6 million relate to Peak Mines. Letters of credit relate to reclamation bonds, worker’scompensationsecurityandotherfinancialassurancesrequiredwithvariousgovernmentagencies.

ThefollowingisasummaryofthechangesinliabilitiesarisingfromfinancingactivitiesfortheyearendedDecember31,2017:

AsatDecember31,

2016 Borrowings RepaymentsFairValuechanges

Interest&Accretion

ForeignExchange

AsatDecember31,

2017LIABILITIESARISINGFROMFINANCINGACTVITIES

Long-termdebt 889.5 424.6 (305.3) (3.3) 2.2 - 1,007.7Interestpayable(1) 8.6 - (59.8) - 58.1 - 6.9

Goldstreamobligation 246.5 - (2.4) 29.4 - - 273.5

Total 1,144.6 424.6 (367.5) 26.1 60.3 - 1,288.1

1. Forthepurposesofthisreconciliation,interestpaidfortheyearendedDecember31,2017excludes$3.9millioninstandbyfeesontheCreditFacilityand

feesontheCompany’sissuedlettersofcredit.


13.GOLDSTREAMOBLIGATIONIn2015,theCompanyenteredintoa$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 Company has designated the gold stream obligation as a financial liability at fair value through profit or loss(“FVTPL”) under the scope of IFRS 9 (2013). Accordingly, the Company values the liability at the present value of itsexpected future cash flows at each reporting periodwith changes in fair value reflected in the consolidated incomestatements and consolidated statements of comprehensive loss. The gold stream obligation contained a maximumleverage ratio covenant (net debt to EBITDA) of 3.5 : 1.0,with the exception that the net leverage covenant limit ispermittedtobeincreasedto4.0:1.0fortwoconsecutivequarters,providedthatitthereafterreturnstoamaximumof3.5:1.0.Furthermore,theleverageratiocontainedintheaboveagreementwithRoyalGoldhasalsobeenadjustedtomatchtherevisedmaximumleverageratioundertheCreditFacility,uptoMarch31,2018.

ThefollowingisasummaryofthechangesintheCompany’sgoldstreamobligation:

(inmillionsofU.S.dollars) CHANGEINSTREAMOBLIGATION

Balance,December31,2015 147.6

FairvalueadjustmentsrelatedtochangesintheCompany’sowncreditrisk(1) 67.8

Otherfairvalueadjustments(2) 31.1


Settlementsduringtheperiod(3) (2.4)

FairvalueadjustmentsrelatedtochangesintheCompany’sowncreditrisk(1) 7.6

Otherfairvalueadjustments(2) 21.8


Less:currentportionofgoldstreamobligation (24.5)

Non-currentportionofgoldstreamobligation 249.0

1. FairvalueadjustmentsrelatedtochangesintheCompany’sowncreditriskareincludedinothercomprehensiveincome.2. Otherfairvalueadjustmentsareincludedintheconsolidatedincomestatements.3. Ofthetotal$2.4millioninsettlements,$1.3millionisunpaidandincludedinaccrualsasatDecember31,2017.

FairvalueadjustmentsrepresenttheneteffectonthegoldstreamobligationofchangesinthevariablesincludedintheCompany’s valuation model between the date of receipt of deposit and the reporting date. These variables includeaccretion, risk-free interest rate, future metal prices, Company-specific credit spread and expected gold and silverouncestobedelivered.


14.DERIVATIVEINSTRUMENTS AsatDecember31

(inmillionsofU.S.dollars) 2017 2016DERIVATIVEASSETS Goldpriceoptioncontracts - 17.6

Dieselswapcontracts - 0.1

Copperforwardcontracts - 0.3

Totalderivativeassets - 18.0

DERIVATIVELIABILITIES

Sharepurchasewarrants(1) - 1.3Unsettledprovisionallypricedconcentratederivatives,andswapcontracts(2) 1.9 4.5Copperpriceoptioncontracts(3) 4.1 -

Totalderivativeliabilities 6.0 5.8

1. OnJune28,2017,NewGold’s sharepurchasewarrantsexpired,unexercised.AsatDecember31,2016, sharepurchasewarrantswere included in tradeandotherpayables.

2. Unsettledprovisionallypricedconcentratederivativesareincludedwithintradeandotherreceivablesinthestatementoffinancialposition.3. Copperpriceoptioncontractsareincludedwithintradeandotherpayablesinthestatementoffinancialposition.

(a) Hedginginstruments YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016EFFECTIVEPORTIONOFCHANGEINFAIRVALUEOFHEDGINGINSTRUMENTS

Foreignexchangegainoncashandcashequivalentsdesignatedashedginginstruments - 4.9Reclassificationofrealizedforeignexchangegainoncashandcashequivalentsdesignatedashedginginstrument

-

3.2

Unrealized(loss)gainondieselswapcontracts(i) (0.4) 1.2

Realizedlossonsettlementofdieselswapcontracts(i) 0.3 2.5

Deferredincometaxrelatedtohedginginstruments - (1.5)

Totalhedginggains(losses)inothercomprehensiveincome (0.1) 10.3

(i)DieselswapcontractsIn2015,theCompanyenteredintodieselswapcontractstohedgedieselcostatMesquite.Realizedgainsandlossesarereclassifiedfromothercomprehensiveincometooperatingexpensesasdieselisconsumedattheminesite.

TheCompanyrealizedalossof$0.3milliononsettlementof1.0milliongallonsfortheyearendedDecember31,2017(2016–lossof$2.5millionon5.5milliongallons).ThehedgewasfullysettledasatJune30,2017.

(b) ProvisionallypricedcontractsTheCompanyhadprovisionallypricedsales forwhichprice finalization isoutstandingatDecember31,2017.Realizedand unrealized non-hedged derivative gains (losses) on the provisional pricing of concentrate sales are classified asrevenue,with the unsettled provisionally priced concentrate derivatives included in trade and other receivables. TheCompany enters into gold and copper swap contracts to reduce exposure to gold and copper prices. Realized andunrealizedgains(losses)arerecordedinrevenue,withtheunsettledgoldandcopperswapsincludedintradeandotherreceivables.


Thefollowingtablessummarizetherealizedandunrealizedgains(losses)onprovisionallypricedsales:


(inmillionsofU.S.dollars) Gold Copper TotalGAIN(LOSS)ONTHEPROVISIONALPRICINGOFCONCENTRATESALESRealized 1.9 10.0 11.9

Unrealized 0.1 4.1 4.2

Totalgain(loss) 2.0 14.1 16.1


(inmillionsofU.S.dollars) Gold Copper Total(LOSS)GAINONTHEPROVISIONALPRICINGOFCONCENTRATESALESRealized 2.8 6.8 9.6

Unrealized (1.5) 6.0 4.5

Total(loss)gain 1.3 12.8 14.1

Thefollowingtablessummarizetherealizedandunrealizedgains(losses)ongoldandcopperswapcontracts:


(inmillionsofU.S.dollars) Gold Copper TotalGAIN(LOSS)ONSWAPCONTRACTSRealized (2.0) (16.8) (18.8)

Unrealized (0.3) (5.8) (6.1)

Totalgain(loss) (2.3) (22.6) (24.9)


(inmillionsofU.S.dollars) Gold Copper TotalGAIN(LOSS)ONSWAPCONTRACTSRealized (2.6) (4.1) (6.7)

Unrealized 1.4 (10.3) (8.9)

Totalgain(loss) (1.2) (14.4) (15.6)


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

AsatDecember31

2017 2016VOLUMESSUBJECTTOFINALPRICINGNETOFOUTSTANDINGSWAPS Goldounces(000s) 2.0 4.0

Copperpounds(millions) 1.6 3.0

(c) GoldpriceoptioncontractsInMarch 2016, the Company entered into gold price option contracts by purchasing put options at a strike price of$1,200perounceandsellingcalloptionsata strikepriceof$1,400perounce for270,000ouncesofgoldproductionbetweenApril2016andDecember2016(“goldpriceoptioncontracts”).InSeptember2016,theCompanyenteredintoasecondtrancheofgoldpriceoptioncontractsbypurchasingputoptionsatastrikepriceof$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 $0.9 million inJune2017relatingtothisthirdtrancheofgoldpriceoptioncontracts.

Thecalloptionssoldandputoptionspurchasedaretreatedasderivativefinancialinstrumentsandmarkedtomarketateachreportingperiodontheconsolidatedstatementoffinancialpositionwithchangesinfairvaluerecognizedinothergainsand losses.Realizedgainsand lossesasa resultof theexerciseof theCompany’s call andputoptionsup toanamountnotexceedingtheCompany’sproductionofgoldouncesforthereportingperiodarerecordedasanadjustmenttorevenue.TheexerciseofoptionsongoldouncesinexcessoftheCompany’sgoldproductionforthereportingperiodarerecordedasothergainsandlosses.TheCompanypresentsthefairvalueofitsputandcalloptionsonanetbasisontheconsolidatedstatementsoffinancialpositionwithin‘derivativeassets’.

For the year ended December 31, 2017, the Company exercised put options for 140,000 ounces and recognized$7.5millionwithin revenue and earnings from discontinued operations. For the year endedDecember 31, 2017, theCompanyrecognizedalossof$11.0millionrelatingtothegoldpriceoptioncontracts,whichincludesthesettlementandlossonrevaluationofthegoldpriceoptioncontractsof$13.9millionaspernote6and$4.6millionincludedinlossfromdiscontinuedoperations,netoftheamountincludedinrevenue.AsatDecember31,2017,thecontractshaveexpired.Nofurthergoldpriceoptioncontractshavebeenenteredintofor2018.


(d) CopperforwardcontractsIn 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‘tradeandotherpayables’.AsatDecember31,2017,allcopperforwardcontractshaveexpired.FortheyearendedDecember31,2017,theCompanyrecognizedalossof$0.3millionrelatedtocopperforwardcontracts.

(e) CopperpriceoptioncontractsInOctober2017,theCompanyenteredintocopperpriceoptioncontractsbypurchasingputoptionsatastrikepriceof$3.00perpoundandsellingcalloptionsatastrikepriceof$3.37perpoundfor27,600tonnes(approximately60millionpounds)ofcopperproductionduring2018(“copperpriceoptioncontracts”).Consistentwiththeaccountingtreatmentof the gold price option contracts described above, the call options sold and put options purchased are treated asderivative financial instruments and marked to market at each reporting period on the consolidated statement offinancialpositionwithchangesinfairvaluerecognizedinothergainsandlosses.RealizedgainsandlossesasaresultoftheexerciseoftheCompany’scallandputoptionsuptoanamountnotexceedingtheCompany’sproductionofcopperpoundsforthereportingperiodarerecordedasanadjustmenttorevenue.TheexerciseofoptionsoncopperpoundsinexcessoftheCompany’scopperproductionforthereportingperiodarerecordedasothergainsandlosses.

Quantity

outstanding RemainingtermExercise

price($/lb)Fairvalue-asset

(liability)(1)

COPPERPRICEOPTIONCONTRACTSOUTSTANDING Coppercallcontracts-sold 27,600tonnes January–December2018 3.37 (7.8)

Copperputcontracts-purchased 27,600tonnes January–December2018 3.00 3.7

1. The Company presents the fair value of its put and call options on a net basis on the consolidated statements of financial position. The Company has a legallyenforceablerighttosetofftheamountsunderitsoptioncontractsandintendstosettleonanetbasis.


15.SHARECAPITALAt December 31, 2017, the Company had unlimited authorized common shares and 578.6 million common sharesoutstanding.

(a) No par value common shares issued Numberofshares

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

Exerciseofoptionsandvestedperformanceshareunits 3,827 16.3

IssuanceofsharesunderFirstNationsagreementsandlandpurchases 329 1.3

AcquisitionofBayfieldVenturesCorp. 84 0.4

BalanceatDecember31,2016 513,709 2,859.0Issuanceofcommonsharesonequityoffering(1) 61,740 166.6IssuanceofcommonsharesunderFirstNationsagreements 2,767 9.5Exerciseofoptionsandvestedperformanceshareunits(i) 420 1.4

BalanceatDecember31,2017 578,636 3,036.5

1. OnMarch 10, 2017, the Company closed a bought deal financing and related agreements and issued 61.7million common shares at a price of $2.80 per share.Proceedsof$172.9millionareincludedwithinequitynetofequityissuancecostsof$8.2millionandtheassociateddeferredtaxrecoveryof$1.9million.

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

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016SHARE-BASEDPAYMENTEXPENSES Stockoptionexpense(i) 2.6 3.6

Performanceshareunitexpense(ii) 1.4 3.5

Restrictedshareunitexpense(1)(iii) 1.2 2.7

Deferredshareunitexpense(iv) 1.0 0.7

CommonsharesissuedunderFirstNationsagreements(2) 2.1 -

Totalshare-basedpaymentexpenses 8.3 10.5

1. FortheyearendedDecember31,2017,$1.1million(2016-$2.2million)ofrestrictedshareunitexpenseand$2.1million(2016–nil)ofcommonsharesissuedunderFirstNationsagreementsexpensewasrecognizedinoperatingexpenses.

2. FortheyearsendedDecember31,2017and2016,commonshares issuedunderFirstNationsagreementspriortothecommencementofcommercialproductionatRainyRiverhavebeencapitalizedtomininginterests.

(i)StockoptionsUndertheCompany’sStockOptionPlan(the“Plan”),themaximumnumberofsharesreservedforexerciseofalloptionsgrantedby theCompanyunder thePlanand forall other security-basedcompensationarrangements,other than theperformanceshareunits,mustnotexceed3.5%oftheCompany’ssharesissuedandoutstandingatthetimetheoptionsaregranted.TheexercisepriceofcertainoptionsgrantedunderthePlanisthefive-dayvolumeweightedaveragesharepriceprecedingthegrantdate.Otheroptionshavetheexercisepriceequaltothesharepriceonthedateofissuance.Options granted under the Plan expire no later than the fifth or seventh anniversary of the date the options weregrantedandvestingprovisionsforissuedoptionsaredeterminedatthediscretionoftheBoard.OptionsgrantedunderthePlanaresettled forequity.TheCompanyhas incorporatedanestimated forfeiture rate for stockoptions thatwillnotvest.


ThefollowingtablepresentschangesinthePlan:

NumberofoptionsWeightedaverage

exerciseprice

(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


Granted 1,957 3.88

Exercised (235) 3.31

Forfeited (985) 5.01

Expired (2,505) 8.87


Theweighted average fair value of the stock options granted during the year endedDecember 31, 2017was C$1.69(2016–C$1.67).OptionswerepricedusingaBlack-Scholesoption-pricingmodel.Expectedvolatilityismeasuredastheannualizedstandarddeviationofstockpricereturns,basedonhistoricalmovementsoftheCompany’sshareprice.Thegrantdatefairvaluewillbeamortizedaspartofcompensationexpenseoverthevestingperiod.

TheCompanyhadthefollowingweightedaverageassumptionsintheBlack-Scholesoption-pricingmodel:

YearendedDecember31

2017 2016Grantprice C$3.88 C$4.44

Expecteddividendyield - -

Expectedvolatility 54.2% 49.8%

Risk-freeinterestrate 1.57% 1.37%

Expectedlifeofoptions 4.4years 3.7years

Fairvalue C$1.69 C$1.67

At December 31, 2017 the Company had 8.7 million stock options that were exercisable with a weighted averageexercise price of C$5.65 (2016 – 8.7 million with a weighted average exercise price of C$6.99). For the year endedDecember31,2017,theweightedaveragesharepriceonthedateofexercisewasC$4.16(2016–C$5.47).Theoptionsvestonethirdperyearoverathree-yearperiodbeginningonthefirstanniversaryofthegrantdate.


ThefollowingtablesummarizesinformationaboutthestockoptionsoutstandingasatDecember31,2017:

Optionsoutstanding Optionsexercisable

Weightedavg.

remainingcontractuallife

Numberofoptions

outstandingWeightedavg.exerciseprice

Weightedavg.remaining

contractuallifeNumberofoptions

outstandingWeightedavg.exerciseprice

ExercisepriceC$ (years) (000s) C$ (years) (000s) C$3.00-3.99 3.5 4,925.4 3.55 2.7 2,023.0 3.35

4.00-4.99 2.8 3,985.3 4.52 2.3 2,695.2 4.64

5.00-5.99 2.5 622.0 5.64 1.9 392.5 5.60

6.00-6.99 1.1 1,269.0 6.34 1.1 1,269.0 6.34

7.00-7.99 0.1 1,443.8 7.65 0.1 1,443.8 7.65

10.00-10.99 0.1 842.0 10.02 0.1 842.0 10.02

Totaloptions 2.4 13,087.5 5.08 1.6 8,665.5 5.65

(ii)PerformanceshareunitsPerformanceshareunits(“PSUs”)areissuedundertheCompany’sLong-TermIncentivePlan(“LTIP”).PSUsvestontheentitlementdate,asdeterminedbytheBoardinitsdiscretion,whichwillnotbelaterthanDecember31oftheyearthatis three years after the yearof service towhich theaward relates (the “EntitlementDate”with respect to aPSU). Inaddition,atthetimePSUsaregranted,theBoardmakesthepaymentofsuchPSUsubjecttoperformanceconditionsormeasures to be achieved by the Company, the Participant or a class of Participants, before the relevant EntitlementDate.

ForallPSUsgrantedtodate,thenumberofsharestobeissuedortheamountofcashtobepaidontheEntitlementDateofPSUswillvarybasedon“AchievedPerformance”.TheAchievedPerformanceisapercentagefrom50%to150%thatismultipliedbythenumberofPSUsgrantedtodeterminethenumberofsharestobeissuedand/ortheamountofcashtobe paid on the EntitlementDate. AchievedPerformance is calculatedbasedon the difference (the “TSRDifference”)between New Gold’s total shareholder return (“TSR”) and the TSR of the S&P/TSX Global Gold Index (the “Index”)(i.e. New Gold’s TSR minus Index TSR) for each of four Measurement Periods (described below). TheMeasurementPeriods are as follows: (i) the first calendar year after the year of service towhich the award relates; (ii) the secondcalendar year after the year of service towhich the award relates; (iii) the period beginning at the start of the thirdcalendaryearaftertheyearofservicetowhichtheawardrelates,butendingonadatebeforetherelevantEntitlementDate(inordertoallowsufficienttimetocalculatetheAchievedPerformanceand,consequently,thenumbersharestobe issued and/or cash tobepaidon the EntitlementDate); and (iv) theperiodbeginningon the first dayof the firstMeasurementPeriodandendingonthelastdayofthethirdMeasurementPeriod.ThefourMeasurementPeriodsareequallyweightedindeterminingtheAchievedPerformanceforaparticularPSUgrant.

IfNewGold’sTSRexceedstheTSRoftheIndexinaMeasurementPeriod(i.e.,theTSRDifferenceisgreaterthanzero),theAchievedPerformanceforthatperiodwillbeover100%.Similarly,ifNewGold’sTSRislessthantheTSRoftheIndexinaMeasurementPeriod(i.e.,theTSRDifferenceislessthanzero),theAchievedPerformanceforthatperiodwillbelessthan100%.ForthePSUs,theminimumAchievedPerformanceforanyMeasurementPeriodis50%andthemaximumis150%.ToachievethemaximumAchievedPerformanceforaMeasurementPeriod,theTSRDifferencemustbeatleast20%(i.e.,NewGold’sTSRminustheIndexTSR≥20%).

OntheEntitlementDate,aPSUmaybesettled:(i) incashequaltothefive-dayvolumeweightedaveragepriceoftheCompany’scommonsharesontheTSXmultipliedbythenumberofPSUsandtheAchievedPerformance;or(ii)bytheissuanceoftheequivalentnumberofcommonsharesofNewGoldasthenumberofPSUsmultipliedbytheAchieved


Performance,or(iii)acombinationofboth.TheBoardmay,initsdiscretion,grantPSUsthatcanonlybesatisfiedbytheissuanceofcommonsharesfromtreasuryorbyacashpaymentorbyacombinationthereof.

The table below presents changes to the number of PSUs outstanding under the LTIP. The LTIP includes PSUs andrestrictedshareunits(“RSUs”).

(iii)RestrictedshareunitsRSUsaregrantedundertheLTIP.EachRSUallowstherecipient,subjecttocertainplanrestrictions,toreceivecashonthevestingdateequaltothevolumeweightedaveragetradingpriceoftheCompany’scommonsharesontheTSXforthe fivetradingdaysprior tothevestingdate.RSUsvest in threeequalannual instalmentscommencingno later than12monthsfromtheendoftheyearforwhichtheperformanceisbeingrewarded.AstheCompanyisrequiredtosettleRSUsincash,itwillrecordanaccruedliabilityandrecordacorrespondingcompensationexpense.TheRSUisafinancialinstrumentthatwillbefairvaluedateachreportingdatebasedonthefive-dayvolumeweightedaveragepriceoftheCompany’scommonshares.Thechangesinfairvaluewillbeincludedinthecompensationexpenseforthatperiod.Itisexpectedthattheliabilitywillbeincludedinthedeterminationofnetearningsoverthenext1.7years(2016–1.7years).ThetablebelowpresentschangestothenumberofRSUsoutstandingundertheLTIP.

(iv)DeferredshareunitsIn2010,theCompanyestablishedadeferredshareunit(“DSU”)planforthepurposesofstrengtheningthealignmentofinterests between eligible directors of the Company and shareholders by linking a portion of the annual directorcompensationtothefuturevalueoftheCompany’scommonshares.

Adirector isonlyentitled topayment in respectof theDSUsgranted tohimorherwhen thedirector ceases tobeadirector of the Company for any reason. On termination, the Company is required to redeem each DSU held by thedirector for payment in cash, being the product of: (i) the number of DSUs held by the director on ceasing to be adirector and (ii) the greater of either (a) theweighted average trading price or (b) the averageof daily high and lowboardlottradingpricesoftheCompany’scommonsharesontheTSXforthefiveconsecutivetradingdaysimmediatelypriortothedateoftermination.

AstheCompanyiscurrentlyrequiredtosettlethisawardincash,itwillrecordanaccruedliabilityandacorrespondingcompensation expense. DSUs are financial instruments that will be fair valued at each reporting date based on theCompany’sshareprice.ThetablebelowpresentschangestotheLTIPandDSUplan:

(inthousandsofunits) PSU(#ofunits) RSU(#ofunits) DSU(#ofunits)CHANGESTOTHELTIPANDDSUPLAN BalanceatDecember31,2015 3,775 3,451 375

Granted 849 1,577 98

Settled/Exercised (542) (1,315) (50)

Forfeited (394) (369) -

BalanceatDecember31,2016 3,688 3,344 423

Granted 625 1,134 283

Settled/Exercised (635) (1,281) -

Forfeited (914) (669) -

BalanceatDecember31,2017 2,764 2,528 706


(c) Loss per share Thefollowingtablesetsoutthecalculationofdilutedearningspershare:

YearendedDecember31

(inmillionsofU.S.dollars,exceptwherenoted) 2017 2016CALCULATIONOFDILUTEDEARNINGSPERSHARE Lossfromcontinuingoperations (101.7) (8.6)

Netloss (108.0) (7.0)Basicweightedaveragenumberofsharesoutstanding(inmillions)

564.7

511.8Dilutionofsecurities:

Stockoptions - -Dilutedweightedaveragenumberofsharesoutstanding(inmillions)

564.7

511.8Lossfromcontinuingoperationspershare:

Basic (0.18) (0.02)

Diluted (0.18) (0.02)

Netlosspershare:

Basic (0.19) (0.01)

Diluted (0.19) (0.01)

The following table lists the equity securities excluded from the calculation of diluted loss per share. Such equitysecurities were excluded as their respective exercise prices exceeded the average market price of the Company’scommonsharesofC$4.22fortheyearendedDecember31,2017(2016–C$5.26).

YearendedDecember31

(inmillionsofunits) 2017 2016EQUITYSECURITIESEXCLUDEDFROMTHECALCULATIONOFDILUTEDEARNINGSPERSHARE

Stockoptions 13.1 6.2

Warrants(1) - 27.9

1. OnJune28,2017,NewGold’ssharepurchasewarrantsexpired,unexercised.


16.DISCONTINUEDOPERATIONSInJuly2017,theCompanybeganaprocessforthesaleofPeakMines,itsgold-copperminelocatedinAustraliaanduponcommencement of the process met the criteria as a discontinued operation under IFRS 5. In November 2017, theCompanyentered intoabindingagreement to sell PeakMinesandexpects a salewithin the firstquarterof2018. Inconjunctionwiththeagreement,theCompanyhasreceiveda$3.0millionprepaymentfromthebuyerwhichhasbeenrecordedasadeferredbenefitwithincurrentliabilitiesontheconsolidatedstatementoffinancialposition.

FortheyearendedDecember31,2017,thenetlossfromPeakMinesisreportedaslossfromdiscontinuedoperations.Totalassetsand liabilitiesofPeakMines (excludinganyassetsand liabilitieswhichdonot formpartof thenetassetsbeing sold) are reported as assets and liabilities of held-for-sale, respectively, as at December 31, 2017 withoutrestatement of the prior-year period comparative amounts. Upon classification of Peak Mines as held-for-sale, theCompanyceasedrecognizingdepreciationanddepletionatPeakMinesfortheyearendedDecember31,2017.

AsatDecember31,2017,theCompanyhasmeasuredtheassetgroupatthelowerofcarryingvalueandfairvaluelesscoststosell(“FVLCS”).Theexpectedpurchaseconsiderationwasusedasthebasisfordeterminingthefairvalueandanestimateofthedisposalcostswereusedasthebasisforthecoststosell.Inperformingthisassessment,theCompanyconcludedthattheexpectedfairvaluelesscoststosellofPeakMineswaslowerthanthecarryingvalue.Asaresult,theCompany recognized a pre-tax impairment loss of $49.0million for the year ended December 31, 2017, inclusive of$0.4millioninincurredtransactioncoststodate(netoftax–$34.0million).ThisimpairmentlosswasentirelyallocatedtoPeakMines’MiningInterests.

Thenet(loss)earningsfromPeakMinesfortheyearendedDecember31,2017areasfollows:

YearendedDecember31

(inmillionsofU.S.dollars,exceptpershareamounts) 2017 2016Revenues 170.5 161.0Operatingexpenses 94.4 90.3

Depreciationanddepletion(1) 24.6 70.3

Revenuelesscostofgoodssold 51.5 0.4

Explorationandbusinessdevelopment 4.8 6.0

Earnings(loss)fromoperations 46.7 (5.6)

Financecosts (0.8) (0.6)

Other(losses)gains (2.9) 3.9

Impairmentlossonheld-for-saleassets (49.0) -

Lossbeforetaxes (6.0) (2.3)Incometax(expense)recovery (0.3) 3.9(Loss)earningsfromdiscontinuedoperations

(6.3) 1.6

1. DepreciationanddepletionrelatestoPeakMinespriortoreclassificationasadiscontinuedoperation.


ThemajorclassesofassetsandliabilitiesofPeakMinesareasfollows:

AsatDecember31


ASSETS Tradeandotherreceivables 3.4

Inventories 10.0

Currentincometaxreceivable -

Prepaidexpensesandother 1.1

Mininginterests 85.3

Deferredtaxassets 9.2Totalassetsheldforsale

109.0

LIABILITIES Tradeandotherpayables 16.9

Currentincometaxpayable 7.7

Reclamationandclosurecostobligations 18.0

Provisions 9.1

Deferredtaxliabilities 11.1

Totalliabilitiesheldforsale 62.8

Netassetsheldforsale 46.2

ThefollowingtableprovidesdetailsofthecashflowfromoperatingandinvestingactivitiesofPeakMinesfortheyearendedDecember31,2017andprior-yearcomparativeperiods:

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016

OPERATINGACTIVITIES Earningsfromdiscontinuedoperations (6.3) 1.6Adjustmentsfor: Reversalofinventorywrite-down (0.4) -Foreignexchangelosses(gains) (2.1) 0.3Reclamationandclosurecostspaid (0.1) (0.1)Depreciationanddepletion 24.6 70.3Othernon-cashadjustments 5.1 (3.9)Incometax(recovery)expense 0.3 (3.9)Financecosts 0.8 0.6Impairmentlossonheld-for-saleassets 49.0 - 70.9 64.9Changeinnon-cashoperatingworkingcapital 2.1 0.7Incometaxespaid (5.8) (8.4)Cashgeneratedfromoperations 67.2 57.2INVESTINGACTIVITIES Mininginterests (34.7) (11.1)Proceedsfromthesaleofassets 0.1 0.7Cashusedbyinvestingactivities (34.6) (10.4)Changeincashandcashequivalents 32.6 46.8


17.INCOMEANDMININGTAXESThefollowingtableoutlinesthecompositionofincometaxexpensebetweencurrenttaxanddeferredtax:

YearendedDecember31


(Note5)CURRENTINCOMEANDMININGTAXEXPENSE

Canada 2.8 (1.8)

Foreign 12.2 15.1

Adjustmentsinrespectofprioryear 0.1 (4.6)

15.1 8.7

DEFERREDINCOMEANDMININGTAXEXPENSE(RECOVERY)

Canada (87.7) 1.4

Foreign (42.0) (18.1)

Adjustmentsinrespectofprioryear (1.3) 5.9

(131.0) (10.8)

Totalincometaxexpense(recovery) (115.9) (2.1)IncometaxexpensediffersfromtheamountthatwouldresultfromapplyingtheCanadianfederalandprovincialincometaxratestoearningsbeforetaxes.Thedifferencesresultfromthefollowingitems:

YearendedDecember31


(Note5)Lossbeforetaxes (217.6) (10.7)

Canadianfederalandprovincialincometaxrates 26.3% 25.8%

Incometax(recovery)expensebasedonaboverates (57.2) (2.8)

INCREASE(DECREASE)DUETO

Permanentdifferences (11.0) (4.3)

Differentstatutorytaxratesonearningsofforeignsubsidiaries (11.7) 0.8

Foreignexchangeonnon-monetaryassetsandliabilities (7.4) (10.1)

Otherforeignexchangedifferences (1.6) 8.2

Prioryears’adjustmentsrelatingtotaxprovisionandtaxreturns

(1.2)

1.3

Canadianminingtax 10.9 0.4

Mexicanspecialdutytax 0.3 0.6

Withholdingtax 1.3 0.3

Changeintaxrates (31.5) -

Changeinunrecognizeddeferredtaxassets 2.0 1.2

DisposalofElMorrogoldstreamasset (8.4) -

Other (0.4) 2.3

Incometaxexpense(recovery) (115.9) (2.1)

TheCompany’sstatutory tax ratehas increased from25.8% in2016to26.3% in2017.The increaseprimarily resultedfromanincreaseintheincometaxrateofBritishColumbiafrom11.5%to12.0%.


ThefollowingtablesprovideanalysisofthedeferredtaxassetsandliabilitiesasatDecember31,2017:

AsatDecember31,2017

(inmillionsofU.S.dollars) Canada USA Australia(1) Mexico TotalDEFERREDTAXASSETS

Unusednon-capitallosses - 3.5 - - 3.5

Property,plantandequipment 60.6 - - - 60.6

Goldstreamobligation 24.3 - - - 24.3

Investmenttaxcredits/governmentassistance 18.2 - - - 18.2

Alternativeminimumtaxcredits - 27.0 - - 27.0

Decommissioningobligations 22.2 - - - 22.2

DerivativeInstruments/Hedging 2.9 - - - 2.9

OntarioMiningTax 6.1 - - - 6.1

Accruedliabilitiesandprovisions 1.3 (0.1) - - 1.2

Other 5.6 - - - 5.6

141.2 30.4 - - 171.6

DEFERREDTAXLIABILITIES

Mininginterests (144.5) (29.3) - - (173.8)

Property,plantandequipment - (24.0) - - (24.0)

Investmenttaxcredits/governmentassistance - - - - -

Decommissioningobligations - (5.7) - - (5.7)

BritishColumbiaMiningTax (36.6) - - - (36.6)

MexicanMiningRoyalty - - - (0.1) (0.1)

Other (6.4) (3.7) - - (10.1)

(187.5) (62.7) - (0.1) (250.3)

Deferredincometaxliabilities,net (46.3) (32.3) - (0.1) (78.7)

1. AsatDecember31,2017,thedeferredtaxassetanddeferredtaxliabilityatPeakMinesareincludedinassetsheld-for-saleandliabilitiesheld-for-sale,respectively.


AsatDecember31,2016

(inmillionsofU.S.dollars) Canada USA Australia Mexico TotalDEFERREDTAXASSETS

Unusednon-capitallosses - 14.9 - - 14.9

Property,plantandequipment 92.4 - 6.6 - 99.0

Investmenttaxcredits/governmentassistance 48.1 - - - 48.1

Alternativeminimumtaxcredits - 15.8 - - 15.8

Decommissioningobligations 9.4 5.5 4.1 - 19.0

DerivativeInstruments/Hedging 19.8 (0.1) - - 19.7

Accruedliabilitiesandprovisions 2.3 0.5 3.3 0.4 6.5

Other 1.3 0.1 - 0.5 1.9

173.3 36.7 14.0 0.9 224.9

DEFERREDTAXLIABILITIES

Mininginterests (276.5) (51.1) (24.8) - (352.4)

BritishColumbiaMiningTax - (45.2) - (5.4) (50.6)

OntarioMiningTax (35.1) - - - (35.1)

Derivativeinstruments (4.2) - - - (4.2)

MexicanMiningRoyalty - - - (0.4) (0.4)

Other - (16.5) (1.3) 5.3 (12.5)

(315.8) (112.8) (26.1) (0.5) (455.2)

Deferredincometaxliabilities,net(1) (142.5) (76.1) (12.1) 0.4 (230.3)

1. Priorperiodcomparativeshavebeenrevisedaspernote5.

Thefollowingtableoutlinesthemovementinthenetdeferredtaxliabilities:

YearendedDecember31


(Note5)MOVEMENTINTHENETDEFERREDTAXLIABILITIES Balanceatthebeginningoftheyear (230.3) (275.5)

Recognizedinnetloss 139.2 20.0

Recognizedinothercomprehensiveincome 1.8 20.4

Recognizedasreductioninmineralproperties (43.6) (6.9)

Recognizedasforeignexchange 50.3 12.0

Other 2.0 (0.3)

Reclassifiedasheld-for-sale 1.9 -

Totalmovementinthenetdeferredtaxliabilities (78.7) (230.3)

Deferredincometaxassetsarerecognizedfortaxlosscarry-forwardstotheextentthattherealizationoftherelatedtaxbenefitthroughfuturetaxableprofitsisprobable.TheCompanydidnotrecognizedeductibletemporarydifferencesonthefollowinglossesbycountry:

• Canadianincometaxlossesof$0.6millionexpiringbetween2018to2036;• Canadiancapitallosscarry-forwardsof$41.3millionwithnoexpirydate;and• Otherlosscarry-forwardsof$20.4millionwithvaryingexpirydates.


In addition to the above, theCompanydidnot recognizenetdeductible temporarydifferences and tax credits in theamountof$196.6million(2016-$240.9million)onothertemporarydifferences.

The Company has $123.2 million (2016 - $114.6 million) of temporary differences associated with investment inSubsidiariesonwhichdeferredtaxliabilitieshavenotbeenrecognized.

TheCompanyrecognizesdeferredtaxesbytakingintoaccounttheeffectsoflocalenactedtaxlegislation.DeferredtaxassetsarefullyrecognizedwhentheCompanyconcludesthatsufficientpositiveevidenceexiststodemonstratethatitisprobablethatadeferredtaxassetwillberealized.ThemainfactorsthattheCompanyconsiders,butarenotlimitedto,are:

• Historicandexpectedfuturetaxableincome;• Anytaxplanningthatcanbeimplementedtorealizethetaxassets;and• Thenature,amountandtimingandreversaloftaxabletemporarydifferences.

Future income is impactedby changes inmarketgold, copperand silverpricesaswell as forecasted future costsandexpenses to produce gold and copper reserves. In addition, the quantities of proven and probable gold and copperreserves,market interest rates and foreign currency exchange rates also impact future levels of taxable income. Anychange in any of these factors will result in an adjustment to the recognition of deferred tax assets to reflect theCompany'slatestassessmentoftheamountofdeferredtaxassetsthatisprobablewillberealized.

OnDecember22,2017,theTaxCutsandJobsAct (“taxreform”)wassigned into lawintheUnitedStates.TaxreformloweredtheU.S.Federalcorporatetaxratefrom35%to21%andmadenumerousothertaxlawchanges.Thechangeintax law required the Company to remeasure existing net deferred tax liabilities using the lower rate in the period ofenactmentresultinginanincometaxbenefitofapproximately$32.6milliontoreflectthesechangesintheyearendedDecember31,2017.TheseestimatesmayrequireadjustmentsbasedonadditionalguidancethatmaybeissuedbytheU.S. Government and as further clarification and interpretations become available. Subsequent adjustments wouldtypicallybeaccountedforasachangeinestimate.


18.RECLAMATIONANDCLOSURECOSTOBLIGATIONSChangestothereclamationandclosurecostobligationsareasfollows:

(inmillionsofU.S.dollars)RainyRiver

NewAfton Mesquite

PeakMines

CerroSanPedro Blackwater Total

CHANGESTORECLAMATIONANDCLOSURECOSTOBLIGATIONS Balance–December31,2015 7.9 7.4 13.2 14.2 17.8 8.3 68.8Reclamationexpenditures - - - - (2.6) - (2.6)Unwindingofdiscount 0.2 0.1 0.2 0.3 0.7 0.2 1.7Revisionstoexpectedcashflows 11.8 (0.1) 0.2 (0.7) 4.2 0.1 15.5Foreignexchangemovement 0.1 0.2 - (0.1) (2.0) 0.3 (1.5)Balance–December31,2016 20.0 7.6 13.6 13.7 18.1 8.9 81.9Less:currentportionofclosurecosts(Note8)

-

-

-

(0.1)

(0.8)

-

(0.9)

Non-currentportionofclosurecosts 20.0 7.6 13.6 13.6 17.3 8.9 81.0Balance–December31,2016 20.0 7.6 13.6 13.7 18.1 8.9 81.9Reclamationexpenditures - (0.2) - (0.1) (1.0) (0.1) (1.4)Unwindingofdiscount 0.4 0.2 0.3 0.4 0.2 0.2 1.7Revisionstoexpectedcashflows 41.4 3.2 6.6 3.1 1.2 (0.3) 55.2Foreignexchangemovement 1.6 0.8 - 1.1 0.7 0.7 4.9Less:amountsreclassifiedasheldforsale

-

-

-

(18.2)

-

-

(18.2)

Balance–December31,2017 63.4 11.6 20.5 - 19.2 9.4 124.1Less:currentportionofclosurecosts(Note8)

-

-

(0.2)

-

(2.4)

-

(2.6)

Non-currentportionofclosurecosts 63.4 11.6 20.3 - 16.8 9.4 121.5

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.

FortheyearendedDecember31,2017,theCompanyupdatedthereclamationandclosurecostobligationsforeachofitsmine sites. The impact of these assessments was an increase of $55.2million (year ended December 31, 2016 –$15.5million),whichprimarily related toRainyRiverandMesquite.Keydriversof theRainyRiver liability increaseof$41.4 million include advancement of the processing plant site area, construction of tailings management area,placementofminerockandotheradditionalobligationsrelatedtosignificantprojectadvancementachievedduringtheperiodastheprojectcontinuedtoadvancetocommercialproduction.ThekeydriveroftheMesquiteliabilityincreaseof$6.6millionwas increased requirements for reclamation slopingonwaste rock, increasing the amountof earthworksrequired.


Themajorityoftheexpendituresareexpectedtooccurbetween2022and2031.Thediscountratesusedinestimatingthesitereclamationandclosurecostobligationswerebetween1.9%and6.0%fortheyearendedDecember31,2017(2016–1.4%and6.0%),andtheinflationrateusedwasbetween1.7%and3.3%fortheyearendedDecember31,2017(2016–1.0%and3.3%).

Regulatoryauthoritiesincertainjurisdictionsrequirethatsecuritybeprovidedtocovertheestimatedreclamationandremediationobligations.AsatDecember31,2017, lettersofcredittotalling$137.8million(2016-$113.0million)andsurety bonds totalling $19.6 million (2016 - $14.8 million) had been issued to various regulatory agencies to satisfyfinancialassurancerequirementsforthispurposewiththeincreasein2017relatedtotheRainyRiverproject.Thelettersof credit are securedby the revolvingCredit Facility (Note12 (c)), and theannual fees are1.50%of the valueof theoutstandinglettersofcredit.

19.SUPPLEMENTALCASHFLOWINFORMATIONSupplementalcashflowinformation(includedwithinoperatingactivities)isasfollows:

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016CHANGEINNON-CASHOPERATINGWORKINGCAPITAL

Tradeandotherreceivables 15.1 (13.9)

Inventories 2.8 (8.8)

Prepaidexpensesandother (1.5) 1.8

Tradeandotherpayables 24.5 0.5

Totalchangeinnon-cashoperatingworkingcapital 40.9 (20.3)

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016OTHERNON-CASHADJUSTMENTS

Unrealizedlossonsharepurchasewarrants (1.2) (0.2)

Unrealizedlossonconcentratecontracts 1.9 4.5

Equitysettledshare-basedpaymentexpense 5.7 5.4

Gainondisposalofassets (0.3) (0.1)

Settlementandloss(gain)onrevaluationofgoldpriceoptioncontracts 13.9 (10.5)

Unrealizedlossongoldstreamobligation 21.8 31.1

Unrealizedlossoncopperforwardcontractsandcopperpriceoptioncontracts 4.4 -

Othernon-cashadjustments 0.2 (1.9)

Totalothernon-cashadjustments 46.4 28.3


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


(inmillionsofU.S.dollars)RainyRiver

NewAfton Mesquite

CerroSanPedro Corporate Other(1)

DiscontinuedOperations(4) Total

OPERATINGSEGMENTRESULTS

Goldrevenues 33.6 94.1 215.7 42.5 - - - 385.9

Copperrevenues - 203.8 - - - - - 203.8

Silverrevenues 0.7 4.1 - 9.9 - - - 14.7

Totalrevenues(2) 34.3 302.0 215.7 52.4 - - - 604.4

Operatingexpenses 38.5 107.1 122.7 52.7 - - - 321.0

Depreciationanddepletion 14.1 139.3 60.2 6.7 - - - 220.3Revenuelesscostofgoodssold

(18.3)

55.6

32.8

(7.0)

-

-

-

63.1

Corporateadministration - - - - 23.7 - - 23.7

Corporaterestructuring - - - - 4.2 - - 4.2Share-basedpaymentexpenses

-

-

-

-

5.1

-

-

5.1

Assetimpairment 268.4 - - - - - - 268.4Explorationandbusinessdevelopment

2.2

1.4

-

-

0.6

2.2

-

6.4

(Loss)incomefromoperations

(288.9)

54.2

32.8

(7.0)

(33.6)

(2.2)

-

(244.7)

Financeincome - - - 0.2 0.9 - - 1.1

Financecosts (1.7) (1.0) (0.4) (0.5) (9.4) (0.2) - (13.2)

Othergains(losses)(3) 12.2 2.4 (7.4) (1.2) 0.3 32.9 - 39.2(Loss)earningsbeforetaxes

(278.4)

55.6

25.0

(8.5)

(41.8)

30.5

-

(217.6)

Incometaxrecovery(expense)

86.0

(0.2)

31.3

(0.7)

2.9

(3.4)

-

115.9

(Loss)earnings(fromcontinuingoperations

(192.4)

55.4

56.3

(9.2)

(38.9)

27.1

-

(101.7)

Lossfromdiscontinuedoperations,netoftax

-

-

-

-

-

-

(6.3)

(6.3)

Net(loss)earnings (192.4) 55.4 56.3 (9.2) (38.9) 27.1 (6.3) (108.0)

1. Otherincludesbalancesrelatingtothedevelopmentandexplorationpropertiesthathavenorevenuesoroperatingcosts.2. Segmentedrevenuereportedaboverepresentsrevenuegeneratedfromexternalcustomers.Therewerenointer-segmentsalesintheyearendedDecember31,2017.3. Othergains(losses)includeforeignexchangerevaluation,anda$33.0millionnetgainonthedisposaloftheElMorrostream.4. RefertoNote16forfurtherinformationondiscontinuedoperations.




RainyRiver

NewAfton Mesquite

CerroSanPedro Corporate Other(1)

DiscontinuedOperations(4) Total

OPERATINGSEGMENTRESULTS

Goldrevenues - 110.4 141.7 79.7 - - - 331.8Copperrevenues - 172.4 - - - - - 172.4Silverrevenues - 4.4 - 14.2 - - - 18.6Totalrevenues(2) - 287.2 141.7 93.9 - - - 522.8Operatingexpenses - 104.8 71.5 99.2 - - - 275.5Depreciationanddepletion(3) -

152.3

38.9

8.9

-

--

200.1

Revenuelesscostofgoodssold -

30.1

31.3

(14.2)

-

--

47.2

Corporateadministration - - - - 22.9 - - 22.9Share-basedpaymentexpenses

-

-

-

-

8.3

-

-

8.3

Assetimpairment - - - - - 6.4 - 6.4Explorationandbusinessdevelopment -

2.1

1.9

-

0.4

(0.3)-

4.1

Income(loss)fromoperations -

28.0

29.4

(14.2)

(31.6)

(6.1)-

5.5

Financeincome - - - 0.7 0.7 - - 1.4Financecosts - (0.7) (0.4) (0.9) (7.7) (0.2) - (9.9)Othergains(losses) - 5.3 5.5 (6.7) (21.8) 10.0 - (7.7)Earnings(loss)beforetaxes - 32.6 34.5 (21.1) (60.4) 3.7 - (10.7)Incometaxrecovery(expense)(3) -

21.9

(0.1)

5.5

(2.7)

(22.5)-

2.1

Earnings(loss)fromcontinuingoperations -

54.5

34.4

(15.6)

(63.1)

(18.8)-

(8.6)

Earningsfromdiscontinuedoperations,netoftax -

--

-

-

-

1.6

1.6

Netearnings(loss) - 54.5 34.4 (15.6) (63.1) (18.8) 1.6 (7.0)

1. Otherincludesbalancesrelatingtothedevelopmentandexplorationpropertiesthathavenorevenuesoroperatingcosts.2. Segmentedrevenuereportedaboverepresentsrevenuegeneratedfromexternalcustomers.Therewerenointer-segmentsalesintheyearendedDecember31,2016.3. Priorperiodcomparativeshavebeenrevisedaspernote5.4. RefertoNote16forfurtherinformationondiscontinuedoperations.


(b) Segmented assets and liabilities Thefollowingtablepresentsthesegmentedassetsandliabilities:

Totalassets Totalliabilities Capitalexpenditures(1)

Asat

December31Asat

December31Asat

December31Asat

December31 YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016(3) 2017 2016(3) 2017 2016(3)SEGMENTEDASSETSANDLIABILITIES RainyRiver 1,774.2 1,505.1 454.4 545.6 499.3 466.4NewAfton 874.5 961.5 147.8 128.4 42.2 40.9Mesquite 482.3 513.3 96.3 139.9 12.8 35.6PeakMines - 170.9 - 64.4 - -CerroSanPedro 43.9 60.5 26.7 29.8 0.7 1.0Blackwater 560.8 547.8 56.9 55.6 11.3 10.0Other(2)(5) 172.6 173.9 1,032.9 896.1 0.7 2.0 3,908.3 3,933.0 1,815.0 1,859.8 567.0 555.9Assetsandliabilitiesheldforsaleandcapitalexpendituresfromdiscontinuedoperations(4)

109.0

-

62.8

-

34.7

11.1Totalassets,liabilitiesandcapitalexpenditures

4,017.3

3,933.0

1,877.8

1,859.8

601.7

567.0

1. Capitalexpendituresperconsolidatedstatementofcashflows.2. Otherincludescorporatebalances,explorationpropertiesandtheElMorrogoldstreamasset.3. Prior-yearperiodcomparativeshavebeenrevisedaspernote5.4. RefertoNote16forfurtherinformationonassetsandliabilitiesheldforsale.5. OtherincludesPeakMines’cashandcashequivalents,whichdonotformpartofthenetassetsheldforsale.

(c) Geographical information TheCompanyoperatesinfourprincipalgeographicalareas-Canada(countryofdomicile),theUnitedStates,Australia,andMexico.TheCompany'srevenuebylocationofoperationsandinformationabouttheCompany’snon-currentassetsbylocationofassetsaredetailedbelowfortheyearsendedDecember31,2017and2016.

Revenue(1) Non-currentassets(2)

(inmillionsofU.S.dollars) 2017 2016 2017 2016REVENUEANDNON-CURRENTASSETSBYLOCATION Canada 336.3 287.2 2,971.0 2,762.4

UnitedStates 215.7 141.7 302.4 359.2

Australia(3) - - 85.3 121.2

Mexico 52.4 93.9 5.1 17.8

Other - - 0.6 34.0

Total 604.4 522.8 3,364.4 3,294.6

1. Presentedbasedonthelocationinwhichthesaleoriginated.2. Non-currentassetsexcludefinancialinstruments(investments,reclamationdepositsandother)anddeferredtaxassets.3. For the years endedDecember 31, 2017 and 2016, revenue fromPeakMines is included in earnings fromdiscontinued operations. As atDecember 31, 2017, the

Company’snon-currentassetsheldinAustraliaareclassifiedasassetsheld-for-sale.

(d) Information about major customers Thefollowingtablepresentssalestoindividualcustomersexceeding10%ofannualsalesforthefollowingperiods.Thefollowing threecustomers represent79% (2016–71%)of theCompany’s concentrateanddoré sales revenue for theyearsendedDecember31.


YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016CUSTOMER REPORTINGSEGMENT

1 Mesquite(1) 210.8 138.7

RainyRiver(1) 34.3 -

CerroSanPedro(1) 4.4 34.1

2 NewAfton 125.5 99.8

3 NewAfton 99.8 99.3

Totalsalestocustomersexceeding10%ofannualsales(2) 474.8 371.9

1. Mesquite,RainyRiverandCerroSanPedroallselltothesamecustomer.2. AmountspresentedexcludesalesgeneratedfromPeakMines,whichhasbeenclassifiedasadiscontinuedoperationfortheyearendedDecember31,2017.

TheCompanyisnoteconomicallydependentonalimitednumberofcustomersforthesaleofitsproductbecausegoldandothermetalscanbesoldthroughnumerouscommoditymarkettradersworldwide.RefertoNote22(a)forfurtherdiscussionontheCompany’sexposuretocreditrisk.

21.CAPITALRISKMANAGEMENTThe Companymanages its capital to ensure that itwill be able to continue as a going concernwhilemaximizing thereturntostakeholdersthroughtheoptimizationofthedebtandequitybalance.

In themanagementofcapital, theCompany includes thecomponentsofequity, long-termdebt,netofcashandcashequivalents,andinvestments.

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016CAPITAL(ASDEFINEDABOVE)ISSUMMARIZEDASFOLLOWS Equity 2,139.5 2,073.2

Long-termdebt 1,007.7 889.5

3,147.2 2,962.7

Cashandcashequivalents (216.2) (185.9)

Total 2,931.0 2,776.8

TheCompanymanagesthecapitalstructureandmakesadjustmentstoitinlightofchangesineconomicconditionsandtheriskcharacteristicsof theunderlyingcapital instruments.Tomaintainoradjustthecapitalstructure, theCompanymayissuenewshares,restructureorissuenewdebt,acquireordisposeofassetsorsellitsinvestments.

In order to facilitate the management of its capital requirements, the Company prepares annual budgets that areupdated as necessary depending on various factors, including successful capital deployment and general industryconditions. TheannualbudgetisapprovedbytheBoardofDirectors.TheCompany’s investmentpolicy istoinvest itssurplusfundsinpermittedinvestmentsconsistingoftreasurybills,bonds,notesandotherevidencesofindebtednessofCanada,theUnitedStatesoranyoftheCanadianprovinceswithaminimumcreditratingofR-1midfromtheDominionBond Rating Service (“DBRS”) or an equivalent rating from Standard & Poor’s and Moody’s and with maturities of12 months or less at the original date of acquisition. In addition, the Company is permitted to invest in bankers’acceptancesandotherevidencesofindebtednessofcertainfinancialinstitutions.Allinvestmentsmusthaveamaximumtermtomaturityof12monthsandtheaveragetermwillgenerallyrangefromsevendaysto90days.Underthepolicy,theCompanyisnotpermittedtomakeinvestmentsinasset-backedcommercialpaper.


22.FINANCIALRISKMANAGEMENTThe Company examines the various financial instrument risks to which it is exposed and assesses the impact andlikelihood of those risks. These risksmay include credit risk, liquidity risk, market risk and other price risks.Wherematerial,theserisksarereviewedandmonitoredbytheBoardofDirectors.

(a) Credit risk CreditriskistheriskofanunexpectedlossifapartytotheCompany’sfinancialinstrumentsfailstomeetitscontractualobligations.TheCompany’s financialassetsareprimarilycomposedofcashandcashequivalents,andtradeandotherreceivables.Creditriskisprimarilyassociatedwithtradeandotherreceivables;however,italsoarisesoncashandcashequivalents, gold and copper price options, and copper forward contracts. To mitigate exposure to credit risk, theCompany has established policies to limit the concentration of credit risk, to ensure counterparties demonstrateminimumacceptablecreditworthiness,andtoensureliquidityofavailablefunds.

The Company closelymonitors its financial assets and does not have any significant concentration of credit risk. TheCompanysells itsgoldexclusively to large internationalorganizationswith strongcredit ratings.Thehistorical levelofcustomer defaults is minimal and, as a result, the credit risk associated with gold and copper concentrate tradereceivablesatDecember31,2017isnotconsideredtobehigh.

TheCompany’smaximumexposuretocreditriskisasfollows:

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016CREDITRISKEXPOSURE Cashandcashequivalents 216.2 185.9

Tradereceivables 27.1 37.1Goldpriceoptioncontracts - 17.6Copperforwardcontracts - 0.3

Totalfinancialinstrumentexposuretocreditrisk 243.3 240.9

AsignificantportionoftheCompany’scashandcashequivalents isheld in largeCanadianfinancial institutions.Short-terminvestments(includingthosepresentedaspartofcashandcashequivalents)arecomposedoffinancialinstrumentsissuedbyCanadianbankswithhighinvestment-graderatingsandthegovernmentsofCanadaandtheU.S.

The Company employs a restrictive investment policy as detailed in the capital risk management section, which isdescribedinNote21.


Theagingoftradeandotherreceivablesisasfollows:

AsatDecember31


0-30days

31-60days

61-90days

91-120days

Over120days

2017Total

2016Total

AGINGTRADEANDOTHERRECEIVABLES RainyRiver 6.0 4.8 6.1 - 0.4 17.3 5.2

NewAfton (2.3) 3.7 - - - 1.4 22.5Mesquite 0.2 - - - 0.5 0.7 0.2

PeakMines(1) - - - - - - 1.3CerroSanPedro 4.3 0.5 0.5 0.5 0.5 6.3 5.5

Blackwater 0.4 - - - - 0.4 0.3Corporate 1.0 - - - - 1.0 2.1

Totaltradeandotherreceivables 9.6 9.0 6.6 0.5 1.4 27.1 37.1

1. TradeandotherreceivablesasatDecember31,2017arepresentedexcludingsalesgeneratedfromPeakMines,whichhasbeenclassifiedasadiscontinuedoperationfortheyearendedDecember31,2017.

TheCompanysells itsgoldandcopperconcentrateproductionfromNewAftontofourdifferentcustomersunderoff-takecontracts.TheCompanysellsitsgoldandcopperconcentrateproductionfromPeakMinestoonecustomerunderanoff-takecontract.

TheCompanyisnoteconomicallydependentonalimitednumberofcustomersforthesaleofitsgoldandothermetalsbecausegoldandothermetalscanbesoldthroughnumerouscommoditymarkettradersworldwide.

(b) Liquidity risk LiquidityriskistheriskthattheCompanywillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheCompanymanagesliquidityriskthroughthemanagementofitscapitalstructureandfinancialleverage,asoutlinedinNote21.

The following table shows the contractual maturities of debt commitments. The amounts presented represent thefuture undiscounted principal and interest cash flows, and therefore, do not equate to the carrying amounts on theconsolidatedstatementsoffinancialposition.

AsatDecember31

(inmillionsofU.S.dollars) <1year 1-3years 4-5yearsAfter

5years2017Total

2016Total

DEBTCOMMITMENTS Tradeandotherpayables 153.7 - - - 153.7 169.2

Long-termdebt - 230.0 500.0 300.0 1,030.0 900.0Interestpayableonlong-termdebt 43.5 100.8 100.8 47.8 292.9 252.5

Goldstreamobligation 24.7 52.4 54.8 158.6 290.5 277.7

Totaldebtcommitments 221.9 383.2 655.6 506.4 1,767.1 1,599.5


TheCompany’sfutureoperatingcashflowandcashpositionarehighlydependentonmetalprices,includinggold,silverand copper, as well as other factors. Taking into consideration the Company’s current cash position, volatile equitymarkets,andglobaluncertaintyinthecapitalmarkets,theCompanyiscontinuallyreviewingexpendituresandassessingbusiness opportunities to enhance liquidity in order to ensure adequate liquidity and flexibility to support its growthstrategy, including thedevelopmentof its projects,while continuingproductionat its currentoperations.Aperiodofcontinuouslowgoldandcopperpricesmaynecessitatethedeferralofcapitalexpenditureswhichmayimpactthetimingofdevelopmentworkandprojectcompletion,aswellasproductionfromminingoperations.Inaddition,insuchapriceenvironment,theCompanymayberequiredtoadoptoneormorealternativestoincreaseliquidity.

(c) Currency risk The Company operates in Canada, the United States, Australia, and Mexico. As a result, the Company has foreigncurrencyexposurewithrespecttoitemsnotdenominatedinU.S.dollars.ThethreemaintypesofforeignexchangeriskfortheCompanycanbecategorizedasfollows:

(i)TransactionexposureThe Company’s operations sell commodities and incur costs in different currencies. This creates exposure at theoperationallevel,whichmayaffecttheCompany’sprofitabilityasexchangeratesfluctuate.

(ii)ExposuretocurrencyriskTheCompany is exposed to currency risk through the followingassets and liabilitiesdenominated in currenciesotherthan the U.S. dollar: cash and cash equivalents, investments; accounts receivable, accounts payable and accruals,reclamationandclosurecostobligations.

The currencies of the Company’s financial instruments and other foreign currency denominated liabilities, based onnotionalamounts,wereasfollows:

AsatDecember31,2017

(inmillionsofU.S.dollars) CAD AUD MXNEXPOSURETOCURRENCYRISK Cashandcashequivalents 16.6 5.9 1.5Tradeandotherreceivables 19.5 - 6.2Incometaxreceivable 0.4 - 4.2

Deferredtaxasset 130.5 - -Tradeandotherpayables (141.6) - (11.5)Deferredtaxliability (183.9) - (0.1)

Reclamationandclosurecostobligations (84.6) - (11.7)Performanceshareunitsandrestrictedshareunits (2.6) - -

Totalexposuretocurrencyrisk (245.7) 5.9 (11.4)


AsatDecember31,2016

(inmillionsofU.S.dollars) CAD AUD MXNEXPOSURETOCURRENCYRISK Cashandcashequivalents 95.3 4.6 1.2

Tradeandotherreceivables 8.0 0.5 5.5Incometax(payable)receivable (1.1) (4.5) 3.1Deferredtaxasset 173.3 14.0 0.9

Tradeandotherpayables (118.3) (12.0) (16.2)Deferredtaxliability (321.1) (26.1) (0.5)Reclamationandclosurecostobligations (36.5) (13.6) (12.2)

Warrants (1.3) - -Employeebenefits (1.1) (7.9) -Restrictedshareunits (2.8) - -

Totalexposuretocurrencyrisk (205.6) (45.0) (18.2)

(iii)TranslationexposureThe Company’s functional and reporting currency is U.S. dollars. The Company’s operations translate their operatingresults fromthehostcurrency toU.S.dollars.Therefore,exchange ratemovements in theCanadiandollar,Australiandollar, and Mexican peso can have a significant impact on the Company’s consolidated operating results. A 10%strengthening (weakening) of the U.S. dollar against the following currencies would have decreased (increased) theCompany’snetlossfromthefinancialinstrumentspresentedbytheamountsshownbelow.

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016IMPACTOF10%CHANGEINFOREIGNEXCHANGERATES Canadiandollar 24.6 20.5

Australiandollar (0.6) 4.6

Mexicanpeso 1.1 1.8


(d) Interest rate risk Interestrateriskistheriskthatthefairvalueorthefuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchangesinmarketinterestrates.ThemajorityoftheCompany’soutstandingdebtobligationsarefixedandarethereforenotexposedtochangesinmarketinterestrates.TheCreditFacilityinterestisvariableanda1%changeininterestrateswouldresultinadifferenceofapproximately$1.4millionininterestpaidfortheyearendedDecember31,2017.

The Company is exposed to interest rate risk on its cash and cash equivalents. Interest earned on cash and cashequivalentsisbasedonprevailingmoneymarketandbankaccountinterestrateswhichmayfluctuate.A1.0%changeinthe interest ratewouldresult inadifferenceofapproximately$2.0million in interestearnedby theCompany for theyearendedDecember31,2017.TheCompanyhasnotenteredintoanyderivativecontractstomanagethisrisk.

(e) Metal and input price risk TheCompany’searnings, cash flowsand financial conditionare subject toprice riskdue to fluctuations in themarketprice of gold, silver and copper.Gold prices have historically fluctuatedwidely and are affected by numerous factorsbeyondtheCompany’scontrol,including:

• thestrengthoftheU.S.economyandtheeconomiesofotherindustrializedanddevelopingnations;• globalorregionalpoliticaloreconomicconditions;• therelativestrengthoftheU.S.dollarandothercurrencies;• expectationswithrespecttotherateofinflation;• interestrates;• purchasesandsalesofgoldbycentralbanksandotherlargeholders,includingspeculators;• demandforjewellerycontaininggold;and• investmentactivity,includingspeculation,ingoldasacommodity.

For the year endedDecember 31, 2017, the Company’s revenue and cash flowswere impacted by gold prices in therangeof$1,151to$1,346perounce,andbycopperpricesintherangeof$2.49to$3.27perpound.Metalpricedeclinescouldcausecontinueddevelopmentof,andproduction from, theCompany’sproperties tobeuneconomic.There isatimelagbetweentheshipmentofgoldandcopperandfinalpricing,andchanges inpricingcanimpacttheCompany’srevenue and working capital position. The Company’s exposure to changes in copper prices has been significantlyreducedduring2018as theCompanyhasentered into copperpriceoption contracts (whereby it sold a seriesof calloptioncontractsandpurchasedaseriesofputoptioncontracts) to reduceexposure tochanges incopperprices.ThedetailsoftheremainingcontractsasatDecember31,2017canbefoundinNote14.

Reservecalculationsandmineplansusingsignificantly lowergold,silver,copperandothermetalpricescouldresult insignificantreductionsinmineralreserveandresourceestimatesandrevisionsintheCompany’slife-of-mineplans,whichinturncouldresultinmaterialwrite-downsofitsinvestmentsinminingpropertiesandincreaseddepletion,reclamationandclosurecharges.Dependingonthepriceofgoldorothermetals,theCompanymaydeterminethatitisimpracticaltocommenceor, if commenced, tocontinuecommercialproductionataparticular site.Metalprice fluctuationsalsocreateadjustments to theprovisionalpricesof salesmade inpreviousperiods thathavenotyetbeensubject to finalpricing,andtheseadjustmentscouldhaveanadverseimpactontheCompany’sfinancialresultsandfinancialcondition.Any of these factors could result in a material adverse effect on the Company’s results of operations and financialcondition.

The Company is also subject to price risk for fluctuations in the cost of energy, principally electricity and purchasedpetroleumproducts.TheCompany’s costsareaffectedby thepricesof commoditiesandother inputs it consumesoruses in its operations, such as lime, sodium cyanide and explosives. The prices of such commodities and inputs are


influenced by supply and demand trends affecting the mining industry in general and other factors outside theCompany’s control. Increases in the price formaterials consumed in the Company’smining and production activitiescouldmateriallyadverselyaffectitsresultsofoperationsandfinancialcondition.

An increase in gold, copper and silver prices would decrease the Company’s net loss whereas an increase in fuel orrestricted shareunit vestedpriceswould increase theCompany’s net loss. A 10% change in commodity priceswouldimpacttheCompany’snetearningsbeforetaxesandothercomprehensiveincomebeforetaxesasfollows:

YearendedDecember31,2017 YearendedDecember31,2016


NetEarnings

OtherComprehensive

IncomeNet

Earnings

OtherComprehensive

Income

IMPACTOF10%CHANGEINCOMMODITYPRICES Goldprice 52.5 - 47.4 -

Copperprice 9.0 - 22.1 -

Silverprice 1.1 - 1.4 -

Fuelprice 4.6 0.3 3.5 0.1

23.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 year ended December 31, 2017 or the year endedDecember31,2016.TheCompany’spolicyistorecognizetransfersintoandtransfersoutoffairvaluehierarchylevelsasofthedateoftheeventorchangeincircumstancesthatcausedthetransfer.

ValuationmethodologiesforLevel2and3financialassetsandliabilities:

ProvisionallypricedcontractsandgoldandcopperswapcontractsThefairvalueoftheprovisionallypricedcontractsandthegoldandcopperswapcontractsiscalculatedusingthemark-to-marketforwardpricesofLondonMetalsExchangegoldandcopperbasedontheapplicablesettlementdatesoftheoutstandingprovisionallypricedcontractsandcopperswapcontracts.


GoldandcopperpriceoptioncontractsandcopperforwardcontractsThefairvalueofthegoldandcopperpriceoptioncontractsandcopperforwardcontractsarecalculatedusingthemark-to-marketmethodbasedonfairvaluepricesobtainedfromthecounterpartiesofthegoldpriceoptioncontracts,copperpriceoptioncontractsandcopperforwardcontracts.

Goldstreamobligation

Thefairvalueof thegoldstreamobligation iscalculatedusingtherisk-free interestratederivedfromthefifteen-yearU.S. Treasury rate, forwardmetal prices, company specific credit spread based on the yield on the Company’s 2025SeniorUnsecuredNotes,andexpectedgoldandsilverouncestobedeliveredfromtheRainyRiverproject lifeofminemodel.

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)andtheexpectedsharepriceattheendofthevestingperiod.

ThefollowingtablesummarizestheCompany’sfinancialassetsandliabilitiesbycategoryandinformationaboutfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisinthestatementoffinancialpositioncategorizedbylevelofsignificanceoftheinputsusedinmakingthemeasurements:


(inmillionsofU.S.dollars) Category Level Level FINANCIALASSETS Cashandcashequivalents Loansandreceivablesatamortizedcost 216.2 185.9Tradeandotherreceivables Loansandreceivablesatamortizedcost 29.0 41.6Provisionallypricedcontracts FinancialinstrumentsatFVTPL 2 4.2 2 4.5

Goldandcopperswapcontracts FinancialinstrumentsatFVTPL 2 (6.1) 2 (9.0)Goldpriceoptioncontracts FinancialInstrumentsatFVTPL 2 - 2 17.6Investments FinancialinstrumentsatFVTPL 1 1.0 1 1.1Copperforwardcontracts FinancialinstrumentsatFVTPL 2 - 2 0.3

FINANCIALLIABILITIES Tradeandotherpayables(1) Financialliabilitiesatamortizedcost 146.0 168.3Long-termdebt Financialliabilitiesatamortizedcost 1,007.7 889.5

Warrants FinancialInstrumentsatFVTPL 1 - 1 1.3Goldstreamobligation FinancialInstrumentsatFVTPL 3 273.5 3 246.5Dieselswapcontracts FinancialliabilityatfairvaluethroughOCI 2 - 2 0.1Performanceshareunits FinancialInstrumentsatFVTPL 3 1.8 3 2.1Restrictedshareunits FinancialinstrumentsatFVTPL 1 0.8 1 0.9Copperpriceoptioncontracts FinancialinstrumentsatFVTPL 2 4.1 2 -

1. Tradeandotherpayablesexcludetheshort-termportionofreclamationandclosurecostobligations,copperforwardcontractsandtheshort-termportionofthegoldstreamobligation.


ThecarryingvaluesandfairvaluesoftheCompany’sfinancialinstrumentsareasfollows:



Carryingvalue Fairvalue

Carryingvalue Fairvalue

FINANCIALASSETS

Cashandcashequivalents 216.2 216.2 185.9 185.9

Tradeandotherreceivables 29.0 29.0 41.6 41.6

Provisionallypricedcontracts 4.2 4.2 4.5 4.5

Goldandcopperswapcontracts (6.1) (6.1) (9.0) (9.0)

Investments 1.0 1.0 1.1 1.1

Goldpriceoptioncontracts - - 17.6 17.6

Copperforwardcontracts - - 0.3 0.3

FINANCIALLIABILITIES

Tradeandotherpayables(1) 146.0 146.0 168.3 168.3

Long-termdebt 1,007.7 1,064.3 889.5 920.0

Goldstreamobligation 273.5 273.5 246.5 246.5

Sharepurchasewarrants - - 1.3 1.3

Dieselswapcontracts - - 0.1 0.1

Performanceshareunits 1.8 1.8 2.1 2.1

Restrictedshareunits 0.8 0.8 0.9 0.9

Copperpriceoptioncontracts 4.1 4.1 - -

1. Tradeandotherpayablesexcludetheshort-termportionofreclamationandclosurecostobligation,copperpriceoptioncontractsandtheshort-termportionofthegoldstreamobligation.

24.PROVISIONSInadditiontotheenvironmental rehabilitationprovision inNote18,provisions includethecash-settledportionof theCompany’sPSUsandRSUsaswellasemployeebenefits.Thefollowingtablepresentschangesinprovisions:


Performanceshareunits

Restrictedshareunits

Employeebenefits Total

AsatDecember31,2015 0.8 1.6 7.9 10.3

Additionalprovisionsrecognized 2.1 5.2 3.3 9.7

Usedduringtheyear (0.8) (3.8) (2.0) (5.9)

Foreignexchange - (0.1) (0.2) (0.3)

AsatDecember31,2016 2.1 2.9 9.0 14.0

Less:currentportion - (2.0) - (2.0)

Non-currentportionofprovisions 2.1 0.9 9.0 12.0

Additionalprovisionsrecognized 0.4 3.8 2.8 7.0

Usedduringtheyear (0.7) (3.5) (3.3) (7.5)

Foreignexchange - - 0.6 0.6

AsatDecember31,2017 1.8 3.2 9.1 14.1

Less:reclassifiedasliabilitiesheldforsale - (1.7) (9.1) (10.8)

Less:currentportion - (0.7) - (0.7)

Non-currentportionofprovisions 1.8 0.8 - 2.6


25.OPERATINGLEASESNon-cancellableoperatingleaserentalsarepayableasfollows:

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016NON-CANCELLABLEOPERATINGLEASERENTALS Lessthan1year 2.0 1.9

Between1and5years 5.0 0.7

Morethan5years 3.2 -

Totalnon-cancellableoperatingleaserentals 10.2 2.6

For the year endedDecember 31, 2017, an amount of $9.0millionwas recognized as an expense in profit or loss inrespectofoperatingleases(2016-$7.7million).

26.COMPENSATIONOFKEYMANAGEMENTPERSONNELTheremunerationoftheCompany’skeymanagementpersonnel(1)wasasfollows:

YearendedDecember31

(inmillionsofU.S.dollars) 2017 2016KEYMANAGEMENTPERSONNELREMUNERATION Short-termbenefits(2) 2.5 3.4

Post-employmentbenefits - -

Otherlong-termbenefits - -

Share-basedpayments 2.4 4.0

Terminationbenefits 1.5 1.2

Totalkeymanagementpersonnelremuneration 6.4 8.7

1. Keymanagementpersonnelarethosepersonshavingauthorityandresponsibilityforplanning,directing,andcontrollingtheactivitiesoftheCompany.2. Short-termbenefitsincludesalaries,bonusespayablewithintwelvemonthsoftheStatementofFinancialPositiondateandotherannualemployeebenefits.

Theremunerationofkeyexecutivesisdeterminedbythecompensationcommitteehavingregardtotheperformanceofindividualsandmarkettrends.

27.COMMITMENTSANDCONTINGENCIESThe Company has entered into a number of contractual commitments for capital items relating to operations anddevelopment.AtDecember31,2017,thesecommitmentstotalled$51.4million,$48.5millionofwhichisexpectedtofalldueoverthenext12months.Thiscomparestocommitmentsof$130.2millionasatDecember31,2016,$103.2millionofwhichwasexpectedtofalldueovertheupcomingyear.Certaincontractualcommitmentsmaycontaincancellationclauses;however,theCompanydisclosesitscommitmentsbasedonmanagement’sintenttofulfillthecontracts.

DIRECTORS

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 (1) Chief Financial Officer and Senior Vice President, and Executive Director, Nexen Energy ULC

Raymond Threlkeld (4) 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

Paula Myson Executive Vice President and Chief Financial Officer

Cory Atiyeh Vice President, Operations

Lisa Damiani Vice President, General Counsel and Corporate Secretary

Rajesh Deora Vice President, Reporting and Tax

Kashif Farooq Vice President, Planning and Advisory

Armando Ortega Vice President, Latin America

Mark Petersen Vice President, Exploration

Martin Wallace Vice President, Treasury and Technology

Peter Woodhouse Vice President, Projects

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

ANNUAL GENERAL MEETING

April 25, 2018 at 4:00 PM (Eastern Time)

Vantage Venues

150 King Street West, 27th Floor

Toronto, Ontario, Canada

Investor Relations

tf: +1.888.315.9715 • 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].

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This document contains statements about expected future events and financial and operating performance that are forward looking. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Forward-looking statements are not guarantees of future performance, and actual results and future events could materially differ from those anticipated in such statements.

Please refer to the Cautionary Note regarding forward-looking statements contained in this Financial Review. All of the forward-looking statements contained in this document are qualified by such cautionary statements. New Gold expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, events or otherwise, except in accordance with applicable securities laws.

All dollar amounts are expressed in US dollars except where otherwise indicated.

Inside Back Cover

Corporate Information(As of December 31, 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 American: NGD

PORTFOLIO OF ASSETS IN TOP-RATED JURISDICTIONS

INVESTED AND EXPERIENCED TEAM

ESTABLISHED OPERATIONAL TRACK RECORD

PEER-LEADING GROWTH PIPELINE

A HISTORY OF VALUE CREATION

WHY INVEST IN NEW GOLD?

Outside Back Cover

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