Building Our Shared Future

We experienced some significant changes and challenges and delivered important achievements. 2016 also marked the start of my role as President (and CEO in January 2017) after seven years leading New Gold’s corporate development and investor relations teams, including most recently as Executive Vice President of Business Development with added responsibility for human resources and exploration.

Under my leadership, Corporate Social Responsibility will remain a top priority at New Gold. At all of our sites – whether at Rainy River, where we are building a mine with first production scheduled for this fall, or at Cerro San Pedro, where we are entering a phased closure – we are working with our local communities, suppliers and partners to build our shared future, a future of success and prosperity. For example, the Cerro San Pedro Mine (CSP) transitioned from active mining to residual leaching in June 2016. While we continue to produce gold and silver from the leaching process, the Integrated Mine Closure program, based on best practices in the management of environmental, human resources and social/community aspects of closure, continues to deliver as we strive to exceed legal requirements and invest in local infrastructure and local capacity.

From a geopolitical perspective, 2016 was also one of the most tumultuous years in our recent past. The Brexit vote, the U.S. Presidential election, and a rise in anti-establishment sentiment have had a profound impact not just on politics and society but also on capital markets. At New Gold, we are increasingly aware of global trends and current challenges impacting our society and our industry. We have included the consideration of landmark events and developments such as the Truth and Reconciliation efforts in Canada (ongoing), the United Nations Sustainable Development Goals (2015) and the Paris Accord (2016) in our review of materiality, strategic planning and risk management. We are working to identify how we can adapt and contribute to these through our work at our sites in collaboration with our partners and peers.

Our Values and Principles

New Gold is a values-based company and we apply our values in everything that we do. We are signatories of the United Nations Global Compact, and our policies and practices are guided by its principles with reference to human rights, labour standards, the environment and anti-corruption. Our standards are based on best practices and international guidance such as ISO 14001 (Environmental), OHSAS 18001 (Occupational Health and Safety), ISO 26000 (Social Responsibility) and the International Cyanide Management Code. As a member of the Mining Association of Canada (MAC), New Gold’s operations adopt the MAC’s Towards Sustainable Mining Protocols. All these standards continue to guide our practices and our strategy as we identify material topics and set short- and long-term goals.

Strategic Priorities in Regards to Sustainability

In 2016, we established five-year Environmental and Social Responsibility goals under the five pillars of the New Gold Strategic Framework: Health and Safety, Operational Execution, Disciplined Growth, People, Environment and Social Responsibility. The identified goals were mapped against the United Nations Sustainable Development Goals (SDGs), as we explore how our work can contribute to achieving the SDGs.

Employment Practices

At New Gold, we recognize that our people are our greatest asset. In 2016, we saw many of our team members depart from permanent employment at our CSP Mine due to our transition from active mining to residual leaching. Gradual closure of CSP started in 2015 when we began the phased slowdown of mining activities and reducing our workforce – all the while working closely with employees, contractors, suppliers and local community members to increase social capital, diversify skills, certify for trades and facilitate local entrepreneurship.

Health and Safety

The starting point for all our achievements, including in the areas of social responsibility, is the health and safety of our employees. We seek to ensure that they are safe in their workplace and empowered in their career aspirations.

In the last few years, New Gold has worked diligently to ensure safety procedures and site standards are in place and work practices are performed in a safe manner with minimal risk.

In 2016 New Gold once again achieved excellent safety results. Rainy River achieved 4 million man hours without a Lost Time Injury (LTI) and New Afton achieved two years LTI free. CSP received, for the fourth consecutive year, the Mexican Mining Chamber Casco de Plata Award for the safest open pit mine in the country with over 500 employees. For the third consecutive year, New Afton won the John T. Ryan Safety Award for Metal Mines for the lowest accident frequency in British Columbia and Yukon.

New Afton is also the 2016 winner of the British Columbia Annual Safety Award for Large Underground Mines.

Environment

Our consistently strong environmental performance reflects the emphasis we have always put on protecting the environment and human health at all our operations. Several aspects of environmental management are critical to our communities of interest and to our business. The way we manage cyanide, water, tailings, biodiversity, energy and greenhouse gas emissions is particularly significant to our local and global communities of interest.

Water, for example, is critical to our communities as well as to our business, as we develop and operate mines in climates that vary from dry to very wet. In all instances we work conscientiously to conserve and recycle water and to use it efficiently. We have also consistently worked to improve the programs and systems to protect the quality of water sources that we may affect with our operations. In 2015, we established the New Gold Water Stewardship Standard, and all of our mines are working diligently to implement its tenets. In 2016, we commenced reporting on our performance and management approach to water through the Carbon Disclosure Project (CDP) Global Water Disclosure.

Community Engagement and Development

At New Gold, we believe that respectful and meaningful dialogue with communities and making a lasting and positive contribution to sustainable development go beyond a moral imperative and are key drivers to achieving a productive and profitable business. All New Gold mines and projects actively engage with the local communities and strive to be a contributor to their economic and social well-being. Our Participation Agreements at New Afton and Rainy River provide a framework for dialogue and ensure communities benefit from opportunities such as employment, training and contracting associated with our operations.

As an example, our permanent workforce at Rainy River was 80% local by the end of 2016, and its Aboriginal workforce grew from 17% in 2015 to over 36% in the last year. At New Afton, 25% of our employees are Aboriginal and 79% are from the local area.

Looking Forward

We have an exciting year in front of us. We started the year with significant changes in our leadership and are working hard to make these transitions as smooth as possible. In 2017, we will be working towards executing our updated Rainy River plan and continuing to deliver operationally while maintaining our focus on the well-being and health and safety of our people, the environment, and social responsibility. I would like to thank our employees, contractors and partners for their support, as well as the contributions made each and every day that contribute to New Gold’s success.

Yours truly,

Hannes Portman Signature

Hannes Portman
President and Chief Executive Officer