Contributing to Sustainable Community Development

Sustainable economic development is one of the main principles of our Community Engagement and Development Standards. Our economic contributions benefit communities and regions in many forms. There are taxes and royalties paid directly to governments, but equally important is the impact of the salaries brought home by hundreds of employees and contractors, the vast majority of whom are from the host communities. We also make investments in community infrastructure, in scholarships, in developing local entrepreneurship, and in capacity building and economic diversification. In addition, whenever it is practical, we strive to source our services and supplies locally. This is a powerful tool for creating direct and indirect economic benefits for local communities.

All New Gold sites continually seek opportunities to support community organizations and activities with a focus on skills development, and to encourage local entrepreneurship to promote diversified, sustainable economic prosperity. Our sponsorships and donations support education, health and wellness, economic diversification, job creation, food banks and environmental conservation initiatives. At the corporate level, our Corporate Donations Committee meets on a quarterly basis to review requests, with a priority on health, environment, education and community development investments.

To assist us in better understanding our indirect benefits to the communities where we operate, we initiated a series of independent third-party studies. In 2012 we commissioned a study of the economic impacts of the Cerro San Pedro Mine to the state and national economies. In 2014 an independent third-party evaluated the potential economic and social impact of the Rainy River project to the region. Although specific to the underlying context of northern Ontario, it is illustrative of the potential contributions in terms of jobs, business development, tax revenues, training and social contributions. In 2015 we plan to conduct a similar assessment for our sites in British Columbia.

About Our Supply Chain

New Gold operates mines in Canada, the United States, Australia and Mexico; annually we procure approximately C$500 million dollars of goods and services. We invest significant resources to ensure our purchasing policies positively impact the communities and the people adjacent to the mines we operate, by providing opportunities to develop businesses and increase overall employment and tax benefits for the local economy. Understanding that each one of our properties has an economic impact on the communities where we operate, wherever possible we strive to select our vendors in the following priority:

  • Local indigenous communities through specific Participation or Impact and Benefits Agreements.
  • Local communities adjacent to the mines.
  • Regionally, in states or provinces.
  • Nationally, in the countries where we operate.
  • Internationally, when that is the only viable option.

In 2014, New Gold made significant strides to document Corporate Supply Chain policies and procedures as well as develop a vendor pre-qualification process, which will be rolled out in 2015. This will enable New Gold Supply Chain professionals to better understand the capabilities of our suppliers and assist us to align with vendors who share our commitment to ethical and sustainable business practices.

The improvements in the supply chain network we have made in 2014, along with the commitments going forward, will help New Gold ensure we leave a positive legacy in the communities we touch.

Performance in 2014

Our corporate donation and sponsorship dollars supported a range of environmental and community programs. This included donations to The Princess Margaret Cancer Foundation, Clinton Giustra Sustainable Growth Initiative and its micro-enterprise initiatives, Indspire, Mining4Life, the Heart and Stroke Foundation, BC Children’s Hospital, KidSafe, Nature Conservancy of Canada and the United Way. We have also sponsored educational initiatives and industry events such as BC MineralsEd, the Canadian Aboriginal Minerals Association Conference and the Global Exploration, Mining and Minerals Dialogue Series.

In 2014 New Gold generated significant direct and indirect economic value in our host communities. Payments for employee wages and benefits in 2014 were approximately $176 million. Almost $5 million was invested in community initiatives, including infrastructure, scholarships, economic diversification projects, environmental conservation and other donations and sponsorships. Royalties, production and property taxes paid to governments were approximately $5 million.

At Cerro San Pedro, almost 70 scholarships were provided to outstanding students at the primary, secondary and high school levels. Mesquite provided 10 scholarships and New Afton provided nine scholarships to local Aboriginal students. Our Indspire sponsorship has resulted in six scholarships to Aboriginal students in British Columbia and Ontario.

Economic Values Generated and Distributed ($ millions)1 – Includes all New Gold sites

Economic Values 2012 2013 2014
Revenues 791.3 779.8 726.0
Operating costs2,3 836.6 479.5 445.0
Employee wages and benefits (includes payroll taxes paid to governments) 180.2 194.7 175.9
Payments to providers of capital (interest paid and standby fees)4 22.0 52.3 52.3
Payments to governments (royalties, property, production and income taxes)5 103.0 34.6 5.06
Community investments7 4.2 3.6 4.8
1

Unaudited figures. Additional information on economic values, and site-specific economic value generated, are disclosed in our Annual Financial Review available on our website.

2

Non-GAAP data includes payments for materials, products and services. Also includes $11 million in exploration expenditures.

3

A total of $2.4 million in property taxes and production taxes had been included in operating costs in 2012; these have been reclassified into payments to governments in 2012 and 2013.

4

In 2012, New Gold made only one interest payment in relation to senior unsecured notes issued in 2012. In 2013, New Gold had made a full year’s worth of payments in relation to those notes.

5

The decline in payments to governments since 2012 is due to the significant changes in income tax paid in the last three years. In 2014 New Gold received income tax refunds of $4.0 million, as compared to $31.7 million paid in 2013 and $100.6 million paid in 2012. The main reasons for the reduction in income taxes paid in 2013 were lower profitability at the Cerro San Pedro and Mesquite mines due to lower commodity prices and increase in operating costs. In 2013 New Gold also received non-recurring tax refunds in Australia as a result of amending prior year tax returns and non-recurring tax incentive credits in Canada. The main reasons for the reduction in income taxes paid in 2014 were lower profitability, particularly at the Cerro San Pedro Mine, due to lower commodity prices as well as increase in operating costs and income tax refunds received related to instalment payments made in 2013.

6

By country, payments to governments in 2014 were approximately: $1.77 million to Canada, $1.27 million to the U.S., $1.78 million to Australia and $0.18 million to Mexico.

7

Expenditures for donations and investment of funds in the broader community where the target beneficiaries are external to the Company. These include contributions to charities, NGOs and research institutes, funds to support community infrastructure and direct costs of social programs and direct community development activities. Includes investments of funds made through agreements with Aboriginal communities, with the exception of annual payments related to commercial production at New Afton.

Our Cerro San Pedro Mine is scheduled to start its first phase of closure later this year, based on industry best practice benchmarks. Part of our commitment to our employees and host community is to support their transition to a post-closure economy. In 2014 we retained the autonomous civil society organization Centro de Colaboración Cívica Mexico to carry out a consultation process with employees and local residents. The main objectives of the participatory process were to understand the concerns and expectations of the Company’s workforce and the communities surrounding the mine, and to identify post-closure income-generating alternatives for employees and residents who are financially dependent on the Company.

As a result of the consultation process, we launched a Community Entrepreneurship Development Program in the municipality of Cerro de San Pedro, in partnership with Sustainable Economic Futures Canada and the Monterrey Institute of Technology and Higher Education. We have also offered financial management and business training to employees and community members through a local education provider.

1

Community Investments are expenditures for voluntary donations and investment of funds in the broader community where the target beneficiaries are external to the Company. These include contributions to charities and non-profits, community infrastructure development and direct costs of social programs.