(All figures are in Canadian dollars unless otherwise indicated)

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

Transaction Highlights – New Gold

• Accretive on all key per share metrics – gold reserves, net asset value,
  future production and cash flow
• Adds 4.0 million ounce gold reserve in Ontario, further growing New
  Gold’s Canadian presence

• Asset located in great mining jurisdiction, near infrastructure

Enhances pipeline by adding asset with annual average production
potential of over 225,000 ounces over the life of the mine, at below
industry average total cash costs⁽¹⁾

Modest transaction size with minimal equity dilution to New Gold
shareholders

Further strengthens New Gold technical development team, who have a
track record of delivering on projects

“The acquisition of Rainy River is consistent with our strategy of
identifying opportunities to create shareholder value,” stated Randall
Oliphant, New Gold Executive Chairman. “We have followed Rainy River
for some time and see this as an opportune time to add this great asset
to our portfolio. We view the combination of Rainy River’s ideal
location, sizeable reserve, robust production potential and experienced
team as presenting a truly compelling opportunity.”

Transaction Highlights – Rainy River

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

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

Rainy River Gold Project

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

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

Rainy River Mineral Resource Estimate
		Metal grade		Contained metal
	Tonnes (Mt)	Au (grams per tonne)	Ag (grams per tonne)	Au (koz)	Ag (koz)
Proven	27.7	1.14	1.94	1,015	1,728
Probable	88.6	1.06	3.01	3,017	8,587
Total Reserves	116.3	1.08	2.76	4,032	10,315
Measured	27.6	1.33	1.90	1,182	1,689
Indicated	130.9	1.18	2.77	4,985	11,649
Total Measured & Indicated	158.5	1.21	2.62	6,167	13,338
Inferred	93.8	0.76	2.32	2,280	6,983

Additional Details of Offer

The Board of Directors of Rainy River, upon the unanimous recommendation
of its Special Committee, after consultation with its financial and
legal advisors, has unanimously approved entering into the Agreement
and recommends that Rainy River shareholders tender their shares to the
Offer. BMO Capital Markets, the financial advisor to Rainy River, has
provided a verbal opinion to the effect that, as of the date of such
opinion and subject to the assumptions, limitations, and qualifications
stated in such opinion, the consideration proposed to be paid to the
holders of Rainy River common shares pursuant to the Offer is fair from
a financial point of view to such holders. CIBC World Markets has
provided a separate verbal opinion solely to Rainy River’s Special
Committee to the effect that, as of the date of such opinion and
subject to the assumptions, limitations, and qualifications stated in
such opinion, the consideration proposed to be paid to the holders of
Rainy River common shares pursuant to the Offer is fair from a
financial point of view to such holders.

Rainy River’s Board of Directors and management team have entered into
lock-up agreements with New Gold agreeing to tender their shares,
including shares issuable on the exercise of stock options, and support
the transaction.

The Agreement between New Gold and Rainy River provides for, among other
things, a non-solicitation covenant on the part of Rainy River subject
to customary “fiduciary out” provisions, a right in favour of New Gold
to match any superior proposal and a payment to New Gold of a
termination fee of approximately $14 million in certain circumstances,
including if Rainy River accepts a superior proposal.

The Offer is expected to commence during the week of June 10, 2013 upon
the mailing of New Gold’s takeover bid circular and related documents,
which will include full details of the Offer. Rainy River’s directors’
circular, which will set out the unanimous recommendation of the board
of Rainy River that shareholders accept the Offer, will also be mailed.
The Offer will be open for acceptance for a period of not less than 35
days from the date of mailing of the takeover bid circular and will be
conditional upon, among other things, there being deposited under the
Offer, and not withdrawn at the expiry time, shares representing not
less than 66 2/3% of the Rainy River shares on a fully diluted basis.
In addition, the Offer will be subject to certain customary conditions,
including receipt of relevant regulatory approvals and the absence of a
material adverse change with respect to Rainy River.

New Gold’s financial advisor is RBC Capital Markets and its legal
advisors are Cassels Brock & Blackwell LLP in Canada and Paul, Weiss,
Rifkind, Wharton & Garrison LLP in the United States. Rainy River’s
financial advisor is BMO Capital Markets and its legal advisors are
Bull, Housser & Tupper LLP and Davies Ward Phillips & Vineberg LLP.
CIBC World Markets provided a fairness opinion to Rainy River’s Special
Committee.

Webcast and Conference Call

New Gold will hold a conference call and webcast on Friday, May 31, 2013
at 7:30 a.m. Eastern Time to discuss the proposed acquisition. A live
audio webcast will be available on New Gold’s homepage at www.newgold.com. Participants may also join the conference by calling 1-647-427-7450 or
toll-free 1-888-231-8191 in North America. To listen to a recorded
playback of the call after the event, please call 1-416-849-0833 or
toll-free 1-855-859-2056 in North America – Passcode 88929900. The
archived webcast will also be available after the call at www.newgold.com.

About New Gold Inc.

New Gold is an intermediate gold mining company. The company has a
portfolio of four producing assets and two significant development
projects. The combination of the New Afton Mine in Canada, the Cerro
San Pedro Mine in Mexico, the Mesquite Mine in the United States and
the Peak Mines in Australia positions New Gold as one of the lowest
cost producers in the industry. In 2013, the company is forecasting
between 440,000 and 480,000 ounces of gold production. In addition to
its four operating mines, New Gold owns 100% of the exciting Blackwater
project in Canada and 30% of the world-class El Morro project located
in Chile. For further information on the company, please visit www.newgold.com.

About Rainy River Resources Ltd.

Rainy River is a Canadian precious metals exploration company whose key
asset is the Rainy River Gold Project, a large gold system centred in
Richardson Township (part of Chapple Township). As at March 31, 2013,
the Company had approximately $90 million in cash and cash equivalents,
and it remains well funded for its ongoing activities, including: 1)
commencement of basic and detailed engineering work and ongoing
permitting and environmental assessment work; 2) continuing to grow the
existing resource through exploration; and 3) conducting a condemnation
program in areas identified for potential mine facilities. The project
is very well located in northwestern Ontario. It is accessed by a
network of roads and is close to hydro-electric infrastructure. The
Rainy River district has a skilled labour force and is one of the
lowest-cost areas for mineral exploration and development in Canada.
Ontario has low political risk and, according to the annual Fraser
Institute global survey of the mining industry, has consistently ranked
as one of the top jurisdictions embracing mineral development.

U.S. Shareholders

New Gold will be filing with the United States Securities and Exchange
Commission a registration statement on Form F-10 in connection with the
Offer which will include the formal offer and take-over bid circular.
New Gold encourages shareholders of Rainy River to read the formal
offer and take-over bid circular which contain the full terms and
conditions of the Offer and other important information. The offer and
take-over bid circular may be obtained free of charge through the
Securities and Exchange Commission’s website at www.sec.gov or by directing a request to the Investor Relations department of New
Gold.

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this news release constitutes “forward
looking statements” within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and forward looking
information under the provisions of Canadian securities laws.
Forward-looking statements are statements that are not historical facts
and are generally, but not always, identified by the use of
forward-looking terminology such as “plans”, “expects”, “is expected”,
“budget”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates”, “projects”, “potential”, “believes” or variations of
such words and phrases or statements that certain actions, events or
results “may”, “could”, “would”, “should”, “might” or “will be taken”,
“occur” or “be achieved” or the negative connotation. Such statements
and information include, without limitation, statements regarding
expectations as to the anticipated timing of the mailing of the offer
materials, the estimated mineral resources and mineral reserves at
Rainy River’s property, the expected further growth in gold reserves
and ongoing cash flows and other benefits of the transaction containing
forward-looking information. This forward looking information is
subject to numerous risks, uncertainties and assumptions, certain of
which are beyond the control of Rainy River and/or New Gold, including
risks relating to acquisitions, including, without limitation, the
parties may be unable to complete the acquisition or completing the
acquisition may be more costly than expected because, among other
reasons, conditions to the closing of the acquisition may not be
satisfied; problems may arise with the ability to successfully
integrate the businesses of New Gold and Rainy River, the parties may
be unable to obtain regulatory approvals required for the acquisition,
New Gold may not be able to achieve the benefits from the acquisition
or it may take longer than expected to achieve those benefits; and the
acquisition may involve unexpected costs or unexpected liabilities.
Other risks include the impact of general economic conditions; industry
conditions; volatility of metals prices; volatility of commodity
prices; currency fluctuations; mining risks; risks associated with
foreign operations; governmental and environmental regulation;
competition from other industry participants; the lack of availability
of qualified personnel or management; stock market volatility; the
ability of New Gold to complete or successfully integrate an announced
acquisition proposal; unexpected costs or unexpected liabilities
related to the acquisition. Readers are cautioned that the material
assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be
imprecise. Actual results, performance or achievement could differ
materially from those expressed in, or implied by, this forward-looking
information and, accordingly, no assurance can be given that any of the
events anticipated by the forward-looking information will transpire or
occur, or if any of them do so, what benefits that Rainy River and/or
New Gold will derive therefrom. New Gold and Rainy River disclaim any
intention or obligation to update or revise any forward-looking
information, whether as a result of new information, future events or
otherwise except as required by applicable securities laws. The
issuance of New Gold shares under the transaction is subject to TSX
acceptance or approval.

Cautionary Note to U.S. Readers Concerning Estimates of Measured,
Indicated and Inferred Mineral Resources

Information concerning the properties and operations discussed in this
news release has been prepared in accordance with Canadian standards
under applicable Canadian securities laws, and may not be comparable to
similar information for United States companies. The terms “Mineral
Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource”
and “Inferred Mineral Resource” used in this news release are Canadian
mining terms as defined in accordance with NI 43-101 under guidelines
set out in the Canadian Institute of Mining, Metallurgy and Petroleum
(“CIM”) Standards on Mineral Resources and Mineral Reserves adopted by
the CIM Council on November 27, 2010. While the terms “Mineral
Resource”, “Measured Mineral Resource” and “Indicated Mineral Resource”
are recognized and required by Canadian regulations, they are not
defined terms under standards of the United States Securities and
Exchange Commission. Under United States standards, mineralization may
not be classified as a “reserve” unless the determination has been made
that the mineralization could be economically and legally produced or
extracted at the time the reserve calculation is made. As such, certain
information contained in this news release concerning descriptions of
mineralization and resources under Canadian standards is not comparable
to similar information made public by United States companies subject
to the reporting and disclosure requirements of the United States
Securities and Exchange Commission. An “Inferred Mineral Resource” has
a great amount of uncertainty as to its existence and as to its
economic and legal feasibility. It cannot be assumed that all or any
part of an “Inferred Mineral Resource” will ever be upgraded to a
higher category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or other economic
studies. Readers are cautioned not to assume that all or any part of
Measured or Indicated Resources will ever be converted into Mineral
Reserves. Readers are also cautioned not to assume that all or any part
of an “Inferred Mineral Resource” exists, or is economically or legally
mineable. In addition, the definitions of “Proven Mineral Reserves” and
“Probable Mineral Reserves” under CIM standards differ in certain
respects from the standards of the United States Securities and
Exchange Commission.

Technical Information

New Gold

The scientific and technical information, as it relates to New Gold, in
this news release has been reviewed and approved by Mark Petersen (AIPG
CPG #10563), a Qualified Person under National Instrument 43-101 and
employee of New Gold.

Rainy River

The scientific and technical information, as it relates to Rainy River,
in this news release has been reviewed and approved by Garett
Macdonald, P.Eng. (PEO #90475344) and Kerry Sparkes, P.Geo. (APEGBC
#25261), both Qualified Persons under National Instrument 43-101 and
employees of Rainy River. Rainy River’s exploration program in
Richardson Township is being supervised by Kerry Sparkes, P.Geo.
(APEGBC #25261), a Qualified Person under National Instrument 43-101
and employee of Rainy River.

Rainy River Mineral Reserves

Open pit mineral reserves have been estimated using a cut-off grade of
0.30 g/t gold-equivalent, and underground reserves have been estimated
using a cut-off grade of 3.5 g/t gold-equivalent. Open pit reserves
have been estimated using a dilution of 9.7% at 0.22 g/t Au and 1.31
g/t Ag, and underground reserves have been estimated using a CAF
dilution of 9% at 0.61 g/t Au and 4.16 g/t Ag and LH dilution of 10% at
1.56 g/t Au and 1.28 g/t Ag. Open Pit Reserves have been estimated
using a mine recovery of 95%, and Underground reserves have been
estimated using a mine recovery of 95%. Additional details regarding
the Mineral Reserve estimate and related Feasibility Study are provided
in the May 23, 2013 NI 43-101 Technical Report available on SEDAR.

Rainy River Mineral Resources

Mineral resources are not mineral reserves and do not have demonstrated
economic viability. Mineral resources are reported relative to
conceptual open pit shells. On average, the conceptual open pit extends
to an elevation of 500 metres below surface. Material above this
elevation offers reasonable prospects for economic extraction from an
open pit because drilling results suggest that the zone of gold
mineralization is broader than currently modeled and that new drilling
information should positively impact future mineral resources. Material
below this elevation is potentially mineable by underground mining
methods. Mineral resources that are potentially mineable by open pit
methods are reported at a cut-off grade of 0.35 g/t gold; underground
mineral resources are reported at a cut-off grade of 2.5 g/t gold. All
mineral resources are based on a gold price of US$1,100 per ounce, a
silver price of US$22.50 per ounce, a foreign exchange rate of 1.10
Canadian dollars to 1.0 US dollar. Metallurgical recoveries include 88%
for gold in open pit resources and 90% for gold in underground
resources, with a silver recovery of 75% in both cases.

All figures are rounded to reflect the relative accuracy of the
estimate. Figures may not add due to rounding. Additional details on
the Mineral Resource estimate are provided in the Rainy River news
release dated October 10, 2012. Mineral Resources were estimated by
SRK Consulting (Canada) Inc. (“SRK”) and are reported in accordance
with Canadian Securities Administrators National Instrument 43-101.

(1) TOTAL CASH COSTS

“Total cash costs” per ounce figures are calculated in accordance with a
standard developed by The Gold Institute, which was a worldwide
association of suppliers of gold and gold products and included leading
North American gold producers. The Gold Institute ceased operations in
2002, but the standard is widely accepted as the standard of reporting
cash costs of production in North America. Adoption of the standard is
voluntary and the cost measures presented may not be comparable to
other similarly titled measures of other companies. Each of New Gold
and Rainy River reports total cash costs on a sales basis. Total cash
costs include mine site operating costs such as mining, processing,
administration, royalties and production taxes, but are exclusive of
amortization, reclamation, capital and exploration costs. Total cash
costs are reduced by any by-product revenue and is then divided by
ounces sold to arrive at the total by-product cash cost of sales. The
measure, along with sales, is considered to be a key indicator of a
company’s ability to generate operating earnings and cash flow from its
mining operations. This data is furnished to provide additional
information and is a non-IFRS measure. Total cash costs presented do
not have a standardized meaning prescribed by IFRS and may not be
comparable to similar measures presented by other mining companies. It
should not be considered in isolation as a substitute for measures of
performance prepared in accordance with IFRS and is not necessarily
indicative of operating costs presented under IFRS. A reconciliation is
provided in the respective MD&A and accompanying the quarterly
financial statements of each of Rainy River and New Gold.

SOURCE New Gold Inc.