New Gold Agrees to Acquire Silver Quest Resources Ltd. Consolidates Ownership of Blackwater Project in British Columbia

New Gold Inc. ("New Gold") (TSX:NGD)(NYSE Amex:NGD) and Silver Quest Resources
Ltd. ("Silver Quest") (TSX VENTURE:SQI) today jointly announce a binding letter
agreement whereby New Gold will acquire, through a plan of arrangement (the
"Arrangement"), all of the outstanding common shares of Silver Quest. Under the
terms of the Arrangement, Silver Quest shareholders will receive 0.09 of a New
Gold share (the "Share Consideration") for each Silver Quest share held and one
common share in a new Yukon-focused precious metals exploration company,
McIntyre Minerals Inc. ("McIntyre") for every three Silver Quest shares held
(the "Spinco Consideration"). The offer values Silver Quest at $1.32 per share,
representing a 52% premium based on the combination of:




--  The Share Consideration of $1.06 per share, representing a 22% premium
    based on New Gold and Silver Quest's October 14, 2011 closing prices on
    the TSX and TSX.V, respectively, implying an equity offer value of
    approximately $131 million on a fully diluted basis and a transaction
    value of $121 million, net of the cash to be received from the exercise
    of Silver Quest's dilutive instruments 

--  The Spinco Consideration of $0.26 per share, representing an additional
    30% premium based on Silver Quest's October 14, 2011 closing price on
    the TSX.V, implying a value of approximately $35 million  



Upon closing of the Arrangement, which is expected in December 2011, New Gold
will acquire Silver Quest's 25% interest in the Davidson Property, which forms
the northern half of the Blackwater Project and in which New Gold currently
holds the remaining 75% interest. Silver Quest's share of the Blackwater mineral
resource includes 0.56 million ounces of indicated and 0.21 million ounces of
inferred gold mineral resources. In addition, New Gold will acquire a 100%
interest in the Capoose Property which covers over 41,000 hectares of land and
has an established gold and silver indicated and inferred mineral resource. The
Capoose Property is located approximately 25 kilometres west of the Blackwater
Project. 


As part of the Arrangement, New Gold will purchase, on a private placement
basis, $3.5 million of McIntyre shares at a price of $0.78 per share ($0.26 per
share value adjusted for the three Silver Quest for one McIntyre share
exchange), which will result in New Gold holding 9.9% of the shares outstanding
of McIntyre, with current Silver Quest shareholders holding the remaining 90.1%
upon completion of the Arrangement. Including the proceeds from the New Gold
private placement, it is expected McIntyre will have approximately $15 million
in cash to fund an aggressive two year exploration program focused on Silver
Quest's 3Ts Gold Project in central British Columbia and a number of Yukon
exploration properties. 


Transaction Highlights - New Gold



--  Consolidates New Gold's ownership of the Blackwater Project in British
    Columbia adding 0.56 million ounces of indicated and 0.21 million ounces
    of inferred gold mineral resources 

--  Adds significant landholding with established gold and silver mineral
    resource in close proximity to Blackwater Project with the Capoose
    Property 

--  Provides New Gold shareholders with a strategic ownership position in
    McIntyre 



"The acquisition of Silver Quest's Davidson interest and the Capoose Property
consolidates our ownership of the Blackwater Project and expands our presence
significantly in the area," stated Randall Oliphant, New Gold Executive
Chairman. "We also look forward to continuing our relationship with Silver Quest
as a shareholder in McIntyre given their team's track record of delivering value
for shareholders."


Transaction Highlights - Silver Quest



--  Immediate and attractive premium recognizing both the current value and
    potential value of the Davidson Property 

--  All-share deal - shareholders retain exposure to the Blackwater Project
    and gain exposure to New Gold's diversified gold production base and
    strong growth profile 

--  Maintain exposure to Silver Quest's 3Ts Gold Project and Yukon
    properties through shares in McIntyre which will be fully funded for an
    aggressive two year exploration program 



"This transaction delivers an immediate and attractive premium to our
shareholders while allowing them to continue to share in the potential at the
Blackwater Project through their New Gold shares," stated Randy Turner,
President and Chief Executive Officer of Silver Quest. "We are pleased that our
shareholders are able to retain their exposure to an exciting portfolio of
exploration properties in the Yukon and British Columbia through their McIntyre
shares with New Gold as a supportive shareholder."


McIntyre Minerals



--  McIntyre will be led by the existing management team and Board of Silver
    Quest, who have significant experience in building companies focused on
    mineral exploration  

--  McIntyre will be a well funded exploration company with sufficient cash
    for aggressive exploration programs in 2012 and 2013 

--  Exploration in British Columbia will be focused on the 3Ts Gold Project
    which covers an epithermal gold-silver vein system within which 12
    individual mineralized veins, up to 650 metres in strike length and up
    to 15 metres in true width, have been identified 

--  3Ts Gold Project covers approximately 3,100 hectares with an established
    inferred mineral resource (942,600 tonnes at 4.89 g/t Au and 77 g/t Ag) 

--  Exploration on the Yukon properties will be focused on 18 properties
    covering more than 93,000 hectares, including extensive land holdings in
    the White Gold District 



"McIntyre will be well funded to continue to advance its portfolio of
exploration properties," stated Randy Turner. "As the McIntyre team evaluates
the preliminary results from work completed in the Yukon during the 2011 field
season, the team looks forward to executing a robust and targeted program in
2012."


Blackwater Project

The Blackwater Project is a bulk-tonnage gold project located in central British
Columbia. New Gold owns 100% of the southern Dave and Jarrit claims within the
Blackwater deposit and 75% of the northern Davidson claim where Silver Quest
owns the remaining 25%. On September 19, 2011, New Gold and Silver Quest
announced an updated resource estimate for the Blackwater Project which is
summarized below.




  Blackwater Deposit - September 2011 Resource Estimates by Property at 0.4 
                             g/t Au Cut-off grade                           
----------------------------------------------------------------------------
                                         Indicated                          
              --------------------------------------------------------------
                                                NGD         SQI             
                            Grade             Share       Share       Total 
                     -------------------  Contained   Contained   Contained 
               Tonnes   Gold     Silver        Gold        Gold        Gold 
Property        000's   (g/t)      (g/t)       (Moz)       (Moz)       (Moz)
----------------------------------------------------------------------------
Dave and        
 Jarrit                                                                     
 (100% New                                                                  
 Gold)         87,226   1.12        6.0        3.13          --         3.13
----------------------------------------------------------------------------
Davidson       
 (75% New Gold/  
 25% Silver                                                                 
 Quest)        77,929   0.89        4.1        1.66        0.56        2.22
----------------------------------------------------------------------------
Total          
 Blackwater   165,155   1.01        5.1        4.79        0.56        5.35
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                                         Inferred                           
              --------------------------------------------------------------
                                                NGD         SQI             
                            Grade             Share       Share       Total 
                      ------------------  Contained   Contained   Contained
                Tonnes    Gold   Silver        Gold        Gold        Gold 
Property         000's    (g/t)    (g/t)       (Moz)       (Moz)       (Moz)
----------------------------------------------------------------------------
Dave and          
 Jarrit                                                                     
 (100% New                                                                  
 Gold)           9,533    1.13      6.5        0.35          --        0.35
----------------------------------------------------------------------------
Davidson        
 (75% New Gold/   
 25% Silver                                                                 
 Quest)         29,226    0.88      4.2        0.61        0.21        0.82
----------------------------------------------------------------------------
Total            
 Blackwater     38,759    0.94      4.8        0.96        0.21        1.17
----------------------------------------------------------------------------



Terms of Offer



--  Silver Quest shareholders will receive 0.09 of a New Gold common share
    for each Silver Quest share held and one common share of McIntyre for
    every three Silver Quest shares held 

--  Values Silver Quest at $1.32 per share including Spinco Consideration,
    based on New Gold's October 14, 2011 closing price and the estimated New
    Gold private placement subscription price 

--  Transaction unanimously approved by the Boards of Directors of both New
    Gold and Silver Quest 

--  Directors and Officers of Silver Quest, representing approximately 7.7%
    of the fully diluted shares outstanding have entered into voting
    agreements in support of the Arrangement 

--  $5 million break fee 

--  New Gold retains a right to match any superior proposal 



The acquisition of Silver Quest by New Gold is expected to be completed by way
of a court approved plan of arrangement. The maximum number of New Gold shares
to be issued, including all options and warrants, would be approximately 11.1
million, in which case New Gold would also acquire approximately $10 million in
cash from option and warrant proceeds. Silver Quest's stock options outstanding
on the effective date of the Arrangement will be exchanged for New Gold and
McIntyre shares on a cashless exercise basis in accordance with the terms of the
Arrangement. Silver Quest warrants will be adjusted or exchanged for new
warrants entitling their holders to acquire common shares of New Gold and
McIntyre. The transaction is targeted to close in December 2011. 


The Special Committee comprised of independent directors of Silver Quest
established to review the transaction received a verbal opinion from Paradigm
Capital Inc. that the consideration to be received by the Silver Quest
shareholders under the terms of the transaction is fair from a financial point
of view to the shareholders of Silver Quest. Silver Quest directors have
determined that the transaction is in the best interest of Silver Quest and its
shareholders and have unanimously approved the transaction. The directors intend
to recommend, in the information circular for the shareholder meeting, that
Silver Quest shareholders vote in favour of the transaction. Directors and
Officers of Silver Quest have entered into lock-up agreements with New Gold
under which they have agreed to vote in favour of the Arrangement, their Silver
Quest shares and options, which represent approximately 7.7% of Silver Quest's
fully diluted shares outstanding. The Arrangement has been approved unanimously
by the Board of Directors of both New Gold and Silver Quest and will be subject
to, among other things, the favourable vote of 66 2/3% of the votes cast by
Silver Quest shareholders and option holders voting as a single class at a
special meeting called to approve the transaction which is expected to take
place in December 2011. 


In the event that the Arrangement is not completed, Silver Quest has agreed,
under certain circumstances, to pay New Gold a termination fee equal to $5
million. Silver Quest has also provided New Gold with certain other customary
rights, including a right to match competing offers. 


Silver Quest securityholders and other interested parties are advised to read
the materials relating to the proposed Arrangement that will be filed by Silver
Quest with securities regulatory authorities in Canada when they become
available. Anyone may obtain copies of these documents when available free of
charge at the Canadian Securities Administrators' website at www.sedar.com. 


This announcement is for informational purposes only and does not constitute an
offer to purchase, a solicitation of an offer to sell the shares or a
solicitation of a proxy.


New Gold's financial advisor is Canaccord Genuity Corp. and its legal advisor is
Cassels Brock & Blackwell LLP. Silver Quest's financial advisor is Paradigm
Capital Inc. and its legal advisor is Gowling Lafleur Henderson LLP. The legal
advisor for the Special Committee of Silver Quest is DuMoulin Black LLP.


Technical Information

The Blackwater mineral resource estimate and other scientific and technical
information contained in this news release related to Blackwater were prepared
by Mr. Ronald Simpson, P. Geo, President of Geosim Services Inc., an independent
"Qualified Person" under National Instrument 43-101 Standards of Disclosure for
Mineral Projects ("NI 43-101"). See New Gold's news release dated September 19,
2011 for details of key assumptions and parameters relating to these resource
estimates. The NI 43-101 technical report in respect of the mineral resource
estimate disclosed will be filed on SEDAR by November 3, 2011. 


The scientific and technical information in this news release related to
Blackwater has been reviewed by Mark Petersen, a Qualified Person under National
Instrument 43-101 and employee of New Gold.




  Capoose - Indicated and Inferred Resource Estimates with Gold Equivalent  
                                   Cut-Off                                  
----------------------------------------------------------------------------
                  Indicated                           Inferred              
----------------------------------------------------------------------------
Cut-            Grade     Contai Contai             Grade     Contai Contai 
off        ---------------  -ned   -ned        ---------------  -ned   -ned 
g/t  Tonnes  Gold  Silver   Gold Silver  Tonnes  Gold  Silver   Gold Silver 
AuEq  000's  (g/t)   (g/t)  (koz)  (Moz)  000's  (g/t)   (g/t)  (koz)  (Moz)
----------------------------------------------------------------------------
0.3  38,605  0.34    23.7  419.4   29.4  49,548  0.32    21.2  508.6   33.8 
----------------------------------------------------------------------------
0.4  31,216  0.38    26.5  383.8   26.6  37,256  0.37    24.6  443.2   29.5 
----------------------------------------------------------------------------
0.5  24,727  0.43    29.5  343.2   23.5  29,555  0.42    27.1  395.2   25.7 
----------------------------------------------------------------------------



The indicated and inferred mineral resource estimate for Capoose has been
prepared in compliance with the standards of National Instrument 43-101 by Dr.
A. Armitage, P. Geol., and J. Campbell, B.Sc., P. Geo., of GeoVector Management
Inc. an Ottawa, Ontario consulting firm specializing in mineral resource
estimation, project assessment and project management. Dr. Armitage acted as the
Qualified Person, as defined in National Instrument 43-101 and is independent of
Silver Quest.


David Pawliuk, P. Geo., Vice-President Exploration for Silver Quest is the
Qualified Person, as defined by National Instrument 43-101, for the Capoose
Project and has reviewed the technical information in this release.


About New Gold Inc.

New Gold is an intermediate gold mining company. The company has a portfolio of
three producing assets and three significant development projects. The Mesquite
Mine in the United States, the Cerro San Pedro Mine in Mexico and Peak Gold
Mines in Australia are expected to produce between 380,000 and 400,000 ounces of
gold in 2011. The fully-funded New Afton project in Canada is scheduled to add
further growth in 2012. In addition, New Gold owns 30% of the world-class El
Morro project located in Chile and, in June 2011, New Gold acquired the exciting
Blackwater project in Canada. For further information on the company, please
visit www.newgold.com.


About Silver Quest Resources Ltd.

Silver Quest is a gold and silver exploration company, whose main areas of
interest are central British Columbia and the White Gold District of the Yukon.
Silver Quest maintains a portfolio of highly prospective projects, ranging from
grassroots exploration through advanced stage resource expansion. The Company is
poised to add shareholder value through project advancement, while evaluating
early to advanced stage gold and silver projects for possible acquisition. For
further information on the company, please visit www.silverquest.ca.


Cautionary Note Regarding Forward-Looking Statements 

Certain information contained in this news release, including any information
relating to New Gold's and/or Silver Quest's future financial or operating
performance may be deemed "forward looking". All statements in this news
release, other than statements of historical fact, that address events or
developments that New Gold/Silver Quest expects to occur, are "forward-looking
statements". Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words "expects",
"does not expect", "plans", "anticipates", "does not anticipate", "believes",
"intends", "estimates", "projects", "potential", "scheduled", "forecast",
"budget" and similar expressions, or that events or conditions "will", "would",
"may", "could", "should" or "might" occur. All such forward-looking statements
are based on the opinions and estimates of the relevant management as of the
date such statements are made and are subject to important risk factors and
uncertainties, many of which are beyond New Gold/Silver Quest's ability to
control or predict. Forward-looking statements are necessarily based on
estimates and assumptions (including that the Arrangement will be completed
successfully on the terms agreed upon by the parties and that the business of
Silver Quest will be integrated successfully in the New Gold organization) 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. 


In the case of New Gold, such factors include, without limitation: significant
capital requirements; fluctuations in the international currency markets and in
the rates of exchange of the currencies of Canada, the United States, Australia,
Mexico and Chile; price volatility in the spot and forward markets for
commodities; impact of any hedging activities, including margin limits and
margin calls; discrepancies between actual and estimated production, between
actual and estimated reserves and resources and between actual and estimated
metallurgical recoveries; changes in national and local government legislation
in Canada, the United States, Australia, Mexico and Chile or any other country
in which New Gold currently or may in the future carry on business; taxation;
controls, regulations and political or economic developments in the countries in
which New Gold does or may carry on business; the speculative nature of mineral
exploration and development, including the risks of obtaining and maintaining
the validity and enforceability of the necessary licenses and permits and
complying with the permitting requirements of each jurisdiction that New Gold
operates, including, but not limited to, Mexico, where New Gold is involved with
ongoing challenges relating to its environmental impact statement for the Cerro
San Pedro Mine; the lack of certainty with respect to the Mexican and other
foreign legal systems, which may not be immune from the influence of political
pressure, corruption or other factors that are inconsistent with the rule of
law; the uncertainties inherent to current and future legal challenges the
company is or may become a party to, including the third party claim related to
the El Morro transaction with respect to New Gold's exercise of its right of
first refusal on the El Morro copper-gold project in Chile and its partnership
with Goldcorp Inc., which transaction and third party claim were announced by
New Gold in January 2010; diminishing quantities or grades of reserves;
competition; loss of key employees; additional funding requirements; actual
results of current exploration or reclamation activities; changes in project
parameters as plans continue to be refined; accidents; labour disputes;
defective title to mineral claims or property or contests over claims to mineral
properties. 


In the case of Silver Quest, such risks include, among other risks, the
approvals of regulators, availability of funds, the results of financing and
exploration activities, the interpretation of drilling results and geological
data, project cost overruns or unanticipated costs and expenses. In addition,
there are risks and hazards associated with the business of mineral exploration,
development and mining, including environmental hazards, industrial accidents,
unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion
losses (and the risk of inadequate insurance or inability to obtain insurance to
cover these risks) as well as "Risk Factors" included in New Gold's and Silver
Quest's continuous disclosure documents filed on and available at www.sedar.com.
Forward-looking statements are not guarantees of future performance, and actual
results and future events could materially differ from those anticipated in such
statements. All of the forward-looking statements contained in this news release
are qualified by these cautionary statements. New Gold/Silver Quest 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.


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


Information concerning the properties and operations discussed herein 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 December 11, 2005. While the terms "Mineral Resource", "Measured
Mineral Resource", "Indicated Mineral Resource" and "Inferred 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.