New Gold Inc., the Canadian miner that produces precious metal in Mexico and Australia, agreed to buy Western Goldfields Inc. for about C$314.6 million ($243.9 million) to gain the Mesquite mine in California. Western Goldfields investors will receive one New Gold share and 0.01 of a Canadian cent for each share they hold, Vancouver- based New Gold said today in a statement. The offer is 19 percent higher than Western Goldfields’ closing price yesterday. The combined company would have three gold mines with production of about 335,000 ounces this year and will be able to fund development of the New Afton project in British Columbia. The transaction will help New Gold in its goal of producing 1 million ounces a year by 2012. New Gold fell 17 cents, or 7.4 percent, to C$2.13 as of 9:31 a.m. in Toronto Stock Exchange trading. The shares rose 30 percent this year through yesterday. Western Goldfields, based in Toronto, gained 14 cents, or 7.3 percent, to C$2.07. Western Goldfields’ Mesquite mine in California is forecast to produce as much as 150,000 ounces of gold this year at a cash cost of $530 to $540 an ounce, New Gold said. New Gold said it will have $171 million in cash, $77 million in asset-backed commercial paper investments and $275 million of debt when the transaction is completed. Either party would be liable for a C$8.8 million breakup fee if they don’t proceed with the deal under “certain circumstances,” the companies said. Shareholder Approval Two-thirds of Western Goldfields shareholders present at a special meeting in May must approve the deal, the company said. Western Goldfields shareholders will own 42 percent of the new entity, New Gold said. New Gold said it is advised by Macquarie Capital Markets Canada Ltd. and Lawson Lundell. Western Goldfields’ financial adviser is BMO Capital Markets and its counsel is Cassels Brock & Blackwell. To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.

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