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 and come in many forms. We pay taxes and royalties directly to governments ($1.4 million), but equally important is the impact of the salaries brought home by hundreds of employees and contractors, mostly from the host communities ($137.4 million).

In 2015 our investments in community infrastructure, scholarships, developing local entrepreneurship, capacity building and economic diversification were $7.1 million. In addition, whenever it is mutually advantageous, we strive to source our services and supplies locally. This is a powerful tool for creating direct and indirect economic benefits for local communities. In 2015, a total of $161.8 million of our expenditures were made locally, and our international suppliers accounted for less than 4% of our procurement spending. Of the Rainy River payments for services and supplies made, 40% were to local businesses controlled by Aboriginal groups.

All New Gold sites continually seek opportunities to support community organizations and activities – for example, by promoting skills development, encouraging local entrepreneurship and improving environmental stewardship. Our sponsorships and donations support education, health and wellness, economic diversification, job creation, food banks and environmental conservation initiatives. At the corporate level, our Donations Committee meets on a quarterly basis to review requests from charitable organizations focused 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 on the state and national economies; in 2015, an independent third party evaluated the potential economic and social impact of the Rainy River project to the region, followed by a similar assessment for our sites in British Columbia.

Performance in 2015

In 2015, New Gold generated significant direct and indirect economic value in our host communities. Payments for employee wages and benefits in 2015 were $137.4 million. We invested over $7 million in community initiatives, including infrastructure, scholarships, economic diversification projects, environmental conservation, and other donations and sponsorships.

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

Economic values 2013 2014 2015
Revenues 779.8 726.0 712.9
Payments for materials, products and services2 479.5 445.0 348.1
Employee wages and benefits (includes payroll taxes paid to governments) 194.7 175.9 137.4
Payments to providers of capital (interest paid and standby fees) 52.3 52.3 52.3
Payments to governments (royalties, property, production and income taxes)3 34.6 5.0 1.44
Community investments5 3.6 4.8 7.1
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.

Rainy River costs were capitalized and therefore have been excluded in 2015.

3.

The decline in payments to governments from 2013 is due to the significant changes in income tax paid. In 2014, New Gold received income tax refunds of $4.0 million, as compared to $31.7 million paid in 2013. The main reasons for the reduction in income taxes paid were lower profitability as a result of continued decreases in metal prices as well as tax losses carried forward from prior years.

4.

By country, payments to governments at all levels in 2015 were $3.46 million in Canada, $2.66 million in the U.S., $7.03 million in Australia and a recovery associated with an income tax refund of $11.74 million from Mexico.

5.

Expenditures for voluntary donations and investment of funds in the broader community where the target beneficiaries are external to the company include contributions to charities, NGOs and research institutes, funds to support community infrastructure, and direct costs of social programs and direct community development activities for all our sites as well as corporate offices.

About Our Supply Chain

At New Gold, we understand that responsible supply chain management is a key generator of business value and an important element of strong corporate responsibility performance. We strive to manage the environmental, social and economic impacts of our supply chain and to create and protect long-term environmental, social and economic value for all involved in our business. New Gold has over 2,000 suppliers across our operations. Our supply chain expenditure in 2015 exceeded $400 million across our mining operations (projects not included). We have approximately 300 suppliers that account for 80% of our expenditures, and tier 1 suppliers (those who provide products directly to the company without using a third party or other manufacturers) account for about 50% of this spending. These tier 1 suppliers include mining contractors, original equipment manufacturers and producers of key commodities and consumables such as mobile equipment; fixed plant, repair, operating and maintenance spare parts; cyanide; explosives; grinding media; drilling tools and consumables; large tires; and chemicals and reagents.

We invest significant resources to ensure our purchasing policies positively affect our host communities by prioritizing local vendors and creating opportunities to develop local businesses and benefit local economies, as well as by promoting ethical conduct.

Our objective is to develop a cost-effective and sustainable supply foundation by developing relationships with our suppliers and business partners, based on the principles of fair competition and integrity. Our approach focuses on ensuring we comply with our commitments and on continuously improving our processes.

2015 Supply Chain Expenditure Profile (US$ millions)1

New Afton Mesquite Peak Mines Cerro San Pedro Rainy River Total
Local2 15.4 37.1 10.7 22 6.4 91.6
Local Aboriginal contracts3 19.9 50.3 70.2
Regional 40.4 24.8 22.3 37.4 41.5 166.4
National 29.9 42.5 61.6 854 27.1 246.1
International 17.8 0.2 0.1 3.5 1.3 22.9
Total 123.4 104.6 94.7 147.9 126.6 597.2
1

Figures for Blackwater are not included.

2

Excludes local Aboriginal contracts shown on following line.

3

Non-Canadian sites do not track data for this category.

4

Includes $0.5 million of expenses not assigned.

We recognize the equality and dignity of the people we do business with, and we expect ethical behaviour and integrity from our suppliers. We work to develop relationships with suppliers who share our values. The Anti-Bribery and Anti-Corruption Policy introduced in 2015 includes guidance to ensure that key processes are in place to confirm that our suppliers and contractors understand our expectations.

Responsible Closure at Cerro San Pedro

The Cerro San Pedro Mine is the first New Gold mine to go through a planned closure process. We are taking this opportunity to build on industry best practices and create a model for socially responsible, integrated closure – recognizing that planning and investing in social closure is as important as conducting environmental reclamation activities. Part of our commitment to our employees and our host communities is to support a successful transition to a post-closure economy. New Gold is striving to leave a legacy of enhanced social capital and local capacity, as well as sustainable enterprises to encourage economic diversification and to minimize the effects generated by the cessation of mining.

A consultation process in 2014 identified concerns and expectations from local community members and included many of our employees, who are mostly local residents. This process generated ideas for sustainable economic development and identified potential local development partners. In 2015, a collective effort, involving different organizations and the Cerro San Pedro Sustainable Development team, led to the launch of a grassroots Entrepreneurial Development (ED) Program in the municipality of Cerro de San Pedro.

The Cerro San Pedro ED Program is currently funded by New Gold and is a working partnership between Sustainable Economic Futures Canada (SEF) and the Monterrey Institute of Technology and Higher Education. In 2015, the ED Program provided financial management and business training to local residents and employees through the Monterrey Institute, as well as business facilitation activities designed to encourage the development of sustainable, new small businesses and to support existing small- to medium-sized enterprises in the municipality.

As an example of the collaboration between SEF and the Monterrey Institute, the workshop “Yo Emprendo” had more than 70 local participants receiving training in businesses. This workshop is part of our economic development program and provides a capacity-building venture created to develop entrepreneurship, creativity, innovation and business education.

Community Investments1

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.