New Gold Inc (NGD.TO) agreed to buy back C$50 million ($42.2 million) worth of its senior secured notes at a discount of 40 percent on face value and will record a related gain in the first quarter.

The transaction will lower New Gold's senior secured note debt to C$187 million from C$237 million and result in a reduction of C$5 million per year in interest payments, the company said in a statement.

The company's total debt will be reduced to C$242 million after the deal.

The natural resource exploration and development company said the deal will result in an estimated pre-tax gain of about $14 million in the first quarter.

New Gold stock closed at C$1.92 Thursday on the Toronto Stock Exchange.

($1=1.184 Canadian Dollar) (Reporting by Sweta Singh in Bangalore; Editing by Himani Sarkar)

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