New Gold Inc (NGD.TO) suspended mining at Amapari mine in Brazil and placed it on temporary care and maintenance, saying it would not be cost-effective to process the limited remaining oxide reserves there.

The company, whose shares were down 5 percent in morning trade, said it would also investigate other strategic options for the Amapari operation. While significant resources remain at Amapari, the additional capital required to maintain economic production levels and the limited remaining oxide reserves justify the decision to place the mine on care and maintenance, Chief Executive Robert Gallagher said in a statement.

The company said it would be more cost-effective to process the remaining oxide ore with the underlying sulphide resource in a new process facility.

It is preparing a preliminary economic assessment to exploit this resource and expects the study to be completed in the first quarter of 2009.

The leaching of stacked material is expected to continue until it will not be economical to do so, the company said.

New Gold Inc was formed in June last year, from the 3-way merger of New Gold, Metallica Resources and Peak Gold.

New Gold shares were down 9 Canadian cents at C$1.68 on the Toronto Stock Exchange. (Reporting by Arup Roychoudhury in Bangalore; Editing by Ratul Ray Chaudhuri)

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