February 2, 2011 / 1:32 PM / in 7 years

UPDATE 2-New Gold says Mexican mine to drive 2011 production

* Higher mining rate at Cerro San Pedro to drive growth

* Sees 2011 production of 380,000-400,000 oz

* Q4 output 124,445 oz vs 111,672 oz yr ago

* Shares up 2 pct (Recasts; adds details)

Feb 2 (Reuters) - New Gold Inc NGD.TO NGD.A said it expects an increased mining rate at its Cerro San Pedro mine in Mexico to drive production in 2011, after reporting an 11 percent rise in fourth-quarter output.

For 2011, the Vancouver-based gold producer forecast output of 380,000-400,000 ounces at a total cash cost of $430-$450 per ounce. In 2010, it produced 382,911 ounces at a total cash cost of $428 per ounce.

Gold dropped on Wednesday on hopes for further economic recovery in the United States, but concerns over unrest in Egypt and the prospects that it could spread into the wider Middle East are continuing to prompt some buying of gold.

U.S. gold futures for April delivery GCJ1 fell $6.30 an ounce to $1,334.00 on Wednesday.

The company said the Cerro San Pedro mine is expected to produce 135,000-145,000 ounces of gold and 1.9-2.1 million ounces of silver in 2011.

The company’s Peak mine in Australia is expected to produce 90,000-100,000 ounces of gold in the year.

New Gold produced 124,445 ounces at a total cash cost of $354 per ounce in the fourth quarter, compared with 111,672 ounces at $472 per ounce a year ago. The Cerro San Pedro mine produced 38,874 ounces of gold, up from 25,781 ounces a year ago. Silver production at the mine more than doubled to 700,988 ounces.

At the Peak mine, gold output rose 20 percent. Shares of the company were up 2 percent at C$8.34 on Wednesday on the Toronto Stock Exchange. The stock has more than doubled in value in the last six months. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Unnikrishnan Nair)

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