MINERAL LEASE AGREEMENT

Exhibit 10.1 to Form 8-K

MINERAL LEASE AGREEMENT

THIS MINERAL LEASE AGREEMENT ("Agreement") is made effective as of the day of October 24, 2006 ("Effective Date"), between DALTON LIVESTOCK, a Nevada general partnership, and WINCHELL RANCH, a Nevada corporation, Lessors, and NEWGOLD, INC., a Delaware corporation, Lessee.

RECITALS

A.   Lessors are owners of the surface and varying interests of the minerals in and to property described in Exhibit "A" attached hereto, which property is located in Elko County, Nevada (the "Premises").

B.   Lessee desires to lease the interests of Lessors in the Premises upon the terms and conditions herein set forth.

C.   Lessors desire to lease their interests in the Premises to Lessee upon the terms and conditions herein set forth.

AGREEMENT

FOR AND IN CONSIDERATION of the payments herein required, the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessors and Lessee (the "Parties" and individually a "Party") agree as follows:

1. GRANT OF LEASE RIGHTS

A.   Grant of Lease . Lessors hereby lease exclusively to Lessee and its successors and assigns all of Lessors' interest in and to all minerals, including barite, (hereafter the "Mineral Substance") except for and excluding all oil, gas, oil shale and other hydrocarbons (liquid or gaseous), coal, uranium and fissionable materials and geothermal resources, of every nature and kind (hereinafter "reserved substances") beneath the surface of, within, or that may be produced from the premises.

B.   Rights of Lessee . Lessee shall have the following rights in respect of the Premises:

i.   Mining and Access Rights . Subject only to any limitations imposed by federal, state and local regulations, the free, unrestricted and uninterrupted right of access, ingress and egress to the Premises over existing roads or alternate routes approved by Lessors and the right to enter upon and occupy the Premises for all purposes reasonably incident to exploring for, developing, mining (by underground mining, surface mining, strip mining or any other surface or subsurface method, including any method later developed), extracting, milling, smelting, refining, stockpiling, storing, processing, removing and marketing therefrom all ores, metals, minerals, mineral products (including intermediate products) and materials of every nature or sort, and the right to place, construct, maintain, use and thereafter remove such structures, facilities, equipment, roadways, haulageways, utility lines, reservoirs and water courses, and other improvements as may be necessary, useful or convenient for the full enjoyment of all of the rights granted under this Agreement subject to subsection F herein. Lessee shall have sole and exclusive custody, possession, ownership and control of all ore, rock, drill core and other Mineral Substances extracted or removed from the Premises and may sell or otherwise dispose thereof. In the exercise of such rights, Lessee shall be subject only to compliance with applicable statutes, rules, regulations and the terms of this Agreement. These rights are also granted and may be utilized for the purpose or in the course of carrying on exploration, development or mining operations on any other properties in which Lessee may have or acquire any right or interest, provided Lessors assent to the same.

ii.   Cross Mining . The right, if Lessee so desires, to mine and remove any Mineral Substances existing on, in or under the Premises through or by means of shafts, openings or pits which may be sunk or made upon adjoining and nearby properties, and the right to store any Mineral Substances from the Premises upon any such properties. In addition, Lessee may use the Premises for any shafts, openings, pits and storage areas sunk or made for the mining, removal and/or stockpiling of any Mineral Substances from any adjoining or nearby properties. Mineral Substances taken from the Premises shall at all times be kept entirely separate and distinct from any other ore or concentrated product until the same are measured and sampled so that the rights of Lessors shall be at all times preserved and protected

iii.   Commingling . The right to commingle ore removed from the Premises or products derived therefrom after treatment, with other ore or products, before or after concentration or beneficiation, so long as the data necessary to determine the weight, grade, and recoverability of both the ore removed from the Premises or products derived therefrom and the ore or products with which it is commingled are obtained by Lessee. Lessee shall then use that data to determine Lessors' royalty for such in minerals, metals and/or other products extracted from ores or products so mixed. Such data and determinations shall be acquired and completed in accordance with generally accepted industry practices.

iv.   Deposit of Waste Materials . The right to temporarily or permanently deposit on or off the Premises tailings, waste rock, overburden, surface stripping materials, process solutions, and all other materials originating from the Premises or from adjoining or nearby properties, even if the sole use of the Premises may be for the placement of such materials subject to any and all reclamation as required by state and Federal statutes and regulations, including but not limited to providing access for livestock and seeding.

v.   Treatment . The right, at Lessee's election and in any manner it deems fit, to beneficiate, concentrate, process, smelt, refine, and otherwise treat on or off the Premises any Mineral Substances taken from the Premises or from adjoining or nearby properties by any physical or chemical method or methods. In exercising this right, Mineral Substances may be removed to a plant or plants existing, established or maintained upon the Premises or elsewhere.

vi.   Water Rights . The right to use any of Lessors' water rights on, about, under or appurtenant to the Premises or to which the Premises are riparian to facilitate the exploration, mining and processing rights granted in this Agreement subject to approval of the Lessors which will not unreasonably be withheld if such use does not materially interfere with Lessors' livestock use of the area.

2. TERM

A.   Term . The term of this Agreement shall commence as of the Effective Date and shall continue for a period of five years thereafter unless sooner terminated in the manner herein provided. If at the end of said five-year period, being the primary term, Lessee is engaged in Mining Operations (as defined below), the term of this Agreement shall automatically continue for so long thereafter as Lessee continues to be engaged in Mining Operations.

B.   Definition of Mining Operations . For purposes of this Agreement "Mining Operations" shall include, but shall not be limited to, development, extraction, processing. leaching or sale of ores, concentrates or derivatives retrieved through leaching of ores, produced from the Premises. Activities off the Premises shall constitute Mining Operations when they are conducted in connection with an integrated mining operation involving the Premises and other properties in which Lessee holds an interest. Development includes activities, including permitting, carried on diligently and in good faith preparatory to commencing or resuming operations at a mine. Lessee shall be deemed to be actively engaged in Mining Operations so long as all such operations, once begun, do not cease for a period of more than 365 consecutive days. In the event Lessee is actively engaged in Mining Operations at the end of the primary term but at any time is unable to obtain a satisfactory market or a satisfactory price for Mineral Substances and as a result suspends mining, processing or marketing operations from time to time, then Mining Operations shall not be deemed to have ceased and this Agreement shall not expire or terminate provided that Lessee notifies Lessors of such loss of market or inability to obtain a satisfactory price and diligently attempts to market Mineral Substances at a satisfactory price and recommence operations. Mining Operations shall not be deemed to have ceased if once begun they are interrupted through Force Majeure in accordance with Section 8. If Mining Operations have not commenced at the end of the primary term because of Force Majeure conditions, the primary term shall be extended until such Force Majeure conditions cease.

C.   Continuation of Use . If, at the end of the primary or extended term, Lessee is not conducting or has ceased Mining Operations, but is utilizing the Premises in support of Mining Operations on other lands, then this Agreement shall continue in force as to the lands subject to such uses and such expansions thereof as may reasonably be contemplated, as designated in good faith by Lessee, and the payment provided in Section 3.A shall be rental for such uses.

3. PAYMENTS TO LESSORS

A.   Annual Rental . As initial consideration for the lease rights granted herein, Lessee shall pay to Lessors Twenty Thousand Dollars ($20,000.00). Subject to Lessee's right to terminate this Agreement, Lessee shall pay the following additional amounts to Lessors as rent:

On each five year term the annual rentals shall be subject to adjustment as set forth in subsection E herein.  

None of the payments made in accordance with the schedule set forth above shall be deductible as a credit against production royalties payable to Lessors pursuant to Section 3.B until production commences. After production commences no production royalties shall be due Lessors until the royalties exceed the annual $50,000.00 rental after each anniversary of the effective date. Lessee's production royalties shall be deductible as a credit against the annual payment until the royalties exceed $50,000.00 during the lease year and then paid to Lessors.

B.   Production Royalty . When Lessee commences production of ores, minerals or materials from the premises, Lessee shall pay to Lessors a production royalty equal to Lessors' percentage in the mineral interest of the parcel from which production occurs as set out in Exhibit "B" of a percentage of the Net Smelter Returns (NSR) received by Lessee from the sale of said ores, minerals or materials, except for barite, from the Premises, should such amount exceed the annual rental payment specified above. The percentage of net smelter returns to which Lessors' percentage payment shall be applied or credited to Lessee's annual rental is as follows:

For all other minerals other than gold, the average fair market value at the time of production, as quoted in Metals Week or a comparable publication.

For barite, the production royalty shall be 5% of the gross revenues derived from the sale of any barite mined upon the premises adjusted to Lessors' percentage in the mineral interest in the parcel from which production occurs.

(1)   If Lessee sells refined gold or silver, Lessee will be deemed to have received proceeds from the sale thereof equal to the number of ounces of refined gold or silver outturned to Lessee's account during the calendar quarter multiplied in the case of gold by the average daily London Bullion Brokers P.M. Gold Fixing during such calendar quarter and in the case of silver by the average of the daily Engelhard industrial bullion price for silver during the calendar quarter. The average price for a calendar quarter shall be determined by dividing the sum of all daily prices posted during the calendar quarter by the number of days that prices were posted The posted price shall be obtained from the Wall Street Journal, Reuters, E&MJ or other industry-accepted source. If a posted price referenced above becomes no longer available, Lessee shall, acting reasonably, select an alternative posted price that closely approximates such original posted price. Lessee shall have the right to market and sell to third parties refined gold and silver in any manner it chooses, including the sale of such refined gold and silver on the commodity market. In this regard, Lessors shall have no right to participate in any gains and/or profits or obligation to suffer any losses accruing to Lessee as a result of forward sales, options trading, commodities futures trading or similar transactions.

(2)   Charges to be deducted from proceeds in determining Net Smelter Returns are the following:

(a)   all costs, charges and expenses paid or incurred by Lessee for treatment in the smelting and refining processes (including handling, processing, interest and provisional settlement fees, sampling, assaying and representation costs, penalties and other processor deductions);

(b )   all costs, charges and expenses paid or incurred by Lessee for transportation (including freight, insurance, security, transaction taxes, handling, port, demurrage, delay and forwarding expenses incurred by reason of or in the course of such transportation) of Mineral Substances from the Premises to the place or places of treatment and thence to the place or places of sale;

(3)   Royalties shall accrue quarterly (based on calendar quarters) and shall become due and payable by Lessee prior to the end of the month following the end of each quarter. Royalty payments shall be accompanied by pertinent information in sufficient detail to explain the calculation of the royalty payment.

(4)   All statements for royalties rendered to Lessors by Lessee during any quarter shall conclusively be presumed to be true and correct after one year following the end of such quarter unless within said one-year period Lessors takes written exception thereto and makes a claim on Lessee for adjustment. No adjustment favorable to Lessee shall be made unless it is made within the same prescribed period.

(5)   Lessors, upon notice in writing to Lessee, and utilizing a designated representative, shall have the right to audit Lessee's accounts and records relating to the payment of the royalty for any calendar quarter within the one-year period following the end of such calendar quarter; provided, however, the making of any audit shall not extend the time for the taking of written exception to and the adjustment of accounts as provided for in the paragraph above. All audits shall be conducted by Lessors, at Lessors' sole expense, at the office of Lessee where the relevant books and records are maintained and such audit shall be conducted during normal business hours.

C.   Place and Allocation of Payment . All payments shall be made and allocated in accordance with the provisions of Section 9 below.

D.   No Royalty on Test Materials . Lessee shall have the right to mine and market amounts of Mineral Substances reasonably necessary for sampling. assaying. metallurgical testing and evaluation of the mineral potential of the Premises without incurring any obligation to make production royalty payments.

E.   The primary term base rental shall be adjusted upward or downward, on each Fifth yearly anniversary of the effective date by an increase or decrease based on the Consumer Price Index (1982-84=100), base beginning with August 2006, published by the Bureau of Labor and Statistics, United States Department of Labor, as follows:

F.   Compensation for Surface Disturbance and Use. Lessors shall receive no compensation for surface damage to the Premises for the use of existing roads or alternate routes approved by Lessors.

Lessors shall receive compensation for those rights granted to Lessee set forth in subsection B on any portion of the Premises used by Lessors in excess of a total of 100 acres upon which Lessors do not hold a 100% interest in the mineral estate. Such compensation shall be at the rate of $25.00 per acre per annum which may be prorated as follows:

There shall be excluded from the 100 acre limit, any portion of the Pre