New Gold said its appeal against a federal ruling in a Mexican court has been denied, which could force the company to halt production at its Cerro San Pedro mine.

Last December New Gold won an injunction that allowed the company to resume full production after an original ruling in September forced it to suspend operations, cancelling the mine’s environmental permit.

New Gold said after it reviews the court’s ruling it will launch an appeal with a Collegiate Appeals Court in Mexico City and may file an application with the Mexican Supreme Court requesting it hear the case.

New Gold also said it is currently in talks with an environmental agency to ensure uninterrupted operations at the Pedro mine, which accounts for almost 30% of its annual gold output.

The Cerro San Pedro mine is expected to produce about 100,000oz of gold in 2010 at a total cash cost of C$390-C$410 ($370-$391) an ounce.