Metallica Resources Inc.: Exhibit 4.23 - Prepared by TNT Filings Inc.



 





	 	Exhibit 4.23
	May 12, 2004	 


	 	 
	BY: Facsimile
    and Overnight Mail	 
	 	 
	Don Hulse	Fred H. Lightner
	Mine Manager	Sr. Vice
    President and
	Minera San
    Xavier, S.A. de C.V.	Chief Operating
    Officer
	Camino Cerro San
    Pedro	Metallica
    Resources, Inc.
	Km. 3+870, no 200
    C.P. 78440	12200 E.
    Briarwood Avenue
	Cerro de San
    Pedro, SLP	Suite 165
	Mexico	Centennial,
    Colorado 80112
	 	U.S.A.



Re:     Mining Contract between Minera
San Xavier, S.A. de C.V. ("MSX") and Washington Group Latin America, Inc. ("WGLA")
for the Cerro San Pedro Project (the "Project") 

Dear Don and Fred: 

As of the date of this letter, WGLA has performed all of the
work under the Mining Contract that it is capable of performing given MSX's
inability to obtain the blasting permit, the Agrarian Court's recent decision
nullifying MSX's Lease Agreement for the Project site, the San Pedro
Municipality's decision to revoke certain environmental authorizations and the
current uncertainty regarding the future of the Project. Therefore, until such
time when MSX notifies WGLA in writing that MSX has secured the blasting permit
and authorizes WGLA to commence the work contemplated by the Mining Contract
WGLA will cease to perform any further work under the Mining Contract. 


WGLA remains committed to assisting MSX make the Project
successful. In that regard, WGLA is providing the enclosed information as the
basis for a mutually agreed upon course of action for the parties to follow
until the earlier of (a) the date on which MSX notifies WGLA that MSX has
received the blasting permit and authorizes WGLA to commence work under the
Mining Contract and (b) 90 days from the date of this letter (the "Standby
Term"). In addition, as consideration for WGLA remaining at the Project site,
WGLA is requesting that MSX execute the enclosed Indemnification Agreement.


Based on a total equipment value of $4,576,223.00, the return
on capital employed ("ROCE") on the equipment currently located at the Project
site is $76,270.00 per month. During the Standby Term, WGLA will maintain the
equipment currently at the Project for a monthly payment of $76,270.00. WGLA
will also not bring any additional equipment into Mexico unless authorized to do
so by MSX. 


	
    A Subsidiary of: Washington
    Group International
	
    Calle Benito
    Juarez #23 Int. 2. - Portales Oriente 
    - Del Benito - Juarez 
    - Mexico









WGLA's monthly current G&A costs are $34,640.
Please note that the G&A costs do not include the direct labor costs being paid
by WGLA to Servicio de Plata y Oro S.A. ("SPO"), which will be treated
separately under the WGLA/SPO contract. 

Based on a monthly equipment cost of
$76,270.00 and G &A cost of $34,640, WGLA will maintain equipment and personnel
at the Project during the Standby Term for $110,910 a month plus any SPO labor
costs. If accepted by MSX, WGLA agrees to continue under this cost structure
until the end of the Standby Term. If MSX notifies WGLA to commence work within
120 days of the date of this letter, MSX agrees to renegotiate the Mining
Schedule and Target Pricing provisions of the Mining Contract in order to
overcome the effects of the delay and any increased costs of performance
resulting from WGLA's inability to continue work during the Standby Term. 


If after 120 days MSX has still not secured
the blasting permit and MSX has not instructed WGLA to commence work, WGLA
proposes that the parties meet again to mutually agree on a course of action.
Possible courses of action include the ability of either party to immediately
terminate the Mining Contract, continue under the current or a similar payment
schedule, or demobilization of the equipment. Estimated demobilization cost plus
the IVA loss would be $1,093,285. 

This letter is intended to amend and
supplement the Mining Contract. Except as described in this letter, all other
terms and conditions of the Mining Contract shall continue on full force and
effect. Please be advised that by presenting this proposal, WGLA is not waiving
any of its other rights or remedies under the Mining Contract at law or in
equity. 

We hope that the proposal outlined in this
letter will enable you to minimize costs and retain equipment and personnel at
the Project site while continuing to pursue the blasting permit. Please sign
where indicated below to confirm your acceptance of this letter. In addition,
please sign the enclosed Indemnification Agreement and return an original to me
along with an originally executed copy of this letter. 

Sincerely, 

/s/ LeRoy E. Wilkes 

      LeRoy E. Wilkes 

      Executive Vice President President, 

      Mining Business Unit 

Washington Group International, Inc. 

Attorney-in-Fact, Washington Group 

Latin America, Inc. 


ACCEPTED AND AGREED 

this 16 day of June, 2004. 


	
    A Subsidiary of: Washington
    Group International
	
    Calle Benito Juarez #23 Int. 2. -
    Portales Oriente - Del Benito - Juarez
    - Mexico









By:     /s/ Fred H. Lightner 

Name:      Fred H. Lightner 

Title         Sr. V.P. & COO 


Enclosures: 


  -
  List of WGLA's equipment located at the Project site, which includes the fair
  market value of each piece of equipment 

  -
  Table of WGLA's G&A costs 

  -
  Indemnification Agreement 



cc:     Curt Cooley 

          Christy Crase 


 

 

 

 


 


	
    A Subsidiary of: Washington
    Group International
	
    Calle Benito Juarez #23 Int. 2. -
    Portales Oriente - Del Benito - Juarez
    - Mexico