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                              AMENDMENT NO. 1 TO THE
                                 CREDIT AGREEMENT


                                             Dated as of June 30, 1997

         AMENDMENT NO. 1 TO THE CREDIT AGREEMENT among Pegasus Gold, 
Inc., a company organized under the laws of British Columbia, Canada 
("PGI"), Pegasus Gold Corporation, a Nevada corporation ("PGC"), and 
Pegasus Gold Australia Pty Ltd, an Australia corporation ("PGA", and 
together with PGI and PGC, the "BORROWERS"), the banks, financial 
institutions and other institutional lenders parties to the Credit 
Agreement referred to below (collectively, the "LENDERS"), the co-agents 
referred to therein and Citibank, N.A., as administrative agent in the 
United States and as a collateral agent (the "US ADMINISTRATIVE AGENT") 
for the Lenders, Citibank Canada, as administrative agent in Canada and 
as a collateral agent (the "CANADIAN ADMINISTRATIVE AGENT") for the 
Lenders, and Citibank Limited, as administrative agent in Australia and 
as a collateral agent (the "AUSTRALIAN ADMINISTRATIVE AGENT", and 
together with the US Administrative Agent and the Canadian 
Administrative Agent, the "ADMINISTRATIVE AGENTS") for the Lenders.

         PRELIMINARY STATEMENTS:

         (1)  The Borrowers, the Lenders and the Administrative Agents 
have entered into a Multicurrency Reducing Revolving Credit Agreement 
dated as of April 17, 1996 (the "CREDIT AGREEMENT").  Capitalized terms 
not otherwise defined in this Amendment have the same meanings as 
specified in the Credit Agreement.

         (2)  In accordance with Section 8.01 of the Credit Agreement, 
the Borrowers and the Required Lenders have agreed to amend the Credit 
Agreement as hereinafter set forth.

         SECTION 1.  AMENDMENTS TO CREDIT AGREEMENT.  The Credit 
Agreement is, effective as of the date hereof and subject to the 
satisfaction of the conditions precedent set forth in Section 3, hereby 
amended as follows:

             (a)  The definition of "EBITDA" in Section 1.01 is amended 
    in full to read as follows:

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              "EBITDA" means, with respect to any Person for any period, net 
         income (or net loss) of such Person for such period PLUS (a) to the 
         extent deducted in computing such net income (or net loss), the sum 
         of (i) interest expense, (ii) income tax expense, (iii) depreciation 
         expense, (iv) amortization expense, (v) non-cash charges related to 
         asset write downs, revaluations and other similar reductions in the 
         carrying value of property, plant and equipment and Investments and 
         (vi) any non-recurring expense paid for by PGI or its Subsidiaries 
         solely with PGI's common stock, PLUS (b) any refund or release to any 
         Borrower or Guarantor of contributions described in clause (c)(i) 
         below, and MINUS (c)(i) contributions made by any Borrower or 
         Guarantor in connection with Liens permitted pursuant to Section 
         5.02(a)(viii) or (ix) and (ii) to the extent included in computing 
         such net income (or net loss), non-recurring gains since January 1, 
         1997, in each case (other than with respect to clauses (b) and (c)(i) 
         above) determined in accordance with GAAP for such period.

         (b)    Section 2.09(c)(ii) is hereby amended by deleting clause (A) 
    therefrom and replacing it with the following:

         (A) except with respect to any Existing Letter of Credit, an issuance 
         fee, payable in the currency in which the applicable Letter of Credit 
         is denominated, for each Letter of Credit issued by such Issuing Bank 
         on or after April 17, 1996, in an amount equal to 0.125% of the 
         Available Amount of such Letter of Credit calculated and payable (i) 
         on the date of issuance of such Letter of Credit and (ii) if such 
         Letter of Credit shall be extended one or more times and remain 
         outstanding for a period in excess of one (1) year, on each annual 
         anniversary of the issuance date of any such Letter of Credit, 
         PROVIDED that such Letter of Credit is outstanding on such anniversary 
         date (and, with respect to any increase in such Available Amount at 
         any time, 0.125% of such increase payable on the date of such 
         increase) and

         (c)  Section 5.01(j) is hereby amended by adding thereto, immediately 
    following the word "Affiliates" appearing in the fourth line of such 
    Section, the words "which are not Loan Parties".

         (d)  Section 5.01(l) is amended (i) by inserting the words "not 
    subject to any contingency that may preclude any Borrower from making 
    delivery or receiving payment thereunder" immediately after the phrase 
    "Gold Price Hedge Agreement" and (ii) by inserting the words "in cash" 
    immediately after the phrase "weighted average realized price of gold".

         (e)  Section 5.02(a) is hereby amended by (i) deleting the word "and" 
    appearing at the end of Section 5.02(a)(vi), (ii) deleting the period 
    appearing at the end 


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    of Section 5.02(a)(vii) and replacing it with a semicolon, and (iii) adding 
    thereto the following Sections 5.02(a)(viii) and (ix) to read as follows:

              (viii)  Liens arising under a Trust Agreement, dated as of 
         October 22, 1996, between PGC, as Grantor, and the Board of Investment 
         of the State of Montana, as Trustee, and furnished solely for purposes 
         of compliance with the financial assurances requirements set forth in 
         Paragraph 44 of the Consent Decree entered September 27, 1996, in the 
         consolidation of UNITED STATES OF AMERICA, ET AL., V. PEGASUS GOLD 
         CORPORATION, ET AL., Civil Action No. 95-95-BLG-JDS, and GROS VENTRE 
         TRIBE, ET AL., V. PEGASUS GOLD INC., ET AL., Civil Action No. 
         95-96-BLG-JDS, in the United States District Court for the District of 
         Montana, Billings Division (hereinafter referred to as the "ZORTMAN 
         CONSENT DECREE"); PROVIDED, HOWEVER, that the aggregate fair market 
         value of all property subject to such Liens shall not at any time 
         exceed US$15,000,000 and no such Lien shall extend to cover any 
         Collateral; and

              (ix)    Liens securing the obligations of any Borrower or 
         any Restricted Subsidiary to reimburse the issuer of any surety or 
         bond required to be furnished under Paragraph 44 of the Zortman 
         Consent Decree; PROVIDED, HOWEVER, that the aggregate fair market 
         value of all property subject to such Liens shall not at any time 
         exceed US$10,000,000 and no such Lien shall extend to cover any 
         Collateral.

         (f)  Section 5.03 is amended by inserting at the end thereof a new 
    Section 5.03(l), to read as follows:

              (l)  MONTHLY FINANCIALS.  As soon as available and in any event 
        within 30 days after the end of each month from July, 1997 through and 
        including December, 1997, (i) Consolidated and consolidating balance 
        sheets of PGI and its Subsidiaries as of the end of such month and 
        Consolidated and consolidating statements of income and a Consolidated 
        statement of cash flows of PGI and its Subsidiaries for the period 
        commencing at the end of the previous Fiscal Year and ending with the 
        end of such month, setting forth in each case in comparative form the 
        corresponding figures for the corresponding period in the previous 
        Fiscal Year and (ii) a schedule in form satisfactory to the US 
        Administrative Agent setting forth the position of the Loan Parties 
        under all Hedge Agreements, all in reasonable detail and duly certified 
        by the chief financial officer of PGI.

        (g)  Section 5.03 is amended by inserting at the end thereof a 
    new Section 5.03(m), to read as follows:

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              (m)  MOUNT TODD REPORT.  As soon as available and in any event 
         within 30 days after the end of each month from July, 1997 through and 
         including December, 1997, a report on the Mount Todd development, in 
         form and covering subject matter satisfactory to the US Administrative 
         Agent.

         (h)  Section 5.03 is amended by inserting at the end thereof a new 
    Section 5.03(n), to read as follows:

              (n)  MOUNT TODD ENGINEERING REPORT.  No later than December 15,
         1997, an engineering report, from an independent engineering firm
         selected by PGI and subject to the approval of the Required Lenders
         (such approval not to be unreasonably withheld), in form and covering
         subject matter satisfactory to the US Administrative Agent and
         prepared on a basis consistent with the feasibility study and
         engineering review regarding the Phase II Development provided to the
         US Administrative Agent prior to the closing of the Credit Agreement.

         (i)  Section 5.03 is amended by inserting at the end thereof a 
    new Section 5.03(o), to read as follows:

              (o)  OFFICER'S CERTIFICATE.  No later than January 30, 1998 and
        no earlier than January 2, 1998, (i) a certificate from the chief
        financial officer of PGI confirming that, as of December 31, 1997,
        subject where applicable to year-end audit adjustments, no Default
        has occurred and is continuing or, if a Default has occurred and is
        continuing, a statement as to the nature thereof and the action that
        the Borrowers have taken and propose to take with respect thereto and
        (ii) a schedule setting forth the computations used by such officer
        in determining compliance as of December 31, 1997 with the covenants
        contained in Sections 5.04(a) through (e); PROVIDED, HOWEVER, that if
        such certificate fails to be delivered on January 30, 1998 and any
        Administrative Agent shall have notified any Borrower of such failure,
        such certificate shall be delivered within three days of such notice.

         (j)  Section 5.04(b) is amended by deleting the periods September 
    30, 1997 to December 30, 1997 and December 31, 1997 to March 30, 1998, 
    and the ratios set opposite such periods, and substituting therefor the 
    periods and ratios set forth below:

                      Period                               Ratios
                      ------                               ------
         September 30, 1997 to December 30, 1997         6.00 to 1.0
         December 31, 1997                               5.75 to 1.0
         January 1, 1998 to March 30, 1998               5.50 to 1.0


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         (k)  Section 5.04(c) is amended by deleting the periods 
    September 30, 1997 to December 30, 1997 and December 31, 1997 to March 30, 
    1998, and the ratios set opposite such periods, and substituting therefor 
    the ratios set forth below:

                          Period                               Ratios
                          ------                               ------
             September 30, 1997 to December 30, 1997         2.40 to 1.0
             December 31, 1997                               2.70 to 1.0
             January 1, 1998 to March 30, 1998               3.00 to 1.0

         (l)  Section 6.01(c) is amended by inserting immediately after 
    the reference "5.04" therein the phrase "or 5.03(o) (but only if the 
    three day grace period provided for in the proviso of such Section 
    5.03(o) shall have expired without delivery of the certificate referred 
    to therein)".

         SECTION 2.  ADDITIONAL FEE.  If the Borrowers fail to comply 
with the covenants set forth in either Section 5.04(b) or 5.04(c) (in 
each case such compliance to be determined without giving effect to 
Sections 1(j) and 1(k) of this Amendment) with respect to the dates of 
September 30, 1997 and December 31, 1997 then, within three Business 
Days after the delivery of (i) with respect to any failure to comply 
with the covenants applicable as of September 30, 1997, the related 
quarterly financial statements delivered in accordance with Section 
5.03(b) of the Credit Agreement or (ii) with respect to any failure to 
comply with the covenants applicable as of December 31, 1997, the chief 
financial officer's certificate delivered in accordance with Section 
5.03(o) of the Credit Agreement, as amended hereby, and, in either case, 
no later than three Business Days after any such financial statements 
are or such certificate is required to be delivered pursuant to such 
Section 5.03(b) or such Section 5.03(o), as applicable:

         (a)  the US Borrower shall pay or cause to be paid to the US 
    Administrative Agent, for the account of each US Lender,

         (b)  the Canadian Borrower shall pay or cause to be paid to the 
    Canadian Administrative Agent, for the account of each Canadian Lender 
    and

         (c)  the Australian Borrower shall pay or cause to be paid to 
    (i) the Australian Administrative Agent, for the account of each 
    Australian Lender and (ii) each Risk Participant (in consideration of 
    such Risk Participant's Obligation to purchase such Risk Participant's 
    Adjusted Pro Rata Share of Australian Borrower Advances)

a fee equal to 0.25% per annum of each such Lender's Revolving Credit 
Commitment (as designated pursuant to Section 2.01(e) of the Credit 
Agreement) for the fiscal quarter ended on September 30, 1997 or 
December 31, 1997, as applicable; PROVIDED, HOWEVER, that if during the 
calendar quarter ended September 30, 1997 or December 31, 1997, as 
applicable, any 


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Borrower is required to pay default rate interest in accordance with 
Section 2.08(c) of the Credit Agreement, the fee payable on such date in 
accordance with this Section shall be reduced PRO RATA, based on the 
number of days occuring in such calendar quarter on which such default 
rate shall be payable; PROVIDED FURTHER that if year-end audit 
adjustments show that the Borrowers were not in compliance with the 
covenants referred to above in this Section 2, the Borrowers shall 
immediately notify the US Administrative Agent of such non-compliance 
and the Borrowers shall pay the fees provided for in this Section 2 
within three Business Days of when such notice was or should have been 
sent.

         SECTION 3.  CONDITIONS TO EFFECTIVENESS.  This Amendment shall 
become effective as of the date first above written when, and only when, 
on or before August 15, 1997 the Borrowers shall have paid to the US 
Administrative Agent for the account of the Lenders (other than the 
Non-Pro Rata Lender) a fee equal to 0.05% of the aggregate amount of the 
Revolving Credit Commitments, and the US Administrative Agent shall have 
received counterparts of this Amendment executed by the Borrowers and 
the Required Lenders or, as to any of the Lenders, advice satisfactory 
to the US Administrative Agent that such Lender has executed this 
Amendment, and the consent attached hereto executed by each Guarantor 
and each Pledgor.

         SECTION 4.  REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.  
Each Borrower represents and warrants as follows:

         (a)  Each Loan Party is a corporation duly organized, validly 
existing and in good standing under the laws of the jurisdiction of its 
incorporation, continuance or amalgamation.

         (b)  The execution, delivery and performance by each Borrower 
of this Amendment and the Credit Agreement, as amended hereby, are 
within such Borrower's corporate powers, have been duly authorized by 
all necessary corporate action, and do not (i) contravene such 
Borrower's charter or bylaws or other constituent documents, (ii) 
violate any foreign or domestic law (including, without limitation, the 
Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt 
Organizations Chapter of the Organized Crime Control Act of 1970), rule, 
regulation (including, without limitation, Regulations G, T, U or X of 
the Board of Governors of the Federal Reserve System), order, writ, 
judgment, injunction, decree, determination or award applicable to any 
Borrower, (iii) result in the breach of any material provision of, or 
constitute a default under, any material contract, loan agreement, 
indenture, mortgage, deed of trust, lease or other instrument binding on 
or affecting any Borrower or any of their properties or (iv) except for 
the Liens created under the Loan Documents, result in or require the 
creation or imposition of any Lien upon or with respect to any of the 
properties of any Loan Party.  No Loan Party is in violation of any such 
law, rule, regulation, order, writ, judgment, injunction, decree, 
determination or award or in breach of any such contract, loan 
agreement, indenture, mortgage, deed of trust, lease or other 
instrument, the violation or breach of which would reasonably be 
expected to have a Material 


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Adverse Effect.  No Borrower is entering into this Amendment in the 
capacity of a trustee of any trust or settlement.  Each Loan Party 
benefits by executing the Loan Documents to which it is a party and the 
interest, fees and other amounts payable hereunder are fair and 
reasonable. Each Loan Party incorporated in Australia has complied with 
Section 289 of the Australian Corporations Law since the later of the 
date of its incorporation and January 1, 1993.

         (c)  No consent of any other Person and no authorization or 
approval or other action by, and no notice to or filing with, any 
foreign or domestic governmental authority or regulatory body or any 
other third party is required for the due execution, delivery or 
performance by any Borrower of this Amendment or the Credit Agreement, 
as amended hereby.

         (d)  This Amendment has been duly executed and delivered by 
each Borrower.  This Amendment and the Credit Agreement, as amended 
hereby, are the legal, valid and binding obligation of each Borrower, 
enforceable against such Borrower in accordance with its terms, except 
as enforcement may be limited by bankruptcy, insolvency, reorganization, 
moratorium or similar laws affecting the enforcement of creditors' 
rights generally and by general equitable principles.

         (e)  There is no action, suit, investigation, litigation or 
proceeding affecting any Loan Party, including any Environmental Action, 
pending or, to the best knowledge of any Borrower, threatened before any 
court, governmental agency or arbitrator that (i) would reasonably be 
expected to have a Material Adverse Effect, or (ii) purports to affect 
the legality, validity or enforceability of this Amendment or the Credit 
Agreement, as amended hereby.

         SECTION 5.  REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS .  (a)  On 
and after the effectiveness of this Amendment, each reference in the 
Credit Agreement to "this Agreement", "hereunder", "hereof" or words of 
like import referring to the Credit Agreement, and each reference in the 
Notes and each of the other Loan Documents to "the Credit Agreement", 
"thereunder", "thereof" or words of like import referring to the Credit 
Agreement, shall mean and be a reference to the Credit Agreement, as 
amended by this Amendment.

         (b)  The Credit Agreement, as specifically amended by this 
Amendment, the Notes and each of the other Loan Documents are and shall 
continue to be in full force and effect and are hereby in all respects 
ratified and confirmed. Without limiting the generality of the 
foregoing, the Collateral Documents and all of the Collateral described 
therein do and shall continue to secure the payment of all Obligations 
of the Loan Parties under the Loan Documents, in each case as amended by 
this Amendment.

         (c)  The execution, delivery and effectiveness of this 
Amendment shall not, except as expressly provided herein, operate as a 
waiver of any right, power or remedy of any 


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Lender or any Administrative Agent under the Credit Agreement, nor 
constitute a waiver of any provision of the Credit Agreement.

         SECTION 6.  COSTS, EXPENSES AND TAXES.  The Borrowers agree to 
pay on demand all costs and expenses of the Administrative Agents in 
connection with the preparation, execution, delivery and administration, 
modification and amendment of this Amendment and the other instruments 
and documents to be delivered hereunder (including, without limitation, 
the reasonable fees and expenses of counsel for the Administrative 
Agents) in accordance with the terms of Section 8.04 of the Credit 
Agreement.  In addition, the Borrowers shall pay any and all stamp and 
other taxes payable or determined to be payable in connection with the 
execution and delivery of this Amendment and the other instruments and 
documents to be delivered hereunder, and agrees to save the 
Administrative Agents and each Lender harmless from and against any and 
all liabilities with respect to or resulting from any delay in paying or 
omission to pay such taxes.

         SECTION 7.  EXECUTION IN COUNTERPARTS.  This Amendment may be 
executed in any number of counterparts and by different parties hereto 
in separate counterparts, each of which when so executed shall be deemed 
to be an original and all of which taken together shall constitute but 
one and the same agreement. Delivery of an executed counterpart of a 
signature page to this Amendment by telecopier shall be effective as 
delivery of a manually executed counterpart of this Amendment.


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         SECTION 8.  GOVERNING LAW.  This Amendment shall be governed 
by, and construed in accordance with, the laws of the State of New York.