Unassociated Document


      Exhibit
10.38

       

    

      To:

       

      Western
Mesquite Mines, Inc.

      2 Bloor
Street West

      Suite
2102

      Box
110

      Toronto,
Ontario

      Canada

      M4W
3E2

      


      Attention:
Treasurer

       

      Western
Goldfields Inc.

      2 Bloor
Street West

      Suite
2102

      Box
110

      Toronto,
Ontario

      Canada

      M4W
3E2

      


      Attention:
Chief Financial Officer

      


      Western
Goldfields (USA) Inc.

      2 Bloor
Street West

      Suite
2102

      Box
110

      Toronto,
Ontario

      Canada

      M4W
3E2

      


      Attention:
Treasurer

       

      Dear
Sirs

       

      US$105,000,000
credit agreement dated 30 March 2007 (as amended and restated by an amendment
and restatement agreement dated 31 May 2007, and as further amended by an
amendment letter dated as of 29 June 2007) between Western Mesquite Mines, Inc.
as Borrower, Western Goldfields (USA) Inc. (formerly known as Western
Goldfields, Inc.) as Guarantor, Investec Bank (UK) Limited as Agent, Mandated
Lead Arranger and Security Trustee, Commonwealth Bank of Australia as Lead
Arranger, the Banks (as defined therein) and the Hedging Banks (as defined
therein) (the “Credit Agreement”)

       

      
        	
                1. 

              	
                We
      refer to the Credit Agreement. Terms and expressions defined in the Credit
      Agreement shall
      have the same meaning when used herein unless otherwise
      defined.

              


      

      


      
        	
                2. 

              	
                You
      have informed us that the Restructure has been
  completed.

              


      

      


      
        	
                3. 

              	
                By
      signing this letter, the Financing Parties and the Hedging Banks hereby
      confirm that they approve the Restructure, and hereby waive any rights
      they may have under the Financing Documents in relation to the undertaking
      by the Guarantor to procure that the events listed in paragraphs (a) to
      (e) of Clause 11.2.3 of the Credit Agreement occur prior to the completion
      of the Restructure, provided that the following is delivered to the Agent
      (in each case in a form and substance satisfactory to the Agent) within 5
      Business Days of the date of this
letter:

              


      

       

      
        
          
          

        

        
          
          

          
            

            Page 1

        

        
          
          

        

      

       

      
        	
              	
                (a) 

              	
                a
      guarantee issued by Western Goldfields Inc. (WGOI) in favour of the Financing Parties
      and the Hedging Banks (the WGOI Guarantee) on the
      terms of the Guarantee;

              


      

       

      
        
          	
                	
                  (b)

                	
                  a
      deed of accession executed by WGOI in relation to the Credit Agreement and
      the Intercreditor Deed;

                


        

      

      


      
        
          	
                	
                  (c)

                	
                  each
      of the documents referred to in paragraph 1 of Schedule 2, Part 1 (Conditions Precedent)
      only to the extent relating to WGOI and required by Canadian
      counsel to the Finance
Parties;

                


        

      

      


      
        
          	
                	
                  (d)

                	
                  such
      know-your-customer documentation relating to WGOI and Western Goldfields
      (USA) Inc. as the Financing Parties and the Hedging Banks reasonably
      require;

                


        

      

      


      
        
          	
                	
                  (e)

                	
                  a
      legal opinion addressed to the Financing Parties and the Hedging Banks
      from Cassels, Brock & Blackwell LLP in relation to WGOI and the WGOI
      Guarantee;

                


        

      

      


      
        
          	
                	
                  (f)

                	
                  an
      acknowledgement agreement executed by Western Goldfields (USA) Inc. in
      relation to the Pledge Agreement (the Acknowledgement Agreement);
      and

                


        

      

       

      
        	
              	
                (g)

              	
                a
      legal opinion addressed to the Financing Parties and the Hedging Banks
      from Lionel Sawyer & Collins in relation to Western Goldfields USA Inc
      and the Acknowledgement Agreement..

              


      

       

      
        	
                4. 

              	
                By
      the acceptance of this letter:

              


      

      
         

        
          	
                	
                  (a) 

                	
                  you
      agree to the repetition of the Repeating Representations by yourselves by
      reference to the facts and circumstances existing on the date of this
      letter;

                


        

        


        
          	
                	
                  (b) 

                	
                  Western
      Goldfields (USA) Inc. undertakes to each Financing Party and each Hedging
      Bank
      that:

                


        

      

       

      
        	
              	
                (i)

              	
                prior
      to the Completion Date, it shall unless the Agent (acting on the
      instructions of the Majority Banks) otherwise agrees own, directly or
      indirectly, 100% of the voting rights in the Borrower;
  and

              


      

       

      
        
          	
                	
                  (ii)

                	
                  following
      the Completion Date and until expiry of the Security Period, it shall,
      unless the Agent (acting on the instructions of the Majority Banks)
      otherwise agrees own at least 50.1 % of the voting rights in the Borrower
      and provide to the Borrower such non-monetary support and assistance using
      its reasonable commercial efforts as is necessary for the Mining
      Operations to be conducted in a manner that would be expected of a
      professional, prudent operator of a mine of the size, location and
      characteristics comparable to the Project and in the manner and with the
      skill and care of a reasonable business man, provided that such support
      and assistance does not constitute a payment or performance guarantee and
      provided further that Western Goldfields (USA) Inc. shall not be liable
      for any losses, costs, expenses, damages or other amounts arising from the
      failure of the Mining Operations to be so conducted;
  and

                


        

      

      


      
        
          	
                	
                  (c)

                	
                  you
      agree that the references to “Guarantor” in Clause 13.1(a), 13.2.1(a) and
      Clause 14.1(j) of the Credit Agreement shall, instead be references to
      Western Goldfields (USA) Inc.

                


        

      

      


      
        
          	
                  5.

                	
                  Without
      prejudice to the rights of any Financing Party or Hedging Bank which have
      arisen on or before the date of this letter, by the acceptance of this
      letter you confirm that, on and after the date of this
    letter:

                


        

      

      


      
        
          	
                	
                  (a)

                	
                  the
      Credit Agreement as amended by this letter, and the other Financing
      Documents, will remain in full force and effect;
  and

                


        

      

       

      
        
           


        

        
          
          

          
            

            Page 2

        

        
           


        

      

       

      
        
          	
                	
                  (b)

                	
                  the
      Security Documents to which you are a party will continue to secure all
      liabilities which are expressed to be secured by
  them.

                


        

      

      


      
        
          	
                  6.

                	
                  Save
      as expressly stated in this letter, nothing in this letter shall constitute
      or be deemed to be a waiver or consent by the Financing Parties or Hedging
      Banks of any other provision, term or matter and none of the rights,
      duties or obligations of any party to the Financing Documents shall be
      affected or impaired by the signature or countersignature of this letter

                


        

      

      


      
        	
                7. 

              	
                This
      letter is hereby designated as a Financing
  Document.

              


      

       

      
        	
                8. 

              	
                This
      letter shall be governed by and construed in accordance with English
      law.

              


      

       

      
        	
                9.

              	
                This
      letter may be signed in any number of counterparts, and this has the same
      effect as if the signatures on the counterparts were on a single copy of
      this letter.

              


      

      


      Please
indicate your acceptance of the terms and conditions of this letter by
countersigning the copy of this letter where indicated below.

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	
                                                Yours
      faithfully

                                              	 	 
      
	 	 	 
	 	 	 
	
                                                /s/
      Michael Jones

                                              	 	
                                                 

                                              
	
                                                Investec
      Bank (UK) Limited

                                              	  
      	
                                                 
    

                                              
	
                                                (as Agent, Security Trustee, Bank and Hedging Bank)

                                              	 	 
      
	      
                                                MICHAEL
      JONES

                                                
                                                  Authorised
      Signatory

                                                

                                              	 	 
      
	 	 	 
	 	 	 
	
                                                Commonwealth
      Bank of Australia

                                              	 	 
      
	
                                                (as
      Bank and Hedging Bank)

                                              	 	 
      
	 
      	 	 
      
	
                                                Accepted
      and
      agreed, on                                              
          2007

                                              
	 
      	 	 
      
	 	 	 
	
                                                Western
      Mesquite Mines, Inc.

                                              	 	 
      
	 
      	 	 
      
	 	 	 
	
                                                Western
      Goldfields Inc.

                                              	 	 
      
	 
      	 	 
      
	 	 	 
	
                                                Western
      Goldfields (USA) Inc.

                                              	 	 
      


                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           


        

        
          
          

          
            

            Page 3

        

        
           


        

      

      


      
        
          	
                	
                  (b)

                	
                  the
      Security Documents to which you are a party will continue to secure all
      liabilities which are expressed to be secured by
  them.

                


        

      

      


      
        
          
            	
                    6.

                  	
                    Save
      as expressly stated in this letter, nothing in this letter shall
      constitute or be deemed to be a waiver or consent by the Financing Parties
      or Hedging Banks of any other provision, term or matter and none of the
      rights, duties or obligations of any party to the Financing Documents
      shall be affected or impaired by the signature or countersignature of this
      letter

                  


          

        

      

      


      
        	
                7. 

              	
                This
      letter is hereby designated as a Financing
  Document.

              


      

      


      
        
          	
                  8. 

                	
                  This
      letter shall be governed by and construed in accordance with English
      law.

                


        

      

      


      
        
          	
                  9.

                	
                  This
      letter may be signed in any number of counterparts, and this has the same
      effect as if the signatures on the counterparts were on a single copy of
      this letter.

                


        

      

      


      Please
indicate your acceptance of the terms and conditions of this letter by
countersigning the copy of this letter where indicated below.

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  	
                                                                          Yours
      faithfully

                                                                        	 	 
	 	 	 
	 
      	 	 
	
                                                                          Investec
      Bank (UK) Limited

                                                                        	 	 
	
                                                                          (as Agent, Security Trustee, Bank and Hedging Bank)

                                                                        	 	 
	 
      	 	 
	
                                                                          /s/
      David Andrew Heuston

                                                                        	 	 
	
                                                                          Commonwealth
      Bank of Australia

                                                                        	 	 
	
                                                                          (as
      Bank and Hedging Bank)

                                                                        	 	 
	David
      Andrew Heuston	 	 
	 	 	 
	
                                                                          Accepted
      and agreed,
      on                                                
      2007

                                                                        
	
                                                                           
      

                                                                        	 	 
	 	 	 
	
                                                                          Western
      Mesquite Mines, Inc.

                                                                        	 	 
	 
      	 	 
	 	 	 
	
                                                                          Western
      Goldfields Inc.

                                                                        	 	 
	 
      	 	 
	 	 	 
	
                                                                          Western
      Goldfields (USA) Inc.

                                                                        	 	 


                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           


        

        
          
          

          
            

            Page 3

        

        
           


        

      

      


      
        
          	
                	
                  (b)

                	
                  the
      Security Documents to which you are a party will continue to secure ail
      liabilities which are expressed to be secured by
  them.

                


        

      

      


      
        
          	
                  6.

                	
                  Save
      as expressly stated in this letter, nothing in this letter shall
      constitute or be deemed to be a waiver or consent by the Financing Parties
      or Hedging Banks of any other provision, term or matter and none of the
      rights. duties or obligations of any party to the Financing Documents
      shall be affected or impaired by the signature or countersignature of this
      letter

                


        

      

      


      
        	
                7. 

              	
                This
      letter is hereby designated as a Financing
  Document.

              


      

      


      
        	
                8. 

              	
                This
      letter shall be governed by and construed in accordance with English
      law.

              


      

      


      
        
          
            	
                    9.

                  	
                    This
      letter may be signed in any number of counterparts, and this has the same
      effect as if the signatures on the counterparts were on a single copy of
      this letter.

                  


          

        

      

      


      Please
indicate your acceptance of the terms and conditions of this letter by
countersigning the copy of this letter where indicated below.

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      Yours
      faithfully

                                    
	 
      
	 
	
                                      lnvestec
      Bank (UK) Limited

                                    
	
                                      (as
      Agent, Security Trustee, Bank and Hedging Bank)

                                    
	 
      
	 
	
                                      Commonwealth
      Bank of Australia

                                    
	
                                      (as
      Bank and Hedging Bank)

                                    
	 
      
	
                                      Accepted
      and agreed, on July 16, 2007

                                    
	 
	/s/ Brian
      Penny
	
                                      Western
      Mesquite Mines, Inc.

                                    
	 
      
	/s/ Brian
      Penny
	
                                      Western
      Goldfields Inc.

                                    
	 
	/s/ Brian
      Penny
	
                                      Western
      Goldfields (USA)
Inc.

                                    


                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           


        

        
          
          

          
            

            Page 3