| 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. |
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| 2.  | You      have informed us that the Restructure has been  completed. |
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| 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 thisletter: |
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|  | (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 FinanceParties; |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (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.. |
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| 4.  | By      the acceptance of this letter: |
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|  | (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; |
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|  | (b)  | Western      Goldfields (USA) Inc. undertakes to each Financing Party and each Hedging      Bank      that: |
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|  | (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. |
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| 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: |
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|  | (a) | the      Credit Agreement as amended by this letter, and the other Financing      Documents, will remain in full force and effect;  and |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

----

|  | (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 inthis 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 |
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| 7.  | This      letter is hereby designated as a Financing  Document. |
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| 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. |
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| Yours      faithfully                                                                                                                                                                                                                                                                                                                                   |         |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                    |         |   |
|                                                                                                                                                                                                                                                                                                                                                    |         |   |
| /s/      Michael Jones                                                                                                                                                                                                                                                                                                                                  |         |   |
| Investec      Bank (UK) Limited                                                                                                                                                                                                                                                                                                                         |    |   |
| (as Agent, Security Trustee, Bank and Hedging Bank)                                                                                                                                                                                                                                                                  |         |   |
| MICHAEL      JONESAuthorised      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.                                                                                                                                                                                                                                                                                                                      |         |   |

----

|  | (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. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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.                                                                                                                                                                                                                                                                                                          |   |   |

----

|  | (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. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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.                        |

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