November 21, 2008 Lundin Mining Corporation

November 21, 2008

Xxxxxx Mining Corporation

0000-000 Xxxx Xxxxxx Xxxx

Toronto, Ontario M5H 1J9

Re: Subordinated Loan

Dear Xxxxxx:

This letter (this “Letter”) sets out the agreement of HudBay Minerals Inc. (“HudBay”) to loan to Xxxxxx Mining Corporation (“Xxxxxx”) CDN$135,796,488.80 (the “Loan”) on the terms set forth in Schedule A, subject to: (1) HudBay and Xxxxxx executing definitive documentation for the Loan, satisfactory to the parties, acting reasonably, as soon as reasonably practicable after the date of this Letter; and (2) Xxxxxx obtaining any required waivers or consents from Xxxxxx’x senior lender, the Bank of Nova Scotia, in connection with all, or any part, of the Loan (collectively, the “Waivers and Consents”).  

Upon HudBay and Xxxxxx executing such definitive documentation, HudBay shall advance to Xxxxxx the maximum amount permitted under the terms of Xxxxxx’x senior credit facility without requiring any Waivers and Consents (approximately US$60,000,000.00), provided that Xxxxxx delivers evidence satisfactory to HudBay, acting reasonably, that no such Waivers and Consents are required by Xxxxxx in connection with it borrowing such amount from HudBay, and, upon receiving all Waivers and Consents, HudBay shall advance to Xxxxxx the balance of the Loan.

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Please acknowledge the foregoing by signing below and by returning a duplicate copy of this Letter to HudBay.

Very truly yours,

HUDBAY MINERALS INC.

By: /s/ Xxxxx X. Xxxxxxxx            

Name: Xxxxx X. Xxxxxxxx

Title: Chief Executive Officer

Accepted and agreed as of the date of this Letter.

XXXXXX MINING CORPORATION

By: /s/ Xxxxxx X. Xxxxxx                 

Name: Xxxxxx X. Xxxxxx

Title: President and Chief Executive Officer

   

SCHEDULE A

Loan Type	Subordinated
Use of Proceeds	General corporate purposes
Interest Rate	LIBOR plus 2.5%
Maturity Date	The earlier of: (a) the Closing Date (as such term is defined in the Subscription Agreement between HudBay and Xxxxxx dated November 21, 2008); (b) the date that is six months from the date the definitive loan documentation is entered into by HudBay and Xxxxxx; and (c) the date that the Arrangement Agreement between HudBay and Xxxxxx dated November 21, 2008 has been terminated by Xxxxxx in accordance with its terms.
Representations and Warranties	Usual and customary for subordinated loan financings
Covenants	Usual and customary for subordinated loan financings
Security	Usual and customary for subordinated loan financings, subject to approval by the Bank of Nova Scotia