F-10

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As filed with the Securities and Exchange Commission on April 20, 2005.

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM F-10

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

Hudson Bay Mining and Smelting Co., Limited	HudBay Minerals Inc.	Hudson Bay Exploration and Development Company Limited
(Exact name of Registrant as specified in its charter)
Canada	Ontario	Canada
(Province or other jurisdiction of incorporation or organization)
1021, 1031, 1041 and 1044	1021, 1031, 1041 and 1044	1021, 1031, 1041 and 1044
(Primary Standard Industrial Classification Code Number)
Not Applicable	Not Applicable	Not Applicable
(I.R.S. Employer Identification Number)
201 Portage Avenue, Suite 2200 Winnipeg, Manitoba R3B 3L3 Canada, (204) 949-4261	201 Portage Avenue, Suite 2200 Winnipeg, Manitoba R3B 3L3 Canada, (204) 949-4261	201 Portage Avenue, Suite 2200 Winnipeg, Manitoba R3B 3L3 Canada, (204) 949-4261
(Address and telephone number of Registrant's principal executive offices)
CT CORPORATION SYSTEM 111 Eighth Avenue, 13th Floor New York, NY 10011 (212) 894-8700	CT CORPORATION SYSTEM 111 Eighth Avenue, 13th Floor New York, NY 10011 (212) 894-8700	CT CORPORATION SYSTEM 111 Eighth Avenue, 13th Floor New York, NY 10011 (212) 894-8700
(Name, address and telephone number of agent for service in the United States)

Copies to:
Brian D. Gordon General Counsel Hudson Bay Mining and Smelting Co., Limited 201 Portage Avenue, Suite 2200 Winnipeg, Manitoba, Canada R3B 3L3 Telephone: (204) 949-4261	Christopher J. Cummings Shearman & Sterling LLP Commerce Court West 199 Bay Street, Suite 4405 Toronto, Ontario, Canada M5L 1E8 Telephone (416) 360-8484	Howard Burshtein Cassels Brock & Blackwell LLP 2100 Scotia Plaza 40 King Street West Toronto, Ontario, Canada M5H 3C2 Telephone (416) 869-5300

Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this Registration Statement becomes effective.

Province of Ontario, Canada
(Principal jurisdiction regulating this offering)

        It is proposed that this filing shall become effective (check appropriate box):

A.

o Upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).



B.

ý At some future date (check the appropriate box below):



1.

o  pursuant to Rule 467(b) on (    ) at (    ) (designate a time not sooner than 7 calendar days after filing).



2.

o  pursuant to Rule 467(b) on (    ) at (    ) (designate a time 7 calendar days or sooner after filing) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on (    ).



3.

o  pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.



4.

ý after the filing of the next amendment to this Form (if preliminary material is being filed).

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus offering procedures, check the following box:    o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
95/8% Senior Secured Notes due 2012	U.S.$175,000,000	100%	U.S.$175,000,000	U.S.$20,597.50
Guarantees of 95/8% Senior Secured Notes due 2012	—	—	—	— (2)

(1)

Exclusive of accrued interest, if any.

(2)

Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no separate fee is payable for the guarantees of the notes being registered.

The Registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registration statement shall become effective as provided in Rule 467 under the Securities Act of 1933 or on such date as the Commission, acting pursuant to Section 8(a) of the Securities Act of 1933, may determine.

PART I

INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

I-1

The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an ofer to sell these securities nor a solicitation of an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion
Preliminary Short Form Prospectus Dated April 20, 2005.

US$175,000,000

Hudson Bay Mining and Smelting Co., Limited

OFFER TO EXCHANGE

the outstanding 9⁵/8% Senior Secured Notes due January 15, 2012
(US$175,000,000 principal amount outstanding)
(CUSIP numbers 44360AA6 and C44255AA2)
for 9⁵/8% Senior Secured Exchange Notes due January 15, 2012

Unconditionally guaranteed as to principal, premium (if any), interest
and certain other amounts by HudBay Minerals Inc.

Terms of Exchange Offer

•

Expires 5:00 p.m., New York City time, on            , 2005, unless extended.



•

All original notes that are validly tendered and not validly withdrawn will be exchanged.



•

Tenders of original notes may be withdrawn any time prior to 5:00 p.m., New York City time, on the date of the expiration of the exchange offer.



•

We will not receive any proceeds from the exchange offer.



•

The terms of the exchange notes to be issued are substantially similar to the original notes, except that the exchange notes will not be subject to the same transfer restrictions as the original notes and will not be entitled to additional interest in the event of a registration default.

Investing in the notes involves risks that are described in the "Risk Factors" section beginning on page 13 of this prospectus.

Neither the United States Securities and Exchange Commission nor any state securities regulator has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offence.

We are permitted, under a multi-jurisdictional disclosure system adopted by the United States, to prepare this prospectus in accordance with Canadian disclosure requirements, which are different from those of the United States. Financial statements included or incorporated herein have been prepared in accordance with Canadian generally accepted accounting principles, and are subject to Canadian auditing and auditor independence standards. They may not be comparable to financial statements of United States companies.

Owning the notes described herein may subject you to tax consequences both in the United States and Canada. Such consequences for investors who are resident in, or citizens of, the United States may not be described fully herein.

Prospective investors should be aware that, during the period of the exchange offer, we or our affiliates, directly or indirectly, may bid for or make purchases of the securities to be distributed or to be exchanged, or certain related securities, as permitted by applicable laws or regulations of Canada or its provinces or territories.

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the United States Securities Act of 1933, as amended. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes received in exchange for original notes where such original notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. A broker-dealer may not participate in the exchange offer with respect to original notes acquired other than as a result of market making or other activities. We have agreed that, for a period of 180 days after the expiration date of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution".

        , 2005

TABLE OF CONTENTS

	Page
EXCHANGE RATE DATA	ii
PRESENTATION OF FINANCIAL INFORMATION	iii
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INFERRED MINERAL RESOURCES	iii
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS	iv
WHERE YOU CAN FIND MORE INFORMATION	iv
SUMMARY	1
RISK FACTORS	13
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	27
USE OF PROCEEDS	29
CAPITALIZATION	30
HUDSON BAY MINING AND SMELTING CO., LIMITED	31
HUDBAY MINERALS INC.	31
EXCHANGE OFFER	34
DESCRIPTION OF NOTES	46
EARNINGS COVERAGES	111
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS	111
PLAN OF DISTRIBUTION	116
LEGAL MATTERS	118
EXPERTS	118
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT	119
INDEX TO FINANCIAL STATEMENTS	F-1
AUDITORS' CONSENT DELOITTE & TOUCHE LLP	C-1
AUDITORS' CONSENT KPMG LLP	C-2
COMMENTS BY KPMG LLP, AUDITORS OF HUDBAY MINERALS INC., FOR U.S READERS ON CANADA—U.S REPORTING DIFFERENCES	C-2

i

        This prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered. The exchange notes offered hereby have not been and will not be qualified for public distribution under the securities laws of any province or territory of Canada. The exchange notes are not being offered and may not be offered or sold, directly or indirectly, in Canada or to any resident thereof except in accordance with the securities laws of the provinces and territories of Canada.

The exchange offer is not being made to, nor will we accept surrenders of or exchange from, holders of the outstanding 9⁵/8% senior secured notes due January 15, 2012 (the "original notes") in any jurisdiction in which the exchange offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction.

        This prospectus is based on information provided by us and by other sources that we believe is reliable. We can not assure you that this information is accurate or complete. This prospectus summarizes certain documents and other information and we refer you to them for a more complete understanding of what we discuss in this prospectus. In making an investment decision, you must rely on your own examination of HBMS and HudBay and the terms of the exchange offer and the exchange notes, including the merits and risks involved.

        We are not making any representation to any person acquiring the exchange notes regarding the legality of an investment in the exchange notes by such purchaser under any legal investment or similar laws or regulations. You should not consider any information in this prospectus to be legal, business or tax advice. You should consult your own attorney, accountant, business advisor and tax advisor for legal, business and tax advice regarding an investment in the exchange notes.

        You must comply with all applicable laws and regulations in force in any applicable jurisdiction and you must obtain any consent, approval or permission required by you for the purchase, offer or sale of the exchange notes under the laws and regulations in force in the jurisdiction to which you are subject or in which you make such purchase, offer or sale, and we will not have any responsibility therefor.

All references in this prospectus to "HBMS", "we", "us" and "our" mean Hudson Bay Mining and Smelting Co., Limited (the corporation resulting from the amalgamation of Hudbay Mining and Smelting Inc., the issuer of original notes, 152640 Canada Inc. and pre-amalgamation Hudson Bay Mining and Smelting Co., Limited) and its subsidiaries and joint ventures. Except as set forth under "Description of Notes", and unless the context otherwise requires, all references to "HudBay" and the "Parent Guarantor" mean HudBay Minerals Inc. and its consolidated subsidiaries and joint ventures.

EXCHANGE RATE DATA

        We and the Parent Guarantor present our financial statements in Canadian dollars. Unless otherwise specified or the context otherwise requires, all dollar amounts in this prospectus are expressed in Canadian dollars.

        The following table sets forth certain exchange rates based upon the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate"). Such rates are set forth as United States dollars per Cdn$1.00 and are the inverse of the rate quoted by the Federal Reserve Bank of New York for Canadian dollars per US$1.00.

ii

	Years Ended December 31,					Three Months Ended March 31,
	2000	2001	2002	2003	2004	2004	2005
Low	0.6410	0.6241	0.6200	0.6349	0.7159	0.7421	0.7961
High	0.6969	0.6697	0.6619	0.7738	0.8493	0.7879	0.8346
End of Period	0.6669	0.6279	0.6329	0.7738	0.8308	0.7631	0.8268
Average	0.6725	0.6444	0.6368	0.7186	0.7683	0.7588	0.8153

	October (2004)	November (2004)	December (2004)	January (2005)	February (2005)	March (2005)
Low	0.7859	0.8149	0.8056	0.8050	0.7958	0.8024
High	0.8199	0.8493	0.8433	0.8342	0.8130	0.8321
End of Month	0.8192	0.8401	0.8308	0.8078	0.8121	0.8268

        On April 19, 2005, the last day prior to the date of this prospectus, the inverse of the noon buying rate for Canadian dollars was $1.00 per US$0.8059.

PRESENTATION OF FINANCIAL INFORMATION

        The financial statements of each of 152640 Canada Inc. and the Parent Guarantor have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). To the extent applicable to the financial statements of 152640 Canada Inc. and the Parent Guarantor, these principles conform in all material respects with United States generally accepted accounting principles ("U.S. GAAP"), except as described in Note 26 to the consolidated financial statements of 152640 Canada Inc. and Note 22 to the consolidated financial statements of the Parent Guarantor.

        References to "$" or "Cdn$" are to Canadian dollars and references to "US$" are to United States dollars.

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF
INFERRED MINERAL RESOURCES

        Incorporated by reference into the prospectus are estimates of "inferred" mineral resources. United States investors are advised that while this term is recognized and required by Canadian regulations, the United States Securities and Exchange Commission ("SEC") does not recognize inferred mineral resources. Inferred mineral resources have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of mineral resources will ever be converted into mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. United States investors are also cautioned not to assume that all or any part of the inferred mineral resource exists, or is economically or legally mineable.

iii

ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS

        We and the Parent Guarantor are corporations organized under the federal laws of Canada and the Province of Ontario, respectively. A majority of the directors, controlling persons and officers and the experts named in, and in the documents incorporated by reference into, this prospectus reside principally in Canada. We have appointed an agent for service of process in the United States but it may be difficult for holders to effect service of process within the United States upon our directors, controlling persons, officers or experts who are not residents of the United States. Furthermore, it may not be possible for you to enforce against us or them, in the United States, judgments obtained in U.S. courts, including judgments based upon the civil liability provisions of the U.S. federal securities laws, because a substantial portion of our assets and the assets of these persons are located outside the United States. See "Risk Factors" and "Description of Notes—Enforceability of Civil Liabilities".

WHERE YOU CAN FIND MORE INFORMATION

        The Parent Guarantor has fully and unconditionally guaranteed the payments to be made by us in connection with the original notes and will do the same for the exchange notes, and the Parent Guarantor satisfies the prescribed eligibility criteria for filing a short form prospectus under Canadian securities legislation. Therefore, we are qualified to avail ourselves of the short form prospectus provisions of Canadian securities legislation. As required by Canadian securities legislation, various disclosure documents filed by the Parent Guarantor under applicable securities legislation are incorporated by reference herein.

Information has been incorporated by reference in this prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of HudBay Minerals Inc., 2200 - 201 Portage Avenue, Winnipeg, Manitoba R3B 3L3, Canada, telephone (204) 949-4261. These documents are also available through the internet via the System for Electronic Document Analysis and Retrieval (SEDAR), which can be accessed at www.sedar.com.

        The Parent Guarantor files with the securities commission or authority in each of the provinces of Canada annual and quarterly reports, material change reports and other information. The Parent Guarantor will also be subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance with the Exchange Act, it will also file reports with and furnish other information to the SEC. Under a multijurisdictional disclosure system adopted by the United States ("MJDS"), these reports and other information (including financial information) may be prepared in accordance with the disclosure requirements of Canada, which differ from those in the United States. You may read any document we or the Parent Guarantor furnish to the SEC at the SEC's public reference room at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain copies of the same documents from the public reference room of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549 by paying a fee. Please call the SEC at 1-800-SEC-0330 or contact them at www.sec.gov for further information on the public reference rooms. The Parent Guarantor's filings will also be electronically available from the SEC's Electronic Document Gathering and Retrieval System, which is commonly known by the acronym EDGAR and which may be accessed at www.sec.gov, as well as from commercial document retrieval services.

        HBMS will not be required, nor does it intend, to file with the Ontario Securities Commission separate continuous disclosure information regarding HBMS except for a material change report where there is a material change in the business, operations or capital of HBMS that is not a material change in respect of the Parent Guarantor. HBMS has been granted an exemption from all remaining continuous disclosure requirements contained within the securities legislation of the Province of Ontario pursuant to a decision of the Ontario Securities Commission dated April 19, 2005 (the "Decision"). The Decision provides in part that HBMS shall be entitled to file, in lieu of such continuous disclosure filings, certain continuous disclosure information of the Parent Guarantor filed with the Ontario Securities Commission together with the material change reports of HBMS described above, provided that certain conditions set forth in the Decision continue to be met. Pursuant to the requirements of MJDS, and in accordance with our reporting covenant under the indenture governing the notes, the Parent Guarantor will file under or furnish to the SEC this continuous disclosure information in lieu of separate HBMS reports or other information.

iv

        Under applicable securities laws in Canada and the United States, the Canadian securities commissions and the SEC allow us to incorporate by reference certain information that the Parent Guarantor files with them, which means that we can disclose important information to you by referring you to those documents. Information that is incorporated by reference is an important part of this prospectus. We incorporate by reference the documents listed below, which were filed with the Canadian securities commissions under the Canadian securities legislation:

(a)

the Parent Guarantor's Annual Information Form dated March 29, 2005, other than documents specifically incorporated by reference into the Annual Information Form;



(b)

management's discussion and analysis of the financial condition and results of operations of Pre-amalgamation HBMS Parent for the years ended December 31, 2003, 2002 and 2001 and for the nine months ended September 30, 2004 and 2003 contained in the final prospectus of the Parent Guarantor dated December 14, 2004 under the heading "Management's Discussion and Analysis of HBMS Parent";



(c)

the audited consolidated financial statements of the Parent Guarantor as at December 31, 2004 and 2003 for the years ended December 31, 2004, 2003 and 2002, together with the auditor's report thereon and the notes thereto;



(d)

management's discussion and analysis of financial condition and results of operations of the Parent Guarantor for the year ended December 31, 2004; and



(e)

the material change report of the Parent Guarantor dated March 1, 2005 relating to the closing of the private placement of 806,452 flow-through common shares of the Parent Guarantor.

        Any annual information form, audited annual consolidated financial statements (together with the auditors' report thereon and notes thereto), unaudited interim consolidated financial statements and the accompanying management's discussion and analysis or material change reports (excluding confidential material change reports) subsequently filed by us or the Parent Guarantor with securities commissions or similar authorities in the relevant provinces and territories of Canada after the date of this prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference into this prospectus. These documents are available through the internet on SEDAR.

        To the extent that any document or information incorporated by reference into this prospectus is included in a report that is filed with or furnished by use to the SEC on Form 40-F, 20-F, 10-K, 10-Q, 8-K or 6-K (or any respective successor form) subsequent to the date of this prospectus and prior to the termination of this offering, such document or information shall also be deemed to be incorporated by reference as an exhibit to the registration statement on Form F-10 of which this prospectus forms a part. In addition, any document filed with or furnished to the SEC by us which specifically states that it is intended to be incorporated by reference into the registration statement of which this prospectus forms a part shall be deemed to be incorporated by reference into that registration statement.

v

Any statement contained in this prospectus or in a document (or part thereof) incorporated by reference, or deemed to be incorporated by reference, in this prospectus shall be deemed to be modified or superseded, for purposes of this prospectus, to the extent that a statement contained in the prospectus or in any subsequently filed document (or part thereof) that also is, or is deemed to be, incorporated by reference in this prospectus modifies or replaces such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this prospectus. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document which it modifies or supersedes.

The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.

You should rely only on the information contained in or incorporated by reference in this prospectus and on the other information included in the registration statement of which this prospectus forms a part. We have not authorized anyone to provide you with different or additional information. We are not making an offer of these exchange notes in any jurisdiction where the offer is not permitted by law. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus.

vi

SUMMARY

The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information included elsewhere in, or incorporated by reference in, this prospectus. You should read the entire prospectus, including, in particular, the "Risk Factors" and financial statements and notes presented later on or incorporated by reference into this prospectus.

HBMS and the Parent Guarantor

        We are a wholly owned subsidiary of the Parent Guarantor. We are an integrated base metals mining and smelting company. We are a significant copper producer and one of the ten largest zinc producers in North America. We have:

•

the 777 and Trout Lake zinc and copper mines near Flin Flon, Manitoba, the Chisel North zinc mine near Snow Lake, Manitoba and the Konuto Lake copper mine in Saskatchewan (the "Mines"), which had at January 1, 2005 aggregate estimated proven and probable mineral reserves of approximately 21.6 million tonnes of ore, grading 4.8% zinc and 2.2% copper and an additional estimated 3.9 million tonnes of inferred mineral resources grading 6.1% zinc and 1.9% copper;



•

a metallurgical complex located in Flin Flon, Manitoba and a zinc concentrator near Snow Lake, Manitoba; the Flin Flon metallurgical complex is comprised of a zinc and copper concentrator, a zinc pressure leach and electro-winning plant and a copper smelter, with an annual production capacity of 115,000 tonnes of cast zinc and 90,000 tonnes of anode copper, as well as gold and silver by-products;



•

a zinc oxide plant with annual production capacity of 45,000 tonnes that takes between 32,000 tonnes and 41,000 tonnes of our annual zinc metal production; and



•

a 50% interest in an established marketing joint venture, Considar Metal Marketing Inc. ("CMM"), which markets our metals and identifies and acquires additional zinc and copper concentrate for our metallurgical complex.

        In 2004 we completed a $435 million capital expenditure program (the "777 Project"), that involved the construction and development of the 777 mine in Flin Flon and the Chisel North mine in Snow Lake, expansion of the Flin Flon concentrator, expansion of the Flin Flon zinc plant, including construction of an electrolytic cellhouse and other infrastructure upgrades. This project has led to improvements in operating margins, workplace productivity and workplace safety.

        Our total 2004 production was approximately 110,200 tonnes of refined zinc, 76,900 tonnes of refined copper, 79,000 ounces of gold and 1,114,600 ounces of silver, derived from 223,000 tonnes of zinc concentrate (including 3,500 tonnes of purchased concentrate) and 284,100 tonnes of copper concentrate (including 98,700 tonnes of purchased concentrate).

        In addition to HBMS, the Parent Guarantor also owns two development projects: the Balmat mine in the State of New York and the Gay's River mine in the Province of Nova Scotia, Canada and two exploration projects: the Southwestern Ontario Project in the Province of Ontario, Canada, and the San Antonio project in Chile.

1

Recent Developments

Acquisition of HBMS and Amalgamation

        On December 21, 2004, the Parent Guarantor completed the acquisition of HBMS from Anglo American International S.A. by causing its subsidiary, Hudbay Mining and Smelting Inc., to purchase all of the outstanding shares of 152640 Canada Inc. for a total consideration of approximately $316 million, payable as to $303 million in cash and $13 million by the issuance of common shares and warrants of the Parent Guarantor.

        On December 21, 2004, the Parent Guarantor also completed a public offering of 1,917,510,000 subscription receipts for total gross proceeds of approximately $143.8 million and Hudbay Mining and Smelting Inc. completed the offering of the original notes for gross proceeds of US$175 million. The proceeds from the offering of the original notes and a portion of the equity offering were used to complete the acquisition of HBMS. Upon completion of the acquisition of HBMS and the related consolidation of the common shares of the Parent Guarantor such subscription receipts were automatically exchanged for 63,917,000 common shares and 958,755,000 common share purchase warrants of the Parent Guarantor. Every 30 common share purchase warrants are exercisable for one common share of the Parent Guarantor upon payment of $3.15.

        On December 21, 2004 Hudbay Mining and Smelting Inc., 152640 Canada Inc. and pre-amalgamation HBMS amalgamated to form HBMS.

Province of Manitoba Loan

        In March 2005, we negotiated the continuation of our $17.5 million loan with the Province of Manitoba. The terms of the original agreement with the Province provided that the loan may be repayable in the event of a change of control of HBMS. After the Parent Guarantor's purchase of HBMS on December 21, 2004, new terms and conditions were negotiated with the Province to maintain the loan repayment schedule in accordance with the terms of the then existing agreement. The loan will remain interest-free pending the satisfaction of certain conditions. HBMS plans to fully retire the $17.5 million outstanding loan principal, which is supported by a letter of credit, by 2008.

Balmat Mine

        The evaluation of the Balmat Mine in upper New York State is ongoing and the Parent Guarantor is preparing to proceed to a feasibility study in June or July of 2005 to determine the viability of reopening the mine, which is currently on a care and maintenance basis.

Collahuasi Agreement

        For the mutual benefit of both parties, HBMS intends to terminate its evergreen concentrate agreement (the "Collahuasi Agreement") with Compania Minera Dona Ines de Collahuasi ("Collahuasi"), Chile, to purchase 40,000 dmt of copper concentrate per year from Collahuasi, effective June 30, 2005. The proposed termination of the Collahuasi Agreement, which would otherwise have expired in 2008, is not expected to impact our ability to supply copper to our Flin Flon smelter.

Operating Facility

        We are continuing our discussions with potential lenders for a new senior secured operating facility.

2

Executive Management and Personnel

        John L. Knowles, the Vice President and Chief Financial Officer of HudBay and HBMS, has tendered his resignation effective June 30, 2005. We are initiating a search for his replacement and will announce the new Chief Financial Officer when the process is complete.

        In addition, two staff members at our metallurgical complex have resigned. We do not believe that their departures will have a material adverse effect on our operations.

3

The Exchange Offer

Securities Offered:	Up to US$175,000,000 aggregate principal amount of 95/8% senior secured exchange notes of HBMS due January 15, 2012 (the "exchange notes"), which have been registered under the United States Securities Act of 1933, as amended (the "Securities Act of 1933"). The terms of the exchange notes are identical in all material respects to those of the outstanding US$175,000,000 aggregate principal amount of 95/8% senior secured notes of HBMS due January 15, 2012, which were issued on December 21, 2004 in a private offering (the "original notes", together with the exchange notes, the "notes"), except that the exchange notes will not be subject to the same transfer restrictions as the original notes, will not be entitled to additional interest in the event of a registration default and all payments on the exchange notes, including principal and interest, will be fully and unconditionally guaranteed on a subordinated basis by HudBay.
Securities Offered By:	The exchange notes will be issued by HBMS, a wholly-owned Canadian subsidiary of HudBay. HBMS is the corporation resulting from the amalgamation on December 21, 2004 of Hudbay Mining and Smelting Inc., the issuer of the original notes, 152640 Canada Inc. and pre-amalgamation HBMS. The exchange notes will be entitled to the benefits of the indenture relating to the original notes (the "indenture").
Registration Rights:	On December 21, 2004, we agreed with the initial purchasers of the original notes, pursuant to a registration rights agreement (the "registration rights agreement"), that holders of the original notes would be entitled to exchange the original notes for registered notes with substantially identical terms. This exchange offer is intended to satisfy those rights. After the exchange offer is complete, holders of the original notes will no longer be entitled to any exchange or registration rights with respect to the original notes except in certain circumstances outlined in the registration rights agreement.
The Exchange Offer:	The exchange notes are being offered in exchange for a like principal amount of original notes. Original notes may only be exchanged in US$1,000 increments. The exchange notes will evidence the same debt as the original notes. The exchange offer is not conditional upon any minimum principal amount of original notes being tendered or accepted for exchange. In order to be exchanged, an original note must be properly tendered and accepted. All original notes that are validly tendered and not validly withdrawn will be exchanged.
	As of this date, there is US$175,000,000 aggregate principal amount of original notes outstanding. Exchange notes will be issued on or promptly after the expiration of the exchange offer.
	The exchange notes have not been and will not be qualified for public distribution under the securities laws of Canada or any province or territory of Canada. The exchange notes are not being offered and may not be offered or sold, directly or indirectly, in Canada, or to any resident thereof, except in accordance with the securities laws of the provinces and territories of Canada. No securities regulatory authority in Canada has in any way passed upon the merits of the securities offered hereby and any representation to the contrary is an offense.

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	The exchange offer is not being made to, nor will we accept surrenders for exchange from, holders of original notes in any jurisdiction in which this exchange offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction.
Expiration Date:	The exchange offer will expire at 5:00 p.m., New York City time, on, 2005 (the "expiration date"), unless we decide to extend the exchange offer, in which case the expiration date will be the latest date to which we extend the exchange offer.
Withdrawal Rights:	You may withdraw your tender of original notes at any time before 5:00 p.m., New York City time, on the expiration date. Any original notes not accepted for exchange for any reason will be returned without expense to the tendering holders thereof as promptly as practicable after the expiration or termination of the exchange offer.
Resale of the Exchange Notes:	Based on interpretations by the staff of the United States Securities and Exchange Commission (the "SEC") set forth in no-action letters issued to third parties, we believe that, except in the case of participating broker-dealers described below, the exchange notes may be offered for resale, resold and otherwise transferred by recipients without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided that:
	—  you are acquiring the exchange notes in the ordinary course of business,
	—  you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in a distribution of the exchange notes,
	—  you are not a broker-dealer which purchased the original note directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act of 1933, and
	—  you are not an "affiliate" of the Parent Guarantor within the meaning of Rule 405 under the Securities Act of 1933.
	If this belief is inaccurate and you transfer any exchange note without delivering a prospectus meeting the requirements of the Securities Act of 1933 or without an exemption from registration of the exchange notes from such requirements, you may incur liability under the Securities Act of 1933. We do not assume or indemnify holders of notes against such liability.
	You should read the discussion under the heading "Exchange Offer" for further information regarding the exchange offer and resale of the exchange notes.

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	Each broker-dealer that is issued exchange notes for its own account in exchange for original notes which were acquired by such broker-dealer as a result of market-making or other trading activities (a "participating broker-dealer") must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resale of the exchange notes. The letter of transmittal states that, by so acknowledging and by delivering a prospectus, the participating broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933.
	A participating broker-dealer may use this prospectus for an offer to resell or otherwise retransfer the exchange notes. We have agreed to use our best efforts to keep the registration statement (of which this prospectus forms a part) effective and to amend and supplement this prospectus in order to permit this prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act of 1933 for such period of time as such persons must comply with such requirements in order to resell the exchange notes; provided, however, that in the case where this prospectus and any amendment or supplement hereto must be delivered by a participating broker-dealer or an initial purchaser, such period shall be the lesser of:
	—  180 days from the expiration date of the exchange offer (or longer, if extended pursuant to the terms of the registration rights agreement), and
	—  the date on which all participating broker-dealers and the initial purchasers have sold all exchange notes held by them.
Accrued Interest on the Exchange Notes and the Original Notes:	The exchange notes will bear interest from December 21, 2004. Holders of original notes whose original notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on such original notes accrued from December 21, 2004 to the date of the issuance of the exchange notes.
Conditions of the Exchange Offer:	The exchange offer is subject to certain customary conditions. See "The Exchange Offer—Certain Conditions of the Exchange Offer". Holders of original notes will have certain rights against us under the registration rights agreement should we fail to consummate the exchange offer. See "The Exchange Offer—Purpose of the Exchange Offer".

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Procedures for Tendering Original Notes:	If you wish to tender your original notes for exchange through the exchange offer, you must either (1) complete, sign and date the letter of transmittal (which accompanies this prospectus) according to the instructions contained in this prospectus and in such letter of transmittal or (2) send by means of The Depository Trust Company's Automated Tender Offer Program System, or ATOP, an agent's message to the exchange agent which indicates that the holder has agreed to the contents of the letter of transmittal and the letter of transmittal may be enforced against the holder. A holder must mail or otherwise deliver:
	—  such properly completed and duly executed letter of transmittal (or a facsimile thereof), including all other documents required by the letter of transmittal, with the original notes, or
	—  the agent's message with a book-entry confirmation
	and any other required documentation to the exchange agent on or prior to the expiration date. The method of delivery of this documentation is at the holder's election and risk.
	By executing the letter of transmittal, or by agreeing to the terms of the letter of transmittal through the submission of an agent's message, each holder will represent to us that, among other things, at the time of the consummation of the exchange offer:
	—  any exchange notes received by such holder are being acquired in the ordinary course of business of the person receiving such exchange notes, whether or not such person is the holder,
	—  such holder will have no arrangements or understanding with any person to participate in the distribution of the exchange notes within the meaning of the Securities Act of 1933,
	—  such holder is not an "affiliate" as defined in Rule 405 under the Securities Act of 1933 of the Parent Guarantor or, if it is an affiliate, it will comply with the applicable registration and prospectus delivery requirements of the Securities Act of 1933, to the extent applicable,
	—  if such holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the exchange notes,
	—  if such holder is a broker-dealer, that will receive exchange notes for its own account in exchange for original notes that were acquired by it as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resale of such exchange notes, and
	—  if such holder is a Canadian resident, that it is eligible to acquire the exchange notes pursuant to an available exemption from the prospectus requirements of the securities legislation of that holder's province of residence.

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Special Procedures for Beneficial Owners:	A beneficial holder of original notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee that wishes to tender such original notes in the exchange offer should promptly contact the person in whose name the original notes are registered and instruct such person to tender on the beneficial holder's behalf. A beneficial holder who wishes to tender on the beneficial holder's own behalf must, prior to completing and executing the letter of transmittal and delivering the original notes, either make appropriate arrangements to register ownership of the original notes in the beneficial holder's name or obtain a properly completed bond power from the registered holder of the original notes. The transfer of record ownership may take considerable time.
Guaranteed Delivery Procedures:	If a holder wishes to tender its original notes and time will not permit the required documents to reach the exchange agent by the expiration date, or the procedure for book-entry transfer cannot be completed on time, or certificates for registered notes cannot be delivered on time, a holder may tender its original notes pursuant to the procedures described in this prospectus under the heading "Exchange Offer—Guaranteed Delivery Procedures".
Federal Income Tax Consequences:	The exchange of the original notes for exchange notes generally will not be a taxable exchange for U.S. federal income tax purposes. U.S. Holders of the original notes will not recognize any taxable gain or loss as a result of such exchange. See "Certain Income Tax Considerations—Certain U.S. Federal Income Tax Considerations".
	No taxes on income (including taxable capital gains) will be payable by a U.S. Holder for Canadian federal income tax purposes solely as a consequence of the exchange of the original notes.
Use of Proceeds:	We will not receive any proceeds from the issuance of the exchange notes. We will pay all expenses incidental to the exchange offer. The net proceeds received from the sale of the original notes were used to complete the acquisition of HBMS by HudBay.
Exchange Agent:	The Bank of New York is serving as the exchange agent in the exchange offer (the "exchange agent"). Please direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent. The telephone number for the exchange agent is 212-815-6331 and the facsimile number is 212-298-1915, Attention: Ms. Giselle Guadalupe.

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The Exchange Notes

The summary below describes the principal terms of the exchange notes. Some of the terms and conditions described below are subject to important limitations and exceptions. The "Description of Notes" section of the prospectus contains a more detailed description of the terms and conditions of the exchange notes. As used in this summary of the offering, references to "HBMS", "we" and "our" refer to Hudson Bay Mining and Smelting Co., Limited only, without reference to its subsidiaries and joint ventures and references to "HudBay" or the "Parent Guarantor" refer to HudBay Minerals Inc., without reference to its subsidiaries and joint ventures.

Issuer:	Hudson Bay Mining and Smelting Co., Limited.
Securities Offered:	US$175,000,000 aggregate principal amount of 95/8% Senior Secured Exchange Notes due January 15, 2012.
Maturity Date:	January 15, 2012.
Interest:	95/8% per annum, payable semiannually in arrears on January 15 and July 15, commencing on July 15, 2005.
Parent Guarantee:	All payments on the exchange notes, including principal, premium (if any) and interest, will be fully and unconditionally guaranteed on a subordinated basis by HudBay (the "Parent Guarantor"). The Parent Guarantee will terminate immediately upon the Parent Guarantor owning less than a majority of the Voting Stock of HBMS.
Subsidiary Guarantees:	All payments on the exchange notes, including principal and interest, will be fully and unconditionally guaranteed on a senior basis by our existing Restricted Subsidiary and our future domestic Restricted Subsidiaries (the "Subsidiary Guarantors"). At the date of this prospectus, our only Restricted Subsidiary is Hudson Bay Exploration and Development Company Limited.
Collateral:	The exchange notes and the Subsidiary Guarantees will be secured by first-priority liens on HBMS's real property, mineral claims and leases in the Provinces of Manitoba and Saskatchewan and second-priority liens on HBMS's and the Subsidiary Guarantor's accounts receivable and inventories, which will secure, on a first-priority basis, our obligations under any future credit facility. See "Description of Notes—Security".
Intercreditor Agreement:	When HBMS enters into any future credit facility, the trustee, on behalf of itself and the holders of the exchange notes, and the agent for such credit facility, on behalf of the lenders thereunder, will enter into an intercreditor agreement that sets forth the priority of their respective liens upon the accounts receivable and inventories of HBMS and the Subsidiary Guarantor and establishes rights and procedures with respect to enforcement of such liens. We expect that any such intercreditor agreement will provide that holders of the exchange notes may not exercise any rights to enforce against our inventory and receivables until the discharge of all obligations under such credit facility and may not enforce against the collateral in respect of which holders of exchange notes will have a first-priority lien until the expiry of 120 days from the date notice is given by the credit facility agent to the trustee of a standstill under the intercreditor agreement. See "Description of Notes—Intercreditor Agreement with Credit Facility Agent".

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Ranking:	The exchange notes and the Subsidiary Guarantees will be senior obligations of HBMS and the Subsidiary Guarantors and will rank:
	—  equally in right of payment to any of HBMS's and the Subsidiary Guarantors' future senior debt;
	—  senior in right of payment to any of HBMS's or the Subsidiary Guarantors' future subordinated debt;
	—  effectively subordinated to any existing and future liabilities of any subsidiaries of HBMS that do not guarantee the notes;
	—  effectively senior to all of HBMS's and the Subsidiary Guarantors' existing and future senior indebtedness that is unsecured or secured by liens on the collateral junior to those securing the exchange notes, in each case to the extent of the value of the collateral securing the exchange notes;
	—  effectively junior to indebtedness under any credit facility and any future liabilities that are secured by a first priority lien on accounts receivable and inventories or secured by a lien on other collateral not securing the exchange notes, to the extent of the value of such collateral; and
	—  effectively junior to HBMS's undertakings with the Provinces of Manitoba and Saskatchewan with respect to the reclamation of HBMS's properties and any future liabilities that are secured by a first priority lien on HBMS's mining equipment, buildings and fixtures, to the extent of the value of such collateral.
	As of December 31, 2004:
	—  HBMS and the Subsidiary Guarantors had approximately $242.9 million of indebtedness, including $15.1 million of obligations under capital leases; and
	—  HBMS and the Subsidiary Guarantors had approximately $22.8 million of outstanding letters of credit secured by cash collateral (excluding $13 million of letters of credit that we have provided in favor of the Province of Manitoba and Saskatchewan as discussed immediately below).
	In addition, at December 31, 2004, HBMS estimated that total reclamation costs relating to the closure of all of HBMS' facilities in Manitoba and Saskatchewan will be approximately $51.6 million. However, the ultimate costs for these obligations are uncertain and may be significantly larger than such estimates. In December 2004, the governments of the Provinces of Saskatchewan and Manitoba informed us that, in their view, our estimate of these reclamation costs may be too low and the security we had provided them for the reclamation obligations may not be sufficient. In further discussions with the Provinces of Saskatchewan and Manitoba we agreed to conduct a feasibility study to more accurately determine the estimated reclamation costs. The study is expected to be completed in the first half of 2005. Pending completion of the feasibility study, we have provided additional security in the form of letters of credit, secured by cash collateral, in the total amount of $13 million. Although we believe that our current reclamation estimate of approximately $51.6 million is adequate and is sufficiently secured by the existing security, we may be required to continue to post additional security as a result of the feasibility study. See "Risk Factors—Reclamation and mine closure costs could adversely affect our cash flow from operations".

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	The Parent Guarantee will be effectively subordinated to any existing and future Indebtedness of the Parent Guarantor (subject to certain exceptions). See "Description of Notes—Parent Guarantee". As of December 31, 2004 the Parent Guarantor had no Senior Indebtedness.
Optional Redemption:	HBMS may redeem up to 35% of the aggregate principal amount of the exchange notes at any time prior to January 15, 2008 with the net proceeds from certain equity offerings at a price equal to 109.625% of the principal amount of the exchange notes. After January 15, 2009, HSMS may redeem some or all of the exchange notes at the redemption prices set forth in this prospectus. See "Description of Notes—Optional Redemption."
Change of Control:	Upon the occurrence of a change of control, HBMS will be required to make an offer to purchase each holder's exchange notes at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase. See "Description of Notes—Repurchase at the Option of Holders—Change of Control."
Certain Covenants:	The indenture governing the exchange notes contains covenants that, among other things, limit HBMS's ability and the ability of its Restricted Subsidiaries to:
	—  incur additional indebtedness or enter into sale and leaseback transactions;
	—  pay dividends or make other equity distributions;
	—  make investments;
	—  create liens;
	—  engage in transactions with affiliates; and
	—  merge or consolidate with other companies or sell substantially all of their assets.
	These limitations will be subject to a number of important exceptions and qualifications. See "Description of Notes". The Parent Guarantor is not subject to these covenants.
Exchange Offer, Registration Rights:	In an effort to give the holders of the original notes the opportunity to exchange the original notes for notes with identical terms that may be publicly traded in the United States, we agreed to:

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	—  file a registration statement for the exchange notes with the SEC within 120 days after the issue date of the original notes,
	—  use our reasonable best efforts to have the registration statement declared effective by the SEC within 240 days after the issue date of the original notes, and
	—  use our reasonable best efforts to consummate the exchange offer within 30 business days after the registration statement is declared effective
	unless the exchange offer would not be permitted by applicable law or SEC policy.
	This prospectus is part of the registration statement.
	In addition, we agreed, in certain circumstances, to file a shelf registration statement that would allow some or all of the notes to be offered to the public in the United States.
	If HBMS fails to satisfy these obligations, it may be required to pay you additional interest. See "Description of Notes—Registration Rights; Special Interest".
Consequences of Failure to Exchange:	Untendered original notes will continue to be subject to certain restrictions on their transfer. In general, the original notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act of 1933 and applicable state securities laws. Except in certain limited circumstances provided for in the registration rights agreement, we do not intend to register resales of the original notes under the Securities Act of 1933 or to register or qualify for distribution the original notes under the securities laws of any other jurisdiction.
Risk Factors:	You should carefully consider all of the information in this prospectus. In particular, you should read the specific risk factors under "Risk Factors" for a discussion of certain risks associated with an investment in the notes and participation in the exchange offer.

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RISK FACTORS

Investing in the notes involves risks. In addition to the other information contained in this prospectus, you should carefully consider the following risk factors and the information under "Forward-Looking Statements", which appears elsewhere in this prospectus, before tendering your original notes for the exchange notes.

Risk Relating to Our Business

The market price of metals is volatile.

        Our earnings and financial condition depend upon the market prices of metals, which can fluctuate widely. Metal prices ultimately depend on demand in the end markets for which metals are used. The principal end markets for zinc are the steel and automotive industries and for copper are the electrical and electronics industries. These industries, as well as certain other industries that use zinc or copper, are cyclical in nature. Demand is affected by numerous factors beyond our control, including the general level of industrial production, interest rates, the rate of inflation, and the stability of exchange rates, any of which can cause significant fluctuations in zinc and copper prices. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political developments. The price of zinc, copper and other metals has fluctuated widely in recent years. Future price declines may materially reduce our profitability and could cause us to reduce output at our operations (including, possibly, closing one or more of our mines or plants), all of which could reduce our cash flow from operations.

        Furthermore, a significant decrease in commodity prices may require us to revise our mineral reserve calculations and life-of-mine plans, which could result in material write-downs of our investment in mining properties and increased amortization, reclamation and closure charges. In addition to adversely affecting our mineral reserve and mineral resource estimates and our financial condition, declining commodity prices could impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.

        We may in the future engage in hedging activities, such as forward sales contracts and commodity put and call option contracts, to minimize the effect of declines in metal prices on our operating results. While these hedging activities may protect us, to some extent, against low metal prices, they also limit the price we can receive on hedged products. As a result, we may be prevented from realizing possible revenues in the event that the market price of a metal exceeds the price stated in a forward sale or call option contract, which could adversely affect our results of operations.

Our operations are subject to currency fluctuations.

        With the exception of purchased concentrates and external refining charges, and interest we will pay in respect of the notes, our costs and expenses are in Canadian dollars. However, our revenue is tied to market prices for zinc and copper, which are denominated in United States dollars. If the Canadian dollar gains value against the United States dollar, our results of operations and financial condition could be materially adversely affected. Although we may use hedging strategies to limit our exposure to currency fluctuations, there can be no assurance that such hedging strategies will be successful or that they will mitigate the risk of such fluctuations.

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We face significant environmental risks.

        All phases of our operations are subject to environmental regulation in the various jurisdictions in which we operate. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. For example, on September 25, 2004, the Canadian federal government issued a proposed notice requiring the preparation and implementation of pollution prevention plans in respect of specified toxic substances released from base metals smelters and refineries and zinc plants, including our metallurgical complex in Manitoba. The proposed notice would set target emissions for mercury, sulphur dioxide and particulate matter below our current emission levels. There is no assurance that existing or future environmental regulation will not materially adversely affect our business, financial condition and results of operations. There is contamination on properties that we own or owned or for which we have or have had care, management or control which may result in a requirement to remediate that could involve material costs. In addition, environmental hazards may exist on the properties on which we hold interests that are unknown to us at present and that have been caused by previous or existing owners or operators of the properties. We may also acquire properties with environmental risks.

        Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations, including us, may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

        Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on us and cause increases in exploration expenses, remedial and reclamation obligations, capital expenditures or production costs, reduction in levels of production at producing properties, or abandonment or delays in development of new mining properties.

We are subject to substantial government regulation.

        Our mining, processing, development and mineral exploration activities are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Mining and exploration activities are also subject to various laws and regulations relating to the protection of the environment. Although we believe that our exploration activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of our properties. Amendments to current laws and regulations governing our operations and activities or more stringent implementation thereof could have a material adverse effect on our business, financial condition and results of operations.

The costs of compliance with the Kyoto Protocol could have a material adverse effect on our operations.

        Canada ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change in late 2002. The protocol became effective on February 16, 2005. Various levels of governments in Canada are developing a number of policy measures in order to meet Canada's emission reduction obligations under the protocol. While the impact of the protocol and these measures cannot be quantified at this time, the likely effect will be to increase costs for fossil fuels, electricity and transportation, restrict industrial emission levels, impose added costs for emissions in excess of permitted levels and increase costs for monitoring and reporting. Compliance with these initiatives could have a material adverse effect on our results of operations.

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Increased concentrate costs could adversely affect our operations.

        We rely on the availability of reasonably priced copper and, to a lesser extent, zinc concentrate to operate our metallurgical complex at full capacity. Production of concentrate from the Mines has not been sufficient to operate the metallurgical plants at full capacity. As a result, in the past, we have purchased significant quantities of copper concentrate and, to a lesser degree, zinc concentrate from third parties. We expect to continue to purchase large amounts of copper concentrate from third parties. Our purchases of copper and zinc concentrate may increase significantly in the future as a result of declining production at the Mines, which may adversely affect our profitability as processing purchased concentrate is less profitable than domestic concentrate.

        The availability of concentrate may be influenced by a number of factors, many of which are not within our control, including operational difficulties at the concentrate suppliers' mines. Shortages of these concentrates have occurred in the past and may occur in the future. We do not have any contracts in place for the purchase of zinc concentrate. Although we have such contracts for copper concentrate, no assurance can be given that agreed upon quantities will be provided by the applicable supplier or that, if supplied, they will be sufficient for our purposes. The price we pay for concentrate is dependent upon (i) treatment and refining charges, which are set at market prices on the basis of supply and demand for concentrate, and agreed between the vendors of the concentrate and us, and (ii) freight costs of transporting the concentrate to our metallurgical complex, each of which can vary significantly. Any price increase in, or reduced availability of, concentrate will adversely affect our profitability and the economic viability of our processing operations.

Our exploration activities may not result in discoveries of commercial quantities of ore.

        The exploration for and development of mineral deposits involves significant risks. Few properties that are explored are ultimately developed into producing mines. Whether a mineral deposit will be commercially viable depends on a number of factors, including: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. Even if we identify and acquire an economically viable ore body, several years may elapse from the initial stages of development. We may incur major expenses to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities. As a result, we cannot assure you that our exploration or development efforts will result in any new commercial mining operations or yield new mineral reserves to replace or expand current mineral reserves.

Estimates of mineral reserves, mineral resources and projected cash flows may prove to be inaccurate.

        There are numerous uncertainties inherent in estimating mineral reserves, mineral resources and the future cash flows that might be derived from them. Accordingly, the figures for mineral reserves, mineral resources and future cash flows incorporated into and included in this prospectus are estimates only. In respect of mineral reserve and mineral resource estimates, no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized or that mineral reserves and mineral resources can be mined or processed profitably. In addition, in respect of future cash flows, actual cash flows may differ materially from estimates. Estimates of mineral reserves, mineral resources and future cash flows to be derived from the production of such mineral reserves, necessarily depend upon a number of variable factors and assumptions, including, among others, geological and mining conditions that may not be fully identified by available exploration data or that may differ from experience in current operations, historical production from the area compared with production from other producing areas, the assumed effects of regulation by governmental agencies and assumptions concerning metal prices, exchange rates, interest rates, inflation, operating costs, development and maintenance costs, reclamation costs, and the availability and cost of labour, equipment, raw materials and other services required to mine and refine the ore. In addition, there can be no assurance that mineral recoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. For these reasons, estimates of our mineral reserves and mineral resources in this prospectus, including classifications thereof based on probability of recovery, and any estimates of future cash flows expected from the production of those mineral reserves and mineral resources, prepared by different engineers or by the same engineers at different times may vary substantially. The actual volume and grade of mineral reserves and mineral resources mined and processed, and the actual cash flows derived from that production, may not be as currently anticipated in such estimates. If our actual mineral reserves and mineral resources or cash flows are less than our estimates, our results of operations and financial condition may be materially impaired. "Inferred" mineral resources have a great amount of uncertainty. See "Cautionary Note to U.S. Investors Concerning Estimates of Inferred Mineral Resources".

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Mining operations are inherently dangerous and subject to conditions or events beyond our control, which could have a material adverse effect on our business; insurance may not cover these risks and hazards adequately or at all.

        Mining operations, including the exploration and development of mineral deposits, generally involve a high degree of risk. Our operations are subject to all the hazards and risks normally encountered in the exploration, development and production of zinc metal and copper metal including: adverse environmental conditions; industrial accidents; metallurgical and other processing problems; unusual or unexpected rock formations; ground or slope failures; structural cave-ins or slides; flooding or fires; seismic activity; rock bursts; equipment failures; and periodic interruptions due to inclement or hazardous weather conditions.

        These risks could result in damage to, or destruction of, mines and other producing facilities resulting in partial or complete shutdowns, personal injury or death, environmental or other damage to our properties or the properties of others, delays in mining, monetary losses and potential legal liability. Milling operations are subject to hazards such as equipment failure or failure of retaining dams around tailings disposal areas that may result in environmental pollution and consequential liabilities.

        Our insurance will not cover all the potential risks associated with our operations. In addition, although certain risks are insurable, we may be unable to maintain insurance to cover these risks at economically feasible premiums. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to us or to other companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards that may not be insured against or that we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.

Title to some of our mineral properties may be challenged or defective.

        The acquisition of title to mineral properties is a very detailed and time-consuming process. Title to mineral concessions may be disputed. Although we believe we have taken reasonable measures to ensure proper title to our properties, there is no guarantee that title to any of our properties will not be challenged or impaired. Third parties may have valid claims underlying portions of our interests, including prior unregistered liens, agreements, transfers or claims, including aboriginal land claims, and title may be affected by, among other things, undetected defects. As a result, we may be constrained in our ability to operate our properties or unable to enforce our rights with respect to our properties. An impairment to or defect in our title to our properties could have a material adverse effect on our business, financial condition or results of operations.

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We may not be able to acquire desirable mining assets in the future.

        One of our strategies is to grow our business by acquiring attractive, quality mining assets. We expect to selectively seek strategic acquisitions in the future. However, there can be no assurance that suitable acquisition opportunities will be identified. Further, restrictive covenants in our current or future debt instruments may restrict and limit our ability to pursue future acquisitions. Our ability to consummate and to integrate effectively any future acquisitions on terms that are favorable to us may be limited by the number of attractive acquisition targets, internal demands on our resources, competition from other mining companies and, to the extent necessary, our ability to obtain financing on satisfactory terms, if at all.

Intense competition could reduce our market share or harm our financial performance.

        The mining industry is intensely competitive and we compete with many companies possessing greater financial and technical resources than us. Since mines have a limited life, we must compete with others who seek mineral reserves through the acquisition of new properties. In addition, we also compete for the technical expertise to find, develop, and operate such properties, the labour to operate the properties, and the capital for the purpose of funding such properties. Many competitors not only explore for and mine base metals, but conduct refining and marketing operations on a global basis. Such competition may result in us being unable to acquire desired properties, to recruit or retain qualified employees or to acquire the capital necessary to fund our operations and develop our properties. We also compete with manufacturers of substitute materials or products for which zinc and copper are typically used. Existing or future competition in the mining industry could materially adversely affect our prospects for mineral exploration and success in the future.

Increased energy prices could adversely affect our operations.

        Mining operations and facilities are intensive users of electricity and carbon based fuels. Energy prices can be affected by numerous factors beyond our control, including global and regional supply and demand, political and economic conditions, and applicable regulatory regimes. The prices of various sources of energy may increase significantly from current levels. An increase in energy prices could materially adversely affect our results of operations and financial condition.

Our revenues will be dependent on our metal production; sustaining current production levels or increasing our mineral production depends on our ability to bring new mines into production and to expand mineral reserves at existing mines.

        We generate revenues primarily through the production and sale of metals. Subject to any future expansion or other development, production from existing operations at the Mines is expected to decline over the planned life of these mines. In addition, our production estimates may vary materially from the actual production from, or productive life of, the subject mines because the feasibility of mineral reserves is largely dependent on market conditions, the regulatory environment and available technology. As a result, our ability to maintain our current production or increase our annual production of metals and generate revenues therefrom will depend significantly upon our ability to discover or acquire and to successfully bring new mines into production and to expand mineral reserves at existing mines.

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Reclamation and mine closure costs could adversely affect our cash flow from operations.

        In view of the uncertainties concerning future removal and site restoration costs on our properties, the ultimate timing of and costs for future removal and site restoration could differ from current estimates. Our estimates for this future liability are subject to change based on amendments to applicable laws and legislation, the nature of ongoing operations and technological innovations. At the request of HudBay, A. C. A. Howe International Limited ("Howe") prepared a worst case scenario estimate of the total environmental capital costs for closure and reclamation of $92 million. As shown in the notes to our financial statements, at December 31, 2004, HudBay estimated that total reclamation costs relating to the closure of all of our facilities in Manitoba and Saskatchewan will be approximately $51.6 million ($26.3 million on a present value basis at December 31, 2004). The Provinces of Saskatchewan and Manitoba have informed us that, in their view, our current estimate of reclamation costs may be too low and the security for the reclamation obligations may not be sufficient. We have had discussions with the Provinces of Saskatchewan and Manitoba and have agreed to conduct a feasibility study to more accurately determine the estimated reclamation costs. The study is expected to be completed in the first half of 2005. Any future changes to our reclamation and mine closure costs (either in our estimates or in the actual costs) could have a material adverse effect on our future operating results.

        In addition, regulatory authorities in various jurisdictions require us to post financial assurances to secure in whole or in part future reclamation and restoration obligations in such jurisdictions. The amount and nature of the financial assurances are dependent upon a number of factors, including our financial condition and reclamation cost estimates. Changes to these amounts, as well as the nature of the collateral to be provided, could significantly increase our costs, making the maintenance and development of existing and new mines less economically feasible. Currently, the security that we provide to the governments of the Provinces of Manitoba and Saskatchewan consists of our equipment, buildings and fixtures in our metallurgical complex. In connection with their informing us of a potential deficiency in our estimate of our reclamation obligations, HBMS has provided additional security in the form of letters of credit, secured by cash collateral, in the total amount of $13 million. After completion of the feasibility study, the appropriate security will be determined with the Provinces. Based on the results of the feasibility study, we may be required to continue to provide all or a portion of the letters of credit or may be required to provide additional security to these letters of credit. To the extent that the value of collateral we have provided to the Provinces is or becomes insufficient to cover the amount of financial assurance we are required to post, we would be required to replace or supplement the existing security with more expensive forms of security, which might include cash deposits, which would reduce our cash available for operations and financing activities. There can be no guarantee that we will be able to maintain or add to our current level of financial assurance. We may not have sufficient capital resources to further supplement our existing security. Additionally, any capital resources that we do utilize for this purpose will reduce our resources available for our operations and commitments, including satisfying our obligations on the notes.

        Although we accrue for future closure costs, we do not reserve cash in respect of these obligations or otherwise fund these obligations in advance. As a result, we will have significant cash costs when we are required to close and restore mine sites that may, among other things, affect our ability to satisfy our obligations under our indebtedness or other contractual commitments. Given the significance of these cash costs, we may not be able to fund them with cash from our operating activities or other available capital resources. We cannot assure you that we will be able to obtain financing on satisfactory terms to fund these costs. If we are unable to fund the removal and site restoration costs, regulatory authorities may foreclose on the collateral securing those obligations.

The temporary shutdown of any of our operations could expose us to significant costs and adversely affect our access to skilled labour.

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        From time to time, we may temporarily shut down our copper smelting and/or zinc refining operations or one or more of our mines if they are no longer considered commercially viable. There are a number of factors that may cause our operations to be no longer commercially viable, many of which are beyond our control. These factors include adverse changes in interest rates or currency exchange rates, decreases in the price of zinc or copper or the market rates for treatment and refining charges, increases in concentrate transportation costs, and increases in labour costs. During such temporary shutdowns, we must continue to expend capital to maintain the plant and equipment. We may also incur significant labour costs as a result of a temporary shutdown if we are required to give employees notice prior to any layoff or to pay severance for any extended layoff. Furthermore, temporary shutdowns may adversely affect our future access to skilled labour, as employees who are laid off may seek employment elsewhere. As well, if the copper smelting and/or zinc refining operations are shut down for an extended period of time, we may be required to engage in environmental remediation of the plant sites, which would require us to incur additional costs. Given the costs involved in a temporary shutdown of our operations, we may instead choose to continue to operate those operations at a loss. This could have a material adverse effect on our results of operations and financial condition.

We are required to obtain government permits in order to conduct mining operations.

        Government approvals and permits are currently required in connection with all of our operations and further approvals and permits may be required in the future. We must obtain and maintain a variety of licences and permits including air quality control, water, electrical and municipal licenses. The duration and success of our efforts to obtain permits are contingent upon many variables outside of our control. Obtaining governmental permits may increase costs and cause delays depending on the nature of the activity to be permitted and the interpretation of applicable requirements implemented by the permitting authority. There can be no assurance that all necessary permits will be obtained and, if obtained, that the costs involved will not exceed our estimates or that we will be able to maintain such permits. To the extent such approvals are required and not obtained or maintained, our operations may be curtailed or we may be prohibited from proceeding with planned exploration, development, or operation of mineral properties.

Disruption of transportation services or increased transportation costs could have a material adverse effect on our business, financial condition and results of operations.

        We are dependent upon a single railway and certain short-line rail networks to transport purchased concentrates to our metallurgical complex and to transport products from our metallurgical complex for further processing and to our customers. We may have similar dependencies at future mining and processing operations. Disruption of these transportation services due to weather-related problems, strikes, lock-outs or other events could have a material adverse effect on our operations. If transportation for our products becomes unavailable, our ability to market our products could suffer. Additionally, increases in our transportation costs relative to those of our competitors could make our operations less competitive and could affect our profitability.

We are dependent upon key management personnel and executives.

        We are dependent upon a number of key management personnel. Our ability to manage our exploration and development activities, and hence our success, will depend in large part on the efforts of these individuals. We entered into employment agreements for the employment of six officers of HBMS after the Acquisition. We have also entered into retention plans with approximately 18 key staff members. We face intense competition for qualified personnel, and there can be no assurance that we will be able to attract and retain such personnel. We do not maintain "key person" life insurance. Accordingly, the loss of the services of one or more of such key management personnel could have a material adverse effect on us. See "Summary—Recent Developments—Executive Management and Personnel".

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Our business will depend on good relations with our employees.

        Production at our mining operations depends on the efforts of our employees. Although certain of our unionized employees have agreed to "no-strike" clauses in their collective bargaining agreements which run until 2012, there can be no assurance that our business will not suffer from work stoppages. Further, relations with employees may be affected by changes in the scheme of labour relations that may be introduced by the relevant governmental authorities in whose jurisdictions we carry on business. Changes in such legislation or otherwise in our relationship with our employees may result in strikes, lockouts or other work stoppages, any of which could have a material adverse effect on our business, results of operations and financial condition.

We are exposed to credit risk from customers to whom CMM provides credit in the normal course of its operations and in connection with certain derivative contracts.

        Our accounts receivable are with CMM. CMM provides credit to its customers in the normal course of its operations. Although CMM mitigates credit risk by carrying out credit evaluations on its customers, making a significant portion of its sales on a cash basis and maintaining insurance on its accounts receivable, if customers default on the credit extended to them, results of operations could be materially adversely affected. Further, we enter into derivative contracts for which we do not obtain collateral or other security. In the event of non-performance by counterparties in connection with such derivative contracts, we will be further exposed to credit risk.

Risk Relating to the Notes

There may be adverse consequences to you if you do not exchange your original notes.

        If you do not exchange your original notes for exchange notes in the exchange offer, then you will continue to be subject to the transfer restrictions on the original notes described in the offering memorandum distributed in connection with the private placement of those original notes. In general, the original notes may not be offered or sold unless they are registered or exempt from registration under the Securities Act of 1933 and applicable state securities laws. Except in certain limited circumstances provided for in the registration rights agreement, we do not intend to register resales of the original notes under the Securities Act of 1933. See "Exchange Offer—Consequences of Failure to Exchange". You should refer to "Exchange Offer" for information about how to tender your original notes. The tender of original notes pursuant to the exchange offer will reduce the aggregate principal amount of the original notes outstanding, which may have an adverse effect upon, and increase the volatility of, the market price of the original notes due to a reduction in liquidity.

The value of the collateral securing the notes may not be sufficient to satisfy our obligation on the notes.

        The notes are secured by a lien upon all of our real property and associated mineral interests in the Provinces of Manitoba and Saskatchewan. These assets do not constitute all of our assets. No appraisal of the collateral has been made in connection with this offering. The value of the collateral in the event of a liquidation may be less than book value and will depend upon, among other things, market and economic conditions, the availability of buyers, the quantity of assets being sold and the speed at which they are to be sold. By their nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. In addition, a significant portion of the collateral includes assets that may only be usable, and thus retain value, as part of our operating business. Accordingly, any such sale of collateral separate from the sale of our operating business may not be feasible or of significant value.

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        Further, at such time as we enter into a credit facility, the notes will be secured only on a second-priority basis with respect to the accounts receivable and inventories to the extent they secure the obligations under that credit facility. We expect that the lenders under any credit facility into which we enter in the future will be secured by a first-priority lien on such collateral. To the extent permitted under the indenture governing the notes and any new credit facility, this collateral may also secure additional debt on a basis effectively senior or equal to the security for the notes. All of our obligations under any credit facility that is secured by first-priority security interests must be repaid in full before this collateral is available to noteholders and other creditors that have a second-priority security interest in such collateral. In addition, other parties may hold liens (including statutory liens) whether or not permitted by the indenture governing the notes, which may entitle them to share in the value of all or a portion of the collateral.

        As a result, the value of the collateral may not be sufficient to satisfy in full our obligations on the notes.

Our significant indebtedness could adversely affect our ability to operate our business.

        We have a significant amount of indebtedness and, as a result, significant debt service obligations. As at December 31, 2004, we had outstanding indebtedness of $242.9 million. In addition, we have other obligations that include pension, employee future benefits and asset retirement obligations.

        This high degree of leverage could materially and adversely affect us in a number of ways including:

•

limiting our flexibility to plan for, or react to, changes in our business or market conditions;



•

limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes, and in particular for the exploration and development of our current properties and projects;



•

limiting our access to cash available from operations for future acquisitions and our business in general;



•

increasing our vulnerability to the impact of adverse economic and industry conditions; and



•

placing us at a disadvantage compared to our competitors that have a lower degree of leverage.

        In addition, we may not be able to generate sufficient cash flows from operations to service our indebtedness, in which case, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing indebtedness or obtain additional financing, any of which could materially adversely affect our operations and ability to implement our business strategy.

        Subject to the terms of the indenture governing the notes, we may incur additional indebtedness in the future. To the extent we incur new indebtedness, the risks associated with our significant leverage discussed above will be exacerbated.

We may not be able to generate sufficient cash to service all of our indebtedness, including the notes.

        Our ability to make payments on and to refinance our indebtedness, including the notes, depends on our ability to generate cash in the future, which will be affected by general economic, financial, competitive, business and other factors beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us in amounts sufficient to enable us to service our debt obligations, including the notes at maturity or otherwise, or to fund our other liquidity needs, including our need to post adequate security for our mine and reclamation costs. If we are unable to meet our debt obligations or to fund our other liquidity needs, we may need to restructure or refinance our indebtedness, including the notes. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:

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•

our financial condition at the time;



•

restrictions in agreements governing our indebtedness, including the indenture governing the notes; and



•

other factors, including financial market or industry conditions.

        As a result, it may be difficult for us to obtain financing on terms that are acceptable to us, or at all. Without this financing, we could be required to reduce or delay capital expenditures, or sell assets to make up for any shortfall in our payment obligations under unfavorable circumstances. The indenture governing the notes and any credit agreement governing our future credit facilities will limit our ability to sell assets. In addition, our mining equipment, buildings and fixtures have been pledged to secure our reclamation undertakings in Saskatchewan and Manitoba and our accounts receivable and inventory will be pledged to secure repayment of any indebtedness we incur under our future credit facilities and to secure, on a second-priority basis, repayment of these notes. If we are unable to adequately reduce expenses or sell assets quickly enough or for sufficient amounts, we may not be able to meet our obligations, including our obligations on the notes.

The lenders under any credit facility that we enter into in the future will have sole and exclusive control of the collateral in which they have a first-priority interest and will, in certain circumstances, be entitled to delay enforcement of remedies by holders of the notes on the first-priority note collateral.

        The rights of the holders of the notes will be limited pursuant to the terms of the intercreditor agreement to be entered into in connection with any credit facility that we enter into in the future, including our expected new credit facility. At any time that we have obligations outstanding under a credit facility, the lenders thereunder will have the sole and exclusive right to control, administer, account for and otherwise deal with the inventory, accounts receivable and other collateral securing the obligations under the credit facility, including the right to exercise any rights or remedies against that collateral upon our default under the terms of the notes and the approval of amendments to the security documents related to such collateral. The holders of the notes will not have the ability to control or direct such actions, even if the rights of the holders are adversely affected. As a result, if there were an event of default under the notes, the lenders under the credit facility could decide not to foreclose on the collateral securing the credit facility. In addition, certain releases of the first-priority liens on this collateral, approved exclusively by the lenders under the credit facility, will also release the second-priority liens on such collateral in favor of the holders of the notes. Moreover, the intercreditor agreement will provide that the holders of the notes may not exercise any rights to enforce against the collateral securing the credit facility until the discharge of all obligations under the credit facility and may not enforce against the other collateral (comprising primarily real property and associated mineral interests in the Provinces of Manitoba and Saskatchewan) securing the notes until the expiry of 120 days from the date that notice is given by the credit facility agent to the trustee of an event of default under the credit facility. See "Description of Notes—Intercreditor Agreement with Credit Facility Agent".

Restrictive covenants in the indenture governing the notes and our expected new credit facility may prevent us from pursuing business activities that could otherwise improve our results of operations.

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        The terms of the indenture governing the notes limit our ability and the ability of our Restricted Subsidiaries to, among other things:

•

incur additional indebtedness or contingent obligations;



•

enter into sale and leaseback transactions;



•

make investments;



•

grant liens;



•

make capital expenditures;



•

enter into transactions with affiliates;



•

sell assets; and



•

acquire the assets of, or merge or consolidate with, other companies.

        We expect that any new credit facility that we may enter into will have similar restrictive covenants and will further require us to maintain certain financial ratios and satisfy other non-financial maintenance covenants. Compliance with these restrictive covenants and financial ratios, as well as those that may be contained in any future debt agreements, may impair our ability to finance our future operations or capital needs or to take advantage of other favorable business opportunities. They may also limit our ability to pay interest or principal on the notes. Our ability to comply with these restrictive covenants and financial ratios will depend on our future performance, which may be affected by events beyond our control. Our failure to comply with any of these restrictive covenants or financial ratios will result in a default under the particular debt instrument, which could permit acceleration of the indebtedness under that instrument and, in some cases, the acceleration of indebtedness under other instruments that contain cross-default or cross-acceleration provisions. In the event of a default, or a cross-default or cross-acceleration, we may not have sufficient funds available to make the required payments under our debt agreements. If we are unable to repay amounts owed under the terms of the credit agreement governing any credit facility that we enter into in the future, those lenders may be entitled to take possession of the collateral securing that facility to the extent required to repay those borrowings. In such event, we may not be able to fully repay the notes, if at all.

We may be unable to repurchase the notes in the event of a change of control.

        Upon the occurrence of certain kinds of change of control events, we will be required to offer to repurchase all outstanding notes at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. In addition, any change of control would constitute a default under the credit agreement governing any credit facility that we enter into in the future. We may not be able to pay you the required price for your notes at that time because we may not have available funds to pay the repurchase price. Any requirements to offer to repurchase the notes may require us to refinance our existing indebtedness. In such an event, we may not be able to obtain additional financing or refinance our existing indebtedness on favorable terms, if at all. In that case, our failure to purchase tendered notes would constitute an event of default under the indenture. Any such failure would also constitute a default under our new senior secured revolving credit facility and may constitute a default under our other indebtedness. See "Description of Notes—Repurchase at the Option of Holders—Change of Control".

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Canadian bankruptcy and insolvency laws may impair the enforcement of remedies under the notes.

        The rights of the trustee who represents the holders of the notes to enforce remedies under the indenture may be significantly impaired if we seek the benefit of the restructuring provisions of applicable Canadian federal bankruptcy, insolvency and other restructuring legislation. The powers of the court under the Bankruptcy and Insolvency Act (Canada), the Winding-Up and Restructuring Act (Canada) and, particularly, under the Companies' Creditors Arrangement Act (Canada) have been exercised broadly to protect a restructuring entity from actions taken by creditors and other parties. For example, these Acts each contain provisions enabling an "insolvent person" to obtain a stay of proceedings against its creditors and others allowing it to remain in possession and administer its property and to prepare and file a proposal or plan of arrangement for consideration by all or some of its creditors to be voted on by the various classes of its creditors affected thereby. Such a restructuring proposal or plan of arrangement, if accepted by the requisite majorities of each affected class of creditors and if approved by the relevant Canadian court, may result in the compromise or extinguishment of your rights under the notes and may result in the debtor retaining possession and administration of its property notwithstanding that an event of default occurred under the notes.

        In addition, bankruptcy liquidations can occur voluntarily as a result of an insolvent debtor filing an assignment in bankruptcy or involuntarily as a result of a creditor filing a bankruptcy petition in respect of an insolvent debtor. In either case, a licensed trustee in bankruptcy becomes vested (whereby ownership is transferred by operation of law) with all of the bankrupt's property, subject to the rights of third parties that must be recognized in bankruptcy. A bankruptcy liquidation also results in a stay of proceedings against unsecured creditors but not against secured creditors. The trustee in bankruptcy can require any party claiming rights in an asset in the possession of the trustee in bankruptcy to prove its claim in accordance with specified Bankruptcy and Insolvency Act (Canada) procedures, and until those procedures are exhausted or the trustee in bankruptcy consents, the trustee in bankruptcy is entitled to remain in possession of the property in issue.

        A practice has also developed whereby the Companies' Creditors Arrangement Act (Canada) is also used as a tool to liquidate companies. The courts have broad powers to fashion case specific remedies for the management of the restructuring process, and those broad powers can be fashioned to suit this objective. Sometimes the liquidation leads to a plan for the distribution of the proceeds, but if priorities are not in contest and there is not enough to payout the senior secured creditors, the court may simply terminate the restructuring once the sales are complete and authorize distribution to the senior secured creditors and other priority claimants.

        Other remedies include receiverships which can either be private, through the appointment of a receiver by a secured party over property of the debtor in which it has a secured interest, or Court-ordered, upon an application to the Court by a secured, or in some circumstances an unsecured, creditor. Because liquidation bankruptcy does not generally affect the rights of secured creditors, a receivership can occur at the same time as a bankruptcy.

        Accordingly, we cannot predict if payments under the notes would be made following commencement of or during any such application or proceeding, whether or when the trustee could exercise its rights under the indenture governing the notes, whether your claims could be compromised, affected, or extinguished in such a proceeding or whether and to what extent holders of the notes would be compensated for any delays in payment, if any, of principal, interest and costs, including the fees and disbursements of the trustee.

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You may be unable to enforce your rights under U.S. bankruptcy law.

        We are governed by the Canada Business Corporations Act, and substantially all of our operating assets are located outside of the United States. It is important to note that under bankruptcy laws in the United States, U.S. courts claim to have jurisdiction over a debtor's property, wherever located, including property situated in other countries. There can be no assurance, however, that courts outside of the United States would recognize a U.S. bankruptcy court's jurisdiction generally or over assets in its jurisdiction specifically. The criteria for cross border recognition of U.S. insolvency proceedings and orders and compromises adopted therein in foreign jurisdictions is a matter of local discretion in those jurisdictions governed by local rules. Accordingly, there is no assurance that, if a Canadian debtor seeks or is otherwise the subject of bankruptcy protection in the United States, such proceedings would afford any protection to such debtor and its assets or operations in Canada or that any orders or restructuring plan implemented through U.S. proceedings would have any effect in Canada.

        There is a growing trend towards inter-jurisdictional cooperation in insolvency proceedings between the U.S. and Canada, but the nature of such cooperation is not governed by a single set of clear rules and remains highly discretionary and case specific, and hence this trend does not allow any assurance to be given as to how any particular cross-border insolvency proceedings might be managed by the U.S. and Canadian courts, or if indeed there would be any cooperation at all.

The ability of U.S. investors to enforce civil remedies may be affected for a number of reasons.

        HBMS, the Parent Guarantor and the Subsidiary Guarantor are organized under the laws of Canada, and substantially all of our collective assets are located in Canada. A majority of our directors and officers reside principally in Canada and their assets may be located outside the United States. We have appointed an agent for service of process in the United States but it may be difficult for holders of the notes to effect service of process within the United States upon these persons who are not residents of the United States. Furthermore, it may not be possible for you to enforce against us or them, in the United States, judgments obtained in U.S. courts, including judgments based upon the civil liability provisions of the U.S. federal securities laws, because a substantial portion of our assets and the assets of these persons are located outside the United States.

Federal, state and provincial fraudulent conveyance, fraudulent preference, bankruptcy and insolvency laws may permit a court to void guarantees and security given by our subsidiaries.

        The Parent Guarantee, the Subsidiary Guarantees and the security provided by any Subsidiary Guarantor, and any payments made pursuant to the terms of any such Parent Guarantee or Subsidiary Guarantees, may be subject to review under federal, state and provincial fraudulent conveyance, fraudulent preference, bankruptcy and insolvency statutes. While the relevant laws may vary from jurisdiction to jurisdiction, under such laws the delivery of a guarantee or the grant of security by a subsidiary, or any payment made pursuant to such guarantee or security, generally will be a fraudulent conveyance or fraudulent preference, as the case may be, if: (i) it was made with the intent of hindering, delaying or defrauding creditors; or (ii) it was made with the intent or effect of giving a creditor preference over other creditors and the subsidiary giving the guarantee or security was insolvent or was unable to pay its debts or was on the verge of becoming insolvent; or (iii) the subsidiary guarantor received less than fair consideration in return for delivering the subsidiary guarantee or the grant of the security and either:

•

it was insolvent or rendered insolvent by reason of the incurrence of the indebtedness;

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•

payment left it with an unreasonably small amount of capital to meet its obligations as they became due or to carry on the business; or



•

it intended to, or believed that it would, incur debts beyond its ability to pay such debts as they mature.

        If a court were to find that the delivery of a guarantee or the grant of the security by a Subsidiary Guarantor or Parent Guarantor, or a payment made pursuant to the terms of its guarantee or security, was a fraudulent conveyance or preference, as the case may be, the court could: (i) void the payment obligations under that guarantee or security; (ii) further subordinate that guarantee to presently existing and future indebtedness; or (iii) require the holders of the notes to repay any amounts received with respect to that guarantee or security. In addition, for a guarantor incorporated under the Canada Business Corporations Act or similar provincial legislation, a court could declare the guarantee provided by that guarantor to be void if it determined that the granting of such guarantee was oppressive, unfairly prejudicial or unfairly disregarded the interests of the creditors of such guarantor. In the event of a finding that a fraudulent conveyance or preference occurred, or that a guarantee is declared void, you may not receive any repayment on the notes from the guarantors pursuant to the Subsidiary Guarantee or Parent Guarantee. If a court declares the security interests in respect of the notes to be void, any claim you may make against us for amounts payable on the notes would be unsecured. Further, the avoidance of the guarantee or security of a subsidiary could result in an event of default with respect to our and our subsidiaries' other indebtedness that could result in the acceleration of our repayment obligation in respect of such indebtedness.

        Subsidiary Guarantees could also be subject to the claim that, because they were incurred for the benefit of HBMS (and only indirectly for the benefit of those subsidiary guarantors), the obligations of the Subsidiary Guarantor were incurred for less than reasonably equivalent value or fair consideration. A court could then void a Subsidiary Guarantor's obligation under its Subsidiary Guarantee, subordinate the Subsidiary Guarantee to other indebtedness of the Subsidiary Guarantor or take other action detrimental to your interests as a note holder. If the Subsidiary Guarantee of any of our subsidiaries is unenforceable, your interests would be effectively subordinated to all of that subsidiary's indebtedness and other liabilities.

        There is currently no active trading market for the notes. If an active trading market does not develop for these notes, you may not be able to resell them.

        No active trading market currently exists for the notes, and none may develop. We do not currently intend to apply for the listing of the notes or any notes issued in any subsequent exchange offer on any securities exchange. Neither WestLB AG, London Branch nor WestLB Securities Inc. will make a market in the notes. Although Credit Suisse First Boston LLC, one of the initial purchasers of the notes, has informed us that it currently intends to make a market in the notes, it is not obligated to do so. Any such market making may be discontinued at any time without notice. If an active trading market does not develop, you may not be able to resell your notes at their fair market value or at all. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. The market for the notes may be subject to similar disruptions. The trading price may depend upon prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our financial condition, performance and prospects. These factors could adversely affect you as a holder of notes.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements. These forward-looking statements are based on our current expectations and our projections about future events, including our current expectations regarding:

•

our future financial or operating performance and that of our subsidiaries and projects;

•

the sufficiency of our capital resources, including availability under a future credit facility;

•

the future price and consumption of zinc and copper;

•

the estimation of mineral reserves and mineral resources;

•

the realization of mineral reserve and mineral resource estimates;

•

the timing and amount of estimated future production;

•

costs of production;

•

capital, operating and exploration expenditures (including environmental capital costs for closure and reclamation of mines);

•

the availability of third party concentrate;

•

mine life projections;

•

cash flow estimates;

•

our business strategies, the measures to implement those strategies and the benefits to be derived therefrom; and

•

the outlook for and other future developments in our affairs or in the industries in which we participate.

        Whenever you read a statement that is not simply a statement of historical fact, such as when we describe what we "plan", "expect", "project", "intend", "believe", "predict", "estimate", "forecast", or "anticipate" or a statement that certain events or conditions "may" or "will" occur, you must remember that these expectations may not be correct or that we may not accomplish such goals. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements.

        Forward-looking statements are based on our opinions and estimates at the date of such statements, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from what we project in the forward-looking statements, including the following, which are discussed in greater detail under the heading "Risk Factors":

•

the volatility of the market price of metals;

•

our exposure to currency fluctuations;

•

our ability to generate cash or establish financing sufficient to service our indebtedness;

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•

our hedging activities;

•

environmental risks;

•

the impact of government regulation;

•

the costs of compliance with the Kyoto Protocol;

•

increased concentrate costs;

•

our ability to yield commercial quantities of ore from our exploration activities;

•

the accuracy of our estimates of mineral reserves, mineral resources and projected cash flows;

•

the effects of hazards and risks normally encountered in mining operations, and the adequacy of our insurance to cover these risks;

•

the impact of title challenges to, or title defects in, our mineral properties;

•

our ability to acquire desirable mining assets in the future;

•

the impact of intense competition on our market share and financial performance;

•

the impact of increased energy costs;

•

our ability to bring new mines into production and to expand mineral reserves at existing mines;

•

the impact of reclamation and mine closure costs on our cash flow from operations;

•

the temporary shutdown of any of our operations;

•

our ability to obtain the government permits required to conduct our mining operations;

•

disruption of transportation services or increased transportation costs;

•

our dependence on key management personnel and executives;

•

our dependence on good relations with our employees; and

•

our exposure to credit risk from our customers.

        Any written or oral forward-looking statement made by us or on our behalf or otherwise included herein are subject to these factors. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. These factors and the other risk factors described in this prospectus are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also harm our future results. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this prospectus are made only as at the date of this prospectus. We do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

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USE OF PROCEEDS

        We will not receive any cash proceeds from the issuance of the exchange notes offered hereby. In consideration for issuing the exchange notes we will receive in exchange original notes in like principal amount. The original notes surrendered in exchange for the exchange notes will be cancelled and cannot be reissued. Accordingly, issuance of the exchange notes will not result in any change in our indebtedness.

        We issued US$175.0 million aggregate principal amount of the original notes on December 21, 2004 to the initial purchasers of those notes. Our net proceeds from the original notes offering were approximately $204.5 million based on the noon buying rate on December 21, 2004. These net proceeds together with $128.6 million from the proceeds of the HudBay equity offering were used to complete the acquisition of pre-amalgamation HBMS, to pay transaction costs in connection therewith and to provide security for reclamation obligations.

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CAPITALIZATION

        The following table sets forth HudBay's consolidated capitalization as at December 31, 2004 and as adjusted to give effect to the issuance of 2,476,371 common shares upon the exercise of 7,291,130 warrants and a private placement offering of 806,452 common shares on a flow-through basis on February 22, 2005.

        This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations", and HudBay's consolidated financial statements and related notes, each of which is incorporated by reference in this prospectus.

		As at December 31, 2004			As at December 31, 2004 after giving effect to Adjustments(1)
		(in thousands, except common share and warrant numbers)
Long term debt (including current portion):
	Obligations under capital leases	$	15,057		$	15,057
	Province of Manitoba loan(2)		15,179			15,179
	Existing notes(3)		210,350			210,350
Shareholders' equity
	Common shares		120,138			130,223
			(77,450,628 outstanding)			(80,733,451 outstanding)
	Warrants		35,850			34,448
			(1,269,478,323 outstanding)			(1,194,837,130 outstanding)
	Contributed surplus		3,288			3,298
	Deficit		(6,486	)		(6,486	)
	Cumulative translation adjustment		(24	)		(24	)
	Total capitalization	$	393,352		$	402,045

Note:

(1)

Adjusted to give effect to the issuance of 2,476,371 common shares upon the exercise of 74,291,130 warrants and a private placement offering of 806,452 common shares on a flow-through basis on February 22, 2005.

(2)

Represents the present value of this loan having a face value of $17.5 million.

(3)

The original notes are denominated in U.S. dollars. The amount present in Canadian dollars in this table is based upon the exchange rate of $1.202 per U.S. $1.00, the closing rate of the Bank of Canada on December 31, 2004.

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HUDSON BAY MINING AND SMELTING CO., LIMITED

        We were formed by the amalgamation of Hudson Bay Mining and Smelting Co., Limited, HudBay Mining and Smelting Inc. and 152640 Canada Inc. on December 21, 2004 pursuant to the Canada Business Corporations Act. We are a wholly owned subsidiary of HudBay Minerals Inc. Our principal executive and registered offices are located at 2200 - 201 Portage Avenue, Winnipeg, Manitoba R3B 3L3, Canada.

        We are an integrated base metals mining and smelting company. We are a significant copper producer and one of the ten largest zinc producers in North America. We have:

•

the 777 and Trout Lake zinc and copper mines near Flin Flon, Manitoba, the Chisel North zinc mine near Snow Lake, Manitoba and the Konuto Lake copper mine in Saskatchewan (the "Mines"), which have aggregate estimated proven and probable mineral reserves of approximately 21.6 million tonnes of ore, grading 4.8% zinc and 2.2% copper and an additional estimated 3.9 million tonnes of inferred mineral resources grading 6.1% zinc and 1.9% copper;



•

a metallurgical complex located in Flin Flon, Manitoba and a zinc concentrator near Snow Lake, Manitoba; the Flin Flon metallurgical complex is comprised of a zinc and copper concentrator, a zinc pressure leach and electro-winning plant and a copper smelter, with an annual production capacity of 115,000 tonnes of cast zinc and 90,000 tonnes of anode copper, as well as gold and silver by-products;



•

a zinc oxide plant with annual production capacity of 45,000 tonnes that takes between 32,000 tonnes and 41,000 tonnes of our annual zinc metal production; and



•

a 50% interest in an established marketing joint venture, Considar Metal Marketing Inc. ("CMM"), which markets our metals and identifies and acquires additional zinc and copper concentrate for our metallurgical complex.

        In 2004 we completed a $435 million capital expenditure program (the "777 Project"), that involved the construction and development of the 777 mine in Flin Flon and the Chisel North mine in Snow Lake, expansion of the Flin Flon concentrator, expansion of the Flin Flon zinc plant, including construction of an electrolytic cellhouse and other infrastructure upgrades. This project has led to improvements in operating margins, workplace productivity and workplace safety.

        Our total 2004 production was approximately 110,200 tonnes of refined zinc, 76,900 tonnes of refined copper, 79,000 ounces of gold and 1,114,600 ounces of silver, derived from 223,000 tonnes of zinc concentrate (including 3,500 tonnes of purchased concentrate) and 284,100 tonnes of copper concentrate (including 98,700 tonnes of purchased concentrate).

HUDBAY MINERALS INC.

        HudBay was formed by the amalgamation of Pan American Resources Inc. and Marvas Developments Ltd. on January 16, 1996, pursuant to the Business Corporations Act (Ontario). On March 12, 2002 Pan American Resources Inc. acquired ONTZINC Corporation, a private Ontario corporation, through a reverse take over and changed its name to ONTZINC Corporation. On December 21, 2004 ONTZINC Corporation changed its name to HudBay Minerals Inc. Its principal executive office is located at 2200 - 201 Portage Avenue, Winnipeg, Manitoba R3B 3L3, Canada and its registered office is currently located at 6 Adelaide Street East, Suite 300, Toronto, Ontario M5C 1H6, Canada.

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        In addition to its principal subsidiary, HBMS, HudBay also owns two development projects: the Balmat mine in the State of New York and the Gay's River mine in the Province of Nova Scotia, Canada and two exploration projects: the Southwestern Ontario Project in the Province of Ontario, Canada and the San Antonio Project in Chile.

        On December 21, 2004 HudBay completed the acquisition of HBMS from Anglo American International S.A. by causing its subsidiary, Hudbay Mining and Smelting Inc. to purchase all of the outstanding shares of 152640 Canada Inc. for a total consideration of approximately $316 million, payable as to $303 million in cash and $13 million by the issuance of common shares and warrants of HudBay.

        On December 21, 2004, HudBay also completed a public offering of 1,917,510,000 subscription receipts for total gross proceeds of approximately $143.8 million and Hudbay Mining and Smelting Inc. completed the offering of the original notes for gross proceeds of US$175 million. The proceeds from the offering of the original notes and a portion of the equity offering were used to complete the acquisition of HBMS. Upon completion of the acquisition of HBMS and the related consolidation of the common shares of HudBay, such subscription receipts were automatically exchanged for 63,917,000 common shares and 958,755,000 common share purchase warrants of HudBay. Every 30 common share purchase warrants are exercisable for one common share of HudBay upon payment of $3.15.

        On December 21, 2004 Hudbay Mining and Smelting Inc., 152640 Canada Inc. and pre-amalgamation HBMS amalgamated to form HBMS.

        As a result of the acquisition of HBMS and the other events discussed above, HudBay holds the principal subsidiaries and properties shown in the following chart. The chart shows the jurisdiction of incorporation of HudBay's principal subsidiaries and the percentage of voting securities HudBay beneficially owns or over which it has control or direction. For each of HudBay's principal properties, the chart also shows HudBay's beneficial interest in the project and the location of the project.

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33

EXCHANGE OFFER

Purpose of the Exchange Offer

        The original notes were not registered under the Securities Act of 1933 or the securities laws of any state of the United States. The original notes were offered and sold to qualified institutional buyers in reliance on Rule 144A and in offshore transactions meeting the requirements of Regulation S under the Securities Act of 1933 and were sold under private placement exemptions from the prospectus requirement laws of the provinces of Ontario and Quebec. The original notes are eligible for trading in The PORTAL Market, however they are not listed on any securities exchange.

        In connection with the issuance of the original notes, we and the Subsidiary Guarantors entered into a registration rights agreement, dated December 21, 2004, with the initial purchasers of the original notes. The following contains a summary of the provisions of the registration rights agreement. It does not restate the agreement in its entirety. We urge you to read the registration rights agreement, because it, and not this description, defines your rights as a holder of the Notes. A copy of the registration rights agreement may be obtained upon request and without charge from the Corporate Secretary of HudBay Minerals Inc., 2200 - 201 Portage Avenue, Winnipeg, Manitoba R3B 3L3, Canada, telephone (204) 949-4261. If we and the Subsidiary Guarantors effect the exchange offer, we and the Subsidiary Guarantor will be entitled to close the exchange offer 20 business days after the commencement thereof provided that we have accepted all of the original notes validly tendered in accordance with the terms of the exchange offer.

        The sole purpose of the exchange offer is to fulfill our obligations under the registration rights agreement. In order to give holders of the original notes who are able to make certain representations the opportunity to exchange the original notes for exchange notes, among other things, we and the Subsidiary Guarantors agreed to:

•

file a registration statement for this exchange offer with the SEC within 120 days after the issue date of the original notes;



•

use our respective reasonable best efforts to have the registration statement declared effective under the Securities Act of 1933 by the SEC within 240 days after the issue date of the original notes; and



•

keep the registration statement effective for not less than 30 days after the date notice of the exchange offer is mailed to the holders of original notes,

unless the exchange offer would not be permitted by any change in law or applicable interpretations thereof by the staff of the SEC.

        Each participating broker-dealer that receives exchange notes for its own account in exchange for original notes, where such original notes were acquired by such participating broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See "Plan of Distribution".

        Also pursuant to the registration rights agreement, we agreed to file with the SEC a shelf registration statement to cover resales of "Transfer Restricted Securities" (as defined in the registration rights agreement) by the holders thereof if:

34

•

we and the Subsidiary Guarantor are not permitted to effect the exchange offer or to consummate the exchange offer because of any change in law or applicable interpretations thereof by the staff of the SEC;



•

the exchange offer is not consummated within 60 days after the date that the registration statement is declared effective;



•

any initial purchaser of original notes so requests in writing prior to the 30th business day following the consummation of the exchange offer with respect to original notes not eligible to be exchanged for exchange notes in the exchange offer and held by it following the consummation of the exchange offer;



•

any holder of original notes (other than an exchanging dealer) is not eligible to participate in the exchange offer, or



•

in the case of any holder of original notes (other than an exchanging dealer) that participates in the exchange offer, such holder does not receive freely tradable exchange notes on the date of the exchange.

        If we are obligated to file a shelf registration statement, we and the Subsidiary Guarantor have agreed to file that shelf registration statement with the SEC as promptly as practicable (but in no event more than 30 days after such filing obligation arises) and use our reasonable best efforts to cause the shelf registration statement to be declared effective by the SEC. We and the Subsidiary Guarantor will use our best efforts to keep the shelf registration statement continuously effective for a period of two years from the issue date of the original notes (subject to certain extensions as provided in the registration rights agreement) or such shorter period that will terminate when all of the Transfer Restricted Securities covered by the shelf registration statement have been sold pursuant thereto or are no longer restricted securities (as defined in Rule 144 under the Securities Act of 1933, or any successor rule thereof).

Terms of the Exchange Offer; Period for Tendering Original Notes

        Promptly after the registration statement of which this prospectus constitutes a part has been declared effective under the Securities Act of 1933 and a notification of clearance has been issued for this prospectus by the Ontario Securities Commission, we will offer the exchange notes in exchange for surrender of the original notes. In substitution for each original note properly tendered to us pursuant to the exchange offer and not withdrawn by the holder thereof, the holder of such original note will receive an exchange note having a principal amount equal to the principal amount of such surrendered original note. The exchange notes will evidence the same debt as the original notes and will be issued under the indenture. An exchange note will bear interest from December 21, 2004. Holders of the original notes whose original notes are accepted for exchange pursuant to the exchange offer will be deemed to have waived the right to, and will not, receive any payment in respect of interest on such original notes for any period subsequent to December 21, 2004.

        Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal (which together constitute the exchange offer), we will accept for exchange original notes which are validly tendered on or prior to 5:00 p.m., New York City time, on the expiration date and not withdrawn as permitted below. As used herein, the term "expiration date" means            , 2005; provided however, that if we in our sole discretion extend the period of time for which the exchange offer is open, the term "expiration date" means the latest date to which the exchange offer is extended.

35

        As of the date of this prospectus, US$175,000,000 aggregate principal amount of original notes are outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about            , 2005, to all United States registered holders of original notes known to us. Our obligation to accept original notes for exchange pursuant to the exchange offer is subject to certain conditions set forth under "—Certain Conditions to the Exchange Offer" below.

        Original notes tendered in the exchange offer must be in denominations of principal amount of US$1,000 or any integral multiple thereof.

        We expressly reserve the right to extend or amend the exchange offer at any time or from time to time prior to the expiration date or to terminate the exchange offer and not to accept for exchange any original notes not theretofore accepted for exchange for any reason, including if any of the events set forth below under "—Certain Conditions to the Exchange Offer" shall have occurred and shall not have been waived by us. We will give oral or written notice of any extension, amendment, non-acceptance or termination to the exchange agent and to the holders of the original notes as promptly as practicable, such notice to such holders in the case of any extension to be issued by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During any extension of the exchange offer, all original notes previously tendered pursuant to the exchange offer will remain subject to the exchange offer and we may accept them for exchange.

Procedures for Tendering Original Notes

        Registered holders of original notes may tender their original notes in the exchange offer. The tender to us of the original notes as set forth below and the acceptance thereof by us will constitute a binding agreement between the tendering holder and us upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. Except as described below under "—Guaranteed Delivery Procedures", a holder who wishes to tender original notes for exchange pursuant to the exchange offer must:

•

deliver to the exchange agent at the address listed below under "—Exchange Agent" a properly completed and duly executed letter of transmittal, along with certificates for the original notes and all other documents required by the letter of transmittal; or



•

transmit to the exchange agent an agent's message, as described below, along with a timely confirmation of book-entry transfer (a "book entry confirmation") of the original notes into the exchange agent's account at The Depository Trust Company ("DTC") under the procedure for book-entry transfer described in this prospectus,

in all cases on or prior to the expiration date.

        Each participating broker-dealer that receives exchange notes for its own account in exchange for original notes, where such original notes were acquired by such participating broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See "Plan of Distribution".

THE METHOD OF DELIVERY OF ORIGINAL NOTES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR ELECTION AND RISK. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO US.

36

How to Tender if You Are a Beneficial Owner

        If holders' original notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and they wish to tender their original notes in the exchange offer, then holders should contact the registered holder promptly and instruct the registered holder to tender on their behalf. If holders wish to tender on their own behalf, they must, before completing and executing the letter of transmittal and delivering the original notes, either:

•

make appropriate arrangements to register ownership of the original notes in their names, or



•

obtain a properly completed bond power from the registered holder.

Procedures for Physical Tender

        To complete a physical tender, a holder must:

•

complete, sign and date the letter of transmittal or a facsimile of the letter of transmittal,



•

have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires,



•

mail or deliver or facsimile the letter of transmittal to the exchange agent on or prior to the expiration date, and



•

deliver the original notes to the exchange agent on or prior to the expiration date or comply with the guaranteed delivery procedures described below.

        To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at its address provided below under "—Exchange Agent" on or prior to the expiration date.

Signatures and Signature Guarantees

        Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed, unless the original notes surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the original notes who has not completed the box entitled "Special Delivery Instructions" on the letter of transmittal or (ii) for the account of an eligible institution (as described below). In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, such guarantees must be made by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States or which is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the United States Securities Exchange Act of 1934 (collectively, "eligible institutions").

When Endorsements or Bond Powers Are Needed

        If the letter of transmittal is signed by a person or persons other than the registered holder or holders of the original notes, such original notes must be endorsed or accompanied by a properly completed bond power, in either case signed exactly as the name or names of the registered holder or holders that appear on the original notes.

37

        If the letter of transmittal or any original notes or bond power are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by us, proper evidence satisfactory to us of their authority to so act must be submitted.

Tendering Through DTC's Automated Tender Offer Program

        The exchange agent has confirmed that any financial institution that is a participant in DTC's system may use DTC's automated tender offer program to tender. Accordingly, participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the original notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent.

        An agent's message is a message transmitted by DTC to and received by the exchange agent and forming part of the book-entry confirmation, stating that:

•

DTC has received an express acknowledgement from a participant in DTC's automated tender offer program that it is tendering original notes that are the subject of such book-entry confirmation,



•

the participant has received and agrees to be bound by the terms of the letter of transmittal or, in the case of an agent's message relating to guaranteed delivery, the participant has received and agrees to be bound by the applicable notice of guaranteed delivery, and



•

we may enforce the agreement against such participant.

        To complete a tender through DTC's automated tender offer program, the exchange agent must receive, on or prior to the expiration date, a timely confirmation of book-entry transfer of such original notes into the exchange agent's account at DTC according to the procedure for book-entry transfer described below or a properly transmitted agent's message.

Determinations Under the Exchange Offer

        All questions as to the validity, form, eligibility (including time of receipt) and acceptance of original notes tendered for exchange will be determined by us, in our sole discretion, which determination shall be final and binding. We reserve the absolute right to reject any and all tenders of any particular original notes not properly tendered or to not accept any particular original notes the acceptance of which might, in our judgment or that of our counsel, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular original notes either before or after the expiration date (including the right to waive the ineligibility of any holder who seeks to tender original notes in the exchange offer). Our interpretation of the terms and conditions of the exchange offer as to any particular original notes either before or after the expiration date (including the letter of transmittal and the instructions thereto) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of original notes for exchange must be cured within such period of time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of original notes for exchange, nor shall we nor any of them incur any liability for failure to give such notification. Tenders of original notes will not be deemed made until such defects or irregularities have been cured or waived.

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        Any original notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

When We Will Issue Exchange Notes

        In all cases, we will issue exchange notes for original notes that we have accepted for exchange in the exchange offer only after the exchange agent timely receives:

•

original notes or a book-entry confirmation of transfer of such original notes into the exchange agent's account at DTC, and



•

a properly completed and duly executed letter of transmittal (or a properly transmitted agent's message) and all other required documents.

Return of Original Notes Not Accepted or Exchanged

        If any tendered original notes are not accepted for any reason or if original notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged original notes will be returned without expense to the tendering holder thereof (or, in the case of original notes tendered by book-entry procedures described below, such non-exchanged original notes will be credited to an account maintained with DTC for the original notes) as promptly as practicable after the expiration or termination of the exchange offer.

Book-Entry Transfer

        The exchange agent will make a request to establish an account with respect to the original notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in DTC's system may make book-entry delivery of original notes by causing DTC to transfer such original notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Although delivery of original notes may be effected through book-entry transfer at DTC, the letter of transmittal, with any required signature guarantees and any other required documents, or an agent's message, must, in any case, be transmitted to and received by the exchange agent at the address set forth below under "—Exchange Agent" on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with.

Guaranteed Delivery Procedures

        If you wish to tender your original notes but they are not immediately available or if you cannot deliver your original notes, the letter of transmittal or other required documents to the exchange agent, or comply with the applicable procedures under DTC's automated tender offer program, prior to the expiration date, you may tender if: (i) the tender is made through an eligible institution, (ii) prior to the expiration date, the exchange agent received from such eligible institution either (a) a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by us, by facsimile transmission, mail or hand delivery or (b) a properly transmitted agent's message and notice of guaranteed delivery, in each case:

39

•

setting forth the name and address of the holder of original notes and the amount of original notes tendered,



•

stating that the tender is being made thereby, and



•

guaranteeing that, within three New York Stock Exchange, or NYSE, trading days after the expiration date, the letter of transmittal (or a facsimile thereof) or agent's message in lieu thereof, together with the original notes or a book-entry confirmation, as the case may be, and any other documents required by the letter of transmittal, will be deposited by the eligible institution with the exchange agent,

and (iii) the exchange agent receives such properly completed and executed letter of transmittal (or a facsimile thereof) or agent's message, as well as all tendered original notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal, within three NYSE trading days after the expiration date.

Terms and Conditions of the Letter of Transmittal

        The letter of transmittal contains, among other things, the following terms and conditions, which are part of the exchange offer.

        Without disposing of the debt evidenced by the original notes, the party tendering original notes for exchange pursuant to the exchange offer (the "transferor") will exchange, assign and transfer the original notes to us and irrevocably constitute and appoint the exchange agent as the transferor's agent and attorney-in-fact to cause the original notes to be assigned, transferred and exchanged. The transferor will represent and warrant that it has full power and authority to tender, exchange, assign and transfer the original notes and to acquire exchange notes issuable upon the exchange of such tendered original notes, and that, when the same are accepted for exchange, we will acquire good and unencumbered title to the tendered original notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The transferor will also warrant that it will, upon request, execute and deliver any additional documents deemed by the exchange agent or us to be necessary or desirable to complete the exchange, assignment and transfer of tendered original notes. The transferor will further agree that acceptance of any tendered original notes by us and the issuance of exchange notes in exchange therefor shall constitute performance in full by us of certain obligations under the registration rights agreement and that we shall have no further obligations or liabilities thereunder (except in certain limited circumstances). All authority conferred by the transferor will survive the death or incapacity of the transferor and every obligation of the transferor shall be binding upon the heirs, personal representatives, successors, assigns, executors and administrators of the transferor.

        By signing or agreeing to be bound by the letter of transmittal, each transferor will represent to us that, among other things,

•

any exchange notes received by such transferor are being acquired in the ordinary course of business of the person receiving such exchange notes, whether or not such person is the transferor;



•

such transferor will have no arrangements or understanding with any person to participate in the distribution of the exchange notes within the meaning of the Securities Act of 1933;



•

such transferor is not an "affiliate" as defined in Rule 405 under the Securities Act of 1933 of the Parent Guarantor or, if it is an affiliate, it will comply with the applicable registration and prospectus delivery requirements of the Securities Act of 1933, to the extent applicable;

40

•

if such transferor is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the exchange notes;



•

if such transferor is a broker-dealer, that will receive exchange notes for its own account in exchange for original notes that were acquired by it as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resale of such exchange notes, and



•

if such transferor is a Canadian resident, that it is eligible to acquire the exchange notes pursuant to an available exemption from the prospectus requirements of the securities legislation of that transferor's province of residence.

Withdrawal Rights

        Except as otherwise provided in this prospectus, tenders of original notes may be withdrawn at any or to 5:00 p.m., New York City time, on the expiration date.

        For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent at the address set forth below under "—Exchange Agent" or the withdrawing holder must comply with the appropriate procedures of DTC's automated tender offer program. Any such notice of withdrawal must:

•

specify the name of the person having tendered the original notes to be withdrawn,



•

identify the original notes to be withdrawn (including the principal amount of such original notes),



•

be signed by the person who tendered the original notes in the same manner as the original signature on the letter of transmittal used to deposit those original notes or be accompanied by documents of transfer sufficient to permit the trustee to register the transfer in the name of the person withdrawing the tender, and



•

specify the name in which such original notes are registered, if different from that of the withdrawing holder.

        If certificates for original notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn. If original notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn original notes and otherwise comply with the procedures of DTC.

        All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by us, in our sole discretion, which determination shall be final and binding on all parties. Any original notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer.

        Any original notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of original notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described above, such original notes will be credited to an account maintained with DTC for the original notes) as soon as practicable after withdrawal. Properly withdrawn original notes may be retendered by following one of the procedures described under "Procedures for Tendering Original Notes" above at any time prior to 5:00 p.m., New York City time, on the expiration date.

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Acceptance of Original Notes for Exchange; Delivery of Exchange Notes

        Upon the terms and subject to the conditions of the exchange offer, the acceptance for exchange of original notes validly tendered and not validly withdrawn and the issuance of the exchange notes will be made on or promptly after the expiration date. For the purposes of the exchange offer, we shall be deemed to have accepted for exchange validly tendered original notes when we have given oral or written notice thereof to the exchange agent, with written confirmation of any oral notice to be given promptly thereafter.

        The exchange agent will act as agent for the tendering holders of original notes for the purposes of receiving exchange notes from us and causing the original notes to be assigned, transferred and exchanged, without disposing of the debt evidenced by the original notes. Upon the terms and subject to the conditions of the exchange offer, delivery of exchange notes to be issued in exchange for accepted original notes will be made by the exchange agent promptly after acceptance of the tendered original notes.

Certain Conditions to the Exchange Offer

        Notwithstanding any other provision of the exchange offer, we shall not be required to accept for exchange, or to issue exchange notes in exchange for, any original notes and we may terminate or amend the exchange offer if at any time prior to 5:00 p.m., New York City time, on the expiration date, we determine that there has been any change in law or in applicable interpretations thereof by the staff of the SEC such that the exchange offer violates such law or interpretations.

        The foregoing conditions are for our sole benefit, and we may assert them in whole or in part at any time and from time to time in our sole discretion. Our failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time.

        In addition, we will not accept for exchange any original notes tendered, and no exchange notes will be issued in exchange for any such original notes, if at such time any stop order shall be threatened or is in effect with respect to (i) the registration statement of which this prospectus constitutes a part, (ii) this prospectus or (iii) the qualification of the indenture under the United States Trust Indenture Act of 1939.

        The exchange offer is not conditional upon any minimum principal amount of original notes being tendered or accepted for exchange.

Exchange Agent

        We have appointed The Bank of New York as the exchange agent for the exchange offer. If you are not tendering under DTC's automated tender offer program, you should send executed letters of transmittal and any other required documents to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows:

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By Mail, Hand Delivery or Overnight Courier:

The Bank of New York
Corporate Trust Operations—Reorganization Unit
101 Barclay Street—7 East
New York, N.Y. 10286
Attention: Ms. Giselle Guadalupe

By Facsimile Transmission: (212) 298-1915
Attention: Ms. Giselle Guadalupe

For Information or Confirmation by Telephone: (212) 815-6331

        DELIVERY OF THE ORIGINAL NOTES TO AN ADDRESS OTHER THAN THE EXCHANGE AGENT'S ADDRESS (IN THE CASE OF CERTIFICATED NOTES) OR THROUGH DTC'S ATOP (IN THE CASE OF BOOK-ENTRY TRANSFER) OR AS SET FORTH IN THE LETTER OF TRANSMITTAL OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.

Fees and Expenses

        We have not retained any dealer-manager or similar agent in connection with the exchange offer and will not make any payment to brokers, dealers, or others soliciting acceptances of the exchange offer. We will, however, pay certain other cash expenses to be incurred in connection with the exchange offer. These expenses include:

•

SEC registration fees for the exchange notes,



•

fees and expenses of the exchange agent,



•

accounting and certain legal fees,



•

printing costs, and



•

related fees and expenses.

Transfer Taxes

        Holders who tender their original notes for exchange pursuant to the exchange offer will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct us to register exchange notes in the name of, or request that original notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon.

Consequence of Failure to Exchange

        Original notes that are not tendered or that are tendered but not accepted by us for exchange pursuant to the exchange offer will continue to be subject to the provisions in the indenture regarding transfer and exchange of the original notes, and to the restrictions on transfer of such original notes as set forth in the legend thereon as a consequence of the issuance of the original notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act of 1933, and similar requirements of applicable securities laws of the states of the United States and other jurisdictions. In general, the original notes may not be offered or sold unless they are registered under the Securities Act of 1933 and applicable state securities laws or they are offered or sold pursuant to an exemption therefrom or in a transaction not subject thereto. Except in certain limited circumstances provided for in the registration rights agreement, we do not intend to register resales of the original notes under the Securities Act of 1933 or to register or qualify for distribution the original notes under the securities laws of any other jurisdiction. See "—Purpose of the Exchange Offer".

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        A holder's ability to sell untendered, or tendered but unaccepted, original notes could be adversely affected because investors prefer unrestricted securities over restricted securities. The tender of original notes in the exchange offer will reduce the aggregate principal amount of the original notes outstanding. Due to the corresponding reduction in liquidity, this may have an adverse effect upon, and increase the volatility of, the market price of any original notes that you continue to hold.

Consequences of Exchanging Original Notes

        Based on interpretations by the staff of the SEC, as set forth in no-action letters issued to third parties, we believe that exchange notes may be offered for resale, resold and otherwise transferred by a holder thereof without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided that:

•

the holder of the original note acquires the exchange note in the ordinary course of business;



•

the holder of the original note is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in a distribution of the exchange notes; and



•

the holder is not:



•

an "affiliate" of the Parent Guarantor within the meaning of Rule 405 under the Securities Act of 1933;



•

a broker-dealer which acquired the original notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act of 1933; or



•

a broker-dealer which acquired the original notes for its own account as a result of market-making or other trading activities and will be the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of the exchange notes.

We do not intend to request the SEC to consider, and the SEC has not considered, the exchange offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the exchange offer as in such other circumstances. If any holder does not meet the above conditions, such holder (i) may not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with any resale transaction. In addition, in order to comply with state securities laws, the exchange notes may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

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        This prospectus may be used for an offer to resell, resale or otherwise transfer exchange notes only as specifically described in this prospectus. Only those broker-dealers that acquired original notes as a result of market-making or other trading activities may participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account in exchange for original notes, where that broker-dealer acquired such original notes as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. Please read "Plan of Distribution" for more details regarding the transfer of exchange notes.

        The exchange notes have not been and will not be qualified for public distribution under the securities laws of any province or territory of Canada. The exchange notes are not being offered and may not be offered or sold, directly or indirectly, in Canada, or to any resident thereof, except in accordance with the securities laws of the provinces and territories of Canada.

Other

        Participation in the exchange offer is voluntary, and you should carefully consider whether to accept the exchange offer and tender your original notes. You are urged to consult your financial and tax advisors in making your own decisions on what action, if any, to take. In the future, we may seek to acquire untendered original notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plan to acquire any original notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered original notes, except as required by the registration rights agreement.

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DESCRIPTION OF NOTES

        You can find the definition of certain terms used in this description under the subheading "Certain Definitions".

        The original notes were, and the exchange notes will be, issued under an indenture (the "Indenture") dated as of December 21, 2004 among Hudbay Mining and Smelting Inc., 152640 Canada Inc., and pre-amalgamation Hudson Bay Mining and Smelting Co., Limited (which companies amalgamated to form HBMS), Hudson Bay Exploration and Development Company Limited, as Subsidiary Guarantor, and The Bank of New York, as trustee (the "Trustee"). On March 24, 2005 HudBay entered into a guarantee (the "Parent Guarantee") pursuant to which it agreed to fully and unconditionally guarantee the payments to be made by HBMS under the original notes and the exchange notes. On April 20, 2005, HBMS, the Subsidiary Guarantor and the Trustee entered into the first supplemental indenture pursuant to which HBMS affirmed that, effective upon the amalgamation referred to above, it had, by operation of Canadian law, assumed the obligations of pre-amalgamation HBMS under the Indenture, the Notes and the registration rights agreement and the Subsidiary Guarantees of pre-amalgamation HBMS and 152640 Canada Inc. were released. In this section, the original notes and the exchange notes are collectively referred to as the "Notes". The terms of the Notes include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939. HBMS is subject to the provisions of the Canada Business Corporations Act, or the CBCA, including those provisions governing trust indentures. However, HBMS has received an exemption from these provisions in respect of the Notes.

        The following description is a summary of the material provisions of the indenture, the Parent Guarantee, the registration rights agreement, the form of intercreditor agreement and the security documents. It does not restate those agreements in their entirety. We urge you to read the indenture, the Parent Guarantee, the registration rights agreement, the form of intercreditor agreement and the security documents because they, and not this description, define your rights as holders of the Notes. Copies of the indenture, the Parent Guarantee and the security documents have been filed as exhibits to the registration statement of which this prospectus forms a part. A copy of the registration rights agreement may be obtained on request without charge from the Corporate Secretary of HudBay Minerals Inc., 2200 - 201 Portage Avenue, Winnipeg, Manitoba R3B 3L3, Canada, telephone (204) 949-4261. Certain defined terms used in this description but not defined below under "—Certain Definitions" have the meanings assigned to them in the indenture. For purposes of this section, the term "HBMS" means Hudson Bay Mining and Smelting Co., Limited only, without reference to any of its Subsidiaries, and references to the Parent Guarantor or HudBay refer to HudBay Minerals Inc., without reference to its subsidiaries and joint ventures. References to "dollars," "Cdn$" and "$" are to Canadian dollars and references to "US$" are to United States dollars.

        The terms of the exchange notes are identical in all material respects to the original notes, except that the exchange notes will not (i) be subject to the same transfer restrictions as, or entitled to certain registration rights relating to, the original notes or (ii) entitled to additional interest in the event of certain registration defaults (as defined below). The registration rights agreement provides that if:

•

we and the Subsidiary Guarantor fail to file the exchange offer registration statement with the SEC on or prior to the 120th day after the issue of the original notes;



•

the exchange offer registration statements is not declared effective by the SEC on or prior to the 240th day after the issue date of the original notes;



•

the exchange offer is not consummated on or before the 60th business day after the exchange offer registration statement is declared effective,

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•

if obligated to file the shelf registration statement and we fail to file the shelf registration statement with the SEC on or prior to the 30th day after such filing obligation arises;



•

if obligated to file a shelf registration statement and the shelf registration statement is not declared effective on or prior to the 90th day after the obligation to file a shelf registration statement arises; or



•

if after either the exchange offer registration statement or the self registration statement is declared effective (A) such registration statement thereafter ceases to be effective; or (B) such registration statement or the related prospectus ceases to be usable (except in certain limited exceptions) in connection with resales of the Transfer Restricted Securities during the periods specified in the registration rights agreement because either (1) any event occurs as a result of which this prospectus would contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend the registration statement or supplement this prospectus, to comply with the Securities Act of 1933 or the Exchange Act of 1934 or the respective rules thereunder;

(each, a "registration default"), then we will pay additional interest ("Special Interest") to each holder of Transfer Restricted Securities, with respect to the first 90-day period (or portion thereof) while a registration default is continuing immediately following the occurrence of such registration default, in an amount equal to US$0.05 per week per US$1,000 of the principal amount of the Transfer Restricted Securities of such holder. The amount of Special Interest will increase by an additional US$0.05 per week per US$1,000 principal amount of the Transfer Restricted Securities of such holder for each subsequent 90-day period (or portion thereof) while a registration default is continuing until all registration defaults have been cured, up to a maximum amount of US$0.50 per week per US$1,000 principal amount of the Transfer Restricted Securities of such holder. Immediately following the cure of a particular registration default, the accrual of Special Interest with respect to such registration default will cease.

        The registered holder of a Note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture and the registration rights agreement.

Brief Description of the Notes, the Subsidiary Guarantees and the Parent Guarantee

The Notes

        The Notes:

•

are general obligations of HBMS;



•

rank equally in right of payment with all current and future senior Indebtedness of HBMS;



•

rank senior in right of payment to all Indebtedness of HBMS which by its terms is subordinated to the Notes;



•

are structurally subordinated to all the liabilities of any Unrestricted Subsidiaries of HBMS and other Subsidiaries that do not guarantee the Notes;

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•

are fully and unconditionally guaranteed by the Subsidiary Guarantor;



•

are fully and unconditionally guaranteed by the Parent Guarantor;



•

are secured by first priority Liens on the First Lien Collateral of HBMS, subject to Permitted Prior Liens;



•

are secured by second priority Liens on the Second Lien Collateral of HBMS, subject to Permitted Prior Liens;



•

rank effectively senior to all of HBMS's existing and future Indebtedness that is unsecured or secured by Liens that are junior to those securing the Notes, to the extent of the value of the First Lien Collateral and the Second Lien Collateral;



•

rank effectively junior to Indebtedness of HBMS under any Credit Facility that is secured by a first priority Lien on the Common Collateral or is secured by other collateral not constituting Note Collateral, to the extent of the value of such collateral; and



•

rank effectively junior to the obligations of HBMS to the Provinces of Manitoba and Saskatchewan under the Reclamation Security Agreements, to the extent of the value of the Reclamation Collateral.

The Subsidiary Guarantees

        The Notes will be guaranteed by HBMS's current Restricted Subsidiary and all of its future Restricted Subsidiaries that are Domestic Subsidiaries.

        Each Subsidiary Guarantee of the Notes will:

•

be a general obligation of the Subsidiary Guarantor;



•

rank equally in right of payment with any current and future senior Indebtedness of that Subsidiary Guarantor;



•

rank senior in right of payment to all Indebtedness of the Subsidiary Guarantor which by its terms is subordinated to the Subsidiary Guarantee;



•

be secured by first priority Liens in the First Lien Collateral of the Subsidiary Guarantor, subject to Permitted Prior Liens;



•

be secured by second priority Liens in the Second Lien Collateral of the Subsidiary Guarantor, subject to Permitted Prior Liens;



•

rank effectively senior to all of the Subsidiary Guarantor's existing and future Indebtedness that is unsecured or secured by Liens that are junior to those securing the Subsidiary Guarantee, to the extent of the value of the First Lien Collateral and the Credit Facility Collateral; and



•

rank effectively junior to Indebtedness of the Subsidiary Guarantor under any Credit Facility that is secured by a first priority Lien on the Common Collateral or is secured by other collateral not constituting Note Collateral, to the extent of the value of such collateral.

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        As of December 31, 2004, HBMS and its Restricted Subsidiaries had total Indebtedness of approximately $242.9 million, of which $15.1 million were obligations under capital leases, and approximately $22.8 million of outstanding letters of credit secured by cash collateral. The Indenture permits HBMS and the Subsidiary Guarantors to incur additional Indebtedness. In addition, at December 31, 2004, we estimated that total reclamation costs relating to the closure of all of our facilities in Manitoba and Saskatchewan will be approximately $51.6 million. However, the ultimate costs for these obligations are uncertain and may be significantly larger than such estimates. We have been informed by the Provinces of Saskatchewan and Manitoba that, in their view, our current estimate of reclamation costs may be too low and the current security established for the reclamation obligations may not be sufficient. In connection with their informing us of a potential deficiency in our estimate of our reclamation obligations, HBMS has provided additional security in the form of letters of credit, secured by cash collateral, in the total amount of $13 million. See "Risk Factors—Reclamation and mine closure costs could adversely affect our cash flow from operations".

        As of the date of this prospectus, one of HBMS's subsidiaries is an "Unrestricted Subsidiary". Under the circumstances described below under the subheading "—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries," HBMS will be permitted to designate certain of its other subsidiaries as "Unrestricted Subsidiaries." HBMS's Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the Indenture. HBMS's Unrestricted Subsidiaries will not guarantee the Notes, and if HBMS designates any Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the indenture, the Subsidiary Guarantee of such Subsidiary will be released. In the event of a bankruptcy, liquidation or reorganization of these entities, the holders of debt and trade creditors of these entities will be paid before such entities will be able to distribute any of their assets to us.

Parent Guarantee

        The Notes are fully and unconditionally guaranteed by the Parent Guarantor. The Parent Guarantee is:

•

a general obligation of the Parent Guarantor;



•

by its terms subordinated in right of payment to all Senior Indebtedness (as defined below) of the Parent Guarantor; and



•

not secured.

        As of December 31, 2004, the Parent Guarantor (exclusive of its subsidiaries) had no Senior Indebtedness.

        The Parent Guarantee is enforceable (in the same manner, including the same restrictions on enforcement, as provided in the Indenture with respect to the Subsidiary Guarantees) by the Trustee and the holders of Notes, their successors, and their transferees.

        The Parent Guarantee will terminate immediately without any further action on the part of the Parent Guarantor upon the earlier of the of (i) the payment in full of the guaranteed obligations and all other amounts, if any, payable under the Parent Guarantee, and (ii) the date on which the Parent Guarantor owns less than a majority of the Voting Stock of HBMS.

        "Senior Indebtedness" means, with respect to the Parent Guarantor, any Indebtedness of the Parent Guarantor, excluding: (a) any Indebtedness of the Parent Guarantor to any of its Subsidiaries; or (b) any trade payables.

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Principal, Maturity and Interest

        HBMS issued original notes in an aggregate principal amount of US$175.0 million on December 21, 2004. HBMS may issue up to US$50.0 million of additional Notes under the indenture from time to time ("Additional Notes"). Any offering of Additional Notes is subject to all of the covenants in the indenture, including the covenant described below under the caption "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock". The Notes and any Additional Notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Any Additional Notes subsequently issued under the indenture will be guaranteed by the Subsidiary Guarantors and the Parent Guarantor and will be secured by the Collateral on an equal and ratable basis. See "—Security".

        HBMS will issue up to US$175.0 million in aggregate principal amount of exchange notes to be exchanged for outstanding original notes tendered into this exchange offer. Notes will be issued in denominations of US$1,000 and integral multiples of US$1,000. The Notes will mature on January 15, 2012.

        Interest on the Notes will accrue at the rate of 9.625% per annum and will be payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2005. HBMS will make each interest payment to the holders of record on the immediately preceding January 1 and July 1. The Notes will bear interest on overdue principal and, to the extent permitted by law, overdue interest at the rate of 9.625% per annum.

        Interest payable on the exchange notes on the first interest payment date, July 15, 2005, will have accrued from December 21, 2004, the date the original notes were issued. Following that interest payment, interest on the Notes will accrue from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The yearly rate of interest that is equivalent to the rate payable under the Notes is the rate payable multiplied by the actual number of days in the year and divided by 360 and is disclosed herein solely for the purpose of providing the disclosure required by the Interest Act (Canada).

Methods of Receiving Payments on the Notes

        If a holder has given wire transfer instructions to HBMS, HBMS will pay all principal, interest and premium and Special Interest, if any, on that holder's Notes in accordance with those instructions. All other payments on Notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless HBMS elects to make interest payments by check mailed to the holders at their address set forth in the register of holders.

Paying Agent and Registrar for the Notes

        The trustee will initially act as paying agent and registrar. HBMS may change the paying agent or registrar without prior notice to the holders of the Notes, and HBMS or any of the Subsidiary Guarantors or the Parent Guarantor may act as paying agent or registrar.

Transfer and Exchange

        A holder may transfer or exchange Notes in accordance with the indenture. The registrar and the trustee may require a holder, among other things, to furnish appropriate endorsements and transfer or exchange documents in connection with a transfer or exchange of Notes. Holders will be required to pay all taxes due on transfer or exchange. HBMS is not required to transfer or exchange any Note selected for redemption. Also, HBMS is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

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Security

        The payment of the Notes and all other Note Obligations, when due, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise and whether by HBMS pursuant to the Notes or by any Subsidiary Guarantor pursuant to the Subsidiary Guarantees, and the performance of all other obligations of HBMS and the Subsidiary Guarantors under the Note Documents, will be secured by Liens upon the First Lien Collateral and the Second Lien Collateral (which we refer to collectively as the "Note Collateral") as provided in the security documents and will be secured by all security documents delivered as required or permitted by the indenture. The obligations of the Parent Guarantor under the Parent Guarantee are unsecured.

Collateral Agent

        The trustee has appointed BNY Trust Company of Canada to serve as Collateral Agent for the benefit of the trustee and the holders of the Notes from time to time, pursuant to a collateral trust agreement between HBMS, the trustee and the Collateral Agent. The security documents provide that the Collateral Agent shall only act at the request of and upon written instructions from the trustee.

Note Collateral

        The indenture and the security documents provide that the Notes and the Subsidiary Guarantees are secured by Liens (subject to Permitted Prior Liens) granted to the Collateral Agent for the benefit of the holders of the Note Obligations on the following property and assets of HBMS and the Subsidiary Guarantors, other than Excluded Assets (which include Reclamation Collateral):

        (1)   all real and immovable property (including leasehold interests and any other interest or right in any real and immovable property) of HBMS or a Subsidiary Guarantor in the Provinces of Manitoba and Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto ("First Lien Collateral"); and

        (2)   (i) all Inventory of HBMS and the Subsidiary Guarantors and (ii) all Receivables of HBMS and the Subsidiary Guarantors (the "Second Lien Collateral").

The First Lien Collateral will also include any Property that becomes part of the First Lien Collateral in circumstances described under the covenant "—Certain Covenants—Limitation on Collateral Asset Sales".

        The indenture and the security documents will provide that the Collateral Agent's Lien in any property and assets of HBMS and the Subsidiary Guarantors that constitute Second Lien Collateral to secure the Note Obligations will be second priority Liens, subject to the Liens of any Credit Facility Agent in the Credit Facility Collateral securing the Credit Facility Obligations (to the extent that Second Lien Collateral also constitutes Credit Facility Collateral) and Permitted Prior Liens. The Credit Facility Collateral will include the Second Lien Collateral and may also include additional collateral for the benefit of the Lenders under the applicable Credit Facility. Property that is both Second Lien Collateral and Credit Facility Collateral is referred to as "Common Collateral."

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        HBMS and the Subsidiary Guarantors have entered into security documents granting the Collateral Agent a security interest in the Note Collateral to secure the payment and performance when due of all of the Notes and other Note Obligations. The security documents provide that, subject to the covenants contained in the indenture, HBMS may issue Additional Notes under the indenture, which will rank equally with the Notes and will be equally and ratably secured by the Note Collateral. Such additional Notes will only be permitted to share in the Note Collateral if such Indebtedness is permitted to be incurred under the covenant described below under the caption "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock".

Enforcement of Security Interests

        The security documents provide that, in enforcing its Liens on the Note Collateral, the Collateral Agent will be subject to such instructions as may be given to it by the trustee.

Release of Security Interests

        The indenture and the security documents provide that the Collateral Agent's Lien on the Note Collateral will no longer secure the Notes or any Note Obligations, and the right of the holders of the Note Obligations to the benefits and proceeds of the Collateral Agent's Lien on the Note Collateral will terminate and be discharged and, at HBMS's written request, the Collateral Agent shall take such action HBMS may request to evidence such termination and discharge:

        (1)   upon payment in full and discharge of the Notes and all other Note Obligations that are outstanding, due and payable at the time the Notes are paid in full and discharged;

        (2)   upon satisfaction and discharge of the indenture as set forth under the caption "—Satisfaction and Discharge;" or

        (3)   upon a Legal Defeasance or Covenant Defeasance as set forth under the caption "—Legal Defeasance and Covenant Defeasance."

        In addition, the security documents provide that the Collateral Agent's Lien on the Property included in the Note Collateral will terminate and be discharged under any one or more of the following circumstances and, at HBMS's written request, the Collateral Agent shall take such action HBMS may request to evidence such termination and discharge:

        (1)   any First Lien Collateral that is sold, conveyed, leased or otherwise disposed of by HBMS or any Subsidiary Guarantor in accordance with or in a manner that does not violate the covenant described below under the caption "—Certain Covenants—Limitation on Collateral Asset Sales" will be released at the time of such sale lease, conveyance or other disposition;

        (2)   if any Subsidiary Guarantor is released from its Subsidiary Guarantee, the assets of that Guarantor will also be released concurrently with the release of the Subsidiary Guarantee;

        (3)   if any asset which is an Excluded Asset becomes subject to the Collateral Agent's Lien, that asset will be released;

        (4)   in respect of any joint venture interest of HBMS or a Subsidiary Guarantor, in which the terms of the joint venture arrangement contain customary terms that require that the respective parties' interests in the venture be pledged in favor of the other joint venture party or parties as security for the pledging party's obligations thereunder, such joint venture interest will be released if HBMS or Subsidiary Guarantor, as the case may be, defaults in its obligations under the venture and, as a result, forfeits all or a portion of its interest in the venture, to the extent of such forfeiture; or

52

        (5)   if any Property is released by the Credit Facility Agent from the Lien securing the Credit Facility Obligations, the Property so released, to the extent it constitutes Common Collateral, will also be released from the Collateral Agent's Lien; provided that the release by the Credit Facility Agent is not given in connection with the repayment in full of the Credit Facility Obligations.

        If HBMS at any time delivers to the Collateral Agent an officers' certificate stating that HBMS or any Subsidiary Guarantor intends to incur a Permitted Prior Lien (other than a Permitted Lien set forth in clause (1) of the definition of "Permitted Liens") upon certain property identified therein with reasonable specificity, then the Collateral Agent shall deliver to HBMS, upon the incurrence of such Lien, a lien subordination agreement in form and substance reasonably satisfactory to the Collateral Agent confirming that the Collateral Agent's Lien upon such property is subject and subordinate to such Lien.

        To the extent HBMS or any of its Restricted Subsidiaries intends to incur a Lien upon the Credit Facility Collateral to secure Indebtedness pursuant to an extension, refinancing, renewal, replacement, defeasance or other amendment of the existing Credit Facility or under a new or additional Credit Facility, and such Lien would not otherwise be addressed by the Intercreditor Agreement, the trustee and the Collateral Agent, on behalf of the trustee and the holders of the Notes, will enter into an amendment or replacement to the Intercreditor Agreement or a new intercreditor agreement, in each case, confirming the priority of such Lien and establishing that the rights and procedures with respect to the enforcement of such Lien and the Liens in favor of the holders of the Notes will be the same as contained the existing Intercreditor Agreement.

Further Assurances

        The security documents provide that HBMS and each Subsidiary Guarantor will do or cause to be done all acts and things which may be required, or which the trustee from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the trustee and holders of Note Obligations, duly created, enforceable and perfected Liens (subject to Permitted Prior Liens) upon the Note Collateral as contemplated by the Note Documents.

        If HBMS or any Subsidiary Guarantor shall at any time acquire any Property described in the definition of First Lien Collateral that is not subject to the Collateral Agent's Lien, then within 30 days of such acquisition HBMS or such Subsidiary Guarantor, as the case may be, and the trustee and the Collateral Agent will enter into such amendments or supplements to the security documents, or additional security documents, in each case in recordable or registerable form, as are necessary in order to grant to the Collateral Agent for the benefit of the trustee and the holders of the Notes a Lien upon such Property, subject to Permitted Prior Liens; and HBMS shall also deliver to the trustee evidence of payment of all filing fees, recording and registration charges, transfer taxes and other costs and expenses, including reasonable legal fees and disbursements of counsel for the trustee, that may be incurred to validly and effectively subject such Property to the Lien of any applicable security document and perfect such Lien.

Compliance with the Trust Indenture Act

        The Indenture provides that HBMS will comply with the applicable provisions of section 314 of the Trust Indenture Act.

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        To the extent applicable, HBMS will cause §313(b) of the Trust Indenture Act, relating to reports, and §314(d) of the Trust Indenture Act, relating to the release of property or securities or relating to the substitution therefore of any property or securities to be subjected to the Collateral Agent's Lien, to be complied with. Any certificate or opinion required by §314(d) may be made by an officer of HBMS or a Subsidiary Guarantor except in cases where §314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the trustee. Notwithstanding anything to the contrary in this paragraph, HBMS will not be required to comply with all or any portion of §314(d) if it determines, in good faith based on advice of counsel, that under the terms of §314(d) and/or any interpretation or guidance as to the meaning thereof of the Securities and Exchange Commission and its staff, including "no action" letters or exemptive orders, all or any portion of §314(d) is inapplicable to one or a series of released Note Collateral.

Intercreditor Agreement with Credit Facility Agent

        When HBMS, or its successor, enters into the new credit facility, the trustee and the Collateral Agent, on behalf of the trustee and the holders of the Notes, and the Credit Facility Agent, on behalf of the Lenders, will enter into an Intercreditor Agreement. The Intercreditor Agreement will set forth the terms on which the trustee and the Credit Facility Agent will confirm the relative priority of their respective Liens upon the Common Collateral and establish rights and procedures with respect to enforcement of such Liens and Liens on the First Lien Collateral for the benefit of the trustee and the holders of the Note Obligations. To the extent HBMS or any of its Restricted Subsidiaries intends to incur a Lien upon the Credit Facility Collateral to secure further Indebtedness pursuant to a new or additional Credit Facility, the trustee and the Collateral Agent, on behalf of the trustee and the holders of the Notes, and the Credit Facility Agent, on behalf of the Lenders under such new or additional Credit Facility, will enter into an amendment or replacement to the Intercreditor Agreement or a new Intercreditor Agreement, in each case, (x) confirming that the priority of such Lien upon the Credit Facility Collateral is senior to the Collateral Agents' Lien and (y) establishing that the rights and procedures with respect to the enforcement of such Lien and the Liens in favor of the holders of the Notes will be the same as contained in the existing Intercreditor Agreement.

Ranking of Liens

        The Intercreditor Agreement will provide that, notwithstanding:

        (1)   the priorities otherwise accorded to the Liens on the Common Collateral by any applicable laws;

        (2)   the respective date or dates upon which amounts may be or have been advanced or become owing or payable or secured under the Notes or the Credit Facility;

        (3)   the time or order of attachment or perfection of any Liens securing any Indebtedness under the Notes or the Credit Facility;

        (4)   the time or order of registration of any Lien upon the Common Collateral or the filing of financing statements or other instruments and documents with respect thereto;

        (5)   the giving of or the failure to give any notice to any of HBMS or any Subsidiary Guarantor or to any other person;

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        (6)   any provision contained in the Credit Facilities or the Note Documents or any other document other than the Intercreditor Agreement, or any amendment, extension, renewal or restatement thereof;

        (7)   the appointment of any liquidator, receiver, administrator or other similar officer in respect of HBMS or any Subsidiary Guarantor or over all or any part of its assets; or

        (8)   any fluctuation from time to time in the amounts under the Credit Facilities or the Note Documents owing and, in particular, but without limitation, any reduction to nil of such amounts or any other circumstances;

all Liens granted by HBMS or any Subsidiary Guarantor on the Common Collateral to secure the Credit Facility Obligations will be senior in all respects and prior to the Liens on the Common Collateral to secure the Note Obligations.

Administration and Enforcement of Liens

        As between the Collateral Agent and the Credit Facility Agent, and with respect to (i) the Collateral Agent, so long as any Note Obligation remains outstanding, and (ii) the Credit Facility Agent, so long as any Credit Facility Obligation remains outstanding, the Credit Facility Agent will have the sole and exclusive right to control, administer, account for and otherwise deal with the Credit Facility Collateral (whether or not it also constitutes Common Collateral), and to determine the manner of every sale or other disposition of the Credit Facility Collateral upon enforcement of the Credit Facility Agent's interest therein or the enforcement of any other right or remedy with respect thereto. The Credit Facility Agent may foreclose on the Credit Facility Collateral in any order in which it in its sole discretion deems appropriate.

        Until the discharge of the Credit Facility Obligations, the trustee will not, directly or indirectly,

        (1)   exercise any of its rights or remedies against the Credit Facility Collateral upon a Default or Event of Default;

        (2)   seek to foreclose or realize upon (judicially or non-judicially) its Lien on the Second Lien Collateral or assert any claims or interest therein (including, without limitation, by setoff or notification of account debtors);

        (3)   request judicial relief, in a bankruptcy, insolvency or liquidation proceeding, that would hinder, delay, limit or prohibit the lawful exercise or enforcement of any right or remedy otherwise available to the Credit Facility Agent in respect of any Credit Facility Liens or that would limit, invalidate, avoid or set aside any Credit Facility Liens;

        (4)   contest the validity, enforcement, perfection or priority of the Liens granted by HBMS or any Subsidiary Guarantor on the Credit Facility Collateral to secure the Credit Facility Obligations.

        Notwithstanding the above, in the event that the Credit Facility Agent demands repayment of the Credit Facility Obligations before the stated maturity of the Credit Facility Obligations, the trustee or the holders of the Notes will be entitled to accelerate the Note Obligations, but the trustee will not in any event, notwithstanding such acceleration, be entitled to, and it shall not, exercise any remedies (including enforcement) against the Second Lien Collateral under any of the Note Documents until the discharge of the Credit Facility Obligations.

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        The trustee will not exercise any right it may have to enforce against the First Lien Collateral until the earlier to occur of (i) the expiry of 10 days from the date the Credit Facility Agent is given written notice by the trustee of any Default or Event of Default if the Credit Facility Agent has not filed notice of a Standstill Period pursuant to the Intercreditor Agreement during such 10 day period; (ii) the expiry of the Standstill Period; (iii) the seeking of an order by or against HBMS or a Subsidiary Guarantor in a bankruptcy or insolvency proceeding, the appointment of a receiver, trustee, custodian, monitor or similar official or the making of a general assignment for the benefit of its creditors; and (iv) the discharge of the Credit Facility Obligations.

        Notwithstanding the foregoing, both before and during a bankruptcy, insolvency or liquidation proceeding, the holders of Notes and the trustee may take any actions and exercise any and all rights that would be available to a holder of unsecured claims, including, without limitation, the commencement of a bankruptcy, insolvency or liquidation proceeding against HBMS or a Subsidiary Guarantor in accordance with applicable law, and if any bankruptcy, insolvency or liquidation proceeding shall be commenced against HBMS or any Subsidiary Guarantor, the Collateral Agent shall be entitled to file proofs of claim and commence other proceedings in order to evidence and protect its interest in the Note Collateral.

Order of Application

        The Intercreditor Agreement will provide that the proceeds of any transfer, sale, disposition or conversion upon the Common Collateral in connection with any foreclosure, collection or other enforcement of security interests with respect thereto in connection with an event of default, the proceeds received from such foreclosure, collection or other enforcement will be applied in the following order:

        First, to the Credit Facility Agent, Collateral Agent and trustee for payment of their respective fees and expenses incurred in connection with any enforcement relating to the Common Collateral under the applicable security documents;

        Second, to the Credit Facility Agent for payment of Credit Facility Obligations until the Credit Facility Obligations have been paid for in full in cash, in such order as may be provided in the Credit Facility;

        Third, to the Collateral Agent for payment of all Note Obligations until such Note Obligations have been paid in full in cash, in such order as may be provided in the Indenture; and

        Fourth, to HBMS or the applicable Subsidiary Guarantor, as the case may be, its successors or assigns, or as required by applicable law.

Notices

        The Intercreditor Agreement will provide that each of the Credit Facility Agent and the trustee shall deliver to the other respective agent written notification of (i) any notice of any default or event of default pursuant to the Credit Facility or the Note Documents, as applicable, or event which with the giving of notice or the lapse of time or both would constitute a default or event of default pursuant thereto; (ii) any notice of an acceleration of the Credit Facility Obligations or Note Obligations; (iii) any demand for payment made upon HBMS or any Subsidiary Guarantor pursuant to the Credit Facility (or related documents) or the Note Documents; (iv) any notice of its intention to realize on the Credit Facility Collateral or Note Collateral, as applicable; and (v) in the case of the Credit Facility Agent only, the commencement of a Standstill Period. The failure by the Credit Facility Agent or trustee to give any such notice will not affect the priorities established in the Intercreditor Agreement and will not impair or release the subordination and other benefits provided by the Intercreditor Agreement or delay or invalidate such enforcement by the Credit Facility Agent or the trustee (to the extent such enforcement by the Credit Facility Agent or the trustee otherwise complies with the terms of the Intercreditor Agreement).

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Amendment; Waiver

        The security documents provide that any waiver or consent granted by the Credit Facility Agent or amendment made by it under the Credit Facilities will be deemed to have been given or made by the trustee or the Collateral Agent under the security documents, insofar as they apply to the Common Collateral, without the consent of or notice to any holder of the Notes and without any action by HBMS or any Subsidiary Guarantor or any holder of the Notes.

Relative Rights

        The provisions described above under the caption "—Intercreditor Agreement with Credit Facility Agent" set forth certain relative rights, as lien holders, of the trustee, the Collateral Agent and the Credit Facility Agent. Notwithstanding such provisions, nothing in the Intercreditor Agreement or the other Note Documents will:

        (1)   impair, as between HBMS and the holders of the Notes, the obligation of HBMS to pay principal of, premium and interest and Special Interest, if any, on the Notes in accordance with their terms or any other obligation of HBMS or any Subsidiary Guarantor;

        (2)   affect the relative rights of holders of Notes as against any other creditors of HBMS or any Subsidiary Guarantor (other than holders of Credit Facility Liens or Permitted Prior Liens);

        (3)   restrict the right of any holder of Notes to sue for payments that are then due and owing (but not enforce any judgment in respect thereof against any Note Collateral to the extent specifically prohibited by the provisions described above under the caption "—Intercreditor Agreement—Administration and Enforcement of Liens");

        (4)   restrict or prevent any holder of Notes or the Collateral Agent from exercising any of its rights or remedies upon a Default or Event of Default not specifically restricted or prohibited by the provisions described above under the caption "—Intercreditor Agreement—Administration and Enforcement of Liens"; or

        (5)   restrict or prevent any holder of Notes or the Collateral Agent from taking any lawful action in an insolvency or liquidation proceeding not specifically restricted or prohibited by the provisions described above under the caption "—Intercreditor Agreement—Administration and Enforcement of Liens".

Subsidiary Guarantees

        The Notes will be fully and unconditionally guaranteed by HBMS's current Restricted Subsidiary and HBMS's future Restricted Subsidiaries that are Domestic Subsidiaries. These Subsidiary Guarantees will be joint and several obligations of the Subsidiary Guarantors. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors—Federal, state and provincial fraudulent conveyance, fraudulent preference, bankruptcy and insolvency laws may permit a court to void guarantees given by our subsidiaries, and, if that occurs, you may not receive any payments on those subsidiary guarantees." Your rights under the Notes or the Subsidiary Guarantees could be limited or voided if a court determines that their issuance has resulted in the occurrence of a fraudulent conveyance.

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        A Subsidiary Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate or amalgamate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person), another Person, other than HBMS or another Subsidiary Guarantor, unless:

        (1)   immediately after giving effect to that transaction, no Default or Event of Default exists; and

        (2)   either:

        (a)   the Subsidiary Guarantor is the surviving person, or the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation, amalgamation or merger assumes all the obligations of that Subsidiary Guarantor under the indenture, its Subsidiary Guarantee and the registration rights agreement pursuant to a supplemental indenture and appropriate security documents satisfactory to the trustee and completes all other required documentation; or

        (b)   the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the indenture.

The Subsidiary Guarantee of a Subsidiary Guarantor will be released:

        (1)   in connection with any sale or other disposition of all or substantially all of the assets of that Subsidiary Guarantor (including by way of consolidation, amalgamation or merger) to a Person that is not (either before or after giving effect to such transaction) a Subsidiary Guarantor, if the sale or other disposition complies with the "Asset Sale" and/or "Collateral Asset Sale" provisions of the indenture;

        (2)   in connection with any sale of all of the Capital Stock of that Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) a Subsidiary Guarantor, if the sale complies with the "Asset Sale" and/or "Collateral Asset Sale" provisions of the indenture;

        (3)   if HBMS designates any Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture; or

        (4)   upon Legal Defeasance or satisfaction and discharge of the indenture as provided below under the captions "—Legal Defeasance and Covenant Defeasance" and "—Satisfaction and Discharge".

Additional Amounts

        All payments made by HBMS under or with respect to the Notes, by any Subsidiary Guarantor pursuant to the Subsidiary Guarantees or by the Parent Guarantor pursuant to the Parent Guarantee, will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the Government of Canada or of any province or territory thereof or by any authority or agency therein or thereof having power to tax (hereinafter, the "Taxes"), unless HBMS, such Subsidiary Guarantor or Parent Guarantor, as the case may be, is required to withhold or deduct Taxes by law or by the interpretation or administration thereof. If HBMS, any Subsidiary Guarantor or the Parent Guarantor is required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Notes, HBMS, such Subsidiary Guarantor or the Parent Guarantor will pay, or cause to be paid, such additional amounts (the "Additional Amounts") as may be necessary so that the net amount received by each holder of Notes (in respect of the beneficial holder thereof) (including Additional Amounts) after such withholding or deduction will not be less than the amount such holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts will be payable with respect to a payment made to a holder in respect of the beneficial holder thereof (an "Excluded Holder") (i) with which HBMS, such Subsidiary Guarantor or the Parent Guarantor does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment, or (ii) which is subject to such Taxes by reason of its being connected with Canada or any province or territory thereof otherwise than solely by reason of the holder's activity in connection with purchasing or disposing of the Notes, by the mere holding of Notes or by reason of the receipt of payments thereunder. HBMS, such Subsidiary Guarantor or the Parent Guarantor will also (a) make such withholding or deduction and (b) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law.

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        HBMS, the Subsidiary Guarantor or the Parent Guarantor, as applicable, will furnish the holders of the Notes, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by HBMS, such Subsidiary Guarantor or the Parent Guarantor. HBMS, any Subsidiary Guarantor or the Parent Guarantor will, upon written request of a holder (other than an Excluded Holder), indemnify each such holder for the amount of (x) any Taxes so levied or imposed and paid by such holder as a result of payments made under or with respect to the Notes, and (y) any Taxes so levied or imposed with respect to any reimbursement under the foregoing clause (x) but excluding any such Taxes on such holder's net income so that the net amount received by such holder (net of payments made under or with respect to the Notes) after such reimbursement will not be less than the net amount the holder would have received if Taxes on such reimbursement had not been imposed.

        At least 30 days prior to each date on which any payment under or with respect to the Notes is due and payable, if HBMS, any Subsidiary Guarantor or the Parent Guarantor, as applicable, will be obligated to pay Additional Amounts with respect to such payment, HBMS or such Subsidiary Guarantor will deliver to the trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the trustee to pay such Additional Amounts to holders on the payment date. Whenever in the indenture or in this "Description of Notes" there is mentioned, in any context, the payment of principal, premium, if any, Redemption Price, Change of Control Payment, Asset Sale Payment, interest or any other amount payable under or with respect to any Note, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

Optional Redemption

        At any time prior to January 15, 2008, HBMS may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the indenture at a redemption price of 109.625% of the principal amount, plus accrued and unpaid interest and Special Interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds of one or more Public Equity Offerings; provided that:

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        (1)   at least 65% of the aggregate principal amount of Notes issued under the indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by HBMS and its Affiliates); and

        (2)   the redemption occurs within 60 days of the date of the closing of the relevant sale of Common Stock.

        Except pursuant to the preceding paragraph and as described below under "—Redemption for Changes in Canadian Withholding Taxes", the Notes will not be redeemable at the option of HBMS before January 15, 2009.

        After January 15, 2009, HBMS may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Special Interest, if any, on the Notes redeemed, to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on January 15 of the years indicated below:

Year	Percentage
2009	104.813%
2010	102.406%
2011 and thereafter	100.000%

Redemption for Changes in Canadian Withholding Taxes

        HBMS may redeem all, but not less than all, of the Notes at any time at 100% of the aggregate principal amount of the Notes, together with accrued and unpaid interest and Special Interest, if any, to the applicable redemption date, if HBMS has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any Additional Amounts as a result of a change in the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any change in any official position regarding the application or interpretation of such laws or regulations, which change is announced or becomes effective on or after December 10, 2004.

No Mandatory Redemption

        HBMS is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

Selection and Notice

        If less than all of the Notes are to be redeemed at any time, the trustee will select Notes for redemption as follows:

        (1)   if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or

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        (2)   if the Notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate.

        No Notes of US$1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional.

        If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of that Note that is to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the holder of Notes upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption.

Repurchase at the Option of Holders

Change of Control

        If a Change of Control occurs, HBMS is required to make an offer to each holder of Notes to purchase all or any part (equal to US$1,000 or an integral multiple of US$1,000) of that holder's Notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of Control Offer, HBMS will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Special Interest, if any, on the Notes repurchased, to the date of purchase. Within 30 days following any Change of Control, HBMS will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date the notice is mailed, pursuant to the procedures required by the indenture and described in the notice. HBMS will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture, HBMS will comply with the applicable securities laws and regulations and will be deemed not to have breached its obligations under the Change of Control provisions of the indenture by virtue of such conflict.

        On the Change of Control Payment Date, HBMS will, to the extent lawful:

        (1)   accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

        (2)   deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

        (3)   deliver or cause to be delivered to the trustee the Notes properly accepted together with an officers' certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by HBMS.

        The paying agent will promptly mail to each holder of Notes properly tendered the Change of Control Payment for such Notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of US$1,000 or an integral multiple of US$1,000.

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        HBMS will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

        The provisions described above that require HBMS to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the indenture are applicable. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the holders of the Notes to require that HBMS repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

        HBMS will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by HBMS and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.

        The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of HBMS and its Restricted Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require HBMS to repurchase its Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of HBMS and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain.

Asset Sales

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale in any single transaction or series of related transactions unless:

        (1)   HBMS (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of;

        (2)   at least 75% of the consideration received in the Asset Sale by HBMS or such Restricted Subsidiary is in the form of cash or Cash Equivalents, property or assets for use in a Permitted Business or Capital Stock of a Person who, as a consequence of such Investment, becomes a Restricted Subsidiary. For purposes of this provision, each of the following will be deemed to be cash:

        (a)   any liabilities, as shown on HBMS's or such Restricted Subsidiary's most recent balance sheet, of HBMS or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases HBMS or such Restricted Subsidiary from further liability; and

        (b)   any securities, Notes or other obligations received by HBMS or any such Restricted Subsidiary from such transferee that are converted by HBMS or such Restricted Subsidiary into cash or Cash Equivalents within 90 days of the receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion.

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        Within 365 days after the receipt of any Net Proceeds from an Asset Sale, HBMS or such Restricted Subsidiary may apply those Net Proceeds at its option:

        (1)   to repay term or revolving credit Indebtedness under a Credit Facility (other than any such Indebtedness that is subordinate in right of payment to the Notes) and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;

        (2)   to permanently repay Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor;

        (3)   to redeem the Notes in accordance with the provisions described under "—Optional Redemption;"

        (4)   to acquire all or substantially all of the assets of, or a majority of the Voting Stock of a Person engaged in, a Permitted Business;

        (5)   to make a capital expenditure; or

        (6)   to acquire other long-term assets that are used or useful in a Permitted Business.

Pending the final application of any Net Proceeds, HBMS or such Restricted Subsidiary may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture.

        Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $5.0 million, HBMS is required to make an Asset Sale Offer to all holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the indenture with respect to offers to purchase or redeem such indebtedness with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. In the Asset Sale Offer HBMS will offer an Asset Sale Payment in cash equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase. If any Excess Proceeds remain after consummation of an Asset Sale Offer, HBMS or such Restricted Subsidiary may use those Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee will select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

        Notwithstanding the foregoing paragraph, with respect to the proceeds of an Asset Sale arising from the issuance of Equity Interests of any of HBMS's Restricted Subsidiaries ("Issuance Proceeds"):

        (1)   prior to the day following the fifth anniversary of the original issuance of the Notes, HBMS shall not be required to use Issuance Proceeds to make an offer to purchase Notes in an amount in excess of 25% of the original aggregate principal amount of the Notes less the aggregate principal amount of Notes previously purchased pursuant to a purchase offer using Issuance Proceeds. To the extent the aggregate principal amount of Notes tendered exceeds the permitted amount of the offer, the tendered Notes shall be selected for repurchase on a pro rata basis; and

        (2)   promptly after the fifth anniversary of the original issuance of the Notes, HBMS shall be required to make an offer to purchase the Notes in accordance with the requirements set forth in the immediately preceding paragraph, in an aggregate amount equal to the aggregate amount of Issuance Proceeds in excess of 25% of the principal amount of the Notes that was not applied to an Asset Sale Offer pursuant to the provisions of this paragraph.

        HBMS will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture, HBMS will comply with the applicable securities laws and regulations and will be deemed not to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such conflict.

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Certain Covenants

Restricted Payments

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

        (1)   declare or pay any dividend or make any other payment or distribution on account of HBMS's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving HBMS or any of its Restricted Subsidiaries) or to the direct or indirect holders of HBMS's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or other payments or distributions payable in Equity Interests (other than Disqualified Stock) of HBMS or to HBMS or a Restricted Subsidiary of HBMS);

        (2)   purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving HBMS) any Equity Interests of HBMS or any direct or indirect parent of HBMS;

        (3)   make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the Notes or the Subsidiary Guarantees (other than any Subordinated Indebtedness held by HBMS or any Subsidiary Guarantor), except payments of interest or principal at the Stated Maturity thereof; or

        (4)   make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

        (1)   no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; and

        (2)   HBMS would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock;" and

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        (3)   such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by HBMS and its Restricted Subsidiaries after the date of the indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (6), (7), (9), (11), (12), (13), (14) and (15) of the next succeeding paragraph), is less than the sum, without duplication, of:

        (a)   50% of the Consolidated Net Income of HBMS for the period (taken as one accounting period) from January 1, 2007 to the end of HBMS's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

        (b)   100% of the aggregate net cash proceeds received by HBMS after the date of the indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of HBMS (other than Disqualified Stock or Flow-through Stock), including the net cash proceeds received from the sale of marketable securities or other property received by HBMS in exchange for such Equity Interests, or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of HBMS that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of HBMS), plus

        (c)   to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) 100% of the aggregate amount received in cash and the Fair Market Value of property other than cash received (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus

        (d)   to the extent that any Unrestricted Subsidiary of HBMS is redesignated as a Restricted Subsidiary after the date of the indenture, the lesser of (i) the fair market value of HBMS's or any Restricted Subsidiary's Investment in such Subsidiary as of the date of such redesignation and (ii) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary, plus

        (e)   the lesser of (i) the Fair Market Value of or (ii) the amount of Restricted Investments made subsequent to the Date of the Indenture by HBMS or any Restricted Subsidiary in a Person (other than an Unrestricted Subsidiary) at the time such Person becomes a Restricted Subsidiary as a result of or in connection with an additional Investment by HBMS or a Restricted Subsidiary, plus

        (f)    $5.0 million.

        The preceding provisions will not prohibit:

        (1)   the payment of any dividend or distribution on, or redemption of, Equity Interests, within 60 days after the date of declaration of such dividend or distribution or the giving of an irrevocable and unconditional notice of such redemption, if at the date of declaration the dividend payment would have complied with the provisions of the indenture;

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        (2)   the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees or of any Equity Interests of HBMS in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of HBMS) of, Equity Interests of HBMS (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (3) (b) of the preceding paragraph;

        (3)   the defeasance, redemption, repurchase or other acquisition of Indebtedness that is subordinated to the Notes or the Guarantees in exchange for, or with the net cash proceeds from, an incurrence of Permitted Refinancing Indebtedness;

        (4)   the payment of any dividend by a Restricted Subsidiary of HBMS that is not a Wholly Owned Restricted Subsidiary to the holders of its Equity Interests on a pro rata basis;

        (5)   so long as no default or Event of Default shall have occurred and be continuing, at the time of or immediately after giving effect to such payment, the repurchase, redemption, repayment, retirement, defeasance or other acquisition for value by HBMS or any of its Restricted Subsidiaries of any Equity Interests (other than Disqualified Stock) of HBMS or any Parent, in each case, held by officers, directors or employees of HBMS or its Restricted Subsidiaries (or permitted transferees of such Persons or the estates of such Persons or any permitted transferees or beneficiaries under their estates) pursuant to the terms of an employee benefit plan or any other agreement pursuant to which such Equity Interests were issued; provided that the aggregate cash consideration paid or distributions or payments made pursuant to this clause (5) in any calendar year shall not exceed $2.0 million;

        (6)   repurchases of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price thereof;

        (7)   payments or distributions required by a final determination of a court of competent jurisdiction to satisfy dissenters' rights, pursuant to or in connection with a consolidation, merger or transfer of assets of HBMS that complies with the provisions of "—Merger, Consolidation or Sale of Assets" below;

        (8)   the payment of cash in lieu of the issuance of fractional shares of Capital Stock upon exercise or conversion of securities exercisable or convertible into Capital Stock of HBMS;

        (9)   repurchases, redemptions, acquisitions, cancellations and other retirements for a nominal value per right of any rights granted pursuant to any shareholders' rights plan (i.e., a "poison pill");

        (10) the distribution, as a dividend or otherwise, of Equity Interests of, or Indebtedness owed to HBMS or a Restricted Subsidiary by, any Unrestricted Subsidiary that has been designated as an Unrestricted Subsidiary after the Issue Date;

        (11) Permitted Payments to Parent;

        (12) any payments made in connection with the consummation of the Transactions (as defined in this prospectus);

        (13) any payments made to employees in connection with HBMS's profit sharing plan;

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        (14) so long as no default or Event of Default shall have occurred and be continuing, any Structured Arrangement;

        (15) loans or advances to executive officers, directors or employees of HBMS or any Restricted Subsidiary in the ordinary course of business and consistent with the past practice of HBMS or any Restricted Subsidiary, as the case may be, not to exceed $1 million in the aggregate principal amount outstanding at any one time; or

        (16) so long as no default or Event of Default shall have occurred and be continuing, Restricted Payments not to exceed $2 million in the aggregate after the date of the indenture.

        The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by HBMS or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.

Incurrence of Indebtedness and Issuance of Preferred Stock

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Indebtedness), and HBMS will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that HBMS or any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness), HBMS may issue Disqualified Stock and any Restricted Subsidiary may issue preferred stock, if the Fixed Charge Coverage Ratio for HBMS's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such four-quarter period;

        The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Indebtedness"):

        (1)   the incurrence by HBMS or any of its Restricted Subsidiaries of Indebtedness and letters of credit under Credit Facilities, in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of HBMS and the Restricted Subsidiaries thereunder) not to exceed the greater of:

        (a)   $70 million less the aggregate amount of all Net Proceeds of Asset Sales applied by HBMS or any of its Restricted Subsidiaries since the date of the indenture to repay term Indebtedness under a Credit Facility or to repay revolving credit Indebtedness and effect a corresponding commitment reduction under a Credit Facility, in each case, pursuant to the covenant described above under the caption "—Repurchase at the Option of Holders—Asset Sales"; or

        (b)   the amount of the Borrowing Base as of the date of such incurrence;

        (2)   the incurrence by HBMS and its Restricted Subsidiaries of Existing Indebtedness;

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        (3)   the incurrence by HBMS and the Subsidiary Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees issued on the date of the Indenture and the Exchange Notes and the related Subsidiary Guarantees offered hereby or otherwise issued pursuant to the registration rights agreement;

        (4)   the incurrence by HBMS or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of HBMS or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4) or Existing Indebtedness consisting of Capital Lease Obligations, mortgage financings or purchase money obligations, not to exceed, at any time outstanding, the greater of (x) $45 million and (y) 5% of Total Assets;

        (5)   the incurrence by HBMS or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clause (2), (3), (4) or (16) of this paragraph;

        (6)   the incurrence by HBMS or a Restricted Subsidiary of Indebtedness to any Restricted Subsidiary of HBMS or the incurrence by any Restricted Subsidiary of HBMS of Indebtedness to HBMS or any Restricted Subsidiary of HBMS; provided, however, that:

        (a)   such Indebtedness owing by HBMS or any Restricted Subsidiary to a Restricted Subsidiary that is not HBMS or a Subsidiary Guarantor must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of HBMS, or the Subsidiary Guarantee of the Notes, in the case of a Subsidiary Guarantor; and

        (b)   (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than HBMS or a Restricted Subsidiary of HBMS, or (ii) any sale or other transfer of any such Indebtedness to a Person that is not either HBMS or a Restricted Subsidiary of HBMS, will be deemed, in each case, to constitute an incurrence of such Indebtedness by HBMS or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

        (7)   the incurrence by HBMS or any of its Restricted Subsidiaries of Hedging Obligations;

        (8)   the guarantee by HBMS or any Subsidiary Guarantor of Indebtedness of HBMS or any Restricted Subsidiary of HBMS that was permitted to be incurred by another provision of this covenant;

        (9)   the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock or preferred stock in the form of additional shares of the same class of Disqualified Stock or preferred stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred stock for purposes of this covenant; provided, in each such case, that the amount thereof is included in the Fixed Charges of HBMS as accrued;

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        (10) the incurrence by HBMS or any of its Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation obligations and other statutory or regulatory requirements; trade contracts, letters of credit, banker's acceptances, surety or appeal bonds, performance or return-of-money bonds or other obligations of a like nature (including without limitation, performance guarantees under concentrate or metal supply agreements) entered into in the ordinary course of business or pursuant to self-insurance obligations and not in connection with the borrowing of money; and the obtaining of advances or credit or the payment of the deferred purchase price of property;

        (11) the incurrence by HBMS or any Restricted Subsidiary of Indebtedness consisting of customary indemnities or obligations in respect of purchase price adjustments, earn outs or similar obligations, in each case, incurred in connection with the acquisition or disposition of any property or assets, including, without limitation, Equity Interests;

        (12) the issuance of preferred stock of a Restricted Subsidiary of HBMS issued to HBMS or another Restricted Subsidiary of HBMS; provided that any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than HBMS or a Restricted Subsidiary of HBMS and any sale or other transfer of any such preferred stock to a Person that is not either HBMS or a Restricted Subsidiary of HBMS will be deemed to constitute an issuance of such preferred stock that was not permitted by this clause (12);

        (13) the incurrence by HBMS or any Restricted Subsidiary of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds;

        (14) the issuance of Indebtedness or preferred stock in connection with a Structured Arrangement;

        (15) the incurrence of Indebtedness by HBMS or any Subsidiary Guarantor that is unsecured, bears no interest and has a stated maturity date not earlier than 91 days after the stated maturity of the Notes; and

        (16) the issuance or incurrence, as the case may be, by HBMS or any Restricted Subsidiary of HBMS of additional preferred stock or Indebtedness in an aggregate principal amount (or accreted value or liquidation preference, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (16), not to exceed $10 million.

        HBMS will not incur, and will not permit any Restricted Subsidiary to incur, any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in right of payment to any other Indebtedness of HBMS or such Restricted Subsidiary unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Subsidiary Guarantee on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of HBMS or any Restricted Subsidiary solely by virtue of being unsecured or by virtue of being secured on a junior lien basis.

        For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (16) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, HBMS will be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under the indenture will be deemed to have been incurred pursuant to the category of Permitted Indebtedness described in clause (1) above.

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Liens

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or Attributable Debt (i) on any item of Note Collateral other than Permitted Liens and (ii) on any other property of HBMS or of any of its Restricted Subsidiaries, whether owned on the date hereof or acquired after the date hereof, or on any income or profits therefrom, or assign or otherwise convey any right to receive income or profits thereon, without at the same time causing the Notes to be secured equally and ratably with, or prior to, any Indebtedness or Attributable Debt secured by such Liens, other than Permitted Liens.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

          (i)  pay dividends or make any other distributions on its Capital Stock to HBMS or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to HBMS or any of its Restricted Subsidiaries;

         (ii)  make loans or advances to HBMS or any of its Restricted Subsidiaries; or

        (iii)  transfer any of its properties or assets to HBMS or any of its Restricted Subsidiaries.

        However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

        (1)   agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of the indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings of such instrument are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such agreement on the date of the indenture;

        (2)   the indenture, the Notes, the Additional Notes, the Exchange Notes and the Guarantees, or encumbrances or restrictions in any other instrument governing Indebtedness or preferred stock of HBMS incurred or issued in compliance with the covenant "—Incurrence of Indebtedness and Issuance of Preferred Stock" that are no more restrictive, taken as a whole, than those contained in the Indenture, the Notes and the Subsidiary Guarantees;

        (3)   any applicable law, rule, regulation, order, approval, license or permit;

        (4)   any instrument of a Person acquired by HBMS or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent created or otherwise caused or suffered to exist in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of an instrument governing Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;

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        (5)   customary provisions in leases, licenses and other agreements entered into in the ordinary course of business restricting assignment or subletting of any lease or assignment of any license or other contract or restricting transfers of non-cash assets;

        (6)   purchase money obligations and Capital Lease Obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (iii) of the preceding paragraph;

        (7)   any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

        (8)   Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

        (9)   reasonable and customary borrowing base, net worth and similar covenants set forth in agreements evidencing Indebtedness otherwise permitted by the indenture;

        (10) customary provisions in joint venture or similar agreements or other arrangements with minority investors in Restricted Subsidiaries; provided, however, that such encumbrance or restriction is applicable only to such Restricted Subsidiary; and provided, further, that (i) in the case of joint ventures existing on the date of the indenture, the encumbrances or restrictions in any amendment, renewal or other modification of the joint venture arrangement are no more onerous, taken as a whole, than those existing on the date of the indenture and (ii) in all other cases, (a) the encumbrance or restriction is not materially more disadvantageous to the holders of the Notes than is customary in comparable agreements and (b) HBMS determines that any such encumbrance or restriction will not materially affect the ability of HBMS to make any anticipated payments of principal or interest on the Notes;

        (11) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of the covenant described above under the caption "—Liens" that limit the right of the debtor to dispose of the assets subject to such Liens;

        (12) any encumbrances or restrictions required by any governmental or regulatory authority having jurisdiction over HBMS or any of its Restricted Subsidiaries or any of their businesses in connection with any grant made or other assistance provided to HBMS or any of its Restricted Subsidiaries by such governmental or regulatory authority;

        (13) reasonable and customary covenants contained in Production and Capacity Arrangements, Third Party Mining Arrangements and Structured Arrangements;

        (14) agreements governing Credit Facilities, provided such restrictions are not materially more restrictive, taken as a whole, than customary provisions in comparable financings;

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        (15) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business; and

        (16) any encumbrance or restriction of the type referred to in clauses (i) through (iii) above imposed by any extension, amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing of any agreement, contract, instrument or obligation referred to in clauses (4) or (6) above that is not materially more restrictive, taken as a whole, than the encumbrance or restriction imposed by the applicable predecessor agreement, contract, instrument or obligation (as determined by the Board of Directors of HBMS in its good faith judgment).

Limitation on Collateral Asset Sales

        (a)   HBMS will not, and will not permit any Subsidiary Guarantor to, consummate a Collateral Asset Sale in any single transaction or series of related transactions unless:

        (1)   HBMS (or the Subsidiary Guarantor, as the case may be) receives consideration at the time of the Collateral Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of;

        (2)   for Collateral Asset Sales having a Fair Market Value of greater than $10 million, at least 75% of the consideration received in the Collateral Asset Sale by HBMS or such Subsidiary Guarantor is in the form of cash, Cash Equivalents, real and immovable property (including leasehold interests and any other interest or right in any real property), together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto for use in a Permitted Business. For purposes of this provision, each of the following will be deemed to be cash:

        (a)   any liabilities, as shown on HBMS's or such Subsidiary Guarantor's most recent balance sheet, of HBMS or any Subsidiary Guarantor (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases HBMS or such Subsidiary Guarantor from further liability; and

        (b)   any securities, Notes or other obligations received by HBMS or any such Subsidiary Guarantor from such transferee that are converted by HBMS or such Subsidiary Guarantor into cash or Cash Equivalents within 90 days of the receipt thereof to the extent of the cash or Cash Equivalents received in that conversion;

        (3)   all Net Proceeds from the Collateral Asset Sale attributable to First Lien Collateral being disposed of in such Collateral Asset Sale ("Net Available Proceeds") are deposited directly by the purchaser into the Trust Monies Account, pending application in accordance with paragraph (b) of this covenant; and

        (4)   HBMS or the Subsidiary Guarantor takes such other actions, at its sole expense, as shall be required to permit the trustee to release the First Lien Collateral being disposed of from the Lien under the indenture and the security documents and to ensure that the Collateral Agent has, for the benefit of the trustee and the noteholders, (i) from the date of completion of such Collateral Asset Sale, a Lien pursuant to the security documents on such Net Available Proceeds in the Trust Monies Account and (ii) within 30 days of the completion of such Collateral Asset Sale, a Lien pursuant to the security documents on any other Property received in connection with Collateral Asset Sale to the extent attributable to the First Lien Collateral disposed of (which Property shall be deemed to be First Lien Collateral).

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        (b)   Trust monies that consist of Net Available Proceeds may be used by HBMS or a Subsidiary Guarantor, at its option,

        (1)   for the purpose of acquiring, developing or investing in real and immovable property (including leasehold interests and any other interest or right in any real property) of HBMS or a Subsidiary Guarantor, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto for use in a Permitted Business (a "First Lien Collateral Investment"); or

        (2)   to make an Asset Sale Offer to all holders of Notes, to purchase such principal amount of outstanding Notes as HBMS shall determine.

        In the Asset Sale Offer HBMS will offer an Asset Sale Payment in cash equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase. If the aggregate principal amount of Notes tendered into such Asset Sale Offer exceeds the principal amount of Notes for which HBMS made the Asset Sale Offer, the trustee will select the Notes to be purchased on a pro rata basis. If any Trust Monies remain after consummation of the Asset Sale Offer, they shall be retained in the Trust Monies Account, and subject to the Lien thereon, pending further use in accordance with this paragraph (b).

        If HBMS or a Subsidiary Guarantor sells, leases, conveys or otherwise disposes of First Lien Collateral in connection with any transaction excluded from the definition of Collateral Asset Sale by virtue of the second paragraph thereof, and, as consideration for such sale, lease, conveyance or other disposition of First Lien Collateral receives Property (including an interest in income or profits from Property), such Property, to the extent attributable to the sale, lease, conveyance or other disposition of such First Lien Collateral, shall become First Lien Collateral and HBMS or such Subsidiary Guarantor shall take such actions as shall be required to ensure that within 30 days of receipt of such Property, the Collateral Agent, for the benefit of the holders of the Note Obligations, has a Lien upon such Property pursuant to the indenture.

Merger, Consolidation or Sale of Assets

        HBMS may not, directly or indirectly: (1) consolidate, amalgamate with or merge with or into another Person (whether or not HBMS is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of HBMS and its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person; unless:

        (1)   either: (a) HBMS is the surviving corporation; or (b) the Person formed by or surviving any such consolidation, amalgamation or merger (if other than HBMS) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of Canada or any province or territory thereof, the United States, any state of the United States or the District of Columbia;

        (2)   the Person formed by or surviving any such consolidation, amalgamation or merger (if other than HBMS) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all of the obligations of HBMS under the Notes, the indenture and the registration rights agreement pursuant to agreements reasonably satisfactory to the trustee;

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        (3)   immediately after such transaction no Default or Event of Default exists; and

        (4)   HBMS or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than HBMS), or to which such sale, assignment, transfer, conveyance or other disposition has been made:

        (a)   will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of HBMS immediately preceding the transaction; and

        (b)   will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock."

        In addition, HBMS may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This "Merger, Consolidation or Sale of Assets" covenant will not apply to a merger, amalgamation or consolidation, or a sale, assignment, transfer, conveyance or other disposition of assets, between or among HBMS and any of its Wholly Owned Restricted Subsidiaries, provided that the surviving entity of any transaction shall be a corporation organized and existing under the laws of Canada or any province or territory thereof, the United States, any state of the United States or the District of Columbia.

Designation of Restricted and Unrestricted Subsidiaries

        The Board of Directors of HBMS may designate any Restricted Subsidiary of HBMS to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by HBMS and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption "—Restricted Payments" or under Permitted Investments. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. In addition, no such designation may be made unless the proposed Unrestricted Subsidiary does not own any Capital Stock in any Restricted Subsidiary that is not simultaneously subject to designation as an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.

        Any designation of a Subsidiary of HBMS as an Unrestricted Subsidiary will be evidenced to the trustee by filing with the trustee a certified copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption "—Certain Covenants—Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of HBMS as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock," HBMS will be in default of such covenant. The Board of Directors of HBMS may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of HBMS of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness could be incurred pursuant to the Fixed Charge Coverage Ratio test described under the caption "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.

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Transactions with Affiliates

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:

        (1)   the Affiliate Transaction is on terms that are, taken as a whole, no less favorable to HBMS or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by HBMS or such Restricted Subsidiary with an unrelated Person; and

        (2)   HBMS delivers to the trustee:

        (a)   with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an officers' certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors (provided that if there are no disinterested members of the Board of Directors, HBMS shall obtain an opinion as described in clause (b) below of this paragraph (2)); and

        (b)   with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to HBMS of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing in Canada or the United States.

        The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

        (1)   compensation, employment or termination agreements or arrangements (including stock options) entered into by HBMS or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto;

        (2)   transactions between or among HBMS and/or its Restricted Subsidiaries provided, however, that any transaction with a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be in the ordinary course of business and on terms that are no less favorable to HBMS or its Restricted Subsidiaries than those that could have been obtained in comparable transactions by HBMS or such Restricted Subsidiaries with a Person that is not an Affiliate;

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        (3)   payment of reasonable fees to, and indemnity provided on behalf of, directors, officers, employees or consultants of HBMS or any Restricted Subsidiary who are not otherwise Affiliates of HBMS;

        (4)   purchases of metal concentrate and the sale or exchange of concentrate or treatment or refining services by HBMS or its Restricted Subsidiaries, in each case, in the ordinary course of business and on terms no less favorable to HBMS or such Restricted Subsidiary that those that could have been obtained in comparable transactions with a Person that is not an Affiliate;

        (5)   (x) guarantees of performance by HBMS and its Restricted Subsidiaries of Unrestricted Subsidiaries in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests of Unrestricted Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries;

        (6)   transactions pursuant to any arrangement, contract or agreement in effect as of the date of the indenture as amended, restated, renewed, extended, refinanced, refunded or replaced from time to time on terms and conditions not materially less favorable, taken as a whole, to HBMS and its Restricted Subsidiaries than the arrangement, contract or agreement in existence on the Issue Date;

        (7)   loans and advances to officers, directors and employees of HBMS or any Subsidiary for entertainment, travel and moving and other relocation expenses and similar expenditures, in each case in the ordinary course of business;

        (8)   transactions with a Person (other than an Unrestricted Subsidiary of HBMS) that is an Affiliate of HBMS solely because HBMS owns, either directly or through a Restricted Subsidiary, an Equity Interest in such Person;

        (9)   any tax-sharing agreement or arrangement and payments pursuant thereto among HBMS and its Subsidiaries and any other Person with which HBMS or any of its Subsidiaries is required or permitted to file a consolidated tax return or with which HBMS or any of its Subsidiaries is part, or could be a part, of a consolidated group for tax purposes in amounts not otherwise prohibited by the indenture;

        (10) sales of Equity Interests (other than Disqualified Stock) to Affiliates of HBMS; and

        (11) Permitted Investments or Restricted Payments that are permitted by the provisions of the indenture described above under the caption "—Restricted Payments."

Limitation on Disposition of Capital Stock of Restricted Subsidiaries

        HBMS will not, and will not permit any Restricted Subsidiary to, issue, transfer, convey, lease or otherwise dispose of, directly or indirectly, any shares of Capital Stock of a Restricted Subsidiary or securities convertible or exchangeable into, or options, warrants, rights or any other interest with respect to, Capital Stock of a Restricted Subsidiary if as a result of such transaction such Restricted Subsidiary would cease to be a Restricted Subsidiary, unless such transaction (1) consists of a sale of all of the Capital Stock of such Restricted Subsidiary owned by HBMS and its Restricted Subsidiaries and (2) complies with the covenant described under the caption, "Repurchase at the Option of Holders—Asset Sales", to the extent such provisions apply.

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Additional Subsidiary Guarantees

        If HBMS or any of its Restricted Subsidiaries acquires or creates another Restricted Subsidiary that is a Domestic Subsidiary after the date of the indenture, then that newly acquired or created Restricted Subsidiary will:

        (1)   execute and deliver to the trustee a supplemental indenture in form reasonably satisfactory to the trustee pursuant to which such Subsidiary shall fully and unconditionally guarantee on a senior basis all of HBMS's obligations under the Notes and the indenture on the terms set forth in the indenture;

        (2)   execute and deliver to the Collateral Agent security documents upon substantially the same terms as the security documents delivered in connection with the issuance of the Notes, granting a first priority Lien upon the Note Collateral of such Subsidiary, other than Credit Facility Collateral, subject to Permitted Prior Liens, and a second priority lien upon the Credit Facility Collateral of such Subsidiary, subject to Permitted Prior Liens, in each case in favor of the Collateral Agent for the benefit of the holders of Note Obligations;

        (3)   cause the Liens granted in such security documents to be duly perfected in any manner permitted by law and cause each other Lien upon such Note Collateral to be (a) released, unless it is a Permitted Lien or (b) subordinated to the Collateral Agent's Lien if it is a Permitted Lien but not a Permitted Prior Lien; and

        (4)   deliver to the trustee an opinion of counsel reasonably satisfactory to the trustee, confirming as to such supplemental indenture, security documents and Liens the matters set forth as to the supplemental indenture, security documents and Liens in the opinions of counsel delivered on behalf of HBMS to the initial purchasers on the date of the indenture in connection with the original issuance of the Notes and, if the property subject to such security documents is an interest in real estate, such local counsel opinions, title insurance policies, surveys and other supporting documents as may have been delivered to the initial purchasers on the date of the indenture in connection with the original issuance of the Notes, all as the trustee may reasonably request and in form and substance reasonably satisfactory to the trustee.

Sale and Leaseback Transactions

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that HBMS or any of its Restricted Subsidiaries may enter into a sale and leaseback transaction if:

        (1)   after giving pro forma effect to the application of the proceeds from such transaction, HBMS or that Restricted Subsidiary, as applicable, could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in the first paragraph of the covenant described above under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption "—Liens;" and

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        (2)   the transfer of assets in such sale and leaseback transaction is permitted by the covenant described above under the caption "—Repurchase at the Option of Holders—Asset Sales."

Business Activities

        HBMS will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to HBMS and its Restricted Subsidiaries taken as a whole.

Payments for Consent

        HBMS will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the Notes unless such consideration is offered to be paid to all holders of the Notes and is paid to all holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Reports

        Whether or not required by the SEC, so long as any Notes are outstanding, HBMS will furnish to the holders of Notes (or make available through the SEC's EDGAR system), within the time periods specified in the SEC's rules and regulations:

        (1)   all quarterly and annual financial information that HBMS would have been required to file with the SEC (a) on Form 10-Q or 10-K, if HBMS was required to file on such Forms, or (b) on Form 20-F or 40-F, as applicable, if HBMS was permitted to file on such Form and as if it was a reporting issuer under the securities laws of the Province of Ontario, including in each case a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by independent chartered accountants; and

        (2)   all current reports that HBMS would have been required to (a) file with the SEC on Form 8-K, if HBMS was required to file such reports, or (b) furnish to the SEC on Form 6-K, if HBMS was permitted to furnish such reports and as if it was a reporting issuer under the securities laws of the Province of Ontario.

        If, at any time after consummation of the exchange offer contemplated by the registration rights agreement, HBMS is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, HBMS will nevertheless continue filing (or furnishing, as applicable) the reports specified in the preceding paragraph with the SEC within the time periods specified above unless the SEC will not accept such a filing. HBMS agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept HBMS's filings for any reason, HBMS will post the reports referred to in the preceding paragraph on its website within the time periods that would apply if HBMS was required to file those reports with the SEC. In addition, HBMS and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

        If at any time HBMS is exempted from the obligation to file reports with the SEC pursuant to the provisions of Rule 12h-5 of the Exchange Act (or any successor provision thereto) or, if applicable, pursuant to an exemption under (or relief from) the corresponding rules under Canadian securities laws, then compliance by the parent company of HBMS with the provisions of this covenant will constitute compliance by HBMS. See "Where You Can Find More Information".

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Events of Default and Remedies

        Each of the following is an Event of Default:

        (1)   default for 30 consecutive days in the payment when due of interest on, or Special Interest with respect to, the Notes;

        (2)   default in payment when due of the principal of, or premium, if any, on the Notes;

        (3)   failure by HBMS or any of its Restricted Subsidiaries to comply with the provisions described under the captions "—Repurchase at the Option of Holders—Change of Control," "—Repurchase at the Option of Holders—Asset Sales," or "—Certain Covenants—Merger, Consolidation or Sale of Assets;"

        (4)   failure by HBMS or any of its Restricted Subsidiaries for 30 days after notice to comply with any of the other agreements in the indenture;

        (5)   default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by HBMS or any of its Restricted Subsidiaries (or the payment of which is guaranteed by HBMS or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the indenture, if that default results in the acceleration of such Indebtedness prior to its expressed maturity, and the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10.0 million or more;

        (6)   failure by HBMS or any of its Restricted Subsidiaries to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $10.0 million (net of applicable insurance coverage, provided that HBMS or such Restricted Subsidiary has submitted a claim for that judgment and the provider of such insurance has not disputed such coverage and has the ability to perform), which judgments are not paid, discharged or stayed for a period of 60 days;

        (7)   except as permitted by the indenture, any Subsidiary Guarantee of a Significant Subsidiary shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor that is a Significant Subsidiary, or any Person acting on behalf of any such Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee;

        (8)   any security document for any reason shall cease to be in full force and effect, or cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby, or any Collateral Agent's Lien purported to be granted thereby on any one or more items of Note Collateral having an aggregate Fair Market Value in excess of $10.0 million ceases to be enforceable or valid, in whole or in part, or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth in the indenture) to be fully enforceable and perfected with the priority set forth in the applicable security document and, in each case, such default continues for 10 days after HBMS has received written notice thereof;

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        (9)   HBMS or any Restricted Subsidiary, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of HBMS or any Restricted Subsidiary set forth in or arising under any security documents; and

        (10) certain events of bankruptcy or insolvency described in the indenture with respect to HBMS or any of its Restricted Subsidiaries that are Significant Subsidiaries;

        In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to HBMS, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

        Holders of the Notes may not enforce the indenture or the Notes except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal or interest or Special Interest.

        The holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the trustee may on behalf of the holders of all of the Notes waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest or Special Interest on, or the principal of, the Notes.

        In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of HBMS with the intention of avoiding payment of the premium that HBMS would have had to pay if HBMS then had elected to redeem the Notes pursuant to the optional redemption provisions of the indenture, an equivalent premium will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to January 15, 2009, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of HBMS with the intention of avoiding the prohibition on redemption of the Notes prior to January 15, 2009, then the initial premium specified in the indenture will also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes.

        HBMS is required to deliver to the trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any Default or Event of Default, HBMS is required to deliver to the trustee a statement specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

        No director, officer, employee, incorporator or stockholder of the parent company of HBMS, HBMS or any Subsidiary of HBMS, as such, will have any liability for any obligations of HBMS or the Subsidiary Guarantors under the Notes, the indenture, the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

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Legal Defeasance and Covenant Defeasance

        HBMS may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes and all obligations of the Subsidiary Guarantors and the Parent Guarantor discharged with respect to their Subsidiary Guarantees ("Legal Defeasance") except for:

        (1)   the rights of holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Special Interest, if any, on such Notes when such payments are due from the trust referred to below;

        (2)   HBMS's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

        (3)   the rights, powers, trusts, duties and immunities of the trustee, and HBMS's and the Subsidiary Guarantor's obligations in connection therewith; and

        (4)   the Legal Defeasance provisions of the indenture.

        In addition, HBMS may, at its option and at any time, elect to have the obligations of HBMS, the Subsidiary Guarantors and the Parent Guarantor released with respect to certain covenants that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "—Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Notes.

        Upon Covenant or Legal Defeasance, the Subsidiary Guarantees and the Parent Guarantee, if any, will terminate and the Note Collateral securing the Notes will be released.

        In order to exercise either Legal Defeasance or Covenant Defeasance:

        (1)   HBMS must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Special Interest, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and HBMS must specify whether the Notes are being defeased to maturity or to a particular redemption date;

        (2)   in the case of Legal Defeasance, HBMS must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) HBMS has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

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        (3)   in the case of Covenant Defeasance, HBMS must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

        (4)   in the case of Legal Defeasance or Covenant Defeasance, HBMS must deliver to the trustee an opinion of counsel in Canada to the effect that holders of the outstanding Notes will not recognize income, gain or loss for Canadian federal or provincial income tax or other tax purposes as a result of such Legal Defeasance or Covenant Defeasance, as applicable, and will be subject to Canadian federal or provincial income tax and other tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance or Covenant Defeasance, as applicable, had not occurred (which condition may not be waived by any holder or the trustee);

        (5)   no Default or Event of Default may have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);

        (6)   such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the indenture) to which HBMS or any of its Subsidiaries is a party or by which HBMS or any of its Subsidiaries is bound;

        (7)   HBMS must deliver to the trustee an officers' certificate stating that the deposit was not made by HBMS with the intent of preferring the holders of Notes over the other creditors of HBMS with the intent of defeating, hindering, delaying or defrauding creditors of HBMS or others; and

        (8)   HBMS must deliver to the trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Amendment, Supplement and Waiver

        Except as provided in the next two succeeding paragraphs, the indenture, the Notes, the Subsidiary Guarantees or the security documents may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the indenture or the Notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes).

        Without the consent of each holder of Notes affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting holder):

        (1)   reduce the principal amount of Notes whose holders must consent to an amendment, supplement or waiver;

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        (2)   reduce the principal of or change the fixed maturity of any Note or alter the provisions (except those providing when notice of redemption is to be provided to holders) with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "—Repurchase at the Option of Holders");

        (3)   reduce the rate of or change the time for payment of interest on any Note, including Additional Amounts;

        (4)   waive a Default or Event of Default in the payment of principal of, or interest or premium, or Special Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

        (5)   make any Note payable in money other than that stated in the Notes;

        (6)   make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of Notes to receive payments of principal of, or interest or premium or Special Interest, if any, on the Notes;

        (7)   waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "—Repurchase at the Option of Holders");

        (8)   release any Subsidiary Guarantor that is a Significant Subsidiary from any of its obligations under its Subsidiary Guarantee or the indenture, except in accordance with the terms of the indenture;

        (9)   affect the ranking, or with respect to Note Collateral, the priority of the Notes, in each case in a manner adverse to the holders of the Notes;

        (10) except as expressly permitted under other provisions of the indenture, release all or substantially all of the Note Collateral from the Liens securing the Notes; and

        (11) make any change in the preceding amendment and waiver provisions.

In addition, no amendment or supplement to the provisions of the security documents described above under "—Security" will impose any obligation on the trustee or adversely affect the rights of the trustee in its individual capacity without the consent of the trustee.

        Notwithstanding the preceding, without the consent of any holder of Notes, HBMS, the Subsidiary Guarantors and the trustee may amend or supplement the indenture, the Notes, the Subsidiary Guarantees or the security documents:

        (1)   to cure any ambiguity, defect or inconsistency;

        (2)   to provide for uncertificated Notes in addition to or in place of certificated Notes;

        (3)   to provide for the assumption of HBMS's or the Subsidiary Guarantors' obligations to holders of Notes in the case of a merger or consolidation or sale of all or substantially all of HBMS's or the Subsidiary Guarantors' assets;

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        (4)   to make any change that, in the good faith judgment of the Board of Directors of HBMS, would provide any additional rights or benefits to the holders of Notes or does not adversely affect the legal rights under the indenture of any such holder;

        (5)   to add guarantees or security with respect to the Notes or confirm and evidence the release, termination or discharge of any security or guarantee when such release, termination or discharge is permitted by the indenture or the security documents;

        (6)   to issue Additional Notes in compliance with the provisions of the indenture;

        (7)   to evidence and provide for the acceptance of appointment by a successor Trustee;

        (8)   to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act;

        (9)   to provide any additional collateral for the benefit of the holders of the Notes; or

        (10) to make, complete or confirm any grant of Note Collateral permitted or required by the indenture or any of the security documents or any release of Note Collateral that becomes effective as set forth in the indenture or any of the security documents.

        The Note Documents will provide that any amendment or waiver of, or any consent under, any provision of the documents securing the Credit Facility Obligations will apply automatically to any comparable provision of the Note Documents without the consent of or notice to any holder of the Notes and without any action by HBMS, any Subsidiary Guarantor, the trustee, the Collateral Agent or any holder of the Notes.

Satisfaction and Discharge

        The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder and the Subsidiary Guarantees and Parent Guarantee thereon, when:

        (1)   either:

        (a)   all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to HBMS, have been delivered to the trustee for cancellation; or

        (b)   all Notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and HBMS or any Subsidiary Guarantor or the Parent Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the trustee for cancellation for principal, premium and Special Interest, if any, and accrued interest to the date of maturity or redemption;

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        (2)   no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit (other than a Default or Event of Default arising from the borrowing of the funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which HBMS or any Subsidiary Guarantor or the Parent Guarantor is a party or by which HBMS or any Subsidiary Guarantor or the Parent Guarantor is bound;

        (3)   HBMS, or any Subsidiary Guarantor or the Parent Guarantor has paid or caused to be paid all sums payable by it under the indenture; and

        (4)   HBMS has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

In addition, HBMS must deliver an officers' certificate and an opinion of counsel to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

        Upon the satisfaction and discharge of the indenture, the Subsidiary Guarantees, if any, and the Parent Guarantee will terminate and the Note Collateral securing the Notes will be released.

Concerning the Trustee

        If the trustee becomes a creditor of HBMS or any Subsidiary Guarantor, the indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

        The holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of Notes, unless such holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense.

Additional Information

        Anyone who receives this prospectus may obtain a copy of the indenture and registration rights agreement without charge by writing to 2200 - 201 Portage Avenue, Winnipeg, Manitoba, Canada R3B 3L3, Attention: General Counsel.

Governing Law

        The Indenture, the Notes, the Subsidiary Guarantees and the Parent Guarantee are governed by the laws of the State of New York.

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Enforceability of Judgments

        Since substantially all of the assets of HBMS, the Subsidiary Guarantors and the Parent Guarantor are outside the United States, any judgment obtained in the United States against HBMS, or the Subsidiary Guarantors or Parent Guarantor, including judgments with respect to the payment of principal, premium, if any, or interest on the Notes, may not be collectible within the United States.

        The laws of the Province of Ontario and the federal laws of Canada applicable therein permit an action to be brought against HBMS, the Subsidiary Guarantors and the Parent Guarantor in a court of competent jurisdiction in such Province on any final and conclusive judgment in personam of any federal or state court located in the Borough of Manhattan in The City of New York ("New York Court") with respect to the indenture, the Notes, the Subsidiary Guarantees or the Parent Guarantee, as applicable, that has not been stayed and is not impeachable as void or voidable under the internal laws of the State of New York and that is for a sum certain if (1) the New York Court rendering such judgment had jurisdiction over the judgment debtor, as recognized by the courts of the Province of Ontario (and submission by HBMS and the Subsidiary Guarantors in the indenture to the jurisdiction of the New York Court will be sufficient for establishing that a New York Court has jurisdiction over HBMS or a Subsidiary Guarantor, as the case may be); (2) there is a real and substantial connection between the subject matter of the action upon which the judgment is based and the State of New York; (3) such judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as such term is understood under the laws of the Province of Ontario and the federal laws of Canada applicable therein or contrary to any order made by the Attorney General of Canada under the Foreign Extraterritorial Measures Act (Canada); (4) the enforcement of such judgment does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriatory, penal or public laws; (5) no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by the Ontario Court; (6) there has been compliance with the Limitations Act (Ontario) which provides that an action on a foreign judgment must be commenced within two years of the date of the foreign judgment; and (7) no order has been made by the Competition Tribunal established under the Competition Act (Canada) restricting the implementation of the judgment as adversely affecting competition in Canada or domestic or foreign trade and commerce in Canada. HBMS does not know of any reason under present laws of the Province of Ontario and the federal laws of Canada applicable therein for avoiding enforcement of such judgments of New York Courts under either the indenture, the Notes, the Subsidiary Guarantees or the Parent Guarantee based upon public policy.

Consent to Jurisdictions and Service

        HBMS and the Subsidiary Guarantors have each appointed CT Corporation System as its agent for service of process in any suit, action or proceeding with respect to the indenture, the Notes or the Subsidiary Guarantees and for actions brought under federal or state securities laws brought in any federal or state court located in The City of New York and each of HBMS and the Subsidiary Guarantors will submit to such jurisdiction.

Book-Entry, Delivery and Form

        Except as set forth below, the exchange notes will only be issued in registered, global form in minimum denominations of US$1,000 and integral multiples of US$1,000 in excess of US$1,000.

        The exchange notes initially will be represented by a single permanent global certificate in registered, book-entry form without interest coupons (the "Global Note") and will be deposited upon issuance with the trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee for credit to an account of a direct or indirect participant in DTC as described below.

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        Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated form except in the limited circumstances described below. See "—Exchange of Book-Entry Notes for Certificated Notes".

Exchange of Book-Entry Notes for Certificated Notes

        A beneficial interest in the Global Note may not be exchanged for a Note in certificated form unless (i) DTC (x) notifies HBMS that it is unwilling or unable to continue as Depository for such Global Note or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) in the case of a Global Note held for an account of Euroclear or Clearstream, Euroclear or Clearstream, as the case may be, (A) is closed for business for a continuous period of 14 days (other than by reason of statutory or other holidays) or (B) announces an intention permanently to cease business or does in fact do so, (iii) there shall have occurred and be continuing an Event of Default with respect to the Notes or (iv) a request for certificates has been made upon 60 days' prior written notice given to the trustee in accordance with DTC's customary procedures and a copy of such notice has been received by HBMS from the trustee. In all cases, certificated Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in approved denominations, requested by or on behalf of DTC (in accordance with its customary procedures). Any certificated Notes issued in exchange for an interest in a Global Note will bear the legend restricting transfers that is borne by such Global Note. Any such exchange will be effected only through the DWAC System and an appropriate adjustment will be made in the records of the Security Register to reflect a decrease in the principal amount of the relevant Global Note.

Depository Procedures

The following description of the operations and procedures of DTC, Euroclear and Clearstream is provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them from time to time. HBMS and its Restricted Subsidiaries take no responsibility for these operations and procedures and urge investors to contact the system or their participants directly to discuss these matters.

        Upon the issuance of the Global Note, DTC will credit, on its internal system, the respective principal amount of the individual beneficial interests represented by such Global Note to the accounts with DTC ("participants") or persons who hold interests through participants. Ownership or beneficial interests in the Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interest of persons other than participants).

        As long as DTC, or its nominee, is the registered holder of the Global Note, DTC or such nominee, as the case may be, will be considered the sole owner and holder of the Notes represented by such Global Note for all purposes under the indenture and the Notes. Except in the limited circumstances described above under "—Exchanges of Book-Entry Notes for Certificated Notes," owners of beneficial interests in a Global Note will not be entitled to have portions of such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Notes in definitive form and will not be considered the owners or holders of the Global Note (or any Notes represented thereby) under the indenture or the Notes. In addition, no beneficial owner of an interest in the Global Note will be able to transfer that interest except in accordance with DTC's applicable procedures (in addition to those under the indenture referred to herein and, if applicable, those of Euroclear and Clearstream). In the event that owners of beneficial interests in a Global Note become entitled to receive Notes in definitive form, such Notes will be issued only in registered form in denominations of US$1,000 and integral multiples thereof.

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        Investors may hold their interests in the Global Note directly through DTC, if they are participants in such system, or indirectly through organizations (including Euroclear and Clearstream) which are participants in such system. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear and Clearstream may also be subject to the procedures and requirements of such system.

        The laws of some states of the United States require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such persons may be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants and certain banks, the ability of a person having beneficial interests in the Global Note to pledge such interests to persons or entities that do not participate in the DTC system, or otherwise take action in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.

        Payments of the principal of and interest on the Global Note will be made to DTC or its nominee as the registered owner thereof. Neither HBMS, the Subsidiary Guarantors, the Parent Guarantor, the trustee nor any of their respective agents will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

        Except for trades involving only Euroclear or Clearstream, beneficial interests in the Global Note will trade in DTC's Same-Day Funds Settlement System, and secondary market trading activity in such interests will therefore settle in immediately available funds. HBMS expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note representing any Notes held by it or its nominee, will immediately credit participants' accounts with payment in amounts proportionate to their respective beneficial interests in the principal amount of such Notes as shown on the records of DTC or its nominee. HBMS also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in "street name." Such payments will be the responsibility of such participants.

        Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

        Subject to compliance with the transfer restrictions applicable to the Notes described above, cross-market transfers between DTC participants, on the one hand, and Euroclear or Clearstream participants on the other hand, will be effected by DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream.

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        Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a DTC participant will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the DTC settlement date. Cash received on Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following the DTC settlement date.

        DTC has advised HBMS that it will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account with DTC interests in the Global Note are credited and only in respect of such portion of the aggregate principal amount of the Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default (as defined below) under the Notes, DTC reserves the right to exchange the Global Note for Notes in certificated form, and to distribute such Notes to its participants.

        DTC has advised HBMS as follows: DTC is

•

a limited purpose trust company organized under the laws of the State of New York,

•

a "banking organization" within the meaning of New York Banking law,

•

a member of the Federal Reserve System,

•

a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and

•

a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Indirect access to the DTC system is available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants").

        Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures in order to facilitate transfers of beneficial ownership interests in the Global Note among participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of HBMS, the Subsidiary Guarantors, the Parent Guarantor, the trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear and Clearstream, their participants or indirect participants of their respective obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to, or payments made on account of, beneficial ownership interests in Global Note.

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Same Day Settlement and Payment

        HBMS will make payments in respect of the Notes represented by the Global Note (including principal, premium, if any, interest and Special Interest, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note holder. HBMS will make all payments of principal, interest and premium and Special Interest, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such holder's registered address. The Notes represented by the Global Note are expected to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. HBMS expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.

Certain Definitions

        Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

        "Acquired Indebtedness" means, with respect to any specified Person:

        (1)   Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and

        (2)   Indebtedness secured by a Lien encumbering any asset acquired by such specified Person (to the extent of the Fair Market Value of the asset where the Indebtedness so secured is not the Indebtedness of the specified Person),

which, in each case, is not repaid at or within five days following the date of such acquisition.

        "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

        "Asset Sale" means:

        (1)   the sale, lease, conveyance or other disposition, of any assets or rights, other than sales and exchanges of inventory (including metal concentrate) and sales of treatment and refining services in the ordinary course of business consistent with past practices and sales of First Lien Collateral; provided that the sale, conveyance or other disposition of all or substantially all of the assets of HBMS and its Restricted Subsidiaries, taken as a whole, will be governed by the provisions of the indenture described above under the caption "—Repurchase at the Option of Holders—Change of Control" and/or the provisions described above under the caption "—Certain Covenants—Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and

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        (2)   the issuance or sale of Equity Interests in any of HBMS's Restricted Subsidiaries.

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

        (1)   any single transaction or series of related transactions that involves assets having a fair market value of less than $5.0 million;

        (2)   a transfer of assets between or among HBMS and any of its Wholly Owned Restricted Subsidiaries;

        (3)   an issuance of Equity Interests by a Restricted Subsidiary of HBMS to HBMS or to a Wholly Owned Restricted Subsidiary of HBMS;

        (4)   the sale or other disposition of receivables or other current assets for cash or Cash Equivalents for Fair Market Value and the factoring of accounts receivable, in each case, in the ordinary course of business;

        (5)   the sale or exchange of equipment in connection with the acquisition of other equipment used in a Permitted Business;

        (6)   any disposition of Capital Stock or assets of, or any other Investment in, any Unrestricted Subsidiary that has been designated as an Unrestricted Subsidiary after the date of the indenture;

        (7)   the creation of any Lien not prohibited by the covenant described under "Certain Covenants—Liens" above;

        (8)   a disposition of goods held for sale in the ordinary course of business or worn-out, obsolete, surplus or damaged equipment (or equipment no longer used or otherwise unsuitable for use in connection with HBMS's or its Restricted Subsidiaries' business) in the ordinary course of business of HBMS and its Restricted Subsidiaries;

        (9)   foreclosures on assets;

        (10) a transfer of real property to a provincial, county, local, municipal or other governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency that enhances the value of mining properties owned by HBMS or a Restricted Subsidiary; provided that, if the Fair Market Value of property is in excess of $1.0 million, the Board of Directors has determined in good faith that such exchange is in the best interest of HBMS;

        (11) any Production and Capacity Arrangement;

        (12) the sale or other disposition of an asset or an interest in real property pursuant to Third Party Mining Arrangements;

        (13) any Structured Arrangement;

        (14) the sale or other disposition of cash or Cash Equivalents; and

        (15) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "—Certain Covenants—Restricted Payments."

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        "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

        "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

        "Board of Directors" means:

        (1)   with respect to a corporation, the board of directors of the corporation;

        (2)   with respect to a partnership, the Board of Directors of the general partner of the partnership; and

        (3)   with respect to any other Person, the board or committee of such Person serving a similar function.

        "Borrowing Base" means, as of any date, an amount equal to:

        (1)   85% of the face amount of all accounts receivable owned by HBMS and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date for which internal financial statements are available that were not more than 90 days past due; plus

        (2)   60% of the book value of all inventory owned by HBMS and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date for which internal financial statements are available,

all calculated on a consolidated basis and in accordance with GAAP.

        "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.

        "Capital Stock" means:

        (1)   in the case of a corporation, corporate stock;

        (2)   in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

        (3)   in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

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        (4)   any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

        "Cash Equivalents" means:

        (1)   United States dollars or Canadian dollars;

        (2)   securities issued or directly and fully guaranteed or insured by the United States government or the Canadian government or any agency or instrumentality of the United States government or the Canadian government (provided that the full faith and credit of the United States or Canada, as applicable, is pledged in support of those securities) having maturities of not more than six months from the date of acquisition;

        (3)   certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any lender party to a Credit Facility or with any U.S. or Canadian commercial bank having capital and surplus in excess of US$500.0 million and a Thomson Bank Watch Rating of "B" or better;

        (4)   repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

        (5)   commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; and

        (6)   money market funds at least 90% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

        "Change of Control" means the occurrence of any of the following:

        (1)   the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger, amalgamation or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of HBMS and its Restricted Subsidiaries, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than the Parent Guarantor, HBMS or a wholly owned Subsidiary of the Parent Guarantor or HBMS;

        (2)   the adoption of a plan relating to the liquidation or dissolution of HBMS;

        (3)   the consummation of any transaction (including, without limitation, any merger, amalgamation or consolidation) the result of which is that any "person" or "group" (as those terms are used in Section 13(d) of the Exchange Act), other than the Parent Guarantor or a wholly owned Subsidiary of the Parent Guarantor becomes the Beneficial Owner, directly or indirectly, of 50% or more of the voting power of the outstanding Voting Stock of HBMS; or

        (4)   the first day on which a majority of the members of the Board of Directors of HBMS are not Continuing Directors.

        "Collateral Agent" means BNY Trust Company of Canada or one of its affiliates, in its capacity as Collateral Agent, together with its successors in such capacity.

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        "Collateral Agent's Lien" means the Lien granted to the Collateral Agent as security for Note Obligations.

        "Collateral Asset Sale" means the sale, lease, conveyance or other disposition, direct or indirect, of First Lien Collateral; provided that the sale, conveyance or other disposition of all or substantially all of the assets of HBMS and its Restricted Subsidiaries, taken as a whole, will be governed by the provisions of the indenture described above under the caption "—Repurchase at the Option of Holders—Change of Control" and/or the provisions described above under the caption "—Certain Covenants—Merger, Consolidation or Sale of Assets" and not by the provisions of the Collateral Asset Sale covenant.

        Notwithstanding the preceding, the following items will not be deemed to be Collateral Asset Sales:

        (1)   a transfer of assets between or among HBMS and any Subsidiary Guarantors;

        (2)   an issuance of Equity Interests by a Guarantor to HBMS or to another Subsidiary Guarantor;

        (3)   the creation of any Lien not prohibited by the covenant described under "Certain Covenants—Liens" above;

        (4)   foreclosures on assets;

        (5)   a transfer of real property to a provincial, county, local, municipal or other governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency that enhances the value of mining properties owned by HBMS or a Guarantor; provided that, if the Fair Market Value of property is in excess of $1.0 million, the Board of Directors has determined in good faith that such exchange is in the best interest of HBMS;

        (6)   any Production and Capacity Arrangement;

        (7)   the sale or other disposition of an asset or an interest in real property pursuant to Third Party Mining Arrangements;

        (8)   any Structured Arrangement; and

        (9)   a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "—Certain Covenants—Restricted Payments."

        "Common Stock" of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding-up of such Person, to shares of Capital Stock of any other class of such Person.

        "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

        (1)   provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

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        (2)   consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

        (3)   depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), accretion expense in respect of asset retirement obligations and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus

        (4)   non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with GAAP; provided that, if the consolidated financial statements of HBMS include a minority interest, the amounts in the foregoing clauses (1) to (4) shall be calculated net of any such amounts included in determining the minority interest.

        Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary of HBMS will be added to Consolidated Net Income to compute Consolidated Cash Flow of HBMS only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to HBMS by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders.

        "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

        (1)   the Net Income of any Person (other than the referent Person) that is not a Restricted Subsidiary of the specified Person or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the specified Person;

        (2)   the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders;

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        (3)   non-cash charges relating to employee benefit or other management compensation plans of the Company or any of its Restricted Subsidiaries or any non-cash compensation charge arising from any grant of stock, stock options or other equity-based awards of the Company or any of its Restricted Subsidiaries (excluding in each case any non-cash charge to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense incurred in a prior period), in each case to the extent that such non-cash charges are deducted in computing such Consolidated Net Income, shall be excluded;

        (4)   non-cash impairment charges (i) resulting directly from the Transactions or (ii) with respect to goodwill, intangible assets or deferred financing fees shall, in each case, be excluded; and

        (5)   the cumulative effect of a change in accounting principles will be excluded.

        "Consolidated Net Worth" means, with respect to any specified Person as of any date, the sum of:

        (1)   the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus

        (2)   the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock.

        "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of who:

        (1)   was a member of such Board of Directors on the date of the indenture; or

        (2)   was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

        "Credit Facilities" means, one or more debt facilities or commercial paper facilities in existence on or entered into after the date of the indenture, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or Hedging Obligations, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

        "Credit Facility Agent" means, at any time in respect of any Credit Facility, the administrative agent, collateral agent or collateral trustee for holders of Credit Facility Obligations that holds the Liens securing such Obligations.

        "Credit Facility Collateral" means, at any time in respect of any Credit Facility:

        (1)   all inventory of HBMS and the guarantors under the Credit Facility;

        (2)   all receivables of HBMS and the guarantors under the Credit Facility and all security therefor;

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        (3)   all cash received from the collateral referred to in clause (2) above; and

        (4)   shares of capital stock of certain of our material Subsidiaries.

        "Credit Facility Obligations" means Indebtedness under a Credit Facility permitted to be incurred under clause (1) or (16) of the covenant described in the second paragraph under the caption "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" and other Obligations (not constituting Indebtedness) under such Credit Facility (which may, but need not, include Hedging Obligations and obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Credit Facility or any of its Affiliates).

        "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

        "Disqualified Stock" of a person means any Capital Stock of that person that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock of HBMS thereof solely because the holders of the Capital Stock have the right to require such issuer to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that HBMS may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "—Certain Covenants—Restricted Payments."

        "Domestic Subsidiary" means any Restricted Subsidiary that is incorporated or organized under the laws of Canada or of any province or territory of Canada.

        "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

"Exchange Notes" means the Notes offered hereby which are being issued pursuant to the registration rights agreement described above in exchange for the original notes or any exchange notes issued in exchange for any Additional Notes pursuant to any similar registration rights agreement (which Exchange Notes, in each case, shall evidence the same continuing Debt as the Notes for which they are exchanged).

        "Excluded Assets" means:

        (1)   Reclamation Collateral;

        (2)   with respect to personal property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as (i) the grant of a security interest therein constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed and (ii) such abandonment, invalidation, unenforceability, breach, termination or default is not rendered ineffective pursuant to any applicable law or principles of equity; provided, however, that (a) such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Note Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the security documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement, and (b) the proceeds of any sale, lease or other disposition of any such lease, license, interest, permit, franchise, power, authority or right that is or becomes an Excluded Asset shall not be an Excluded Asset unless they satisfy the conditions set forth in clauses (i) and (ii) of this definition;

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        (3)   with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as the grant of a security interest therein (i) requires a third party consent or (ii) constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed; provided, however, that such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in this definition are and remain satisfied and to the extent such assets otherwise constitute Note Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the security documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement;

        (4)   other property in which a security interest cannot be perfected by the filing of a financing statement under applicable personal property security legislation; and

        (5)   any property acquired in connection with a Structured Arrangement.

        "Existing Indebtedness" means the Province of Manitoba loan (as described elsewhere in this prospectus) and the other Indebtedness of HBMS and its Restricted Subsidiaries in existence on the date of the indenture after giving effect to the Transactions (as defined in this prospectus), including the Amalgamation, until such amounts are repaid.

        "Fair Market Value" means, with respect to any Property, the price that could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined, except as otherwise provided, (i) if such Property has a Fair Market Value equal to or less than $5.0 million, by the principal financial officer of HBMS, or (ii) if such Property has a Fair Market Value in excess of $5.0 million, by the Board of Directors of HBMS acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of HBMS.

        "Fixed Charges" means, with respect to any specified Person and its Restricted Subsidiaries for any period, the sum, without duplication, of:

        (1)   the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations relating to interest; plus

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        (2)   the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

        (3)   any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

        (4)   the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock or preferred stock, as the case may be,) or to such Person or a Restricted Subsidiary of such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, provincial, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP.

        "Fixed Charges" does not include accretion expense in respect of asset retirement obligations.

        "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems Disqualified Stock or preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.

        In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

        (1)   acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, amalgamations or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period will be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act or the equivalent rule under Canadian securities laws;

        (2)   the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded; and

        (3)   the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date.

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        "Flow-through Stock" means capital stock that is issued to a person under a written agreement between the person and a corporation under which the corporation agrees (i) to incur, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share is to be issued; and (ii) to renounce, before March of the first calendar year that begins after that period, to the person in respect of the share, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share.

        "GAAP" means, as of any date of determination, generally accepted accounting principles in Canada and which are applicable as of any date of determination.

        "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

        "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under:

        (1)   interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and

        (2)   other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates, or interest rates or commodity prices;

entered into in the ordinary course of business and not for speculative purposes.

        "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

        (1)   in respect of borrowed money;

        (2)   evidenced by bonds, Notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

        (3)   in respect of banker's acceptances;

        (4)   representing Capital Lease Obligations;

        (5)   representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

        (6)   representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person; provided that, where such Indebtedness is not assumed and recourse for the obligation of such Indebtedness is limited to the value of the asset secured, the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset as of the date of determination and (b) the amount of such Indebtedness) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person. "Indebtedness" does not include liabilities associated with the costs of decommissioning and restoring facilities or real property of a Person, including amounts recorded as asset retirement obligations upon a balance sheet of the specified Person in accordance with GAAP.

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        The amount of any Indebtedness outstanding as of any date will be:

        (1)   the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

        (2)   the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness; and

        (3)   the liquidation preference and any mandatory redemption payment obligation in respect of any Disqualified Stock and preferred stock of a Restricted Subsidiary.

        "Intercreditor Agreement" means an Intercreditor Agreement among the trustee, the Collateral Agent and the Credit Facility Agent with terms substantially as described under "—Intercreditor Agreement with Credit Facility Agent", as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms.

        "Inventory" means all inventory comprising minerals and mineral bearing substances after they have been extracted, recovered or removed from a deposit and all work in progress and finished mineral products therefrom.

        "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations but excluding the Subsidiary Guarantees), advances or capital contributions (excluding commission, payroll, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities of such other Person, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If HBMS or any Restricted Subsidiary of HBMS sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of HBMS such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of HBMS, HBMS will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "—Certain Covenants—Restricted Payments". The acquisition by HBMS or any Restricted Subsidiary of HBMS of a Person that holds an Investment in a third Person will be deemed to be an Investment by HBMS or such Restricted Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption "—Certain Covenants—Restricted Payments."

        "Lenders" has the meaning given to that term in the Credit Facility.

        "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any option or other agreement to sell or give a security interest in such asset.

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        "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends payable by such Person, excluding, however:

        (1)   any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

        (2)   any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

        "Net Proceeds" means an amount equal to the aggregate cash proceeds received by HBMS or any of its Restricted Subsidiaries in respect of any Asset Sale or Collateral Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale or Collateral Asset Sale), net of the direct costs relating to such Asset Sale or Collateral Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale or Collateral Asset Sale, taxes paid or payable as a result of the Asset Sale or Collateral Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale or Collateral Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

        "Non-Recourse Debt" means Indebtedness:

        (1)   as to which neither HBMS nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;

        (2)   no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of HBMS or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and

        (3)   as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of HBMS or any of its Restricted Subsidiaries.

        "Note Collateral" has the meaning set forth under the caption "—Security—Note Collateral."

        "Note Documents" means the indenture, the Notes, the Exchange Notes, the Subsidiary Guarantees and the security documents.

        "Note Obligations" means the Notes (including all Additional Notes and all Exchange Notes therefor), the Subsidiary Guarantees and all other Obligations of any obligor under the Note Documents.

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        "Obligations" means any principal, premium (if any), interest (including special interest), if any, and interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to HBMS or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including special interest), guarantees (including the Subsidiary Guarantees) and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof.

        "Parent" means any direct or indirect parent company of HBMS.

        "Permitted Business" means any business that derives a majority of its revenues from any of the businesses engaged in by HBMS and its Restricted Subsidiaries on the date of original issuance of the Notes and/or activities that are reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, any of the businesses in which HBMS and its Restricted Subsidiaries are engaged on the date of original issuance of the Notes.

        "Permitted Investments" means:

        (1)   any Investment in HBMS or in any Restricted Subsidiary;

        (2)   any Investment in Cash Equivalents;

        (3)   any Investment in a Person, if as a result of such Investment:

        (a)   such Person becomes a Restricted Subsidiary of HBMS; or

        (b)   such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, HBMS or any Restricted Subsidiary of HBMS;

        (4)   any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "—Repurchase at the Option of Holders—Asset Sales";

        (5)   any Investment to the extent the consideration therefor is composed of Equity Interests (other than Disqualified Stock) of HBMS;

        (6)   any Investments by a Person received (i) in compromise or resolution of (A) obligations payable to such Person in its capacity as trade creditor or from customers, which obligations were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer, or (B) litigation, arbitration or other disputes; or (ii) as a result of a foreclosure by HBMS or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

        (7)   Investments represented by Hedging Obligations;

        (8)   an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

        (9)   an Investment in Considar Metal Marketing S.A. or its Subsidiary, Considar Metal Marketing Inc., to purchase the White Pine Copper Refinery Inc.

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        (10) Investments in Considar Metal Marketing S.A. and its Subsidiaries having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) at any one time outstanding (but excluding any Investment made pursuant to clause (9) above) not to exceed $250,000;

        (11) Investments (other than Investments in the form of cash or Cash Equivalents) in Permitted Joint Ventures having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) not to exceed at any one time outstanding 5.0% of Total Assets;

        (12) repurchases of the Notes (including any Additional Notes) or the Exchange Notes;

        (13) Investments in Permitted Joint Ventures, to the extent that such Investments are funded from Flow-through Stock; and

        (14) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (13) since the date of the indenture, not to exceed $2.0 million.

        "Permitted Joint Venture" means any venture with another Person or Persons in the ordinary course of, and of a nature that is or shall have become customary in, a Permitted Business as a means of actively exploiting, exploring for, acquiring, developing, producing, processing, marketing or transporting metals, minerals or other products produced in association therewith through agreements, transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of a Permitted Business jointly with third parties, including, without limitation: (1) ownership interests in mineral properties, processing facilities or ancillary real property interests; and (2) operating, processing, farm-in, farm-out, development, area of mutual interest, unitization, pooling, joint bidding, joint venture, service, partnership, subscription and stock purchase agreements and other similar agreements.

        "Permitted Liens" means:

        (1)   Liens to secure Indebtedness permitted by clause (1) of the second paragraph of the covenant entitled "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" on property and assets of HBMS and its Restricted Subsidiaries except property and assets constituting First Lien Collateral;

        (2)   Liens created pursuant to the security documents securing the Notes and the Subsidiary Guarantees (including Additional Notes and Exchange Notes and the related Subsidiary Guarantees);

        (3)   (i) Liens on the Reclamation Collateral securing Obligations under the Reclamation Security Agreements, including (ii) the power, license and permission to enter upon the lands described in the Reclamation Security Agreements for the purpose of realizing on the Liens granted under the Reclamation Security Agreements;

        (4)   Liens in favor of HBMS, a Guarantor or any Wholly Owned Restricted Subsidiary;

        (5)   Liens on property of a Person existing at the time such Person is merged with or into or consolidated with HBMS or any Restricted Subsidiary of HBMS; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with HBMS or the Restricted Subsidiary;

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        (6)   Liens on property existing at the time of acquisition of the property by HBMS or any Restricted Subsidiary of HBMS, provided that such Liens were in existence prior to the contemplation of such acquisition;

        (7)   Liens to secure the performance of statutory obligations or regulatory requirements (including reclamation obligations), bid, surety or appeal bonds, performance bonds, warranty or contractual requirements or other obligations of a like nature incurred in the ordinary course of business;

        (8)   Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired, constructed, leased or improved, as the case may be, with such Indebtedness;

        (9)   Liens existing on the date of the indenture on any asset of HBMS or any of its Subsidiaries;

        (10) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

        (11) Liens securing Indebtedness under Hedging Obligations; provided, that (a) such Liens are only secured by property or assets that secure the Indebtedness subject to the Hedging Obligation; (b) if such Hedging Obligations are with one or more parties to Credit Facilities, then secured by the same collateral as secures the applicable Credit Facilities; or (c) such Liens are restricted to cash or Cash Equivalents in an amount not exceeding US$10 million.

        (12) Liens securing Permitted Refinancing Indebtedness incurred to refinance any secured Indebtedness; provided that the Liens securing such Permitted Refinancing Indebtedness are not extended to any additional assets or property;

        (13) contract mining agreements and leases or subleases granted to others that do not materially interfere with the ordinary conduct of business of HBMS or its Restricted Subsidiaries;

        (14) Liens on and pledges of the Equity Interests of Unrestricted Subsidiaries;

        (15) Liens with respect to the Capital Stock of a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale of all or substantially all of the Capital Stock of such Restricted Subsidiary, pending the closing of such sale or disposition;

        (16) Royalty interests or other Liens on interests in real property, or the production from such property, pursuant to Third Party Mining Arrangements;

        (17) Liens on cash or inventory in favor of a customer in a Production and Capacity Arrangement limited to an amount equal to the prepayment, or the future production that is the subject of the prepayment, under such arrangement; and

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        (18) Liens not otherwise permitted by clauses (1) through (17) above incurred in the ordinary course of business of HBMS or any Restricted Subsidiary of HBMS with respect to obligations that do not exceed $10 million at any one time outstanding.

        "Permitted Payments to Parent" means, without duplication as to amounts, any payment of dividends, distributions or other amounts to the Parent in amounts required to permit Parent to pay (1) reasonable accounting, legal and administrative expenses of the Parent (including compensation of the Parent's directors, officers, employees and consultants) when due in an aggregate amount not to exceed $2.5 million per calendar year, (2) federal, provincial, state and local income taxes to the extent such income taxes are attributable to the income of HBMS and its Subsidiaries, (3) franchise taxes or other fees required to maintain Parent's existence, and (4), if applicable, to pay interest and/or principal on Indebtedness of Parent the proceeds of which have been contributed to HBMS or any of its Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, HBMS incurred in accordance with the covenant described under "—Incurrence of Indebtedness and Issuance of Preferred Stock."

        "Permitted Prior Liens" means:

        (1)   Liens described in clauses (1), 3(ii), (5), (6), (7), (8), (9), (11), (13), (14), (15) and (17) of the definition of "Permitted Liens";

        (2)   Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the security documents;

        (3)   restrictions, easements, rights-of-way, servitudes or other similar rights in land (including, without limiting the generality of the foregoing, rights-of-way and servitudes for railways, sewers, drains, gas and oil pipelines, gas and water mains, electric light and power and telephone or telegraph or cable television conduits, poles, wires and cables) granted to or reserved or taken by other persons which singly or in the aggregate do not materially detract from the value of the land concerned or materially impair its use for the purpose for which it is held;

        (4)   security given to a public utility or any municipality or governmental or other public authority which is required by such utility or municipality or other authority in connection with any Permitted Business, all in the ordinary course thereof which singly or in the aggregate does not materially detract from the value of the assets concerned or materially impair their use and for the purpose for which they are held;

        (5)   any reservations, limitations, provisos and conditions expressed in any original grant from the Crown;

        (6)   Liens by reason of a judgment or decree not otherwise resulting in an Event of Default;

        (7)   Liens in favor of customs and revenue authorities to secure payments of customs duties in connection with importation of goods;

        (8)   Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security;

        (9)   Liens encumbering property or assets under construction arising from progress or partial payments by customers of HBMS or its Restricted Subsidiaries relating to such property or assets;

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        (10) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by HBMS or any of its Restricted Subsidiaries in the ordinary course of business;

        (11) Liens in mineral property or products derived from such property to secure obligations incurred or guarantees of obligations incurred in connection with or necessarily incidental to commitments of purchase or sale of, or the transporting, storage or distribution of, such property or the products derived from such property; provided that such Liens are not created or incurred in connection with any Indebtedness;

        (12) Liens securing insurance premium financing arrangements; provided that such Lien is limited to the applicable insurance contracts;

        (13) title defects or irregularities which are of a minor nature and in the aggregate will not materially impair the use of the property for the purpose for which it is held; and

        (14) Liens that are stated, in a Credit Facility or related security document, to be permitted prior liens under such Credit Facility.

        "Permitted Refinancing Indebtedness" means any Indebtedness of HBMS or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease, purchase, repurchase or refund other Indebtedness of HBMS or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

        (1)   the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on, and any premium or penalties required to be paid under the terms of the instrument governing, the Indebtedness and the amount of all fee, expenses and premiums incurred in connection therewith);

        (2)   such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded;

        (3)   if the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded; and

        (4)   such Indebtedness is incurred either by HBMS or by the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded.

        "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

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        "Production and Capacity Arrangements" means any agreement or other arrangement for the sale of future metal production or treatment and refining capacity of HBMS or its Restricted Subsidiaries.

        "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Equity Interests in, and other securities of, any other Person.

        "Public Equity Offering" means (1) an offer and sale of Common Stock of HBMS or (2) an offer and sale of Common Stock of a direct or indirect parent company of HBMS (to the extent the net proceeds therefrom are contributed to the equity capital of HBMS) pursuant to (x) a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of HBMS or such direct or indirect parent company), (y) a prospectus qualified with one or more securities commissions in Canada, or (z) a private issuance exempt from registration under the Securities Act.

        "Receivables" means all debts, claims, demands and choses in action (including all book debts and accounts) of HBMS or any Subsidiary Guarantor due from any sale or other disposition of any Inventory, together with the benefit of all judgments and all other securities for such debts, claims, demands and choses in action and all other rights and benefits in respect thereto to which such Person is now or may hereafter become entitled.

        "Reclamation Collateral" means all present and after-acquired mining equipment, buildings and fixtures owned by HBMS and located on the lands set forth in the Reclamation Security Agreements, all increases, additions, accretions, attachments, parts, profits and accessions to any of this collateral, together with any substitutions for and replacements and renewals of any of this collateral, and all proceeds derived directly or indirectly from any dealing with any of this collateral (or any dealings with such proceeds), whether or not of the same type, class or kind as the original property, including a right to insurance payment or any other payment as indemnity or compensation for loss or damage, and payments made in the total or partial discharge of an intangible, chattel paper, an instrument, a security or a mortgage or charge in respect of an interest in land.

        "Reclamation Security Agreements" means (i) the Security Agreement, issued on May 7, 2004, by HBMS in favor of Her Majesty the Queen in Right of the Province of Manitoba, and (ii) the Security Agreement, issued on March 31, 1999, by HBMS in favor of Her Majesty the Queen in Right of the Province of Saskatchewan, in each case with respect to the implementation of approved closure plans relating to HBMS's operations in the provinces of Manitoba and Saskatchewan, as such agreements may be amended, modified, renewed, restated or replaced, in whole or in part, from time to time.

        "Restricted Investment" means an Investment other than a Permitted Investment.

        "Restricted Subsidiary" of a Person means any Subsidiary of that Person that is not an Unrestricted Subsidiary.

        "security documents" means the Intercreditor Agreement and one or more security agreements, pledge agreements, collateral assignments, mortgages, collateral agency agreements, deed of trust or other grants or transfers for security executed and delivered by HBMS or any Subsidiary Guarantor creating (or purporting to create) a Lien upon Note Collateral in favor of the Collateral Agent equally and ratably for the benefit of the holders of the Note Obligations, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms.

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        "Significant Subsidiary" means any Subsidiary of HBMS that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof.

        "Standstill Default" means a default under any Credit Facility.

        "Standstill Notice" means the notice delivered by the Credit Facility Agent to the trustee of the commencement of a Standstill Period.

        "Standstill Period" means the period of time which (a) commences with the delivery of a Standstill Notice to the trustee and (b) expires on the date which is the earlier of (i) 120 days from the date of such delivery and (ii) such time as the Standstill Defaults shall have been cured or waived in writing by the Credit Facility Agent.

        "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

        "Structured Arrangement" means any transaction, between HBMS or any of its Restricted Subsidiaries and another Person, the effects of which include the realization of tax benefits by such other Person from tax losses or unclaimed deductible expenses of HBMS (or a Restricted Subsidiary, as the case may be); provided, that (1) HBMS delivers to the trustee a resolution of the Board of Directors set forth in an officers' certificate certifying that the transaction is, in their good faith judgment, fair, from a financial point of view, to HBMS or such Restricted Subsidiary and (2), if such transaction is an Affiliate Transaction, the transaction complies with the requirements of the covenant set forth under "Certain Covenants—Transactions with Affiliates"; provided, further, that if such transaction thereafter ceases to satisfy the preceding requirements as a Structured Arrangement, it will thereafter cease to be a Structured Arrangement for purposes of the indenture and shall be deemed to be effected as of such date and, if the transaction is not otherwise permitted by the indenture as of such date, HBMS will be in default under the indenture if such transaction does not comply with the preceding requirements or is otherwise unwound within 30 days of that date.

        "Subsidiary" means, with respect to any specified Person:

        (1)   any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

        (2)   any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

        "Subsidiary Guarantee" means the Guarantee by each Subsidiary Guarantor of HBMS's payment obligations under the indenture and on the Notes, executed pursuant to the terms of the indenture.

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        "Subsidiary Guarantors" means:

        (1)   each Restricted Subsidiary of HBMS that is a Domestic Subsidiary as of the date of the indenture; and

        (2)   any other Restricted Subsidiary of HBMS that executes a Subsidiary Guarantee in accordance with the provisions of the indenture;

and their respective successors and assigns.

        "Third Party Mining Arrangements" means any arrangement with another Person or Persons of a nature that is, or shall have become customary in, a Permitted Business for the purposes of sharing the risks or costs of exploring, acquiring, developing or producing minerals from property owned by HBMS or a Restricted Subsidiary, including, without limitation, operating, processing, farm-in, farm-out, development, area of mutual interest, unitization, pooling, joint bidding, joint venture, service, partnership, subscription and stock purchase agreements and other similar agreements.

        "Total Assets" of any Person means, as of any date, the consolidated total assets determined in accordance with GAAP, and set forth on a consolidated balance sheet of such Person and its Restricted Subsidiaries, as of the end of the most recently ended fiscal quarter for which internal financial statements are available.

        "Trust Monies Account" means an account maintained with the trustee or its agent into which are deposited, by or on behalf of HBMS, trust monies derived from releases or dispositions of Note Collateral.

        "Unrestricted Subsidiary" means Mingold Resources Inc. and any Subsidiary of HBMS that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

        (1)   has no Indebtedness other than Non-Recourse Debt;

        (2)   is not party to any agreement, contract, arrangement or understanding with HBMS or any Restricted Subsidiary of HBMS unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to HBMS or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of HBMS;

        (3)   is a Person with respect to which neither HBMS nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results;

        (4)   has at least one director on its Board of Directors that is not a director or executive officer of HBMS or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of HBMS or any of its Restricted Subsidiaries; and

        (5)   does not own, lease or otherwise have an interest in Note Collateral.

        "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

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        "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

        (1)   the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

        (2)   the then outstanding principal amount of such Indebtedness.

        "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

EARNINGS COVERAGES

HBMS

        HBMS's interest expense for the twelve month periods ended December 31, 2004 was $3.7 million. HBMS's earnings before interest expense and income tax for the twelve month period ended December 31, 2004 were $55.2 million, for an interest coverage ratio for the twelve month period ended December 31, 2004 of 15 times.

        Giving effect to the issuance of the original notes, HBMS's interest expense for the twelve month period ended December 31, 2004 would have been $25 million. Giving effect to the issuance of the original notes, HBMS's earnings before interest expense and income tax for the twelve month period ended December 31, 2004 would have been $76.4 million, for an interest coverage ratio for the twelve month period ended December 31, 2004 of 3.1 times.

HudBay

        HudBay's interest expense for the twelve month period ended December 31, 2004 was $1.6 million. Consolidated loss before interest expense and income tax for the twelve month period ended December 31, 2004 was $8.8 million for a deficiency of earnings required to attain an earnings coverage ratio of one-to-one of $10.4 million.

        Giving effect to the issuance of the original notes and the acquisition of HBMS as if they both occurred on January 1, 2004, HudBay's interest expense for the twelve month period ended December 31, 2004 would have been $25.6 million. Giving effect to the issuance of the original notes and the acquisition of HBMS, HudBay's consolidated earnings before interest expense and income tax for the twelve month period ended December 31, 2004 would have been $69.8 million for an interest coverage ratio for the twelve month period ended December 31, 2004 of 2.7 times.

MATERIAL FEDERAL INCOME TAX CONSIDERATIONS

U.S. Federal Income Tax Considerations

        The following summary discusses certain material U.S. federal income tax consequences to U.S. Holders (as defined below) relating to the exchange of original notes for exchange notes and the ownership and disposition of the notes. This summary deals only with notes held as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This summary does not address any state, local, or foreign tax consequences. Additionally, this summary does not address the tax consequences applicable to special classes of holders, including:

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•

holders who may be subject to special tax treatment, such as dealers in securities or foreign currencies, banks, financial institutions, insurance companies, tax-exempt entities and traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;



•

holders holding the notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle;



•

holders of the notes whose "functional currency" is not the U.S. dollar; or



•

holders subject to the alternative minimum tax.

        The summary below is based upon the provisions of the Code, its legislative history, existing and proposed U.S. Treasury regulations, published rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, resulting in U.S. federal income tax consequences different from those discussed below. There can be no assurance that the Internal Revenue Service (the "IRS") will not challenge one or more of the tax consequences discussed herein.

This summary of U.S. federal income tax consequences is for general information only. You should consult your own tax advisors concerning the U.S. federal income tax consequences to you and any consequences arising under the laws of any other taxing jurisdiction of the ownership and disposition of the notes.

U.S. Holders

        For purposes of this summary, you are a "U.S. Holder" if you are a beneficial owner of the notes that is:

•

a citizen or resident alien individual of the United States;



•

a corporation (or any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;



•

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or



•

a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

        If a partnership holds the notes, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the notes, you should consult your tax advisor regarding the consequences, under the Code and the laws of any other taxing jurisdiction, of the ownership of notes by such partnership.

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Exchange of Original Notes

        The exchange of original notes for exchange notes generally will not be a taxable exchange for U.S. federal income tax purposes. As a result, (i) you will not recognize any gain or loss upon the exchange of an original note for an exchange note; (ii) the holding period of the exchange note received will include the holding period of the original note exchanged therefor; and (iii) your adjusted tax basis in the exchange note received will be the same as the adjusted tax basis of the original note exchanged therefor immediately before such exchange.

Interest on the Notes

        Interest on the notes generally will be taxable to you as ordinary income at the time it is paid or accrued in accordance with your regular method of accounting for U.S. federal income tax purposes. Such interest generally will be treated as income from outside the United States, and, for taxable years beginning on or before December 31, 2006, generally will be treated as "passive income", or in the case of certain U.S. Holders, "financial services income", for U.S. foreign tax credit purposes. Recently enacted legislation will modify the U.S. foreign tax credit limitation by reducing the number of classes of income from sources outside the United States to two for taxable years beginning after December 31, 2006. Interest paid in such years generally will be treated as "passive category income", or in the case of certain U.S. Holders, "general category income", for U.S. foreign tax credit purposes.

Market Discount

        If you purchased a note at a price less than the note's principal amount, the amount of the difference will be treated as market discount unless such difference is less than a specified de minimis amount (generally .0025 of the note's principal amount times the number of complete years to maturity from the date you acquired the note). Market discount generally accrues ratably over the remaining term of a note unless a holder elects to accrue market discount on a constant yield basis. If you are a U.S. Holder of a note with market discount, you will be required to treat any gain recognized on the sale or other disposition of the note as ordinary income rather than capital gain to the extent of the market discount accrued on the note. You may elect to include market discount in income as it accrues, in which case any gain recognized on the sale or other disposition of a note will be capital gain. Such election will apply to all debt instruments that you acquire during or after the taxable year to which the election applies, and may only be revoked with the consent of the IRS. Market discount generally will be treated as income from outside the United States, and, for taxable years beginning on or before December 31, 2006, generally will be treated as "passive income", or in the case of certain U.S. Holders, "financial services income", for U.S. foreign tax credit purposes. For taxable years beginning after December 31, 2006, market discount generally will be treated as "passive category income", or in the case of certain U.S. Holders, "general category income", for U.S. foreign tax credit purposes.

Bond Premium

        If you purchased a note at a price in excess of the amount payable at maturity, you generally may elect to amortize the excess, or bond premium, over the remaining term of the note on a constant yield method as an offset to interest. If you elect to amortize bond premium, the amortized bond premium will reduce your basis in the note. Such an election to amortize bond premium as an offset to interest income in respect of a note accordingly should offset your interest income from outside the United States. If you do not elect to amortize bond premium, that premium will decrease the gain or increase the loss you would otherwise recognize on disposition of the note. An election to amortize bond premium on a constant yield method will also apply to all debt instruments that you hold or subsequently acquire during or after the taxable year to which the election applies. The election may not be revoked without the consent of the IRS.

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Sale, Exchange, Redemption or other Disposition of the Notes

        You generally will recognize gain or loss upon the sale, exchange (other than an exchange of an original note for an exchange note, as discussed above), redemption or other disposition of a note equal to the difference between the amount realized upon the sale, exchange, redemption or other disposition (reduced by any amounts attributable to accrued but unpaid interest, which will be taxable to you as interest as described above) and your adjusted tax basis in the note. Your adjusted tax basis in a note is generally the price you paid for the note, increased by any market discount previously included in income and reduced (but not below zero) by any amortized bond premium. Any gain or loss that you recognize on a disposition of a note will be capital gain or loss, and will be long-term capital gain or loss if you have held the note for more than one year at the time of disposition. Your ability to deduct capital losses against ordinary income may be limited.

Information Reporting and Backup Withholding

        In general, information reporting requirements will apply to certain payments of principal and interest on the notes and the proceeds of the sale of a note unless you are an exempt recipient (such as a corporation). Backup withholding tax will apply to such payments if you fail to provide your taxpayer identification number or certification of exempt status or fail to report in full interest and dividend income. You should consult your tax advisors as to your qualification for exemption from backup withholding and the procedure for obtaining such an exemption.

        Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax provided that you furnish the required information to the IRS in a timely manner.

Canadian Federal Income Tax Considerations

        The following is a summary of the principal Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) (the "Canadian Tax Act") to a person who purchased an original note and who, for purposes of the Canadian Tax Act and at all relevant times deals at arm's length with us and is not affiliated with us and holds the notes as capital property (an "Unconnected Holder"). Generally, the notes would be considered to be capital property to a holder provided that the holder does not hold the notes in the course of carrying on a business and has not acquired them in one or more transactions considered to be an adventure in the nature of trade. For the purposes of the Canadian Tax Act, related persons (as therein defined) are deemed not to deal at arm's length, and it is a question of fact as to whether unrelated persons deal at arm's length. This summary is not applicable to a holder that is a financial institution (as defined in the Canadian Tax Act for purposes of the mark-to-market rules), a specified financial institution, a holder an interest in which is a tax shelter investment (all as defined in the Canadian Tax Act), or an insurer that carries on business in Canada and elsewhere.

        This summary is based upon the facts set out in this offering, the provisions of the Canadian Tax Act and the regulations under the Canadian Tax Act (the "Regulations") in force at the date of this offering and our understanding of the current published administrative and assessing practices and policies of the Canada Revenue Agency (the "CRA") and takes into account all specific proposals to amend the Canadian Tax Act and the Regulations which have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date of this offering ("Tax Proposals"). There can be no assurance that any Tax Proposals will be implemented in their current form or at all. This summary is not exhaustive of all possible Canadian federal income tax considerations, and, except for the Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial decision or action, or CRA administrative practices or policies, nor does it take into account other federal or any provincial, territorial or foreign tax legislation or considerations, which may differ significantly from those discussed in this offering.

114

        This discussion is of a general nature only, and is not intended to be, nor should it be interpreted as, legal or tax advice to any particular Unconnected Holder and no representation is made with respect to the Canadian income tax consequences to any particular person acquiring notes. Unconnected Holders should therefore consult their own tax advisors with respect to their particular circumstances.

Holders Resident in Canada

        This portion of the summary is applicable to Unconnected Holders who, at all relevant times and for purposes of the Canadian Tax Act, are or are deemed to be resident of Canada and an applicable tax treaty or convention ("Resident Unconnected Holders").

Interest Payments

        A Resident Unconnected Holder that is a corporation, partnership, unit trust or any trust of which a corporation or a partnership is a beneficiary will be required to include in computing income for a taxation year any interest accrued to the Resident Unconnected Holder on the notes to the end of the Resident Unconnected Holder's taxation year, or that is receivable or received by the Resident Unconnected Holder before the end of that taxation year, except to the extent that such interest was included in computing the Resident Unconnected Holder's income for a preceding taxation year. Any other Resident Unconnected Holder that is entitled to receive interest earned on the notes will be required to include in income for a taxation year all interest that is received or receivable by such holder in that taxation year, depending on the method regularly followed by the holder in computing income to the extent such interest was not included in computing its income for a preceding year. A Resident Unconnected Holder that is a "Canadian-controlled private corporation" (as defined in the Canadian Tax Act) may be liable to pay an additional refundable tax of 6²/3% on certain investment income, including interest.

Dispositions

        On a disposition or deemed disposition of a note, including a redemption or purchase by HBMS or a repayment by HBMS upon maturity, a Resident Unconnected Holder will generally be required to include in computing its income for the taxation year in which the disposition occurred all interest on the note that has accrued to the holder from the last interest payment date to the extent that such interest has not otherwise been included in its income for the year or a preceding year.

        In general, a disposition or deemed disposition of a note will give rise to a capital gain (or capital loss) equal to the amount by which the proceeds of disposition, net of accrued interest and any costs of disposition, exceed (or are exceeded by) the adjusted cost base of the note to the holder. The amount of any capital loss otherwise determined may be limited or suspended in certain circumstances. Generally, one-half of a capital gain must be included in income as a taxable capital gain, and one-half of a capital loss is an allowable capital loss. An allowable capital loss for a year normally may be deducted by the holder in computing income to the extent of any taxable capital gains for the year. Any allowable capital loss not deductible in the year may be deducted against taxable capital gains in computing taxable income for any of the three preceding taxation years or any subsequent taxation year (in accordance with the detailed rules contained in the Canadian Tax Act). Capital gains realized by an individual will be relevant in computing possible liability under the alternative minimum tax. A Resident Unconnected Holder that is a "Canadian-controlled private corporation" (as defined in the Canadian Tax Act) may be liable to pay an additional refundable tax of 6²/3% on certain investment income, including taxable capital gains.

115

Exchange of Original Notes

        The exchange of an original note for an exchange note by a Resident Unconnected Holder pursuant to an exchange offer will not constitute a taxable transaction, as the exchange note will be issued as evidence of the same continuing indebtedness of HBMS.

Holders Not Resident in Canada

        This portion of the summary is applicable to Unconnected Holders who, at all relevant times and for purposes of the Canadian Tax Act and any applicable income tax convention, are not and are not deemed to be resident of Canada ("Non-Resident Unconnected Holders").

        Amounts paid or credited, or deemed to be paid or credited, as, on account or in lieu of payment of, or in satisfaction of, the principal amount of the notes or premium or interest on the notes by us to an Unconnected Holder, including in respect of a required offer to purchase the notes, will be exempt from Canadian withholding tax.

        No other taxes on income, including taxable capital gains, will be payable under the Canadian Tax Act by an Unconnected Holder solely as a consequence of the acquisition, ownership or disposition of the notes.

PLAN OF DISTRIBUTION

        Based on positions taken by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the exchange notes issued in exchange for original notes pursuant to this exchange offer may be offered for resale, resold or otherwise transferred by holders thereof, other than any holder which is

•

an "affiliate" of ours within the meaning of Rule 405 under the Securities Act of 1933,



•

a broker-dealer which acquired the original notes directly from us, or



•

a broker-dealer which acquired the original notes for its own account as a result of market-making or other trading activities and will be the beneficial owner (as defined in rule 13d-3 under the Securities Exchange Act of 1933) of the exchange notes,

without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided that such exchange notes are acquired in the ordinary course of such holder's business, and such holder is not participating in, and does not intend to participate in, and has no arrangement or understanding with any person to participate in, a distribution of such exchange notes.

        Each holder of original notes who wishes to exchange its original notes for exchange notes in the exchange offer will be required to make representations to us as set forth in "Exchange Offer". Holders who tender original notes in the exchange offer with the intention of participating in a distribution of the exchange notes may not rely upon no-action letters issued to third parties, including "Exxon Capital Holdings Corporation" (available May 13, 1988), "Morgan Stanley & Co. Incorporated" (available June 5, 1991) and "Shearman & Sterling" (available July 2, 1993), or similar no-action letters.

116

        Each participating broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes received in exchange for original notes where such original notes were acquired as a result of market-making activities or other trading activities.

        We have agreed to use our best efforts to keep the registration statement (of which this prospectus forms a part) effective and to amend and supplement this prospectus in order to permit this prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act of 1933 for such period of time as such persons must comply with such requirements in order to resell the exchange notes (the "resale period"); provided, however, that in the case where this prospectus and any amendment or supplement hereto must be delivered by a participating broker-dealer or an initial purchaser, such period shall be the lesser of:

•

180 days from the date the registration statement (of which this prospectus forms a part) is first declared effective by the SEC (or longer, if extended pursuant to the terms of the registration rights agreement), and



•

the date on which all participating broker-dealers and the initial purchasers have sold all exchange notes held by them.

We have agreed that, for a period of 180 days after the expiration date of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until            , 2005, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

        We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act of 1933 and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act of 1933. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933.

        For a period of 180 days after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the original notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the original notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act of 1933.

117

        By acceptance of this exchange offer, each participating broker-dealer agrees that, upon receipt of notice from us of:

•

any request made by the SEC or any state securities authority for amendments and supplements to the registration statement (of which this prospectus forms a part) or this prospectus or for additional information after the registration statement has become effective;



•

the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of the registration statement (of which this prospectus forms a part) or the initiation of any proceedings for that purpose;



•

the receipt of any notification by us with respect to the suspension of the qualification of the Transfer Restricted Securities to be sold by any participating broker-dealer for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose;



•

the happening of any event or the failure of any event to occur or the discovery of any facts or otherwise during the applicable period which makes any statement made in the registration statement (of which this prospectus forms a part) or this prospectus untrue in any material respect or which causes such registration statement or this prospectus to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or



•

our reasonable determination that a post-effective amendment to the registration statement (of which this prospectus forms a part) would be appropriate

(which notice we agree to provide to any participating broker-dealer that has provided in writing to us a telephone or facsimile number and address for notices), such participating broker-dealer will discontinue its disposition of notes pursuant to the registration statement (of which this prospectus forms a part) until (1) we have amended or supplemented this prospectus to correct such misstatement or omission and have furnished copies of the amended or supplemented prospectus to such participating broker-dealer or (2) we have advised in writing that the use of this prospectus may be resumed. If we give any such notice to suspend the use of this prospectus, we will extend the resale period by the number of days during the period from and including the date of the giving of such notice to and including the date when participating broker-dealers shall have received (1) copies of the supplemented or amended prospectus or (2) our advice in writing as described above.

LEGAL MATTERS

        Certain legal matters in connection with the exchange notes offered hereby will be passed upon for us by Cassels Brock & Blackwell LLP, Toronto, Ontario, with respect to matters of Canadian law, and by Shearman & Sterling LLP, Toronto, Ontario, with respect to matters of United States law.

EXPERTS

        The consolidated financial statements of 152640 Canada Inc. as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003, included in this prospectus have been audited by Deloitte & Touche LLP, independent registered chartered accountants, as stated in their reports (which audit report expresses an unqualified opinion and includes an explanatory paragraph referring to previously issued financial statements, and includes a separate report titled Comments by Independent Registered Chartered Accountants on Canada-United States of America Reporting Differences referring to explanatory paragraphs pertaining to substantial doubt about the ability of 152640 Canada Inc. to continue as a going concern and a change in accounting principle) appearing herein, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

118

        The consolidated financial statements of HudBay Minerals Inc. as at December 31, 2004 and 2003 and for each of the years in the three-year period ended December 31, 2004 incorporated by reference in this prospectus have been audited by KPMG LLP, independent auditors, as stated in their report incorporated by reference herein. In addition, in connection with the consolidated financial statements of HudBay, as at December 31, 2004 and 2003 and for each of the years in the three year period ended December 31, 2004, KPMG LLP has provided comments for U.S. readers related to changes in accounting principles included herein.

        The mineral reserve and mineral resource estimates in respect of our properties in the Provinces of Manitoba and Saskatchewan as included in our Annual Information Form, which is incorporated herein by reference, have been so incorporated and included in this prospectus in reliance on the authority of Kim Lau, P. Geo., and Gary Allen, P. Eng. as experts in mining, engineering and geology. Neither Kim Lau nor Gary Allen has any interest, direct or indirect, in any of our properties. The mineral resources estimates in respect of the Balmat Mine is included in our Annual Information Form, which is incorporated herein by reference, has been so incorporated and included in this prospectus in reliance on the report of John E. Steers, P. Eng., given on his authority as an expert in mining, engineering and geology. Mr. Steers does not have any interest, direct or indirect, in any of our properties. As of the date of this prospectus, each of Kim Lau, Gary Allen or John E. Steers beneficially own, directly or indirectly, less than one per cent of the issued and outstanding shares of HudBay.

DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

        The following documents have been filed with the SEC either separately or as exhibits to the registration statement of which this prospectus forms a part: the documents incorporated by reference herein listed under "Where You Can Find More Information"; the consents of each of KPMG LLP, Chartered Accountants, Deloitte & Touche LLP, Chartered Accountants, John E. Steers, P. Eng., Kim Lau BSc. Geo. and Garry Allen MSc. P.Eng.; certain powers of attorney; the indenture and the first supplemental indenture; the Parent Guarantee, the security documents; the appointment of agent for service of process and undertaking on Form F-X; and the Statement of Eligibility of the Trustee on Form T-1.

119

INDEX TO FINANCIAL STATEMENTS

Pro Forma Consolidated Statement of Operations of HudBay Minerals Inc. for the year ended December 31, 2004	F-2
Consolidated Financial Statements of 152640 Canada Inc. as at December 31, 2003 and 2002 for the years ended December 31, 2003, 2002 and 2001, together with the report of independent registered chartered accountant thereon and the notes thereto	F-11

F-1

Unaudited Pro Forma Consolidated Statement of Operations of

HudBay Minerals Inc.

Year ended December 31, 2004

F-2

COMPILATION REPORT ON
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

To: The Directors of HudBay Minerals Inc.:

We have read the accompanying unaudited pro forma consolidated statement of operations of HudBay Minerals Inc. (the "Corporation" or "HUDBAY") for the year ended December 31, 2004 and have performed the following procedures.

1.

Compared the figures in the column captioned HUDBAY to the audited consolidated statement of operations of the Corporation for the year ended December 31, 2004, and found them to be in agreement.

2.

Compared the figures in the columns captioned HBMS to the unaudited consolidated statement of operations of Hudson Bay Mining and Smelting Co., Limited, ("HBMS") for the nine months ended September 30, 2004 and the consolidated statement of operations of HBMS for the period from October 1, 2004 to December 21, 2004 and found them to be in agreement.

3.

Made enquiries of certain officials of the Corporation who have responsibility for financial and accounting matters about:

(a)

the basis for determination of the pro forma adjustments; and

(b)

whether the pro forma consolidated statement of operations complies as to form in all material respects with the published requirements of Canadian securities legislation.

4.

The officials:

(a)

described to us the basis for determination of the pro forma adjustments; and

(b)

stated that the pro forma consolidated statement of operations complies as to form in all material respects with the published requirements of Canadian securities legislation.

5.

Read the notes to the pro forma consolidated statement of operations, and found them to be consistent with the basis described to us for determination of the pro forma adjustments.

6.

Recalculated the application of the pro forma adjustments to the aggregate of the amounts in the columns captioned HUDBAY and HBMS for the year ended December 31, 2004, and found the amounts in the column captioned Pro forma to be arithmetically correct.

A pro forma financial statement is based on management assumptions and adjustments that are inherently subjective. The foregoing procedures are substantially less than either an audit or a review, the objective of which is the expression of assurance with respect to management's assumptions, the pro forma adjustments, and the application of the adjustments to the historical financial information. Accordingly, we express no such assurance. The foregoing procedures would not necessarily reveal matters of significance to the pro forma financial statements, and we therefore make no representation about the sufficiency of the procedures for the purposes of a reader of such statements.

/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
April 20, 2005

F-3

Comments for United States Readers on Differences Between Canadian and United States Reporting Standards

The above report, provided solely pursuant to Canadian requirements, is expressed in accordance with standards of reporting generally accepted in Canada. To report in conformity with United States standards on the reasonableness of the pro forma adjustments and their application to the pro forma financial statements requires an examination or review substantially greater in scope than the review we have conducted. Consequently, we are unable to express any opinion in accordance with standards of reporting generally accepted in the United States with respect to the compilation of the accompanying unaudited pro forma financial information.

/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
April 20, 2005

F-4

HUDBAY MINERALS INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For The Year Ended December 31, 2004
($000)

	HudBay			HBMS Nine months ended September 30, 2004			HBMS October 1 to December 21, 2004			Pro forma Adjustments (note 3)				Pro forma
Revenue
Sales	$	13,327		$	385,026		$	129,001		$	—			$	527,354
Amortization of deferred charge of derivative instruments		—			4,426			6,653			—				11,079
		13,327			389,452			135,654			—				538,433
Expenses
Operating		14,081			308,378			106,987			(7,448	)	(c)		421,998
General and administrative		3,934			6,068			2,883			—				12,885
Stock option compensation		1,193			—			—			—				1,193
Depreciation and amortization		1,443			39,902			11,029			(2,260	)	(d)		50,114
Accretion		138			1,266			3,245			(1,710 911 (632	) )	(e) (f) (g)		3,218
Exploration		1,734			—			—			—				1,734
		22,523			355,614			124,144			(11,139	)			491,142
Operating (loss) earnings		(9,196	)		33,838			11,510			11,139				47,291
Other income		103			2,662			909			—				3,674
Gain on derivative instruments		78			4,342			3,488			—				7,908
Write-off and amortization of deferred charges		(620	)		—			—			(1,358	)	(b)		(1,978	)
Premium on debenture prepayment		(761	)		—			—			761		(g)		—
Foreign exchange gain (loss)		1,562			(2,192	)		1,445			12,057		(h)		12,872
Interest expense		(1,559	)		0			(3,070	)		(21,311 309	)	(a) (g)		(25,631	)
Net (loss) earnings before taxes		(10,393	)		38,650			14,282			1,597				44,136
Income tax expense (recovery)		(473	)		(150	)		1,641			—				1,018
Net (loss) earnings	$	(9,920	)	$	38,800		$	12,641		$	1,597			$	43,118
Basic earnings (loss) per share (note 4)	$	(1.12	)											$	0.56
Diluted earnings (loss) per share (note 4)	$	(1.12	)											$	0.56
Basic weighted average number of common shares outstanding		8,894,235													76,494,361
Diluted weighted average number of common shares outstanding		8,894,235													76,588,928

F-5

HUDBAY MINERALS INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For The Year Ended December 31, 2004
($000)

1.     BASIS OF PRESENTATION

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2004 is based on the historical financial statements of HudBay Minerals Inc. (the "Corporation") and Hudson Bay Mining and Smelting Co., Limited ("HBMS"). The pro forma consolidated statement of operations has been compiled from information in the:

a)    audited consolidated financial statements of the Corporation for the year ended December 31, 2004;

b)    unaudited consolidated financial statements of HBMS for the nine months ended September 30, 2004;

c)    unaudited consolidated financial information of HBMS for the period from October 1, 2004 to December 21, 2004; and

d)    the additional information described in the "Pro Forma Transactions" below.

The unaudited pro forma consolidated statement of operations should be read in conjunction with the Corporation's historical financial statements and accompanying notes for its fiscal year ended December 31, 2004 included by reference elsewhere in this Short Form Prospectus.

The financial statements of the Corporation and of HBMS used in the preparation of these pro forma consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). In certain respects, GAAP as applied in the United States differs from that applied in Canada (note 5). The Corporation has reviewed the accounting policies of HBMS and believes they are materially consistent with the Corporation's accounting policies. No adjustments have been made to the unaudited pro forma consolidated statement of operations to conform accounting policies.

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2004 gives effect to the acquisition of HBMS, the issuance of the senior secured notes and subscription receipts and the subsequent exchange into common shares and warrants of the Corporation and the repayment of the convertible debentures as if they occurred on January 1, 2004.

The pro forma consolidated statement of operations is based on estimates and assumptions set forth in the notes to such information. The pro forma consolidated statement of operations is being furnished solely for information purposes and is not necessarily indicative of the combined results or financial position that might have been achieved for the period or date indicated, nor is it necessarily indicative of future results that may occur.

Pro forma adjustments are necessary to reflect the issuance of subscription receipts and the subsequent exchange into common shares and warrants of the Corporation, the acquisition of HBMS, the issuance of senior secured notes and related interest and estimated transaction costs and the repayment of convertible debentures. The pro forma adjustments and allocation of the purchase price for HBMS are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized by management and an independent valuator. The final valuation will be based on the actual net tangible and intangible assets of HBMS that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a material change to the unaudited pro forma consolidated statement of operations. In addition, the impact of integration activities could cause material differences in the information presented.

F-6

2.     PRO FORMA TRANSACTIONS

Acquisition of HBMS:

On December 21, 2004, the Company acquired all of the outstanding common shares of HBMS for total purchase consideration of $315,790, plus $4,324 of corporate transaction costs. The total purchase consideration of $315,790 was satisfied by cash of $302,790 and by the issuance to Anglo American International, S.A. of 5,777,777 common shares and 86,666,667 share purchase warrants, where every 30 share purchase warrants are exercisable for one common share at an exercise price of $3.15 per common share. The value of the common share consideration of $11,700 has been determined based on the average of the closing price of the Company's common shares for the two days before and after the date of announcement of the transaction on October 7, 2004. The value of the warrant consideration of $1,300 has been based on a similar method to the valuation of the warrants issued in the public offering.

The following table summarizes the preliminary allocation of the purchase consideration based on management's current best estimate of the fair value of the assets and liabilities acquired on the date of acquisition:

Current assets (including cash of $51,504)	$	229,601
Investments		463
Property, plant and equipment		349,358
Intangible assets		552
Current liabilities		(72,665	)
Debt obligations		(15,179	)
Pensions and post-employment benefit obligations		(130,353	)
Asset retirement obligations		(26,213	)
Obligations under capital leases		(15,074	)
Other non-current liabilities		(376	)
	$	320,114

Management expects to obtain additional information in 2005, including independent valuations, that may require additional adjustments to amounts shown above for property, plant and equipment, intangible assets and asset retirement obligations, and these potential adjustments may be material.

F-7

The excess of the net book value of assets acquired and liabilities assumed over the total consideration was allocated as follows:

Increase (decrease):
Assets
Investment	$	275
Property, plant and equipment		(24,307	)
Intangible assets		552
Future income tax asset		12,900
		10,580
Liabilities
Accrued liabilities		2,193
Debt obligations		(2,321	)
Asset retirement obligations		(10,216	)
Pensions and post-employment benefit obligations		54,358
		44,014
Excess of net book value over purchase price	$	54,594

3.     ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS:

(a)    To record 12 months of interest on the senior secured notes.

(b)    To record 12 months of amortization of the deferred financing costs related to the issuance of the secured subordinate notes.

(c)    To adjust pension and other employee future benefits expense resulting from fair value adjustments booked on acquisition.

(d)    To adjust depreciation and amortization expense resulting from fair value adjustments recorded to property, plant and equipment.

(e)    To adjust accretion expense related to fair value adjustments to asset retirement obligations.

(f)    To adjust accretion expense related to fair value adjustments to provincial loan book obligations.

(g)    To adjust expenses for convertible debt assumed to be eliminated on January 1, 2004.

(h)    To record foreign exchange gains based related to the senior secured notes for differences between the foreign exchange rate from January 1, 2004 to December 31, 2004.

4.     EARNINGS PER SHARE

The calculation of basic earnings per share in the pro forma consolidated statement of operations is based on the pro forma number of common shares of the Corporation outstanding for the year ended December 31, 2004 had the issuance of the common shares of the Corporation related to the pro forma transactions taken place on January 1, 2004.

The share consolidation on a 30 for 1 basis, as outlined in the Prospectus, has been reflected as if the consolidation had taken place on January 1, 2004.

F-8

5.     RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

        If United States GAAP were employed, the pro forma consolidated statement of operations for the year ended December 31, 2004 would be adjusted as follows:

	Pro forma Cdn GAAP			US GAAP Adjustments			Pro forma US GAAP
Revenue
Sales	$	527,354		$	—		$	527,354
Amortization of deferred charge of derivative instruments		11,079			(11,079)	(a)		—
		538,433			(11,079	)		527,354
Expenses
Operating		421,998			—			421,998
General and administrative		12,885			—			12,885
Stock option compensation		1,193			—			1,193
Depreciation and amortization		50,114			5,230	(b)		55,344
Accretion		3,218			—			3,218
Exploration		1,734			—			1,734
		491,142			5,230			496,372
Operating earnings		47,291			(16,309	)		30,982
Other income		3,674			—			3,674
Gain on derivative instruments		7,908			—			7,908
Write-off of deferred charges		(1,978	)		—			(1,978	)
Premium on debenture prepayment		—			—			—
Foreign exchange gain		12,872			—			12,872
Interest expense		(25,631	)		—			(25,631	)
Net earnings before taxes		44,136			(16,309	)		27,827
Income tax expense		1,018			—			1,018
Net earnings	$	43,118		$	(16,309	)	$	26,809
Basic earnings per share	$	0.56					$	0.35
Diluted earnings per share	$	0.56					$	0.35
Basic weighted average number of common shares outstanding		76,494,361						76,494,361
Diluted weighted average number of common shares outstanding		76,588,928						76,588,928

F-9

The areas of material differences between Canadian and United States GAAP and their impact on the pro forma consolidated statement of operations are described below:

a)

Derivative instruments

For U.S. GAAP purposes, the Company adopted Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Investment and Hedging Activities" effective January 1, 2001 ("SFAS 133"). SFAS 133 requires that all derivatives be recorded on the balance sheet as either assets or liabilities at their fair value. Changes in the fair value of derivatives are recognized in the earnings of the current period unless specific hedge accounting criteria are met. Management has not designated any derivative contracts as hedges for U.S. GAAP purposes under SFAS 133.

Prior to January 1, 2004, for Canadian GAAP purposes, gains and losses on derivative contracts were deferred and recognized in the period to which the gains and losses of the underlying transaction relate.

For Canadian GAAP purposes, the Company adopted Accounting Guideline 13, Hedging Relationships ("AcG 13") effective January 1, 2004, and recorded all derivative contracts at their fair value. After January 1, 2004, all changes in the fair market value of the related contracts are being recorded as unrealized gains and losses in the statement of operations. Transition deferred charges and any related amortization arising on adoption of AcG 13 under Canadian GAAP is reversed under U.S. GAAP.

b)

Depreciation and amortization:

Under Canadian GAAP, amortization of mine development costs using the units of production method is calculated using historical costs plus estimated future underground development costs required to access proven and probable reserves. For U.S. GAAP purposes, amortization of mine development costs is calculated using historical capitalized costs incurred. Mine development costs which benefit the entire mine life are amortized over proven and probable reserves and the remainder of the mine development costs are amortized over the currently accessible proven and probable reserves to which these costs relate.

F-10

REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

To the Director of 152640 Canada Inc.

        We have audited the consolidated balance sheets of 152640 Canada Inc. as at December 31, 2003 and 2002 and the consolidated statements of operations and deficit and of cash flows for each of the years in the three year period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the 152640 Canada Inc. as at December 31, 2003 and 2002 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2003 in accordance with Canadian generally accepted accounting principles.

        The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion.

        On October 25, 2004, we issued a report to the director of 152640 Canada Inc. on the consolidated financial statements for the same periods, audited in accordance with Canadian generally accepted auditing standards and prepared in accordance with Canadian generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP
Independent Registered Chartered Accountants
Winnipeg, Canada
November 28, 2004

F-11

COMMENTS BY INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS ON
CANADA-UNITED STATES OF AMERICA REPORTING DIFFERENCES

        The standards of the Public Company Accounting Oversight Board (United States) for auditors require the addition of an explanatory paragraph when the consolidated financial statements are affected by conditions and events that cast substantial doubt on 152640 Canada Inc.'s ability to continue as a going concern, such as those described in Note 1 to 152640 Canada Inc.'s consolidated financial statements. Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the Director dated November 28, 2004 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors' report when these are adequately disclosed in the financial statements.

        The standards of the Public Company Accounting Oversight Board (United States) for auditors also require the addition of an explanatory paragraph (following the opinion paragraph) outlining changes in accounting principles that have been implemented in the financial statements. As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the Company adopted the recommendations of the Canadian Institute of Chartered Accountants Handbook Section 1650 — Foreign Currency Translation.

/s/ DELOITTE & TOUCHE LLP
Independent Registered Chartered Accountants
Winnipeg, Canada
November 28, 2004

F-12

152640 CANADA INC.

CONSOLIDATED BALANCE SHEETS

(expressed in Canadian dollars)

	September 30,		December 31,
	2004		2003		2002
	$000 (Unaudited)		$000		$000
ASSETS
Current assets
Cash and cash equivalents	25,908		3,527		4,003
Accounts receivable (note 26)	71,964		63,911		60,484
Less: Allowance for doubtful items	(1,220	)	(1,180	)	(1,071	)
Inventories (note 4)	87,205		80,885		78,154
Prepaid expenses and other assets	11,596		6,865		12,172
Current portion of fair value of derivatives (note 14)	8,486		—		—
	203,939		154,008		153,742
Investments (note 5)	152		152		152
Property, plant and equipment (note 6)	367,409		358,236		579,524
Fair value of derivatives (note 14)	5,259		—		—
	576,759		512,396		733,418
LIABILITIES
Current liabilities
Accounts payable (note 26)	42,410		49,412		55,954
Accrued liabilities (note 26)	24,846		18,032		17,433
Current portion of obligations under capital lease (note 7)	2,748		13		123
Current portion of long-term debt (note 8)	2,000		2,000		479,522
Current portion of fair value of derivatives (note 14)	2,092		—		—
	74,096		69,457		553,032
Obligations under capital leases (note 7)	10,836		—		13
Debt obligations (note 8)	15,500		17,500		19,500
Pension obligation (note 9)	34,684		33,669		34,596
Other employee future benefits (note 10)	38,168		36,608		34,085
Asset retirement obligation (note 2)	32,818		30,825		36,884
Fair value of derivative instruments (note 14)	855		—		—
Deferred charge derivative instruments (note 14)	6,653		—		—
Other non-current liabilities	1,048		1,010		2,907
	214,658		189,069		681,017
Redeemable preferred shares (note 11)	1,270,241		1,270,241		668,967
	1,484,899		1,459,310		1,349,984

F-13

		September 30,		December 31,
		2004		2003		2002
		$000 (Unaudited)		$000		$000
SHAREHOLDER'S DEFICIENCY
Capital stock
Issued and outstanding
	122,348 common shares (note 11)	15,021		15,021		15,021
Contributed surplus (note 11)		117,847		117,847		117,847
Cumulative translation adjustments		(277	)	(251	)	(6	)
Deficit		(1,040,731	)	(1,079,531	)	(749,428	)
		(908,140	)	(946,914	)	(616,566	)
		576,759		512,396		733,418
Nature of operations and going concern (note 1)
Contingencies (note 12)
Commitments (note 18)

Approved by the Board

The accompanying notes are an integral part of these financial statements

F-14

152640 CANADA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

(expressed in Canadian dollars)

	For the nine months ended September 30,				For the years ended December 31,
	2004		2003		2003		2002		2001
	$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Revenue
Sales	385,026		298,753		417,914		436,092		390,589
Other income	2,662		461		843		1,775		1,722
Amortization of deferred charge of derivative instruments (note 14)	4,426		—		—		—		—
Business interruption insurance (note 19)	—		—		—		1,701		17,272
	392,114		299,214		418,757		439,568		409,583
Costs and expenses
Operating	308,378		316,188		430,626		440,431		417,364
General and administrative	6,068		5,141		6,907		9,561		10,321
Depreciation and amortization	39,902		53,475		70,709		66,429		73,327
Accretion	1,266		1,134		2,078		1,890		1,937
Exploration	—		—		5,550		4,538		2,130
Foreign exchange loss (gain)	2,192		(34,931	)	(37,272	)	(2,021	)	33,021
Gain on derivative instruments (note 14)	(4,342	)	—		—		—		—
Asset impairment (note 6)	—		—		268,944		—		—
	353,464		341,007		747,542		520,828		538,100
Net earnings (loss) before taxes	38,650		(41,793	)	(328,785	)	(81,260	)	(128,517	)
Taxes (note 13)	150		(1,103	)	(1,318	)	(1,698	)	(1,208	)
Earnings (loss) for the period	38,800		(42,896	)	(330,103	)	(82,958	)	(129,725	)
Deficit — beginning of period	(1,079,531	)	(749,428	)	(749,428	)	(666,470	)	(536,745	)
Deficit — end of period	(1,040,731	)	(792,324	)	(1,079,531	)	(749,428	)	(666,470	)

The accompanying notes are an integral part of these financial statements

F-15

152640 CANADA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(expressed in Canadian dollars)

			For the nine months ended September 30,				For the years ended December 31,
			2004		2003		2003		2002		2001
			$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Cash generated (utilized) by:
Operating activities
Earnings (loss) for the period			38,800		(42,896	)	(330,103	)	(82,958	)	(129,725	)
	Items not affecting cash
		Depreciation and amortization	39,902		53,476		70,709		66,428		73,327
		Asset impairment	—		—		268,944		—		—
		Unrealized portion of change in fair value of derivative	281		—		—		—		—
		Amortization of deferred charge in derivative instruments	(4,426	)	—		—		—		—
Net change in non-cash working capital items (note 22)			(19,252	)	4,816		(6,685	)	16,129		(17,877	)
Other non-cash operating items (note 23)			4,578		(5,073	)	(6,604	)	(11,418	)	4,714
			59,883		10,323		(3,739	)	(11,819	)	(69,561	)
Investing activities
Capital expenditures			(47,896	)	(89,305	)	(118,366	)	(112,897	)	(188,523	)
Proceeds from sale of investments			—		—		—		—		87
			(47,896	)	(89,305	)	(118,366	)	(112,897	)	(188,436	)
Financing activities
(Repayments) proceeds from bank			—		—		—		(2,291	)	528
Proceeds from sales leaseback			14,353		—		—		—		—
Repayments of obligations under capital lease			(1,959	)	(91	)	(123	)	(113	)	(37	)
(Repayments) proceeds from borrowings			(2,000	)	(479,523	)	(479,522	)	(8,220	)	84,138
Preferred shares issued			—		574,973		601,274		126,054		186,657
			10,394		95,359		121,629		115,430		271,286
Change in cash and cash equivalents			22,381		16,377		(476	)	(9,286	)	13,289
Cash and cash equivalents — beginning of period			3,527		4,003		4,003		13,289		—
Cash and cash equivalents — end of period			25,908		20,380		3,527		4,003		13,289
Supplementary information
Non-cash acquisition of equipment			1,177		—		—		—		—
Interest paid			557		732		748		9,104		17,105
Capital tax paid			161		1,613		2,094		1,720		1,108

The accompanying notes are an integral part of these financial statements

F-16

152640 CANADA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004 and 2003 (unaudited) and
December 31, 2003 and 2002 and 2001 (audited)
(expressed in Canadian dollars)

1.     NATURE OF THE OPERATIONS AND GOING CONCERN

152640 Canada Inc. (the Company) is an indirect wholly-owned subsidiary of Anglo American plc (AAplc) (the Parent), a company incorporated in England and Wales. The Company, through its wholly-owned subsidiary, Hudson Bay Mining and Smelting Co., Limited, is a base metals producer. Hudson Bay Mining and Smelting Co., Limited's base metals facilities consist of mines, mills and a metallurgical complex for the extraction of copper and zinc. Hudson Bay Mining and Smelting Co., Limited also undertakes exploration and development activities. These activities are conducted in the provinces of Manitoba and Saskatchewan, Canada. Hudson Bay Mining and Smelting Co., Limited also operates a zinc oxide plant in Ontario. The Company requires the use of specialized facilities and technology and relies on such facilities to maintain their production levels. The Company is also affected by market prices of zinc and copper, operating costs and interest rates.

These consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business. The Company's ability to continue as a going concern is dependent on the Company's attainment of profitable operations, continued financial support from its shareholder, the ability of the Company to raise equity financing, external financings and further share issuances to meet the Company's liabilities as they become payable. If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported loss for the year and the balance sheet classification used.

On October 7, 2004, the Parent entered into an agreement to sell the Company to ONTZINC Corporation of Toronto, Canada. The terms of the agreement are such that the closing of the sale, which is subject to the receipt of all necessary shareholder, regulatory and third party consents, satisfaction of customary closing conditions and the raising of the required financing, is to occur on or prior to January 1, 2005.

2.     BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada and are presented in Canadian dollars. These principles conform in all material respects with generally accepted accounting principles in the United States, or "U.S. GAAP," except as described in Note 26.

These consolidated financial statements include the financial statements of 152640 Canada Inc., its wholly-owned subsidiary, Hudson Bay Mining & Smelting Co., Limited and the proportionate share of the assets and liabilities of any joint ventures where the Company shares joint control. Inter-company accounts and transactions have been eliminated on consolidation.

The interim consolidated financial statements as at September 30, 2004 and for the nine-months ended September 30, 2004 and 2003 do not include all disclosures normally provided in annual consolidated financial statements. In management's opinion, the unaudited consolidated financial information includes all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.

F-17

The following is a summary of significant accounting policies of the Company:

Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires the use of management estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes. Significant areas where management's judgement is applied include ore reserve determinations, in-process inventory quantities, plant and equipment lives and salvage values, contingent liabilities, future income tax valuation reserves, asset retirement obligation, fair value of derivative instruments, pension obligations and other employee future benefits. Actual results could differ from these estimates by material amounts.

Foreign currency translation

Monetary assets and liabilities are translated at year end exchange rates and other assets and liabilities are translated at historical rates. Gains and losses on translation of monetary assets and monetary liabilities are charged to earnings.

The assets and liabilities of self-sustaining foreign operations are translated at year end exchange rates, and revenues and expenses are translated at monthly average exchange rates. Differences arising from these foreign currency translations are recorded in shareholder's deficiency as a cumulative translation adjustment until they are realized by a reduction in the investment.

Effective January 1, 2002, the Company adopted the recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1650 — Foreign Currency Translation, in respect of foreign currency translation that eliminate the deferral and amortization of currency translation adjustments related to long-term monetary items with a fixed and ascertainable life. The adoption of the standard, which has been applied retroactively with no restatement of prior periods, did not have a significant effect on the Company's financial statements.

Revenue recognition

Sales are recognized and revenues are recorded at market prices when title and the rights and obligations of ownership pass to the customer, collection is reasonably assured and the price is reasonably determinable. A number of the Company's products are sold under pricing arrangements where final prices are determined by quoted market prices in a period subsequent to the date of sale. Subsequent variations in the final determination of metal weights, assay and price are recognized as revenue adjustments as they occur until the price is finalized.

General and administrative expenses

The Company classifies general and administrative expenses as those related to the corporate administrative activities of Hudson Bay Mining and Smelting Co., Limited which is principally comprised of senior executive compensation, corporate memberships, legal, audit, actuarial and public relations consulting.

F-18

Taxes

The provision for income and mining taxes is based on the liability method. Future income tax assets and liabilities are determined based on the difference between tax bases of the Company's assets and liabilities, and the respective amounts reported in the financial statements. Future tax assets or liabilities are calculated by applying substantively enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of certain assets and liabilities. Future tax assets are evaluated and if realization is not considered more likely than not, a valuation allowance is provided. The Company has not recognized these assets.

Cash and cash equivalents

Cash and cash equivalents consist of cash on deposit and interest-bearing instruments with original maturity dates less than three months.

Inventories

Inventories consist substantially of in-process inventory (concentrates and metals), metal products and supplies. Concentrates, metals and all other saleable products are valued at the lower of cost and estimated net realizable value. Cost includes material, labour and amortization of all capital assets directly involved with the mining and production processes. In-process inventories represent materials that are currently in the process of being converted to a saleable product. Conversion processes vary depending on the nature of the concentrate or metal. In-process material is measured based on assays of the material fed to the processing plants and the projected recoveries of the respective plants and is valued at cost. Cost of finished metal inventories represent the average cost of the in-process inventories incurred prior to the refining and casting process, plus applicable refining and casting costs.

Supplies are valued at the lower of cost, replacement and value-in-use. Cost is determined on an average basis.

Investments

Investments include marketable securities recorded at lower of cost or market.

Property, plant and equipment

(a)

Mineral properties

Mineral exploration costs are expensed as incurred. When management's evaluation indicates that the property is capable of economical commercial production, as a result of establishing proven and probable resources, future costs are capitalized as mine development expenditures.

(b)

Mine development expenditures

Exploration and development costs for properties deemed capable of economical commercial production are capitalized and amortized using the unit of production method. The unit of production amortization is based on the related proven and probable tons of ore reserves and associated future development costs. The cost of underground development to provide access to a reserve or resource at an operating mine is capitalized where that portion of the development is necessary to access more than one workplace or stope. Capital development includes shafts, ramps, track haulage drifts, ancillary drifts, sumps, electrical substations, refuge stations, ventilation raises, permanent manways, ore and waste pass raises, exploration drifts and exploration diamond drilling.

F-19

Ongoing repairs, maintenance and development expenditures are charged to operations as incurred. This includes ore stope access drifts, footwall and hangingwall drifts in stopes, drawpoints, drill drifts, sublevels, slots, drill raises, stope manway access raises and definition diamond drilling.

No amortization is provided in respect of mine development expenditures until commencement of economical commercial production. Commercial production occurs when an asset or property is substantially complete and ready for its intended use. Any production revenue prior to commercial production, net of related costs, is offset against the development costs.

(c)

Buildings, plant and equipment

Expenditures for building, plant and equipment additions, major replacements and improvements are capitalized at cost, net of applied investment tax credits. Buildings, plant and equipment, including assets under capital lease, are depreciated on either a unit-of-production or straight-line basis. The unit-of-production method is based on proven and probable tons of ore reserves. The assets using the straight-line method are depreciated over the estimated useful lives of the assets, which range from 1 to 15 years. The Company also includes future estimated residual values in its determination of depreciation.

(d)

Capitalized interest

Interest on borrowings related to the financing of major capital projects under construction is capitalized during the construction phase as part of the cost of the project.

(e)

Asset impairment

The Company reviews and evaluates the carrying value of its operating mines and development properties for impairment when events or changes in circumstances indicate that the carrying amounts of related assets or groups of assets may not be recoverable. If the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is measured and assets are written down to fair value which is normally the discounted value of future cash flows. Future cash flows are estimated based on estimated future recoverable mine production, expected sales prices (considering current and historical prices, price trends and related factors), production levels, cash costs of production, capital and reclamation costs, all based on detailed engineering life-of-mine plans. Future recoverable mine production is determined from proven and probable reserves and measured, indicated and inferred mineral resources after taking into account estimated dilution and recoveries during mining, and estimated losses during ore processing and treatment. Estimates of recoverable production from measured, indicated and inferred mineral resources are considered economically mineable and are based on management's confidence in converting such resources to proven and probable reserves. All long-lived assets are considered together for purposes of estimating future cash flows. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. It is possible that changes in estimates could occur which may affect the expected recoverability of the Company's investments in mineral properties.

F-20

Pension and other employee future benefits

The Company maintains several defined benefit plans for employees. The plans are funded and administered with relevant regulations and actuarial guidelines. The Company also operates a defined contribution plan for certain employees. Pension obligations are based on actuarial determinations. Certain actuarial assumptions used in the determination are based upon management's best estimates, including expected plan performance, salary escalation and retirement dates of employees. Differences between the actuarial liabilities and the amounts recorded in the financial statements will arise from changes in plan assumptions, changes in benefits, or through experience as results differ from actuarial assumptions.

The Company provides on-going health care benefits to certain pensioners known as "Special Category Members". Special Category Members include pensioners who retired with an unreduced pension or other early or special arrangements. The group also includes widows, widowers and dependant children of deceased members.

The Company provides long-term disability income, health benefits and other post employment benefits to hourly paid employees and long-term disability health benefits to salaried employees.

Asset retirement obligations

Effective January 1, 2004, the Company adopted CICA 3110 — Asset Retirement Obligations ("CICA 3110"), the new accounting standard on asset retirement obligations. The adoption of CICA 3110 did not have a significant impact on the Company, as the Company's policy for asset retirement obligations was consistent with the accounting standards outlined in CICA 3110. The provisions of CICA 3110 require the asset retirement obligation to be recorded at fair value at the time the legal liability exists and can be measured. The associated asset retirement obligations are capitalized as part of the carrying amount of the long-lived asset and depreciated over the estimated remaining useful life of the asset. The company has recorded asset retirement obligations primarily associated with decommissioning and restoration costs. As required under the standard, the company will make periodic assessments as to the reasonableness of its asset retirement obligation estimates and revise those estimates accordingly. The respective asset and liability balances will be adjusted, which will correspondingly increase or decrease the amounts expensed in future periods.

The long-term asset retirement obligation is based on environmental plans, in compliance with the current environmental and regulatory requirements. Accretion expense is charged to the Consolidated Statement of Operations and Deficit based on application of an interest component to the existing liability.

Total undiscounted future cash flows required to settle the decommissioning and restoration asset retirement obligations are estimated to be $51.1 million. A credit adjusted risk-free rate of 4% has been utilized to determine the obligation recorded in the balance sheet. Management anticipates that such obligations will substantially be settled at or near the closure of the mining facility currently expected to be 2016.

Financial instruments and commodity contracts

The Company employs derivative financial instruments, including forwards and option contracts, to manage risk originating from actual exposures to commodity price risk, foreign exchange risk and interest rate risk. Prior to January 1, 2004, gains and losses on these contracts were deferred and recognized in the period to which the gains and losses of the underlying transaction relate.

F-21

On January 1, 2004, the Company prospectively adopted the amendments made to the CICA Accounting Guideline 13 ("AcG-13") "Hedging relationships" and EIC 128, "Accounting for Trading, Speculative or Non Trading Derivative Financial Instruments". This guideline addresses the identification, designation, documentation and effectiveness of hedging transactions for the purposes of applying hedge accounting. It also establishes conditions for applying or discontinuing hedge accounting. Under the new guideline, hedging transactions must be documented and it must be demonstrated that the hedges are sufficiently effective in order to continue accrual accounting for positions hedged with derivatives. Derivative instruments that do not qualify as a hedge under AcG-13, or are not designated as a hedge, are recorded in the balance sheet as either an asset or a liability with the changes in fair value recognized in net earnings.

Although, in management's opinion, the contracts continue to be effective in mitigating the Company's exposure to commodity and foreign exchange risk, the Company has elected not to designate any of its price risk management activities as accounting hedges under AcG-13 and, accordingly, will account for all these derivative instruments using the fair value accounting method. Management may evaluate, from time to time, its hedge accounting policies and practices and may elect to designate and document contracts as hedges in the future.

The impact on the Company's consolidated financial statements at January 1, 2004 due to the implementation of this accounting standard resulted in the recognition of currency and commodity derivative instrument assets with a fair value of $16.7 million, derivative instrument liabilities with a fair value of $5.6 million and a net deferred charge of $11.1 million which will be recognized into net earnings over the term of the previously designated hedged item.

Net income or expense associated with an interest rate swap agreement is recognized on the accrual basis over the life of the swap agreements as a component of interest. The cost of each option contract is amortized on a straight-line basis over the life of the contract. During the periods presented, the Company had no interest rate swaps.

3.     DEVELOPMENT OF ACCOUNTING STANDARDS

Financial Instruments

The Accounting Standards Board ("AcSB") is in the process of finalizing its financial instruments proposals (Section 3855, Financial Instruments — Recognition and Measurement, and Section 1530 — Comprehensive Income), which will introduce standards addressing the following issues, specifically: Classification of financial assets and liabilities, when to recognize financial instruments on the balance sheet, how to measure them, how to account for gains and losses and the introduction of the concept of comprehensive income. Final standards are expected to be issued in the first quarter of 2005 with effective dates for fiscal years starting on or after October 1, 2006.

As an element of the financial project noted above, the AcSB is finalizing a proposal on accounting for derivatives and hedges (Section 3865). The basics of the new rules are as follows:

•

all derivatives must be measured at fair value;



•

changes in fair value must be recognized immediately in earnings unless it qualifies as a hedge;



•

changes in the value of a "fair value" hedge must be recognized in earnings immediately, but is off-set by a change in the carrying value of the hedged item; and

F-22

•

changes in the fair value of a "cash flow" hedge are accumulated in Other Comprehensive Income (OCI) until the hedged item affects earnings.

The new standard will combine current guidance and provide additional clarity around the application of hedge accounting under Canadian GAAP.

Non monetary transactions

In March 2004, the AcSB issued an Exposure Draft of a proposed new Section 3830, Non monetary transactions. This Exposure Draft proposes to replace culmination of the earnings process as the test for fair value measurement of a non monetary transaction with a test for commercial substance. This Exposure Draft would require that non monetary transactions be recorded at fair value unless they lack commercial substance, previously these transactions were recorded at fair value except when they do not represent the culmination of the earnings process. A final standard is expected in the fourth quarter of 2004 to be effective in the month of issuance.

Variable Interest Entities

In June 2003, the CICA released Accounting Guideline 15 — Consolidation of Variable Interest Entities ("AcG-15"). AcG-15 provides guidance to those entities (defined as variable interest entities ("VIEs")) where the equity at risk is not sufficient to permit that entity to finance its activities without additional subordinated financial support from other parties, equity investors lack voting control or there is an obligation to absorb expected losses or the right to receive expected residual returns. AcG-15 requires consolidation by a business of VIEs in which it is the primary beneficiary. The primary beneficiary is defined as the party that has exposure to the majority of the expected losses and /or expected residual returns over the VIE. AcG-15 is effective for interim and annual periods beginning on or after November 1, 2004. The Company does not anticipate a material impact on its financial position, results of operations or cash flows as a result of adoption.

4.     INVENTORIES

	September 30,	December 31,
	2004	2003	2002
	$000 (Unaudited)	$000	$000
Work in process	60,491	51,075	47,408
Finished goods	12,952	15,053	15,604
Materials and supplies	13,762	14,757	15,142
	87,205	80,885	78,154

5.     INVESTMENTS

	September 30,	December 31,
	2004	2003	2002
	$000 (Unaudited)	$000	$000
Marketable securities — at cost	152	152	152
Quoted market value	436	368	305

F-23

6.     PROPERTY, PLANT AND EQUIPMENT

			December 31,
	September 30, 2004
			2003		2002
	$000 (Unaudited)		$000		$000
Property, plant and equipment	942,794		920,304		894,630
Accumulated depreciation	(738,043	)	(782,269	)	(541,268	)
	204,751		138,035		353,362
Mine development	637,755		772,614		682,203
Accumulated amortization	(475,097	)	(552,413	)	(456,041	)
	162,658		220,201		226,162
	367,409		358,236		579,524

During 2004, certain fully depreciated redundant assets for previously closed mines were removed from property, plant and equipment ($52.1 million) and mine development ($104.7 million) along with their associated accumulated depreciation or amortization.

Included in the property, plant and equipment are the following:

				December 31,
		September 30, 2004
				2003		2002
		$000 (Unaudited)		$000		$000
Property, plant and equipment under construction or development		5,808		222,552		165,996
Decommissioning assets — net of amortization		1,561		1,063		3,097
Capitalized interest		24,548		24,548		23,890
Equipment under capital lease
	Cost	16,236		706		705
	Accumulated depreciation	(1,454	)	(563	)	(187	)
		14,782		143		518
Amortization expense related to equipment under capital lease		891		61		58

During 2003, in accordance with its policy on asset impairment and due to the history of operating losses and negative cash flow from operations, the Company determined that the carrying value of the property, plant and equipment and unamortized mine development expenditures might be impaired. As a result of a decline in the projected realized prices of the Company's products, when converted into Canadian dollars, the carrying value of these assets were not considered to be recoverable based on future potential earnings and costs under current market conditions and ore reserve level (see note 2). The carrying values of these assets were reduced as follows:

F-24

	December 31, 2003
	$000
Property, plant and equipment	215,573
Unamortized mine development expenditure	53,371
	268,944

7.     OBLIGATIONS UNDER CAPITAL LEASE

The Company has entered into capital lease obligations for equipment.

			December 31,
	September 30, 2004
			2003		2002
	$000 (Unaudited)		$000		$000
Lease obligations	13,584		13		136
Less: Current portion of obligation	(2,748	)	(13	)	(123	)
	10,836		—		13

The following represents the minimum lease payments for equipment used in operations for the next five years:

	September 30, 2004		December 31, 2003
	$000 (Unaudited)		$000
2004	852		14
2005	3,410		—
2006	3,410		—
2007	3,739		—
2008	3,666		—
2009	241		—
	15,318		14
Less: Imputed interest	(1,734	)	(1	)
	13,584		13

The interest rate averages 5.5% and is fixed for the term of the leases that expire in 2007 and 2008.

F-25

8.     DEBT OBLIGATIONS

		December 31, 2003
	September 30, 2004
		2003	2002
	$000 (Unaudited)	$000	$000
Province of Manitoba	17,500	19,500	21,500
Commercial paper	—	—	472,783
Bank loan	—	—	4,739
	17,500	19,500	499,022
Less: Current portion of long-term debt	2,000	2,000	479,522
	15,500	17,500	19,500

The interest free loan from the Province of Manitoba is secured by an irrevocable standby letter of credit issued by a Canadian chartered bank and guaranteed by the Parent and is due in instalments of $2 million on June 14 of 2004 and 2005, $4 million on June 14, 2006 and 2007 and $7.5 million on June 14, 2008. The Province can declare all indebtedness to be due and payable in full on the instalment date immediately following the date of termination of Project 2012. Project 2012 is a defined set of capital projects and shall be deemed to terminate if the Board has directed the Project cease, or the Company fails to maintain the agreed level of capital expenditures on Project 2012 during the term of the loan. During 2003, the cumulative capital expenditures on the Project met the total Project commitment.

The Commercial Paper represents short-term notes payable, which were rolled over or refinanced by the Company on a long-term basis. The Commercial Paper bears interest at short-term market rates and is guaranteed by the Parent. The Commercial Paper for 2002 included denominations of US$161.7 million and $216.1 million which are swapped into US$ at a total of US$137.6 million. In 2003, Commercial Paper was repaid from cash received from issuance of preferred shares.

The Company's interest expense on long-term debt and weighted average interest rate is as follows:

	For the nine months ended September 30,		For the years ended December 31,
	2004	2003	2003	2002	2001
	$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Interest expense	—	1,400	1,500	9,100	18,600
Weighted average interest rate	—	1.4%	1.4%	1.8%	4.0%

Interest expense on long-term debt is included in operating costs.

The Company has a line of credit up to a maximum of $30 million which bears interest at the prime rate and is guaranteed by the Parent. The line of credit is utilized to cover short-term cash requirements and to secure letters of credit.

		December 31,
	September 30, 2004
		2003	2002
	$000 (Unaudited)	$000	$000
Outstanding letters of credit	5,300	4,000	1,600

F-26

The outstanding letters of credit reduce the amounts available under the line of credit.

9.     PENSION OBLIGATION

The Company maintains non-contributory and contributory defined benefit pension plans for its employees.

The company uses a December 31 measurement date for all of its plans. For the Company's significant plans, the most recent actuarial valuations filed for funding purposes were performed as at December 31, 2003. For these plans, the next actuarial valuation required for funding purposes will be performed at December 31, 2004.

Information about the Company's non-contributory and contributory defined benefit plan is as follows:

		December 31,
		2003		2002
		$000		$000
Obligations and funded status
Change in pension obligation
	Obligation at beginning of year	165,332		158,696
	Service cost	5,542		5,121
	Interest cost	11,538		10,453
	Plan amendments	18,333		2,820
	Actuarial (gains) losses	(1,555	)	4,119
	Benefits paid	(12,643	)	(15,877	)
	Obligation at end of year	186,547		165,332
Change in pension plan assets
	Fair value of plan assets at beginning of year	117,677		127,942
	Actual return on plan assets	10,575		(6,258	)
	Employer contributions	18,869		11,870
	Benefits paid	(12,643	)	(15,877	)
	Fair value of plan assets at end of year	134,478		117,677
Unfunded status of plans at end of year		(52,069	)	(47,655	)
Unrecognized actuarial and investment losses		9,183		13,059
Unrecognized prior service costs		9,217		—
Net pension obligation at end of year		(33,669	)	(34,596	)

As a result of the closure of the Ruttan mine, the Company plans to settle its obligations under the pension plans for the former employees of the Ruttan mine through the purchase of insurance contracts by which the insurer assumes all of the Company's risks and obligations under the plans. Finalization of the settlements will occur in the future. In 2002, the former employees of the closed Ruttan mine no longer earned further benefit entitlement under their benefit plans.

Pension expense includes the following components:

F-27

	September 30,				December 31,
	2004		2003		2003		2002		2001
	$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Service cost	4,312		4,154		5,542		5,121		5,399
Interest cost	9,271		6,509		11,538		10,443		10,342
Expected return on plan assets	(7,237	)	(5,997	)	(8,398	)	(8,271	)	(8,841	)
Amortization of actuarial and investment losses	7		108		144		—		—
Amortization of unrecognized prior service costs	4,513		6,550		8,733		—		447
Settlement of Ruttan wind-ups	—		—		—		2,820		934
Defined benefit pension expense	10,866		11,324		17,559		10,113		8,281
Defined contribution pension expense	152		157		384		150		160
Pension expense	11,018		11,481		17,943		10,263		8,441

Additional information

The weighted average assumptions used in the determination of the accrued benefit obligations were as follows:

	December 31,
	2003	2002	2001
	%	%	%
Discount rate	6.85	6.75	6.75
Expected return on plan assets	7.55	6.95	6.50
Rate of compensation increase	4.25	4.25	4.25

The Company's pension cost is materially affected by the discount rate used to measure obligations, the level of plan assets available to fund those obligations and the expected long-term rate of return on plan assets.

The Company reviews the assumptions used to measure pension costs (including the discount rate) on an annual basis. Economic and market conditions at the measurement date impact these assumptions from year to year.

Establishing the expected future rate of return on pension assets is a judgmental matter. The Company considers the following factors in determining this assumption:

•

Duration of pension plan liabilities; and



•

Types of investment classes in which the plan assets are invested and the expected compound return on those investment classes.

Plan Assets

The pension plan weighted average asset allocations, by asset category are as follows:

F-28

	December 31,
	2003	2002	2001
	%	%	%
Equity securities	58.2	53.9	55.3
Debt securities	41.8	46.1	44.7
	100.0	100.0	100.0

The target asset allocation is as follows:

	December 31,
	2003	2002	2001
	%	%	%
Equity securities	57	57	57
Debt securities	43	43	43
	100	100	100

The Company's primary quantitative investment objective is to maximize the long term real rate of return, subject to an acceptable degree of investment risk. Risk tolerance is established through consideration of several factors, including past performance, current market conditions and the funded status of the plan.

With the exception of fixed income investments, the plan assets are actively managed by investment managers, with the goal of attaining returns that are in excess of that which could be realized with passively managed investments. Although, the actual composition of the invested funds will vary from the prescribed investment mix, the investment managers have a responsibility to bring items back to the appropriate mix.

Contributions

For the period ended September 30, 2004, the Company contributed $9.94 million and $0.15 million to its defined benefit and defined contribution plans, respectively. The Company expects total contributions for the year to be $13.1 million and $0.2 million for its defined benefit and defined contribution plans respectively.

10.   OTHER EMPLOYEE FUTURE BENEFITS

The Company uses a December 31 measurement date. Information about the Company's post retirement and other post employment benefits is as follows:

		December 31,
		2003	2002
		$000	$000
Obligations and funded status
Change in other employee future benefits
	Obligation at beginning of year	34,489	33,929
	Service cost	1,668	525
	Interest cost	2,256	2,121
	Plan amendments	306	—

F-29

		December 31,
		2003		2002
		$000		$000
	Actuarial losses	(813	)	(467	)
	Benefits paid	(1,706	)	(1,619	)
	Obligation at end of year	36,200		34,489
Unfunded status of plans at end of year		(36,200	)	(34,489	)
Unrecognized actuarial and investment losses		(408	)	404
Net other employee future benefits at end of year		(36,608	)	(34,085	)

Other employee future benefits expense includes the following components:

	September 30,		December 31,
	2004	2003	2003	2002		2001
	$000 (Unaudited)	$000 (Unaudited)	$000	$000		$000
Service cost	1,277	1,251	1,668	525		1,859
Interest cost	1,300	796	2,256	2,121		2,056
Amortization of unrecognized prior service costs	6	230	306	—		(1,150	)
Other	—	—	—	(674	)	—
Other employee future benefit expense	2,583	2,277	4,230	1,972		2,765

Additional Information

The weighted average assumptions used in the determination of other employee future benefits expense and obligations are as follows:

	December 31
	2003	2002	2001
	%	%	%
Discount rate	7.00	6.75	6.75
Expected return on plan assets	N/A	N/A	N/A
Rate of compensation increase	4.25	4.25	4.75

The health care cost trend rate used in measuring other employee future benefits was assumed to begin at 9.08% in 2004, gradually declining to 4.5% by 2009 and remaining at those levels thereafter.

If the health care cost trend rate was increased by one percentage point, the accumulated post-retirement benefit obligation and the aggregate service and interest cost would have increased as follows:

F-30

	December 31
	2003	2002
	$000	$000
Accumulated post-retirement benefit obligation	7,049	6,546
Aggregate of service and interest cost	675	640

If the health care cost trend rate was decreased by one percentage point, the accumulated post-retirement benefit obligation and the aggregate service and interest cost would have decreased as follows:

	December 31
	2003	2002
	$000	$000
Accumulated post-retirement benefit obligation	5,542	5,147
Aggregate of service and interest cost	521	494

Contributions

For the period ended September 30, 2004, the Company contributed $1.29 million to its other employee future benefits. The Company expects total contributions for the year to be $1.7 million.

11.   REDEEMABLE PREFERRED SHARES, COMMON SHARES AND CONTRIBUTED SURPLUS

Share Capital

The authorized and issued share capital of the Company is as follows:

Authorized

An unlimited number of non-voting preferred shares, entitled to non-cumulative dividends as and when declared. These shares are redeemable at the option of the holder and as such they are recorded as a liability. These shares are also redeemable at the option of the Company.

An unlimited number of voting common shares.

Issued

			December 31,
		September 30, 2004
			2003	2002
		(Unaudited)
Redeemable preferred shares
	Issued	127,024,042	127,024,042	66,896,730
	Stated capital ($000)	1,270,241	1,270,241	668,967
Common shares
	Issued	122,348	122,348	122,348
	Stated capital ($000)	15,021	15,021	15,021

The redeemable preferred shares have a redemption value equal to their stated capital and would rank in priority before common shares in event of liquidation.

F-31

Contributed surplus

Contributed surplus represents amounts contributed by the parent prior to January 1, 2001.

12.   CONTINGENCIES

The Company and its subsidiaries are involved in various claims and litigation arising in the ordinary course and conduct of their business. Since the outcome is uncertain, no amount has been recorded in these consolidated financial statements.

The significant claims and litigation matters are as follows:

(a)

Statements of claim were filed against Saskatchewan Power Corporation ("SaskPower"), the Company and Churchill River Power Company Limited ("CRP") on February 10, 1995 seeking an aggregate of $1 billion in compensatory damages and in excess of $100 million in punitive damages. These claims were filed in connection with the use and operation of the Whitesand Dam and the Island Falls Hydro Electric Station in Saskatchewan which were transferred by CRP, formerly a wholly-owned subsidiary of the Company, to SaskPower in 1981. Based on the current knowledge of management, in management's opinion, the ultimate resolution of the claims will not be material to the financial statements.



(b)

In 2004, two complaints were filed in the State of North Carolina, U.S.A., naming numerous defendants, including the Company and its joint venture, Considar Metal Marketing Inc. The claims seek damages in the amount of $67 million that are alleged to have been sustained as a result of an accident which occurred at a plant owned by West Pharmaceuticals Services, Inc. in Kinston, North Carolina. The defendants have retained counsel to defend the claims and liability is denied. The likelihood of success of the claims cannot be determined at this time. Based on the current knowledge of management, in management's opinion, the ultimate resolution of the claims will not be material to the financial statements.



(c)

On April 21, 2004, Novawest Resources Inc. issued a claim in the British Columbia Supreme Court seeking unspecified damages including against Hudson Bay Exploration and Development Company Limited, a subsidiary of the Company. The claim alleges a breach of confidence and claims damages as a result of such breach. The defendants have retained counsel to defend the claim and liability is denied. The likelihood of success of the claim cannot be determined at this time. Based on the current knowledge of management, in management's opinion, the ultimate resolution of the claim will not be material to the financial statements.

13.   TAXES

Tax expense consists largely of large corporation tax. A reconciliation of income taxes calculated at the statutory rates to the actual tax provision:

	September 30,				December 31,
	2004		2003		2003		2002		2001
	$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Statutory tax rate	42.62	%	44.12	%	44.12	%	46.12	%	46.12	%
Tax expense (benefit) at statutory rate	16,472		(18,439)		(145,060)		(37,477)		(59,272)

F-32

	September 30,		December 31,
	2004	2003	2003	2002	2001
	$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Resource and depletion allowance net of resource taxes (recovery)	(11,484)	—	—	10,874	7,016
Benefit of current tax losses not recognized	(19,423)	13,517	11,983	37,634	36,686
Benefit of other timing differences not recognized	14,435	19,820	153,294	(2,687)	3,418
Other permanent differences	—	(14,898)	(20,217)	(8,344)	12,152
Large corporation tax and other	(150)	1,103	1,318	1,698	1,208
	(150)	1,103	1,318	1,698	1,208

The Company has non-capital loss carryforwards of approximately $215.8 million (2002 — $188.6 million) which have not been recognized in the financial statements. Additionally, temporary differences between the tax and accounting bases of assets and liabilities which would result in an income tax asset of $229.4 million (2002 — $139.4 million) have not been recognized. Comparative balances for non-capital loss carryforwards and unrecognized income tax assets were previously reported as $201.5 million and $129.6 million. The 2002 amounts were originally reported based on expected filing with regulatory authorities and have been restated to reflect the actual filings. These losses expire as follows:

	$
2007	35,720,000
2008	71,323,000
2009	81,598,000
2010	27,161,000

The future tax asset results from temporary differences between the financial statement carrying balances of property, plant and equipment, pension, other employee future benefits and asset retirement obligation and the related tax pool balances as well as available non capital losses. The future tax asset has been fully reduced by a valuation allowance.

Through its joint venture interest in Considar Metal Marketing SA, the Company has non-capital loss carryforwards of approximately $0.3 million (2002 — $0.02 million) which have not been recognized in the financial statements. The tax benefits pertaining to non-capital loss carryforwards expire as follows:

	$
2007	22,000
2010	243,000

14.   RISK MANAGEMENT USING FINANCIAL INSTRUMENTS

As discussed in Note 2, on January 1, 2004 the fair value of all outstanding derivative instruments that are not recorded as accounting hedges were recorded on the Consolidated Balance Sheet with an offsetting amount to deferred charge as applicable. The deferred charge is recognized into revenue or expense, as applicable, over the term of the previously hedged item. Changes in fair value after that time are recorded on the consolidated balance sheet with the associated unrealized gain or loss recorded in net earnings. Of the total deferred charge of $11.1 million recorded at January 1, 2004, $4.4 million has been recognized as revenue in the nine months ended September 30, 2004, and the balance will be recognized as follows (in millions):

F-33

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
	$ (Unaudited)	$ (Unaudited)	$ (Unaudited)	$ (Unaudited)
2004	n/a	n/a	n/a	2.1
2005	0.6	0.5	0.5	0.4
2006	0.8	0.9	0.9	—

The estimated fair value of all derivative financial instruments is based on quoted market prices or, in their absence, third party market indications and forecasts. Unrealized gains or losses and realized gains or losses are recorded as a separate element of earnings. The loss on financial instruments includes the unrealized fair value loss of $0.3 million and settled gains of $4.6 million.

Foreign Currency Risk Management

The Company uses forward exchange contracts to limit the effects of movements in exchange rates on foreign currency denominated assets and liabilities and future anticipated transactions. Forward exchange sales contracts with a nominal US dollar value have been entered into to manage the risk associated with anticipated future foreign currency exposures (2004 — US$26 million at $1.5551, 2005 — US$8 million at $1.5868, 2006 — US$6 million at $1.5890).

The Company uses currency collar contracts, whereby the Company establishes a range within which the Company manages its exposure to currency fluctuations. The Company has outstanding currency call option contracts, giving it the right but not the obligation to purchase (2004 — US$8 million at $1.5650, 2005 — US$8 million at $1.5650, 2006 — US$6 million at $1.5650) and outstanding currency put option contracts, giving the buyer the right but not the obligation to sell to the Company (2004 — US$8 million at $1.6010, 2005 — US$8 million at $1.6040, 2006 — US$6 million at $1.6065).

Credit Risk

The Company provides credit to its customer in the normal course of its operations. It carries out, on a continuing basis, credit checks on its customers and maintains provisions for contingent credit losses. Substantially all of the Company's accounts receivables are with Considar Metal Marketing, a joint venture.

The Company is exposed to credit risk in the event of non-performance by counterparties in connection with its derivative contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but mitigates this risk by dealing only with financially sound counterparties and, accordingly, does not anticipate loss for non-performance.

Commodity Price Risk Management

The Company maintains price protection programs and conducts commodity price risk management through the use of forward sales contracts, spot deferred contracts and option contracts. The Company has gold forward sales contracts at average rates of US$317.30 for 16,100 ounces in 2004, US$329.71 for 16,200 ounces in 2005 and US$332.63 for 2,200 ounces in 2006.

The Company uses commodity collar contracts, whereby the Company establishes a range within which the Company manages its exposure to commodity fluctuations. The Company has outstanding gold call option contracts, giving it the right but not the obligation to purchase at US$415.75 for 37,200 ounces in 2004 and US$450 for 20,400 ounces in 2005 and outstanding gold put option contracts, giving the it the right but not the obligation to sell at US$380 for 37,200 ounces in 2004 and at US$390 for 20,400 ounces in 2005.

F-34

Through its joint venture interest in Considar Metal Marketing SA, the Company manages the risk associated with forward physical sales that are made on a fixed price basis regarding zinc and zinc oxide, and accordingly, enters into forward zinc purchase contracts. At December 31, 2003, the joint venture had outstanding forward contracts to purchase 30,114 tonnes of zinc at prices ranging from US$802 to US$1,010 per tonne with settlement dates in the next three years.

F-35

152640 CANADA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2004 and 2003 (unaudited) and
December 31, 2003 and 2002 and 2001 (audited)
(expressed in Canadian dollars)

15.   FAIR VALUE OF FINANCIAL INSTRUMENTS

				December 31,
		September 30, 2004		2003		2002
		Carrying value	Fair value	Carrying value	Fair value	Carrying value	Fair value
		$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000	$000
Assets
Cash		25,908	25,908	3,537	3,537	4,003	4,003
Accounts receivable — net of allowance for doubtful items		70,744	70,744	62,732	62,731	59,413	59,413
Liabilities
Accounts payable and accrued liabilities		67,256	67,256	67,444	67,444	73,387	73,387
Current portion of long-term debt		2,000	2,000	2,000	2,000	479,522	479,522
Current portion of obligations under capital lease		2,748	2,748	13	13	123	123
Long-term debt		15,500	14,800	17,500	16,514	19,500	18,319
Derivative instruments
Foreign exchange risk
	Asset	13,745	13,745	1,390	15,922	—	999
	Liability	2,947	2,947	—	—	270	5,710

The carrying value for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, current portion of long-term debt and current portion of obligations under capital lease approximate their fair value due to their short-term nature. The fair value of long-term debt has been determined using discounted cash flows at current market rates. Derivative financial instruments have been valued at current fair values using quoted market prices or accepted valuation methodologies.

16.   RELATED PARTY INFORMATION

All of the common and preferred shares of the Company are owned indirectly by AAplc. The Company is related to companies controlled by AAplc or over which AAplc has a significant influence.

The following table summarizes the Company's related party transactions for the periods:

F-36

				September 30,		December 31,
		Type of transaction
			Classification	2004	2003	2003	2002	2001
				$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Common control enterprise
Anglo American (Luxembourg) SA		Derivative instruments	Derivative instruments	3,946	2,402	3,395	—	—
Anglo American plc		Interest income	Operating	89	—	—	—	—
Anglo American Exploration (Canada) Ltd.		Management fees	Other income	19	19	25	25	25
				4,054	2,421	3,420	25	25
Common control enterprise
Compania Minera Dona Ines de Collahuasi		Concentrate purchases	Operating	44,597	21,220	29,141	4,913	13,829
Anglo American Exploration (Canada) Ltd.		Exploration	Exploration	—	—	5,640	7,064	10,223
Boart Longyear Inc.		Services and supplies	Operating	2,816	2,508	3,611	4,280	4,817
Anglo American (Luxembourg) SA		Derivative instruments	Derivative instruments	—	—	—	4,462	3,019
Anglo American Corporation		Consulting	General and administrative	—	17	—	—	161
Other		Technical/ personal	Operating	17	48	261	432	579
				47,430	23,793	38,653	21,151	32,628
Significantly influenced investee
	Considar SA	Marketing	General and administrative	—	—	—	—	123

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Traders in, and producers of, base metals often exchange product of like quality and weight at different geographic locations to reduce freight costs that otherwise would be incurred if the metal were physically shipped to the desired locations. The Company also makes use of this marketing tool, and sometimes the exchange partner is a company under common control. All transactions of this nature are at competitive market rates and terms.

At the end of the periods, the amounts due (to) from related entities are as follows:

F-37

			December 31,
	September 30, 2004
			2003		2002
	$000 (Unaudited)		$000		$000
Common control enterprise
Anglo American Exploration (Canada) Ltd.	11,628		4,152		1,622
Anglo American (Luxembourg) SA	8,569		—		(402	)
Boart Longyear Inc.	(248	)	(294	)	(220	)
Other	25		(27	)	79
	19,974		3,831		1,079

These balances are payable on demand and have arisen from the sales of product and provision of services referred to above.

As at September 30, 2004, cash and cash equivalents include a short-term interest-bearing deposit of $17.8 million with Anglo American (Luxembourg) SA.

17.   INVESTMENT IN JOINT VENTURES

Considar Metal Marketing SA, an entity incorporated under the laws of the Grand Duchy of Luxembourg, is a Joint Venture in which the Company holds a 50% interest. The Joint Venture, together with its wholly-owned subsidiary, Considar Metal Marketing Inc., carries on the business of providing metal marketing to customers in various metal related industries.

Prior to 2004, the Company held an interest in the Namew Lake Joint Venture which was inactive during the period covered by these financial statements.

The following is a summary of the Company's 50% pro rata share of the assets, liabilities, revenues and expenses of the Considar Metal Marketing SA Joint Venture. Substantially all of the Company's sales are transacted with the joint venture. Such information is presented prior to inter-company eliminations.

			December 31,
		September 30, 2004
			2003	2002
		$000 (Unaudited)	$000	$000
Assets
Current assets
	Cash	1,259	761	870
	Accounts receivable	19,428	16,600	17,534
	Inventories	25,543	26,416	25,266
	Prepaid expense and other assets	60	32	29
	Unrealized fair value derivative	2,033	—	—
		48,323	43,809	43,699
Unrealized fair value derivative		822	—	—
Property, plant and equipment		111	117	134
		49,256	43,926	43,833
Liabilities

F-38

				December 31,
		September 30, 2004
				2003		2002
		$000 (Unaudited)		$000		$000
Current liabilities
	Accounts payable and accrued liabilities	45,403		43,347		42,674
	Unrealized fair value derivative	105		—		—
	Deferred charge	732		—		—
		46,240		43,347		42,674
Shareholder's equity
Share capital		1,605		1,605		1,605
Cumulative translation adjustment		(278	)	(251	)	(6	)
Deficit		1,689		(775	)	(440	)
		3,016		579		1,159
		49,256		43,926		43,833

	September 30,				December 31,
	2004		2003		2003		2002		2001
	$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Revenues
Sales	211,643		175,256		240,141		257,102		223,654
Other income	3		76		345		144		(367	)
Amortization of deferred charge of derivative instruments	1,306		—		—		—		—
	212,952		175,332		240,486		257,246		223,287
Costs and expenses
Operating, general and administrative	212,451		175,363		240,785		257,257		222,717
Depreciation and amortization	21		23		32		43		43
(Gain) on derivative instruments	(1,984	)	—		—		—		—
	210,488		175,386		240,817		257,300		222,760
Earnings (loss) before taxes and for the period	2,464		(54	)	(331	)	(54	)	527
Cash flow resulting from operating activities	1,946		249		155		426		(2,887	)
Cash flow resulting from financing activities	—		—		—		—		2,251
Cash flow resulting from investing activities	(16	)	(11	)	(15	)	(15	)	(129	)

18.   COMMITMENTS

Operating lease commitments

The Company has entered into various lease commitments for facilities and equipment. The leases expire in periods ranging from 1 to 4 years. The aggregate remaining minimum annual lease payments required for the next four years are as follows:

F-39

	September 30, 2004	December 31, 2003
	$ (Unaudited)	$
2004	898,000	2,074,000
2005	3,376,000	751,000
2006	2,479,000	251,000
2007	297,000	—

Through its joint venture interest in Considar Metal Marketing SA, as at December 31, 2003, the Company has various lease commitments for facilities and equipment which expire in periods ranging from 1 to 8 years. The aggregate remaining minimum annual lease payments required for the next five years are as follows:

	December 31, 2003
	$
2004	209,000
2005	233,000
2006	231,000
2007	219,000
2008 and thereafter	747,000

The company has recorded the following operating lease expense:

	September 30,		December 31,
	2004	2003	2003	2002	2001
	$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Operating lease expense	3,084	4,242	6,185	6,579	5,842

Buy sell commitments

The Company has entered into a commitment to deliver 85,000 tons of copper anodes annually for refining during the next year, with the option to extend for an additional year, each year. In the event that the Company is unable to meet the terms of the contract, it would be required to make a payment of US$0.04 per pound of copper anode not delivered.

The Company has a commitment to purchase copper concentrate for payment based on a deemed delivery rather than a required physical delivery. The contract requires delivery as follows:

2004 to 2008 72,000 tonnes annually

Payment is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a fixed treatment and refining credit. If the Company cannot process the deemed tonnage in a timely manner, management believes the Company will be able to negotiate alternate arrangements for the sale or diversion of the tonnage.

The Company has a commitment to purchase 40,000 DMT per year of copper concentrate from a related party (Compania Minera Dona Ines de Collahuasi) through 2008. Payment is made 45 days after the date of the bill of lading, and is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a treatment, refining, and freight credit. Management intends to seek opportunities to swap the tonnage with other smelters (where a freight advantage exists). If the Company cannot process the concentrate or swap tonnage in a timely manner, management believes that alternate arrangements can be negotiated for the sale or diversion of the tonnage.

F-40

The Company relies partly on processing purchased concentrates to achieve a portion of profits. The continued availability of such concentrates at economic terms beyond the expiry of current existing contracts cannot be determined at this time.

Other commitments and agreements

(a)

The Company has provided relocation grants and guaranteed buy-back of new homes for employees who were required to move out of Company owned housing due to demolition. As of December 31, 2003, management believes the market value of the new homes purchased exceeds the related guarantee amounts.



(b)

In September 1999, the 777 Project, which will extend the mine life to 2016, was approved at a projected cost of US$240 million. In proceeding with this project, contracts and commitments totalling CAD $10.5 million were in place at December 31, 2003.



(c)

In December 2003, the Company established retention arrangements for certain employees. These arrangements provide for payments upon the occurrence of triggering events, which include change of control of the Company and continued employment of the specified employees to specified dates. The amount of payments to be made, if any, is dependent on future events, the certainty of which are not reasonably determinable at this time. The Company has accrued the estimated liability of $0.5 million to September 30, 2004.



(d)

Under a Purchase and Sale Agreement made between Considar Metal Marketing Inc. ("CMM"), Considar WP Acquisition Corp. ("Considar WP") and White Pine Copper Refinery Inc. ("White Pine"), dated June 4, 2000 and amended on May 16, 2001, CMM has a right to acquire all of the issued and outstanding shares of White Pine from Considar WP by giving notice to Considar WP at certain times in 2004, 2005 or 2006. In addition, Considar WP has the right to require that CMM purchase such shares by giving notice to CMM by a certain time in 2005.

CMM is a wholly-owned subsidiary of Considar Metal Marketing, S.A. ("CMMSA"). Hudson Bay Mining and Smelting Co., Limited ("HBMS") and Considar, Inc. ("Considar") are the holders of all of the issued and outstanding shares of CMMSA. Pursuant to a letter agreement between HBMS and Considar, dated June 4, 2000, if HBMS and Considar cannot agree on some alternate form of financing for the acquisition of the shares of White Pine by CMM, each of HBMS and Considar have agreed to make available to CMM sufficient funds to pay one half of the purchase price of US$13 million for such shares and for all other amounts payable by CMM under the Purchase and Sale Agreement at and after the closing of the transaction.

(e)

On the majority of the Callinan/777 mine, the Company is subject to a royalty payment of $0.25 per ton of ore milled and a net profits interest of 6²/3% of the net proceeds of production if cumulative and aggregate cash flow for the year is positive. To date, the aggregate cash flow has been significantly negative.



(f)

Hudson Bay Mining and Smelting Co., Limited has a Profit Sharing Plan whereby 10% of the Company's After Tax Earnings (excluding provisions for future income tax) calculated in accordance with UK generally accepted accounting principles for any given fiscal year will be distributed to all employees in the Flin Flon / Snow Lake operations, with the exception of executive officers and key management personnel.

F-41

(g)

The Company entered into an agreement with the Saskatchewan Government on March 31, 1999 with respect to the Company's reclamation undertakings. In addition, the Company entered into a similar agreement with the Manitoba Government on May 7, 2004. The Company has pledged the company's mining equipment, buildings and fixtures on lands in Manitoba and Saskatchewan that include the Flin Flon metallurgical complex and certain associated mines to the Saskatchewan and Manitoba Governments for the reclamation obligation. As at December 31, 2003, the net book value of the assets is approximately $237.5 million, with an estimated salvage value at the time of decommissioning of $47.6 million. The security interests granted to the Province of Saskatchewan and Manitoba rank pari passu.

Subsequent to September 30, 2004, the Company has been informed by the Provinces of Saskatchewan and Manitoba that, in their view, the current Company estimate of reclamation costs may be too low and the security for the reclamation obligations may not be sufficient.

The Company has had preliminary discussions with the Provinces of Saskatchewan and Manitoba and has agreed to conduct a feasibility study to more accurately determine the estimated reclamation costs. The study is expected to be completed in the first half of 2005.

The Company believes that its current reclamation cost estimate of approximately $51.1 million ($32.8 million on a present value basis at September 30, 2004) is adequate and is sufficiently secured by the existing security. However, the Company will provide additional security in the form of a letter of credit in the amount of $13 million during the period of the feasibility study. After completion of the feasibility study, the appropriate security will be determined by the Provinces.

(h)

In the normal course of operations, the company provides indemnifications that are often standard contractual terms to counterparties in transactions such as purchase and sale contracts, service agreements, director/officer contracts and leasing transactions. These indemnification agreements may require the company to compensate the counterparties for costs incurred as a result of various events, including environmental liabilities, changes in (or in the interpretation of) laws and regulations, or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnification agreements will vary based upon the contract, the nature of which prevents the company from making a reasonable estimate of the maximum potential amount that could be required to pay to counterparties. Historically, the Company has not made any significant payments under such indemnifications. Management estimates that there are no significant liabilities with respect to these indemnification guarantees.

19.   BUSINESS INTERRUPTION INSURANCE

In August 2000, the Company had a smelter incident and a flood in the Ruttan mine. Both incidents resulted in the operations being shut down for a period of time. The financial impact of the incidents has been recorded in the income statement in 2000.

The Company has business interruption insurance and in 2003 received insurance proceeds of $2.3 million (2002 — $5.0 million). At December 31, 2003, the Company had an outstanding receivable of $0.9 million relating to the Ruttan mine flood. In all fiscal years, the Company accrued the insurance proceeds once it had reasonable assurance over the collection of amounts claimed. The smelter incident claim was settled in 2002.

F-42

20.   RUTTAN MINE

In June 2002, the Company ceased operations at the Ruttan mine, which employed approximately 340 employees, due to depleting reserves and weak metal prices. In 2001, to reflect the pending closure, the Company recorded a charge to operations of $21.5 million which was comprised of $15.7 million for accelerated depreciation and amortization, and $5.8 million for operating costs. The $5.8 million in operating costs includes $3.5 million related to employee termination benefits, $1.25 million relating to community and worker adjustment commitments and a $1.0 million non-cash write-down of supplies inventories (the cash charge to operating costs in 2001 totalled $4.75 million). The following continuity schedule details additional amounts and the related cash flows:

	Employee termination benefits		Community and worker adjustment commitments		Total cash costs
	$000		$000		$000
Accrued balance at December 31, 2000	5,452		—		5,452
Additional charge in 2001	3,500		1,250		4,750
Accrued balance at December 31, 2001	8,952		1,250		10,202
Adjustments	(895	)	562		(333	)
Payments in 2002	(7,519	)	(595	)	(8,114	)
Accrued balance at December 31, 2002	538		1,217		1,755
Adjustments	—		(170	)	(170	)
Payments in 2003	(538	)	(561	)	(1,099	)
Accrued balance at December 31, 2003	—		486		486
Payments in 2004	—		(57	)	(57	)
Accrued balance at September 30, 2004 (Unaudited)	—		429		429

The $5.45 million accrued balance at December 31, 2000 related to employee termination benefits that had been accrued by the Company in anticipation of the closing of the Ruttan mine. The Company expects to settle the majority of the accrued balance outstanding at September 30, 2004 by December 31, 2004.

21.   RESTRUCTURING

In 2003, the Company undertook a review of manpower levels in operations that resulted in reduction of approximately 100 employees. As a result, employee termination benefits of $5.5 million were recorded in operating costs. Substantially all of these costs were paid by December 31, 2003.

F-43

22.   NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS

		September 30,				December 31,
		2004		2003		2003		2002		2001
		$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Net change in non-cash working capital items
	Accounts receivable	(8,013	)	(2,228	)	(3,318	)	19,299		3,322
	Inventories	(6,320	)	8,665		(2,731	)	9,494		(5,705	)
	Accounts payable and accrued liabilities	(188	)	(3,423	)	(5,943	)	(8,157	)	(11,408	)
	Prepaid expenses and other assets	(4,731	)	1,802		5,307		(4,507	)	(4,086	)
		(19,252	)	4,816		(6,685	)	16,129		(17,877	)

23.   NET CHANGE IN OTHER NON-CASH WORKING OPERATING ITEMS

		September 30,			December 31,
		2004	2003		2003		2002		2001
		$000 (Unaudited)	$000 (Unaudited)		$000		$000		$000
Net change in other non-cash operating items
	Pension obligation	1,015	(949	)	(927	)	(1,610	)	690
	Other employee future benefits	1,560	1,047		2,523		352		1,267
	Asset retirement obligation	1,993	(4,052	)	(6,059	)	(718	)	567
	Other non-current liabilities	10	(1,119	)	(2,141	)	(9,442	)	2,190
		4,578	(5,073	)	(6,604	)	(11,418	)	4,714

24.   SUBSEQUENT EVENTS

On October 7, 2004, the Parent entered into an agreement to sell the Company (see also note 1).

25.   SEGMENTED INFORMATION

The CICA Handbook Section 1701, Segment Disclosures, establishes standards for reporting information about a company's operating segments. The Company is an integrated base metals producer and operates in a single reportable operating segment.

The Company's revenue by significant product types:

		September 30,		December 31,
		2004	2003	2003	2002	2001
		$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Revenues
	Copper	207,244	142,655	213,135	211,484	192,871
	Zinc	86,669	78,466	104,783	102,973	93,568
	Zinc oxide	41,255	35,207	46,111	46,414	55,442
	Gold	26,540	18,810	27,288	28,874	31,557

F-44

	September 30,		December 31,
	2004	2003	2003	2002	2001
	$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Other	23,318	23,615	26,597	46,347	17,151
	385,026	298,753	417,914	436,092	390,589

26.   RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") which differ in certain material respects from accounting principles generally accepted in the United States ("U.S. GAAP"). The differences between Canadian and U.S. GAAP and their effect on the Company's consolidated financial statements are summarized in the tables below.

		September 30,				December 31,
		2004		2003		2003		2002		2001
		$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Consolidated statements of operations
Earnings (loss) for the period
	Canadian GAAP — As reported	38,800		(42,896	)	(330,103	)	(82,958	)	(129,725	)
	Start up costs (i)	—		—		1,208		(1,340	)	—
	Depreciation and amortization (i), (ii), (v)	(8,751	)	(989	)	(1,319	)	(11,788	)	(6,141	)
	Derivative instruments (iv)	(4,426	)	19,417		20,965		2,871		(19,432	)
	Impairment of mineral properties (v)	—		—		18,354		—		—
Net earnings (loss) under U.S. GAAP before other comprehensive income adjustments		25,623		(24,468	)	(290,895	)	(93,215	)	(155,298	)
	Available-for-sale securities (iii)	67		29		64		(92	)	(42	)
	Additional minimum pension liability (vi)	—		—		2,126		(4,438	)	(170	)
	Foreign currency translation adjustments (ix)	(26	)	(200	)	(245	)	(6	)	—
	Comprehensive income (loss) (ix)	25,664		(24,639	)	(288,950	)	(97,751	)	(155,510	)

The following consolidated statement of operations includes U.S. GAAP adjustments for start-up costs, depreciation and amortization, derivative instruments and impairment charges to reconcile Canadian GAAP results of operations to U.S. GAAP. In addition, other income, foreign exchange gain (loss), gain (loss) on derivative instruments and interest expense would be classified as non-operating items in the consolidated statement of operations under U.S. GAAP.

F-45

		September 30,				December 31,
		2004		2003		2003		2002		2001
		$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000
Revenue
Sales		385,026		298,753		417,914		436,092		390,589
Business interruption insurance		—		—		—		1,701		17,272
		385,026		298,753		417,914		437,793		407,861
Expenses
Operating		307,997		315,458		428,723		434,900		408,553
General and administrative		6,068		5,141		6,907		9,561		10,321
Depreciation and amortization		48,653		54,464		72,028		78,217		79,468
Accretion		1,266		1,134		2,078		1,890		1,937
Exploration		—		—		5,550		4,538		2,130
Foreign exchange (gain) loss		2,192		(1,152	)	(3,493	)	1,922		6,101
Asset impairment (note 6)		—		—		250,590		—		—
		366,176		375,045		762,383		531,028		508,510
Operating (loss) earnings		18,850		(76,292	)	(344,469	)	(93,235	)	(100,649	)
Other income		2,662		461		843		1,775		1,722
Foreign exchange gain (loss)		—		33,779		33,779		3,943		(26,920	)
Gain (loss) on derivative instruments		4,342		19,417		20,965		2,871		(19,432	)
Interest expense		(381	)	(730	)	(695	)	(6,871	)	(8,811	)
Net (loss) earnings before taxes		25,473		(23,365	)	(289,577	)	(91,517	)	(154,090	)
Taxes		150		(1,103	)	(1,318	)	(1,698	)	(1,208	)
Net (loss) earnings		25,623		(24,468	)	(290,895	)	(93,215	)	(155,298	)
Available-for-sale securities (iii)		67		29		64		(92	)	(42	)
	Additional minimum pension liability (vi)	—		—		2,126		(4,438	)	(170	)
	Foreign currency translation adjustments (ix)	(26	)	(200	)	(245	)	(6	)	—
	Comprehensive income (loss) (ix)	25,664		(24,639	)	(288,950	)	(97,751	)	155,510

The following summarizes the adjustments to the Company's balance sheets in order to conform to U.S. GAAP.

		September 30, 2004		December 31, 2003		December 31, 2002
		Canadian GAAP	U.S. GAAP	Canadian GAAP	U.S. GAAP	Canadian GAAP	U.S. GAAP
		$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000	$000
Consolidated balance sheets
Assets:
	Investments (iii)	152	436	152	369	152	305
	Property, plant and equipment (i), (ii), (v)	367,409	358,658	358,236	358,236	579,524	561,281
	Intangible asset (vi)	—	9,567	—	9,567	—	—
	Fair value of derivatives (iv)	13,745	13,745	—	15,882	—	1,020
Liabilities:

F-46

		September 30, 2004				December 31, 2003				December 31, 2002
		Canadian GAAP		U.S. GAAP		Canadian GAAP		U.S. GAAP		Canadian GAAP		U.S. GAAP
		$000 (Unaudited)		$000 (Unaudited)		$000		$000		$000		$000
	Pension obligation (vi)	(34,684	)	(46,733	)	(33,669	)	(45,718	)	(34,596	)	(39,204	)
	Fair value of derivatives liability (iv)	(2,947	)	(2,947	)	—		(4,803	)	—		(10,906	)
	Derivatives transition adjustment (iv)	(6,653	)	—		—		—		—		—
Shareholder's Deficiency
	Deficit	(1,040,731	)	(1,042,829	)	(1,079,531	)	(1,068,452	)	(749,428	)	(777,557	)
	Currency translation adjustment (viii)	(277	)	—		(251	)	—		(6	)	—
	Accumulated other comprehensive loss	—		(2,475	)	—		(2,516	)	—		(4,461	)

				December 31,
		September 30, 2004
				2003		2002
		$000 (Unaudited)		$000		$000
Consolidated balance sheets
Deficit
	Canadian GAAP — As reported	(1,040,731	)	(1,079,531	)	(749,428	)
	Start up costs (i)	6,398		6,398		5,190
	Depreciation and amortization (i), (ii), (v)	(33,503	)	(24,752	)	(23,433	)
	Derivative instruments (iv)	6,653		11,079		(9,886	)
	Impairment of mineral properties (v)	18,354		18,354		—
	U.S. GAAP	(1,042,829	)	(1,068,452	)	(777,557	)

			December 31,
	September 30, 2004
			2003		2002
	$000 (Unaudited)		$000		$000
Accumulated other comprehensive income (loss)
Canadian GAAP	—		—		—
Available-for-sale securities (iii)	284		217		153
Additional minimum pension liability (vi)	(2,482	)	(2,482	)	(4,608	)
Foreign currency translation adjustments (ix)	(277	)	(251	)	(6	)
U.S. GAAP	(2,475	)	(2,516	)	(4,461	)

(i)

Start-up costs

Under Canadian GAAP, net start up costs including operating costs, capitalized interest costs and pre-production revenues are deferred until a mine or significant capital asset reaches a commercial level of production at which point they are amortized over the mine or asset life respectively. For U.S. GAAP purposes, net start up costs are expensed as incurred.

F-47

(ii)

Depreciation and amortization

Under Canadian GAAP, amortization of mine development costs using the units of production method is calculated using historical costs plus estimated future under ground development costs required to access proven and probable reserves. For U.S. GAAP purposes, amortization of mine development costs is calculated using historical capitalized costs incurred. Mine development costs which benefit the entire mine life are amortized over proven and probable reserves and the remainder of the mine development costs are amortized over the currently accessible proven and probable reserves to which these costs relate.

(iii)

Marketable securities

Under Canadian GAAP, investments in marketable securities are carried at the lower of cost and market value. Under U.S. GAAP, the Company's marketable securities are considered to be "available-for-sale" securities and are carried at market value with unrealized gains or losses included in comprehensive income until realized or an other than temporary decline in value occurs.

(iv)

Derivative instruments

For U.S. GAAP purposes, the Company adopted Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Investment and Hedging Activities" effective January 1, 2001 ("SFAS 133"). SFAS 133 requires that all derivatives be recorded on the balance sheet as either assets or liabilities at their fair value. Changes in the fair value of derivatives are recognized in the earnings of the current period unless specific hedge accounting criteria are met. Management has not designated any derivative contracts as hedges for U.S. GAAP purposes under SFAS 133.

The adoption of SFAS 133 at January 1, 2001 did not result in any transition adjustment since prior to this date, the Company had been recorded its derivative contracts at fair value for U.S. GAAP purposes.

Prior to January 1, 2004, for Canadian GAAP purposes, gains and losses on derivative contracts were deferred and recognized in the period to which the gains and losses of the underlying transaction relate.

For Canadian GAAP purposes, the Company adopted Accounting Guideline 13, Hedging Relationships ("AcG-13") effective January 1, 2004, and recorded all derivative contracts at their fair value. After January 1, 2004, all changes in the fair market value of the related contracts are being recorded as unrealized gains and losses in the statement of operations. Transition deferred charges and any related amortization arising on adoption of AcG-13 under Canadian GAAP is reversed under U.S. GAAP.

(v)

Impairment of mineral properties

For U.S. GAAP purposes, the Company has early adopted the recommendations of Emerging Issues Task Force (EITF) 04-03-Mining Assets: Impairment and Business Combinations, effective January 1, 2003. This guidance has harmonized the U.S. and Canadian GAAP requirements concerning the appropriate basis of ore reserves to utilize in an impairment calculation. As a result, proven and probable reserves and mineralization expected to be classified as reserves has been used in impairment calculations.

F-48

During 2003, the Company wrote down certain assets for Canadian GAAP purposes. Due to differences in amortization rates applied (see ii above), the U.S. GAAP carrying value of the impaired assets was lower than the Canadian GAAP carrying value, resulting in a lower write down.

(vi)

Additional minimum pension liability

Under U.S. GAAP, the Company is required to recognize an additional minimum pension liability in the amount of the excess of the unfunded accumulated benefit obligation over the recorded pension benefits liability. An offsetting intangible asset is recorded equal to any unrecognized prior service costs, with any difference recorded as a change in other comprehensive income. No similar standard exists under Canadian GAAP.

U.S. GAAP requires additional disclosure relating to pension obligations and other employee future benefits. These additional disclosures are included in notes 9 and 10.

(vii)

Joint ventures

U.S. GAAP requires investments in joint ventures to be accounted for under the equity method, while under Canadian GAAP, the accounts in joint ventures are proportionately consolidated. However, under rules promulgated by the Securities and Exchange Commission, a foreign registrant may, subject to the provision of additional information, continue to follow proportionate consolidation for the purposes of registration and other filing notwithstanding the departure from U.S. GAAP. Consequently, the balance sheets have not been adjusted to restate the accounting for joint venture under U.S. GAAP. Additional information concerning the Company's interests in joint ventures is presented in note 17.

(viii)

Comprehensive income

Comprehensive income is recognized and measured under U.S. GAAP pursuant to SFAS 130 — Reporting Comprehensive Income. This standard defines comprehensive income as all changes in equity other than those resulting from investments by owners and distributions to owners. Comprehensive income is comprised of two components, net income and other comprehensive income ("OCI"). OCI refers to amounts that are recorded as an element of shareholders' equity but are excluded from net income because these transactions or events were attributed to changes from non-owner sources. These items include minimum pension liability adjustments, derivative instruments and foreign currency gains and losses related to the translation of the results of subsidiary entities where the functional currency is not the Canadian dollar. The concept of comprehensive income does not yet exist under Canadian GAAP.

(ix)

Income tax information

Temporary differences giving rise to significant portions of deferred tax assets and deferred tax liabilities as calculated under Canadian GAAP are presented in Note 13. Under U.S. GAAP, gross deferred tax assets would be as follows:

F-49

		December 31,
	September 30, 2004
		2003	2002
	$000 (Unaudited)	$000	$000
Property, plant and equipment	212,500	203,000	117,600
Pension obligation	8,900	9,000	10,200
Other employee future benefits	9,200	9,200	9,200
Asset retirement obligations	7,500	7,400	8,800
Non-capital losses	41,700	53,600	48,900
	279,800	282,200	194,700

Net deferred tax assets, however, would remain unchanged as the increase in gross deferred tax assets would be offset by an equivalent increase in the valuation allowance.

(x)

Other supplemental information provided for U.S. GAAP purposes:

			December 31,
		September 30, 2004
			2003	2002
		$000 (Unaudited)	$000	$000
Accounts receivable less allowance for doubtful accounts
	Trade	58,061	56,464	51,874
	Related parties	11,653	4,152	1,701
	Other	1,030	2,115	5,838
Total accounts receivable		70,744	62,731	59,413

			December 31,
		September 30, 2004
			2003	2002
		$000 (Unaudited)	$000	$000
Accounts payable
	Trade	37,664	43,410	49,715
	Related parties	248	321	622
	Other	4,498	5,681	5,617
Total accounts payable		42,410	49,412	55,954

			December 31,
		September 30, 2004
			2003	2002
		$000 (Unaudited)	$000	$000
Accrued liabilities
	Hydro	2,208	2,216	2,173
	Profit sharing and employee bonuses	5,037	493	1,141
	Vacation pay	10,916	11,072	11,292

F-50

			December 31,
		September 30, 2004
			2003	2002
		$000 (Unaudited)	$000	$000
	Other	6,685	4,251	2,827
Total accrued liabilities		24,846	18,032	17,433

The Company includes shipping and handling costs in operating costs:

	September 30,		December 31,
	2004	2003	2003	2002	2001
	$000 (Unaudited)	$000 (Unaudited)	$000	$000	$000
Shipping and handling	13,573	14,228	18,904	20,653	18,619

(xi)

Asset retirement obligations

Effective January 1, 2003, U.S. GAAP standards were established for the recognition, measurement and disclosure of liabilities for legal obligations associated with the retirement of a tangible long-lived asset that result from its acquisition, construction, development or normal operation. A liability is generally recognized for such an obligation at its fair value when incurred and a corresponding asset retirement cost is added to the carrying amount of the related assets. In subsequent periods, the carrying amount of the liability is adjusted to reflect the passage of time and any changes in the timing or amount of the underlying future cash flows. The asset retirement cost is amortized to expense over the asset's useful life.

Under Canadian GAAP, a similar standard became effective for the Company's fiscal year beginning on January 1, 2004.

The Company's accounting policy has been in accordance with the current guidance outlined under U.S. and Canadian GAAP prior to fiscal 2001. As a result, no transitional adjustments have been reflected in these financial statements.

The following additional disclosure is provided concerning the Company's asset retirement obligation. The Company's asset retirement obligations relate to the final reclamation and closure of currently operating mines and closed properties.

		September 30, 2004		December 31, 2003
		$000 (Unaudited)		$000
Balance — Beginning of period		30,825		36,884
Acquisition of:
	Accretion expense	1,266		2,078
	Liabilities incurred	600		577
	Liabilities settled	(83	)	(9,852	)
	Revision in estimated cash flows	210		1,138

F-51

	September 30, 2004	December 31, 2003
	$000 (Unaudited)	$000
Balance — End of period	32,818	30,825

(xii)

Recent accounting pronouncements

In January 2003, the Financial Accounting Standards Board, or "FASB", issued Interpretation No. 46, Consolidation of Variable Interest Entities, and an Interpretation of Accounting Research Bulletin No. 51 ("FIN 46"). FIN 46 establishes accounting guidance for consolidation of variable interest entities that function to support the activities of the primary beneficiary. FIN 46 applies to any business enterprise, public or private, that has a controlling interest, contractual relationship or other business relationship with a variable interest entity. In December 2003, the FASB issued Interpretation No. 46R ("FIN 46R") which supersedes FIN 46. FIN 46R is effective for all Variable Interest Entities ("VIEs") created prior to February 1, 2003 at the end of the first interim or annual reporting period ending after December 15, 2003. FIN 46R is applicable to all non-VIEs created prior to February 1, 2003 by public entities at the end of the first interim or annual reporting period ending after March 15, 2004. The Company has determined that is has no VIEs.

In March 2004, the Emerging Issues Task Force issued EITF 04-2, Whether Mineral Rights are Tangible or Intangible Assets ("EITF 04-2"). The Task Force reached a consensus that mineral rights are tangible assets. In April 2004, the FASB issued proposed FASB Staff Positions ("FSPs") FAS 141-1 and FAS 142-1, Interaction of FASB Statements No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), and EITF Issue No. 04-2, Whether Mineral Rights are Tangible or Intangible Assets. The proposed FSPs amend SFAS 141 and 142 to conform them to the Task Force consensus. The FSPs are effective for the first reporting period beginning after April 29, 2004. The Company does not anticipate that the adoption of EITF 04-2 and FSPs 141-1 and 142-1 will have a material effect on the Company's results of operations, financial position or disclosures.

In March 2004, the EITF issued EITF 04-3, Mining Assets: Impairment and Business Combinations. EITF 04-3 requires mining companies to consider cash flows to the economic value of mining assets (including mineral properties and rights) beyond those assets' proven and probable reserves, as well as anticipated market price fluctuations, when assigning value in a business combination in accordance with SFAS 141 and when testing the mining assets for impairment in accordance with SFAS 144. The consensus is effective for fiscal periods beginning after March 31, 2004 (see v).

In March 2004, the EITF Task Force concluded that current authoritative literature is clear that a company must assign goodwill to its reporting units, which may be individual operating mines, despite the inevitable impairment of goodwill. Since a mine is a wasting asset and the cash flows from the mine ultimately will not support the amount of recorded goodwill, a goodwill impairment charge is inevitable. Therefore, the Task Force concluded that this Issue will be removed from the agenda because it cannot be resolved without amending SFAS 142 or SFAS 131, Disclosures about Segments of an Enterprise and Related Information. The Company does not consider that adoption of the EITF in its current form would have any material effect on the Company's results of operations, financial position or disclosures.

F-52

AUDITORS' CONSENT
DELOITTE & TOUCHE LLP

        We have read the preliminary short form prospectus of Hudson Bay Mining and Smelting Co., Limited dated April 20, 2005 relating to the offer to exchange the US$175,000,000 outstanding 9⁵/8% senior secured notes of Hudson Bay Mining and Smelting Co., Limited for 9⁵/8% senior secured exchange notes, in each case unconditionally guaranteed as to the payment of principal, premium (if any), interest and certain other amounts by HudBay Minerals Inc. We have complied with Canadian generally accepted standards for an auditor's involvement with offering documents.

        We consent to the use in the above-mentioned prospectus of our report to the director of 152640 Canada Inc. (the "Company") on the consolidated balance sheets of the Company as at December 31, 2003 and 2002 and the consolidated statements of operations and deficit and of cash flows for each of the years in the three-year period ended December 31, 2003. Our report is dated November 28, 2004.

/s/ Deloitte & Touche LLP
Chartered Accountants
Winnipeg, Canada
April 20, 2005

C-1

AUDITORS' CONSENT
KPMG LLP

The Board of Directors of HudBay Minerals Inc.

        We have read this short form prospectus dated April 20, 2005 relating to the offer to exchange the US$175,000,000 outstanding 9⁵/8% senior secured notes of Hudson Bay Mining and Smelting Co., Limited for 9⁵/8% senior secured exchange notes, in each case unconditionally guaranteed as to the payment of principal, premium (if any), interest and certain other amounts by HudBay Minerals Inc. We have complied with Canadian generally accepted standards for an auditor's involvement with offering documents.

        We consent to the incorporation by reference in this prospectus of our report to the shareholders of HudBay Minerals Inc. on the consolidated balance sheets of HudBay Minerals Inc. as at December 31, 2004 and 2003 and the consolidated statements of operations and deficit and cash flows for each of the years in the three-year period ended December 31, 2004. Our report is dated March 30, 2005.

/s/ KPMG LLP
Chartered Accountants
Toronto Canada
April 20, 2005.

COMMENTS BY KPMG LLP, AUDITORS OF HUDBAY MINERALS INC.,
FOR U.S READERS ON CANADA—U.S REPORTING DIFFERENCES

        In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of HudBay Minerals Inc.'s financial statements, such as the change described in note 2, related to the adoption of recommendations of the Canadian Institute of Chartered Accountants Handbook Section 3110—Asset Retirement Obligations and the retroactive change in accounting policy related to exploration costs, to the consolidated financial statements as at December 31, 2004 and for the years then ended. Our report to the shareholders dated March 30, 2005, incorporated by reference herein, is expressed in accordance with Canadian reporting standards, which do not require a reference to such a change in accounting principles in the auditors' report when the change is properly accounted for and adequately disclosed in the financial statements.

/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
March 30, 2005

C-2

US$175,000,000

HUDSON BAY MINING AND SMELTING CO., LIMITED

Offer to Exchange

9⁵/8% Senior Secured Notes due January 15, 2012
(US$175,000,000 principal amount outstanding)
(CUSIP numbers 44360AA6 and C44255AA2)
for 9⁵/8% Senior Secured Exchange Notes due January 15, 2012

            , 2005

Until                        , 2005, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS

HudBay Minerals Inc.

        Under the Business Corporations Act (Ontario) (the "Act"), HudBay Minerals Inc. ("HudBay") may indemnify a present or former director or officer or a person who acts or acted at HudBay's request as a director or officer of another corporation of which HudBay is or was a shareholder or creditor, and his or her heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal or administrative action or proceeding to which he or she is made a party by reason of being or having been a director or officer of HudBay or such other corporation and provided that the director or officer acted honestly and in good faith with a view to the best interests of HudBay, and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, such director or officer had reasonable grounds for believing that his or her conduct was lawful. Such indemnification may be made in connection with an action by or on behalf of HudBay or such other corporation to procure a judgment in its favor only with court approval. A director or officer is entitled to indemnification from HudBay as a matter of right if he or she was substantially successful on the merits in his or her defense of the action or proceeding and fulfilled the conditions set forth above.

        The by-laws of HudBay provide that HudBay shall indemnify a director or officer, a former director or officer or any person who acts or acted, at HudBay's request, as a director or officer of a subsidiary of HudBay, and their heirs and legal representatives, subject to the provisions of the Act, from and against any liability and all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of HudBay (including a subsidiary), provided that the indemnified person acted honestly and in good faith with a view to the best interests of the corporation and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

        HudBay maintains directors' and officers' liability insurance which insures its directors and officers against certain losses resulting from certain wrongful acts committed in their official capacity for which they become obligated to pay, to the extent permitted by applicable law.

Hudson Bay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited

        Under the Canada Business Corporations Act (the "CBCA"), a corporation may indemnify a present or former director or officer of such corporation or another individual who acts or acted at the corporation's request as a director or officer, or an individual acting in a similar capacity, of another entity against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the corporation or other entity, and the corporation may advance moneys to the individual for the costs, charges and expenses of any such proceeding. The corporation may not indemnify the individual, and any advance must be repaid by the individual, unless the individual acted honestly and in good faith with a view to the best interests of the corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the corporation's request and in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty the individual had reasonable grounds for believing that the individual's conduct was lawful. Such indemnification and advances may be made in connection with a derivative action only with court approval. Such individual is entitled to indemnification or advances from the corporation as a matter of right in respect of all costs, charges and expenses reasonably incurred by him in connection with the defense of a civil, criminal, administrative, investigative or other proceeding to which he is subject by reason of being or having been a director or officer of the corporation or other entity as described above if the individual was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done and if the individual fulfils the conditions set forth above.

        The bylaws of Hudson Bay Mining and Smelting Co., Limited ("HBMS") provide that, subject to the CBCA, HBMS may indemnify a present or former director or officer of HBMS or another individual who acts or acted at HBMS' request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses provided for in the CBCA. The bylaws of Hudson Bay Exploration and Development Company Limited ("HBED") provide that, subject to the CBCA, HBED may indemnify a present or former director or officer of HBED or another individual who acts or acted at HBED's request as a director or officer, or an individual acting in a similar capacity, of a body corporate of which HBED is or was a shareholder or creditor, against all costs, charges and expenses provided for in the CBCA.

        HBMS and HBED each maintain directors' and officers' liability insurance which insures their respective directors and officers against certain losses resulting from certain wrongful acts committed in their official capacity for which they become obligated to pay, to the extent permitted by applicable law.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act") may be permitted to directors, officers or persons controlling the Registrants pursuant to the foregoing provisions, the Registrants have been informed that, in the opinion of the U.S. Securities and Exchange Commission (the "Commission"), such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

II-1

EXHIBITS

Exhibit Number	Description
4.1*	HudBay's renewal annual information form for the year ended December 31, 2004, dated March 29, 2005.
4.2*	Pre-amalgamation HBMS Parent's management discussion and analysis of financial condition and results of operations for the years ended December 31, 2003, 2002 and 2001 and for the nine months ended September 30, 2004 and 2003.
4.3*	HudBay's audited consolidated financial statements as at December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002, together with the auditor's report thereon and the notes thereto.
4.4*	HudBay's management's discussion and analysis of results of operations and financial condition for the year ended December 31, 2004, supplemented to include selected financial information together with management's discussion and analysis of the financial condition and results of operations of Pre-amalgamation HBMS Parent for the years ended December 31, 2004 and 2003.
4.5*	HudBay's material change report dated March 1, 2005 relating to the closing of the private placement of 806,452 flow-through common shares of HudBay.
5.1*	Consent of KPMG LLP.
5.2*	Consent of Deloitte & Touche LLP.
5.3*	Consent of John E. Steers, P.Eng.
5.4*	Consent of Kim Lau BSc. Geo.
5.5*	Consent of Garry Allen MSc. P.Eng.
6.1	Powers of Attorney (contained on the signature page of this Registration Statement).
7.1*	Indenture dated as of December 21, 2004 among HudBay Mining and Smelting Inc., the subsidiary guarantors party thereto and The Bank of New York, as trustee (the "Trustee").
7.2*	First Supplemental Indenture dated as of April 20, 2005 among HBMS, HBED, as guarantor, and the Trustee.
7.3*	Statement of Eligibility and Qualification of The Bank of New York on Form T-1.
99.1*	Parent Guarantee dated as of March 24, 2005 by HudBay.
99.2*	Canadian Collateral Agency Agreement dated as of December 21, 2004 among HudBay Mining and Smelting Inc., Pre-amalgamation HBMS Parent, Pre-amalgamation HBMS, HBED, the Trustee and BNY Trust Company of Canada, as collateral agent (the "Collateral Agent").
99.3*	Trust Monies Hypothecation Agreement dated as of December 21, 2004 between Pre-amalgamation HBMS and the Collateral Agent.

II-2

99.4*	Security Agreement dated as of December 21, 2004 by HudBay Mining and Smelting Inc. in favor of the Collateral Agent.
99.5*	Security Agreement dated as of December 21, 2004 by Pre-amalgamation HBMS Parent in favor of the Collateral Agent.
99.6*	Security Agreement dated as of December 21, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.7*	Debenture Delivery Agreement (Manitoba) dated as of December 21, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.8*	Debenture Delivery Agreement (Saskatchewan) dated as of December 21, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.9*	Security Agreement dated as of December 21, 2004 by HBED in favor of the Collateral Agent.
99.10*	Debenture Delivery Agreement (Manitoba) dated as of December 21, 2004 by HBED in favor of the Collateral Agent.
99.11*	Debenture Delivery Agreement (Saskatchewan) dated as of December 21, 2004 by HBED in favor of the Collateral Agent.
99.12*	Demand Debenture (Material Properties — Manitoba) dated December 10, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.13*	Demand Debenture (Immaterial Properties — Manitoba) dated December 17, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.14*	Demand Debenture (Material Properties — Saskatchewan) dated December 10, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.15*	Demand Debenture (Immaterial Properties — Saskatchewan) dated December 10, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.16*	Demand Debenture (Material Properties — Manitoba) dated December 10, 2004 by HBED in favor of the Collateral Agent.
99.17*	Demand Debenture (Immaterial Properties — Manitoba) dated December 17, 2004 by HBED in favor of the Collateral Agent.
99.18*	Demand Debenture (Immaterial Properties — Saskatchewan) dated December 10, 2004 by HBED in favor of the Collateral Agent.
99.19**	Letter of Transmittal.
99.20**	Notice of Guaranteed Delivery.

II-3

99.21**	Letters to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.
99.22**	Brokers' Letter to Clients.
99.23**	Instructions to Registered Holders.

*

Filed herewith

**

To be filed by amendment.

II-4

PART III

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

Item 1. Undertaking

        The Registrants undertake to make available, in person or by telephone, representatives to respond to inquires made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form F-10 or to transactions in said securities.

Item 2. Consent to Service of Process

        Concurrently with the filing of this Registration Statement on Form F-10, each of the Registrants has filed with the Commission a written irrevocable consent and power of attorney on Form F-X.

        Any change to the name or address of the agent for service of process of any Registrant shall be communicated promptly to the Commission by an amendment to the Form F-X referencing the file number of the relevant registration statement.

III-1

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, each of the Registrants certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-10 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Winnipeg, Province of Manitoba, Canada, on April 20, 2005.

HUDBAY MINERALS INC.
By:	/s/ John L. Knowles Name: John L. Knowles Title: Vice President and Chief Financial Officer
HUDSON BAY MINING AND SMELTING CO., LIMITED
By:	/s/ John L. Knowles Name: John L. Knowles Title: Vice President and Chief Financial Officer
HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
By:	/s/ John L. Knowles Name: John L. Knowles Title: Treasurer

III-2

SIGNATURES WITH RESPECT TO HUDBAY MINERALS INC.

POWERS OF ATTORNEY

        Each person whose signature appears below constitutes and appoints each of Peter R. Jones and John L. Knowles his true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by or on behalf of the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Peter R. Jones Peter R. Jones	President, Chief Executive Officer and Director (Principal Executive Officer)	April 20, 2005
/s/ John L. Knowles John L. Knowles	Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	April 20, 2005
/s/ M. Norman Anderson M. Norman Anderson	Director	April 20, 2005
/s/ James W. Ashcroft James W. Ashcroft	Director	April 20, 2005
/s/ Richard W. Brissenden Richard W. Brissenden	Director	April 20, 2005
/s/ Ian L. T. Conn Ian L. T. Conn	Director	April 20, 2005
/s/ Allen J. Palmiere Allen J. Palmiere	Director and Chairman	April 20, 2005

III-3

SIGNATURES WITH RESPECT TO HUDSON BAY MINING AND SMELTING CO., LIMITED

POWERS OF ATTORNEY

        Each person whose signature appears below constitutes and appoints each of Peter R. Jones and John L. Knowles his true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by or on behalf of the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Peter R. Jones Peter R. Jones	President, Chief Executive Officer and Director (Principal Executive Officer)	April 20, 2005
/s/ John L. Knowles John L. Knowles	Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	April 20, 2005
/s/ M. Norman Anderson M. Norman Anderson	Director	April 20, 2005
/s/ James W. Ashcroft James W. Ashcroft	Director	April 20, 2005
/s/ Richard W. Brissenden Richard W. Brissenden	Director	April 20, 2005
/s/ Ian L. T. Conn Ian L. T. Conn	Director	April 20, 2005
/s/ Allen J. Palmiere Allen J. Palmiere	Director	April 20, 2005

III-4

SIGNATURES WITH RESPECT TO
HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

POWERS OF ATTORNEY

        Each person whose signature appears below constitutes and appoints each of Peter R. Jones and John L. Knowles his true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by or on behalf of the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Peter R. Jones Peter R. Jones	President and Director (Principal Executive Officer)	April 20, 2005
/s/ John L. Knowles John L. Knowles	Treasurer (Principal Financial Officer and Principal Accounting Officer)	April 20, 2005
/s/ Brian Donald Gordon Brian Donald Gordon	Director	April 20, 2005
/s/ H. Russell Rood H. Russell Rood	Director	April 20, 2005

III-5

AUTHORIZED REPRESENTATIVE

        Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, the Authorized Representative has signed this Registration Statement, solely in its capacity as the duly authorized representative of each of HudBay Minerals Inc., Hudson Bay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited in the United States, in the City of Newark, State of Delaware, on April 20, 2005.

PUGLISI & ASSOCIATES (Authorized U.S. Representative)
By:	/s/ Gregory F. Lavelle Name: Gregory F. Lavelle Title: Managing Director

III-6

EXHIBIT INDEX

Exhibit Number	Description
4.1*	HudBay's renewal annual information form for the year ended December 31, 2004, dated March 29, 2005.
4.2*	Pre-amalgamation HBMS Parent's management discussion and analysis of financial condition and results of operations for the years ended December 31, 2003, 2002 and 2001 and for the nine months ended September 30, 2004 and 2003.
4.3*	HudBay's audited consolidated financial statements as at December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002, together with the auditor's report thereon and the notes thereto.
4.4*	HudBay's management's discussion and analysis of results of operations and financial condition for the year ended December 31, 2004, supplemented to include selected financial information together with management's discussion and analysis of the financial condition and results of operations of Pre-amalgamation HBMS Parent for the years ended December 31, 2004 and 2003.
4.5*	HudBay's material change report dated March 1, 2005 relating to the closing of the private placement of 806,452 flow-through common shares of HudBay.
5.1*	Consent of KPMG LLP.
5.2*	Consent of Deloitte & Touche LLP.
5.3*	Consent of John E. Steers, P.Eng.
5.4*	Consent of Kim Lau BSc. Geo.
5.5*	Consent of Garry Allen MSc. P.Eng.
6.1	Powers of Attorney (contained on the signature page of this Registration Statement).
7.1*	Indenture dated as of December 21, 2004 among HudBay Mining and Smelting Inc., the subsidiary guarantors party thereto and the Trustee.
7.2*	First Supplemental Indenture dated as of April 20, 2005 among HBMS, HBED, as guarantor, and the Trustee.
7.3*	Statement of Eligibility and Qualification of The Bank of New York on Form T-1.
99.1*	Parent Guarantee dated as of March 24, 2005 by HudBay.
99.2*	Canadian Collateral Agency Agreement dated as of December 21, 2004 among HudBay Mining and Smelting Inc., Pre-amalgamation HBMS Parent, Pre-amalgamation HBMS, HBED, the Trustee and the Collateral Agent.
99.3*	Trust Monies Hypothecation Agreement dated as of December 21, 2004 between Pre-amalgamation HBMS and the Collateral Agent.

99.4*	Security Agreement dated as of December 21, 2004 by HudBay Mining and Smelting Inc. in favor of the Collateral Agent.
99.5*	Security Agreement dated as of December 21, 2004 by Pre-amalgamation HBMS Parent in favor of the Collateral Agent.
99.6*	Security Agreement dated as of December 21, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.7*	Debenture Delivery Agreement (Manitoba) dated as of December 21, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.8*	Debenture Delivery Agreement (Saskatchewan) dated as of December 21, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.9*	Security Agreement dated as of December 21, 2004 by HBED in favor of the Collateral Agent.
99.10*	Debenture Delivery Agreement (Manitoba) dated as of December 21, 2004 by HBED in favor of the Collateral Agent.
99.11*	Debenture Delivery Agreement (Saskatchewan) dated as of December 21, 2004 by HBED in favor of the Collateral Agent.
99.12*	Demand Debenture (Material Properties — Manitoba) dated December 10, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.13*	Demand Debenture (Immaterial Properties — Manitoba) dated December 17, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.14*	Demand Debenture (Material Properties — Saskatchewan) dated December 10, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.15*	Demand Debenture (Immaterial Properties — Saskatchewan) dated December 10, 2004 by Pre-amalgamation HBMS in favor of the Collateral Agent.
99.16*	Demand Debenture (Material Properties — Manitoba) dated December 10, 2004 by HBED in favor of the Collateral Agent.
99.17*	Demand Debenture (Immaterial Properties — Manitoba) dated December 17, 2004 by HBED in favor of the Collateral Agent.
99.18*	Demand Debenture (Immaterial Properties — Saskatchewan) dated December 10, 2004 by HBED in favor of the Collateral Agent.
99.19**	Letter of Transmittal.

99.20**	Notice of Guaranteed Delivery.
99.21**	Letters to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.
99.22**	Brokers' Letter to Clients.
99.23**	Instructions to Registered Holders.

*

Filed herewith

**

To be filed by amendment.

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TABLE OF CONTENTS
EXCHANGE RATE DATA
PRESENTATION OF FINANCIAL INFORMATION
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INFERRED MINERAL RESOURCES
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
WHERE YOU CAN FIND MORE INFORMATION
SUMMARY
HBMS and the Parent Guarantor
Recent Developments
The Exchange Offer
The Exchange Notes
RISK FACTORS
Risk Relating to Our Business
Risk Relating to the Notes
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
CAPITALIZATION
EXCHANGE OFFER
DESCRIPTION OF NOTES
Brief Description of the Notes, the Subsidiary Guarantees and the Parent Guarantee
EARNINGS COVERAGES
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS U.S. Federal Income Tax Considerations
Canadian Federal Income Tax Considerations
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
INDEX TO FINANCIAL STATEMENTS
Unaudited Pro Forma Consolidated Statement of Operations of HudBay Minerals Inc. Year ended December 31, 2004
COMPILATION REPORT ON UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
HUDBAY MINERALS INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For The Year Ended December 31, 2004 ($000)
REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
152640 CANADA INC. CONSOLIDATED BALANCE SHEETS (expressed in Canadian dollars)
152640 CANADA INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (expressed in Canadian dollars)
152640 CANADA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (expressed in Canadian dollars)
152640 CANADA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2004 and 2003 (unaudited) and December 31, 2003 and 2002 and 2001 (audited) (expressed in Canadian dollars)
152640 CANADA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2004 and 2003 (unaudited) and December 31, 2003 and 2002 and 2001 (audited) (expressed in Canadian dollars)
AUDITORS' CONSENT DELOITTE & TOUCHE LLP
AUDITORS' CONSENT KPMG LLP
COMMENTS BY KPMG LLP, AUDITORS OF HUDBAY MINERALS INC., FOR U.S READERS ON CANADA—U.S REPORTING DIFFERENCES

EX-4.1

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Exhibit 4.1

RENEWAL ANNUAL INFORMATION FORM

OF

HUDBAY MINERALS INC.

March 29, 2005

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	1
CURRENCY PRESENTATION AND EXCHANGE RATE DATA	1
DOCUMENTS INCORPORATED BY REFERENCE	1
GENERAL DEVELOPMENT OF THE BUSINESS	2
OUR BUSINESS	5
RISK FACTORS	22
INDUSTRY REGULATION	30
MINERAL POTENTIAL OF OUR MATERIAL PROPERTIES	34
DIVIDENDS	35
DESCRIPTION OF CAPITAL STRUCTURE	35
MARKET FOR SECURITIES	38
ESCROWED SECURITIES	39
DIRECTORS AND OFFICERS	39
AUDIT COMMITTEE DISCLOSURE	42
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS	44
LEGAL PROCEEDINGS	44
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	44
TRANSFER AGENT AND REGISTRAR	46
MATERIAL CONTRACTS	46
INTEREST OF EXPERTS	46
ADDITIONAL INFORMATION	47
GLOSSARY OF MINING TERMS	48

ii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        We make "forward-looking statements" throughout this annual information form ("AIF") including, but not limited to, statements with respect to our future financial or operating performance and that of our subsidiaries and projects, the future price and consumption of zinc and copper, the estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures (including environmental capital costs for closure and reclamation of mines), the availability of third party concentrate, mine life projections and cash flow estimates. Whenever you read a statement that is not simply a statement of historical fact, such as when we describe what we or others "plan", "expect", "project", "intend", "believe", "predict", "estimate", "forecast", or "anticipate" or a statement that certain events or conditions "may" or "will" occur, you must remember that these expectations may not be correct or that we or others, as the case may be, may not accomplish such goals. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. Forward-looking statements are based on our opinions and estimates at the date of such statements, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from what we project in the forward-looking statements. These factors include the inherent risks of fluctuating metal prices and currency exchange rates, hedging risks, the impact of governmental regulation, the exploration, development and operation of mineral properties, the uncertainties involved in interpreting drilling results, project cost overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors described in this AIF under the heading "Risk Factors". Unless required by applicable securities laws, we have no intention to update or revise any forward-looking statements if circumstances, estimates or opinions change. You are cautioned not to place undue reliance on forward-looking statements.

CURRENCY PRESENTATION AND EXCHANGE RATE DATA

        This AIF contains references to both United States dollars and Canadian dollars. All dollar amounts referenced, unless otherwise indicated, are expressed in Canadian dollars and United States dollars are referred to as "United States dollars" or "US$".

        The closing, high, low and average exchange rates for the United States dollar in terms of the Canadian dollar for each of the three years ended December 31, 2004, 2003 and 2002 as reported by the Bank of Canada, were as follows:

	Year ended December 31,
	2004		2003		2002
Closing	$	1.20	$	1.30	$	1.58
High		1.39		1.58		1.62
Low		1.17		1.28		1.40
Average(1)		1.30		1.40		1.57

(1)

Calculated as an average of the daily noon rates for each period.

        On March 29, 2005, the Bank of Canada noon rate of exchange was US$1.00 = Cdn $1.2136

DOCUMENTS INCORPORATED BY REFERENCE

        Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this AIF to the extent that a statement contained herein, or in any other subsequently filed document that also is incorporated or is deemed to be incorporated by reference herein, modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement will not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this AIF. No document or statement therein shall be incorporated or deemed to be incorporated by reference in this AIF unless such document or statement, as the case may be, is specifically

stated to be incorporated or deemed to be incorporated by reference herein. See "General Development of the Business — Acquisition of HBMS" in respect of the incorporation by reference of the business acquisition report that we filed in connection with our acquisition of HBMS (as defined herein).

Unless the context otherwise suggests, references to "we", "us", "our" and similar terms, as well as references to the "Company", refer to HudBay Minerals Inc. Unless otherwise stated, all information regarding share capital reflects the consolidation of our common shares on the basis of one new common share for every 30 old common shares, which was effected on December 21, 2004.

GENERAL DEVELOPMENT OF THE BUSINESS

        We were formed by the amalgamation of Pan American Resources Inc. and Marvas Developments Ltd. on January 16, 1996, pursuant to the Business Corporations Act (Ontario). On March 12, 2002, we acquired OntZinc Corporation, a private Ontario corporation, through a reverse takeover and changed our name to ONTZINC Corporation. On December 21, 2004, we acquired Hudson Bay Mining and Smelting Co., Limited ("HBMS") and changed our name to HudBay Minerals Inc.

        Our registered office is located at 6 Adelaide Street East, Suite 300, Toronto, Ontario M5C 1H6. Our principal executive office is located at 2200-201 Portage Avenue, Winnipeg, Manitoba R3B 3L3.

Our History

        In November 2001, we entered into a joint venture agreement with Regal Consolidated Ventures Limited ("Regal"), pursuant to which we acquired a 50% interest in the Gay's River Property. Pasminco Resources Canada Company ("Pasminco") holds a 2% net smelter return royalty in respect of the Gay's River Property. In November 2002, we purchased the remaining 50% interest in the Gay's River Property from Regal and in connection therewith we issued to Regal 400,000 Common Shares. We have agreed to issue to Regal an additional 66,666 Common Shares upon the completion of the business plan for re-opening the Gay's River mine and an additional 133,333 Common Shares upon a production decision being made. In March 2004, we paid to Pasminco $2 million in satisfaction of the purchase price of the Gay's River Property. We now have a 100% interest in the Gay's River Property subject to a 2% net smelter royalty payable to Pasminco.

        Pursuant to a securities exchange agreement entered into in January 2002, we changed our name from Pan American Resources Inc. to ONTZINC Corporation and the corporation formerly named OntZinc Corporation changed its name to Pan American Resources Corp. and became our wholly-owned subsidiary. As a result of the foregoing, we indirectly acquired a 100% interest in the Southwestern Ontario Project.

        In May 2002, we sold our interest in the San Antonio Project, a copper and gold porphyry project, to a private Chilean mining group for US$850,000. On April 5, 2004, we regained control of the project following the failure of the purchaser to complete scheduled payments. We currently indirectly hold a 100% interest in the San Antonio Project.

        As of September 2003, one of our subsidiaries acquired the Balmat Mine from ZCA Mines, Inc. ("ZCA") for US$20 million, pursuant to an asset purchase agreement (the "Balmat Acquisition Agreement"). The purchase price is payable wholly out of 30% of any future net cash flow from operations after allowing for reasonable capital and exploration expenditures and a further US$5 million is payable if the price of zinc is sustained at US$0.70 per pound for a consecutive 24 month period in the five years following the date of the Balmat Acquisition Agreement. Pursuant to the Balmat Acquisition Agreement, we assumed certain future liabilities, including, all future debts, obligations, commitments and liabilities arising out of or directly relating to the ownership and operation of the Balmat Mine and, in particular, any future liabilities relating to the reclamation of such mine.

        In order to meet the anticipated financial requirements associated with maintaining and reactivating the Balmat Mine, we have completed several private placements of securities. Proceeds of these private placements have also been used for working capital purposes.

2

Acquisition of HBMS

        On October 7, 2004, we entered into an acquisition agreement to acquire from Anglo American International, S.A. all of the issued and outstanding shares of 152640 Canada Inc. (the "Acquisition"), which held all of the issued and outstanding shares of HBMS, for a purchase price of $325 million, subject to adjustment on closing. Effective December 13, 2004 the parties amended the Acquisition Agreement to provide that the net purchase price would be paid in cash in the amount of approximately $303 million and as to $13 million by the issuance to Anglo American of 5,777,777 common shares of the Company and 86,666,667 share purchase warrants (the "Warrants"). Following the Acquisition, we consolidated our common shares on the basis of one new common share of the Company for every 30 old common shares (the "Consolidation"). As a result of the Consolidation, every 30 Warrants are exercisable for one common share, at a price of $3.15 per common share, at any time prior to 5:00 p.m. (Toronto time) on December 21, 2009. The business acquisition report, dated March 3, 2005, in respect of the Acquisition is incorporated by reference into and forms an integral part of this AIF.

        To fund the Acquisition, we completed an offering (the "Subscription Receipt Offering") of 1,917,510,000 subscription receipts (the "Subscription Receipts") for gross proceeds of approximately $143.8 million and one of our wholly-owned subsidiaries completed an offering (the "Debt Financing") of 9⁵/8% senior secured notes (the "Notes") due January 15, 2012 for gross proceeds of US$175 million. Upon closing of the Acquisition, each Subscription Receipt was exchanged for one pre-Consolidation Common Share and one-half of a Warrant. The Notes contain covenants that, among other things, restrict our ability in certain circumstances to declare or pay dividends or make other distributions on our Common Shares, incur additional debt, enter into sale or leaseback transactions, create liens, make investments, engage in transactions with affiliates, consolidate or merge into other entities or sell assets.

        Pursuant to a guarantee ("Parent Guarantee") dated as of March 24, 2005, we have unconditionally guaranteed the debt obligations of HBMS under the Notes. We have fully and unconditionally guaranteed all payments on the exchange notes, including payments of principal, premium (if any) and interest. The guarantee is unsecured and ranks subordinate in right of payment to all senior indebtedness of the Company. The guarantee will terminate on the date upon which we cease to hold a majority of the outstanding voting shares of HBMS.

3

        We hold the principal subsidiaries and properties shown in the following chart. The chart shows the jurisdiction of incorporation of our principal subsidiaries and the percentage of voting securities we beneficially own or over which we have control or direction. For each of our principal properties, the chart also shows our beneficial interest in the project and the location of the project.

4

OUR BUSINESS

Our Business

        We are an integrated base metals mining and smelting company. We have:

•

the 777 and Trout Lake zinc and copper mines near Flin Flon, Manitoba, the Chisel North Zinc Mine near Snow Lake, Manitoba and the Konuto Lake Copper Mine in Saskatchewan (collectively, the "HBMS Mines"), which had, at January 1, 2005, aggregate estimated proven and probable mineral reserves of approximately 21.6 million tonnes of ore, grading 4.8% zinc and 2.2% copper, and an additional estimated 3.9 million tonnes of inferred mineral resources, grading 6.1% zinc and 1.9% copper;



•

a metallurgical complex located in Flin Flon, Manitoba and a zinc concentrator near Snow Lake, Manitoba; the Flin Flon metallurgical complex is comprised of a zinc and copper concentrator, a zinc pressure leach and electro-winning plant and a copper smelter, with an annual production capacity of 115,000 tonnes of cast zinc and 90,000 tonnes of anode copper, as well as gold and silver by-products;



•

a zinc oxide plant with annual production capacity of 45,000 tonnes that takes between 32,000 and 41,000 tonnes of our annual zinc metal production;



•

a seasoned exploration team with a proven track record of discovering new ore bodies, together with a land position of more than 200,000 hectares located primarily in Manitoba and Saskatchewan, offering potential for further mineral discoveries;



•

experienced mine and production management, and a stable work-force with an excellent health and safety record; and



•

a 50% interest in an established marketing joint venture, Considar Metal Marketing Inc. ("CMM"), which markets our metals and identifies and acquires additional zinc and copper concentrate for our metallurgical complex.

        In 2004, we completed a $435 million capital expenditure program (the "777 Project"), that involved the construction and development of the 777 mine in Flin Flon and the Chisel North mine in Snow Lake, expansion of the Flin Flon concentrator, expansion of the Flin Flon zinc plant, including construction of an electrolytic cellhouse and other infrastructure upgrades. This project has led to improvements in operating margins of the mines, workplace productivity and workplace safety.

        Total 2004 HBMS production was approximately 110,200 tonnes of refined zinc, 76,900 tonnes of refined copper, 79,000 ounces of gold and 1,114,600 ounces of silver, derived from 223,000 tonnes of zinc concentrate (including 3,500 tonnes of purchased concentrate) and 284,100 tonnes of copper concentrate (including 98,700 tonnes of purchased concentrate).

        We also own two development projects: the Balmat mine in the State of New York, and the Gay's River mine in the Province of Nova Scotia, Canada; and, in addition to the exploration lands in Manitoba and Saskatchewan, exploration properties in the Province of Ontario and Chile.

Our Competitive Strengths

        We believe that the following business strengths will enable us to increase our production and profitability.

Modern, Upgraded Facilities

        Between 1998 and 2004, we invested approximately $435 million to expand, modernize and improve our mines and plants. The 777 Project involved construction and development of the modern 777 and Chisel North mines, capacity expansion at the zinc concentrator in Flin Flon and expansion of our zinc plant, including the installation of an electrolytic cellhouse. The design of our zinc plant permits a further 15% capacity expansion. The 777 Project improved our productivity through both the implementation of new technology and streamlining of our workforce. This has translated into operating efficiencies, cost reductions and the production of higher grades of ore.

5

Land Position with Strategic Exploration Potential

        We hold a land position of more than 200,000 hectares in Manitoba and Saskatchewan. Over the more than 75 year operating history of HBMS, we have brought into production over 25 ore bodies on HBMS lands. Currently, we operate four mines on this land. Our land position includes select portions of the highly productive Flin Flon greenstone belt that we believe has excellent potential for further ore body discoveries. Since much of this property is within 100 kilometres of our two concentrators, we anticipate that we will be able to economically exploit even small ore bodies that we discover.

        We also own 51,276 acres of mineral rights in northern New York and lease an additional 4,774 acres of mineral rights in the areas proximate to the Balmat mine.

Vertically Integrated Operations

        Our Flin Flon and Snow Lake operations are comprised of four operating mines, two concentrators, a 90,000 tonne per year copper smelter and a 115,000 tonne per year zinc plant. These integrated operations limit our exposure to fluctuating third party treatment and refining charges. In addition, we have available capacity at our metallurgical plants, currently filled by purchased concentrates, which gives us the flexibility to develop ore bodies in the area of Flin Flon and Snow Lake that a mining company without proximate metallurgical plants could not develop profitably after payment of transportation and treatment charges. Our zinc oxide production division, Zochem, receives and processes a significant amount of our zinc metal production. This off-take mitigates the impact on us of volume cycles and price volatility in the zinc metal market. Through CMM, our marketing joint venture, we monitor and maintain customer relationships that have, historically, supported demand and premium pricing for our zinc, zinc oxide and copper.

Experienced Management Team

        Our management and directors have considerable experience in identifying, acquiring and financing mining operations as well as managing public companies. We believe this experience provides a solid base on which to expand our operations. Our management team also has a proven record of success in various aspects of the mining industry, including mining, processing, marketing and the subsequent reclamation of mines. The experience of management at HBMS was integral to the success of the 777 Project, which was completed ahead of schedule and on budget.

Skilled and Stable Workforce and Strong Safety Record

        The HBMS workforce is well trained, historically stable and has significant operational experience at all levels. There has not been a labour work stoppage at the existing HBMS operations in over 30 years, despite significant labour reductions since 1991. Moreover, HBMS has a labour stability agreement in place until 2012 providing a framework for labour relations that mitigates the risk of strikes or lockouts at its operations. See "Our Business — Operations — Employees."

        HBMS has established a strong safety record. In 2004, HBMS was recommended for registration of its Safety Management System under Occupational Health and Safety Assessment Series 18001 ("OHSAS 18001"). For the three years ended December 31, 2004, HBMS experienced an average annual rate of approximately 0.8 lost time injury frequency per 200,000 hours worked. We believe that improvements in the safety of the HBMS workforce assist in maintaining healthy labour relations between the HBMS management and workforce.

Well-Developed Low-cost Infrastructure

        We have a well-developed, low-cost infrastructure. Substantially all of our electrical power is supplied by Manitoba Hydro from both its and Saskatchewan Power Corporation's power grids, which are fed by three hydroelectric generating stations. Historically, the price of electricity from Manitoba Hydro has been among the lowest offered by major energy utilities in North America. The water supply for the Flin Flon metallurgical complex is pumped from nearby Trout Lake. Further, the Flin Flon properties have well developed access to rail, road and air transportation. Rail access allows concentrate and many other key consumables, such as propane and fuel oil, to be purchased in bulk. It also provides the lowest cost transport of our products.

6

Our Strategy

        Our strategy is to leverage our proven operating assets, significant mineral reserves and experienced workforce to:

Identify Further Opportunities to Lower our Costs

        Over the past decade, we have lowered our costs through infrastructure investments, a focus on workplace safety, targeted workforce reduction and an increase in production. We will continue to review further opportunities to reduce our costs of production, including lowering our costs for copper refining through the anticipated purchase by CMM of the White Pine copper refinery. Increasing production of concentrate from the HBMS Mines or other of our properties proximate to or otherwise synergistic with our metallurgical facilities is our most significant opportunity to reduce our costs and improve our profitability.

Investigate Opportunities for Mine Development and Mineral Reserve Exploration

        We plan to exploit ore bodies and pursue expanded exploration programs. We believe that there remains significant potential to discover additional mineral reserves within the HBMS Mines, particularly at the Trout Lake and 777 mines. We also intend to focus our exploration program on the HBMS land position in Manitoba and Saskatchewan. Reopening the Balmat mine is also a priority. Using the experienced operations managers from HBMS and the marketing experience of CMM, we believe that we can reproduce many of the operational efficiencies of HBMS at the Balmat mine. We will also investigate the potential for integrating these operations with our metallurgical facilities in Flin Flon. We will otherwise focus our development and exploration programs on our other existing projects or future projects to the extent they present attractive opportunities to expand our mineral reserves.

Pursue Growth Through Selective Acquisitions

        We believe there is opportunity for future growth through selective acquisitions of operating assets and properties at an advanced state of development. Leveraging the expertise of our management team, we intend to pursue a selective and disciplined acquisition strategy in areas of political stability, with a particular focus on properties in North America, South America and Australia.

Maintain Strong Safety and Environmental Performance

        One of our core values is protecting the health and welfare of our employees and the environment. We have achieved an excellent safety record in recent years and we are committed to maintaining this record. We intend to continue to adhere to strict environmental compliance standards with a goal of continually improving our environmental performance. Each of the Flin Flon and Snow Lake operations has been certified to the ISO 14001:1996 Environmental Management System. We believe that our ability to minimize lost-time injuries and environmental regulatory violations is a significant factor in maintaining and realizing opportunities to improve overall operational efficiency.

7

Operations

        We are a vertically integrated base metals mining and smelting company. The following chart outlines our current operations flow.

        The following map shows the locations of our facilities in Manitoba and Saskatchewan.

        The Balmat mine is located in St. Lawrence County, New York State, approximately 32 kilometres south of the St. Lawrence River.

Historical Production

        We produce zinc and copper products from concentrates sourced from the HBMS Mines ("domestic concentrates") and from concentrates purchased from other parties ("purchased concentrates"). The chart

8

below sets out our total metal production from the HBMS operations for the years ended December 31, 2004, 2003 and 2002.

			Production Summary
		Units	2004	2003	2002
Metal Production from Domestic Concentrates
	Zinc	000s tonnes	108.4	93.0	102.1
	Copper	000s tonnes	43.7	42.1	45.2
	Gold	000s troy ounces	77.6	57.0	57.1
	Silver	000s troy ounces	696.5	630.3	802.8
Metal Production from Purchased Concentrates
	Zinc	000s tonnes	1.8	24.8	6.0
	Copper	000s tonnes	33.2	41.3	40.7
	Gold	000s troy ounces	1.4	3.6	4.9
	Silver	000s troy ounces	418.1	460.5	486.5
Total Metal Production
	Zinc	000s tonnes	110.2	117.8	108.1
	Copper	000s tonnes	76.9	83.4	85.9
	Gold	000s troy ounces	79.0	60.6	62.0
	Silver	000s troy ounces	1,114.6	1,090.8	1,289.3

Underground Mining Operations

        Our material properties are the HBMS Mines and related plants and the Balmat mine. The HBMS Mines consist of the 777, Trout Lake and Chisel North mines in northern Manitoba and the Konuto Lake mine in northern Saskatchewan. The Balmat mine is not currently in operation. Each of the HBMS Mines and the Balmat mine is an underground mine.

The HBMS Mines

Location

        Other than the Chisel North mine, the HBMS Mines are within 24 kilometres of Flin Flon. The Chisel North mine is approximately 215 kilometres east of Flin Flon. The Town of Flin Flon is approximately 750 kilometres north of Winnipeg, the capital of the Province of Manitoba. Flin Flon has a population of approximately 7,000 people, with an additional 3,000 people living in the surrounding community, and has well developed access to road, rail and air transportation.

        The water supply for Flin Flon is taken from Trout Lake. Electrical power is supplied from the Manitoba Hydro and Saskatchewan Power Corporation power grids, which are fed by three hydroelectric generating stations.

        Annual rental costs for the mineral rights are approximately $280,000, based on a rate of $8.00 per hectare.

        The geographical area has cool summers and very cold winters with a mean annual temperature of -2.5^oC. The predominant vegetation is closed stands of black spruce and jack pine with a shrub layer of ericaceous shrubs and ground cover of mosses and lichens.

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Geology

        The HBMS Mines are located in the Canadian shield, one of the world's largest exposed areas of Precambrian rocks. Within the Canadian shield are large, deformed remnants of ancient volcanic-sedimentary terrain ("greenstone belts"), which historically have been proven locations of base and precious metals.

        The ore bodies of the Flin Flon greenstone belt occur in a highly prospective early Proterozoic island-arc assemblage that stretches for an exposed length of 250 kilometres east-west and 75 kilometres north-south. The deposits are precious metal rich and of the copper-zinc volcanic massive sulphide ("VMS") type hosted in both felsic and mafic volcanic rocks with the felsic type hosting the largest deposits. VMS deposits are best classified into just two major groups, copper-zinc type and zinc-lead-copper type, respectively, which reflects the associations of major ore metals and other geological characteristics. VMS deposits in the area range in size from less than 100,000 tonnes to the more than 100 million tonne Flin Flon/777/Callinan cluster of ore bodies.

History

        HBMS has operated in the Flin Flon greenstone belt for more than 75 years. During this period, HBMS has mined approximately 155 million tonnes of ore.

        In the mid-1990s, a strategic review of the HBMS operations showed a company in decline; HBMS had declining reserves, lower ore grades, rising costs and a poor safety record. At this time, HBMS concluded that it had less than a ten-year mine life and planned closure of operations before 2005.

        In connection with the closure plan, HBMS decided to continue exploration efforts until 1998, the latest time an ore body could be developed for production prior to the planned closure. In 1993, based on its drilling program, HBMS discovered the 777 deposit and by 1997 had defined this ore body. HBMS determined that the 777 ore body had the potential to extend its operations for another 12 to 16 years, if a number of critical factors were first addressed. As a result, HBMS significantly lowered its overall unit operating cost, improved its safety performance and created a performance-oriented culture.

777 Mine

        The 777 mine is situated approximately one kilometre north of Flin Flon and is part of the Flin Flon deposit cluster of ore bodies. The 777 mine contains approximately 76.8% of the estimated HBMS mineral reserves as at January 1, 2005.

        This mine was first indicated in 1993 by an underground exploration hole that intersected the mineralization at a depth of 1,000 metres. In 1995, a drilling program delineated the ore body. In 1999, HBMS commenced the development of the 777 mine as part of the 777 Project and commercial production from the mine commenced in January 2004.

        The Flin Flon cluster of ore bodies, which encompasses the Flin Flon and 777 ore bodies, is comprised of a sequence of volcanic flow and volcaniclastic rocks that are predominantly basaltic in nature. In the mine area, the mine horizon stratigraphic sequence lies on the west side of the Hidden Lake Syncline and strikes about 350 degrees true and dips 50 to 60 degrees to the east.

        The mine has an internal ramp system to allow movement between working levels. The 777 shaft is a 6.7 metre diameter vertical shaft to a depth of 1,530 metres. Ore and waste hoisting is with a double-drum hoist with a capacity in excess of 1.35 million tonnes per year using 16-tonne skips. A separate double drum hoist operates a cage and counterweight and a single drum hoist operates a small cage.

        Mining is by a combination of mechanized cut and fill and longhole open stoping. Paste backfill is used to fill mined stopes and is delivered from the Flin Flon concentrator by pumping through a network of lined boreholes and pipes. Pillars are left as regional support in addition to the backfill. The host country rock, particularly in the hanging wall, is competent.

        Ventilation control is adequate and the main shaft is the primary fresh air intake. Dedicated compressors supply compressed air. Air and water pipes are installed to distribute the compressed air and water through the mine. The mine also has adequate electrical power for mining purposes.

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        The following chart sets forth the production of the 777/Callinan mine for the years ended December 31, 2004, 2003 and 2002.

777/Callinan Mine Historical Statistics

		December 31,
	Units	2004		2003		2002
Ore Mined	000s tonnes	975.9		709.2		601.1
Zinc	%	4.50		3.96		3.95
Copper	%	2.89		2.80		2.31
Gold	grams/tonne	2.26		1.92		1.95
Silver	grams/tonne	23.14		21.81		19.17
Manpower	persons	188		177		177
Contained Zinc	tonnes (Mm lbs)	43,906 (96.8	)	28,090 (61.93	)	23,714 (52.28	)
Contained Copper	tonnes (Mm lbs)	28,203 (62.2	)	19,871 (43.81	)	13,862 (30.56	)
Contained Gold	kilograms (troy oz)	2,013 (70,999	)	1,362 (43,777	)	1,175 (37,769	)
Contained Silver	kilograms (troy oz)	20,585 (726,125	)	15,464 (497,179	)	11,521 (370,401	)

Trout Lake Mine

        The Trout Lake mine is located beneath Trout Lake, approximately six kilometres northeast of Flin Flon. The Trout Lake mine contains approximately 15.3% of the estimated HBMS mineral reserves.

        The Trout Lake mine was discovered by Granges Exploration in the 1970s, as a result of testing by drilling an electromagnetic geophysical target located in an area beneath Trout Lake believed to be underlain by felsic volcanic rocks similar to those that host the Flin Flon ore bodies. Commercial production commenced at the Trout Lake mine in 1988.

        The Trout Lake ore body sub-crops beneath Trout Lake and contains more than 30 lenses in several zones. The lenses dip approximately 60 degrees and the average lens width is 8 metres. The ore body is a proximal volcanic massive sulphide deposit. Chalcopyrite and sphalerite are the main base metal sulphides and occur with pyrite in massive sulphide layers.

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        The main shaft has been sunk to a depth of 1,091 metres. The mine development includes a number of inclined ramps and steeply inclined ventilation shafts and ore passes. The main shaft is a circular two-compartment 4.9 metre diameter vertical shaft operating to a depth of 1,091 metres. The ramp extends to 1,100 metres below surface at an inclination of 15% from the horizontal. A 762 metre long inclined conveyor delivers the ore from the underground crusher to the coarse ore bin adjacent to the shaft.

        Mining is by longhole open stoping using trackless equipment. Crushed ore is trucked from the mine site to the Flin Flon concentrator for processing and subsequent treatment in HBMS' zinc plant and copper smelter.

        The following chart sets forth the production of the Trout Lake mine for the years ended December 31, 2004, 2003 and 2002.

Trout Lake Mine Historical Statistics

		December 31,
	Units	2004		2003		2002
Ore Mined	000s tonnes	916.1		872.7		898.6
Zinc	%	5.32		4.82		4.21
Copper	%	1.46		1.17		1.63
Gold	grams/tonne	1.47		1.78		1.34
Silver	grams/tonne	13.58		20.40		12.10
Manpower	persons	177		183		181
Contained Zinc	tonnes (Mm lbs)	48,773 (107.5	)	42,018 (92.63	)	37,832 (83.41	)
Contained Copper	tonnes (Mm lbs)	13,412 (29.6	)	10,219 (22.53	)	14,639 (32.27	)
Contained Gold	kilograms (troy oz)	1,231 (43,422	)	1,556 (50,021	)	1,202 (38,632	)
Contained Silver	kilograms (troy oz)	11,337 (399,890	)	17,802 (572,352	)	10,876 (349,669	)

Konuto Lake Mine

        The Konuto Lake mine is situated in Saskatchewan, approximately 24 kilometres southwest of Flin Flon. The Konuto Lake mine contains approximately 1.0% of the estimated HBMS mineral reserves.

        The Konuto Lake ore body was discovered by an airborne geophysical survey in 1994 with follow-up diamond drilling taking place the same year. The Konuto project capital development and construction started in 1997 and production began in 1999. In 2001 a parallel, wide lens was discovered and is currently being mined. The mine produces approximately 300,000 ore tonnes per annum from near vertical multiple lenses between 40m and 465m depths. Initial mining was by cut and fill using unconsolidated waste rockfill and since 2003 includes longhole open stoping.

        The deposit consists of volcanic hosted massive sulphides overlain by barren basalt volcanic flows. Chalcopyrite and minor sphalerite are the main base metal sulphides and occur with pyrite in massive sulphide layers conformable to stratigraphy. The horizon that hosts the deposit has been repeated by north trending isoclinal folding and may be the same horizon that hosted the Birch-Flexar ore bodies two kilometres east of the Konuto Lake deposit.

        The mine consists of a ramp to a depth of 456 metres. Mining is by a combination of longhole open and cut and fill stoping. The ore is crushed on surface under a contract and then hauled over a company road to the concentrator at Flin Flon.

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        The following chart sets forth the production of the Konuto Lake mine for the years ended December 31, 2004, 2003 and 2002.

Konuto Lake Mine Historical Statistics

		December 31,
	Units	2004		2003		2002
Ore Mined	000s tonnes	327.2		321.5		298.9
Zinc	%	2.08		1.82		2.12
Copper	%	4.07		3.73		4.06
Gold	grams/tonne	1.92		1.99		2.02
Silver	grams/tonne	9.60		9.50		7.58
Manpower	persons	42		55		55
Contained Zinc	tonnes (Mm lbs)	6,793 (15.0	)	5,841 (12.9	)	6,334 (14.0	)
Contained Copper	tonnes (Mm lbs)	13,308 (29.3	)	11,985 (26.4	)	12,146 (26.8	)
Contained Gold	kilograms (troy oz)	573 (20,200	)	639 (20,553	)	605 (19,441	)
Contained Silver	kilograms (troy oz)	2,863 (100,999	)	3,053 (98,158	)	2,265 (72,823	)

Chisel North Mine

        The Chisel North mine is ten kilometres west of the Snow Lake concentrator and about six kilometres south of the town of Snow Lake, which is approximately 215 kilometres from Flin Flon. The Chisel North mine contains approximately 6.8% of the estimated HBMS mineral reserves.

        In 1986, an exploration program was initiated to systematically explore the Chisel basin. Additional drilling was carried out between 1993 and 1997 to suitably define the ore body for a feasibility study. A total of 77,632 metres in 130 holes and wedges were drilled by 1998. Commercial production commenced at the Chisel North mine in June 2000.

        The deposit consists of massive sulphides overlain by barren basalt volcanic flows. Sphalerite and minor amounts of chalcopyrite are the main base metal sulphides and occur with pyrite in massive sulphide layers conformable to stratigraphy. The ore resources are between 400 metre and 650 metre depths in four stacked zinc rich sulphide lenses.

        The mine is currently being operated from the 502 metre level to the 687 metre level. Mining is by room and pillar and post pillar cut and fill using trackless equipment. The ore is hauled to surface for crushing and trucking to the Snow Lake concentrator, by independent trucking contractors.

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        The following chart sets forth the production of the Chisel North mine for the years ended December 31, 2004, 2003 and 2002.

Chisel North Mine Historical Statistics

		December 31,
	Units	2004		2003		2002
Ore Mined	000s tonnes	327.9		303.2		259.5
Zinc	%	9.99		11.32		10.57
Copper	%	0.16		0.20		0.22
Gold	grams/tonne	0.48		0.62		0.55
Silver	grams/tonne	25.47		20.26		18.82
Manpower	persons	65		72		65
Contained Zinc	tonnes (Mm lbs)	32,736 (72.2	)	34,319 (75.7	)	27,418 (60.4	)
Contained Copper	tonnes (Mm lbs)	518 (1.1	)	606 (1.3	)	561 (1.2	)
Contained Gold	kilograms (troy oz)	143 (5,060	)	187 (6,015	)	142 (4,577	)
Contained Silver	kilograms (troy oz)	7,612 (268,517	)	6,143 (197,504	)	4,885 (157,053	)

The Balmat Mine

        Note that Imperial units of measurement (i.e. tons, acres, etc.) are used in this description of the Balmat Mine.

        The Balmat Mine is a development property located in the Balmat-Edwards mining district in St. Lawrence County, New York State about 32 kilometres south of the St. Lawrence river. The area has been a mining district for over 90 years and all the infrastructure required for ongoing operations at the Balmat mine is available in the immediate area.

        The Balmat property comprises several reclaimed zinc mines and one (the Balmat Mine) currently on care and maintenance, as well as related assets, including a 5,000-ton per day concentrator, a rail siding and related maintenance facilities, administration buildings and associated infrastructure. The mine was put on care and maintenance in October 2001 due to low zinc prices, and is currently under evaluation for re-activation.

        We indirectly own 51,276 acres of mineral rights in St. Lawrence (51,175 acres) and Franklin (101 acres) counties in northern New York. We lease an additional 4,774 acres of mineral rights in the areas proximate to the Balmat mine.

        The four main ore bodies that comprise the Balmat Mine are the Mud Pond, Mahler, New Fold and Northeast Fowler. Leased claims cover 38% of the Mud Pond ore body, 15% of the Mahler ore body, 33% of the New Fold ore body and 40% of the Northeast Fowler trend. The leased claims are subject to a 4% net smelter return royalty. With the exception of one ten-year lease that expires in 2014, the leases have an initial 20-year term, with the first set to expire in 2021, and are renewable for additional terms of 20 years.

History

        Between 1915 and 2001, over 43 million tons of ore grading 9.4% zinc were mined from the four mines that have comprised the Balmat-Edwards zinc district. Drilling and development subsequent to 1996 led to a ten-fold increase in Mud Pond mineral reserves. The Mahler orebody was discovered in 2000, while high-grade mineralization was intersected in the New Fold and Northeast Fowler trends in 1997 and 2004 respectively. Prior to October 2001, when the mine was put on care and maintenance, over 9.4 million tons of ore grading 8% zinc was produced from the Balmat mine.

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Geology

        The Balmat-Edwards district occurs in the Frontenac Arch, an area characterised by a northwesterly trending window of Precambrian rocks overlain by and exposed beneath younger Paleozoic strata and Pleistocene glacial and lacustrine deposits.

        The Balmat-Edwards zinc deposits occur in Proterozoic metasedimentary rocks of the Grenville Supergroup.

        The zinc orebodies occur in siliceous dolomitic and evaporite-bearing marbles of the Upper Marble Formation, the uppermost of four metasedimentary formations mapped in the district. The Upper Marble is exposed in the core of the Sylvia Lake syncline, a major recumbent, doubly plunging, isoclinal fold lying between the towns of Balmat and Edwards. The Balmat mine is located in the southwestern hinge area of the Sylvia Lake syncline.

Mineralization

        The majority of the 14 orebodies in the Balmat Mine are arranged in three "clusters", containing three to five orebodies each.

        The mineralization is dominantly zinc sulphide with lead sulphide and iron sulphide. The zinc to lead ratio is approximately 35 to 1.

        Stratiform "parent" and stratabound but generally crosscutting "daughter" massive sulphide orebodies plunge gently (15 to 25 degrees) from north-northwest to northeast and generally range in size from 500,000 to 10,000,000 tons. Ore occurs as both tabular and podiform bodies with complex cross-sectional configurations.

Sampling and Analysis

        All assays are done at the mine site using appropriate quality-control, quality-assurance checks.

        The assay laboratory/metallurgical testing facility has established, documented and supervised procedures for sample preparation, assaying and metallurgical tests. In addition, there is a documented procedure for quality control assurance.

        Historic data indicates consistently very close correlation between estimated mill head grades versus calculated mill head grades, concentrate grades and tailings losses.

Concentrators

Flin Flon Concentrator

        At the Flin Flon concentrator, we produce zinc and copper concentrates from ore mined at the 777, Trout Lake and Konuto Lake mines. As part of the 777 Project, the capacity of the Flin Flon concentrator was expanded from 1.81 million tonnes of ore per year to 2.18 million tonnes of ore per year. The concentrator can handle ore from each mine separately and blending is done at the grinding stage.

        The Flin Flon concentrator facility includes a paste backfill, copper sulphate and lime slaking plant. The facility also includes associated infrastructure facilities such as maintenance shops and laboratories.

        The ore is crushed in a two-staged process using cone crushers to -19mm with a combination of screens and recycling of oversized material. The fine material is stored in seven 725 tonne fine ore bins. The grinding circuit has two 3.8 metre by 4.9 metre rod mills and a 5.0 metre by 9.7 metre ball mill operating in closed circuit with six cyclones. The final product is 80% passing 70 microns at a rate of 300 tonnes per hour.

        The copper circuit has six 40 m³ cells for roughing/scavenging and a bank of four 16 m³ and four 8 m³ cells for closed circuit cleaning. On removal of the copper, the slurry is fed to the zinc circuit with nine 40m³ cells for roughing/scavenging and a three stage cleaning circuit. The system includes an on stream analyzer.

        The concentrates are dewatered in two 8 metre diameter high rate thickeners and five 2.6 metre by 6 metre vacuum disc filters. Both copper and zinc concentrate are transferred to the concentrator storage sheds prior to

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treatment in the metallurgical complex. Tailings from the concentrator are pumped to the Flin Flon tailings impoundment immediately adjacent to the concentrator. We plan to expand the tailings pond in 2005.

Snow Lake Concentrator

        The Snow Lake concentrator is approximately 215 kilometres east of Flin Flon. The facility processes only the Chisel North mine ore and produces zinc concentrate that is processed at the zinc plant in Flin Flon. Concentrate is shipped by truck to Flin Flon.

        After being shut down in 1998, we reopened the Snow Lake Concentrator in 2000 in connection with the commencement of production at the Chisel North mine. The Snow Lake concentrator has a rated capacity of 1.4 million tonnes of ore per year including crushing, grinding, flotation, thickening, filtering and drying capabilities. However, all of the circuits necessary to throughput rated capacity are not in operation at this time. Power, water, vacuum and other services are available to allow refurbishment to the full production rate.

        The ore is crushed to -19mm material by a single primary crusher. The oversize is processed through a cone crusher and delivered to a 750 tonne fine ore bin. The crushed ore is first ground in a rod mill and then in a ball mill. The zinc flotation is by a set of four zinc rougher cells, three scavenger cells and a three stage cleaning circuit. The concentrates are dewatered and held in a storage shed.

        Tailings generated by the Snow Lake concentrator are deposited in Anderson Lake, which we believe mitigates environmental concerns. We expect that the tailings area will have sufficient volume for the projected mine life.

Balmat Concentrator

        The 5,000 ton per day Balmat concentrator was commissioned in 1971. In the past, the Balmat concentrator has produced zinc concentrate that is coarse grained and free from any appreciable amounts of elements deletrious to the smelting and refining process. The Balmat concentrator has not been in operation since October 2001.

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Concentrator Production

        The following chart sets forth certain information regarding the total concentrate produced at the HBMS Mines during the most recently completed three fiscal years.

			Flin Flon Concentrator			Snow Lake Concentrator
			December 31,			December 31,
Production Data
			2004	2003	2002	2004	2003	2002
Ore Milled		000s tonnes	2,156.1	1,902.7	1,810.1	327.9	304.0	259.8
	Zinc	%	4.50	3.99	3.76	9.99	11.32	10.56
	Copper	%	2.46	2.22	2.28	0.16	0.20	0.22
	Gold	grams/tonne	1.89	1.89	1.68	0.48	0.62	0.55
	Silver	grams/tonne	17.31	19.03	13.71	25.47	20.26	18.82
Zinc Concentrate		000s tonnes	152.5	121.2	103.5	61.8	65.1	51.9
	Zinc Grade	%	50.4	49.6	50.05	51.50	51.41	51.42
	Zinc Recovery to Zinc Concentrate	%	79.2	79.1	76.0	97.3	97.3	97.2
Copper Concentrate		000s tonnes	209.0	166.3	159.1	—	—	—
	Copper Grade	%	23.6	23.2	24.28	—	—	—
	Copper Recovery to Copper Concentrate	%	93.0	91.5	93.7	—	—	—
	Gold Recovery to Copper Concentrate	%	69.7	46.7	57.0	—	—	—
	Silver Recovery to Copper Concentrate	%	68.1	47.9	63.0	—	—	—
Manpower:		persons	83	81	79	25	25	23
Productivity:		tonnes milled per employee per month	2,165	1,958	1,909	1,093	1,013	941

Zinc Plant

        Our zinc plant produces special high-grade ("SHG") zinc metal of varying dimensions, from zinc concentrate. Our plant is one of four primary zinc producers in North America. We produced 110,200 tonnes of refined cast zinc in 2004. As part of the 777 Project, the capacity of the zinc plant was expanded by 15% to 115,000 tonnes of cast zinc per year.

        Both domestic concentrate and purchased concentrate are processed at the plant. Approximately 20% and 2% of concentrate treated at our zinc plant in 2003 and 2004, respectively, was purchased concentrate. We expect that our need for purchased concentrate will increase, due to declining zinc production at our mines. In the past, we have purchased zinc concentrate from a number of North American mines. We do not currently have any contracts to purchase zinc concentrate. However, we anticipate that future concentrate requirements will be fully met from both North and South American sources.

        The plant incorporates a two-stage zinc pressure leach plant. The zinc pressure leach plant uses Dynatec technology to recover zinc from zinc sulphide concentrate. The concentrate is treated in a high acid leach autoclave and a low acid leach autoclave that recovers most of the zinc. The zinc plant also includes a solution purification stage and a modern electro-winning cellhouse designed by Asturiana de Zinc, which uses the largest cathodes in operation. Included in the zinc plant are an oxygen plant, a concentrate handling, storage and regrinding facility, a zinc pressure leach plant, a solution purification plant, a cellhouse, a casting plant and a zinc storage area with the ability to load trucks or rail cars.

        The zinc solutions from the pressure leach plant are treated in a four-stage purification process to remove impurities such as copper and cadmium. Following purification, the solution is pumped to the cell house for electro-winning to produce SHG zinc. The cathode zinc is then melted in an induction furnace at the casting plant. The casting plant can produce SHG and zinc alloys in three sizes.

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        The zinc plant has a dedicated leach residue disposal facility. The bulk of the waste material is gypsum and iron. Wastewater is treated and recycled through the zinc plant.

        The zinc casting plant is certified to ISO 9001-2000 (quality).

Copper Smelter

        At our copper smelter, copper concentrates are processed into anodes, which are then shipped by rail to the White Pine copper refinery. There the anodes are refined into market standard copper cathodes.

        The copper smelter has an annual capacity of 90,000 tonnes of anode copper. In 2004, we produced 76,900 tonnes, while undergoing a one-month shutdown during the year.

        Both domestic concentrate and purchased concentrate are refined at the smelter. Approximately 40% and 35% of concentrate treated at our copper smelter in 2003 and 2004, respectively, was purchased concentrate. Concentrate has previously been purchased from a number of North American mines, with the principal supplier being the Highland Valley Copper mine in British Columbia. A frame agreement with Highland Valley Copper provides for 72,000 dry metric tonnes (dmt) of concentrate per year through 2008. There is also an evergreen concentrate agreement for 40,000 dmt of concentrate per year with Collahuasi, a Chilean company, which agreement expires in 2008. In the past, concentrate deliverable under the Collahuasi concentrate agreement, has been swapped for North American concentrate.

        Copper concentrate is delivered to the smelter by conveyor or rail. The copper smelter includes facilities for concentrate handling and storage, flux blending, roasting, calcine handling, smelting in a reverberatory furnace, processing in converting furnaces, anode refining and casting and rail car loading of anodes.

        The converter gas handling system at the smelter has reduced fugitive gas emissions at ground level by 90% since 2000, and HBMS has reduced total particulate emission in compliance with regulations and the voluntary Accelerated Reduction and Elimination of Toxics ("ARET") program.

        The concentrate is roasted in one of five 6.6 metre by 9.1 metre roasters to remove approximately half of the sulphur. The calcine is then processed through a reverberatory furnace to produce copper matte. The matte is converted into blister copper in converters and then refined and cast into anode in a wheel mould.

        The smelter has procedures to handle all the wastes produced by the process. The roaster gases are passed through an electrostatic precipitator to remove dust, which is recycled to the furnaces. The slag is dumped in a slag dumpsite and is used for tailings dam construction.

Zochem

        Zochem is the value-added zinc oxide production division of HBMS, located in Brampton, Ontario. Zochem is a stand-alone operation that takes between 32,000 tonnes and 41,000 tonnes of our zinc metal production per year, buffering our production schedules and inventories against the impact of zinc market cyclicality. In 2004, Zochem was the third largest producer of zinc oxide in North America, accounting for approximately 18% of the North American market.

        The Zochem facilities have a total capacity of 45,000 tonnes per year of zinc oxide. In 2004, Zochem produced approximately 38,724 tonnes of zinc oxide. The zinc oxide produced by Zochem is sold through CMM.

        Zochem is registered to ISO 9001:2000 (quality), OHSAS 18001 (safety management system) and ISO 14001:1996 (environmental management system).

White Pine Copper Refinery

        The White Pine copper refinery processes copper anode into refined copper cathode. The White Pine copper refinery is located in the western upper peninsula of Michigan. Pursuant to a tolling agreement with CMM, White Pine Copper Refinery Inc. has agreed to process approximately 85,000 short tons of copper anode per year supplied by CMM at a toll charge of US$0.08375 per pound of cathode copper.

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        The tolling agreement will terminate upon CMM exercising its option to acquire White Pine Copper Refinery Inc., which option CMM holds pursuant to an agreement with Considar WP Acquisition Corp., a subsidiary of Considar Inc. ("Considar"), which is our joint venture partner in CMM. This call option may be exercised after June 30, 2005 but before September 30, 2005 or after June 30, 2006 but before September 30, 2006. Pursuant to the agreement, Considar WP Acquisition Corp. may also compel CMM to purchase White Pine Copper Refinery Inc. This put option may be exercised between July 1 and September 30, 2005. We anticipate that CMM will purchase the White Pine copper refinery. The purchase price to be paid by us for White Pine Copper Refinery Inc. is US$13 million, subject to certain adjustments.

        The White Pine Copper Refinery Inc. is the beneficiary of an agreement with the State of Michigan pursuant to which the State of Michigan has covenanted not to take any action against White Pine for cleanup costs at the White Pine property in connection with contamination that existed at the time it acquired the property, including contamination emanating from, or attributable to, such contamination, under certain sections of the Natural Resources and Environmental Protection Act (Michigan). Pursuant to this agreement, White Pine Copper Refinery Inc. has agreed to certain conditions, including certain remedial obligations. If we purchase the White Pine Copper Refinery we expect that this covenant not to sue will continue for our benefit.

Employees

        We have approximately 1,390 permanent employees in the Flin Flon and Snow Lake areas, of whom approximately 1,113 are unionized. Unions representing steelworkers, machinists and aerospace workers, electrical workers, boilermakers, carpenters, painters and operating engineers are among the unions represented. In 1998, HBMS entered into an amending agreement in respect of certain existing collective bargaining agreements, establishing a framework for union/management relations to 2012, subject to the satisfaction of certain ongoing conditions. The amending agreement prohibits strikes and lockouts and provides for binding arbitration in the event that negotiated contract settlements are not achieved. All current collective bargaining agreements are for three-year terms, with the current term ending on December 31, 2005. We also have a profit sharing plan whereby 10% of HBMS' after tax earnings for any given fiscal year will be distributed to all employees at the Flin Flon/Snow Lake operations, with the exception of executive officers and key management personnel.

        Our Zochem division employs 42 people, 26 of whom are unionized. Zochem and the Communication, Energy, and Paperworkers union have a three-year collective agreement, which expires in July, 2006. The Flin Flon amending agreement does not apply to the Zochem collective bargaining agreement.

        Since 1991, we have maintained a rigorous manpower reduction strategy, which reduced our workforce by 1,138 permanent positions, including 120 positions in late 2003. Consistent with our ongoing reduction of personnel, the 2003 restructuring focused largely on administrative and overhead activities. Restructured work systems were built around the concept of shared services, which saw previously distributed service groups such as engineering, maintenance and loss control consolidated so as to optimize skill utilization and labour efficiency. Experience through 2004 demonstrated that the reductions are permanent and sustainable, and have resulted in a streamlining of our Company.

        In connection with the Acquisition, HBMS agreed to pay approximately $1.89 million to approximately 23 current employees to cover payments to be made under a retention plan, payable in two equal installments — the first payment of which has been made and the second payment is due in September 2005. In addition, we have agreed to pay retention bonuses in the aggregate amount of $1 million to those HBMS employees appointed as our officers following the Acquisition, which payments have been and will be made in three equal installments on the closing of the Acquisition and six and twelve months thereafter. See "Our Directors and Officers".

Health and Safety

        The safety performance at our HBMS facilities is measured by a variety of indices and has markedly improved in all categories over the last ten years. Lost time accident (LTA) frequency rates per 200,000 hours worked have fallen from 16.2 accidents in 1994 to consistently in the 0.8 range over the last three years. Injury

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severity per 200,000 hours worked has also dropped from 7,289 days in 1994 to 638 in 2004. There was a slight increase in lost time accidents from 2003 to 2004, which resulted in an overall increase in lost time severity.

        As a result of the significant reduction in the LTA and severity frequency rate per 200,000 hours worked, there was a reduction in HBMS' Worker's Compensation Board assessments from approximately $5 million in 1995 to approximately $1.3 million in 2004. Compensation costs in 2004 were approximately $0.3 million higher than 2003, with the increase mainly due to costs associated with an accident that occurred in 2001.

        In October 2004, we received certification for our Safety Management System under OHSAS 18001.

Principal Products and Marketing

        Our primary products are zinc metal, copper metal and zinc oxide. We also produce gold, silver and lead as by-products.

        We market our metals through CMM. We formed CMM as a joint venture company with Considar. Both Considar and us own 50% of the shares of Considar Metal Marketing S.A., which in turns owns CMM. CMM markets, predominantly in North America, all of our zinc metal, copper metal and zinc oxide production. CMM also assists us in identifying and acquiring additional zinc and copper concentrates to fill the capacity of the HBMS metallurgical complex.

        Based on targeted marketing, quality products and long-standing customer relationships, we have historically received a market premium on zinc and copper sales, typically in the range of US$0.025 to US$0.055 per pound of zinc and US$0.01 to US$0.04 per pound of copper. Our continuing receipt of these premiums will depend on regional supply and demand within the North American market and the continued success of the marketing efforts of CMM.

        White Pine Copper Refinery Inc. has agreed to purchase approximately 85,000 short tons of copper per year from CMM, pursuant to the tolling agreement. See "Our Business — Operations — White Pine Copper Refinery".

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Suppliers and Raw Materials

        We spend a significant percentage of our annual consolidated revenue to procure goods and services in support of our business activities. Principal goods and services include copper and zinc concentrate, maintenance and repair parts and services, electricity, fuel and lubricants, ground support materials, explosives, tires, chemical reagents and ventilation supplies. We use suppliers or independent contractors for a portion of our equipment rebuilds and repairs both on and off-site, as well as for construction and reclamation activities and to support computer systems.

        In the past, we have purchased concentrate from a number of North American mines, with the principal supplier being the Highland Valley Copper mine in British Columbia. We also have an evergreen concentrate agreement for concentrate with Collahuasi, which agreement expires in 2008. Historically, concentrate deliverable under the Collahuasi concentrate agreement have been swapped for North American concentrate.

Competition

        The base metals mineral exploration and mining business is highly competitive. We compete with numerous other companies for the discovery and acquisition of mineral rich properties that can be developed and produced economically, the technical expertise to find, develop, and operate such properties, the labour to operate the properties, and the capital for the purchase of such properties. Many of these companies are substantially larger and have greater financial resources than we do. Our ability to acquire additional mineral reserves in the future will depend not only on our ability to develop and operate our current properties, but also on our ability to identify and acquire suitable producing properties or prospects for base metals development or mineral exploration. We also compete with manufacturers of substitute materials or products for which zinc and copper are traditionally used. For example, steel treated with epoxy resins or paint may be used in place of zinc-based galvanized steel and aluminum based conductors may be used in place of copper-based conductors. However, due to the metallic properties of zinc and copper, there are few, if any, substitutes of either that are of comparable quality.

Environmental Liabilities

        We have a dedicated team of seven engineers and technicians at HBMS who are charged with managing our environmental activities and our environmental compliance with all applicable standards and regulations.

Air Quality

        During the past ten years, we have invested a significant amount to reduce emissions from our copper smelter, resulting in reductions of airborne emissions. We have participated in the Environment Canada ARET and Strategic Options Process ("SOP") programs. We have substantially achieved the ARET reductions and 73% of the 2008 SOP reduction targets. By 2008, we expect to reduce our emissions to 80% of 1988 levels but this may require capital expenditures.

        On September 25, 2004, the Canadian federal government issued a proposed notice requiring the preparation and implementation of pollution prevention plans in respect of specified toxic substances released from base metal smelters and refineries and zinc plants. The proposed notice would set annual air release targets for sulphur dioxide, particulate matter and mercury as factors to be considered in the preparation of the pollution prevention plans utilizing best available techniques. The air release targets are divided into two phases, with the first reductions being set for December 31, 2008 with a subsequent reduction by December 31, 2015. The mercury reduction targets in the proposed notice are consistent with the Canada-wide Standard (CWS) for Mercury Emissions endorsed by the Manitoba provincial government. Recent studies have confirmed that our current mercury emissions are of a similar order as those reported in recent years. These targets are below our current emissions levels for the specified substances and, if implemented in its proposed form, the costs of meeting these targets would be material.

        In an effort to improve ambient air quality in the Flin Flon area close to the tailings deposition site, we have placed a slag cover over exposed tailings beaches. Further, we are currently changing our tailings deposit plan to minimize dusting potential.

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Water Quality

        Water management and water quality is an area on which HBMS has focused attention over recent years. The acid generating nature of the concentrate tailings, common to all base metals operations of this type, has the potential to affect activities downstream from the tailings management facility. Currently, treated effluents from the tailings management facility are in compliance with environmental regulations.

        Since the introduction of MMER in 2002, HBMS has had three events that have resulted in seven situations in which environmental thresholds were exceeded. HBMS has acted to resolve each of these events. No fines have been levied in respect of such events to date.

Contaminated Soils and Facilities

        The concentrators, metallurgical facilities and mine sites reflect the impact of historic and current operations. HBMS has undertaken some clean up of the plant and mine areas as part of recent plant site improvements and waste management programs. Full cleanup and restoration will only be undertaken at closure. We believe that progressive reclamation of past operating sites has occurred with good results. We have estimated that total reclamation costs relating to the closure of all our facilities in Manitoba and Saskatchewan will be approximately $51.6 million and the net present value of these costs is $30.8 million. In connection with our acquisition of HBMS we requested that Howe prepare a worst case scenario estimate of the total environmental capital costs for closure and reclamation, which Howe estimated to be $92 million.

        In December 2004, the Provinces of Manitoba and Saskatchewan informed us that, in their view, the HBMS estimate of reclamation costs may be too low and the security for the reclamation obligations may not be sufficient.

        We have had preliminary discussions with the Provinces of Saskatchewan and Manitoba and have agreed to conduct a feasibility study to more accurately determine the estimated reclamation costs. The study has been awarded to an engineering firm and is to be completed by the end of June 2005.

        We believe that our current reclamation cost estimate of approximately $51.6 million is adequate and is sufficiently secured by the existing security. However, we have provided additional security in the form of letters of credit in the aggregate amount of $13 million, which will remain in place during the period of the reclamation study. After completion of the feasibility study, the appropriate security will be determined with the provinces.

        See "Risk Factors — Reclamation and mine closure costs could adversely affect our cash flow from operations".

RISK FACTORS

        An investment in our securities is speculative and involves significant risks that should be carefully considered by prospective investors before purchasing such securities. In addition to the risk factors described elsewhere in this AIF, the risk factors that should be taken into account in any investment decision include, but are not limited to, those set out below. Any one or more of these risks could have a material adverse effect on the value of our securities and should be taken into account in assessing our activities.

The market price of metals is volatile.

        Our earnings and financial condition depend upon the market prices of metals, which can fluctuate widely. Metal prices ultimately depend on demand in the end markets for which metals are used. The principal end markets for zinc and copper are the steel and automotive industries and the electrical and electronics industries, respectively. These industries, as well as certain other industries that use zinc or copper, are cyclical in nature. Demand is affected by numerous factors beyond our control, including the general level of industrial production, interest rates, the rate of inflation, and the stability of exchange rates, any of which can cause significant fluctuations in zinc and copper prices. Such external economic factors are in turn influenced by changes in international investment patterns, monetary systems and political developments. The price of zinc, copper and other metals has fluctuated widely in recent years. Future price declines may materially reduce our profitability

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and could cause us to reduce output at our operations (including, possibly, closing one or more of our mines or plants), all of which could reduce our cash flow from operations.

        Furthermore, a significant decrease in commodity prices may require us to revise our mineral reserve calculations and life-of-mine plans, which could result in material write-downs of our investment in mining properties and increased amortization, reclamation and closure charges. In addition to adversely affecting our mineral reserve estimates and our financial condition, declining commodity prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.

        We may in the future engage in hedging activities, such as forward sales contracts and commodity put and call option contracts, to minimize the effect of declines in metal prices on our operating results. While these hedging activities may protect us, to some extent, against low metal prices, they also limit the price we can receive on hedged products. As a result, we may be prevented from realizing possible revenues in the event that the market price of a metal exceeds the price stated in a forward sale or call option contract, which could adversely affect our results of operations.

Our operations are subject to currency fluctuations.

        As our core operations are located in Canada, our costs are incurred primarily in Canadian dollars. However, our revenue is tied to market prices for zinc and copper, which are denominated in United States dollars. If the Canadian dollar gains value against the United States dollar, our results of operations and financial condition could be materially adversely affected. Although we may use hedging strategies to limit our exposure to currency fluctuations, there can be no assurance that such hedging strategies will be successful or that they will mitigate the risk of such fluctuations.

We face significant environmental risks.

        All phases of our operations are subject to environmental regulation in the various jurisdictions in which we operate. Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. For example, on September 25, 2004, the Canadian federal government issued a proposed notice requiring the preparation and implementation of pollution prevention plans in respect of specified toxic substances released from base metals smelters and refineries and zinc plants, including our metallurgical complex in Manitoba. The proposed notice would set target emissions for mercury, sulphur dioxide and particulate matter below our current emission levels. There is no assurance that existing or future environmental regulation will not materially adversely affect our business, financial condition and results of operations. There is contamination on properties that we own or owned or for which we have or have had care, management or control that may result in a requirement to remediate that could involve material costs. In addition, environmental hazards may exist on the properties on which we hold interests that are unknown to us at present and that have been caused by previous or existing owners or operators of the properties. We may also acquire properties with environmental risks.

        Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations, including us, may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

        Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on us and cause increases in exploration expenses, remedial and reclamation obligations, capital expenditures or production costs, reduction in levels of production at producing properties, or abandonment or delays in development of new mining properties.

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We are subject to substantial government regulation.

        Our mining, processing, development and mineral exploration activities are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Mining and exploration activities are also subject to various laws and regulations relating to the protection of the environment. Although we believe that our exploration activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of our properties. Amendments to current laws and regulations governing our operations and activities or more stringent implementation thereof could have a material adverse effect on our business, financial condition and results of operations.

The costs of compliance with the Kyoto Protocol could have a material adverse effect on our operations.

        Canada ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change in late 2002. The Kyoto Protocol came into effect in Canada in February 2005. Various levels of governments in Canada are developing a number of policy measures in order to meet Canada's emission reduction obligations under the protocol. While the impact of the protocol and these measures cannot be quantified at this time, the likely effect will be to increase costs for fossil fuels, electricity and transportation, restrict industrial emission levels, impose added costs for emissions in excess of permitted levels and increase costs for monitoring and reporting. Compliance with these initiatives could have a material adverse effect on our results of operations.

Increased concentrate costs could adversely affect our operations.

        We rely on the availability of reasonably priced copper and, to a lesser extent, zinc concentrate to operate the HBMS metallurgical complex at full capacity. Production of concentrate from the HBMS Mines has not been sufficient to operate the metallurgical plants at full capacity. As a result, we purchase significant quantities of copper and, to a lesser degree, zinc concentrate from third parties. Our purchases of copper and zinc concentrate may increase significantly in the future as a result of declining production at the HBMS Mines, which may adversely affect our profitability as processing purchased concentrate is less profitable than domestic concentrate.

        The availability of concentrate may be influenced by a number of factors, many of which are not within our control, including operational difficulties at the concentrate suppliers' mines. Shortages of these concentrates have occurred in the past and may occur in the future. We do not have any purchased zinc concentrate contracts in place. Although we have such contracts for copper concentrate, no assurance can be given that agreed upon quantities will be provided by the applicable supplier or that, if supplied, they will be sufficient for our purposes. The price we pay for concentrate is dependent upon (i) treatment and refining charges, which are set on the basis of supply and demand for concentrate, and agreed between the vendors of the concentrate and HBMS, and (ii) freight costs of transporting the concentrate to HBMS' Flin Flon metallurgical complex, both of which can vary significantly. Accordingly, any price increase in, or reduced availability of, concentrate will adversely affect our profitability and the economic viability of our processing operations.

Our exploration activities may not result in discoveries of commercial quantities of ore.

        The exploration for and development of mineral deposits involves significant risks. Few properties that are explored are ultimately developed into producing mines. Whether a mineral deposit will be commercially viable depends on a number of factors, including: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. Even if we identify and acquire an economically viable ore body, several years may elapse from the initial stages of development. We may incur major expenses to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing facilities. As a result, we cannot assure you that our exploration or development efforts will result in any new commercial mining operations or yield new mineral reserves to replace or expand current mineral reserves.

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Estimates of mineral reserves, mineral resources, and projected cash flows may prove to be inaccurate.

        There are numerous uncertainties inherent in estimating mineral reserves and the future cash flows that might be derived from their production. Accordingly, the figures for mineral reserves and mineral resources and future cash flows contained in this AIF are estimates only. In respect of mineral reserve and mineral resource estimates, no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized or that a mineral reserves can be mined or processed profitably. In addition, in respect of future cash flows, actual cash flows may differ materially from estimates. Estimates of mineral reserves and mineral resources, and future cash flows to be derived from the production of such mineral reserves and mineral resources, necessarily depend upon a number of variable factors and assumptions, including, among others, geological and mining conditions that may not be fully identified by available exploration data or that may differ from experience in current operations, historical production from the area compared with production from other producing areas, the assumed effects of regulation by governmental agencies and assumptions concerning metal prices, exchange rates, interest rates, inflation, operating costs, development and maintenance costs, reclamation costs, and the availability and cost of labour, equipment, raw materials and other services required to mine and refine the ore. In addition, there can be no assurance that mineral recoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. For these reasons, estimates of our mineral reserves and mineral resources in this AIF, including classifications thereof based on probability of recovery, and any estimates of future cash flows expected from the production of those mineral reserves and mineral resources, prepared by different engineers or by the same engineers at different times may vary substantially. The actual volume and grade of mineral reserves mined and processed, and the actual cash flows derived from that production, may not be as currently anticipated in such estimates. If our actual mineral reserves and mineral resources or cash flows are less than our estimates, our results of operations and financial condition may be materially impaired.

Mining operations are inherently dangerous and subject to conditions or events beyond our control, which could have a material adverse effect on our business; Insurance may not cover these risks and hazards adequately or at all.

        Mining operations, including the exploration and development of mineral deposits, generally involve a high degree of risk. Our operations are subject to all the hazards and risks normally encountered in the exploration, development and production of zinc metal and copper metal including: adverse environmental conditions; industrial accidents; metallurgical and other processing problems; unusual or unexpected rock formations; ground or slope failures; structural cave-ins or slides; flooding or fires; seismic activity; rock bursts; equipment failures; and periodic interruptions due to inclement or hazardous weather conditions.

        These risks could result in damage to, or destruction of, mines and other producing facilities resulting in partial or complete shutdowns, personal injury or death, environmental or other damage to our properties or the properties of others, delays in mining, monetary losses and potential legal liability. Milling operations are subject to hazards such as equipment failure or failure of retaining dams around tailings disposal areas that may result in environmental pollution and consequential liabilities.

        Our insurance will not cover all the potential risks associated with our operations. In addition, although certain risks are insurable, we may be unable to maintain insurance to cover these risks at economically feasible premiums. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to us or to other companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards that may not be insured against or that we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial performance and results of operations.

Title to some of our mineral properties may be challenged or defective.

        The acquisition of title to mineral properties is a very detailed and time-consuming process. Title to mineral concessions may be disputed. Although we believe we have taken reasonable measures to ensure proper title to our properties, there is no guarantee that title to any of our properties will not be challenged or impaired. Third

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parties may have valid claims underlying portions of our interests, including prior unregistered liens, agreements, transfers or claims, including aboriginal land claims, and title may be affected by, among other things, undetected defects. As a result, we may be constrained in our ability to operate our properties or unable to enforce our rights with respect to our properties. An impairment to or defect in our title to our properties could have a material adverse effect on our business, financial condition or results of operations.

Our significant indebtedness could adversely affect our ability to operate our business.

        We have a significant amount of indebtedness comprised of the long-term portion of obligations under capital leases, senior secured notes, and a government loan. As at December 31, 2004, we had outstanding indebtedness of $235.2 million with a ratio of debt to equity of 1.54 to 1. In addition, we have other obligations that include pension, employee future benefits and asset retirement obligations.

        As of March 24, 2005, we have unconditionally guaranteed the debt obligations of HBMS under the Notes. We have fully and unconditionally guaranteed, on a subordinated basis, all payments on the Notes, including principal, premium (if any) and interest.

        This high degree of leverage could materially and adversely affect us in a number of ways including:

•

limiting our flexibility to plan for, or react to, changes in our business or market conditions;



•

limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes, and in particular for the exploration and development of our current properties and projects;



•

limiting our access to cash available from operations for future acquisitions and our business in general;



•

increasing our vulnerability to the impact of adverse economic and industry conditions; and



•

placing us at a disadvantage compared to our competitors that have a lower degree of leverage.

        In addition, we may not be able to generate sufficient cash flows from operations to service our indebtedness, in which case, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing indebtedness or obtain additional financing, any of which could materially adversely affect our operations and ability to implement our business strategy.

Restrictive covenants in the indenture governing the Notes and in any new credit facility may prevent us from pursuing business activities that could otherwise improve our results of operations.

        The terms of the indenture governing the Notes limit the ability of certain of our principal subsidiaries to, among other things:

•

incur additional indebtedness or contingent obligations;



•

enter into sale and leaseback transactions;



•

make investments;



•

grant liens;



•

make capital expenditures;



•

enter into transactions with affiliates;



•

sell assets; and



•

acquire the assets of, or merge or consolidate with, other companies.

        We expect that any new credit facility will have similar restrictive covenants and will further require us to maintain certain financial ratios and satisfy other non-financial maintenance covenants. Compliance with these restrictive covenants and financial ratios, as well as those that may be contained in any future debt agreements, may impair our ability to finance our future operations or capital needs or to take advantage of other favourable business opportunities. Our ability to comply with these restrictive covenants and financial ratios will depend on

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our future performance, which may be affected by events beyond our control. Our failure to comply with any of these restrictive covenants or financial ratios will result in a default under the particular debt instrument, which could permit acceleration of the indebtedness under that instrument and, in some cases, the acceleration of indebtedness under other instruments that contain cross-default or cross-acceleration provisions. In the event of a default, or a cross-default or cross-acceleration, we may not have sufficient funds available to make the required payments under our debt agreements. If we are unable to repay amounts owed under the terms of the credit agreement governing any credit facility that we may enter into in the future, those lenders may be entitled to take possession of the collateral securing that facility to the extent required to repay those borrowings. In such event, we may not be able to fully repay the notes, if at all.

We may not be able to acquire desirable mining assets in the future.

        One of our strategies is to grow our business by acquiring attractive, quality mining assets. We expect to selectively seek strategic acquisitions in the future. However, there can be no assurance that suitable acquisition opportunities will be identified. Further, restrictive covenants in our current or future debt instruments may restrict and limit our ability to pursue future acquisitions. Our ability to consummate and to integrate effectively any future acquisitions on terms that are favourable to us may be limited by the number of attractive acquisition targets, internal demands on our resources, competition from other mining companies and, to the extent necessary, our ability to obtain financing on satisfactory terms, if at all.

Intense competition could reduce our market share or harm our financial performance.

        The mining industry is intensely competitive and we compete with many companies possessing greater financial and technical resources than us. Since mines have a limited life, we must compete with others who seek mineral reserves through the acquisition of new properties. In addition, we also compete for the technical expertise to find, develop, and operate such properties, the labour to operate the properties, and the capital for the purpose of funding such properties. Many competitors not only explore for and mine base metals, but conduct refining and marketing operations on a global basis. Such competition may result in us being unable to acquire desired properties, to recruit or retain qualified employees or to acquire the capital necessary to fund our operations and develop our properties. We also compete with manufacturers of substitute materials or products for which zinc and copper are typically used. Existing or future competition in the mining industry could materially adversely affect our prospects for mineral exploration and success in the future.

Increased energy prices could adversely affect our operations.

        Mining operations and facilities are intensive users of electricity and carbon based fuels. Energy prices can be affected by numerous factors beyond our control, including global and regional supply and demand, political and economic conditions, and applicable regulatory regimes. The prices of various sources of energy may increase significantly from current levels. An increase in energy prices could materially adversely affect our results of operations and financial condition.

Our revenues will be dependent on our metal production; sustaining current production levels or increasing our mineral production depends on our ability to bring new mines into production and to expand mineral reserves at existing mines.

        We generate revenues primarily through the production and sale of metals. Subject to any future expansion or other development, production from existing operations at the HBMS Mines is expected to decline over the life of mine. In addition, these production estimates and the life-of-mine estimates included in this AIF may vary materially from the actual production from, or productive life of, the subject mines because the feasibility of mining a mineral deposit is largely dependent on market conditions, the regulatory environment, and available technology. As a result, our ability to maintain our current production or increase our annual production of metals and generate revenues therefrom will depend significantly upon our ability to discover or acquire and to successfully bring new mines into production and to expand mineral reserves at existing mines.

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Reclamation and mine closure costs could adversely affect our cash flow from operations.

        In view of the uncertainties concerning future removal and site restoration costs on our properties including those held by HBMS, the ultimate timing of and costs for future removal and site restoration could differ from current estimates. Our estimates for this future liability are subject to change based on amendments to applicable laws and legislation, the nature of ongoing operations and technological innovations. At our request Howe estimated a worst case scenario of the total environmental capital costs for closure and reclamation of $92 million. We had previously estimated that total reclamation costs relating to the closure of all of our facilities in Manitoba and Saskatchewan would be approximately $51.6 million. The Provinces of Saskatchewan and Manitoba have informed us that, in their view, the previous estimate of reclamation costs is too low and that the security for the reclamation obligations may not be sufficient. Any future changes to our reclamation and mine closure costs (either in our estimates or in the actual costs) could have a material and adverse effect on our future operating results.

        In addition, regulatory authorities in various jurisdictions require us to post financial assurances to secure in whole or in part future reclamation and restoration obligations in such jurisdictions. The amount and nature of the financial assurances are dependent upon a number of factors, including our financial condition and reclamation cost estimates. Changes to these amounts, as well as the nature of the collateral to be provided, could significantly increase our costs, making the maintenance and development of existing and new mines less economically feasible. Currently, the security that we provide to the governments of the Provinces of Saskatchewan and Manitoba consists of the equipment, buildings and fixtures located at the HBMS metallurgical complex. In connection with the provinces informing us of a potential deficiency in our previous estimate of reclamation obligations, we have provided additional security in the form of letters of credit in the aggregate amount of $13 million pending the outcome of a new reclamation study to be completed in 2005. However, the Provinces may require further financial assurances. To the extent that the value of the collateral provided to the Provinces is or becomes insufficient to cover the amount of financial assurance we are required to post, we would be required to replace or supplement the existing security with more expensive forms of security, which might include cash deposits, which would reduce our cash available for operations and financing activities. There can be no guarantee that we will be able to maintain or add to our current level of financial assurance. We may not have sufficient capital resources to further supplement our existing security.

        Although we accrue for future closure costs, we do not reserve cash in respect of these obligations or otherwise fund these obligations in advance. As a result, we will have significant cash costs when we are required to close and restore mine sites that may, among other things, affect our ability to satisfy our obligations under our indebtedness or other contractual commitments. Given the significance of these cash costs, we may not be able to fund them with cash from our operating activities or other available capital resources. We cannot assure you that we will be able to obtain financing on satisfactory terms to fund these costs. If we are unable to fund the removal and site restoration costs, regulatory authorities may foreclose on the collateral securing those obligations. We may not have sufficient capital resources to further supplement our existing security. Additionally, any capital resources that we do utilize for this purpose will reduce our resources available for our operations and commitments, including satisfying our obligations on the Notes.

The temporary shutdown of any of our operations could expose us to significant costs and adversely affect our access to skilled labour.

        From time to time, we may have to temporarily shutdown our copper smelting and/or zinc refining operations or one or more of our mines if they are no longer considered commercially viable. There are a number of factors that may cause our operations to be no longer commercially viable, many of which are beyond our control. These factors include adverse changes in interest rates or currency exchange rates, decreases in the price of zinc or copper or the market rates for treatment and refining charges, increases in concentrate transportation costs, and increases in labour costs. During such temporary shutdowns, we will have to continue to expend capital to maintain the plant and equipment. We may also incur significant labour costs as a result of a temporary shutdown if we are required to give employees notice prior to any layoff or to pay severance for any extended layoff. Furthermore, temporary shutdowns may adversely affect our future access to skilled labour, as employees who are laid off may seek employment elsewhere. As well, if the copper smelting and/or zinc refining operations are shutdown for an extended period of time, we may be required to engage in environmental

28

remediation of the plant sites, which would require us to incur additional costs. Given the costs involved in a temporary shutdown of our operations, we may instead choose to continue to operate those operations at a loss. This could have a material adverse effect on our results of operations and financial conditions.

We are required to obtain government permits in order to conduct mining operations.

        Government approvals and permits are currently required in connection with all of our operations and further approvals and permits may be required in the future. We must obtain and maintain a variety of licences and permits including air quality control, water, electrical and municipal licences. The duration and success of our efforts to obtain permits are contingent upon many variables outside of our control. Obtaining governmental permits may increase costs and cause delays depending on the nature of the activity to be permitted and the interpretation of applicable requirements implemented by the permitting authority. There can be no assurance that all necessary permits will be obtained and, if obtained, that the costs involved will not exceed our estimates or that we will be able to maintain such permits. To the extent such approvals are required and not obtained or maintained, our operations may be curtailed or we may be prohibited from proceeding with planned exploration, development, or operation of mineral properties.

Disruption of transportation services or increased transportation costs could have a material adverse effect on our business, financial condition and results of operations.

        At the HBMS properties, we are dependent upon a single railway and certain short-line rail networks to transport purchased concentrate to our Flin Flon metallurgical complex and to transport products from the Flin Flon metallurgical complex for further processing and to our customers. We may have similar dependencies at future mining and processing operations. Disruption of these transportation services due to weather-related problems, strikes, lock-outs or other events could have a material adverse effect on our operations. If transportation for our products becomes unavailable, our ability to market our products could suffer. In addition, increases in our transportation costs relative to those of our competitors could make our operations less competitive and could affect our profitability.

We are dependent upon key management personnel and executives.

        We are dependent upon a number of key management personnel, including the services of certain key employees. Our ability to manage our exploration and development activities, and hence our success, will depend in large part on the efforts of these individuals. We face intense competition for qualified personnel, and there can be no assurance that we will be able to attract and retain such personnel. We do not maintain "key person" life insurance. Accordingly, the loss of the services of one or more of such key management personnel could have a material adverse effect on us.

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Our business will depend on good relations with our employees.

        Production at our mining operations depends on the efforts of our employees. Although certain HBMS unionized employees have agreed to "no-strike" clauses in their collective bargaining agreements, which run until 2012, there can be no assurance that our business will not suffer from work stoppages. Further, relations with employees may be affected by changes in the scheme of labour relations that may be introduced by the relevant governmental authorities in whose jurisdictions we carry on business. Changes in such legislation or otherwise in our relationship with our employees may result in strikes, lockouts or other work stoppages, any of which could have a material adverse effect on our business, results of operations and financial condition.

We are exposed to credit risk from customers to whom CMM provides credit in the normal course of its operations and in connection with certain derivative contracts.

        Our accounts receivable are with CMM. CMM provides credit to its customers in the normal course of its operations. Although CMM mitigates credit risk by carrying out credit evaluations on its customers, making a significant portion of its sales on a cash basis and maintaining insurance on its accounts receivable, if customers default on the credit extended to them, results of operations could be materially adversely affected. Further, we enter into derivative contracts for which we do not obtain collateral or other security. In the event of non-performance by counterparties in connection with such derivative contracts, we will be further exposed to credit risk.

INDUSTRY REGULATION

Land and Mineral Rights

        Our mining interests are governed by the laws of the province in which the mining interests are situated. We have interests in mining interests that are held as freehold titles, mine or mineral claims, mineral leases, mining leases, quarrying dispositions, quarry mineral leases, quarry permits, sand and gravel leases, surface leases, surface permits, Order-in-Council leases, leases of Crown lands or minerals, general permits relating to Crown lands and exploration licences. The rights applicable to such interests are described, circumscribed, limited, restricted and qualified by the laws of the province applicable to such interests, and by the terms of the grant of such interests. Royalty payments may be required to be paid on mineral leases.

Manitoba

        Manitoba mineral leases are granted, under The Mines and Minerals Act (Manitoba), generally for terms of 21 years. Upon application, a lessee is entitled to the renewal of the lease for further terms of 21 years if, at the time of the application for renewal, the lessee is in compliance with The Mines and Minerals Act and the terms and conditions of the mineral lease.

        The annual lease rental rate for a mineral lease in production is currently $8.00 per hectare per year. There are no other charges required to maintain the leases. Prior to obtaining a mineral lease in Manitoba, the applicant must first obtain a mineral prospecting licence and a mineral exploration licence. The cost associated with a mineral prospecting licence, if issued to a corporation, is $200. The mineral exploration licence application fee is $300 with a deposit of $0.50 per hectare also required.

        A mineral lease includes and is subject to a reserve, in favour of the Province, of royalties in respect of minerals that are produced under the lease. The royalty reserved to the Province in respect of a mineral must be calculated in accordance with the regulations. However, no royalties will be paid in respect of a mineral for which a royalty would otherwise be payable, if a tax is payable under The Mining Tax Act (Manitoba).

Saskatchewan

        Saskatchewan leases for provincial mineral lands are granted under The Crown Minerals Act (Saskatchewan) and The Mineral Disposition Regulations, 1986 (Saskatchewan). The term of a lease is ten years, renewable for a further term of ten years if the holder has complied with The Crown Minerals Act (Saskatchewan) and associated regulations. Annual license fees of $25 per hectare are payable in each of the first ten years of the lease, with a minimum of $400 per lease; $50 per hectare in years 11 through 20 of a renewed lease, with a minimum of $800

30

per lease; and $75 per hectare thereafter, with a minimum of $1,200 per lease. Prior to obtaining a mineral lease in Saskatchewan, the applicant must first apply for a permit or claim to explore provincial mineral lands. The costs associated with a permit to explore provincial mineral lands include: a recording fee of $0.15 per hectare with a minimum of $1,500 and a maximum of $7,500, a cash deposit of $15,000, and expenditure requirements of $1.25 per hectare in the first permit year and $4.00 per hectare in subsequent permit years. The term of the permit is two years and may not be renewed. A permit may be converted into a claim. The costs associated with a claim to explore provincial mineral lands include: a recording fee of $0.30 per hectare with a minimum of $10; expenditure requirements of $12 per hectare in claim years 2 through 10, with a minimum of $192 per claim; and $25 per hectare for each claim year after year 10, with a minimum of $400 per claim. A claim may be converted into a lease.

        Royalty payments are payable under a lease of provincial mineral land upon or in respect of all materials produced, saved or recovered from, or allocated under a unitization agreement to any provincial mineral lands.

Environmental Regulation

        The mining industry is subject to extensive regulation by federal, provincial and local authorities as to matters including, but not limited to:

•

employee health and safety;



•

air quality;



•

water quality and availability;



•

the protection and enhancement of the environment (including the protection of plants and wildlife);



•

the generation, handling, use, storage, transportation, release, disposal and clean-up of regulated materials, including wastes; and



•

the reclamation and restoration of mining properties after mining is completed.

        Our mining operations are regulated primarily by provincial legislation, although we must also comply with applicable federal legislation and local by-laws.

        Both of the provinces in which we operate have stringent environmental legislation and requirements. These laws require regulatory approval of many aspects of our mining and production operations. The construction, development and operation of a mine entails compliance with applicable environmental legislation and the obtaining of various permits, licences and approvals from various governmental authorities, which can include costly and time consuming environmental impact assessments. In addition, legislation requires that sites be abandoned and reclaimed to the satisfaction of provincial authorities. A breach of environmental legislation (including permits, licences and approvals) may result in the imposition of fines, other penalties, clean-up orders or the interruption of our activities, which could have a material adverse effect on our operations.

Provincial Environmental Legislation

        In general, Manitoba and Saskatchewan have similar environmental legislation. Both Manitoba and Saskatchewan have requirements for environmental impact assessments of new projects or major expansions. These assessments typically involve extensive stakeholder consultation, including public advertising and input. Each province also has its own legislation with respect to heritage and cultural resources, the handling and transportation of dangerous goods and site remediation and reclamation.

        In Manitoba, air emissions from our metallurgical complex are governed by the Inco Limited and Hudson Bay Mining and Smelting Co., Limited Smelter Complex Regulation (the "HBMS Regulation"), made under The Environment Act (Manitoba) (the "EA"). The HBMS Regulation sets maximum levels of sulphur dioxide emissions and particulate emissions that HBMS may emit. The HBMS Regulation also sets requirements for ambient air monitoring, stack sampling, and particulate emission monitoring and measurement.

        Under The Mines and Minerals Act (Manitoba), before the holder of a mineral lease in Manitoba may commence mining, the holder must first submit a mine closure plan. A mine closure plan sets out a program for

31

protection of the environment during the life of a project and for rehabilitation of the project site upon closing of the project, which includes the provision of security to the Province for performance of rehabilitation work in accordance with an approved mine closure plan.

        In Saskatchewan, environmental matters relating to mining operations are governed primarily by The Environmental Management and Protection Act, 2002 (Saskatchewan) (the "EMPA") and the Mineral Industry Environmental Protection Regulations, 1996 (Saskatchewan) (the "MIEP") made under the EMPA. The EMPA and its regulations require permits and approvals for the operation of any facility that discharges a pollutant into the environment. Under the MIEP, the Saskatchewan government also regulates the decommissioning, abandonment and reclamation of a mine or operation and requires that an assurance fund be established to ensure the completion of the decommissioning and reclamation of the mining site. We have entered into security agreements in favour of the Provinces of Saskatchewan and Manitoba, whereby we have pledged certain HBMS mining assets as collateral to cover decommissioning costs.

        In Ontario, environmental matters related to the Zochem plant are primarily governed by the Environmental Protection Act (Ontario) ("EPA"), Ontario Water Resources Act ("OWRA") and the regulations thereunder. The EPA regulates discharges to the natural environment including air, land, noise, odour and vibration. The EPA also regulates waste handling, storage, disposal and transportation. The OWRA regulates discharges to surface and ground water. Zochem may be required under either or both the EPA and the OWRA to obtain certain permits and certificates relating to, among other things, the storage of hazardous products, storm water management and water use. Both the EPA and the OWRA provide for penalties and clean-up orders to be levied in the event of non-compliant discharges.

Federal Environmental Legislation

        We must comply with the Canadian Environmental Protection Act, 1999 ("CEPA"), which regulates certain restricted and prohibited substances, and can require the preparation of pollution prevention plans. Emissions to water from our mining operations are regulated by the MMER. On September 25, 2004, the Canadian federal government issued a proposed notice requiring the preparation and implementation of pollution prevention plans in respect of specified toxic substances released from base metals smelters and refineries and zinc plants, including our metallurgical complex. The proposed notice would set target emissions for mercury, sulphur dioxide and particulate matter below our current emission levels.

        The federal Canadian Environmental Assessment Act ("CEAA") requires that an environmental impact assessment be conducted with respect to certain proposed projects. Projects that are subject to CEAA include projects requiring the disposition of federal lands and projects requiring federal approvals.

        Zinc and copper mining frequently involves crossing, impounding, diverting and using surface waters. Such activities can require approval under federal legislation, such as the Fisheries Act (Canada) for the construction of a project that may result in the harmful alteration of fish habitat, or the Navigable Waters Protection Act (Canada) if the water course is navigable by watercraft.

Municipal By-laws

        We are also subject to local laws, including by-laws passed by local municipalities relating to local land use, rural road closures, storm run-off and sanitary discharges and nuisance situations.

Kyoto Protocol

        The processing of zinc and copper results in the production of various combustion products including carbon compounds. Canada, as a party to the United Nations Framework Convention on Climate Change (the "Convention") and the subsequent implementation protocol that was adopted in 1997 (known as the "Kyoto Protocol"), has stated its intention to reduce overall greenhouse gas emissions to 94% of 1990 levels by no later than 2012. One of the greenhouse gases of concern is carbon dioxide, which results from zinc and copper production. Many other countries are also party to the Convention and the Kyoto Protocol and have similar intentions to limit greenhouse gas emissions. The Kyoto Protocol came into effect in Canada in February 2005.

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Environmental Management and Compliance

        We have established a comprehensive environmental management program directed at environmental protection. The program consists of an environmental policy, codes of practice, regular audits, the integration of environmental procedures with operating procedures, employee training and emergency prevention and response procedures.

        We believe that we are in material compliance with all applicable environmental legislation. We believe that all approvals currently required to conduct our current mining operations have been obtained. Given the nature of the extensive and comprehensive regulatory requirements, violations during mining operations inevitably occur from time to time. We have been cited for few environmental violations, none of which have had a material adverse effect on the environment, our ability to continue any operation or on our financial condition.

        We may be required to prepare and present to federal, provincial or local authorities data relating to the impact that a proposed development or existing zinc and copper mine may have on the environment. Such requirements could prove costly and time-consuming and could delay commencing and continuing exploration or production operations.

        Future legislation and administrative regulations may further emphasize the protection and enhancement of the environment and, as a consequence, our activities may be even more closely regulated. Such legislation and changes to legislation, as well as future interpretations of laws and increased enforcement, may result in increased capital and/or operating costs as well as delays, interruptions or a termination of operations, the extent of which cannot be predicted.

Health and Safety and Labour Regulations

        The Act Respecting Hudson Bay Mining and Smelting Co., Limited (Canada) was enacted in 1947, placing HBMS under federal jurisdiction. As a result, HBMS is governed by federal labour legislation and must report annually under the Employment Equity Act (Canada).

        The Act Respecting Hudson Bay Mining and Smelting Co., Limited was amended to delegate safety and health matters to the Manitoba government and, as a result, the following pieces of Manitoba legislation apply to HBMS: The Workplace Safety and Health Act (Manitoba), The Manitoba Hydro Act (Manitoba), The Fires and Prevention and Emergency Response Act (Manitoba), The Gas and Oil Burner Act (Manitoba), The Elevator Act (Manitoba) and The Steam and Pressure Plants Act (Manitoba). As a result, generally, labour matters are regulated federally and workplace safety and health is regulated provincially.

Aboriginal Rights

        Canadian courts have recognized that aboriginal peoples may continue to have unenforced rights at law in respect of land used or occupied by their ancestors where treaties have not been concluded to deal with those rights. These rights may vary from limited rights of use for traditional purposes to a right of aboriginal title and will depend upon, among other things, the nature and extent of prior aboriginal use and occupation. The courts have encouraged the federal and provincial governments and aboriginal peoples to resolve rights claims through negotiation of treaties. In Manitoba and Saskatchewan there are many treaties in place. Aboriginal rights and claims are currently handled primarily under the terms of those treaties.

Electric Utility Industry

        The electric utility industry is subject to extensive regulation regarding the environmental impact of electricity generation activities. Future legislation changes could increase the price at which electrical power is available to us and, as a result, could increase our costs of zinc and copper production.

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MINERAL POTENTIAL OF OUR MATERIAL PROPERTIES

        Our material properties are the HBMS Mines and the Balmat mine. At this time, only the HBMS Mines are producing. The Balmat mine is currently under evaluation for re-opening.

HBMS Mines

Mineral reserves and Inferred Mineral Resources

        The mineral resource estimates have been prepared under the guidance of Kim Lau BSc. P.Geo., who is employed by HBMS as a Senior Mineral Resource Analyst and who is a Qualified Person under National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). The mineral reserve estimates as at January 1, 2005 have been prepared under the guidance of Garry Allen MSc. P.Eng., who is employed by HBMS as Manager of Mines Technical Services and who is a Qualified Person under NI 43-101.

        The categorization of mineral resource is determined in a twelve step process, which includes determination of the integrity and validation of the data collected, including confirmation of specific gravity, assay results and methods of data recording. The process also includes determining the appropriate geological model, selection of data and the application of statistics models including probability plots and restrictive kriging to establish continuity and model validation. The resultant estimates of measured and indicated mineral resources are converted to proven and probable mineral reserves by the application of mining dilution and recovery, as well as the determination of economic viability using historical operating costs. Other factors such as depletion from production are applied as appropriate.

Estimate of HBMS Mineral Reserves (as at January 1, 2005)⁽¹⁾⁽²⁾

	Tonnes	Au (g/t)	Ag (g/t)	Cu (%)	Zn (%)
Trout Lake
Proven	1,584,000	1.2	14.0	1.3	4.6
Probable	1,727,000	1.2	15.1	1.8	4.0
777
Proven	2,963,000	2.4	30.7	2.2	4.5
Probable	13,633,000	2.1	27.6	2.4	4.7
Konuto Lake
Proven	184,000	2.3	7.2	4.0	0.9
Probable	34,000	1.9	5.3	4.8	0.9
Chisel North
Proven	628,000	0.2	21.0	0.1	9.5
Probable	846,000	0.5	18.9	0.3	8.1
Total Proven	5,360,000	1.8	23.8	1.8	5.0
Total Probable	16,240,000	1.9	25.8	2.3	4.8
Total Reserve	21,600,000	1.9	25.3	2.2	4.8

(1)

The zinc price used for mineral reserve estimation was US$0.52 per pound, the copper price was US$0.91 per pound, the gold price was US$325 per ounce and the silver price was US$4.25 per ounce.

(2)

The estimate as at January 1, 2005 was prepared in accordance with NI 43-101 and the Canadian Institute on Mining, Metallurgy and Petroleum "CIM Standards on Mineral Resources and Reserves: Definitions and Guidelines"

        In addition to the mineral reserves, we have an estimated 3.9 million tonnes of inferred mineral resources, grading 6.1% zinc and 1.9% copper. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

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Balmat Mine

        A report entitled "Reserve and Resource Audit, Balmat No. 4 Mine, Balmat-Edwards Mining District, Balmat, New York, USA", dated January 2003, (the "Balmat Report") has been prepared for the Company by John E. Steers, P. Eng., a qualified person under National Instrument 43-101. The Balmat Report estimated our Balmat mineral reserves at 1.976 million tons grading 11.9% zinc, and additional inferred mineral resources at approximately 3.1 million tons grading 12.9% zinc. The classifications were based on the CIM Council Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by the CIM Council on August 20, 2003. The mineral reserves were calculated using a cut-off grade of 6% zinc per ton and an average mining recovery of 85%, and minimum heights in the 5.5 to 8.0 foot range depending on mining method. Dilution is incorporated in the mineral resource estimate through minimum mining heights assumed. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

        The Balmat mine, currently under care and maintenance, is being reviewed for re-activation. A comprehensive review of mineral reserves and mineral resources is underway, including an assessment of appropriate mining methods and associated mine production rates, as well as proposed additional stepout and infill diamond drilling that will bring the confidence of the estimate to a level suitable for a production decision. A feasibility study for Balmat will be completed on a priority basis, leading to a decision regarding re-activation of the mine.

DIVIDENDS

        We have never paid a dividend on the Common Shares and do not expect to do so in the foreseeable future. The actual timing, payment and amount of any dividends paid by us will be determined by the board of directors from time to time based upon, among other things, our cash flow, results of operations and financial condition, our need for funds to finance ongoing operations and such other business considerations as the board of directors considers relevant.

DESCRIPTION OF CAPITAL STRUCTURE

Common Shares

        We are authorized to issue an unlimited number of Common Shares of which there are 80,714,692 issued and outstanding as of March 29, 2005.

        Holders of Common Shares are entitled to receive notice of any meetings of our shareholders, to attend and to cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting rights with respect to the election of directors and, accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all directors standing for election. Holders of Common Shares are entitled to receive on a pro-rata basis such dividends, if any, as and when declared by the Company's board of directors at its discretion from funds legally available therefor and upon our liquidation, dissolution or winding up are entitled to receive on a pro-rata basis our net assets after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro-rata basis with the holders of Common Shares with respect to dividends or liquidation. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund provisions.

Preference Shares

        We are authorized to issue an unlimited number of Preference Shares, none of which are issued and outstanding as of March 29, 2005.

        Preference Shares may from time to time be issued and the directors may fix the designation, rights, privileges, restrictions and conditions attaching to any series of Preference Shares. Preference Shares shall be entitled to preference over the Common Shares and over any other of our shares ranking junior to the Preference Shares with respect to the payment of dividends and the distribution of assets or return of capital in the event of our liquidation, dissolution or winding up or any other return of capital or distribution of our assets among our shareholders for the purpose of winding up our affairs. Preference Shares may be convertible into

35

Common Shares at such rate and upon such basis as the directors in their discretion may determine. No holder of Preference Shares will be entitled to receive notice of, attend, be represented at or vote at any annual or special meeting, unless the meeting is convened to consider our winding up, amalgamation or the sale of all or substantially all of our assets, in which case each holder of Preference Shares will be entitled to one vote in respect of each Preference Share held. Holders of Preference Shares will not be entitled to vote or have rights of dissent in respect of any resolution to, among other things, amend our articles to increase or decrease the maximum number of authorized Preference Shares, increase or decrease the maximum number of any class of shares having rights or privileges equal or superior to the Preference Shares, exchange, reclassify or cancel Preference Shares, or create a new class of shares equal to or superior to the Preference Shares.

Warrants

        The Warrants were created and issued pursuant to a warrant indenture (the "Warrant Indenture") between us and Equity Transfer Services Inc., as warrant agent thereunder (the "Warrant Agent"). The following summary of certain provisions of the Warrant Indenture is not complete and is qualified in its entirety by reference to the provisions of the Warrant Indenture.

        Every 30 Warrants entitle the holder to purchase one Common Share at a price of $3.15. The exercise price and the number of Common Shares issuable upon exercise are both subject to standard anti-dilution provisions. Warrants are exercisable at any time prior to 5:00 p.m. (Toronto time) on December 21, 2009, after which time the Warrants will expire and become null and void. Under the Warrant Indenture, we are entitled to purchase in the market, by private contract or otherwise, all or any of the Warrants then outstanding, and any Warrants so purchased will be cancelled.

        No fractional Common Shares will be issuable upon the exercise of any Warrants, and no cash or other consideration will be paid in lieu of fractional shares. Holders of Warrants will not have any voting or pre-emptive rights or any other rights that a holder of Common Shares would have.

Rights

        The fundamental objectives of the shareholder rights plan (the "Rights Plan"), implemented under the terms of a shareholder rights plan agreement dated as of November 9, 2004, are to provide adequate time for our board of directors and shareholders to assess an unsolicited take-over bid for us, to provide the board of directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a take-over bid is made, and to provide shareholders with an equal opportunity to participate in a take-over bid.

        One Right has been issued by us in respect of each Common Share that is currently outstanding, and one Right will be issued in respect of each Common Share issued during the balance of the term of the Rights Plan (which term expires on November 9, 2007) prior to the Separation Time, as described below.

        The Rights will separate from the Common Shares and will be exercisable ten trading days (the "Separation Time") after a person has acquired, or commences a take-over bid to acquire, 20% or more of the Common Shares, other than by an acquisition pursuant to a take-over bid permitted by the Rights Plan (a "Permitted Bid"). The acquisition by any person (an "Acquiring Person") of 20% or more of the Common Shares, other than by way of a Permitted Bid, is referred to as a "Flip-in Event". Any Rights held by an Acquiring Person will become void upon the occurrence of a Flip-in Event. Ten trading days after the occurrence of the Flip-in Event, each Right (other than those held by the Acquiring Person), will permit the purchase of $180 worth of Common Shares for $90.

        For the purposes of the Rights Plan the requirements for a Permitted Bid include the following:

(a)

the take-over bid must be made by way of a take-over bid circular;



(b)

the take-over bid must be made to all shareholders, other than the bidder;



(c)

the take-over bid must be outstanding for a minimum period of 60 days and Common Shares tendered pursuant to the take-over bid may not be taken up prior to the expiry of the 60 day period and only if at such time more than 50% of the Common Shares held by shareholders, other than the bidder, its

36

affiliates and persons acting jointly or in concert and certain other persons (the "Independent Shareholders"), have been tendered to the take-over bid and not withdrawn;

(d)

if more than 50% of the Common Shares held by Independent Shareholders are tendered to the take-over bid within the 60 day period, the bidder must make a public announcement of that fact and the take-over bid must remain open for deposits of Common Shares for an additional ten days from the date of such public announcement;



(e)

the take-over bid must permit Common Shares to be deposited pursuant to the take-over bid, unless such take-over bid is withdrawn, at any time prior to the date Common Shares are first taken up and paid for; and



(f)

the take-over bid must provide that any Common Shares deposited pursuant to the take-over bid may be withdrawn until taken up and paid for.

        The Rights Plan also allows for a competing Permitted Bid (a "Competing Permitted Bid") to be made while a Permitted Bid is in existence. A Competing Permitted Bid must satisfy all the requirements of a Permitted Bid except that it may expire on the same date as the Permitted Bid, subject to the requirement that it be outstanding for a minimum period of 35 days.

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MARKET FOR SECURITIES

Prior Sales

        The following table contains details of prior sales of our securities that are currently outstanding but not listed or quoted on a marketplace, which sales were effected during the preceding twelve month period.

Date of Issuance	Number of Common Shares (Post-Consolidation)	Price per Common Share (Post-Consolidation)
November 30, 2004(1)	172,600	$	2.70
September 2004(2)	810,666	$	1.50
June 2004(3)	1,036,919	$	5.40

Notes:

(1)

Issue of 5,178,000 units pursuant to the exercise of the over-allotment option granted in respect of the September 2004 private placement. Each unit was comprised of one Common Share (pre-Consolidation) and one-half of one common share purchase warrant. As of the date hereof, every 30 common share purchase warrants entitle the holder thereof to purchase one Common Share (post-Consolidation) at a price of $3.60 per Common Share, at any time prior to November 30, 2006.

(2)

The private placement that closed as September 30, 2004 originally consisted of 34,520,000 units at a price of $0.05 per unit, each such unit being comprised of one Common Share (pre-Consolidation) and one-half of a common share purchase warrant. As at the date hereof, every 30 common share purchase warrants entitle the holder thereof to purchase one Common Share (post-Consolidation) upon the payment of $1.80, at any time prior to September 28, 2006. On December 10, 2004 the Company repurchased and cancelled 10,200,000 of these units (pre-Consolidation) at the original subscription price. See "Interest of Management and Others in Material Transactions".

(3)

Private placement of 31,107,570 units at a price of $5.40 per unit, each unit being comprised of one Common Share (pre-Consolidation) and one-half of a common share purchase warrant. As at the date hereof, every 30 common share purchase warrants entitle the holder thereof to purchase one Common Share (post-Consolidation) upon the payment of $6.00, at any time prior to March 31, 2006.

Price Range And Trading Volume

        Our Common Shares are listed on the TSX under the symbol "HBM". The volume of trading and the closing price of our Common Shares, as adjusted for the Consolidation, during the periods indicated are set forth in the following table.

Period	High		Low		Volume
	($)		($)		(Shares)
2004
January	$	7.80	$	4.50	257,480
February	$	7.20	$	5.10	427,977
March	$	6.60	$	4.50	1,284,370
April	$	5.10	$	3.00	371,494
May	$	4.50	$	2.70	320,328
June	$	3.60	$	2.40	1,142,387
July	$	3.00	$	1.50	646,391
August	$	2.10	$	1.50	337,026
September	$	2.10	$	1.50	192,805
October	$	5.10	$	1.50	1,669,670
November	$	5.10	$	3.30	877,087
December	$	3.60	$	1.80	1,850,176

        On March 29, 2005, the last day on which the Common Shares traded prior to the date of this AIF, the closing price of our Common Shares on the TSX was $3.14 per share.

        Our Warrants began trading on the TSX on December 24, 2004. During the five days of 2004 in which the Warrants traded the high trading price was $0.05, the low trading price was $0.04 and total volume was 117,017,000.

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ESCROWED SECURITIES

        The following table sets forth information relating to our securities held in escrow as of March 29, 2005. Equity Transfer Services Inc. is the escrow agent in respect of all of the escrowed securities. All of the escrowed securities are eligible for release from escrow.

Designation of Class	Number of Securities Held in Escrow	Percentage of Class
Common Shares	48,501	0.1%
Common Shares	120,000	0.1%
Common Shares	703,630	0.9%

DIRECTORS AND OFFICERS

        The following table sets forth the name, municipality of residence, position and principal occupation of each person who currently is one of our directors and/or executive officers.

Name and Municipality of Residence	Position with the Company	Principal Occupation
ALLEN J. PALMIERE(2)(3)(4)(5) Toronto, Ontario	Chairman and director since December 21, 2004(1)	President, Chief Executive Officer and Director of Silk Road Resources Ltd.
RICHARD W. BRISSENDEN(2)(5) Toronto, Ontario	Director since June 13, 2003(1)	Chairman of Excellon Resources Inc.
PETER JONES Flin Flon, Manitoba	Director(1), President and Chief Executive Officer	President and Chief Executive Officer of the Company
IAN CONN Dallas, Texas	Director since December 21, 2004(1)	Management consultant
NORMAN ANDERSON(3)(4) Vancouver, British Columbia	Director since December 21, 2004(1)	President of Anderson & Associates
JAMES W. ASHCROFT(2)(3)(4)(5) Sudbury, Ontario	Director since December 21, 2004(1)	Mining Consultant
H. RUSSELL ROOD Flin Flon, Manitoba	President, Mining Division	President, Mining Division of the Company
ALAN HAIR Flin Flon, Manitoba	Vice President, Metallurgy, Safety, Health and Environment	Vice President, Metallurgy, Safety, Health and Environment of the Company
JOHN KNOWLES Winnipeg, Manitoba	Vice President and Chief Financial Officer	Vice President and Chief Financial Officer of the Company
BRIAN GORDON Winnipeg, Manitoba	Vice President and General Counsel	Vice President and General Counsel of the Company
TOM GOODMAN Flin Flon, Manitoba	Vice President, Technical Services and Human Resources	Vice President, Technical Services and Human Resources of the Company

Notes:

(1)

The term of office for each director of the Company will expire upon the completion of the next annual meeting of shareholders of the Company.

(2)

Member of the Audit Committee. Mr. Palmiere is the Chair of the Committee.

(3)

Member of the Compensation Committee. Mr. Palmiere is the Chair of the Committee.

(4)

Member of the Corporate Governance and Nominating Committee. Mr. Palmiere is the Chair of the Committee.

(5)

Member of the Environmental, Health and Safety Committee. Mr. Ashcroft is the Chair of the Committee.

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        As at March 29, 2005, our directors and executive officers, as a group, beneficially owned, directly or indirectly, or exercised control or direction over 11,833 Common Shares, representing less than 0.1% of the total number of Common Shares outstanding.

        Each of the foregoing individuals has held his present principal occupation other office or position with the same firm set opposite his name for the past five years, except for: Mr. Palmiere who, from October 1993 to May 2003, was chief financial officer of Zemex Corporation; Mr. Jones, who, from 1995 to 2002, held various positions other than President and Chief Executive Officer with the Company and Mr. Goodman, who managed a copper smelting and refining company for the Anglo American group in Zambia from September 2001 to February 2003.

        The following is a brief biography of each individual who currently is one of our directors and/or officers.

Allen J. Palmiere — Chairman and Director. Mr. Palmiere is a Chartered Accountant, and has served in senior management financial supervisory capacities in the mining industry most of his career. In the past, Mr. Palmiere has been Treasurer of Northgate Exploration Ltd.; President, Chief Executive Officer and Chief Financial Officer of Breakwater Resources Ltd.; and Chief Financial Officer of Zemex Corporation. He is a member of the board of directors of Constellation Copper Corporation and the Chair of its audit committee. He is currently the President, Chief Executive Officer and a director of Silk Road Resources Ltd.

Richard Brissenden — Director. Mr. Brissenden is a Chartered Accountant. He has been Chairman of Excellon Resources Inc., a mineral exploration and development company, since September 1990. Since February 1996, he has been President of Regal Consolidated Ventures Limited, a mineral exploration and development company. Mr. Brissenden also serves as a director of several other public companies.

Peter R. Jones, P. Eng. — President, Chief Executive Officer and Director. Mr. Jones has been the President and Chief Executive Officer of HBMS since 2002. He joined HBMS in 1995 as Vice President Mining and has subsequently held the positions of Senior Vice President Projects and President Metallurgical Division. As Senior Vice President Projects he was responsible for the 777 Project. Prior to joining HBMS, he held senior positions in operations and projects with Cominco Limited, Cape Breton Development Corporation and Cominco Engineering Services. He has a broad background having worked in potash mines, coal mines, open pit and underground lead zinc mines, gold mines and has directed extensive feasibility studies and management services for a wide range of clients throughout the world. Mr. Jones graduated from the Camborne School of Mines, United Kingdom in 1969 and the Banff School of Advanced Management in 1984. Mr. Jones is the President of the Mining Association of Manitoba and a Director of the Mining Association of Canada.

Ian Conn — Director. Mr. Conn is the personal advisor of several Chief Executive Officers in China, France and Australia. He is the former President and Chief Executive Officer of the Asian Pacific Business Unit, Thomas Group Incorporated Limited. Mr. Conn obtained a Bachelor of Engineering from Queen's University in Kingston, Ontario. He has served as a member of a number boards of directors.

Norman Anderson, P. Eng. — Director. Mr. Anderson has been involved in the mining industry for over 50 years and is the former Chairman and Chief Executive Officer of Cominco Ltd. Currently, Mr. Anderson is President of the management consulting firm of Anderson & Associates. He has been active in consulting, particularly due diligence consulting and evaluations for financial institutions and mining companies, since 1987. He holds a Bachelor of Science in Geological Engineering from the University of Manitoba in Winnipeg, Manitoba. Mr. Anderson serves on a number of boards of directors of public companies.

James W. Aschroft, P. Eng — Director. Mr. Ashcroft is the president of J.W. Ashcroft & Associates, a mining consulting company. As a former President of the Ontario division of INCO Limited, he managed a vertically-integrated mining company, which during his tenure completed a $270 million mining project, improved its safety and environment record and maintained stable labour relations. He received a national diploma in engineering at Wigan Mining College in Lancashire, England and has completed an Executive Management Training Course at the Richard Ivey School of Business. Mr. Ashcroft serves on a number of boards of directors and, in some cases, sits on the health and environment, audit and corporate governance committees of such boards.

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H. Russell Rood — President, Mining Division. Mr. Rood has been with HBMS for six years, prior to which he worked for De Beers, holding various senior management positions. Mr. Rood holds a Bachelor of Civil Engineering and Bachelor of Mining Engineering degrees from the University of Witwatersrand in South Africa. He also attended a part time management program through the School of Business Leadership in Johannesburg, South Africa. Mr. Rood is a member of the South African Institute of Mining.

Alan Hair — Vice President, Metallurgy, Safety, Health & Environment. Since joining HBMS in 1996, Mr. Hair has held various operational management roles in the surface plants and was appointed the Vice-President, Metallurgy in early 2004. Prior to joining HBMS, Mr. Hair was Smelting Manager at MIM's zinc smelter in Avonmouth, England. He graduated from the University of Leeds, England in 1983 with a Bachelor of Science Honours degree in Mineral Engineering.

John L. Knowles — Vice President and Chief Financial Officer. Mr. Knowles has been involved in the natural resource industry for 20 years, holding senior positions in public and private companies in Canada and Africa. He is a Chartered Accountant and he holds an Honours Bachelor of Commerce degree from Queen's University.

Brian D. Gordon — Vice President and General Counsel. Mr. Gordon obtained his Bachelor of Law degree from the University of Manitoba. Formerly a partner with a major Manitoba law firm, he joined HBMS in 1994 as director, general counsel and corporate secretary. Mr. Gordon is a member of the Law Society of Manitoba and of the Canadian Bar Association.

Tom A. Goodman — Vice President, Technical Services and Human Resources. Mr. Goodman is a graduate in Chemical and Metallurgical Technology from the British Columbia Institute of Technology. He worked for Anglo American for over 26 years in a wide variety of operational, technical, and management positions. He recently returned to us after managing a copper smelting and refining company for the Anglo American group in Zambia.

Corporate Cease Trade Orders or Bankruptcies

        None of our directors, officers or other members of our management is, or within the ten years prior to the date hereof has been, a director, officer, promoter or other member of management of any other issuer that, while that person was acting in the capacity of a director, officer, promoter or other member of management of that issuer, was the subject of a cease trade order or similar order or an order that denied the issuer access to any statutory exemptions for a period of more than 30 consecutive days or was declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or has been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, other than Mr. Brissenden, who is a director of Regal Consolidated Ventures Limited, which is subject to a cease trade order issued on June 12, 2001 due to its failure to file financial statements. Mr. Brissenden was also a director of Trenton Industries Inc., which was placed in receivership in 1995. Mr. Brissenden resigned from the board of directors of Trenton Industries Inc. immediately preceding the bankruptcy of that company.

Penalties and Sanctions

        None of our directors, officers or other members of management is, or within the ten years prior to the date hereof has been (i) subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; or (ii) subject to any other penalties or sanctions imposed by a court or regulatory authority that would be likely to be considered important to a reasonable investor making an investment decision.

Conflict of Interest

        To the best of our knowledge, and other than as disclosed herein, there are no known existing or potential conflicts of interest among us, our directors, officers or other members of management, or persons who, as a result of their outside business interests except that certain of the directors, officers, and other members of

41

management serve as directors, officers, promoters and members of management of other public companies and therefore it is possible that a conflict may arise between their duties as a director, officer or member of management of the Company and their duties as a director, officer, promoter or member of management of such other companies.

        Our directors and officers are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and we will rely upon such laws in respect of any directors' and officers' conflicts of interest or in respect of any breaches of duty by any of its directors or officers. All such conflicts will be disclosed by such directors or officers in accordance with the Business Corporations Act (Ontario) and they will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.

Compensation of Directors

        In 2004, we paid no fees to any of the non-executive directors for meetings attended. We reimbursed all directors for out-of-pocket expenses reasonably incurred while performing their duties. We paid two legal firms, with which two of our former directors were associated, for legal services provided during our most recent fiscal year.

AUDIT COMMITTEE DISCLOSURE

        The Audit Committee is responsible for monitoring our systems and procedures for financial reporting and internal control, reviewing certain public disclosure documents and monitoring the performance and independence of our external auditors. The committee is also responsible for reviewing our annual audited financial statements, unaudited quarterly financial statements and management's discussion and analysis of financial results of operations for both annual and interim financial statements and review of related operations prior to their approval by the full board of directors.

        The Audit Committee's charter sets out its responsibilities and duties, qualifications for membership, procedures for committee member removal and appointment and reporting to our board of directors. A copy of the charter is attached hereto as Schedule "B".

Composition

        The Audit Committee is comprised of three directors, all of whom are independent directors: Allen J. Palmiere (Chair), Richard W. Brissenden and James W. Ashcroft. In addition to being independent directors as described above, all members of our Audit Committee must meet an additional "independence" test under Multilateral Instrument 52-110, Audit Committees in that their directors' fees are the only compensation they, or their firms, receive from us and that they are not otherwise affiliated with us. Each member of the Audit Committee is financially literate within the meaning of Multilateral Instrument 52-110.

Relevant Educational Experience

        Set out below is a description of the education and experience of each audit committee member that is relevant to the performance of his responsibilities as an audit committee member.

Allen J. Palmiere — Mr. Palmiere is a Chartered Accountant.

James Ashcroft — Mr. Ashcroft is a former president of the Ontario division of INCO Limited, a vertically-integrated mining company. In addition to his national diploma in engineering from Wigan Mining College in Lancashire, England, he has completed the Executive Management Training Course at the Richard Ivey School of Business. He serves on a number of boards of directors and, in some cases, sits on the audit and corporate governance committees of such boards.

Richard W. Brissenden — Mr. Brissenden is a Chartered Accountant.

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Policy Regarding Non-Audit Services Rendered by Auditors

        Pursuant to the audit committee charter, the audit committee is to pre-approve all non-audit services to be provided to us or any of our subsidiaries by our independent auditor. More generally, the audit committee is to instruct the independent auditor that the board of directors, as representatives of the shareholders, is the client of the independent auditor. The audit committee is also to review and discuss, on an annual basis, with the independent auditor all significant relationships the independent auditor has with us to determine their independence.

Remuneration of Auditors

        The following tables presents, by category, the fees accrued by KPMG LLP as external auditors for the Company and Deloitte & Touch LLP as external auditors for HBMS for the fiscal years ended December 31, 2004 and 2003.

	2004				2003
Category of Fees	KPMG LLP		Deloitte & Touche LLP		KPMG LLP		Deloitte & Touche LLP
Audit fees	$	521,391	$	322,263	$	95,000	$	325,000
Audit related fees		—		479,046		—
Tax fees		3,200		4,533		3,200		12,000
All other fees		—		346,387		27,097		217,000

        "Audit related fees" include fees for financial information presentation and certification. "Tax fees" include tax compliance services and tax advisory and planning services. "All Other Fees" include principally consultation and research services related to prospectus preparation, stock exchange listing application and acquisition activities of the Company. Management will present regular updates to the Audit Committee of the services rendered by the auditors in response to the Committee's oversight regarding external auditor independence and pre-approved service authorizations.

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INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

        None of the Company's directors, executive officers or senior officers, nor any associate of such director, executive officer or senior officer is indebted to us or any of our subsidiaries. In addition, none of the indebtedness of these individuals to another entity has been the subject of a guarantee, support agreement, letter of credit or similar arrangement or understanding with us or any of our subsidiaries.

LEGAL PROCEEDINGS

        In May 2004, a number of plaintiffs initiated an action, in the State of North Carolina, against Zochem, CMM and a number of other defendants seeking damages in an unspecified amount and alleging that they had been injured as a result of an explosion that occurred at a pharmaceutical plant. The plaintiffs have alleged that Zochem and/or CMM designed, manufactured, sold and supplied chemicals used in the manufacture of a rubber compound that were dangerous, defective and susceptible to causing explosions. HBMS has retained legal counsel in North Carolina and cannot currently assess its potential liability in relation to this claim.

        An action has been commenced against Hudson Bay Exploration and Development Company Limited, Anglo American Exploration (Canada) Ltd. and certain employees thereof claiming a breach of confidence relating to mining claims staked by the defendants in Northern Québec. The plaintiff has alleged that the defendants misused confidential information to its detriment. The plaintiff is seeking, among other things, to have the claims transferred to the plaintiff, along with unspecified damages. Pursuant to an agreement dated December 21, 2004, Anglo American Exploration (Canada) Ltd. has agreed to indemnify and save harmless Hudson Bay Exploration and Development Company Limited from and against all losses, damages, costs and liabilities incurred under any judgment or settlement made in connection with this action.

        In 1994, HBMS received $18.5 million pursuant to a litigation settlement agreement. The Canada Revenue Agency questioned HBMS' treatment of the receipt of these funds as non-taxable damages and, as a result, HBMS conformed to the Canada Revenue Agency position and then filed a notice of objection. HBMS has had discussions with the Canada Revenue Agency in this regard and has considered litigation to support its position.

        HBMS has been named as a co-defendant in two actions alleging various wrongful actions committed in connection with the use and operation of the Whitesand Dam and the Island Falls Hydroelectric station in Saskatchewan. The plaintiffs have claimed for an aggregate of $1 billion in compensatory damages and in excess of $100 million in punitive damages. One of HBMS' former subsidiaries constructed and operated the dam until it was transferred to SaskPower in 1981. The plaintiffs in both actions claim that the lands on which the hydroelectric facilities were built are subject to aboriginal rights. No further steps have been taken by the plaintiffs to proceed with their claims since 1995.

        A claim has been filed against HBMS in relation to the workplace death of an employee. We understand that such a claim is statute barred pursuant to the Workers Compensation Act. We believe that HBMS has a good defence to this claim and that HBMS should not be held liable in respect of this claim. The Chief Medical Examiner of the Province of Manitoba has also commenced an inquest into this workplace death. The inquest is currently underway. In November 2004, the claim was denied by the Workers Compensation Board.

        Except as noted above, we are not aware of any litigation outstanding, threatened or pending against us as of the date hereof that would be material to our financial condition or results of operations.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

        Other than as described below or as disclosed elsewhere in this AIF, none of our directors, executive officers or principal shareholders and no associate or affiliate of the foregoing persons has or has had any material interest, direct or indirect, in any transaction within the past three years or in any proposed transaction that has materially affected or will materially affect us or any of our subsidiaries.

Financial Assistance for the Balmat Acquisition

        In connection with our purchase of the Balmat Mine, St. Lawrence Zinc Company LLP, one of our subsidiaries received assistance from Frame Mining Company ("FMC"), a company controlled by our former

44

Chief Executive Officer and a former director. FMC advanced US$1 million to our subsidiary in order for it to assume an environmental bond. Further, FMC provided security on a proposed US$4 million project loan to our subsidiary. As security for these debts, we pledged a 51% interest in our subsidiary. Under the terms of the agreement, 26% of the ownership interest held as security was released to us after the repayment of the US$1 million advanced by FMC and an additional payment of US$200,000. The remaining 25% ownership interest held as security was released in 2003 upon the final payment of US$800,000 to FMC.

Settlement of Debt

        In 2003, we settled $362,724 of related party debts through the issuance of 100,756 Common Shares.

Agreements with Frame Parties

        Pursuant to an agreement dated June 17, 2004 (the "June Agreement"), Frame Mining Corporation, Curraghdale Inc. and Curraghdale Corp. (collectively the "Frame Parties") sold to Gregory J. Peebles, who was then our Chairman and Chief Executive Officer, 666,666 Common Shares and 318,159 common share purchase warrants. The June Agreement provided for an aggregate purchase price of $3,600,000. Of this purchase price, $15,000 was paid on June 17, 2004, $180,000 was to be payable in twelve consecutive monthly instalments of $15,000 each with each instalment payable on the 20th day of each month, beginning on July 20, 2004 and ending on June 20, 2005 and the balance of $3,405,000 was to be payable on July 2, 2005. The outstanding balance of the purchase price was secured by a pledge of the purchased securities and recourse of the Frame Parties was limited to the purchased securities. If the purchased securities were sold prior to full payment therefor, for greater than the original $0.18 purchase price per share, or if on the day prior to the date the balance of the purchase price was to be payable, the trading price of the Common Shares exceeds $0.18 or $0.20 in the case of the warrants, the Frame Parties were entitled to receive from Mr. Peebles 20% of the excess subject to an aggregate limit of $5 million. Mr. Peebles disclosed the terms of this agreement to certain members of our board of directors on December 8, 2004.

        On December 8, 2004, Mr. Peebles, the Frame Parties and Mr. Clifford Frame entered into a further agreement (the "December Agreement"). Mr. Peebles also signed the December Agreement on behalf of us although no other of our officers or directors reviewed the December Agreement prior to its execution and, accordingly, we expressed doubt concerning the binding nature of this Agreement. The December Agreement provided that Mr. Peebles was entitled to satisfy the unpaid portion of the purchase price under the June Agreement by paying $1,500,000 to the Frame Parties. Of this sum, $1,000,000 was paid upon the closing of the acquisition of HBMS and the balance of the amount was to be paid no later than January 17, 2005. In addition, the December Agreement provided that we were to pay on the closing of the Acquisition $120,000 to Frame Mining Corporation and Curraghdale Inc. to settle claims made by Curraghdale Inc. for compensation for services rendered by Mr. Clifford Frame from November 1, 2003 to April 21, 2004 in his then capacity as our Chairman and Chief Executive and with respect to a claim by Frame Mining Corporation for repayment of a $10,000 loan. The December Agreement further provided that we were to make available to the Frame Parties for subscription on the Acquisition up to 20,000,000 Subscription Receipts at the offering price of $0.075 each. We made the payments and issued and sold to the Frame Parties the securities as set out in the December Agreement. Mr. Peebles joined us, as our Chairman and Chief Executive Officer, on April 21, 2004. We entered into three arrangements with certain corporations owned or controlled by Mr. Peebles (the "Peebles Affiliates"), on April 30, 2004, which provided that such Peebles Affiliates would provide various services to us and be paid various forms of compensation in connection therewith (the "Consulting and Services Agreements"). Upon a further review of the Consulting and Services Agreements, these agreements were deemed to be inappropriate, and accordingly were terminated on November 9, 2004, but with effect as at April 30, 2004. We did not make any payments under the Consulting and Services Agreement and the parties have mutually released each other from any and all claims and liabilities thereunder.

September Private Placement

        Mr. Peebles and Mr. Irwin, a former Corporate Secretary and a former director of the Company, purchased 333,333 units and 6,666 units, respectively, pursuant to the private placement completed on September 30, 2004, at a price of $1.50 per unit. In the course of reviewing our preliminary prospectus dated November 10, 2004, the

45

Ontario Securities Commission raised concerns that these transactions occurred when Mr. Peebles and Mr. Irwin may have had material undisclosed information concerning the acquisition of HBMS that had not been generally disclosed. In response to these concerns, but without admitting any impropriety or unlawful conduct, Mr. Peebles and Mr. Irwin have returned to us the securities acquired by them in the private placement, at the original subscription price of $1.50 per unit. We have cancelled these securities.

Resignation of Gregory J. Peebles

        On December 10, 2004, the mutual decision was made by us and Mr. Peebles that he should resign as our Chairman, Chief Executive Officer and a director. A severance agreement was entered into, pursuant to which we paid to Mr. Peebles the sum of $500,000 in severance and $166,666 in payment of owed employment income.

TRANSFER AGENT AND REGISTRAR

        The transfer agent, registrar for the Common Shares and warrant agent for the Warrants is Equity Transfer Services Inc. at its principal offices in Toronto, Ontario.

MATERIAL CONTRACTS

        The only contracts material to us entered into by us since January 1, 2002, other than in the ordinary course of business, are as follows:

1.

the Balmat Acquisition Agreement referred to under the heading "General Development of the Business";

2.

the Acquisition Agreement referred to under the heading "General Development of the Business — Acquisition of HBMS";

3.

shareholders' rights plan between the Company and Equity Transfer Services Inc. dated November 9, 2004 and ratified by our shareholders on December 8, 2004. The fundamental objectives of the rights plan are to provide adequate time for our board of directors and shareholders to assess an unsolicited take-over bid for us, to provide the board of directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a take-over bid is made, and to provide shareholders with an equal opportunity to participate in a take-over bid;

4.

the warrant indenture between Equity Transfer Services Inc. and us dated December 21, 2004 that governs the Warrants. The warrant indenture provides for adjustment to the exercise price of and the kind and number of common shares to be issued upon exercise of the Warrants;

5.

the Parent Guarantee referred to under the heading "General Development of the Business — Acquisition of HBMS";

6.

the Note indenture among Hudson Bay Mining and Smelting Co., Limited, Hudson Bay Exploration and Development Company Limited and the Bank of New York, as trustee, dated December 21, 2004 that governs the Notes issued by Hudson Bay Mining and Smelting Co., Limited in connection with the Acquisition; and

7.

the registration rights agreement between Hudson Bay Mining and Smelting Co., Limited, Credit Suisse First Boston LLC and WestLB AG, London Branch, dated December 21, 2004, pursuant to which HBMS must register the Notes under the United States Securities Act of 1933, as amended.

INTEREST OF EXPERTS

        None of Cassels Brock & Blackwell LLP, ACA Howe International Limited or John E. Steers, P. Eng or any director, officer, employee or partner thereof, as applicable, received or has received a direct or indirect interest in our property or of any of our associates or affiliates. As at the date hereof, the directors, officers, employees and partners, as applicable, of each of the aforementioned companies and partnerships beneficially own, directly or indirectly in the aggregate less than one per cent of our securities.

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        No director, officer, employee or partner, as applicable, of the aforementioned companies or partnerships is currently expected to be elected, appointed or employed as one of our directors, officers or employees or of any of our associates or affiliates.

ADDITIONAL INFORMATION

        Additional information, including director's and officer's remuneration and indebtedness, principal holders of our securities and securities authorized for issuance under equity compensation plans, as applicable, is contained in our management information circular dated May 21, 2004 and in our prospectus dated December 14, 2004 (the "Prospectus"). Additional financial information is provided in our Prospectus and in our financial statements and management's discussion and analysis for the fiscal year ended December 31, 2004.

        Additional information relating to the Company may be found at www.sedar.com.

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SCHEDULE "A"
GLOSSARY OF MINING TERMS

        The following is a glossary of terms used in this annual information form.

"basalt"	A general term for dark-colored mafic igneous rocks, commonly extrusive but locally intrusive (e.g., as dikes), composed chiefly of calcic plagioclase and clinopyroxene; the fine-grained equivalent of gabbro. Nepheline, olivine, orthopyroxene, or quartz may be present. Adj. basaltic.
"CIM"	Canadian Institute of Mining, Metallurgy and Petroleum.
"concentrator"	A plant where ore is separated into values (concentrates) and rejects (tails). An appliance in such a plant, e.g., flotation cell, jig, electromagnet, shaking table. Also called mill.
"double-drum hoist"	A hoist with two drums that can be driven separately or together by a clutch.
"felsic"	A mnemonic adj. derived from (fe) for feldspar, (l) for lenad or feldspathoid, and (s) for silica, and applied to light-colored rocks containing an abundance of one or all of these constituents. Also applied to the minerals themselves, the chief felsic minerals being quartz, feldspar, feldspathoid, and muscovite.
"grade"	The amount of valuable metal in each tonne or ore, expressed as grams per tonne for precious metals.
	Cut-off grade — is the minimum metal grade at which a tonne of rock can be processed on an economic basis.
	Recovered grade — is actual metal grade realized by the metallurgical process and treatment of ore, based on actual experience or laboratory testing.
"hectare"	One hectare equals 2.47 acres.
"mafic"	Pertaining to or composed dominantly of the ferromagnesian rock-forming silicates; said of some igneous rocks and their constituent minerals.
"metallurgy"	The science of extracting metals from ores by mechanical and chemical processes and preparing them for use.
"mine"	An excavation in the earth for the purpose of extracting minerals. The excavation may be an open pit on the surface or underground workings.
"mineral reserves"	That part of a measured or indicated mineral resource which could be economically mined, demonstrated by at least a preliminary feasibility study that includes adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined. Mineral reserves are those parts of mineral resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the qualified person(s) making the estimates, is the basis of an economically viable project after taking account of all relevant processing, metallurgical, economic, marketing, legal, environment, socio-economic and government factors. Mineral reserves are inclusive of diluting material that will be mined in conjunction with the mineral reserves and delivered to the treatment plant or equivalent facility. The term "mineral reserve" need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals. Mineral reserves are subdivided into proven mineral reserves and probable mineral reserves. Mineral reserves fall under the following categories:

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"proven mineral reserves"	That part of a measured mineral resource that is the economically mineable part of a measured mineral resource, demonstrated by at least a preliminary feasibility study that includes adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.
"probable mineral reserves"	That part of an indicated and in some circumstances a measured mineral resource that is economically mineable demonstrated by at least a preliminary feasibility study that includes adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
"mineral resources"	A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth's crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources fall under the following categories:
"measured mineral resource"	That part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
"indicated mineral resource"	That part of a mineral resource for which quantity, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters and to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
"inferred mineral resource"	That part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
"mineralization"	The process or processes by which a mineral or minerals are introduced into a rock, resulting in a valuable or potentially valuable deposit. It is a general term incorporating various types; for example, fissure filling, impregnation and replacement.
"Mm"	Millions.

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"mm"	Millimetres (0.001 metres).
"NI 43-101"	National Instrument 43-101 — Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators.
"ore"	A natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit, or from which some part may be profitably separated.
"ounce" or "oz"	Troy ounce, equal to approximately 31.103 grams.
"recovery"	A term used in process metallurgy to indicate the proportion of valuable material obtained in the process. It is generally stated as a percentage of valuable metal in the processed material that is recovered compared to the total valuable metal present.
"roasting"	Heating an ore to effect some chemical change that will facilitate smelting.
"stratiform"	Having the form of a layer, bed, or stratum; consisting of roughly parallel bands or sheets, such as a stratiform intrusion.
"stratigraphic sequence"	A chronologic succession of sedimentary rocks from older below to younger above, essentially without interruption; e.g., a sequence of bedded rocks of interregional scope, bounded by unconformities.
"stratigraphy"	The science of rock strata. It is concerned not only with the original succession and age relations of rock strata but also with their form, distribution, lithologic composition, fossil content, geophysical and geochemical properties; indeed, with all characters and attributes of rocks as strata; and their interpretation in terms of environment or mode of origin, and geologic history.
"tailings"	The gangue and other refuse material resulting from the washing, concentration, or treatment of ground ore.
"ton"	An English unit of measurement 1,102 kilograms.
"tonne"	A metric tonne, 1,000 kilograms or 2,204.6 pounds.

Conversion Table

To Convert	To	Multiply by
Short tons	Tonnes	1.10231
Long tons	Tonnes	0.98422
Pounds	Tonnes	2204.62
Ounces (troy)	Tonnes	32,150
Ounces (troy)	Kilograms	32.150
Ounces (troy)	Grams	0.03215
Ounces (troy)/short ton	Grams/tonne	0.02917
Acres	Hectares	2.47105
Miles	Kilometres	0.62137
Feet	Metres	3.28084

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SCHEDULE "B"
AUDIT COMMITTEE CHARTER

I.     PURPOSE

        The Audit Committee is a committee of the Board of Directors. The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by:

•

reviewing the financial reports and other financial information provided by the Company to any governmental body or the public and other relevant documents;



•

recommending the appointment and reviewing and appraising the audit efforts of the Company's independent auditor and providing an open avenue of communication among the independent auditor, financial and senior management and the Board of Directors;



•

serving as an independent and objective party to monitor the Company's financial reporting process and internal controls, the Company's processes to manage business and financial risk, and its compliance with legal, ethical and regulatory requirements;



•

encouraging continuous improvement of, and fostering adherence to, the Company's policies, procedures and practices at all levels.

        The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section III of this Charter. The Audit Committee's primary function is to assist the Board of Directors in fulfilling its responsibilities and it recognizes that the Company's management is responsible for preparing the Company's financial statements and that the Company's independent auditors are responsible for auditing those financial statements.

II.    COMPOSITION AND MEETINGS

        The Audit Committee shall be comprised of a minimum of three directors as determined by the Board, all of whom shall be "independent" directors as such term is defined in Appendix "A". All members of the Committee shall, to the satisfaction of the Board of Directors, be "financially literate" as such term is defined in Appendix "A".

        The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

        The Committee shall meet at least four times annually, or more frequently as circumstances require. The Committee shall meet prior to the filing of quarterly financial statements to review and discuss the unaudited financial results for the preceding quarter and the related Management's Discussion & Analysis and shall meet prior to filing the annual audited financial statements to review and discuss the audited financial results for the year and related Management's Discussion & Analysis.

        As part of its job to foster open communication, the Committee should meet at least annually with management and the independent auditor in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.

        The Committee may ask members of management or others to attend meetings and provide pertinent information as necessary. For purposes of performing their oversight related duties, members of the Committee shall have full access to all corporate information and shall be permitted to discuss such information and any other matters relating to the financial position of the Company with senior employees, officers and independent auditors of the Company.

        Quorum for the transaction of business at any meeting of the Audit Committee shall be a majority of the number of members of the Committee or such greater number as the Audit Committee shall by resolution determine.

        Meetings of the Audit Committee shall be held from time to time and at such place as the Audit Committee or the Chairman of the Committee shall determine upon a 48 hours prior notice. The notice period may be

51

waived by a quorum of the Committee. Each of the Chairman of the Committee, members of the Committee, Chairman of the Board, independent auditors, Chief Executive Officer, Chief Financial Officer or Secretary shall be entitled to request that the Chairman of the Audit Committee call a meeting which shall be held within 48 hours of receipt of such request.

III.  RESPONSIBILITIES AND DUTIES

        To fulfill its responsibilities and duties the Audit Committee shall:

1.

Create an agenda for the ensuing year.

2.

Review and update this Charter at least annually, as conditions dictate.

3.

Describe briefly in the Company's annual report and more fully in the Company's Management Information Circular or its Annual Information Form the Committee's composition and responsibilities and how they were discharged and otherwise assist management in providing the information required by Form 52-110F1 in the Company's Annual Information Form or such other disclosure document required by Multilateral Instrument 52-110.

4.

Report periodically to the Board of Directors.

Documents/Reports Review

5.

Review the Company's interim and annual financial statements as well as all interim and annual Management's Discussion and Analysis and interim and annual earnings press releases prior to their publication and/or filing with any governmental body, or the public.

6.

Review policies and procedures with respect to directors' and officers' expense accounts and management perquisites and benefits, including their use of corporate assets and expenditures related to executive travel and entertainment, and review the results of the procedures performed in these areas by the independent auditor, based on terms of reference agreed upon by the independent auditor and the Audit Committee.

7.

Satisfy itself that adequate procedures are in place for the review of the Company's public disclosure of financial information extracted or derived from the Company's financial statements, other than the public disclosure referred to in paragraph 5, and periodically access the adequacy of such procedures.

Independent Auditor

8.

Recommend to the Board of Directors the selection of the independent auditor, considering independence and effectiveness and approve the fees and other compensation to be paid to the independent auditor. Instruct the independent auditor that the Board of Directors, as the shareholders' representative, is the independent auditor's client.

9.

Monitor the relationship between management and the independent auditor including reviewing any management letters or other reports of the independent auditor and discussing and resolving any material differences of opinion between management and the independent auditor.

10.

Review and discuss, on an annual basis, with the independent auditor all significant relationships they have with the Company to determine their independence.

11.

Pre-approve all non-audit services to be provided to the Company or its subsidiaries by the independent auditor.

12.

Oversee the work and review the performance of the independent auditor and approve any proposed discharge of the independent auditor when circumstances warrant. Consider with management and the independent auditor the rationale for employing accounting/auditing firms other than the principal independent auditor.

13.

Periodically consult with the independent auditor out of the presence of management about significant risks or exposures, internal controls and other steps that management has taken to control such risks, and the fullness and accuracy of the organization's financial statements. Particular emphasis should be given to the

52

adequacy of internal controls to expose any payments, transactions, or procedures that might be deemed illegal or otherwise improper.

14.

Satisfy itself that adequate procedures are in place to: (a) cause the independent auditor reports directly to the Audit Committee; and (b) arrange for the independent auditor to be available to the Audit Committee and the full Board of Directors as needed.

15.

Review and approve the Company's hiring policies regarding partners, employees and former partners and employees of the Company's independent auditor.

Financial Reporting Processes

16.

In consultation with the independent auditor review the integrity of the organization's financial reporting processes, both internal and external.

17.

Consider the independent auditor's judgments about the quality and appropriateness, not just the acceptability, of the Company's accounting principles and financial disclosure practices, as applied in its financial reporting, particularly about the degree of aggressiveness or conservatism of its accounting principles and underlying estimates and whether those principles are common practices or are minority practices.

18.

Consider and approve, if appropriate, major changes to the Company's accounting principles and practices as suggested by management with the concurrence of the independent auditor and ensure that the management's reasoning is described in determining the appropriateness of changes in accounting principles and disclosure.

Process Improvement

19.

Establish regular and separate systems of reporting to the Audit Committee by each of management and the independent auditor regarding any significant judgments made in management's preparation of the financial statements and the view of each as to appropriateness of such judgments.

20.

Review the scope and plans of the independent auditor's audit and reviews prior to the audit and reviews being conducted. The Committee may authorize the independent auditor to perform supplemental reviews or audits as the Committee may deem desirable.

21.

Following completion of the annual audit and quarterly reviews, review separately with each of management and the independent auditor any significant changes to planned procedures, any difficulties encountered during the course of the audit and reviews, including any restrictions on the scope of work or access to required information and the cooperation that the independent auditor received during the course of the audit and reviews.

22.

Review and resolve any significant disagreements among management and the independent auditor in connection with the preparation of the financial statements.

23.

Where there are significant unsettled issues the Committee shall ensure that there is an agreed course of action for the resolution of such matters.

24.

Review with the independent auditor and management significant findings during the year and the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.

25.

Review activities, organizational structure, and qualifications of the chief financial officer and the staff in the financial reporting area and see to it that matters related to succession planning within the Company are raised for consideration at the full Board of Directors.

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Ethical and Legal Compliance

26.

Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting internal controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

27.

Review and update periodically a Code of Ethical Conduct and ensure that management has established a system to enforce this Code. Review through appropriate actions taken to ensure compliance with the Code of Ethical Conduct and to review the results of confirmations and violations of such Code.

28.

Review management's monitoring of the Company's system in place to ensure that the Company's financial statements, reports and other financial information disseminated to governmental organizations, and the public satisfy legal requirements.

29.

Review, with the organization's counsel, legal and regulatory compliance matters, including corporate securities trading policies, and matters that could have a significant impact on the organization's financial statements.

Risk Management

30.

Review management's program of risk assessment and steps taken to address significant risks or exposures, including insurance coverage.

General

31.

Conduct or authorize investigations into any matters within the Committee's scope of responsibilities.

The committee shall be empowered to retain and compensate independent counsel, accountants and other professionals to assist it in the performance of its duties as it deems necessary.

32.

Perform any other activities consistent with this Charter, the Company's By-laws and governing law, as the Committee or the Board deems necessary or appropriate.

Appendix "A" to Schedule "A"

Independence Requirement of Multilateral Instrument 52-110

        A member of the Audit Committee shall be considered "independent", in accordance with Multilateral Instrument 52-110 — Audit Committees ("MI 52-110"), subject to the additional requirements or exceptions provided in MI 52-110, if that member has no direct or indirect relationship with the Company, which could reasonably interfere with the exercise of the member's independent judgment. The following persons are considered to have a material relationship with the Company and, as such, can not be a member of the Audit Committee:

(a)

an individual who is, or has been within the last three years, an employee or executive officer of the Company;



(b)

an individual whose immediate family member is, or has been within the last three years, an executive officer of the Company;



(c)

an individual who:



(i)

is a partner of a firm that is the Company's internal or external auditor;



(ii)

is an employee of that firm; or



(iii)

was within the last three years a partner or employee of that firm and personally worked on the Company's audit within that time;



(d)

an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual:



(i)

is a partner of a firm that is the Company's internal or external auditor;

54

(ii)

is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or



(iii)

was within the last three years a partner or employee of that firm and personally worked on the Company's audit within that time;



(e)

an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the Company's current executive officers serves or served at the same time on the entity's compensation committee; and



(f)

an individual who received, or whose immediate family member who is employed as an executive officer of the Company received, more than $75,000 in direct compensation from the Company during any 12 month period within the last three years, other than as remuneration for acting in his or her capacity as a member of the Board of Directors or any Board committee, or the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service for the Company if the compensation is not contingent in any way on continued service.

        In addition to the independence criteria discussed above, any individual who:

(a)

has a relationship with the Company pursuant to which the individual may accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any subsidiary entity of the Company, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee; or as a part-time chair or vice-chair of the board or any board or committee, or



(b)

is an affiliated entity of the Company or any of its subsidiary entities,

        is deemed to have a material relationship with the Company, and therefore, is deemed not to be independent.

        The indirect acceptance by an individual of any consulting, advisory or other fee includes acceptance of a fee by:

(a)

an individual's spouse, minor child or stepchild, or a child or stepchild who shares the individual's home; or



(b)

an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any subsidiary entity of the Company.

Financial Literacy Under Multilateral Instrument 52-110

        "Financially literate", in accordance with MI 52-110, means that the director has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company's financial statements.

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QuickLinks

Exhibit 4.1
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
CURRENCY PRESENTATION AND EXCHANGE RATE DATA
DOCUMENTS INCORPORATED BY REFERENCE
GENERAL DEVELOPMENT OF THE BUSINESS
OUR BUSINESS
777/Callinan Mine Historical Statistics
Trout Lake Mine Historical Statistics
Konuto Lake Mine Historical Statistics
Chisel North Mine Historical Statistics
RISK FACTORS
INDUSTRY REGULATION
MINERAL POTENTIAL OF OUR MATERIAL PROPERTIES
DIVIDENDS
DESCRIPTION OF CAPITAL STRUCTURE
MARKET FOR SECURITIES
ESCROWED SECURITIES
DIRECTORS AND OFFICERS
AUDIT COMMITTEE DISCLOSURE
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
LEGAL PROCEEDINGS
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
TRANSFER AGENT AND REGISTRAR
MATERIAL CONTRACTS
INTEREST OF EXPERTS
ADDITIONAL INFORMATION
SCHEDULE "A" GLOSSARY OF MINING TERMS
SCHEDULE "B" AUDIT COMMITTEE CHARTER

EX-4.2

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Exhibit 4.2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read this discussion and analysis in conjunction with our consolidated financial statements and related notes thereto that appear elsewhere in this offering circular. All figures are in Canadian dollars unless otherwise noted. Included herein are certain forward-looking statements that involve various risks, uncertainties and other factors. See "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors".

Overview

Nature of Business

        We explore for, develop, mine and process base metals and endeavor to continuously improve our cost and safety performance and environmental standards. We undertake exploration and development activities, primarily within economic transportation distance of our metal processing complex located in Flin Flon, Manitoba, Canada. Our production facilities consist of four operating mines, two concentrators and metallurgical facilities consisting of a zinc plant and copper smelter complex for the extraction of zinc and copper, together with gold and silver by-products. The Trout Lake, Konuto Lake, and 777/Callinan mines are located in the Flin Flon area, and ore from these mines is processed through the Flin Flon concentrator. The Chisel North mine and concentrator are located in the Snow Lake area. The Ruttan mine and concentrator at Leaf Rapids were closed in mid-2002 as the operation was no longer economically viable. Our downstream operating division, Zochem, consumes on average between 25% and 30% of our zinc production to produce zinc oxide.

        Between 1998 and 2004, we invested approximately $435 million in the 777 Project, which involved construction of the new 777 mine in Flin Flon, development of the Chisel North mine near Snow Lake, expansion of the Flin Flon concentrator capacity from 1.81 million to 2.18 million tonnes per year, and expansion of the Flin Flon zinc plant, including construction of a state-of-the-art electrolytic cellhouse with capacity to support annual production of 115,000 tonnes of cast zinc.

        Also in 1998, and in support of the 777 Project, we entered into an amending agreement in respect of certain existing collective bargaining agreements, which amending agreement prohibits strikes and lockouts through 2012 and provides for binding arbitration in the event that negotiated contract settlements are not achieved. In late 2003, HBMS restructured its administrative and overhead activities by building work systems around the concept of shared services. This saw previously distributed service groups such as engineering, maintenance and loss control consolidated so as to optimize skill utilization and labor efficiency. This resulted in a permanent reduction of 120 positions.

        The 777 Project, the labor amending agreement, closure of the Ruttan mine and the 2003 restructuring have resulted in a smaller workforce, higher labor productivity and lower unit operating costs and improved zinc and copper grades.

        We endeavor to operate the zinc plant and copper smelter at full capacity at all times. Purchased concentrates are used to fill excess plant capacity not utilized in the processing of concentrates produced from domestic mines. As such, requirements for purchased concentrates are determined by plant capacity and production capability at company owned mines. For the period January 1, 2001 to September 30, 2004, 57% of copper production came from company owned mines, while the remaining 43% came from purchased concentrates. For the same period, company mines contributed 89% of total zinc production with only 11% being sourced from purchased concentrate. The contribution to income earned from processing purchased concentrates is dependent upon the treatment and refining charges (TC/RCs) defined in the purchase agreement, as well as the freight cost (net of any credit from the vendor) of transporting the concentrate to Flin Flon. TC/RCs are set by the market on the basis of supply and demand for concentrates. Freight credits are generally set at parity with transport costs to a major world port. Fluctuations in TC/RCs and ocean freight costs can affect the extent to which economic purchased concentrate is available to us. As well, purchased concentrate availability can also be affected by operational changes at the concentrate supplier's mines.

1

        Metal sales volumes for any given period are affected by the volume and grade of ore mined, metal recovery through the concentrator and grade of purchased concentrate. For the 2001-2003 period, total ore volume mined declined and grade improved primarily as a result of the mid-2002 closure of the high volume, low grade Ruttan mine. In the first nine months of 2004, both zinc and copper grades improved further as the new 777 Mine came into commercial production.

        We sell substantially all of our copper anode, cast zinc and zinc oxide to CMM. CMM is a wholly-owned subsidiary of Considar Metal Marketing S.A. ("CMMSA"), which is a joint venture company that is 50% owned by us. CMM contracts with the White Pine copper refinery and other third parties to refine copper anodes into market-standard cathodes, and simultaneously to extract the contained precious metals from the anodes. The copper cathodes and precious metals are sold at market prices. Cast zinc slabs and blocks and zinc oxide are sold by CMM to customers in Eastern Canada and the United States. Sales of zinc oxide typically generate less than 10% of our revenues. We consolidate proportionally the results of CMMSA in our results.

        We require the use of specialized facilities and technology and rely on such facilities to maintain our production levels. We are highly integrated and as such do not allocate resources to, or report individual facilities as, profit centres.

Key Factors Affecting the Business

        Key factors affecting our results of operations and financial condition are zinc and copper prices, the U.S. dollar/Canadian dollar exchange rate, ore volume and grade, concentrator recoveries, treatment and refining charges for purchased concentrates, shipping costs, heavy fuel oil price, electrical power costs and the availability of, and wages for, labor.

        Concentrate purchases can differ materially from year to year depending primarily upon production from the Mines and, to a lesser degree, the treatment and refining charge regime in the concentrate market. Treatment and refining charges, together with concentrate freight costs, directly impact the profitability of processing purchased concentrate. As the margins earned from domestic concentrate are significantly larger than those earned from purchased concentrate, we seek to optimize ore volume and grade from our own mines. However, there is limited ability to change mine plans on short notice. As a result, concentrator recoveries are key in that metal not recovered through the concentrator will generally be replaced with less profitable purchased material. Expected declines in the production from our Mines may result in an increase in the amount of purchased concentrate we process, thereby reducing our profitability.

        Although copper sales generally account for a greater portion of total revenue than zinc sales, revenue (and income) is more sensitive to zinc price fluctuations as a much larger portion of zinc metal production comes from domestic concentrate. The U.S. dollar/Canadian dollar exchange rate is key to us in that metal is sold in U.S. dollars while the majority of costs, with the exception of concentrate purchases and third-party refining charges, are incurred in Canadian dollars.

        Fluctuations in the price of heavy fuel oil, although having a noticeable impact on smelter costs, have a relatively small impact on our overall costs compared to similar fluctuations in metal price or exchange rate. Electrical power costs are incurred primarily in the electrolytic cellhouse. On a unit basis, power costs remained unchanged for several years prior to 2004, with an approximate 5% increase approved in 2004, and a further 5% increase expected in 2005. Labor wages remained generally stable in recent years and this is expected to continue in the near future under the terms of the collective bargaining agreement.

2

Results of Operations

        The following table sets forth sales information and realized prices for the periods indicated.

									Nine Months Ended September 30
			Years Ended December 31,
Sales
			2001		2002		2003		2003		2004
Zinc		Tonnes	87,948		105,192		118,589		91,562		83,323
Copper		Tonnes	79,165		83,452		80,480		57,396		53,075
Gold		oz	68,972		59,319		57,636		40,331		50,175
Silver		oz	1,207,879		1,233,602		1,035,553		724,547		700,855
Zinc (including sales to Zochem)		($000)	122,578		131,945		140,653		106,191		115,857
Less Sales to Zochem			(29,010	)	(28,972	)	(35,870	)	(27,725	)	(29,188	)
Zochem Zinc Oxide Sales			55,442		46,414		46,111		35,207		41,255
Copper			192,871		211,484		213,135		142,655		207,244
Gold			31,557		28,874		27,288		18,810		26,540
Silver			8,304		8,994		7,003		4,763		6,022
Cadmium and Other			60		56		40		28		69
Total HBMS Sales before Adjustment			381,802		398,795		398,360		279,929		367,799
Adjustment to Consolidate CMMSA			8,787		37,297		19,554		18,824		17,227
Total Consolidated HBMS Sales		($000)	390,589		436,092		417,914		298,753		385,026
Gross Realized Metal Prices:
	Zinc	US$/lb	0.41		0.36		0.38		0.37		0.48
	Copper	US$/lb	0.71		0.73		0.86		0.78		1.33
	Gold	US$/oz	295.35		309.91		339.22		327.91		372.87
	Silver	US$/oz	4.44		4.64		4.83		4.60		6.54
Average Exchange Rate for Period		$/US$	1.5491		1.5709		1.4010		1.4294		1.3282

Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003

Revenue

        Revenue in the nine months ended September 30, 2004 was $392.1 million compared to $299.2 million in the nine months ended September 30, 2003, representing an increase of $92.9 million, or 31.0%. Metal prices were the largest single factor affecting sales in the first nine months of 2004. Realized copper prices increased from US$0.78/lb in the first nine months of 2003 to US$1.33/lb in the first nine months of 2004, and realized zinc prices increased from US$0.37/lb in the first nine months of 2003 to US$0.48/lb in the first nine months of 2004. The effect of these increased prices was partially offset by a decline in the U.S. dollar compared to the Canadian dollar, and by lower production levels. Total metal sales in the nine months ended September 30, 2004 were 83,323 tonnes of zinc and 53,075 tonnes of copper, compared to 91,562 tonnes of zinc and 57,396 tonnes of copper in the nine months ended September 30, 2003, or declines of 9.0% and 7.5%, respectively. Zinc sales in 2003 were augmented by approximately 4,000 tonnes of zinc cathode sold from inventory. An unusually high ore grade ratio of copper to zinc in early 2004 negatively affected zinc recoveries in the Flin Flon concentrator and resulted in lower zinc metal production rates compared to 2003. Copper production in the first nine months of 2004 was also affected by lower grade purchased concentrate feedstock.

Operating Costs

        Operating costs in the nine months ended September 30, 2004 were $308.4 million compared to $316.2 million in the nine months ended September 30, 2003, representing a decrease of $7.8 million, or 2.5%. Excluding purchased concentrates, operating costs in the first nine months of 2004 were $220.4 million compared to $238.5 million in the first nine months of 2003. Incorporated in the lower 2004 costs are the effects of the restructuring program that was completed in late 2003. Contributing to the higher cost in 2003 was a drawdown of opening inventory that increased the volume and cost of sales. Concentrate purchases were

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$88.0 million in the first nine months of 2004 compared to $77.7 million in same period in 2003, reflecting higher metal prices which more than offset volumes that were approximately 33% lower in the first nine months of 2004. Minimal zinc concentrate was purchased in the first nine months of 2004 due to increased concentrate production from the Mines and concentrators. During the first seven months of 2004, unit power costs were unchanged from the same period in 2003. A power cost increase of approximately 5% took effect August 1, 2004. Heavy fuel oil cost was $0.9 million lower in the first nine months of 2004 due to an 8% reduction in price from an average of $0.26/litre in the first nine months of 2003 compared to $0.24/litre in the first nine months of 2004.

General and Administrative

        General and administrative costs in the nine months ended September 30, 2004 were $6.1 million, which was an increase of $0.9 million over the nine months ended September 30, 2003. The increase results from additional legal/audit fees and performance pay, offset in part by reduced consulting fees.

Depreciation and Amortization

        Depreciation and amortization in the nine months ended September 30, 2004 was $39.9 million compared to $53.5 million in the nine months ended September 30, 2003, representing a decrease of $13.6 million, or 25.4%. The impairment charge recorded at the end of 2003 reduced asset values with a corresponding reduction in amortization and depreciation.

Foreign Exchange

        We had a foreign exchange loss of $2.2 million in the first nine months of 2004 compared to a foreign exchange gain of $34.9 million in the first nine months of 2003. The gain in 2003 was primarily the result of the retirement in 2003 of U.S. dollar denominated commercial paper instruments, following a strengthening of the Canadian dollar against the U.S. dollar.

Earnings

        As a result of the foregoing, we had earnings of $38.8 million in the first nine months of 2004 compared to a net loss of $42.9 million in the first nine months of 2003.

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002

Revenue

        Revenue in fiscal 2003 was $418.8 million compared to $439.6 million in fiscal 2002, representing a decrease of $20.8 million or 4.7%.

        Zinc metal sales in fiscal 2003 were 118,589 tonnes compared to 105,192 tonnes in fiscal 2002, or an increase of 12.7%, primarily as a result of the installation of a cathode charging system in November 2002, which corrected melting furnace inductor failures that had occurred in fiscal 2002. Realized zinc prices increased from US$0.36/lb in 2002 to US$0.38/lb in 2003 and the U.S. dollar weakened by 11% against the Canadian dollar from 2002 to 2003. The net result was that zinc sales revenues were 7% higher in fiscal 2003 than in fiscal 2002.

        Copper metal sales were 80,480 tonnes in fiscal 2003 compared to 83,452 tonnes in fiscal 2002, or a decrease of 3.7%. The reduction in fiscal 2003 was due partially to a one month vacation shutdown of the copper smelter. Realized copper prices increased from US$0.73/lb in fiscal 2002 to US$0.86/lb in fiscal 2003, though the weaker U.S. currency moderated the effect on sales. Copper sales revenues were 0.8% higher in fiscal 2003 than in fiscal 2002.

        With the closure of the high volume, low grade Ruttan copper/zinc mine in mid-2002, precious metal by-product volume dropped. Gold and silver production in fiscal 2003 was 2% and 15% lower, respectively, than in 2002. Realized gold price was US$339/oz in fiscal 2003 compared to US$310/oz in fiscal 2002, and realized silver price was US$4.83/oz in fiscal 2003 compared to US$4.64/oz in fiscal 2002. The combination of the increase in prices, the decrease in volume and a weaker U.S. dollar compared to fiscal 2002 resulted in precious metal sales revenues that were 9% lower in fiscal 2003 than in fiscal 2002.

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Operating Costs

        Operating costs in fiscal 2003 were $430.6 million compared to $440.4 million in fiscal 2002, representing a decrease of $9.8 million, or 2.3%. Excluding purchased concentrates, operating costs in fiscal 2003 were $34.3 million lower than in fiscal 2002, due in part to the fact that fiscal 2003 did not include operating expenses of the high volume, low grade Ruttan mine which was closed in June 2002, partially offset by increased production from the higher grade 777/Callinan deposits. Concentrate purchases were $24.5 million higher in fiscal 2003 compared to fiscal 2002, primarily to meet requirements to replace material from the Ruttan mine. General wages for hourly employees did not change from fiscal 2002 to fiscal 2003. Other significant cost elements include power rates, which remained unchanged, and heavy fuel oil, which rose to $0.255/litre in fiscal 2003 compared to $0.221/litre in fiscal 2002. The heavy fuel oil price increase was offset by improvements in process efficiencies as total consumption decreased from 55.9 million litres in 2002 to 47.5 million litres in 2003.

General and Administrative

        General and administrative costs in fiscal 2003 were $6.9 million compared to $9.6 million in fiscal 2002, representing a decrease of $2.7 million or 28.1%. In 2003, accruals were reduced to reflect lower projected performance-related payroll costs. Included in 2002 were additional management training costs and travel, and legal costs relating to customer credit issues.

Depreciation and Amortization

        Depreciation and amortization in fiscal 2003 was $70.7 million compared to $66.4 million in fiscal 2002, representing an increase of $4.3 million, or 6.4%, primarily as a result of depreciation associated with the newly expanded zinc plant and new cellhouse, partially offset by the decrease in depreciation resulting from the closure of the Ruttan mine.

Accretion and Exploration

        Accretion and exploration costs in fiscal 2003 were $7.6 million compared to $6.4 million in fiscal 2002, representing an increase of $1.2 million, or 18.7%, primarily resulting from an increase in exploration activity in 2003.

Foreign Exchange

        We had a foreign exchange gain of $37.3 million in fiscal 2003 compared to a foreign exchange gain of $2.0 million in fiscal 2002. The gain in fiscal 2003 was due to the retirement of U.S. dollar denominated commercial paper instruments that had been issued in prior years when the U.S. dollar was much higher compared to the Canadian dollar.

Impairment

        During 2003, a review of the realizable value of our assets in relation to their book value resulted in the recording of an impairment charge of $268.9 million. The impairment was determined using an estimate of future cash flows arising from estimated recoverable mine production, plant production levels, expected metal sales prices and cash costs of production, capital and reclamation, all of which are contained in detailed engineering life-of-mine plans. As a result of a decline in the projected realized prices of our products when converted into Canadian dollars, the carrying value of these assets was not considered to be recoverable based on future potential earnings and costs under current market conditions and ore reserve levels.

Earnings

        As a result of the foregoing, we had a net loss of $330.1 million in fiscal 2003 compared to a net loss of $83.0 million in fiscal 2002.

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Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

Revenue

        Revenue in fiscal 2002 was $439.6 million compared to $409.6 million in fiscal 2001, representing an increase of $30.0 million or 7.3%.

        Zinc metal sales in fiscal 2002 were 105,192 tonnes compared to 87,948 tonnes in fiscal 2001, or an increase of 19.6%, as a result of processing of additional concentrate purchased to feed expanded capacity at the zinc plant and new electrolytic cellhouse commissioned in mid-2001. Realized zinc prices decreased from US$0.41/lb in 2001 to US$0.36/lb in 2002 and the U.S. dollar strengthened by 1% against the Canadian dollar from 2001 to 2002. The net result was that zinc sales revenues were 7.6% higher in fiscal 2002 than in fiscal 2001.

        Copper metal sales were 83,452 tonnes in fiscal 2002 compared to 79,165 tonnes in fiscal 2001, or an increase of 5.4%. Realized copper prices increased from US$0.71/lb in fiscal 2001 to US$0.73/lb and, together with the impact of the strengthened U.S. dollar compared to the Canadian dollar, copper sales revenues were 9.7% higher in fiscal 2002 than in fiscal 2001.

        With the closure of the high volume, low grade Ruttan copper/zinc mine in mid-2002, gold by-product volume dropped, with 2002 gold production 14% lower than in 2001. Silver production was unchanged with the reduction from the closure of the Ruttan mine offset by additional silver in purchased concentrate. Realized gold price was US$310/oz in fiscal 2002 compared to US$295/oz in fiscal 2001, and realized silver price was US$4.64/oz in fiscal 2002 compared to US$4.44/oz in fiscal 2001. The combination of the increase in prices, the decrease in gold volume and a stronger U.S. dollar compared to fiscal 2001 resulted in precious metal sales revenues that were 5% lower in fiscal 2002 than in fiscal 2001.

        Revenue for fiscal 2001 also included $17.3 million of business interruption insurance, compared to $1.7 million in fiscal 2002. The insurance settlements in both 2001 and 2002 related to a flood at the Ruttan mine and an accident in the copper smelter, both of which occurred in 2000.

Operating Costs

        Operating costs in fiscal 2002 were $440.4 million compared to $417.4 million in fiscal 2001, representing an increase of $23.0 million, or 5.5%. Excluding purchased concentrates, operating costs in fiscal 2002 were $8.5 million lower than in fiscal 2001 due in part to the fact that the second half of fiscal 2002 excluded operating expenses of the Ruttan mine, which was closed in June 2002. Concentrate purchases were $31.5 million higher in fiscal 2002 compared to fiscal 2001, primarily to fill the increased zinc production capacity following completion of the zinc plant expansion and electrolytic cellhouse in mid 2001 and to meet requirements to replace material from the Ruttan mine. Power rates and heavy fuel oil prices remained unchanged. Included in fiscal 2001 operating costs was a $10.0 million writedown of inventories and a provision of $5.0 million for projected costs associated with the decision near year-end to close the Ruttan mine and concentrator in mid-2002. General wages for hourly employees in fiscal 2002 increased 1.75% from fiscal 2001 rates. Other significant cost elements include power rates which remained constant, and heavy fuel oil, which was also constant at $0.221/litre in fiscal 2002 compared to $0.223/litre in fiscal 2001.

General and Administrative

        General and administrative costs in fiscal 2002 were $9.6 million compared to $10.3 million in fiscal 2001, representing a decrease of $0.7 million or 6.8%. This was due primarily to legal costs associated with a smelter accident that occurred in August 2000.

Depreciation and Amortization

        Depreciation and amortization in fiscal 2002 was $66.4 million compared to $73.3 million in fiscal 2001, representing a decrease of $6.9 million, or 9.4%. Accelerated depreciation and amortization of $16 million was recognized in 2001 in anticipation of the Ruttan mine closure. Offsetting this, cellhouse depreciation began during 2002.

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Accretion and Exploration

        Accretion and exploration in fiscal 2002 was $6.4 million compared to $4.1 million in fiscal 2001, representing an increase of $2.3 million, or 56.1% due primarily to increased exploration activity in 2002.

Foreign Exchange

        We had a foreign exchange gain of $2.0 million in fiscal 2002 compared to a foreign exchange loss of $33.0 million in fiscal 2001. The loss in fiscal 2001 was primarily due to the impact of the weaker Canadian dollar on U.S. dollar denominated commercial paper instruments.

Earnings

        As a result of the foregoing, we had a net loss of $83.0 million in fiscal 2002 compared to a net loss of $129.7 million in fiscal 2001.

Cash Flows, Liquidity and Capital Resources

Liquidity and Capital Resources Prior to the Transactions

        Our liquidity requirements arise primarily from the need to fund capital expenditures for the maintenance and development of our mines and facilities, to fund working capital needs and to meet our debt service requirements. Our primary sources of liquidity are cash generated from operating activities and amounts available to us under our line of credit. In years prior to 2004, liquidity shortfalls were met with funding from Anglo American, our parent company prior to the Acquisition. During 2004, we have generated sufficient cash flow from operations to meet all of our operating and capital requirements.

        We maintain a $30 million line of credit with our bank. Our obligation under this line of credit is guaranteed by Anglo American plc. The facility is used for short-term cash requirements and to secure letters of credit, and bears interest at the prime rate. This facility will not be continued subsequent to the Acquisition.

        We have an interest free loan from the Province of Manitoba that is secured by an irrevocable standby letter of credit and guaranteed by Anglo American plc. In June of each of 2002, 2003 and 2004, we made repayments of $2 million in accordance with the terms of the loan agreement. The balance at September 30, 2004 was $17.5 million. Under the terms of the agreement with the Province, the loan is repayable in installments of $2 million in 2005, $4 million in each of 2006 and 2007 and $7.5 million in 2008. The existing terms of this loan provide that it is repayable, together with a premium, on a change of control of HBMS. We intend to negotiate with the Province of Manitoba to continue this loan on terms comparable to the existing loan. Among other things, we expect that the Province will require us to provide a letter of credit on our expected new credit facility or provide cash collateral in an amount equal to the outstanding principal amount under the loan. If we are unable to re-negotiate this loan we will repay the loan, prior to completion of the Acquisition out of cash on hand.

Cash Flow — Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003

        Cash flow from operating activities in the first nine months of 2004 was $59.9 million, compared to $10.3 million in the first nine months of 2003, primarily due to higher metal prices in the first nine months of 2004, partially offset by U.S. dollar weakness.

        Total capital expenditures in the first nine months of 2004 were $47.9 million, including $11.5 million of capital expenditures relating to completion of the 777 mine and the Flin Flon concentrator, and the balance for capital development in the Mines. Total capital expenditures in the first nine months of 2003 were $89.3 million, which included $43.8 million relating to the 777 Project, and the balance of $45.5 being capital development and equipment.

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        Financing activities in the first nine months of 2004 included $14.4 million of sale leasebacks to finance mobile mine equipment and repayment of $2.0 million of the loan from the province of Manitoba. In the first nine months of 2003, commercial paper borrowings of $479.5 million were repaid with proceeds from the issuance of preferred shares in the amount of $575.0 million to Anglo American. The balance of funds from the equity issue was used to fund operations and capital expenditures in the first nine months of 2003.

Cash Flow — Fiscal 2001, 2002 and 2003

        During 2001, 2002 and 2003, we consumed significant amounts of cash resources in our operations and capital investments. Cash outflows before financing were $504.8 million in total during the years 2001 through 2003. The major factor in this period was capital expenditures, which were $419.7 million in total during the period. Major project costs, primarily for the 777 Project, were $247.8 million of the total capital expenditures, the balance of which was for mine development and other sustaining capital.

        Cash used by operating activities was $69.6 million in 2001, declining to $11.8 million in 2002 and $3.7 million in 2003. The expanded zinc plant capacity and new zinc cellhouse, commissioned in 2001 to replace the previous facility and closure of the high volume, low margin Ruttan mine in 2002, contributed to improved cash flow from operations.

        To maintain liquidity during this period, commercial paper debt was issued to third parties in 2001 which, together with previously outstanding commercial paper debt, was repaid in 2002 and 2003. Our remaining net cash requirements were funded by equity injections from Anglo American. In 2003, Anglo American contributed $601.3 million of equity to fund the full repayment of our commercial paper borrowings and its operating cash requirements for the year.

Liquidity and Capital Resources Following the Transactions

        In connection with the Acquisition, we have received an indicative term sheet for a senior secured revolving credit facility in the amount of $50 million to be secured by accounts receivable and inventories. In addition, we intend to negotiate with the Province of Manitoba for the continuation of their existing loan to us. The existing loan is repayable together with a premium on a change of control of HBMS. Among other things, we expect that the Province will require us to provide a letter of credit on our expected new credit facility or provide cash collateral in an amount equal to the outstanding principal amount under the loan. If we are unable to renegotiate this loan, we will repay the loan prior to completion of the Acquisition out of cash on hand. See "Description of Material Indebtedness and Other Liabilities".

        We have derivative contracts in place in which an affiliate of Anglo American plc is the counterparty. To the extent these derivative contracts are not left in place after the Acquisition, we will liquidate these contracts or seek an alternative counterparty to assume these contracts.

        We believe that our cash and short term investments and cash flow from operations, together with borrowings under our new senior secured revolving credit facility, will be sufficient to fund our operations and commitments for the remainder of fiscal 2004 and fiscal 2005, including the exercise of CMM's option to acquire the White Pine refinery. However, the actual amounts of future cash flow and commitments are subject to a number of risks and uncertainties and, therefore, may vary from our projections. As a result, we cannot assure you that our sources of liquidity will be sufficient to enable us to meet our commitments. See "Risk Factors — Risks Relating to Our Business". In addition, we cannot assure you that we will be successful in negotiating the expected new credit facility on terms acceptable to us or at all. If we are not successful, we will need to seek other sources of liquidity which may be difficult to find. See "Risk Factors — Risks Relating to Our Business — We may not be able to generate sufficient cash to service all of our indebtedness, including the notes."

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Contractual Obligations

        The following table summarizes, as at September 30, 2004, certain of our contractual obligations for the period specified:

	Payments Due by Period
Contractual Obligations (as at September 30, 2004)	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years
	($000)
Long-term debt obligations	$	17,500	$	2,000	$	15,500	$	—	$	—
Capital lease obligations		13,584		2,747		5,959		4,878		—
Operating lease obligations		8,620		3,753		4,070		269		528
Purchase obligations		12,021		12,021
Pension and other employee future benefits obligations		13,439		13,439
Asset retirement(1)		51,100		1,043		8,062		2,000		39,995
Other long-term liabilities and contractual obligations		1,048		1,048		—		—		—
Total	$	117,312	$	36,051	$	33,591	$	7,147	$	40,523

(1)

In December 2004, the Provinces of Saskatchewan and Manitoba informed us that, in their view, our current estimate for closure and related costs may be too low. See "Risk Factors — Reclamation and mine closure costs could adversely affect our cash flow from operations" and "Description of Material Indebtedness and Other Liabilities — Reclamation Security Agreements."

        The following is a description of certain of the contractual obligations outlined in the above table and of certain other commitments and obligations not included in the table:

Purchase Obligations

        Copper Refinery Obligation.    We have entered into a commitment to deliver 85,000 tons of copper anodes annually for refining during the next year, with the option to extend for an additional year, each year. In the event that we are unable to meet the terms of the contract, we would be required to make a payment of US$0.04 per pound of copper anode not delivered. The approximate amount of this obligation is $9.1 million.

        Copper Concentrate Purchase Obligation.    We have a commitment to purchase copper concentrate for payment based on a deemed delivery rather than a required physical delivery. The contract requires delivery of 72,000 tonnes annually for years 2004 to 2008. Payment is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a fixed treatment and refining credit. If we cannot process the deemed tonnage in a timely manner, we believe that we will be able to negotiate alternate arrangements for the sale or diversion of the tonnage. We have an annual commitment through 2008 to purchase 40,000 dry metric tonnes per year of copper concentrate from Compania Minera Dona Ines de Collahuasi ("Collahuasi") which is a Chilean joint venture company in which Anglo American has a significant interest. Payment is made 45 days after the date of the bill of lading, and is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a treatment, refining, and freight credit. The agreement with Collahuasi does not require Collahuasi's consent to complete the Acquisition. Collahuasi has acknowledged that its obligations under the agreement remain in place after the transaction, although it has reserved its contractual right to renegotiate terms dealing with payment procedures after the Acquisition is completed. We intend to seek opportunities to swap the tonnage with other smelters (where a freight advantage exists). If we cannot process the concentrate or swap tonnage in a timely manner, management believes that alternate arrangements can be negotiated for the sale or diversion of the tonnage. No amount is included in the table due to the fact that price is dependent on future market prices.

        Other.    The remainder of purchase obligations comprises routine orders to purchase goods and services.

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Pension and Other Employee Future Benefits Obligations

        Pension and other employee future benefits obligations represent the various contractual funding requirements for our pension plan and other employee future benefits in the 12 months ended September 30, 2005. The obligatory funding requirements for the pension plan and other employee future benefits are actuarily determined and are subject to future uncertainties, including the expected rate of return on plan assets, and the discount rate on pension obligations, each of which may change over time.

Asset Retirement Obligation

        The amounts included in the asset retirement obligation represent the estimated fair value of our present legal obligation for closure and related costs at all of our existing operating and non-operating mines and properties based upon the closure plans applicable to those mines and properties. We have recently been informed by the Provinces of Saskatchewan and Manitoba that, in their view, our current estimate of reclamation costs may be too low and the security for the reclamation obligations may not be sufficient. We have had preliminary discussions with the Provinces of Saskatchewan and Manitoba and have agreed to conduct a feasibility study to more accurately determine the estimated reclamation costs. The study is expected to be completed in the first half of 2005. We believe that our current reclamation cost estimate of approximately $51.1 million ($32.8 million on a present value basis at September 30, 2004) is adequate and is sufficiently secured by the existing security. However, we will provide additional security in the form of a letter of credit in the amount of $13 million during the period of the feasibility study. After completion of the feasibility study, the appropriate security will be determined with the Provinces. Although we believe our current estimate for our reclamation costs is sufficient, the estimate contained in the feasibility study may be materially larger. See "Risk Factors — Reclamation and mine closure costs could adversely affect our cash flow from operations" and "Description of Material Indebtedness and Other Liabilities — Reclamation Security Agreements."

Other Commitments and Agreements

        We have certain other commitments and agreements that are not included in the table above, including a profit sharing plan whereby 10% of our after tax earnings for any given fiscal year will be distributed to all employees in the Flin Flon/Snow Lake operations, with the exception of executive officers and key management personnel. See Note 18 to our consolidated financial statements contained elsewhere in this offering circular.

Off-Balance Sheet Arrangements

        We are not involved in any off balance sheet transactions.

Risk Profile

Overview

        We are subject to various risks in our day-to-day operations. The likelihood and severity of these risks are mitigated by application of high standards in the planning, construction and operation of our facilities. In addition, emphasis is placed on hiring and retaining competent personnel and developing their skills through training in safety and loss control. We have a solid track record of developing and operating base metal mines, and our safety record, as expressed by the widely-used frequency measure of lost time accidents per 200,000 hours worked, has followed a steady improvement curve, from more than 16 in 1994 to 0.9 in the first nine months of 2004.

        Business risk is also mitigated through the purchase of insurance coverage, including coverage for property damage, business interruption and liability.

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Financial Risk and Financial Instruments

        Our net income is sensitive to fluctuations in metal prices. Further, the market prices of all of our metal products are U.S. dollar based and our net income is therefore sensitive to fluctuations in the US$/Cdn$ exchange rate. The approximate sensitivities of 2004 net income to movements in metal prices and exchange rates, using the first half of 2004 as a basis (and not assuming the effect of this offering), are shown in the following table.

	Change	Earnings Impact
Zinc	US1¢/lb	Cdn$	3.0 million
Copper	US1¢/lb	Cdn$	1.3 million
Gold	US$10/oz	Cdn$	0.9 million
Silver	US$1/oz	Cdn$	0.8 million
Exchange Rate	Cdn1¢/U.S.dollar	Cdn$	2.7 million

        In order to mitigate the impact of fluctuating metal prices and exchange rates, from time to time we enter into derivative transactions pursuant to our Risk Management Policies and Procedures. These policies prohibit the implementing of uncovered commodity and currency positions and we do not use complex derivatives to manage our exposures and do not hold commodity and currency positions for speculative purposes. The accounting policy relating to financial instruments and commodity contracts and details of forward contracts and options held by us are set out in Notes 2 and 14 to our consolidated financial statements. For a further discussion of the impact of metal prices and currency exchange rates on our business, see "Risk Factors".

Credit Risk

        Essentially all our sales are to CMM. CMM's financial results are proportionately consolidated into our financial statements. All of our accounts receivable from metal sales are with CMM. CMM provides credit to its customers in the normal course of its operations. It carries out, on a continuing basis, credit checks on its customers and maintains provisions for contingent credit losses. CMM mitigates its credit risk by carrying out credit evaluations on its customers, by making a significant portion of its sales on a cash basis and by maintaining insurance on its accounts receivable.

        We are exposed to credit risk in the event of non-performance by counterparties in connection with our derivative contracts. We do not obtain collateral or other security to support financial instruments subject to credit risk but mitigate this risk by dealing only with financially sound counterparties and, accordingly, we do not anticipate loss for non-performance.

Operational Risk

        The business of metal mining and processing is generally subject to certain types of risks and hazards, industrial accidents such as cave-ins, rock bursts, rock falls and flooding, unusual or unexpected rock formations, vessel or other structural failure, changes in the regulatory environment, equipment failures and metal losses. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage, delays in mining or processing (including partial or complete shutdowns), monetary losses and possible legal liability. As a result we could be required to incur significant costs that could have a material adverse effect on our financial performance, liquidity and results of operations.

        Our reserves are estimates and there can be no assurance that anticipated tonnage and grade can be achieved. To maintain or grow production levels over the long term we must continually replace mineral reserves depleted by production by upgrading mineral resources to reserves, expanding known orebodies or locating new ones. Success in mineral exploration is highly uncertain and there is a risk that future depletion of mineral reserves, through normal mining operations, will not be adequately replaced.

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Environmental Risk

        Our activities are subject to extensive federal and local laws and regulations governing environmental protection and employee health and safety. We are required to obtain governmental permits and to comply with applicable decommissioning and reclamation rules. Although we make provision for reclamation costs, there can be no assurance that these provisions will be adequate to discharge the obligations associated with these regulations. Failure to comply with applicable environmental and health and safety laws can result in injunctions, damages or revocation of permits and imposition of penalties. There can be no assurance that we have been or will be at all times in complete compliance with such laws and regulations or that the costs of complying will not have a material adverse effect on our financial performance, liquidity and results of operations.

Critical Accounting Estimates

        The preparation of our financial statements in accordance with Canadian GAAP requires our management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate the estimates periodically, including those relating to ore reserve determinations, asset impairment, in-process inventory quantities, future income tax valuation reserves, asset retirement obligations, pension obligations and other employee future benefits. Actual results could differ from these estimates by material amounts.

Ore Reserves

        Ore reserves are estimated to determine future recoverable mine production based on assessment of geological, engineering and metallurgical analyses, estimates of future production costs, capital costs and reclamation costs as well as metal prices. The costs of mineral properties and mine development are capitalized and amortized by the unit-of-production method based on related proven and probable ore reserves.

Impairment

        The carrying value of our operating mines and plant and equipment is periodically reviewed for impairment when events or changes in circumstances indicate that the carrying amounts of related assets or groups of assets may not be recoverable. If total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is measured and recorded to write down the asset to its fair value. During 2003 we determined that the carrying value of our property, plant and equipment and unamortized mine development expenditures did not reflect the fair value of those assets based on future potential earnings and costs. The carrying values of these items were written down by a total of $269 million based on the discounted cash flows forecast to be generated by our assets.

In-Process Inventories

        In-process concentrates and metal inventory quantities comprise the majority of our inventories by value, and represent materials that are in the process of being converted into saleable product. Measurement of in-process inventories is based on assays of material received at our metallurgical plants and estimates of recoveries in the production processes. Realizable value of in-process inventories is estimated at financial statement dates and inventories are carried at the lower of cost and net realizable value.

Future Tax Assets and Liabilities

        We use the liability method of tax allocation for accounting for income taxes. Under the liability method, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities. Future tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the future tax assets will not be realized. We evaluate the carrying value of our future tax assets periodically by assessing our valuation allowance and by adjusting the amount of such valuation allowance, if necessary. The factors used to assess the likelihood of realization are forecasts of future taxable income and available tax planning strategies that could be implemented to realize future tax assets.

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Asset Retirement Obligations

        Asset retirement obligations are estimated based on environmental plans, in compliance with current environmental and regulatory requirements. Decommissioning costs are estimated and provided for, along with an identical decommissioning asset, when a new mine or plant is placed into commercial production. The decommissioning asset is amortized on a straight-line basis over the life of the mine or plant. Restoration costs are estimated and accrued over the life of each operating mine. The accrued amounts are increased by an annual interest component such that at the end of the asset life the provision is equal to the balance estimated to be paid at that date.

        In view of the uncertainties concerning these future obligations, the ultimate timing and cost of reclamation and mine closure may differ materially from our estimates.

Pensions and Other Employee Future Benefits

        Our on-going health care benefit plans comprise the majority of post-retirement obligations. The obligations relating to these plans, together with pension plans maintained by us, are estimated based on actuarial determinations, which incorporate assumptions using management's best estimates of factors including plan performance, salary escalation, retirement dates of employees and drug cost escalation rates.

Changes in Accounting Policies

Financial Instruments and Commodity Contracts

        Effective January 1, 2004, the CICA issued Accounting Guideline 13 ("AcG-13") "Hedging Relationships", to clarify circumstances in which hedge accounting is appropriate. In addition, the CICA simultaneously amended EIC 128, "Accounting for Trading, Speculative or Non Trading Derivative Financial Instruments" to require that all derivative instruments that do not qualify as a hedge under AcG-13, or are not designated as a hedge, be recorded in the balance sheet as either an asset or a liability with the changes in fair value recognized in earnings.

        As a result of this change in accounting policy, our earnings for the nine months ended September 30, 2004, increased by $4.1 million. Total assets increased by $13.7 million and total liabilities increased by $9.6 million as at September 30, 2004 as a result of this new accounting policy. Cash flow was not affected by this change. In accordance with the transitional provisions of AcG-13 and EIC-128, this new guideline has been applied prospectively whereby prior periods have not been restated.

        Further details on this change in accounting policy are set out in Note 2 to the financial statements.

        Further details on recent accounting pronouncements under U.S. GAAP are set out in Note 26 to the financial statements.

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QuickLinks

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Results of Operations
Cash Flows, Liquidity and Capital Resources
Contractual Obligations
Off-Balance Sheet Arrangements
Risk Profile
Critical Accounting Estimates
Changes in Accounting Policies

EX-4.3

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Exhibit 4.3

Consolidated Financial Statements
(In Canadian dollars)

HUDBAY MINERALS INC.
(FORMERLY ONTZINC CORPORATION)

Years ended December 31, 2004, 2003 and 2002

AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the balance sheets of HudBay Minerals Inc. (formerly ONTZINC Corporation) as at December 31, 2004 and 2003 and the statements of operations and deficit and cash flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003, the results of its operations and cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles.

/s/ KPMG LLP
Chartered Accountants

Toronto, Canada

March 30, 2005

HUDBAY MINERALS INC.
(FORMERLY ONTZINC CORPORATION)

CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)

December 31, 2004 and 2003

		2004		2003
				(Restated — note 2)
Assets
Current assets:
	Cash and cash equivalents	$	64,553	$	2,114
	Accounts receivable, net of allowance for doubtful accounts of nil (2003 — nil)		73,210		89
	Debentures subscription receivable (note 10(a))		—		2,000
	Inventories (note 4)		100,282		—
	Prepaid expenses and other		3,496		554
	Current portion of fair value of derivatives (note 17)		3,418		—
	Future income taxes (note 16)		12,900		—
			257,859		4,757
Investments (note 5)			463		—
Property, plant and equipment (note 6)			358,662		5,351
Deferred financing costs (notes 10(a) and (c))			9,600		169
Intangible assets (note 7)			552		—
Environmental deposits (note 8)			1,789		1,588
Restricted cash (note 20(c)(v))			13,000		—
Fair value of derivatives (note 17)			772		—
		$	642,697	$	11,865

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			2004			2003
						(Restated — note 2)
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	64,491		$	533
	Accrued liabilities			26,548			492
	Interest payable on long-term debt			563			—
	Current portion of obligations under capital leases (note 9)			3,338			—
	Current portion of long-term debt (note 10)			2,000			—
	Current portion of pension obligation (note 11)			12,650			—
	Current portion of other employee future benefits (note 12)			2,012			—
	Current portion of fair value of derivatives (note 17)			178			—
				111,780			1,025
Obligations under capital leases (note 9)				11,719			—
Long-term debt (note 10)				223,529			1,039
Pension obligation (note 11)				57,437			—
Other employee future benefits (note 12)				57,929			—
Asset retirement obligations (note 13)				27,120			769
Other non-current liabilities				417			—
Shareholders' equity:
	Share capital:
		Common shares (note 14(a))		120,138			21,379
		Share subscription receivable		—			(250	)
		Shares to be issued		—			47
	Warrants (note 14(b))			35,850			4,433
	Warrants to be issued			—			50
	Contributed surplus (note 14(c))			3,288			2,096
	Equity component of convertible debentures (note 10(a))			—			962
	Cumulative translation adjustment			(24	)		—
	Deficit			(6,486	)		(19,685	)
				152,766			9,032
Contingencies (notes 13 and 15)
Commitments (notes 17 and 20)
Subsequent events (note 23)
			$	642,697		$	11,865

See accompanying notes to consolidated financial statements.

On behalf of the Board:

"Allen J. Palmiere"
"Peter R. Jones" Director
Director

2

HUDBAY MINERALS INC.
(FORMERLY ONTZINC CORPORATION)

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(In thousands of Canadian dollars, except share and per share amounts)

Years ended December 31, 2004, 2003 and 2002

			2004			2003			2002
						(Restated — note 2)
Sales			$	13,327		$	—		$	—
Expenses:
	Operating			14,081			1,501			148
	General and administrative			3,934			2,390			564
	Stock option compensation			1,193			1,463			—
	Depreciation and amortization			1,443			5			2
	Accretion			138			34			10
	Exploration			1,734			277			487
				22,523			5,670			1,211
Operating loss				(9,196	)		(5,670	)		(1,211	)
Other income				103			8			2
Gain on derivative instruments				78			—			—
Write-off of deferred charges				(620	)		—			—
Premium on debenture prepayment (note 10(a))				(761	)		—			—
Foreign exchange gain (loss)				1,562			207			(4	)
Interest expense				(1,559	)		—			—
Loss before income taxes				(10,393	)		(5,455	)		(1,213	)
Income tax recovery (note 16)				473			—			—
Loss for the year				(9,920	)		(5,455	)		(1,213	)
Deficit, beginning of year:
	As previously stated			(19,052	)		(13,908	)		(12,958	)
	Changes in accounting policies (note 2):
		Asset retirement obligations		(43	)		(10	)		—
		Exploration costs		(590	)		(312	)		(59	)
	As restated			(19,685	)		(14,230	)		(13,017	)
Realization of equity component of debenture (note 10(a))				1,140			—			—
Reduction of stated capital (note 14(e))				21,979			—			—
Deficit, end of year			$	(6,486	)	$	(19,685	)	$	(14,230	)
Basic and diluted loss per share			$	(1.12	)	$	(1.45	)	$	(0.53	)
Basic and diluted weighted average number of common shares outstanding				8,894,235			3,769,526			2,282,518

See accompanying notes to consolidated financial statements.

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HUDBAY MINERALS INC.
(FORMERLY ONTZINC CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)

Years ended December 31, 2004, 2003 and 2002

			2004			2003			2002
						(Restated — note 2)
Cash provided by (used in):
Operating activities:
	Loss for the year		$	(9,920	)	$	(5,455	)	$	(1,213	)
	Items not affecting cash:
		Depreciation and amortization		1,227			5			2
		Amortization of deferred financing costs		216			—			—
		Provision for bad debts		52			711			—
		Accretion expense on reclamation liabilities		73			34			10
		Accretion of debt component of convertible debentures		638			—			—
		Stock option compensation		1,193			1,463			—
		Loss (gain) on sale of assets and settlement of liabilities		761			(90	)		(10	)
		Unrealized foreign exchange gain		(2,980	)		—			—
		Unrealized portion of change in fair value of derivative		(78	)		—			—
		Future income taxes		(397	)		—			—
	Other			(286	)		—			—
	Change in non-cash working capital (note 21)			2,273			(121	)		(4	)
				(7,228	)		(3,453	)		(1,215	)
Financing activities:
	Decrease in loans payable			—			(5	)		(196	)
	Issuance of common shares net of costs			139,484			8,628			—
	Proceeds of exercise of stock options			64			—			—
	Proceeds on exercise of warrants			117			9			—
	Decrease in debenture subscription receivable			2,000			—			—
	Issuance of convertible debenture			600			—			—
	Repayment of convertible debenture			(2,860	)		—			—
	Issuance of Senior Secured Notes (note 10(c))			214,112			—			—
	Advance from Hudson Bay Mining and Smelting Co., Ltd. prior to acquisition			540			—			—
	Deferred financing cost			(9,600	)		(165	)		(8	)
	Repayments of obligations under capital leases			(17	)		—			—
				344,440			8,467			(204	)
Investing activities:
	Proceeds received from (additions to) property, plant and equipment			(5,180	)		(1,507	)		1,186
	Additions to environmental deposits			(294	)		(1,588	)		—
	Cash acquired with property acquisitions			—			—			409
	Acquisition of Hudson Bay Mining and Smelting Co., Ltd., net of cash acquired (note 3)			(255,610	)		—			—
	Increase in restricted cash			(13,000	)		—			—
				(274,084	)		(3,095	)		1,595
Foreign exchange loss on cash held in foreign currency				(689	)		—			—
Increase in cash and cash equivalents				62,439			1,919			176
Cash and cash equivalents, beginning of year				2,114			195			19
Cash and cash equivalents, end of year			$	64,553		$	2,114		$	195

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HUDBAY MINERALS INC.
(FORMERLY ONTZINC CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands of Canadian dollars)

Years ended December 31, 2004, 2003 and 2002

		2004		2003		2002
Supplementary cash flow information:
	Interest paid	$	309	$	—	$	—
Supplemental disclosure of non-cash financing and investing activities:
	Issuance of convertible debentures		—		2,000		—
	Share subscription receivable		—		250		—
	Shares issued in settlement of amounts due to companies related by common directors		—		363		—
	Shares issued in settlement of other indebtedness		40		35		—
	Shares and warrants issued in connection with the acquisition of Hudson Bay Mining and Smelting Co., Ltd.		13,000		—		—

See accompanying notes to consolidated financial statements.

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HUDBAY MINERALS INC.
(FORMERLY ONTZINC CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Canadian dollars, except share and per share data)

Years ended December 31, 2004, 2003 and 2002

HudBay Minerals Inc. (the "Company") changed its name from ONTZINC Corporation by way of Articles of Amendment dated December 21, 2004. The Company is incorporated under the Ontario Business Corporations Act. Prior to December 21, 2004, the Company was engaged in the business of evaluation, acquisition and exploration of mineral properties. Substantially all of the efforts of the Company were devoted to these business activities. Prior to that date, the Company had not earned significant revenue and was considered to be in the development stage.

On December 21, 2004, the Company completed a public offering of common shares and warrants raising gross proceeds of $143,813 and also completed an offering of U.S.$175,000 Senior Secured Notes. The Company then utilized the proceeds from these financings to complete the acquisition from Anglo American International, S.A. ("Anglo American") of all of the outstanding shares of 152640 Canada Inc., which held all of the outstanding shares of Hudson Bay Mining and Smelting Co., Ltd. ("HBMS"). As a result, the Company's primary business activity is now base metals production with facilities consisting of mines, mills and a metallurgical complex for the extraction of copper and zinc in the Provinces of Manitoba and Saskatchewan.

Also on December 21, 2004, the Company completed a 30 for 1 common share consolidation which has been retroactively reflected as if the common share consolidation had occurred on January 1, 2002. All references to common shares within these consolidated financial statements reflect the consolidation.

1.

SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of presentation:

These consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP") and are presented in Canadian dollars. These principles conform in all material respects with generally accepted accounting principles in the United States ("U.S. GAAP"), except as described in note 22.

These consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated on consolidation.

The financial position of HBMS as at December 31, 2004 and its results of operations and cash flows from the date of acquisition on December 21, 2004 to December 31, 2004 have been included in these consolidated financial statements. The proportionate share of the assets and liabilities of any joint ventures in which HBMS shares joint control has also been included. Summarized financial information in respect of HBMS is presented in note 10(c).

(b)

Use of estimates:

The preparation of financial statements requires the use of management estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes. Significant areas where management's judgment is applied include ore reserve determinations, in-process inventory quantities, plant and equipment estimated economic lives and salvage values, contingent liabilities, future income tax valuation reserves, asset retirement obligation, pension obligations and other employee future benefits. Actual results could differ from those estimates by material amounts.

(c)

Translation of foreign currencies:

Monetary assets and liabilities are translated at year-end exchange rates and other assets and liabilities are translated at historical rates. Gains and losses on translation of monetary assets and monetary liabilities are charged to earnings.

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The assets and liabilities of self-sustaining foreign operations are translated at year-end exchange rates, and revenue and expenses are translated at monthly average exchange rates. Differences arising from these foreign currency translations are recorded in shareholders' equity as a cumulative translation adjustment until they are realized by a reduction in the investment.

(d)

Revenue recognition:

Prior to December 21, 2004, the Company had not earned significant revenue and was considered to be in the development stage.

Sales are recognized and revenue is recorded at market prices when title and the rights and obligations of ownership pass to the customer, collection is reasonably assured and the price is reasonably determinable. A number of the Company's products are sold under pricing arrangements where final prices are determined by quoted market prices in a period subsequent to the date of sale. Subsequent variations in the final determination of metal weights, assay and price are recognized as revenue adjustments as they occur until the price is finalized.

(e)

Cash and cash equivalents:

Cash and short-term investments with a remaining maturity of three months or less at the date of acquisition are classified as cash and cash equivalents.

(f)

Inventories:

Inventories consist substantially of in-process inventory (concentrates and metals), metal products and supplies. Concentrates, metals and all other saleable products are valued at the lower of cost and estimated net realizable value. Cost includes material, labour and amortization of all property, plant and equipment directly involved with the mining and production process. In-process inventories represent materials that are currently in the process of being converted to a saleable product. Conversion processes vary depending on the nature of the concentrate or metal. In-process inventory is measured based on assays of the material fed to the processing plants and the projected recoveries of the respective plants and is valued at cost. Cost of finished metal inventory represent the average cost of the in-process inventory incurred prior to the refining and casting process, plus applicable refining and casting costs.

Supplies are valued at the lower of cost, replacement and value in use. Cost is determined on an average basis.

(g)

Investments:

Investments include marketable securities recorded at the lower of cost and market.

(h)

Property, plant and equipment:



(i)

Mineral properties:

Mineral exploration costs are expensed as incurred. When management's evaluation indicates that the property is capable of economical commercial production, as a result of establishing proven and probable resources, future costs are capitalized as mine development expenditures.

(ii)

Mine development expenditures:

Exploration and development costs for properties deemed capable of economical commercial production are capitalized and amortized using the unit-of-production method. The unit-of-production amortization is based on the related proven and probable tons of ore reserves

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and associated future development costs. The cost of underground development to provide access to a reserve at an operating mine is capitalized where that portion of the development is necessary to access more than one workplace or stope. Capital development includes shafts, ramps, track haulage drifts, ancillary drifts, sumps, electrical substations, refuge stations, ventilation raises, permanent manways, and ore and waste pass raises.

Ongoing repairs, maintenance and development expenditures are charged to operations as incurred. These include ore stope access drifts, footwall and hangingwall drifts in stopes, drawpoints, drill drifts, sublevels, slots, drill raises, stope manway access raises and definition diamond drilling.

No amortization is provided in respect of mine development expenditures until commencement of economical commercial production. Commercial production occurs when an asset or property is substantially complete and ready for its intended use. Any production revenue prior to commercial production, net of related costs, is offset against the development costs.

(iii)

Plant and equipment:

Expenditures for plant and equipment additions, major replacements and improvements are capitalized at cost, net of applied investment tax credits. Plant and equipment, including assets under capital lease, are depreciated on either unit-of-production or straight-line basis. The unit-of-production method is based on proven and probable tons of ore reserves. The assets using the straight-line method are depreciated over the estimated useful lives of the assets, which range from one to 15 years. The Company also includes future estimated residual values in its determination of depreciation.

(iv)

Capitalized interest:

Interest on borrowings related to the financing of major capital projects under construction is capitalized during the construction phase as part of the cost of the project.

(v)

Impairment of long-lived assets:

The Company reviews and evaluates the carrying value of its operating mines and development properties annually for impairment, or when events or changes in circumstances indicate that the carrying amounts of related assets or groups of assets may not be recoverable. If the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is measured and assets are written down to fair value, which is normally the discounted value of future cash flows. Future cash flows are estimated based on estimated future recoverable mine production, expected sales prices (considering current and historical prices, price trends and related factors), production levels, cash costs of production, capital and reclamation costs, all based on detailed engineering life-of-mine plans. Future recoverable mine production is determined from proven and probable reserves and measured, indicated and inferred mineral resources after taking into account estimated dilution and recoveries during mining, and estimated losses during ore processing and treatment. Estimates of recoverable production from measured, indicated and inferred mineral resources are considered economically mineable and are based on management's confidence in converting such resources to proven and probable reserves. All long-lived assets are considered together for purposes of estimating future cash flows. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. It is possible that changes in estimates could occur which may affect the expected recoverability of the Company's investments in mineral properties.

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(i)

Pension and other employee future benefits:

The Company has non-contributory and contributory defined benefit pension plans for its employees. The benefits are based on years of service and final average salary for the salary plan, and flat dollar amount combined with years of service for the hourly. The Company provides long-term disability income, health benefits and other post-employment benefits to hourly employees and long-term disability health benefits to salaried employees. The Company also provides ongoing health care benefits to certain pensioners known as "Special Category Members."

The Company accrues its obligations under the defined benefit plans as the employees render the services necessary to earn the pension and other retirement benefits. The actuarial determination of the accrued benefit obligations for pensions and other retirement benefits uses the projected benefit method prorated on service (which incorporates management's best estimate of future salary levels, other cost escalation, retirement ages of employees and other actuarial factors). The measurement date of the plan assets and accrued benefit obligation coincides with the Company's fiscal year. The most recent actuarial valuation of the pension plans for funding purposes was as of December 31, 2003, and the next required valuation required for funding purposes will be performed at December 31, 2004.

Actuarial gains (losses) on plan assets arise from the difference between the actual return on plan assets for a period and the expected return on plan assets for that period. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. Actuarial gains (losses) on the accrued benefit obligation arise from differences between actual and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit obligation. The average remaining service period of the active employees covered by the pension plan is 12 years. The average remaining service period of the active employees covered by the other retirement benefits plan is 13.7 years.

The Company also has defined contribution plans providing pension benefits for its salaried employees. The cost of the defined contribution plans is recognized based on the contributions required to be made during each period.

(j)

Financial instruments and commodity contracts:

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, current portion of long-term debt and current portion of obligations under capital leases approximate their fair value due to their short-term nature. The fair value of long-term debt has been determined using discounted cash flows at current market rates. Derivative financial instruments have been valued at current fair values using quoted market prices or accepted valuation methodologies.

The Company employs derivative financial instruments, including forwards and option contracts, to manage risk originating from actual exposures to commodity price risk, foreign exchange risk and interest rate risk.

In management's opinion, the contracts continue to be effective in mitigating the Company's exposure to commodity and foreign exchange risk, the Company's management elected not to designate some of its price risk management activities as accounting hedges under The Canadian Institute of Chartered Accountants' ("CICA") Accounting Guideline 13 ("AcG-13"), Hedging Relationships, and, accordingly, account for some of these derivative instruments using the fair value accounting method. Management may evaluate, from time to time, its hedge accounting policies and practices and may elect to designate and document contracts as hedges in the future.

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The estimated fair value of all derivative financial instruments is based on quoted market prices or, in their absence, third party market indications and forecasts. Unrealized gains or losses and realized gains or losses are recorded as a separate element of earnings.

(k)

Stock-based compensation plans:

The Company's stock-based compensation plan is described in note 14(c). The Company accounts for all stock-based payments using the fair value-based method. Under this method, compensation cost attributable to options granted is measured at fair value at the grant date. Any consideration paid on exercise of stock options or purchase of stock is credited to share capital.

Prior to January 1, 2003, the Company did not recognize any compensation cost when options were issued. Any consideration paid on the exercise of options was recorded as share capital. All stock options issued in 2002 were related to the acquisition of the Gay's River property and have been capitalized as such.

(l)

Income taxes:

The Company accounts for income and mining taxes under the asset and liability method. Under this method of tax allocation, future income and mining tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax basis (temporary differences). Future income tax assets and liabilities are measured using the enacted tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in income in the year in which the change is enacted or substantively enacted. The amount of future income tax assets recognized is limited to the amount that is more likely than not to be realized.

(m)

Flow-through shares:

The Company financed a portion of its exploration and development activities through the issue of flow-through shares. Under the terms of these share issues, the tax attributes of the related expenditures are renounced to subscribers. Share capital is reduced and future income tax liabilities are increased by the estimated income tax benefits renounced by the Company to the subscribers.

(n)

Loss per share:

Basic loss per share is computed by dividing loss for the year by the weighted average number of common shares outstanding for the year. Shares held in escrow are included in the weighted average number of common shares when they are released from escrow. Diluted loss per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued using the treasury stock method.

2.

CHANGES IN ACCOUNTING POLICIES

(a)

Asset retirement obligations:

Effective January 1, 2004, the Company adopted the recommendations under Section 3110, Asset Retirement Obligations ("Section 3110"), of the CICA Handbook on a retroactive basis. Section 3110 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation of a long-lived asset.

These recommendations require that the fair value of a liability for an asset retirement obligation be recorded in the period in which it is incurred. When the liability is initially recorded, the cost is

10

capitalized by increasing the carrying amount of the related long-lived asset. Upon settlement of the liability, a gain or loss is recorded. This differs from the prior practice that involved accruing for the estimated reclamation and closure liability through charges to the consolidated statements of operations over the life of the mine. The Company has recorded asset retirement obligations primarily associated with decommissioning and restoration costs. As required under the standard, the Company will make periodic assessments as to the reasonableness of its asset retirement obligation estimates and revise those estimates accordingly. The respective asset and liability balances will be adjusted, which will correspondingly increase or decrease the amounts expensed in future periods.

The long-term asset retirement obligation is based on environmental plans, in compliance with the current environmental and regulatory requirements. Accretion expense is charged to the consolidated statements of operations and deficit based on application of an interest component to the existing liability.

The prior period financial statements have been restated retroactively for this change in accounting policy. The adoption of this standard had no impact on the opening balance sheet at January 1, 2002. The effect on the loss in 2003 was an increase of $34 ($0.01 per share). The effect on the loss in 2002 was an increase of $10 (nil per share).

(b)

Exploration costs:

The Company changed its accounting policy for exploration expenditures effective January 1, 2004. The change in the accounting policy is to only capitalize those exploration costs when management's evaluation indicates that the property is capable of economical commercial production. This policy change has been applied retroactively with restatement of prior periods. This policy change had the following impact on the opening balance sheet at January 1, 2002: decreased property, plant and equipment by $59 and increased deficit by $59. The effect on the loss in 2003 was an increase of $277 ($0.07 per share). The effect on the loss in 2002 was an increase of $254 ($0.11 per share).

3.

ACQUISITION OF HUDSON BAY MINING AND SMELTING CO., LTD.

On December 21, 2004, the Company acquired all of the outstanding common shares of HBMS for total purchase consideration of $315,790, plus $4,324 of corporate transaction costs. The total purchase consideration of $315,790 was satisfied by cash of $302,790 and by the issuance to Anglo of 5,777,777 common shares and 86,666,667 share purchase warrants, where every 30 share purchase warrants are exercisable for one common share at an exercise price of $3.15 per common share. The value of the common share consideration of $11,700 has been determined based on the average of the closing price of the Company's common shares for the two days before and after the date of announcement of the transaction on October 7, 2004. The value of the warrant consideration of $1,300 has been based on a similar method to the valuation of the warrants issued in the public offering as described in note 14(b). The acquisition has been accounted for by the purchase method and the result of operations and cash flows have been included within these consolidated financial statements from December 21, 2004.

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The following table summarizes the preliminary allocation of the purchase consideration based on management's current best estimate of the fair value of the assets and liabilities acquired on the date of acquisition:

Current assets (including cash of $51,504)	$	229,601
Investments (note 5)		463
Property, plant and equipment (note 6)		349,358
Intangible assets (note 7)		552
Current liabilities		(72,665	)
Debt obligations (note 10)		(15,179	)
Pensions and post-retirement benefit obligations (notes 11 and 12)		(130,353	)
Asset retirement obligations (note 13)		(26,213	)
Obligations under capital leases (note 9)		(15,074	)
Other non-current liabilities		(376	)
	$	320,114

Management expects to obtain additional information in 2005, including independent valuations, that may require additional adjustments to amounts shown above for property, plant and equipment, intangible assets and asset retirement obligations, and these potential adjustments may be material.

4.

INVENTORIES

	2004		2003
Work in process	$	72,061	$	—
Finished goods		14,639		—
Material and supplies		13,582		—
	$	100,282	$	—

5.

INVESTMENTS

	2004		2003
Marketable securities, which approximates market value	$	463	$	—

6.

PROPERTY, PLANT AND EQUIPMENT

2004	Cost		Accumulated depreciation and amortization		Net book value
Property, plant and equipment	$	203,705	$	418	$	203,287
Mine development		156,189		814		155,375
	$	359,894	$	1,232	$	358,662

2003	Cost		Accumulated depreciation and amortization		Net book value
Property, plant and equipment	$	5,358	$	7	$	5,351

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Included in the property, plant and equipment are the following:

		2004		2003
Property, plant and equipment under construction or development		$	6,753	$	—
Equipment under capital leases:
	Cost	$	15,521	$	—
	Less accumulated depreciation		39		—
		$	15,482	$	—
Amortization expense related to equipment under capital leases		$	39	$	—

7.

INTANGIBLE ASSETS

Intangible assets include zinc process licensing agreements and are amortized over the estimated life of the zinc plant facility, being 13 years.

	Cost		Accumulated depreciation and amortization		Net book value
Zinc process licencing agreements	$	552	$	—	$	552

8.

ENVIRONMENTAL DEPOSITS

The Company has deposited various amounts with government agencies in the Province of Nova Scotia, Canada and in New York State, United States, in connection with the acquisitions of the Gay's River and Balmat mine properties.

9.

OBLIGATIONS UNDER CAPITAL LEASES

The Company has entered into capital lease obligations for equipment.

	2004		2003
Lease obligations	$	15,057	$	—
Less current portion of obligations		3,338		—
	$	11,719	$	—

13

The following represents the minimum lease payments for equipment used in operations for the next five years:

2005	$	4,076
2006		4,053
2007		4,046
2008		3,357
2009		1,335
		16,867
Less imputed interest		1,810
	$	15,057

The interest rate averages 5.4% and is fixed for the term of the leases that expire in 2007, 2008 and 2009.

10.

LONG-TERM DEBT

	2004		2003
Convertible debentures (a)	$	—	$	1,039
Province of Manitoba (b)		15,179		—
Senior Secured Notes (c)		210,350		—
		225,529		1,039
Less current portion of long-term debt		2,000		—
	$	223,529	$	1,039

(a)

Convertible debentures:

On December 19, 2003, the Company completed a private placement of $2,000 principal amount of secured convertible debentures. The proceeds were received in January 2004. In January 2004, an additional $600 of secured convertible debentures were issued. The debentures were to mature on December 19, 2005 and bore interest at a rate of 12% per annum, payable semi-annually. Proceeds of the placement were received in January 2004. Commissions and legal costs of $216 (2003 — $165) were incurred on the placement of the debentures and were recorded as deferred financing costs. Up to December 23, 2004, the deferred financing costs were being amortized over the life of the debenture, being two years.

The debentures were repaid in the amount of $2,860 on December 23, 2004. After application of a Black-Scholes model to value the holder conversion option at that date, it was determined that $2,743 of the repayment amount related to the extinguishment of the liability. At December 23, 2004, the balance sheet liability in respect of the debentures, representing the fair value at date of issuance plus accretion to date of repayment, was $1,982. The difference of $761 has been recorded as debt settlement expense.

At December 23, 2004, the equity component of the debentures, representing the fair value of the holder conversion option at date of issuance, was $1,250. The difference between this and the fair value of the holder conversion option, or $110 as at December 23, 2004, has been credited to retained earnings and the carrying value of the equity component has been eliminated.

Interest expense amounted to $941 for 2004 (2003 — nil).

14

The unamortized amount of deferred financing costs relating to the debentures at December 23, 2004 of $108 has been written off as a component of financing costs for the year.

(b)

Province of Manitoba:

The interest-free loan from the Province of Manitoba is secured by an irrevocable standby letter of credit issued by a Canadian chartered bank and is due in instalments of $2 million on June 14, 2005, $4 million on June 14, 2006 and 2007 and $7.5 million on June 14, 2008. As at December 21, the fair value of the loan was determined using the net present value of the interest-free component of the loan, assuming a discount rate of 6%.

(c)

Senior Secured Notes:

On December 21, 2004, a subsidiary of the Company issued U.S. $175,000 Senior Secured Notes ("Notes") bearing interest at 9.625% per annum with interest payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2005. The Notes will mature on January 15, 2012. Subsequent to the issuance of the Notes, the subsidiary which issued the Notes amalgamated with HBMS. Financing costs amounting to $9,600 were incurred in connection with the issuance of the Notes and will be amortized into income on a straight-line basis over the term of the Notes.

HBMS may redeem up to 35% of the aggregate principal amount of the Notes at any time prior to January 15, 2008 with the net proceeds from certain equity offerings at a price equal to 109.625% of the principal amount of the Notes plus accrued and unpaid interest. After January 15, 2009, HBMS may redeem some or all of the Notes at the redemption prices of 104.813% in 2009, 102.406% in 2010 and 100% thereafter. In addition, if HBMS undergoes a change of control or if it sells certain of its assets, it may be required to offer to purchase the Notes at specified redemption prices. HBMS also has the right to redeem all of the Notes if at any time Canadian law changes to require it to withhold taxes from payments on the Notes.

The Notes are HBMS's senior obligations and will rank equally in right of payment with all of its existing and future senior indebtedness and rank senior to all of its existing and future subordinated indebtedness. The Notes are guaranteed on a senior basis by the Company's subsidiary, Hudson Bay Exploration and Development Company Limited, and will be guaranteed by any future domestic restricted subsidiaries. Subsequent to December 31, 2004, the Notes are also guaranteed by the Company. The Company's guarantee of the Notes will terminate on the date upon which it owns less than a majority of the voting shares of HBMS. The Notes and the subsidiary guarantee are secured by first priority liens on HBMS's real property, mineral claims and leases in the Provinces of Manitoba and Saskatchewan and second priority liens on HBMS's and the subsidiary guarantor's accounts receivable and inventories, which may be used to secure, on a first-priority basis, HBMS's obligations under any future credit facility.

The Company's interest expense on the Notes and weighted average interest rate is as follows:

Interest expense	$	608
Weighted average interest rate		9.625%

15

Summarized financial information for HBMS as at December 31, 2004 and for the period ended December 31, 2004 is as follows:

Assets
Current assets	$	239,846
Due from Hudbay Minerals Inc.		210,350
Non-current assets		375,664
	$	825,860
Liabilities and Shareholder's Equity
Current liabilities	$	93,046
Due to Hudbay Minerals Inc.		22,059
Other long-term liabilities		168,444
Debt obligations		223,529
Shareholder's equity		318,782
	$	825,860
Sales	$	13,327
Operating and other expenses		(14,239	)
Other income		57
Gain on derivative instruments		78
Interest expense		(608	)
Income taxes		76
Loss for the ten day period ended December 31, 2004	$	1,309

11.

PENSION OBLIGATION

Prior to December 21, 2004, the Company did not sponsor any pension plans. HBMS maintains several non-contributory and contributory defined benefit pension plans for its employees.

The Company uses a December 31 measurement date for all of its plans. For the Company's significant plans, the most recent actuarial valuations filed for funding purposes were performed as at December 31, 2003. For these plans, the next actuarial valuation required for funding purposes will be performed at December 31, 2004.

16

Information about the Company's non-contributory and contributory defined benefit plan is as follows:

Obligations and funded status:
	Change in pension obligation:
		Obligation, at December 21, 2004	$	217,432
		Service cost		607
		Interest cost		345
		Benefits paid		(572	)
	Obligation, at December 31, 2004			217,812
	Change in pension plan assets:
		Fair value of plan assets, at December 21, 2004		146,942
		Actual return on plan assets		283
		Employer contributions		1,072
		Benefits paid		(572	)
	Fair value of plan assets, at December 31, 2004			147,725
Pension obligation, at December 31, 2004			$	(70,087	)

As a result of the closure of the Ruttan mine, the Company plans to settle its obligations under the pension plans for the former employees of the Ruttan mine through the purchase of insurance contracts by which the insurer assumes all of the Company's risks and obligations under the plans. Finalization of the settlements will occur in the future.

Pension expense includes the following components:

Service cost	$	607
Interest cost		345
Expected return on plan assets		(283	)
		669
Defined contribution pension		5
	$	674

(a)

Additional information:

The weighted average assumptions used in the determination of the accrued benefit expense and obligations were as follows:

Discount rate	5.8%
Expected return on plan assets	7.0%
Rate of compensation increase	4.7%

The Company's pension cost is materially affected by the discount rate used to measure obligations, the level of plan assets available to fund those obligations and the expected long-term rate of return on plan assets.

17

The Company reviews the assumptions used to measure pension costs (including the discount rate) on an annual basis. Economic and market conditions at the measurement date impact these assumptions from year to year.

Establishing the expected future rate of return on pension assets is a judgmental matter. The Company considers the following factors in determining this assumption:

(i)

Duration of pension plan liabilities; and



(ii)

Types of investment classes in which the plan assets are invested and the expected compound return on those investment classes.



(b)

Plan assets:

The pension plan weighted average asset allocations, by asset category, are as follows:

Equity securities	59%
Debt securities	41%
	100%

The target asset allocation is as follows:

Equity securities	57%
Debt securities	43%
	100%

The Company's primary quantitative investment objective is to maximize the long-term real rate of return, subject to an acceptable degree of investment risk. Risk tolerance is established through consideration of several factors, including past performance, current market conditions and the funded status of the plan.

With the exception of fixed income investments, the plan assets are actively managed by investment managers, with the goal of attaining returns that are in excess of that which could be realized with passively managed investments. Although the actual composition of the invested funds will vary from the prescribed investment mix, the investment managers have a responsibility to bring items back to the appropriate mix.

(c)

Expected cash flows:

Expected employer contributions (or benefit payments in respect of the supplementary plan) and expected benefit payments for fiscal year ending December 31, 2005 amount to $12,650 and $9,031, respectively.

18

12.

OTHER EMPLOYEE FUTURE BENEFITS

Prior to December 21, 2004, the Company did not sponsor any post-employment benefit plans. HBMS sponsors several such plans and uses a December 31 measurement date. Information about the Company's post-retirement and other post-employment benefits is as follows:

Obligations and funded status:
	Change in other employee future benefits:
		Obligation, at December 21, 2004	$	59,870
		Service cost		22
		Interest cost		104
		Benefits paid		(55	)
Obligation, at December 31, 2004			$	59,941

Other employee future benefits expense includes the following components:

Service cost	$	22
Interest cost		104
Other employee future benefit expense	$	126

(a)

Additional information:

The weighted average assumptions used in the determination of other employee future benefits expense and obligations are as follows:

Discount rate	6.0%
Weighted average health care trend rate	4.6%

The health care cost trend rate used in measuring other employee future benefits was assumed to begin at 9.2% in 2005, gradually declining to 4.6% by 2015 and remaining at those levels thereafter.

If the health care cost trend rate was increased by one percentage point, the accumulated post-retirement benefit obligation and the aggregate service and interest cost would have increased as follows:

Accumulated post-retirement benefit obligation	$	12,558
Aggregate of service and interest cost		38

If the health care cost trend rate was decreased by one percentage point, the accumulated post-retirement benefit obligation and the aggregate service and interest cost would have decreased as follows:

Accumulated post-retirement benefit obligation	$	9,749
Aggregate of service and interest cost		28

(b)

Expected cash flow:

Expected employer contributions and expected benefit payments for fiscal year ending December 31, 2005 amount to $2,012 and $2,012, respectively.

19

13.

ASSET RETIREMENT OBLIGATIONS

The following additional disclosure is provided concerning the Company's asset retirement obligation. The Company's asset retirement obligations relate to the final reclamation and closure of currently operating mines, mines under care and maintenance, and closed properties.

	2004		2003
Balance, beginning of year	$	769	$	248
Liability in respect of mineral property acquired		—		487
Liability assumed through acquisition of HBMS		26,213		—
Accretion expense		138		34
Balance, end of year	$	27,120	$	769

Total undiscounted future cash flows required to settle the decommissioning and restoration asset retirement obligations are estimated to be $53.9 million. A credit adjusted risk-free rate of 9.625% has been utilized to determine the obligation recorded in the consolidated balance sheets. Management anticipates that such obligations will substantially be settled at or near the closure of the mining and processing facilities. The current mine plan based on known reserves and resources extends to 2018.

In view of the uncertainties concerning environmental remediation, the ultimate cost of asset retirement obligations could differ materially from the estimated amounts provided. The estimate of the total liability for asset retirement obligation costs is subject to change based on amendments to laws and regulations and as new information concerning the Company's operations becomes available. Future changes, if any, to the estimated total liability as a result of amended requirements, laws, regulations and operating assumptions may be significant and would be recognized prospectively as a change in accounting estimate, when applicable. Environmental laws and regulations are continually evolving in all regions in which the Company operates. The Company is not able to determine the impact, if any, of environmental laws and regulations that may be enacted in the future on its results of operations or financial position due to the uncertainty surrounding the ultimate form that such future laws and regulations may take.

The Company is undertaking an independent review of its asset retirement obligations assumed through its acquisition of HBMS as described in note 3, with additional information to be made available during 2005. Should estimates change, the purchase price allocation would be changed at that time.

20

14.

SHARE CAPITAL

(a)

Common shares:

Authorized:

Unlimited common shares

Issued:

	2004					2003
	Common shares		Amount			Common shares	Amount
Balance, beginning of year	5,661,592		$	21,379		2,955,666	$	16,626
Issued for debt	5,334			40		112,423		398
Issued on private placements, net	2,382,466			7,817		2,581,837		9,666
Issued pursuant to public offering	69,694,778			156,813		—		—
Cancellation of repurchase shares	(340,000	)		(336	)	—		—
Exercise of warrants	28,030			160		11,666		52
Exercise of options	19,334			64		—		—
Value attributed to warrants issued	—			(29,465	)	—		(4,484	)
Tax effect of flow-through shares	—			(397	)	—		—
Share issue costs	—			(13,958	)	—		(879	)
Elimination of fractional shares	(906	)		—		—		—
Stated capital reduction	—			(21,979	)	—		—
Balance, end of year	77,450,628		$	120,138		5,661,592	$	21,379

On December 21, 2004, the Company completed an offering of 63,917,000 subscription receipts at a price of $2.25 per subscription receipt pursuant to a final prospectus dated December 14, 2004, for gross proceeds of $143,813. Net proceeds of the issuance were approximately $133,005. Each subscription receipt entitled the holder to receive one common share and 15 common share purchase warrants. Every 30 common share purchase warrants entitles the holder thereof to acquire one common share for a period of 5 years from the date of issuance, exercisable at a price of $3.15 per share. The gross proceeds of $2.25 per subscription receipt was allocated on the basis of $2.025 as to each common share and $0.225 as to each one-half of one share purchase warrant.

In connection with the offering, the agents for the offering were issued broker warrants to acquire 3,835,020 common shares at a price equal to 115% of the offering price of the subscription receipts, or $2.589 per warrant, for a period of 24 months to December 21, 2006.

Under the terms of the agreement for the acquisition of HBMS from Anglo American on December 21, 2004, the Company issued to Anglo American 5,777,778 common shares and 86,666,667 warrants for consideration of $13,000.

On December 21, 2004, the Company completed a 30 for 1 common share consolidation which has been retroactively reflected as if the share consolidation had occurred on January 1, 2002 and is reflected in the following disclosures. The warrants outstanding at the time of the share consolidation were not consolidated.

(i)

In addition, the Company completed the following private placements during 2004:



(a)

In September 2004, 1,105,666 units at a price of $1.50 per unit for gross proceeds of $1,726. Each unit consists of one common share and 15 common share purchase warrants. Each 30 common share purchase warrants entitles the holder thereof to acquire one common share for a period of two years from the date of issuance, exercisable at a price of $1.80 per share.

In addition, the broker was issued 3,452,000 broker warrants, with each 30 broker warrants exercisable at a price of $1.50 per share for a period of two years from the closing date and paid a

21

commission of $117. An over-allotment option was provided to the broker to purchase up to 15% of the number of broker units issued at closing at the issue price of $2.70 at any time prior to November 30, 2004. On November 30, 2004, the broker exercised its over-allotment option and purchased an additional 172,600 units at a price of $2.70 per unit. Upon exercise of the over-allotment option, the broker was issued an additional 517,800 broker warrants, with each 30 broker warrants exercisable at a price of $2.70 per unit. Each broker unit is comprised of one common share and 15 broker common share purchase warrants. Every 30 broker common share purchase warrants is exercisable for one common share at an exercise price of $3.60 for a period of two years from the date of issue.

The former Chairman and Chief Executive Officer of the Company and the former Corporate Secretary purchased 333,333 and 6,667 of these units, respectively. Subsequent to September 30, 2004, the Company and these officers agreed to unwind these transactions, so that the securities comprising the units have been returned to the Company and the Company has returned the purchase price paid for the units.

(b)

In June 2004, 1,036,920 units at a price of $5.40 per unit for gross proceeds of $5,599. Each unit consists of one common share and 15 common share purchase warrants. Every 30 warrants entitled the holder thereof to acquire one common share for a period of two years from the date of issuance, exercisable at a price of $6.00 per share. Certain former officers and directors of the Company purchased an aggregate of 795,986 of these units.



(ii)

The Company completed the following private placements during 2003:



(a)

In May 2003, 233,333 units at a price of $3.00 per unit for gross proceeds of $700. Each unit consists of one common share and 30 common share purchase warrants. Every 30 warrants can be exercised to purchase one common share for a price of $3.90 for a period of 24 months from the date of closing.



(b)

In June 2003, 164,355 units at a price of $3.00 per unit for gross proceeds of $493. Each unit consists of one common share and 30 common share purchase warrants. Every 30 warrants entitles the holder thereof to acquire one common share for a period of two years from the date of issuance, exercisable at a price of $3.90 per share.



(c)

In September 2003, 909,091 units at a price of $3.30 per unit for gross proceeds of $3,000. Each unit consists of one common share and 30 common share purchase warrants. Every 30 warrants entitled the holder thereof to acquire one common share for a period of two years from the date of issuance, exercisable at a price of $4.20 per share.



(d)

In October 2003, 1,125,613 units at a price of U.S. $3.00 per unit for gross proceeds of $4,273 (U.S. $3,377). Each unit consists of one common share and 30 common share purchase warrants, every 30 warrants entitling the holder to acquire one common share for a period of two years from the date of issuance exercisable at a price of U.S. $3.60 per share. Of the 1,125,613 units subscribed, 25,613 were issued to the subscriber after December 31, 2003. The related value of these units has been classified as shares to be issued and warrants to be issued.



(e)

In November 2003, 39,444 common shares at a price of U.S. $4.50 per share for gross proceeds of $230 (U.S. $178).



(f)

In December 2003, 135,613 units at a price of $7.50 per unit for gross proceeds of $1,017. Each unit consists of one flow-through common share and 15 share purchase warrants. Every 30 warrants entitles the holder to acquire one flow-through common share for a period of two years from the date of issuance exercisable at a price of $9.00 per share. In addition, 406,840 warrants valued at $55 and every 30 warrants exercisable at a price of $7.50 per share were issued to brokers and have been accounted for as issue costs.

The tax benefit to be renounced to the holders of the flow-through common shares was charged to capital stock when the renouncement was made in 2004.

22

In 2003, the Company settled $363 of related party debts through the issuance of 100,756 common shares and $35 of other amounts payable through the issuance of 11,667 units of the Company, each unit being one common share and 30 common share purchase warrants, every 30 warrants exercisable at a price of $3.90 per share for two years from the date of closing. In addition, the Company issued 250,000 warrants, every 30 warrants exercisable at a price of $3.00 per share for two years in settlement of a debt to a supplier.

(b)

Warrants:

	Number		Amount
Warrants outstanding, January 1, 2003	—		$	—
Issued on private placements	75,244,424			4,451
Exercised	(350,000	)		(18	)
Warrants outstanding, December 31, 2003	74,894,424			4,433
Issued on private placements	40,140,997			2,380
Issued pursuant to public offering	1,045,421,667			27,181
Issued to agents for public offering	115,050,600			2,078
Warrants repurchased	(5,100,000	)		(173	)
Exercised	(840,909	)		(43	)
Cancelled	(88,456	)		(6	)
Warrants outstanding, December 31, 2004	1,269,478,323		$	35,850

Warrants outstanding to acquire common shares (30 warrants required to acquire one common share) of the Company at December 31, 2004 are as follows:

Warrants outstanding	Exercise price		Expiry date
350,000	$	0.13	February 24, 2005
6,650,000		0.13	May 30, 2005
2,805,650		0.13	June 25, 2005
2,086,544		0.13	August 25, 2005
250,000		0.10	October 3, 2005
26,431,825		0.14	September 8 - 23, 2005
33,000,000		U.S. 0.12	October 9 - 21, 2005
768,400		U.S. 0.12	January 13, 2006
1,984,200		0.30	December 23 - 31, 2005
406,840		0.25	December 30, 2005
15,553,797		0.20	March 31, 2006
12,160,000		0.06	September 28, 2006
3,452,000		0.05	September 28, 2006
2,589,000		0.12	November 30, 2006
517,800		0.09	November 30, 2006
1,045,421,667		0.105	December 21, 2009
115,050,600		0.086	December 21, 2006
1,269,478,323

For purposes of valuation, the fair value of warrants issued prior to December 21, 2004 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield of 0%; expected volatility of 100% for the year ended December 31, 2003 and 125% for the year ended December 31, 2004; risk-free interest rate of 4.5%; and an expected life of two years.

The fair value of the listed warrants and the broker warrants issued on December 21, 2004 was estimated on the date of issuance using the Black-Scholes option model with the following

23

assumptions: dividend yield of 0%; expected volatility of 40%; risk-free interest rate of 4.25%; and an expected life of five and two years, respectively.

(c)

Stock option plan:

Under the Company's stock option plan, the Company may grant options up to 10% of the issued and outstanding common shares of the Company to employees, officers, directors and consultants of the Company and its affiliates and other designated persons for a maximum term of five years. The options vest immediately and the option price may not be less than the market price of the shares at the time the option is granted. The maximum number of shares that may be issued to any optionee is 5% of the shares outstanding at the time of the grant.

	2004				2003			2002
	Number of shares		Weighted average exercise price		Number of shares	Weighted average exercise price		Number of shares		Weighted average exercise price
Balance, beginning of year	550,000		$	5.08	142,500	$	5.89	70,833		$	5.54
Cancelled	(334,167	)		4.80	—		—	(13,333	)		4.50
Expired	—			—	—		—	(24,167	)		7.50
Granted	466,667			3.60	407,500		4.80	109,167			6.30
Exercised	(19,333	)		3.30	—		—	—			—
Outstanding, end of year	663,167			3.60	550,000		5.08	142,500			5.89

On July 5, 2004, the Company repriced an aggregate of 85,833 previously granted options to $3.00. The options were previously exercisable at prices ranging from $3.30 to $7.20 per share with expiry dates from June 13, 2006 to November 27, 2008.

The following table summarizes the options outstanding at December 31, 2004:

Number of options outstanding and currently exercisable	Exercise price		Weighted average remaining contractual life (years)
116,500	$	3.30	3.4
30,000		4.50	1.4
30,833		7.50	2.4
85,833		3.00	3.6
266,667		3.60	4.6
133,334		4.80	4.9
663,167

The fair value of the options granted during 2003 and 2004 has been estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 4.50%; dividend yield of 0%; volatility factor of the expected market price of the Company's common stock of 100% for the year ended December 31, 2003 and 125% for the year ended December 31, 2004; and a weighted average expected life of these options of 4.0 years.

Stock-based compensation amounted to $1,192 and $1,463 for the years ended December 31, 2004 and 2003, respectively. In 2002, all options granted were in connection with the acquisition of a property and have been capitalized as such.

(d)

Loss per share:

As a result of net losses in each of the years, the potential effect of exercising stock options, warrants and convertible debentures has not been included in the calculation of diluted loss per share because to do so would be anti-dilutive.

24

(e)

Stated capital reduction:

On December 8, 2004, a special resolution was passed by the Company's shareholders to eliminate the deficit of the Company at June 30, 2004 by reducing the stated capital by $21,979. This deficit was accumulated in connection with the Company's historical operations and does not relate to the Company's current business mandate.

15.

CONTINGENCIES

The Company and its subsidiaries are involved in various claims and litigation arising in the ordinary course and conduct of their business. Since the outcome is uncertain, no amount has been recorded in these consolidated financial statements.

The significant claims and litigation matters are as follows:

(a)

Statements of claim were filed against Saskatchewan Power Corporation ("SaskPower"), the Company and Churchill River Power Company Limited ("CRP") on February 10, 1995, seeking an aggregate of $1 billion in compensatory damages and in excess of $100 million in punitive damages. These claims were filed in connection with the use and operation of the Whitesand Dam and the Island Falls Hydro Electric Station in Saskatchewan which were transferred by CRP, formerly a wholly owned subsidiary of the Company, to SaskPower in 1981. Based on the current knowledge of management, in management's opinion, the ultimate resolution of the claims will not be material to the consolidated financial position.



(b)

In May 2004, a number of plaintiffs initiated an action, in the State of North Carolina, against Zochem, Considar Metal Marketing Inc. ("CMM") and a number of other defendants seeking damages in an unspecified amount and alleging that they had been injured as a result of an explosion that occurred at a pharmaceutical plant. The plaintiffs have alleged that Zochem and/or CMM designed, manufactured, sold and supplied chemicals used in the manufacture of a rubber compound that were dangerous, defective and susceptible to causing explosions. HBMS has retained legal counsel in North Carolina and cannot currently assess its potential liability in relation to this claim.



(c)

On April 21, 2004, Novawest Resources Inc. issued a claim in the British Columbia Supreme Court seeking unspecified damages, including against Hudson Bay Exploration and Development Company Limited, a subsidiary of the Company. The claim alleges a breach of confidence and claims damages as a result of such breach. The defendants have retained counsel to defend the claim and liability is denied. The likelihood of success of the claim cannot be determined at this time. Based on the current knowledge of management, in management's opinion, the ultimate resolution of the claim will not be material to the consolidated financial position.

16.

INCOME TAXES

Income tax expense differs from the amount that would be computed by applying the statutory income tax rates to income before income taxes. A reconciliation of income taxes calculated at the statutory rates to the actual tax provision is as follows:

	2004			2003			2002
Statutory tax rate		38%			40%			40%
Tax benefit at statutory rate	$	(3,921	)	$	(2,202	)	$	(485	)
Resource and depletion allowance, net of resource tax recovery		(18	)		—			—
Benefit of current tax losses not recognized		3,205			1,632			485
Benefit of other timing differences not recognized		405			—			—
Other permanent differences		329			570			—
Reduction in valuation allowance		(473	)		—			—
	$	(473	)	$	—		$	—

25

The tax recovery consists largely of a reduction of the valuation allowance arising from the renunciation of the income tax benefits associated with a flow-through share issuance in December 2003.

The tax effects of temporary differences that give rise to significant portions of the future tax assets at December 31, 2004 and 2003 are presented below:

	2004		2003
Property, plant and equipment	$	265,675	$	1,633
Pension obligation		26,016		—
Other employee future benefits		22,405		—
Asset retirement obligations		9,184		—
Non-capital losses		58,252		3,108
Share issue costs		3,744		312
Other		—		131
		385,276		5,184
Less valuation allowance		372,376		5,184
Net future tax asset	$	12,900	$	—

The non-capital losses on a pretax basis expire as follows:

2005	$	404
2006		282
2007		279
2008		39,515
2009		82,141
2010		29,921
2011		4,402

The tax benefit of approximately $113.7 million of the non-capital losses has not been recognized in the financial statements.

17.

RISK MANAGEMENT USING FINANCIAL INSTRUMENTS

(a)

Foreign currency risk management:

The Company uses forward exchange or currency collar contracts to limit the effects of movements in exchange rates on foreign currency-denominated assets and liabilities and future anticipated transactions.

The Company paid U.S. $1.2 million to purchase an option giving it the right, but not the obligation, to pay an additional U.S. $2.9 million to purchase U.S. dollar put options. The put options secure the right, but not the obligation, to sell U.S. $4.375 million per quarter at $1.20482 starting in April 2005 and continuing to January 2009. The fair value at December 31, 2004 approximates its carrying value as its carrying value was adjusted to fair value on December 31, 2004.

(b)

Credit risk:

The Company provides credit to its customers in the normal course of its operations. It carries out, on a continuing basis, credit checks on its customers and maintains provisions for contingent credit losses. Substantially all of the Company's accounts receivable are with CMM, a joint venture.

The Company is exposed to credit risk in the event of non-performance by counterparties in connection with its derivative contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but mitigates this risk by dealing only with financially sound counterparties and, accordingly, does not anticipate loss for non-performance.

26

(c)

Commodity price risk management:

From time to time, the Company maintains price protection programs and conducts commodity price risk management through the use of forward sales contracts, spot deferred contracts, option contracts and commodity collar contracts.

Through its joint venture interest in CMM, the Company manages the risk associated with forward physical sales that are made on a fixed price basis regarding zinc and zinc oxide and, accordingly, enters into forward zinc purchase contracts. At December 31, 2004, the joint venture had outstanding forward contracts to purchase 31,091 tonnes of zinc at prices ranging from U.S. $814 to U.S. $1,241 per tonne with settlement dates in the next three years. The fair value at December 31, 2004 approximates its carrying value as its carrying value was adjusted to fair value on December 21, 2004.

18.

RELATED PARTY INFORMATION

(a)

In order to close the acquisition of the Balmat mine, the Company received financial assistance from Frame Mining Company ("Framco"), a company controlled by a former officer and director of the Company. Framco advanced U.S. $1 million to the Company in order for the Company to assume an environmental bond. In addition, Framco agreed to provide security on a proposed U.S. $4 million project loan to the Company. As security for these debts, the Company agreed to pledge a 51% interest in the Company. Under the terms of the agreement, 26% of the ownership interest held as security was released to the Company subsequent to the repayment of the U.S. $1 million advanced by Framco and an additional payment of U.S. $200. The remaining 25% ownership interest was released upon the final repayment of U.S. $800 to Framco. The amounts paid to Framco have been included in the acquisition cost of the Balmat mine.

(b)

During 2003, two individuals who were former officers of the Company, advanced $110 to the Company for operating purposes. The advances were repaid through the issuance of 36,667 of the units issued in May 2003.

(c)

During the years ended December 31, 2004 and 2003, the Company paid $2,317 and $428, respectively, to two law firms which were associated with two individuals who were former directors of the Company at the time. The payments in 2004 were substantially in respect of services in connection with the acquisition of HBMS and the related financings.

(d)

In June 2004, certain individuals who were former officers and directors of the Company at the time purchased an aggregate of 795,986 units in connection with a private placement completed by the Company (note 14(a)(i)(b)).

(e)

In September 2004, the former Chairman of the Company acquired 333,333 units and the then corporate secretary acquired 6,667 units in connection with a private placement completed by the Company (note 14(a)(i)(a)). In December 2004, these transactions were reversed.

19.

INVESTMENT IN JOINT VENTURES

Considar Metal Marketing SA ("CMMSA"), an entity incorporated under the laws of the Grand Duchy of Luxembourg, is a joint venture in which the Company holds a 50% interest. The joint venture, together with its wholly owned subsidiary, CMM, carries on the business of providing metal marketing to customers in various metal-related industries.

27

The following is a summary of the Company's 50% pro rata share of the book value of the assets, liabilities, revenue and expenses of the CMMSA joint venture. Substantially all of the Company's sales are transacted with the joint venture. Such information is presented prior to intercompany eliminations.

Assets
Current assets		$	52,535
Unrealized fair value derivative			772
Property, plant and equipment			112
Liabilities
Current liabilities		$	49,264
Future income taxes payable			1,290
Sales		$	6,898
Costs and expenses:
	Operating, general and administrative		7,053
	Depreciation and amortization		2
	Gain on derivative instruments		(78	)
			6,977
Loss before income taxes		$	(79	)
Cash flows:
	Operating activities	$	106
	Investing activities		(5	)

20.

COMMITMENTS

(a)

Operating lease commitments:

The Company has entered into various lease commitments for facilities and equipment. The leases expire in periods ranging from one to four years. The aggregate remaining minimum annual lease payments required for the next four years are as follows:

2005	$	3,469
2006		2,424
2007		549
2008		12

Through its joint venture interest in CMMSA, as at December 31, 2004, the Company has various lease commitments for facilities and equipment which expire in periods ranging from one to eight years. The aggregate remaining minimum annual lease payments, representing 100% of CMMSA's commitment, required for the next five years are as follows:

2005	$	212
2006		223
2007		218
2008		216
2009 and thereafter		503

The Company has recorded operating lease expense of $94.

(b)

Buy-sell commitments:

The Company has entered into a commitment to deliver 85,000 tonnes of copper anodes for refining during the next year, with the option to extend for an additional year, each year. In the event that the

28

Company is unable to meet the terms of the contract, it would be required to make a payment of U.S. $0.04 per pound of copper anode not delivered.

The Company has a commitment to purchase copper concentrate for payment based on a deemed delivery rather than a required physical delivery. The contract requires delivery of 72,000 tonnes annually from 2005 to 2008.

Payment is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a fixed treatment and refining credit. If the Company cannot process the deemed tonnage in a timely manner, management believes the Company will be able to negotiate alternate arrangements for the sale or diversion of the tonnage.

The Company has a commitment to purchase 40,000 DMT per year of copper concentrate through 2008. Payment is made 45 days after the date of the bill of lading, and is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a treatment, refining and freight credit. Management intends to seek opportunities to swap the tonnage with other smelters (where a freight advantage exists). If the Company cannot process the concentrate or swap tonnage in a timely manner, management believes that alternate arrangements can be negotiated for the sale or diversion of the tonnage.

The Company relies partly on processing purchased concentrates to achieve a portion of profits. The continued availability of such concentrates at economic terms beyond the expiry of current existing contracts cannot be determined at this time.

(c)

Other commitments and agreements



(i)

The Company has provided housing loss guarantees for employees who were required to move out of Company-owned housing due to demolition. As of December 31, 2004, management believes the market value of the new homes purchased exceeds the related guarantee amounts.



(ii)

Under a Purchase and Sale Agreement made between CMM, Considar WP Acquisition Corp. ("Considar WP") and White Pine Copper Refinery Inc. ("White Pine"), dated June 4, 2000 and amended on May 16, 2001, CMM has a right to acquire all of the issued and outstanding shares of White Pine from Considar WP by giving notice to Considar WP at certain dates in 2004, 2005 or 2006. In addition, Considar WP has the right to require that CMM purchase such shares by giving notice to CMM in September 2005.

CMM is a wholly owned subsidiary of CMMSA. HBMS and Considar, Inc. ("Considar") are the holders of all of the issued and outstanding shares of CMMSA. Pursuant to a letter agreement between HBMS and Considar, dated June 4, 2000, if HBMS and Considar cannot agree on some alternate form of financing for the acquisition of the shares of White Pine by CMM, each of HBMS and Considar has agreed to make available to CMM sufficient funds to pay one-half of the purchase price of U.S. $13 million for such shares and for all other amounts payable by CMM under the Purchase and Sale Agreement at and after the closing of the transaction.

(iii)

On the majority of the Callinan/777 mine, the Company is subject to a royalty payment of $0.25 per ton of ore milled and a net profits interest of 6²/3% of the net proceeds of production if cumulative and aggregate cash flow for the year is positive. To date, the aggregate cash flow has been negative.



(iv)

HBMS has a profit-sharing plan, whereby 10% of the Company's after-tax earnings (excluding provisions for future income tax) calculated in accordance with U.K. generally accepted accounting principles for any given fiscal year will be distributed to all employees in the Flin Flon/Snow Lake operations, with the exception of executive officers and key management personnel.



(v)

The Company entered into a security agreement dated March 31, 1999 in favour of the Province of Saskatchewan in respect of its reclamation undertakings in Saskatchewan. As security for the implementation of decommissioning plans in respect of its undertakings in Saskatchewan, the

29

Company has granted to the Province of Saskatchewan a first priority security interest in its mining equipment, buildings and fixtures and a first charge on all proceeds derived from any dealings with such mining equipment, buildings and fixtures. In addition, the Company has a security agreement dated May 7, 2004 in favour of the Province of Manitoba in respect of its reclamation undertakings in Manitoba. As security for the implementation of a decommissioning plan in respect of its undertakings in Manitoba, the Company has granted to the Province of Manitoba a first priority security interest in its mining equipment, buildings and fixtures owned by the Company and located on the lands and a first charge on all proceeds derived from any dealings with such mining equipment, buildings and fixtures. The security interests granted to the Provinces of Saskatchewan and Manitoba rank pari passu.

The Company has commenced a study of reclamation costs, to a level of confidence greater than that of the existing conceptual study, to more accurately determine the estimated reclamation costs. The study is expected to be completed during 2005.

The Company believes its current reclamation cost estimate of approximately $51.6 million, for the HBMS properties, is adequate and is sufficiently secured by the existing security. However, the Company has provided additional security to the provinces in the form of restricted cash in the amount of $13 million during the period of preparation of the study. Upon completion of the study, the appropriate security will be determined by the provinces.

(vi)

In the normal course of operations, the Company provides indemnifications that are often standard contractual terms to counterparties in transactions, such as purchase and sale contracts, service agreements and leasing transactions. These indemnification agreements may require the Company to compensate the counterparties for costs incurred as a result of various events, including environmental liabilities, changes in (or in the interpretation of) laws and regulations, or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnification agreements will vary based upon the contract, the nature of which prevents the Company from making a reasonable estimate of the maximum potential amount that could be required to pay to counterparties. Historically, the Company has not made any significant payments under such indemnifications. Management estimates that there are no significant liabilities with respect to these indemnification guarantees.



(vii)

The Company has outstanding letters of credit in the amount of $22.8 million that are secured by an equal amount of restricted cash.

21.

CHANGE IN NON-CASH WORKING CAPITAL

	2004			2003			2002
Accounts receivable	$	(8,285	)	$	—		$	(153	)
Inventories		(11,843	)		—			—
Accounts payable and accrued liabilities		17,565			442			222
Prepaid expenses and other assets		4,328			(563	)		(73	)
Interest payable		508			—			—
	$	2,273		$	(121	)	$	(4	)

22.

RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated financial statements of the Company have been prepared in accordance with Canadian GAAP which differ in certain material respects from U.S. GAAP.

30

If U.S. GAAP were employed, the net loss for the years would be adjusted as follows:

		2004			2003			2002
Loss for the year based on Canadian GAAP		$	(9,920	)	$	(5,455	)	$	(1,213	)
Impact on loss of U.S. GAAP adjustments:
	Depreciation and amortization (a)		(142	)		—			—
	Accretion of convertible debentures (b)		632			—			—
	Debt settlement expense (b)		508			—			—
	SFAS 143 cumulative adjustment (d)		—			(10	)		10
Loss for the year under U.S. GAAP		$	(8,922	)	$	(5,465	)	$	(1,203	)
Basic and diluted loss per share under U.S. GAAP, before cumulative impact of change in accounting policy		$	(1.00	)	$	(1.45	)	$	(0.53	)
Basic and diluted loss per share under U.S. GAAP		$	(1.00	)	$	(1.45	)	$	(0.53	)

The following summarizes the Company's adjusted consolidated balance captions conforming to U.S. GAAP:

		2004			2003
Assets:
	Property, plant and equipment (a)	$	368,120		$	5
Liabilities:
	Convertible debentures (b)		—			2,000
Shareholder's deficiency:
	Common shares		154,936			21,379
	Deficit		(28,607	)		(19,685	)
	Currency translation adjustment		—			—
	Accumulated other comprehensive loss		(24	)		—
	Equity component of convertible debenture		—			—

(a)

Depreciation and amortization:

Under Canadian GAAP, amortization of mine development costs using the units of production method is calculated using historical costs plus estimated future underground development costs required to access proven and probable reserves. For U.S. GAAP purposes, amortization of mine development costs is calculated using historical capitalized costs incurred. Mine development costs which benefit the entire mine life are amortized over proven and probable reserves and the remainder of the mine development costs are amortized over the currently accessible proven and probable reserves to which these costs relate.

(b)

Convertible debentures:

Under Canadian GAAP, the Company accounts for the convertible debentures in accordance with their substance and, as such, they are presented in the consolidated financial statements in their liability and equity component parts. The debt component is accreted over the life of the debt by way of a charge to interest expense. Under U.S. GAAP, the entire face value of the convertible debentures is treated as debt and interest is based on the coupon rate of 12%.

Under Canadian GAAP, the premium on redemption is calculated by reference to the carrying value of the debt component only and the residual equity component is credited to shareholders' equity. Under U.S. GAAP, the premium on redemption is calculated by reference to the entire face value of the debentures.

31

(c)

Flow-through shares:

Under U.S. GAAP, when flow-through shares are issued, the proceeds are allocated between the issue of shares and the sale of tax benefits. The allocation is made based on the difference between the quoted price of the existing shares and the amount that the investor pays for the shares. The shareholders' equity is reduced and a liability is recognized for this difference. Since the Company did not receive any premium over the market value of the shares at the time of the issuance, the premium amounted to nil for the flow-through shares issued in December 2003 (note 14(a)(ii)(f)).

(d)

Asset retirement obligations:

Under U.S. GAAP, the Company adopted SFAS 143, Accounting for Asset Retirement Obligations, on January 1, 2003. Under Canadian GAAP, the Company adopted Section 3110, Asset Retirement Obligations, on January 1, 2004, which is consistent with SFAS 143. The Company retroactively adjusted their financial statements to reflect the adoption of Section 3110.

(e)

Stated capital reduction:

Canadian GAAP allows for the reduction of the stated capital of outstanding common shares with a corresponding offset to deficit. This reclassification, which the Company made in 2004, is not permitted by U.S. GAAP and would result in an increase in both share capital and deficit of $21,979 at December 31, 2004.

(f)

Comprehensive income:

Comprehensive income is recognized and measured under U.S. GAAP pursuant to SFAS 130, Reporting Comprehensive Income. This standard defines comprehensive income as all changes in equity other than those resulting from investments by owners and distributions to owners. Comprehensive income is comprised of two components, net income and OCI. OCI refers to amounts that are recorded as an element of shareholders' equity but are excluded from net income because these transactions or events were attributed to changes from non-owner sources. The following is a summary of the Company's comprehensive income as measured under SFAS 130:

		2004			2003			2002
Loss under U.S. GAAP		$	(8,922	)	$	(5,465	)	$	(1,203	)
Other comprehensive income (loss):
	Change in cumulative translation adjustments		(24	)		—			—
Comprehensive loss based on U.S. GAAP		$	(8,946	)	$	(5,465	)	$	(1,203	)

(g)

Joint ventures:

U.S. GAAP requires investments in joint ventures to be accounted for under the equity method, while under Canadian GAAP, the accounts in joint ventures are proportionately consolidated. However, under rules promulgated by the Securities and Exchange Commission, a foreign registrant may, subject to the provision of additional information, continue to follow proportionate consolidation for the purposes of registration and other filings notwithstanding the departure from U.S. GAAP. Consequently, the consolidated balance sheets have not been adjusted to restate the accounting for joint venture under U.S. GAAP. Additional information concerning the Company's interests in joint ventures is presented in note 19.

32

(h)

Other supplemental information provided for U.S. GAAP purposes:

		2004		2003
Accounts receivable less allowance for doubtful accounts:
	Trade	$	67,005	$	—
	Related parties		263		—
	Other		5,942		89
		$	73,210	$	89
Accounts payable:
	Trade	$	58,538	$	533
	Other		5,953		—
		$	64,491	$	533
Accrued liabilities:
	HBMS acquisition and related financing costs	$	1,634	$	—
	Hydro		2,367		—
	Profit-sharing and employee bonuses		5,590		—
	Vacation pay		10,896		—
	Other		6,061		492
		$	26,548	$	492

The Company includes shipping and handling costs in operating costs:

Shipping and handling $ 52 $ —

(i)

Recent accounting pronouncements:



(i)

SFAS 123R, Accounting for Stock-based Compensation ("SFAS 123R"):

In December 2004, the FASB issued SFAS 123R. SFAS 123R is applicable to transactions in which an entity exchanges its equity instruments for goods and services. It focuses primarily on transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires that the fair value of such equity instruments is recorded as an expense as services are performed. Prior to SFAS 123R, only certain pro forma disclosures of accounting for these transactions at fair value were required. SFAS 123R will be effective for the Company's 2005 consolidated financial statements, and permits varying transition methods including: retroactive adjustment of prior periods as far back as 1995 to give effect to the fair value based method of accounting for awards granted in those prior periods; retrospective application to all interim periods in 2005; or prospective application to future periods beginning in third quarter 2005. The Company is presently evaluating the effect of the varying methods of adopting SFAS 123R.

(ii)

SFAS 151, Inventory Costs ("SFAS 151")

SFAS 151 was issued in November 2004 as an amendment to ARB No. 43. SFAS 151 specifies the general principles applicable to the pricing and allocation of certain costs to inventory. Under SFAS 151, abnormal amounts of idle facility expense, freight, handling costs and wasted materials are recognized as current period charges rather than capitalized to inventory. SFAS 151 also requires that the allocation of fixed production overhead to the cost of inventory be based on the normal capacity of production facilities. SFAS 151 will be effective for inventory costs incurred beginning in the Company's 2006 fiscal year. The Company is presently evaluating the impact of SFAS 151 on the Company's consolidated financial statements.

(iii)

SFAS 153, Exchanges of Non-Monetary Assets ("SFAS 153")

SFAS 153 was issued in December 2004 as an amendment to APB Opinion No. 29. SFAS 153 provides guidance on the measurement of exchanges of non-monetary assets, with exceptions for

33

exchanges that do not have commercial substance. Under SFAS 153, a non-monetary exchange has commercial substance if, as a result of the exchange, the future cash flows of an entity are expected to change significantly.

Under SFAS 153, a non-monetary exchange is measured based on the fair values of the assets exchanged. If fair value is not determinable, the exchange lacks commercial substance or the exchange is to facilitate sales to customers, a non-monetary exchange is measured based on the recorded amount of the non-monetary asset relinquished. SFAS 153 will be effective for non-monetary exchanges that occur in fiscal periods beginning after June 15, 2005.

23.

SUBSEQUENT EVENTS

(a)

On February 22, 2005, the Company completed a private placement of 806,452 flow-through common shares at a price of $3.10 per share for aggregate gross proceeds of approximately $2,500. Commission of 5% of the gross proceeds of the offering was paid to the underwriters and net proceeds were $2,373. The proceeds will be used to incur Canadian exploration expenses which will be renounced in favour of the holders for the 2005 taxation year.

(b)

Broker warrants issued in connection with the Company's offering of subscription receipts on December 21, 2004 have been exercised subsequent to December 31, 2004, aggregating the following amounts: 70,950,678 warrants to purchase 2,365,022 common shares for proceeds of $6,119.

(c)

Effective March 24, 2005, the Company agreed to guarantee HBMS's U.S. $175,000 Notes. The Company guarantee is unsecured and ranks subordinate in right of payment to all senior indebtedness of the Company. The Company guarantee will terminate on the date upon which it owns less than a majority of the voting shares of HBMS (note 10(c)).

34

QuickLinks

Exhibit 4.3
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EX-4.4

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Exhibit 4.4

HUDBAY MINERALS INC.

Management's Discussion and Analysis of
Results of Operations and Financial Condition
Year Ended December 31, 2004

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Unless the context otherwise suggests, references to "we", "us", "our" and similar terms, as well as references to the "Company", refer to HudBay Minerals Inc.

        You should read this Management's Discussion and Analysis ("MD&A") in conjunction with our consolidated financial statements for the year ended December 31, 2004 and related notes thereto, which have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). Our consolidated financial statements include the results of Hudson Bay Mining and Smelting Co., Limited ("HBMS") for only the ten-day period ended December 31, 2004. Included herein is unaudited information relating to HBMS results of operations for the twelve-month period ended December 31, 2004. All figures are in Canadian dollars unless otherwise noted.

        This MD&A contains certain forward-looking statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding our future plans and objectives are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed in documents that we have filed from time to time with the Toronto Stock Exchange and other regulatory authorities.

        Additional information regarding the Company, including our Annual Information Form, is available on SEDAR at www.sedar.com and on our website at www.hudbayminerals.com.

Overview

        We are an integrated mining and metal processing company that operates mines and concentrators in Northern Manitoba and Saskatchewan, Canada and a metal processing complex in Flin Flon, Manitoba.

        On December 21, 2004, we acquired indirectly all of the outstanding shares of HBMS, realizing our strategy of acquiring high-quality mining assets at an advanced stage of development or in production.

Nature of HBMS Business

        Through HBMS we undertake exploration and development activities, primarily within economic transportation distance of our metal processing complex located in Flin Flon, Manitoba. Our production facilities consist of four operating mines, two concentrators and metallurgical facilities consisting of a zinc plant and copper smelter complex for the extraction of zinc and copper with gold and silver by-products. The Trout Lake, Konuto and 777 mines are located in the Flin Flon area, and ore from these mines is processed through the Flin Flon concentrator. The Chisel North mine and concentrator are located in the Snow Lake area. A downstream operating division of HBMS, Zochem, consumes on average between 25% and 30% of HBMS' zinc production to produce zinc oxide.

        Between 1998 and 2004, HBMS invested approximately $435 million executing the 777 Project, which involved construction of the new 777 mine in Flin Flon, development of the Chisel North mine near Snow Lake, expansion of the Flin Flon concentrator capacity from 1.81 million to 2.18 million tonnes per year, and expansion of the Flin Flon zinc plant, including construction of a state-of-the-art electrolytic cellhouse with capacity to support annual production of 115,000 tonnes of cast zinc.

        In 1998, and in support of the 777 Project, HBMS entered into an amending agreement in respect of certain of its collective bargaining agreements. The amending agreement prohibits strikes and lockouts through 2012 and provides for binding arbitration in the event that negotiated contract settlements are not achieved.

        The 777 Project, the labour amending agreement, closure of the Ruttan mine and a labour restructuring and efficiency improvement project in 2003 have resulted in a smaller workforce, higher labour productivity, lower unit operating costs, and improved zinc and copper grades.

1

        Our objective is to operate the HBMS zinc plant and copper smelter at full capacity at all times. We use purchased concentrate to fill excess plant capacity not utilized in the processing of concentrate produced from HBMS mines. As such, requirements for purchased concentrate are determined by plant capacity and production capability at our mines. For the period January 1, 2002 to December 31, 2004, 53.2% of HBMS copper production came from HBMS mines, while the remaining 46.8% came from purchased concentrate. During the same period, HBMS mines contributed 90.3% of total zinc production with only 9.7% being sourced from purchased concentrate. The contribution to income earned from processing purchased concentrate is dependent upon the treatment and refining charges (TC/RCs), as well as the freight cost (net of any credit from the vendor) of transporting the concentrate to Flin Flon. TC/RCs are set by the market on the basis of supply and demand for concentrate. Freight credits are generally set at parity with transport cost to a major world port. Fluctuations in TC/RCs and ocean freight costs can affect the extent to which economic purchased concentrate is available to us. As well, purchased concentrate availability can also be affected by operational changes at the concentrate supplier's mines.

        Metal sales volumes for any given period are affected by the volume and grade of ore mined, metal recovery through the concentrator and grade of purchased concentrate. HBMS sells substantially all of its copper anode, cast zinc and zinc oxide to Considar Metal Marketing Inc. ("CMM"), a wholly-owned subsidiary of Considar Metal Marketing S.A. ("CMMSA"), which is a joint venture company that is 50% owned by HBMS. CMM contracts with the White Pine copper refinery and other third parties to refine copper anodes into market-standard cathodes, and to simultaneously extract the contained precious metals from the anodes. The copper cathodes and precious metals are sold at market prices. Cast zinc slabs and blocks and zinc oxide are sold by CMM to customers in Eastern Canada and the United States. Sales of zinc oxide typically generate less than 10% of our revenues. The financial results of CMMSA are proportionately consolidated in our financial statements with effect from December 21, 2004.

Other Activities

        In addition to HBMS' operations and exploration activities, we own 100% of four projects:

•

the Balmat Mine, a development zinc property in New York State, which is currently being evaluated for possible restart of mining operations;



•

the Gay's River Mine, a development zinc/lead/gypsum property in Nova Scotia, Canada, which is currently being evaluated for future mining operations;



•

the Southwestern Ontario Project, a zinc exploration project comprised of mineral leases covering approximately 10,500 hectares; and



•

the San Antonio Project, an exploration project in Chile.

2

Summarized Financial Results

        The following table sets out summary consolidated financial information for us as at and for the years ended December 31, 2004, 2003 and 2002.

		Year ended December 31,
		2004(1)			2003(2)			2002(2)
		(thousands, except loss per share information)
Statement of Operations
	Sales	$	13,327		$	—		$	—
	Net loss		(9,920	)		(5,455	)		(1,213	)
Per Common Share:
	Basic and diluted loss	$	(1.12	)	$	(1.45	)	$	(0.53	)
Balance Sheet:
	Cash and cash equivalents	$	64,553		$	2,114		$	195
	Total assets		642,697			11,865			4,333
	Total long-term debt and capital leases, excluding current portion		235,248			1,039			—
	Shareholders' equity		152,766			9,032			3,029

Note:

(1)

Includes ten days of HBMS reporting only.

(2)

Restated to give effect to the change in accounting policy relating to exploration costs.

Quarterly Information

        The following table sets forth our selected consolidated financial information for each of the eight most recently completed quarters.

		2004												2003(1)
		Q4			Q3(1)			Q2(1)			Q1(1)			Q4			Q3			Q2			Q1
		(in thousands, except per share information)
For the period:
	Net revenue	$	13,308		$	6		$	7		$	6		$	3		$	5		$	—		$	—
	Net loss		(2,891	)		(3,282	)		(2,083	)		(1,664	)		(3,429	)		(1,359	)		(365	)		(302	)
Per Common Share
	Basic and diluted loss		(0.18	)		(0.45	)		(0.30	)		(0.29	)		(0.65	)		(0.38	)		(0.11	)		(0.10	)

Note:

(1)

Restated to give effect to the change in accounting policy relating to exploration costs

3

Results of Operations

        The following table sets out the contribution of HBMS to our operating results in the year ended December 31, 2004:

	HudBay (excluding HBMS) Year ended December 31, 2004			HBMS Ten-day period ended December 31, 2004			Consolidated Year ended December 31, 2004
	(thousands)
Sales	$	—		$	13,327		$	13,327
Operating costs		(3,457	)		(10,624	)		(14,081	)
General and administrative		(3,609	)		(325	)		(3,934	)
Stock option compensation		(1,193	)		—			(1,193	)
Write off of deferred charges		(620	)		—			(620	)
Depreciation and amortization		(241	)		(1,202	)		(1,443	)
Accretion		(69	)		(69	)		(138	)
Exploration		(1,734	)		—			(1,734	)
Debenture prepayment premium		(761	)		—			(761	)
Foreign exchange gain (loss)		3,581			(2,019	)		1,562
Other income		46			57			103
Gain on derivative instruments		—			78			78
Interest expense		(951	)		(608	)		(1,559	)
Income tax recovery		397			76			473
Loss for the period	$	(8,611	)	$	(1,309	)	$	(9,920	)

The Company (excluding HBMS)

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

        We incurred a loss of $8.6 million for the year ended December 31, 2004, compared to a loss of $5.5 million for the year ended December 31, 2003.

        Operating costs increased to $3.5 million for the year ended December 31, 2004, from $1.5 million for the year ended December 31, 2003, principally because of costs associated with the Balmat Mine, which we acquired in September 2003 and is currently held on a care and maintenance basis. The costs of maintaining the Gay's River Mine property are also included.

        General and administrative expenses increased to $3.6 million for the year ended December 31, 2004 from $2.4 million for the year ended December 31, 2004. The increase primarily reflects the addition of senior management, and increased operating, acquisition and financing activities. A severance payment and retention payments arising out of the acquisition of HBMS are also included in 2004. Costs for 2003 included a provision for bad debt expense of $0.7 million in connection with the sale of the San Antonio property, and there was no comparable provision in 2004. We regained control of the San Antonio property following the failure of the purchaser to complete scheduled payments.

        We recorded stock option compensation of $1.2 million during the year ended December 31, 2004, primarily in relation to the expense of 466,667 options granted to our former executive officers in July and November 2004. The expense of $1.5 million in 2003 relates primarily to grants of options to individuals who were, at that time, executive officers and directors.

        During 2004 we incurred costs of $0.6 million in connection with plans to list our common shares on the London Stock Exchange's Alternative Investment Market. We abandoned the listing during the third quarter of 2004 and all related costs were written off. There was no comparable expense in 2003.

        As a result of the issuance of US$175 million senior secured notes by HBMS in December 2004, we were required to repay the $2.6 million principal amount of secured convertible debentures issued in December 2003 and January 2004. Depreciation and amortization expense for the year ended December 31, 2004 of $0.2 million

4

includes the amortization and write-off of $0.2 million of issue costs relating to these debentures. A further amount of $0.8 million has been recorded as debt settlement expense in connection with repayment of the debentures. For accounting purposes under GAAP, we segregated the debentures into their debt and equity components: interest expense for the year ended December 31, 2004 of $1.0 million includes $0.3 million interest paid on the debentures plus $0.6 million accreted interest in respect of the equity component of the debentures that was established as $1.2 million at the date of issuance. The difference of $1.1 million between the $1.2 million carrying value of the equity component and the fair value of $0.1 million as at December 23, 2004, has been credited to retained earnings.

        A foreign exchange gain of $3.6 million was recorded for the year ended December 31, 2004. This includes a gain of $3.8 million arising from the revaluation of our senior secured notes in the amount of US$175 million, at the December 31, 2004 rate of exchange.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

        During 2003 and 2002, we did not have any revenue other than interest earned. Our loss increased during 2003 to $5.5 million from $1.2 million during 2002. The increased loss resulted from, among other things, increased care and maintenance expenses arising in connection with the acquisition of the Balmat Mine, increased costs associated with various other acquisition projects, write-down of accounts receivable and stock option compensation expense.

        Operating costs for the year ended December 31, 2003 increased to $1.5 million from $0.1 million in 2002, principally because of the costs associated with the Balmat Mine. Expenditures in 2002 primarily related to the Gay's River Mine.

        General and administrative expenses for the year ended December 31, 2003 were $2.4 million compared with $0.6 million in the previous year. This increase primarily relates to professional fees and travel expenses associated with several initiatives to acquire major zinc operations and fees paid with respect to financings that did not materialize. In addition during 2003, we made a $0.7 million provision for bad debts reflecting the write-down of the receivable arising from the sale of the San Antonio Project in Chile in 2002.

        A foreign exchange gain of $0.2 million was recorded for the year ended December 31, 2003, primarily on account of the translation of the financial statements of our U.S. subsidiary, St. Lawrence Zinc Company LLC, into Canadian currency. A loss of $4,000 was recorded in 2002.

        Stock option compensation expense of $1.5 million charged in 2003 reflects the application of the fair value method of accounting for stock options granted to employees and consultants during the year. In 2002, all options granted were capitalized to exploration and development projects.

HBMS

Period from December 21, 2004 to December 31, 2004

        Our consolidated statement of operations includes the operating results of HBMS for the ten-day period ended December 31, 2004. For this period, sales were $13.3 million, operating costs were $10.6 million and general and administrative costs were $0.3 million. Including an exchange loss of $2.0 million arising from U.S. denominated net assets and interest of $0.6 million, the net loss for the period was $1.3 million. The results of HBMS operations prior to December 21, 2004 are not audited and not included in our consolidated financial statements. Information on the results of HBMS' operations for the twelve-month period ended December 31, 2004 is provided below under the heading entitled "Supplemental Information on HBMS Results for the full year 2004".

5

Cash Flows, Liquidity and Capital Resources

        The following table sets out the contribution of HBMS to our cash flows from operating activities for the year ended December 31, 2004:

		HudBay (excluding HBMS) Year ended December 31, 2004			HBMS Ten-day period ended December 31, 2004			Consolidated Year ended December 31, 2004
		(thousands)
Operating activities
	Loss for the period	$	(8,611	)	$	(1,309	)	$	(9,920	)
	Items not affecting cash		(1,108	)		1,813			705
	Change in non-cash working capital and other		2,218			(231	)		1,987
Cash generated by (required for) operating activities			(7,501	)		273			(7,228	)
Cash generated by (required for) financing activities			344,457			(17	)		344,440
Cash required for investing activities			(270,961	)		(3,123	)		(274,084	)
Foreign exchange loss on cash held in foreign currency			—			(689	)		(689	)
Increase (decrease) in cash and cash equivalents			65,995			(3,556	)		62,439

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

        As of December 31, 2004, we had cash and cash equivalents of $64.6 million compared to $2.1 million at December 31, 2003.

        Our liquidity requirements arise primarily from the need to fund capital expenditures for the maintenance and development of our mines and facilities, to fund working capital needs, and to meet our debt service requirements. Our primary sources of liquidity are cash generated from operating activities and amounts available to us under our line of credit. During 2004 HBMS generated sufficient cash flow from operations to meet all of its operating and capital requirements.

        We have an interest free loan from the Province of Manitoba that is secured by an irrevocable standby letter of credit. In June, 2004, 2003 and 2002, HBMS made repayments of $2 million in accordance with the terms of the loan agreement. The undiscounted balance at December 31, 2004 was $17.5 million. Under the terms of the agreement with the Province, the loan is repayable in installments of $2 million in 2005, $4 million in each of 2006 and 2007 and $7.5 million in 2008.

        Cash required for our operating purposes (not including HBMS) was $7.5 million during the year ended December 31 2004, compared with $3.5 million in the same period in 2003. The increased requirement for cash reflects the greater operating loss for the period, attributable primarily to increases in management fees, mine care and maintenance, and debenture interest. HBMS contributed cash from operations of $0.3 million for the ten-day period from December 21, 2004 to December 31, 2004.

        Financing activities on a consolidated basis generated $344.5 million during the year ended December 31, 2004, compared with $8.5 million during the previous year. We raised $6.7 million, net of costs, by way of private placements of shares and warrants and $132.8 million, net of costs, by way of a public issue of subscription receipts in December 2004. In addition we raised $205.1 million, net of costs, through the issuance of US$175.0 million principal amount of 9⁵/8% senior secured notes in December 2004.

        Investing activities used cash of $274.1 million in the year ended December 31, 2004 compared to $3.1 million in the previous year. Of this, $255.6 million relates to the acquisition of HBMS. In addition, during 2004, we invested $5.2 million in mineral properties and capital equipment, including $2.0 million paid to Pasminco Resources Canada Company in satisfaction of the final cash purchase price outstanding in respect of the Gay's River Mine. Environmental deposits paid to governmental agencies after adjustment for currency translation were $0.3 million during 2004.

6

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

        As of December 31, 2003, we had cash and cash equivalents of $2.1 million compared to $0.2 million at December 31, 2002.

        Cash required for operating activities in 2003 was $3.5 million compared with $1.2 million in the previous year. The increase in operating costs resulted from increased mine care and maintenance fees, professional fees and travel costs.

        In 2003, we raised $8.5 million through financing activities. In contrast, we incurred a cash requirement of $0.2 million in 2002. During 2003, we completed several private placements of securities for aggregate net proceeds of $8.6 million. We did not complete any financing during 2002.

        Investing activities in 2003 required funding of $3.1 million compared with cash received from such activities of $1.6 million in 2002. The major items in 2003 were costs of $1.6 million associated with the acquisition of the Balmat Mine, and environmental deposits with government agencies in respect of the Balmat and Gay's River mine properties totaling $1.6 million. In 2002, we recorded $1.2 million proceeds in respect of the sale of the San Antonio Project assets.

Contractual Obligations

        The following table summarizes, as at December 31, 2004, certain of our contractual obligations for the period specified.

	Payments Due by Period
Contractual Obligations (as at December 31, 2004)	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years
	($000)
Long-term debt obligations	$	227,850	$	2,000	$	15,500	$	—	$	210,350
Capital lease obligations		15,057		3,338		10,384		1,335		—
Operating lease obligations(1)		6,454		3,469		2,985		—		—
Purchase obligations		10,299		10,299		—		—		—
Pension and other employee future benefits obligations		14,662		14,662		—		—		—
Asset retirement obligations		52,247		1,093		8,154		2,108		40,892
Other long-term liabilities and contractual obligations		417		417		—		—		—
Total	$	326,986	$	35,278	$	37,023	$	3,443	$	251,242

Note:

(1)

Does not include our share of the lease obligations of our joint venture, CMM.

Purchase Obligations

        Copper Refinery Obligation. We have entered into a commitment to deliver 85,000 tons of copper anodes annually for refining during the next year, with the option to extend for an additional year, each year. In the event that we are unable to meet the terms of the contract, we would be required to make a payment of US$0.04 per pound of copper anode not delivered. The approximate amount of this obligation is C$8.2 million.

        Copper Concentrate Purchase Obligation. We have a commitment to purchase copper concentrate for payment based on a deemed delivery rather than a required physical delivery. The contract requires delivery of 72,000 tonnes annually for years 2004 to 2008. Payment is based on the market price of contained metal during a quotational period following delivery of the concentrate, less a fixed treatment and refining credit. If we cannot process the deemed tonnage in a timely manner, management believes that we will be able to negotiate alternate arrangements for the sale or diversion of the tonnage.

        We have a commitment to purchase 40,000 dry metric tonnes per year of copper concentrate from Compania Minera Dona Ines de Collahuasi through 2008. Management intends to seek opportunities to swap

7

the tonnage with other smelters. If we cannot process the concentrate or swap tonnage in a timely manner, management believes that alternate arrangements can be negotiated for the sale of the tonnage.

        No amount is included in the table due to the fact that price is dependent on future market prices.

        Routine orders to purchase goods and services comprise the remainder of our purchase obligations.

Pension and Other Employee Future Benefits Obligations

        Pension and other employee future benefits obligations comprise our contractual funding requirements in respect of pension plan and other employee future benefits in the twelve months ending December 2005. The obligatory funding requirements for the pension plan and other employee future benefits are actuarially determined and are subject to future uncertainties, including the expected rate of return on plan assets, and the discount rate on pension obligations, each of which may change over time.

Asset Retirement Obligation

        The amounts included in the asset retirement obligation represent the estimated fair value of our present legal obligation for closure and related costs at all of our existing operating and non-operating mines and properties based upon the closure plans applicable to those mines and properties. The Provinces of Saskatchewan and Manitoba have recently informed us that, in their view, our current estimate of reclamation costs may be too low and the security for the reclamation obligations may not be sufficient. We have commenced a study of reclamation costs to more accurately determine the estimated reclamation costs. The study will be awarded to an engineering firm and is expected to be completed by the end of June 2005.

        We believe our current reclamation cost estimate of approximately $51.6 million, for the HBMS properties, is adequate and is sufficiently secured by the existing security. However, we have provided additional security to the Provinces in the form of restricted cash in the amount of $13.0 million during the period of preparation of the study. Upon completion of the study, the appropriate security will be determined in consultation with the Provinces.

Other Commitments and Agreements

        We have certain other commitments and agreements that are not included in the table above, including a profit sharing plan whereby 10% of our after tax earnings for any given fiscal year will be distributed to all employees in the Flin Flon/Snow Lake operations, with the exception of executive officers and key management personnel.

Share Capital

        As of March 29, 2005, we have 80,714,692 common shares outstanding. In addition, as of the same date, we have 663,167 options outstanding under our share option plan and 1,171,556,075 share purchase warrants outstanding. An aggregate of 39,715,036 common shares are issuable upon exercise of these options and warrants.

Off-Balance Sheet Arrangements

        We are not involved in any off-balance sheet transactions.

8

Risk Profile

Overview

        We are subject to various risks in our day-to-day operations. The likelihood and severity of these risks are mitigated by application of high standards in the planning, construction and operation of our facilities. In addition, we place emphasis on hiring and retaining competent personnel and developing their skills through training in safety and loss control. We have a solid track record of developing and operating base metal mines, and our safety record, as expressed by the widely-used frequency measure of lost time accidents per 200,000 hours worked, has improved from 16.2 accidents in 1994 to consistently in the 0.8 range over the three years ended December 31, 2004.

        Business risk is also mitigated through the purchase of insurance coverage, including coverage for property damage, business interruption and liability.

Financial Risk and Financial Instruments

        Our net income is sensitive to fluctuations in metal prices. Further, the market prices of all of our metal products are U.S. dollar based and our net income is therefore sensitive to fluctuations in the US$/Cdn$ exchange rate. The approximate sensitivities of 2004 net income to movements in metal prices and exchange rates, using 2004 as a basis, are shown in the following table.

	Change	Earnings Impact
Zinc	US$0.01 per pound	Cdn$3.1 million
Copper	US$0.01 per pound	Cdn$1.3 million
Gold	US$10.00 per ounce	Cdn$1.0 million
Silver	US$1.00 per ounce	Cdn$0.9 million
Exchange Rate	Cdn$0.01 per US$1.00	Cdn$0.7 million(1)

Note:

(1)

Following the issuance of the Senior Secured Notes, prior to which the earnings impact was Cdn.$2.5 million.

        In order to mitigate the impact of fluctuating metal prices and exchange rates, from time to time we enter into derivative transactions pursuant to our Risk Management Policies and Procedures. These policies prohibit us from implementing uncovered commodity and currency positions and we do not use complex derivatives to manage our exposures. We do not hold commodity and currency positions for speculative purposes.

Credit Risk

        Substantially all of our sales are to CMM. CMM's financial results are proportionately consolidated into our financial statements through CMMSA. All of our accounts receivable from metal sales are with CMM. CMM provides credit to its customers in the normal course of its operations. It carries out, on a continuing basis, credit checks on its customers and maintains provisions for contingent credit losses. CMM mitigates its credit risk by carrying out credit evaluations on its customers, by making a significant portion of its sales on a cash basis and by maintaining insurance on its accounts receivable.

        We are exposed to credit risk in the event of non-performance by counterparties in connection with our derivative contracts. We do not obtain collateral or other security to support financial instruments subject to credit risk but mitigate this risk by trying to deal only with financially sound counterparties and, accordingly, do not anticipate loss for non-performance.

Operational Risk

        The business of metals mining and processing is generally subject to certain types of risks and hazards including industrial accidents such as cave-ins, rock bursts, rock falls and flooding, unusual or unexpected rock formations, vessel or other structural failure, changes in the regulatory environment and metal losses. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal

9

injury or death, environmental damage, delays in mining or processing, monetary losses and possible legal liability. As a result we could be required to incur significant costs that could have a material adverse effect on our financial performance, liquidity and results of operations.

        Our estimates of mineral reserves and mineral resources are estimates only and there can be no assurance that anticipated tonnage and grade can be achieved. To maintain or grow production levels over the long term, we must continually replace mineral reserves depleted by production by upgrading mineral resources to reserves, expanding known ore bodies or locating new ones. Success in mineral exploration is highly uncertain and there is a risk that future depletion of mineral reserves, through normal mining operations, will not be adequately replaced.

Environmental Risk

        Our activities are subject to extensive federal, provincial and local laws and regulations governing environmental protection and employee health and safety. We are required to obtain governmental permits and to comply with applicable decommissioning and reclamation rules. Although we make provision for reclamation costs, there can be no assurance that these provisions will be adequate to discharge the obligations associated with these regulations. Failure to comply with applicable environmental and health and safety laws can result in injunctions, damages or revocation of permits and imposition of penalties. There can be no assurance that we have been or will be at all times in compliance with such laws and regulations or that the costs of complying will not have a material adverse effect on our financial performance, liquidity and results of operations.

Transactions with Related Parties

        Details of related party transactions are set out in Note 18 to the financial statements.

Critical Accounting Estimates

        The preparation of the financial statements in accordance with Canadian GAAP requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate the estimates periodically, including those relating to mineral reserve determinations, asset impairment, in-process inventory quantities, future income tax valuation reserves, asset retirement obligations, pension obligations and other employee future benefits. Actual results could differ from these estimates by material amounts.

Mineral Reserves

        Mineral reserves are estimated to determine future recoverable mine production based on assessment of geological, engineering and metallurgical analyses, estimates of future production costs, capital costs and reclamation costs as well as metal prices. The costs of mineral properties and mine development are capitalized and amortized by the unit-of-production basis based on related proven and probable mineral reserves.

Impairment

        The carrying value of our operating mines and plant and equipment is periodically reviewed for impairment when events or changes in circumstances indicate that the carrying amounts of related assets or groups of assets may not be recoverable. If total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset, an impairment loss is measured and recorded to write down the asset to its fair value.

In-Process Inventories

        In-process concentrates and metal inventory quantities comprise the majority of our inventories by value, and represent materials that are in the process of being converted into saleable product. Measurement of in-process inventories is based on assays of material received at our metallurgical plants and estimates of recoveries in the production processes. Realizable value of in-process inventories is estimated at financial statement dates and inventories are carried at the lower of cost and net realizable value.

10

Future Tax Assets and Liabilities

        We use the liability method of tax allocation for accounting for income taxes. Under the liability method, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities. Future tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the future tax assets will not be realized. We evaluate the carrying value of our future tax assets periodically by assessing its valuation allowance and by adjusting the amount of such valuation allowance, if necessary. The factors used to assess the likelihood of realization are forecasts of future taxable income and available tax planning strategies that could be implemented to realize future tax assets.

Asset Retirement Obligations

        Asset retirement obligations are estimated based on environmental plans, in compliance with current environmental and regulatory requirements. Decommissioning costs are estimated and provided for, along with an identical decommissioning asset, when a new mine or plant is placed into commercial production. The decommissioning asset is amortized on a straight-line basis over the life of the mine or plant. Restoration costs are estimated and accrued over the life of each operating mine. The accrued amounts are increased by an annual interest component such that at the end of the asset life the provision is equal to the balance estimated to be paid at that date.

        In view of the uncertainties concerning these future obligations, the ultimate timing and cost of reclamation and mine closure may differ materially from our estimates.

Pensions and Other Employee Future Benefits

        Our on-going health care benefit plans comprise the majority of post-retirement obligations. The obligations relating to these plans, together with pension plans maintained by us, are estimated based on actuarial determinations, which incorporate assumptions using management's best estimates of factors including plan performance, salary escalation, retirement dates of employees and drug cost escalation rates.

Changes in Accounting Policies

Asset Retirement Obligations

        Effective January 1, 2004, we adopted the recommendations under Section 3110, Asset Retirement Obligations, of the Canadian Institute of Chartered Accountants Handbook ("Section 3110") on a retroactive basis. Section 3110 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation of a long-lived asset. These recommendations require that the fair value of a liability for an asset retirement obligation be recorded in the period in which it is incurred. When the liability is initially recorded, the cost is capitalized by increasing the carrying amount of the related long-lived asset. Upon settlement of the liability, a gain or loss is recorded. This differs from the prior practice that involved accruing for the estimated reclamation and closure liability through charges to the statement of operations over the life of the mine. We have recorded asset retirement obligations primarily associated with decommissioning and restoration costs. As required under the standard, we will make periodic assessments as to the reasonableness of its asset retirement obligation estimates and revise those estimates accordingly. The respective asset and liability balances will be adjusted, which will correspondingly increase or decrease the amounts expensed in future periods.

        The long-term asset retirement obligation is based on environmental plans, in compliance with the current environmental and regulatory requirements. Accretion expense is charged to the Consolidated Statement of Operations and Deficit based on application of an interest component to the existing liability.

Exploration Costs

        Prior to December 21, 2004, we were in the development stage and considered our exploration costs to have the characteristics of property, plant and equipment. As such, we deferred all exploration costs, including acquisition costs, field exploration and field supervisory costs relating to specific properties until those properties were brought into production, at which time, they would be amortized on a unit-of-production basis

11

based on proven and probable mineral reserves or until the properties were abandoned, sold or considered to be impaired in value, at which time, an appropriate charge would be made.

        In connection with the acquisition of HBMS on December 21, 2004, we have adopted the accounting policy of HBMS regarding exploration costs with effect from January 1, 2004. As a result of the adoption of the change in accounting policy regarding exploration costs, certain financial statement balances were restated.

MANAGEMENT'S DISCUSSION AND ANALYSIS
Supplemental Information on HBMS Results for the full year 2004

        The following information is provided for HBMS for the twelve-month periods ending December 31, 2004 (unaudited) and 2003 (audited).

	For the year ended December 31
	2004			2003
	(Unaudited)			(Audited)
	(thousands)
Revenue	$	527,354		$	417,914
Operating Costs		(479,302	)		(511,626	)
Asset Impairment		—			(269,000	)
Operating Earnings		48,052			(362,712	)	(1)
Net Earnings		50,132			(330,103	)
Cash Flow from Operations		93,836			(3,739	)
Investing Activities		(85,081	)		(118,366	)
Financing Activities		35,666			121,629
Net Cash Flow		44,421			(476	)

(1)

Includes asset impairment of $269,000 in 2003.

        In 2004, HBMS achieved operating cash costs of US$0.16 per pound of zinc, net of by-product credits. The US$0.28 per pound improvement over 2003 was primarily related to an impairment in 2003 in realized metal prices as well as completion of the $435 million capital expenditure on the 777 group of projects, which were all in full production during 2004.

12

Non GAAP Reconciliation

        Non GAAP Reconciliation of Cash Cost per pound of Zinc, Net of By-Product credits.

		For the year ended December 31
		2004		2003
		(Unaudited)		(Audited)
		(thousands)
Operating Costs per financial statements		$479,302		$511,626		(1)
Non-cash operating costs
	Depreciation and amortization(1)	(52,100	)	(70,700	)
	Accretion and other non-cash	(4,578	)	(2,078	)
		422,624		438,848
Less: By-product credits(2)		(372,514	)	(277,261	)
Cash cost net of by-products		C$50,110		C$161,587
Exchange rate (C$/US$)		1.30		1.40
Cash cost net of by-products		US$38,546		US$115,419
Zinc sales (000 lbs)		245,347		261,444
Cash cost per pound of zinc, net of by-product credits		US$0.16		US$0.44

(1)

Excluding asset impairment.

(2)

By-product credits include the Company's proportionate share of by-product sales by CMM (2004: $21.6 million, 2003: $19.6 million) and the premium on zinc oxide sales (2004: $17.8 million, 2003: $10.24 million).

Cash cost per pound of zinc, net of by-product credits, is furnished to provide additional information and is a non-GAAP measure that does not have a standardized meaning and is therefore unlikely to be comparable to similar measures presented by other issuers. This measure should not be considered in isolation as a substitute for measures of performance prepared in accordance with generally accepted accounting principles and is not necessarily indicative of operating expenses as determined under generally accepted accounting principles. This measure is intended to provide investors with information about the cash generating capabilities of HBMS' operations. HBMS uses this information for the same purpose. Mining operations are capital intensive. This measure excludes capital expenditures. Capital expenditures are discussed throughout the MD&A and the consolidated financial statements.

Revenue

        HBMS earned revenues of approximately $527.4 million for the year ended December 31, 2004 from sales of approximately 73,900 tonnes of copper, 111,300 tonnes of zinc (including sales to Zochem), 38,700 tonnes of zinc oxide, 75,600 ounces of gold, and 1,055,000 ounces of silver. For the year, realized metal prices averaged US$1.35/lb copper, US$0.49/lb zinc, US$387/troy oz gold, and US$6.66/troy oz silver. The Canadian to US dollar exchange rate averaged 1.30 for the year.

        Compared to 2003, total sales revenue in 2004 increased by 26%, largely related to improved realized metal prices for copper and zinc, in US$, which improved by approximately 57% and 26% respectively over 2003. Average realized gold and silver prices also improved by 14% and 38% respectively. The impact of improved metal prices was partly offset as the Canadian to US exchange rate strengthened from an average of 1.40 in 2003 to 1.30 in 2004.

        Copper and zinc sales quantities in 2004 were approximately 92% and 94%, respectively, compared to sales quantities in 2003 reflecting the metallurgical treatment of greater quantities of concentrates from HBMS owned mines and a planned maintenance summer shutdown of the copper smelter.

13

Operating Earnings

        Operating earnings for the year ended December 31, 2004 was approximately $48.1 million. Compared to 2003, operating earnings in 2004 increased by $411 million, of which $269 million relates to an asset impairment charge in 2003.

        HBMS mined a total of 2.55 million tonnes of ore in 2004 and tonnage mined increased at all mines compared to 2003, with the largest increase at the new 777 Mine which reached commercial production as of January 1, 2004. In total, tonnage mined was up by 15% in 2004 and both copper and zinc grade improved by 16% and 4% respectively compared to 2003.

        During 2004, the Copper Smelter processed a total of 284,100 tonnes of copper concentrates, producing 76,900 tonnes of copper metal. For the same period, the Zinc Plant processed a total of 223,000 tonnes of zinc concentrates, producing 110,200 tonnes of zinc metal. In addition to the concentrates produced from HBMS owned mines, the Flin Flon metallurgical plants processed some 98,700 tonnes of copper concentrate and 3,500 tonnes of zinc concentrate purchased from third parties.

        Improved production from our mines in 2004 reduced our requirement for purchased concentrate, and, as a result, processing of copper and zinc concentrate purchased from third parties decreased by some 10,100 and 42,800 tonnes respectively compared to 2003. Production of copper metal in 2004 was approximately 92% of 2003 largely from processing greater volumes of concentrate from HBMS mines and a planned summer maintenance shut down. Cast zinc metal production in 2004 was approximately 94% compared to 2003 primarily due to a drawdown of cathode inventory in 2003 which boosted cast metal by some 3,400 tonnes, and by the deferral of the bi-annual maintenance shutdown from 2003 into 2004.

        Depreciation and amortization totaled $52.1 million in 2004 compared to $70.7 million in 2003, with the decrease relating primarily to the impairment charge taken at the end of 2003.

Net Earnings

        Net earnings for the year ended December 31, 2004 was approximately $50.1 million compared to a loss of $330.1 million for 2003. Excluding the impact of the asset impairment in 2003, net earnings for 2004 increased by $111.3 million over 2003. The increase is comprised of $141.8 million in operating profit net of $30.5 million additional expense, which is essentially the absence of a foreign exchange gain that was realized in 2003.

Cash Flow from Operations

        Cash flow from operations in 2004 increased by approximately $97.5 million compared to 2003, primarily as a result of improved metal prices and the commencement of commercial production at the 777 Mine.

Investing Activities

        HBMS capital expenditure for 2004 totaled $69.5 million, with $15.7 million of the total required to complete the 777 group of projects, $40.7 million for mine development, and the balance required for various stay-in-business projects. This represents a decrease of 41% compared to 2003, which included $65.5 million for the 777 projects, $28.4 million mine development, and the balance for stay-in-business.

        In December 2004, $13 million was placed in trust for the governments of Manitoba and Saskatchewan as financial assurance for our asset retirement obligations. The requirement to maintain this trust value will be determined from the outcome of a study to be completed during 2005.

Financing Activities

        In 2004, HBMS entered into capital leasing (sales and leaseback) arrangements that contributed $14.4 million to financing cash flow. On December 21, 2004, HBMS issued US $175 million Senior Secured Notes bearing interest at 9.625% per annum with interest payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2005. The Notes will mature on January 15, 2012.

14

        As of March 24, 2005, HudBay agreed to guarantee HBMS' Notes. The HudBay guarantee is unsecured and ranks subordinate in right of payment to all senior indebtedness of HudBay. The guarantee will terminate on the date upon which HudBay owns less than a majority of the voting shares of HBMS.

        The net inflow from financing activities is the net result of the above, offset by amounts advanced to HudBay in connection with the acquisition.

March 30, 2005

15

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Exhibit 4.4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
MANAGEMENT'S DISCUSSION AND ANALYSIS Supplemental Information on HBMS Results for the full year 2004

EX-4.5

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EXHIBIT 4.5

FORM 51-102F3
MATERIAL CHANGE REPORT

Item 1    Name and Address of Company

HudBay Minerals Inc.
6 Adelaide Street East, Suite 300
Toronto, Ontario
M5C 1H6

Item 2    Date of Material Change

February 22, 2005

Item 3    News Release

A Press Release was issued in Toronto, Ontario on February 22, 2005 and subsequently filed on SEDAR.

Item 4    Summary of Material Change

HudBay Minerals Inc. (the "Company") announced that it had had completed its previously announced private placement of flow-through common shares for aggregate gross proceeds to the Company of approximately $2,500,000.

Item 5    Full Description of Material Change

HudBay Minerals Inc. (the "Company") announced that it had completed its previously announced private placement of flow-through common shares for aggregate gross proceeds to the Company of approximately $2,500,000.

The Company issued 806,452 flow-through common shares at a price of $3.10 per share pursuant to the brokered private placement through a syndicate of investment dealers led by GMP Securities Ltd.

Proceeds from the offering will be used for development on the Company's exploration properties in Manitoba and Saskatchewan. This financing is the first stage in a planned exploration program of up to $10 million in the Flin Flon Greenstone Belt during the next 12 months.

HudBay Minerals Inc. is an integrated Canadian mining and metal producing company that operates mines and concentrators in Northern Manitoba and Saskatchewan and a metal processing complex in Flin Flon, Manitoba with annual production capacity of approximately 90,000 tonnes of copper and approximately 115,000 tonnes of zinc.

Item 6    Reliance on subsection 7.1(2) or (3) of National Instrument 51-102

N/A

Item 7    Omitted Information

N/A

Item 8    Executive Officer

Brian Gordon, Vice-President and General Counsel of HudBay Minerals Inc.; Tel: (204) 949-4261.

Item 9    Date of Report

March 1, 2005

HUDBAY MINERALS INC.
(Signed)
By:	/s/ Brian Gordon
	Name: Brian Gordon Title: Vice-President and General Counsel

2

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EXHIBIT 4.5

EX-5.1

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Exhibit 5.1

[Letterhead of KPMG LLP]

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

We consent to use of our report incorporated by reference and our comments to U.S. readers on Canada – U.S. reporting differences, each dated March 30, 2005, relating to the audited consolidated financial statements of HudBay Minerals Inc. as at December 31, 2004 and 2003 and for each of the years in the three-year period ended December 31, 2004 in the Registration Statement on Form F-10 of HudBay Minerals Inc., Hudson Bay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited. We also consent to the reference to our firm under the heading "Experts" in the Registration Statement.

/s/ KPMG LLP
Chartered Accountants

April 20, 2005

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Exhibit 5.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

EX-5.2

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Exhibit 5.2

CONSENT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

We consent to the use in this Registration Statement of HudBay Minerals Inc., Hudson Bay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited on Form F-10 of our reports dated November 28, 2004 (which audit report expresses an unqualified opinion and includes an explanatory paragraph referring to previously issued financial statements, and includes a separate report titled Comments by Independent Registered Chartered Accountants on Canada-United States of America Reporting Differences referring to explanatory paragraphs pertaining to substantial doubt about the ability of 152640 Canada Inc. to continue as a going concern and a change in accounting principle) related to the financial statements of 152640 Canada Inc. as of December 31, 2003 and 2002 and for each of the years in the three year period ended December 31, 2003, appearing in the prospectus, which is part of this Registration Statement and to the reference to us under the heading "Experts" in such prospectus.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Independent Registered Chartered Accountants
Winnipeg, Canada
April 20, 2005

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Exhibit 5.2
CONSENT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

EX-5.3

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Exhibit 5.3

CONSENT OF JOHN E. STEERS, P.ENG.

April 20, 2005

I, John E. Steers, P.Eng., hereby consent to the use of and reference to my name and my report, and the incorporation of information derived from my report evaluating the mineral reserves of the Balmat No. 4 Mine, in the Registration Statement on Form F-10 filed by HudBay Minerals Inc., HudBay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited, as such may thereafter be amended or supplemented, and in the prospectus contained therein. I also consent to the reference to me under the heading "Experts" in such Registration Statement.

/s/ John E. Steers, P.Eng.
John E. Steers, P.Eng.

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Exhibit 5.3
CONSENT OF JOHN E. STEERS, P.ENG.

EX-5.4

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Exhibit 5.4

CONSENT OF KIM LAU BSC. P.GEO.

April 20, 2005

I, Kim Lau BSc. Geo., hereby consent to the incorporation by reference into the Registration Statement on Form F-10 filed by HudBay Minerals Inc. ("HudBay"), HudBay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited, as such may thereafter be amended or supplemented, and in the prospectus contained therein, of references to me in HudBay's Annual Information Form for the year ended December 31, 2004 under the heading "HBMS Mines — Mineral Reserves and Inferred Mineral Resources". I also consent to the reference to me under the heading "Experts" in such Registration Statement.

Kim Lau BSc. Geo.
/s/ Kim Lau BSc. Geo.

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Exhibit 5.4
CONSENT OF KIM LAU BSC. P.GEO.

EX-5.5

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Exhibit 5.5

CONSENT OF GARRY ALLEN MSC. P.ENG.

April 20, 2005

I, Garry Allen MSc. P.Eng., hereby consent to the incorporation by reference into the Registration Statement on Form F-10 filed by HudBay Minerals Inc. ("HudBay"), HudBay Mining and Smelting Co., Limited and Hudson Bay Exploration and Development Company Limited, as such may thereafter be amended or supplemented, and in the prospectus contained therein, of references to me in HudBay's Annual Information Form for the year ended December 31, 2004 under the heading "HBMS Mines — Mineral reserves and Inferred Mineral Resources". I also consent to the reference to me under the heading "Experts" in such Registration Statement.

/s/ Garry Allen MSc. P.Eng.
Garry Allen MSc. P.Eng.

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Exhibit 5.5
CONSENT OF GARRY ALLEN MSC. P.ENG.

EX-7.1

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Exhibit 7.1

Final Execution Version

HUDBAY MINING AND SMELTING INC.

9⁵/8% SENIOR SECURED NOTES

DUE JANUARY 15, 2012

INDENTURE

Dated as of December 21, 2004

The Bank of New York
Trustee

CROSS-REFERENCE TABLE*

Trust Indenture Act Section		Indenture Section
310	(a)(1)	7.10
	(a)(2)	7.10
	(a)(3)	N.A.
	(a)(4)	N.A.
	(a)(5)	7.10
	(b)	7.10
	(c)	N.A.
311	(a)	7.11
	(b)	7.11
	(c)	N.A.
312	(a)	2.05
	(b)	14.03
	(c)	14.03
313	(a)	7.06
	(b)(1)	N.A.
	(b)(2)	7.06; 7.07
	(c)	7.06;14.02
	(d)	7.06
314	(a)	4.09; 4.25; 14.02
	(b)	10.02
	(c)(1)	14.04
	(c)(2)	14.04
	(c)(3)	N.A.
	(d)	N.A.
	(e)	14.05
	(f)	N.A.
315	(a)	7.01
	(b)	7.05; 14.02
	(c)	7.01
	(d)	7.01
	(e)	6.14
316	(a) (last sentence)	2.09
	(a)(1)(A)	6.05
	(a)(1)(B)	6.04
	(a)(2)	N.A.
	(b)	6.07
	(c)	2.12; 9.04
317	(a)(1)	6.08
	(a)(2)	6.12
	(b)	2.04
318	(a)	14.01
	(b)	N.A.
	(c)	14.01

N.A. means not applicable.

*

This Cross Reference Table is not part of the Indenture.

TABLE OF CONTENTS

		Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01	Definitions	1
Section 1.02	Other Definitions	21
Section 1.03	Incorporation by Reference of Trust Indenture Act	22
Section 1.04	Rules of Construction	22
ARTICLE 2. THE NOTES
Section 2.01	Form and Dating; Terms	23
Section 2.02	Execution and Authentication	23
Section 2.03	Registrar and Paying Agent	24
Section 2.04	Paying Agent to Hold Money in Trust	24
Section 2.05	Holder Lists	24
Section 2.06	Transfer and Exchange	25
Section 2.07	Replacement Notes	34
Section 2.08	Outstanding Notes	34
Section 2.09	Treasury Notes	35
Section 2.10	Temporary Notes	35
Section 2.11	Cancellation	35
Section 2.12	Defaulted Interest	35
Section 2.13	Issuance of Additional Notes	36
ARTICLE 3. REDEMPTION
Section 3.01	Notices to Trustee	36
Section 3.02	Selection of Notes to be Redeemed	36
Section 3.03	Notice of Redemption	37
Section 3.04	Effect of Notice of Redemption	37
Section 3.05	Deposit of Redemption Price	37
Section 3.06	Notes Redeemed in Part	38
Section 3.07	Optional Redemption; Redemption for Changes in CanadianWithholding Taxes	38
Section 3.08	No Mandatory Redemption	39
Section 3.09	Repurchase at the Option of Holders: Change of Control; Asset Sales	39

i

ARTICLE 4. COVENANTS
Section 4.01	Payment of Notes	40
Section 4.02	Maintenance of Office or Agency	41
Section 4.03	Corporate Existence	41
Section 4.04	Money for Security Payments to Be Held in Trust	41
Section 4.05	Maintenance of Properties	42
Section 4.06	Maintenance of Insurance	42
Section 4.07	Taxes	43
Section 4.08	Stay, Extension and Usury Laws	43
Section 4.09	Compliance Certificate	43
Section 4.10	Restricted Payments	43
Section 4.11	Incurrence of Indebtedness and Issuance of Preferred Stock	46
Section 4.12	Liens	48
Section 4.13	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	48
Section 4.14	Asset Sales	50
Section 4.15	Limitation on Collateral Asset Sales	51
Section 4.16	Additional Amounts	53
Section 4.17	Change of Control	54
Section 4.18	Designation of Restricted and Unrestricted Subsidiaries	54
Section 4.19	Transactions with Affiliates	55
Section 4.20	Limitation on Disposition of Capital Stock of Restricted Subsidiaries	56
Section 4.21	Additional Guarantees	56
Section 4.22	Sale and Leaseback Transactions	57
Section 4.23	Business Activities	57
Section 4.24	Payments for Consent	57
Section 4.25	Reports	57
Section 4.26	Business Prior to Amalgamatio	58
ARTICLE 5. SUCCESSORS
Section 5.01	Merger, Consolidation or Sale of Assets	58
Section 5.02	Successor Corporation Substituted	59

ii

ARTICLE 6. EVENTS OF DEFAULT
Section 6.01	Events of Default	59
Section 6.02	Acceleration	60
Section 6.03	Other Remedies	61
Section 6.04	Waiver of Past Defaults	62
Section 6.05	Control by Majority	62
Section 6.06	Limitation on Suits	63
Section 6.07	Rights of Holders of Notes to Receive Payment	63
Section 6.08	Collection Suit by Trustee	63
Section 6.09	Restoration of Rights and Remedies	63
Section 6.10	Rights and Remedies Cumulative	63
Section 6.11	Delay or Omission Not Waiver	64
Section 6.12	Trustee May File Proofs of Claim	64
Section 6.13	Priorities	64
Section 6.14	Undertaking for Costs	64
ARTICLE 7. TRUSTEE
Section 7.01	Duties of Trustee	65
Section 7.02	Rights of Trustee	65
Section 7.03	Individual Rights of Trustee	66
Section 7.04	Trustee's Disclaimer	66
Section 7.05	Notice of Defaults	66
Section 7.06	Reports by Trustee to Holders	67
Section 7.07	Compensation and Indemnity	67
Section 7.08	Replacement of Trustee	68
Section 7.09	Successor Trustee by Merger, etc.	68
Section 7.10	Eligibility; Disqualification	68
Section 7.11	Preferential Collection of Claims Against Company	69
Section 7.12	Appointment of Co-Trustee	69
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01	Option to Effect Legal Defeasance or Covenant Defeasance	70
Section 8.02	Legal Defeasance and Discharge	70
Section 8.03	Covenant Defeasance	70
Section 8.04	Conditions to Legal or Covenant Defeasance	71
Section 8.05	Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions	72
Section 8.06	Repayment to Company	72
Section 8.07	Reinstatement	72

iii

ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01	Without Consent of Holders of the Notes	73
Section 9.02	With Consent of Holders of Notes	73
Section 9.03	Compliance with Trust Indenture Act	75
Section 9.04	Revocation and Effect of Consents	75
Section 9.05	Notation on or Exchange of Notes	75
Section 9.06	Trustee to Sign Amendments, etc	75
Section 9.07	Amendments, Waivers and Consents Under Credit Facility Documents	75
ARTICLE 10. COLLATERAL AND SECURITY
Section 10.01	Security Documents; Collateral; Additional Collateral	75
Section 10.02	Recording, Registration and Opinions	77
Section 10.03	Further Assurance	78
Section 10.04	Release of Collateral	78
Section 10.05	Possession and Use of Collateral	78
Section 10.06	Specified Releases of Collateral	79
Section 10.07	Disposition of Collateral Without Release	81
Section 10.08	Form and Sufficiency of Release	81
Section 10.09	Purchaser Protected	82
Section 10.10	Authorization of Actions to be Taken by the Trustee Under the Security Documents	82
Section 10.11	Authorization of Receipt of Funds by the Trustee Under the Security Documents	82
Section 10.12	Certain TIA Requirement	82
Section 10.13	Appointment of Collateral Agent	83
ARTICLE 11. APPLICATION OF TRUST MONIES
Section 11.01	"Trust Monies" Defined	83
Section 11.02	Withdrawal of Trust Monies to Fund an Asset Sale Offer or Similar Offers Relating to Proceeds of Insurance or Expropriation.	84
Section 11.03	Withdrawal of Trust Monies for a First Lien Collateral Investment	84
Section 11.04	Investment of Trust Monies	85
Section 11.05	Withdrawal of Trust Monies Representing Second Lien Collateral	85
ARTICLE 12. GUARANTEES
Section 12.01	Guarantee	85
Section 12.02	Limitation on Guarantor Liability	87
Section 12.03	Execution and Delivery of Guarantee	87
Section 12.04	Guarantors May Consolidate, etc., on Certain Terms	87
Section 12.05	Release of Guarantee	88
Section 12.06	Subrogation	88
Section 12.07	Benefits Acknowledged	89
ARTICLE 13. SATISFACTION AND DISCHARGE
Section 13.01	Satisfaction and Discharge	89
Section 13.02	Money Held in Trust	89

iv

ARTICLE 14. MISCELLANEOUS
Section 14.01	Trust Indenture Act Controls	90
Section 14.02	Notices	90
Section 14.03	Communication by Holders of Notes with Other Holders of Notes	91
Section 14.04	Certificate and Opinion as to Conditions Precedent	92
Section 14.05	Statements Required in Certificate or Opinion	92
Section 14.06	Rules by Trustee and Agents	92
Section 14.07	No Personal Liability of Directors, Officers, Trustees, Employees, Shareholders, Partners and Principals	92
Section 14.08	Governing Law	92
Section 14.09	Waiver of Jury Trial	92
Section 14.10	Force Majeure	93
Section 14.11	No Adverse Interpretation of Other Agreements	93
Section 14.12	Successors	93
Section 14.13	Agent for Service; Submission to Jurisdiction; Waiver of Immunities	93
Section 14.14	Conversion of Currency	93
Section 14.15	Currency Equivalent	94
Section 14.16	Severability	94
Section 14.17	Counterpart Originals	94
Section 14.18	Table of Contents, Headings, etc.	94

Exhibit A — Form of Notes
Exhibit B — Form of Certificate of Transfer
Exhibit C — Form of Certificate of Exchange
Exhibit D — Form of Notation of Guarantee
Exhibit E — Collateral Agency Agreement
Exhibit F — Intercreditor Terms

v

        INDENTURE dated as of December 21, 2004 (the "Indenture"), among HudBay Mining and Smelting Inc., a corporation existing under the federal laws of Canada (the "Company"), 152640 Canada Inc. ("152640 Canada"), Hudson Bay Mining and Smelting Co., Limited ("HBMS"), and Hudson Bay Exploration and Development Company Limited ("HBED") (each of 152640 Canada, HBMS and HBED a "Guarantor" and together the "Guarantors") and The Bank of New York, as trustee (the "Trustee").

        The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 9⁵/8% Senior Secured Notes due January 15, 2012 (the "Notes"):

ARTICLE 1.

DEFINITIONS AND INCORPORATION
BY REFERENCE

Section 1.01 Definitions.

        Set forth below are certain defined terms used in this Indenture. Reference is made to this Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

        "144A Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

        "Acquired Indebtedness" means, with respect to any specified Person:

        (a)   Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and

        (b)   Indebtedness secured by a Lien encumbering any asset acquired by such specified Person (to the extent of the Fair Market Value of the asset where the Indebtedness so secured is not the Indebtedness of the specified Person),

        which, in each case, is not repaid at or within five days following the date of such acquisition.

        "Acquired Person" has the meaning set forth in the definition of "Investments" in Section 1.01 hereof.

        "Acquisition" means the acquisition by ONTZINC Corporation of all of the outstanding capital stock of 152640 Canada Inc. pursuant to the agreement, dated October 7, 2004, between ONTZINC Corporation and Anglo American International, S.A.

        "Additional Notes" means Notes other than the Initial Notes issued under this Indenture in accordance with Section 2.13, hereof, as part of the same series as the Initial Notes.

        "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

        "Agent" means any Registrar, Paying Agent or co-registrar.

        "Amalgamation" means the amalgamation of the Company, 152640 Canada Inc. and Hudson Bay Mining and Smelting Co., Limited.

        "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

        "Asset Sale" means:

        (a)   the sale, lease, conveyance or other disposition of any assets or rights, other than sales and exchanges of inventory (including metal concentrate) and sales of treatment and refining services in the ordinary course of business consistent with past practices and sales of First Lien Collateral; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries, taken as a whole, will be governed by the provisions of Section 4.17 and/or Section 5.01 hereof and not by Section 4.14; and

        (b)   the issuance or sale of Equity Interests in any of the Company's Restricted Subsidiaries.

        Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

        (a)   any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $5.0 million;

        (b)   a transfer of assets between or among the Company and any of its Wholly Owned Restricted Subsidiaries;

        (c)   an issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or to a Wholly Owned Restricted Subsidiary of the Company;

        (d)   the sale or other disposition of receivables or other current assets for cash or Cash Equivalents for Fair Market Value and the factoring of accounts receivable, in each case, in the ordinary course of business;

        (e)   the sale or exchange of equipment in connection with the acquisition of other equipment used in a Permitted Business;

        (f)    any disposition of Capital Stock or assets of, or any other Investment in, any Unrestricted Subsidiary that has been designated as an Unrestricted Subsidiary after the date of this Indenture;

        (g)   the creation of any Lien not prohibited by Section 4.12;

        (h)   a disposition of goods held for sale in the ordinary course of business or worn-out, obsolete, surplus or damaged equipment (or equipment no longer used or otherwise unsuitable for use in connection with the Company's or its Restricted Subsidiaries' business) in the ordinary course of business of the Company and its Restricted Subsidiaries;

        (i)    foreclosure on assets;

        (j)    a transfer of real property to a provincial, county, local, municipal or other governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency that enhances the value of mining properties owned by the Company or a Restricted Subsidiary; provided that, if the Fair Market Value of property is in excess of $1.0 million, the Board of Directors has determined in good faith that such exchange is in the best interest of the Company;

        (k)   any Production and Capacity Arrangement;

        (l)    the sale or other disposition of an asset or an interest in real property pursuant to Third Party Mining Arrangements;

        (m)  any Structured Arrangement;

        (n)   the sale or other disposition of cash or Cash Equivalents; and

        (o)   a Restricted Payment or Permitted Investment that is permitted by Section 4.10.

        "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

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        "Bankruptcy Law" means Title 11, U.S. Code, the Bankruptcy, Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or any similar United States federal or state law or Canadian federal, provincial, territorial or other foreign law for the relief of debtors or any amendment thereto.

        "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

        "Board of Directors" means:

        (a)   with respect to a corporation, the board of directors of the corporation;

        (b)   with respect to a partnership, the Board of Directors of the general partner of the partnership; and

        (c)   with respect to any other Person, the board or committee of such Person serving a similar function.

        "Borrowing Base" means, as of any date, an amount equal to:

        (a)   85% of the face amount of all accounts receivable owned by the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date for which internal financial statements are available that were not more than 90 days past due; plus

        (b)   60% of the book value of all inventory owned by the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter preceding such date for which internal financial statements are available,

all calculated on a consolidated basis and in accordance with GAAP.

        "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement.

        "Business Day" means any day other than a Legal Holiday.

        "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.

        "Capital Stock" means:

        (a)   in the case of a corporation, corporate stock;

        (b)   in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

        (c)   in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

        (d)   any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

        "Cash Equivalents" means:

        (a)   United States dollars or Canadian dollars;

        (b)   securities issued or directly and fully guaranteed or insured by the United States government or the Canadian government or any agency or instrumentality of the United States government or the Canadian government (provided that the full faith and credit of the United States or Canada, as applicable, is pledged in support of those securities) having maturities of not more than six months from the date of acquisition;

        (c)   certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank

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deposits, in each case, with any lender party to a Credit Facility or with any U.S. or Canadian commercial bank having capital and surplus in excess of US$500.0 million and a Thomson Bank Watch Rating of "B" or better;

        (d)   repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

        (e)   commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition;

        (f)    money market funds at least 90% of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (e) of this definition.

        "Change of Control" means the occurrence of any of the following:

        (a)   the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger, amalgamation or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than ONTZINC, the Company or a wholly owned Subsidiary of ONTZINC or the Company;

        (b)   the adoption of a plan relating to the liquidation or dissolution of the Company;

        (c)   the consummation of any transaction (including, without limitation, any merger, amalgamation or consolidation) the result of which is that any "person" or "group" (as those terms are used in Section 13(d) of the Exchange Act), other than ONTZINC or a wholly owned Subsidiary of ONTZINC becomes the Beneficial Owner, directly or indirectly, of 50% or more of the voting power of the outstanding Voting Stock of the Company;

        (d)   the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors.

        "Clearstream" means Clearstream Banking, société anonyme or any successor securities clearing agency.

        "Collateral Agency Agreement" means the collateral agency agreement dated as of date hereof among the Company, the Trustee and the Collateral Agent, substantially in the form of Exhibit E hereto, as the same may be amended, supplemented, modified or replaced in accordance with the terms thereof.

        "Collateral Agent" means BNY Trust Company of Canada or one of its affiliates, in its capacity as Collateral Agent, together with its successors or assigns in such capacity.

        "Collateral Agent's Lien" means the Lien granted to the Collateral Agent as security for Note Obligations.

        "Collateral Asset Sale" means the sale, lease, conveyance or other disposition, direct or indirect, of First Lien Collateral; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries, taken as a whole, will be governed by Section 4.17 hereof and/or Section 5.01 hereof and not by Section 4.15 hereof.

        Notwithstanding the preceding, the following items will not be deemed to be Collateral Asset Sales:

        (a)   a transfer of assets between or among the Company and any Guarantors;

        (b)   an issuance of Equity Interests by a Guarantor to the Company or to another Guarantor;

        (c)   the creation of any Lien not prohibited by Section 4.12 hereof;

        (d)   foreclosures on assets;

        (e)   a transfer of real property to a provincial, county, local, municipal or other governmental agency in exchange for the granting of a permit or the taking of other regulatory action by such governmental agency that enhances the value of mining properties owned by the Company or a Guarantor; provided that,

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if the Fair Market Value of property is in excess of $1.0 million, the Board of Directors has determined in good faith that such exchange is in the best interest of the Company;

        (f)    any Production and Capacity Arrangement;

        (g)   the sale or other disposition of an asset or an interest in real property pursuant to Third Party Mining Arrangements;

        (h)   any Structured Arrangement; and

        (i)    a Restricted Payment or Permitted Investment that is permitted by Section 4.10 hereof.

        "Common Stock" of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding-up of such Person, to shares of Capital Stock of any other class of such Person.

        "Company" means the Person named as the "Company" in the first paragraph of this Indenture and any and all successors thereto.

        "Company Request" or "Company Order" means a written request in the form of an officer's certificate or order signed in the name of the Company by any two of its Chairman, Chief Executive Officer, President, Chief Financial Officer, any Vice President, its Treasurer or its Secretary, and delivered to the Trustee.

        "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

        (a)   provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

        (b)   consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

        (c)   depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), accretion expense in respect of asset retirement obligations and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus

        (d)   non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with GAAP; provided that, if the consolidated financial statements of the Company include a minority interest, the amounts in the foregoing clauses (a) to (d) shall be calculated net of any such amounts included in determining the minority interest.

        Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company will be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders.

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        "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

        (a)   the Net Income of any Person (other than the referent Person) that is not a Restricted Subsidiary of the specified Person or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the specified Person;

        (b)   the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders;

        (c)   non-cash charges relating to employee benefit or other management compensation plans of the Company or any of its Restricted Subsidiaries or any non-cash compensation charge arising from any grant of stock, stock options or other equity-based awards of the Company or any of its Restricted Subsidiaries (excluding in each case any non-cash charge to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense incurred in a prior period), in each case to the extent that such non-cash charges are deducted in computing such Consolidated Net Income, shall be excluded;

        (d)   non-cash impairment charges (i) resulting directly from the Transactions or (ii) with respect to goodwill, intangible assets or deferred financing fees shall, in each case, be excluded; and

        (e)   the cumulative effect of a change in accounting principles will be excluded.

        "Consolidated Net Worth" means, with respect to any specified Person as of any date, the sum of:

        (a)   the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus

        (b)   the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock.

        "Continuing Directors" means, as of any date of determination, any member of the Board of Directors who:

        (a)   was a member of such Board of Directors on the date of this Indenture; or

        (b)   was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

        "Corporate Trust Office of the Trustee" will be the principal office of the Trustee at which time its corporate trust business shall be administered, which office at the date hereof is located at the address of the Trustee specified in Section 14.02 hereof or such other address as to which the Trustee may designate from time to time by giving notice to the Company on the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).

        "Credit Facilities" means, one or more debt facilities or commercial paper facilities in existence on or entered into after the date of this Indenture, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or Hedging Obligations, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.

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        "Credit Facility Agent" means, at any time in respect of any Credit Facility, the administrative agent, collateral agent or collateral trustee for holders of Credit Facility Obligations that holds the Liens securing such Obligations.

        "Credit Facility Collateral" means, at any time in respect of any Credit Facility:

        (a)   all inventory of the Company and the Guarantors under the Credit Facility;

        (b)   all receivables of the Company and the Guarantors under the Credit Facility and all security therefor;

        (c)   all cash received from the collateral referred to in clause (b) above; and

        (d)   shares of capital stock of certain of the Company's material Subsidiaries.

        "Credit Facility Obligations" means Indebtedness under a Credit Facility permitted to be incurred under Section 4.11(b) hereof and other Obligations (not constituting Indebtedness) under such Credit Facility (which may, but need not, include Hedging Obligations and obligations under deposit account services agreements and cash management contracts with any lender that is or at any time was party to such Credit Facility or any of its Affiliates).

        "Custodian" means the Trustee, as custodian for the Depository with respect to the Notes in global form, or any successor entity thereto.

        "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

        "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto, except that such Note will not bear the Global Note Legend and will not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto.

        "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

        "Disqualified Stock" of a person means any Capital Stock of that person that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock of the Company solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.10 hereof.

        "Domestic Subsidiary" means any Restricted Subsidiary that is incorporated or organized under the laws of Canada or of any province or territory of Canada.

        "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

        "Euroclear" means Euroclear S.A./N.V., as operator of the Euroclear system.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Exchange Notes" means the notes issued in exchange for the Notes issued in this offering or any Additional Notes (which, in each case, will evidence the same continuing Debt as such Notes) pursuant to the

7

Registration Rights Agreement or any similar Registration Rights Agreement with respect to any Additional Notes.

        "Exchange Offer" has the meaning set forth in the Registration Rights Agreement.

        "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement.

        "Excluded Assets" means:

        (a)   Reclamation Collateral;

        (b)   with respect to personal property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as (i) the grant of a security interest therein constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed and (ii) such abandonment, invalidation, unenforceability, breach, termination or default is not rendered ineffective pursuant to any applicable law or principles of equity; provided, however, that (a) such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in clauses (i) and (ii) in this definition are and remain satisfied and to the extent such assets otherwise constitute Note Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the security documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement, and (b) the proceeds of any sale, lease or other disposition of any such lease, license, interest, permit, franchise, power, authority or right that is or becomes an Excluded Asset will not be an Excluded Asset unless they satisfy the conditions set forth in clauses (i) and (ii) of this definition;

        (c)   with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for as long as the grant of a security interest therein (i) requires a third party consent or (ii) constitutes or would result in the abandonment, invalidation or unenforceability of such lease, license, interest, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, interest, permit, franchise, power, authority or right is governed; provided, however, that such lease, license, interest, permit, franchise, power, authority or right will be an Excluded Asset only to the extent and for as long as the conditions set forth in this definition are and remain satisfied and to the extent such assets otherwise constitute Note Collateral, will cease to be an Excluded Asset, and will become subject to the security interests granted to the Collateral Agent under the security documents, immediately and automatically at such time as such conditions cease to exist, including by reason of any waiver or consent under the applicable instrument or agreement;

        (d)   other property in which a security interest cannot be perfected by the filing of a financing statement under applicable personal property security legislation; and

        (e)   any property acquired in connection with a Structured Arrangement.

        "Existing Indebtedness" means (i) the loan agreement between HBMS and Her Majesty the Queen in right of the Province of Manitoba, dated June 14, 1991, as amended August 30, 1994, March 14, 1997 and March 14, 1999 (the "Manitoba Loan"), and (ii) the other Indebtedness of the Company and its Restricted Subsidiaries in existence on the date of this Indenture after giving effect to the Transactions, including the Amalgamation, until such amounts are repaid.

        "Fair Market Value" means, with respect to any Property, the price that could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined, except as otherwise provided, (i) if such Property has a Fair Market Value equal to or less than $5.0 million, by the principal financial officer of the Company, or (ii) if such Property has a Fair Market Value in excess of $5.0 million, by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company.

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        "First Lien Collateral" means, all real and immovable property (including leasehold interests and any other interest or right in any real property) now or hereafter owned or acquired by the Company or a Guarantor in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, other than Excluded Assets. The First Lien Collateral will also include any Property that becomes part of the First Lien Collateral in circumstances described under Section 4.15.

        "Fixed Charges" means, with respect to any specified Person and its Restricted Subsidiaries for any period, the sum, without duplication, of:

        (a)   the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations relating to interest; plus

        (b)   the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

        (c)   any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such guarantee or Lien is called upon; plus

        (d)   the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock or preferred stock, as the case may be) or to such Person or a Restricted Subsidiary or such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, provincial, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP.

Fixed Charges does not include accretion expense in respect of asset retirement obligations.

        "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems Disqualified Stock or preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

        (a)   acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, amalgamations or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period will be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, or the equivalent rule under Canadian securities laws;

9

        (b)   the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded; and

        (c)   the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date.

        "Flow-through Stock" means capital stock that is issued to a person under a written agreement between the person and a corporation under which the corporation agrees (i) to incur, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share is to be issued; and (ii) to renounce, before March of the first calendar year that begins after that period, to the person in respect of the share, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share.

        "GAAP" means, as of any date of determination, generally accepted accounting principles in Canada and which are applicable as of any date of determination.

        "Global Note Legend" means the legend set forth in Section 2.06(g)(iii), which is required to be placed on all Global Notes issued under this Indenture.

        "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto, issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.

        "Governmental Agency" means (a) any international, foreign, federal, provincial or municipal government, or political subdivision thereof, (b) any governmental agency, authority, board, bureau, commission, department or instrumentality, (c) any court or administrative tribunal, (d) any non-governmental agency or entity that is vested by a governmental agency with applicable jurisdiction over a Person, or (e) any arbitration tribunal or other non-governmental authority to whose jurisdiction a Person has given its general consent.

        "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit.

        "guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

        "Guarantee" has the meaning set forth in Section 12.01 hereof.

        "Guarantors" means:

        (a)   each Restricted Subsidiary of the Company that is a Domestic Subsidiary as of the date of this Indenture; and

        (b)   any other Restricted Subsidiary of the Company that executes a Guarantee in accordance with the provisions of this Indenture.

and their respective successors and assigns.

        "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under:

        (a)   interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and

        (b)   other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates, interest rates or commodity prices;

entered into in the ordinary course of business and not for speculative purposes.

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        "Holder" means a Person in whose name a Note is registered in the Note Register.

        "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

        (a)   in respect of borrowed money;

        (b)   evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

        (c)   in respect of banker's acceptances;

        (d)   representing Capital Lease Obligations;

        (e)   representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

        (f)    representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person; provided that, where such Indebtedness is not assumed and recourse for the obligation of such Indebtedness is limited to the value of the asset secured, the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset as of the date of determination and (b) the amount of such Indebtedness) and, to the extent not otherwise included, the guarantee by the specified Person of any indebtedness of any other Person. "Indebtedness" does not include liabilities associated with the costs of decommissioning and restoring facilities or real property of a Person, including amounts recorded as asset retirement obligations upon a balance sheet of the specified Person in accordance with GAAP.

        The amount of any Indebtedness outstanding as of any date will be:

        (a)   the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

        (b)   the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness; and

        (c)   the liquidation preference and any mandatory redemption payment obligation in respect of any Disqualified Stock and preferred stock of a Restricted Subsidiary.

        "Indenture" means this Indenture, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

        "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant.

        "Initial Notes" means the first US$175,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof.

        "Intercreditor Agreement" means an Intercreditor Agreement among the Trustee, the Collateral Agent and the Credit Facility Agent, as amended, supplemented or otherwise modified from time to time, in accordance with its terms and any other intercreditor agreement entered into by the Trustee and the Collateral Agent, in each case, pursuant to Section 10.01(c) of this Indenture and having terms and provisions substantially to the effect set forth in Exhibit F, or provisions which are stated to be, in the Officers' Certificate and Opinion of Counsel required by Section 14.04, not materially less favorable to the Holders as compared to the provisions set forth in Exhibit F.

        "Interest Payment Date" means January 15 and July 15 of each year to stated maturity of the Notes issued hereunder to Stated Maturity.

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        "Inventory" means all inventory comprising minerals and mineral bearing substances after they have been extracted, recovered or removed from a deposit and all work in progress and finished mineral products therefrom.

        "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations but excluding the Guarantees), advances or capital contributions (excluding commission, payroll, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities of such other Person, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.10 hereof. The acquisition by the Company or any Restricted Subsidiary of the Company of a Person (an "Acquired Person") that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investment held by the Acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.10 hereof.

        "Issue Date" means December 21, 2004.

        "Legal Holiday" means a Saturday, a Sunday or a day on which commercial banking institutions in the City of New York, the City of Toronto, the City of Winnipeg or in the City of the Corporate Trust Office of the Trustee are authorized or obligated by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest will accrue on such payment for the intervening period.

        "Lenders" has the meaning given to that term in the Credit Facility.

        "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders for use by such Holders in connection with the Exchange Offer.

        "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any option or other agreement to sell or give a security interest in such asset.

        "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends payable by such Person, excluding, however:

        (a)   any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and

        (b)   any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

        "Net Proceeds" means an amount equal to the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale or Collateral Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale or Collateral Asset Sale), net of the direct costs relating to such Asset Sale or Collateral Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale or Collateral Asset Sale, taxes paid or payable as a result of the Asset Sale or Collateral Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness

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secured by a Lien on the asset or assets that were the subject of such Asset Sale or Collateral Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

        "Non-Recourse Debt" means Indebtedness:

        (a)   as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;

        (b)   no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and

        (c)   as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries.

        "Non-U.S. Person" means a Person who is not a U.S. Person.

        "Note Collateral" means the First Lien Collateral and the Second Lien Collateral.

        "Note Documents" means this Indenture, the Notes, the Exchange Notes, the Guarantees and the Security Documents.

        "Note Obligations" means the Notes (including all Additional Notes and all Exchange Notes therefor), the Guarantees and all other Obligations of any obligor under the Note Documents.

        "Notes" has the meaning assigned to it in the preamble to this Indenture and more particularly means any Note authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Notes" will include any Additional Notes that may be issued under a supplemental indenture and all Exchange Notes for all purposes under this Indenture, both the Initial Notes and the Additional Notes and Exchange Notes will be treated as a single class.

        "Obligations" means any principal, premium (if any), interest (including special interest), if any, and interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or its Restricted Subsidiaries whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including special interest), guarantees (including the Guarantees) and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereof.

        "Offering Memorandum" means the offering memorandum of the Company dated December 10, 2004 relating to the sale of the Initial Notes.

        "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.

        "Officers' Certificate" means (with respect to a Person other than the Trustee) a certificate signed on behalf of a Person by two Officers of such Person, one of whom must be the principal executive officer, the principal financial officer, a treasurer or a principal accounting officer of such Person that meets the requirements of Section 14.05 hereof.

        "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 14.04 hereof. The counsel may be an employee of or counsel to the Company, any Restricted Subsidiary of the Company or the Trustee.

        "Parent" means any direct or indirect parent company of the Company.

        "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

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        "Permitted Business" means, any business that derives a majority of its revenues from any of the businesses engaged in by the Company and its Restricted Subsidiaries on the date of original issuance of the Notes and/or activities that are reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, any of the businesses in which the Company and its Restricted Subsidiaries are engaged on the date of original issuance of the Notes.

        "Permitted Investments" means:

        (a)   any Investment in the Company or in any Restricted Subsidiary;

        (b)   any Investment in Cash Equivalents;

        (c)   any Investment in a Person, if as a result of such Investment:

        (i)    such Person becomes a Restricted Subsidiary of the Company; or

        (ii)   such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or any Restricted Subsidiary of the Company;

        (d)   any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.14 hereof;

        (e)   any Investment to the extent the consideration therefor is composed of Equity interests (other than Disqualified Stock) of the Company;

        (f)    any Investments by a Person received (i) in compromise or resolution of (A) obligations payable to such Person in its capacity as trade creditor or from customers, which obligations were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer, or (B) litigation, arbitration or other disputes; or (ii) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or transfer of title with respect to any secured Investment in default;

        (g)   Investments represented by Hedging Obligations;

        (h)   an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

        (i)    an Investment in Considar Metal Marketing S.A. or its Subsidiary, Considar Metal Marketing Inc., to purchase the White Pine Copper Refinery Inc.

        (j)    Investments in Considar Metal Marketing S.A. and its Subsidiaries having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) at any one time outstanding (but excluding any Investment made pursuant to clause (i) above) not to exceed $250,000;

        (k)   Investments (other than Investments in the form of cash or Cash Equivalents) in Permitted Joint Ventures having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value) not to exceed at any one time outstanding 5.0% of Total Assets;

        (l)    repurchases of the Notes (including any Additional Notes) or the Exchange Notes;

        (m)  Investments in Permitted Joint Ventures, to the extent that such Investments are funded from Flow-through Stock; and

        (n)   other Investments in any Person having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (n) since the date of this Indenture, not to exceed $2.0 million.

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        "Permitted Joint Venture" means any venture with another Person or Persons in the ordinary course of, and of a nature that is or shall have become customary in, a Permitted Business as a means of actively exploiting, exploring for, acquiring, developing, producing, processing, marketing or transporting metals, minerals or other products produced in association therewith through agreements, transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of a Permitted Business jointly with third parties, including, without limitation: (1) ownership interests in mineral properties, processing facilities or ancillary real property interests; and (2) operating, processing, farm-in, farm-out, development, area of mutual interest, unitization, pooling, joint bidding, joint venture, service, partnership, subscription and stock purchase agreements and other similar agreements.

        "Permitted Liens" means:

        (a)   Liens to secure Indebtedness permitted by Section 4.11(b)(i) hereof on property and assets of the Company and its Restricted Subsidiaries except property and assets constituting First Lien Collateral;

        (b)   Liens created pursuant to the security documents securing the Notes and the Guarantees (including Additional Notes and Exchange Notes and the related Guarantees);

        (c)   (i) Liens on the Reclamation Collateral securing Obligations under the Reclamation Security Agreements, including (ii) the power, license and permission to enter upon the lands described in the Reclamation Security Agreements for the purpose of realizing on the Liens granted under the Reclamation Security Agreements;

        (d)   Liens in favor of the Company, a Guarantor or any Wholly Owned Restricted Subsidiary;

        (e)   Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary;

        (f)    Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition;

        (g)   Liens to secure the performance of statutory obligations or regulatory requirements (including reclamation obligations), bid, surety or appeal bonds, performance bonds, warranty or contractual requirements or other obligations of a like nature incurred in the ordinary course of business;

        (h)   Liens to secure Indebtedness (including Capital Lease Obligations) permitted by Section 4.11(b)(iv) covering only the assets acquired, constructed, leased or improved, as the case may be, with such Indebtedness;

        (i)    Liens existing on the date of this Indenture on any asset of HBMS or any of its Subsidiaries;

        (j)    Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

        (k)   Liens securing Indebtedness under Hedging Obligations; provided, that (a) such Liens are only secured by property or assets that secure the Indebtedness subject to the Hedging Obligation; (b) if such Hedging Obligations are with one or more parties to Credit Facilities, then secured by the same collateral as secures the applicable Credit Facilities; or (c) such Liens are restricted to cash or Cash Equivalents in an amount not exceeding US$10.0 million.

        (l)    Liens securing Permitted Refinancing Indebtedness incurred to refinance any secured Indebtedness; provided that the Liens securing such Permitted Refinancing Indebtedness are not extended to any additional assets or property;

15

        (m)  contract mining agreements and leases or subleases granted to others that do not materially interfere with the ordinary conduct of business of the Company or its Restricted Subsidiaries;

        (n)   Liens on and pledges of the Equity Interests of Unrestricted Subsidiaries;

        (o)   Liens with respect to the Capital Stock of a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale of all or substantially all of the Capital Stock of such Restricted Subsidiary, pending the closing of such sale or disposition;

        (p)   Royalty interests or other Liens on interests in real property, or the production from such property, pursuant to Third Party Mining Arrangements;

        (q)   Liens on cash or inventory in favor of a customer in a Production and Capacity Arrangement limited to an amount equal to the prepayment, or the future production that is the subject of the prepayment, under such arrangement; and

        (r)   Liens not otherwise permitted by clauses (a) through (q) above incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $10.0 million at any one time outstanding.

        "Permitted Payments to Parent" means, without duplication as to amounts, any payment of dividends, distributions or other amounts to the Parent in amounts required to permit Parent to pay (1) reasonable accounting, legal and administrative expenses of the Parent (including compensation of the Parent's directors, officers, employees and consultants) when due in an aggregate amount not to exceed $2.5 million per calendar year, (2) federal, provincial, state and local income taxes to the extent such income taxes are attributable to the income of the Company and its Subsidiaries, (3) franchise taxes or other fees required to maintain Parent's existence, and (4), if applicable, to pay interest and/or principal on Indebtedness of Parent the proceeds of which have been contributed to the Company or any of its Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, the Company incurred in accordance with Section 4.11 hereof

        "Permitted Prior Liens" means:

        (a)   Liens described in clauses (a), (c)(ii), (e), (f), (g), (h), (i), (k), (m), (n), (o) and (q ) of the definition of "Permitted Liens";

        (b)   Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the security interests created by the security documents;

        (c)   restrictions, easements, rights-of-way, servitudes or other similar rights in land (including, without limiting the generality of the foregoing, rights-of-way and servitudes for railways, sewers, drains, gas and oil pipelines, gas and water mains, electric light and power and telephone or telegraph or cable television conduits, poles, wires and cables) granted to or reserved or taken by other persons which singly or in the aggregate do not materially detract from the value of the land concerned or materially impair its use for the purpose for which it is held;

        (d)   security given to a public utility or any municipality or governmental or other public authority which is required by such utility or municipality or other authority in connection with any Permitted Business, all in the ordinary course thereof which singly or in the aggregate does not materially detract from the value of the assets concerned or materially impair their use and for the purpose for which they are held;

        (e)   any reservations, limitations, provisos and conditions expressed in any original grant from the Crown;

        (f)    Liens by reason of a judgment or decree not otherwise resulting in an Event of Default;

        (g)   Liens in favor of customs and revenue authorities to secure payments of customs duties in connection with importation of goods;

        (h)   Liens incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment insurance and other types of social security;

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        (i)    Liens encumbering property or assets under construction arising from progress or partial payments by customers of the Company or its Restricted Subsidiaries relating to such property or assets;

        (j)    Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

        (k)   Liens in mineral property or products derived from such property to secure obligations incurred or guarantees of obligations incurred in connection with or necessarily incidental to commitments of purchase or sale of, or the transporting, storage or distribution of, such property or the products derived from such property; provided that such Liens are not created or incurred in connection with any Indebtedness;

        (l)    Liens securing insurance premium financing arrangements; provided that such Lien is limited to the applicable insurance contracts;

        (m)  title defects or irregularities which are of a minor nature and in the aggregate will not materially impair the use of the property for the purpose for which it is held; and

        (n)   Liens that are stated, in a Credit Facility or related security document, to be permitted prior liens under such Credit Facility.

        "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease, purchase, repurchase or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

        (a)   the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on, and any premium or penalties required to be paid under the terms of the instrument governing, the Indebtedness and the amount of all fee, expenses and premiums incurred in connection therewith);

        (b)   such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded;

        (c)   if the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded; and

        (d)   such Indebtedness is incurred either by the Company or by the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased, purchased, repurchased or refunded.

        "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

        "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture, except where otherwise permitted by the provisions of this Indenture.

        "Production and Capacity Arrangements" means any agreement or other arrangement for the sale of future metal production or treatment and refining capacity of the Company or its Restricted Subsidiaries.

        "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Equity Interests in, and other securities of, any other Person.

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        "Public Equity Offering" means (1) an offer and sale of Common Stock of the Company or (2) an offer and sale of Common Stock of a direct or indirect parent company of the Company (to the extent the net proceeds therefrom are contributed to the equity capital of the Company) pursuant to (x) a registration statement that has been declared effective by the SEC pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company or such direct or indirect parent company), (y) a prospectus qualified with one or more securities commissions in Canada, or (z) a private issuance exempt from registration under the Securities Act.

        "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

        "Receivables" means all debts, claims, demands and choses in action (including all book debts and accounts) of the Company or any Guarantor due from any sale or other disposition of any Inventory and all books and records pertaining thereto, together with the benefit of all judgments and all other securities for such debts, claims, demands and choses in action, and all other rights and benefits in respect thereto to which such Person is now or may hereafter become entitled.

        "Reclamation Collateral" means (1) all present and after-acquired mining equipment, buildings and fixtures owned by the Company and located on the lands set forth in the Reclamation Security Agreements, all increases, additions, accretions, attachments, parts, profits and accessions to any of this collateral, together with any substitutions for and replacements and renewals of any of this collateral, and all proceeds derived directly or indirectly from any dealing with any of this collateral (or any dealings with such proceeds), whether or not of the same type, class or kind as the original property, including a right to insurance payment or any other payment as indemnity or compensation for loss or damage, and payments made in the total or partial discharge of an intangible, chattel paper, an instrument, a security or a mortgage or charge in respect of an interest in land and (2) any other collateral that is or becomes the subject of the Reclamation Security Agreements.

        "Reclamation Security Agreements" means (i) the Security Agreement, issued on May 7, 2004, by the Company in favor of Her Majesty the Queen in Right of the Province of Manitoba, and (ii) the Security Agreement, issued on March 31, 1999, by the Company in favor of Her Majesty the Queen in Right of the Province of Saskatchewan, in each case with respect to the implementation of approved closure plans relating to the Company's operations in the provinces of Manitoba and Saskatchewan, as such agreements may be amended, modified, renewed, restated or replaced, in whole or in part, from time to time.

        "Record Date" for the interest payable on or any Interest Payment Date means January 1 and July 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.

        "Registration Rights Agreement" means the Registration Rights Agreement, dated as of December 21, 2004 by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.

        "Regulation S" means Regulation S promulgated under the Securities Act.

        "Regulation S Legend" means the legend set forth in Section 2.06(g)(ii) to be placed on all Notes issued under this Indenture that were sold pursuant to Regulation S of the Securities Act.

        "Regulation S Global Note" means a Global Note in the form of Exhibit A hereto bearing the Regulation S Legend but without the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee.

        "Responsible Officer," means when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Person who at the time shall be such officer, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

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        "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend.

        "Restricted Global Note" means a Global Note bearing the Private Placement Legend.

        "Restricted Investment" means an Investment other than a Permitted Investment.

        "Restricted Subsidiary" of a Person means any Subsidiary of that Person that is not an Unrestricted Subsidiary.

        "Rule 144" means Rule 144 promulgated under the Securities Act.

        "Rule 144A" means Rule 144A promulgated under the Securities Act.

        "Rule 903" means Rule 903 promulgated under the Securities Act.

        "Rule 904" means Rule 904 promulgated the Securities Act.

        "SEC" means the Securities and Exchange Commission.

        "Second Lien Collateral" means (i) all Inventory of the Company and the Guarantors and (ii) all Receivables of the Company and the Guarantors. Second Lien Collateral shall also include other Property that is the subject of a Lien in favor of the Credit Facility Agent under a Credit Facility, other than Capital Stock of a Subsidiary of the Company. The Second Lien Collateral does not include cash held by the Company or the Guarantors as of the date of this Indenture.

        "Securities Act" means the Securities Act of 1933, as amended.

        "Security Documents" means the Intercreditor Agreement, the Collateral Agency Agreement, the Trust Monies Account Hypothecation Agreement, dated as of the Issue Date, between the Collateral Agent and Hudson Bay Mining and Smelting Company, Limited and one or more debentures, debenture delivery agreements, security agreements or other grants or transfers for security executed and delivered by the Company or any Guarantor creating (or purporting to create) a Lien upon Note Collateral in favor of the Collateral Agent equally and ratably for the benefit of the holders of the Note Obligations, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with their respective terms.

        "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.

        "Significant Subsidiary" means any Subsidiary of the Company that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof.

        "Special Interest" means all additional interest then owing, if any, pursuant to the Registration Rights Agreement.

        "Special Record Date" for the payment of any Defaulted Interest means a date fixed for payment by the Trustee pursuant to Section 2.12.

        "Standstill Default" means a default under any Credit Facility.

        "Standstill Notice" means the notice delivered by the Credit Facility Agent to the Trustee of the commencement of a Standstill Period.

        "Standstill Period" means the period of time which (a) commences with the delivery of a Standstill Notice to the Trustee and (b) expires on the date which is the earlier of (i) 120 days from the date of such delivery and (ii) such time as the Standstill Defaults shall have been cured or waived in writing by the Credit Facility Agent.

        "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

        "Structured Arrangement" means any transaction, between the Company or any of its Restricted Subsidiaries and another Person, the effects of which include the realization of tax benefits by such other Person

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from tax losses or unclaimed deductible expenses of the Company (or a Restricted Subsidiary, as the case may be); provided, that (1) the Company delivers to the Trustee a resolution of the Board of Directors set forth in an Officers' Certificate certifying that the transaction is, in their good faith judgment, fair, from a financial point of view, to the Company or such Restricted Subsidiary and (2), if such transaction is an Affiliate Transaction, the transaction complies with the requirements of Section 4.19 hereof; provided, further, that if such transaction thereafter ceases to satisfy the preceding requirements as a Structured Arrangement, it shall thereafter cease to be a Structured Arrangement for purposes of this Indenture and shall be deemed to be effected as of such date and, if the transaction is not otherwise permitted by this Indenture as of such date, the Company will be in default under this Indenture if such transaction does not comply with the preceding requirements or is otherwise unwound within 30 days of that date.

        "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of that Person (or any combination thereof).

        "Third Party Mining Arrangements" means any arrangement with another Person or Persons of a nature that is, or shall have become customary in, a Permitted Business for the purposes of sharing the risks or costs of exploring, acquiring, developing or producing minerals from property owned by the Company or a Restricted Subsidiary, including, without limitation, operating, processing, farm-in, farm-out, development, area of mutual interest, unitization, pooling, joint bidding, joint venture, service, partnership, subscription and stock purchase agreements and other similar agreements.

        "TIA" means the U.S. Trust Indenture Act of 1939 as in effect on the date hereof; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended.

        "Total Assets" of any Person means, as of any date, the consolidated total assets determined in accordance with GAAP, and set forth on a consolidated balance sheet of such Person and its Restricted Subsidiaries, as of the end of the most recently ended fiscal quarter for which internal financial statements are available.

        "Transactions" means the offering of the Notes, the contribution to the Company of the proceeds from the ONTZINC public offering of subscription receipts, the Company's providing a letter of credit to secure the Province of Manitoba Loan and the Acquisition.

        "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

        "Trust Monies" has the meaning set forth in Section 11.01(a) hereof.

        "Trust Monies Account" has the meaning set forth in Section 11.01(b) hereof.

        "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.

        "Unrestricted Global Note" means a permanent Global Note, substantially in the form of Exhibit A attached hereto, that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Notes that do not bear the Private Placement Legend.

        "Unrestricted Subsidiary" means Mingold Resources Inc. and any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

        (a)   has no Indebtedness other than Non-Recourse Debt;

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        (b)   is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;

        (c)   is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results;

        (d)   has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries; and

        (e)   does not own, lease or otherwise have an interest in the Note Collateral.

        "U.S. Person" means a U.S. person as defined in Rule 902(k) under the Securities Act.

        "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

        "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

        "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

Section 1.02 Other Definitions.

Term	Defined in Section
"Acquired Person" (see "Investments")	1.01
"Additional Amounts"	4.16
"Additional Security Documents"	10.01(d)
"Affiliate Transaction"	4.19
"Asset Sale Offer"	Exhibit A, Section 7
"Asset Sale Payment"	4.14
"Authentication Order"	2.02
"Change of Control Offer"	4.17
"Change of Control Payment"	4.17
"Common Collateral"	10.01
"Covenant Defeasance"	8.03
"DTC"	2.03
"Event of Default"	6.01
"Excess Proceeds"	4.14
"Excluded Holder"	4.16
"First Currency"	14.15
"First Lien Collateral Investment:	4.15
"Incur"	4.11
"Judgment currency"	14.14
"Legal Defeasance"	8.02
"Net Available Proceeds"	4.15

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"Note Register"	2.03
"Offer Amount"	3.09
"Offer Period"	3.09
"Other Currency"	14.15
"Paying Agent"	2.03
"Purchase Date"	3.09
"Registrar"	2.03
"Restricted Payments"	4.10
"Taxes"	4.16

Section 1.03 Incorporation by Reference of Trust Indenture Act.

        Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

        The following TIA terms used in this Indenture have the following meanings:

        "indenture securities" means the Notes;

        "indenture security Holder" means a Holder;

        "indenture to be qualified" means this Indenture;

        "indenture trustee" or "institutional trustee" means the Trustee; and

        "obligor" on the Notes and the Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Guarantees, respectively.

        All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.

Section 1.04 Rules of Construction.

        Unless the context otherwise requires:

        (a)   a term has the meaning assigned to it;

        (b)   an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

        (c)   "or" is not exclusive;

        (d)   words in the singular include the plural, and in the plural include the singular;

        (e)   provisions apply to successive events and transactions;

        (f)    unsecured or unguaranteed Indebtedness shall not be deemed to be subordinate to secured or guaranteed Indebtedness merely by virtue of its nature as unsecured or unguaranteed Indebtedness;

        (g)   the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section, clause or other subdivision;

        (h)   "US$," "U.S. Dollars" and "United States Dollars" each refer to United States dollars, or such other money of the United States that at the time of payment is legal tender for payment of public and private debts;

        (i)    "$," "C$", "Cdn$" and "Canadian Dollars" each refer to Canadian dollars, or such other money of Canada that at the time of payment is legal tender for payment of public and private debts;

        (j)    provisions apply to successive events and transactions;

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        (k)   unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and

        (l)    references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

ARTICLE 2.

THE NOTES

Section 2.01 Form and Dating; Terms.

        (a)   General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of US$1,000 and integral multiples thereof.

        (b)   The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with this Indenture, this Indenture shall govern and be controlling.

        (c)   Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

        (d)   Terms. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to US$225,000,000 (of which US$175,000,000 aggregate principal amount of Initial Securities is being issued, authenticated and delivered the date hereof in accordance with Section 2.02 hereof).

        The Notes shall be subject to repurchase by the Company pursuant to an Asset Sale Offer as provided in Sections 4.14 and 4.15 hereof or a Change of Control Offer as provided in Section 4.17 hereof. The Notes shall not be redeemable, other than as provided in Article 3.

        Additional Notes ranking pari passu with the Initial Notes may be created and issued from time to time by the Company without notice to or consent of the Holders and shall be consolidated with and form a single class with the Initial Notes and shall have the same terms as to status, redemption or otherwise as the Initial Notes; and provided, that the Company's ability to issue Additional Notes shall be subject to the Company's compliance with Section 4.11 hereof. Any Additional Notes shall be issued, in accordance with Section 2.13.

        (e)   Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream.

Section 2.02 Execution and Authentication.

        One Officer shall execute the Notes on behalf of the Company by manual or facsimile signature.

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        If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.

        A Note shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until authenticated substantially in the form of Exhibit A attached hereto by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been duly authenticated and delivered under this Indenture.

        The Trustee shall, upon a written order of the Company signed by two Officers (an "Authentication Order"), authenticate and deliver Notes for original issue in an aggregate principal amount of US$175,000,000 for the Initial Notes and in an aggregate principal amount specified in an Authentication Order for any Additional Notes issued hereunder. Each such Authentication Order shall specify the amount of Notes to be authenticated and the date on which such Notes are to be authenticated. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 and 2.13 hereof.

        The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.

Section 2.03 Registrar and Paying Agent.

        The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes ("Note Register") and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any Guarantor may act as Paying Agent or Registrar.

        The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes.

        The Company initially appoints the Trustee to act as the Registrar and Paying Agent for the Notes and to act as Custodian with respect to the Global Notes.

Section 2.04 Paying Agent to Hold Money in Trust.

        The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Special Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Restricted Subsidiary) shall have no further liability for the money so paid over to the Trustee. If the Company or a Restricted Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes.

Section 2.05 Holder Lists.

        The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such

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date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA § 312(a).

Section 2.06 Transfer and Exchange.

        (a)   Transfer and Exchange of Global Notes. A Global Note may be transferred in whole and not in part only to another nominee of DTC or to a successor of DTC or its nominee. A beneficial interest in a Global Note may not be exchanged for a Definitive Note unless (i) the Depositary (x) notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or (y) has ceased to be a clearing agency registered under the Exchange Act, (ii) in the case of a Global Note held for an account of Euroclear or Clearstream, Euroclear or Clearstream, as the case may be, (A) is closed for business for a continuous period of 14 days (other than by reason of statutory or other holidays) or (B) announces an intention permanently to cease business or does in fact do so, (iii) there shall have occurred and be continuing an Event of Default with respect to the Notes or (iv) a request for certificates has been made upon 60 days' prior written notice given to the Trustee in accordance with the Depositary's customary procedures and a copy of such notice has been received by the Company from the Trustee. Upon the occurrence of any of the preceding events in (i) – (iv) above, Definitive Notes shall be issued in such names and denominations as the Depositary (in accordance with its customary procedures) shall instruct the Trustee in accordance with the Applicable Procedures. Global Notes also may be exchanged or replaced as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note, except for Definitive Notes issued subsequent to any of the preceding events in (i) to (iv) above. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

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        (b)   Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

        (i)    Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).

        (ii)   All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant, in each case, given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant, in each case, given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (i) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.

        (iii)  Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof.

        (iv)  Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) hereof and:

        (1)   such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (A) a Broker-Dealer, (B) a Person participating in the distribution of the Exchange Notes or (C) a Person who is an affiliate (as defined in Rule 144) of the Company;

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        (2)   such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (3)   such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (4)   the Registrar receives the following:

        (A)  if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

        (B)  if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the applicable certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (4), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        If any such transfer is effected pursuant to subparagraph (2) or (4) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (2) or (4) above.

        Beneficial interests in an Unrestricted Global Note can be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note without any certification.

        (c)   Transfer or Exchange of Beneficial Interests for Definitive Notes.

        (i)    Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon the occurrence of any of the preceding events in 2.06(a)(i) — (iv) and receipt by the Registrar of the following documentation:

        (1)   if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

        (2)   if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;

        (3)   if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;

        (4)   if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;

        (5)   if such beneficial interest is being transferred to the Company or any of its Restricted Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or

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        (6)   if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

        (ii)   Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only upon the occurrence of any of the preceding events in 2.06(a)(i) — (iv) and if:

        (1)   such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

        (2)   such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (3)   such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (4)   the Registrar receives the following:

        (A)  if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

        (B)  if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit B hereto, including the applicable certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (4), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        (iii)  Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon the occurrence of any of the preceding events in 2.06(a)(i) — (iv) and satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall

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execute and the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend.

        (d)   Transfer and Exchange of Definitive Notes for Beneficial Interests.

        (i)    Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

        (1)   if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

        (2)   if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;

        (3)   if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;

        (4)   if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;

        (5)   if such Restricted Definitive Note is being transferred to the Company or any of its Restricted Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof,

        (6)   if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (1) above, the appropriate Restricted Global Note, in the case of clause (2) above, the appropriate 144A Global Note, in the case of clause (3) above, the appropriate Regulation S Global Note.

        (ii)   Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

        (1)   such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

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        (2)   such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (3)   such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (4)   the Registrar receives the following:

        (A)  if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

        (B)  if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the applicable certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

        (iii)  Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

        (iv)  Unrestricted Definitive Notes to Beneficial Interests in Restricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in a Restricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Restricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Restricted Global Notes.

If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(2), (ii)(4) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

        (e)   Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

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        (i)    Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

        (1)   if the transfer will be made pursuant to a QIB in accordance with Rule 144A under the Securities Act, then the transferor must deliver a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;

        (2)   if the transfer shall be made pursuant to Rule 903 or Rule 904 then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or

        (3)   if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

        (ii)   Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

        (1)   such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

        (2)   any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

        (3)   any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

        (4)   the Registrar receives the following:

        (A)  if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

        (B)  if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the applicable certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (4), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        (iii)  Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

        (f)    Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not

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broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. Any Notes that remain outstanding after the consummation of the Exchange Offer, and Exchange Notes issued in connection with the Exchange Offer, shall be treated as a single class of securities under this Indenture.

        (g)   Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

        (i)    Private Placement Legend. Except as permitted by subparagraph (ii) below and except for any Exchange Note, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."

        (ii)   Regulation S Legend. Any Regulation S Global Note and any other Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend and shall bear a legend in substantially the following form:

"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT."

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        (iii)  Global Note Legend. Each Global Note shall bear a legend in substantially the following form:

"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06(h) OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."

        (h)   Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

        (i)    General Provisions Relating to Transfers and Exchanges.

        (i)    To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's Authentication Order or at the Registrar's request.

        (ii)   No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.14 and 4.17 hereof).

        (iii)  Neither the Registrar nor the Company shall be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

        (iv)  All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

        (v)   The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection or (B) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a Record Date and the next succeeding Interest Payment Date.

        (vi)  Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute

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owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

        (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of this Section 2.06.

        (viii) Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 4.02, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more replacement Notes of any authorized denomination or denominations of a like aggregate principal amount.

        (ix)  At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Notes to be exchanged at such office or agency. Whenever any Global Notes or Definitive Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the replacement Global Notes and Definitive Notes which the Holder making the exchange is entitled to in accordance with the provisions of Section 2.02 hereof.

        (x)   All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07 Replacement Notes.

        If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note of like tenor and principal amount if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses (including any tax or governmental charge that may be imposed in connection therewith and the fees and expenses of the Trustee) in replacing a Note.

        In case any mutilated, destroyed, lost or stolen Notes has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note.

        Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

        The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.08 Outstanding Notes.

        The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

        If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.

        If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

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        If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

Section 2.09 Treasury Notes.

        In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer as the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to deliver any such direction, waiver or consent with respect to the Notes and that the pledgee is not the Company or any obligor upon the Notes or any Affiliate of the Company or of such other obligor.

Section 2.10 Temporary Notes.

        Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes in exchange for temporary Notes.

        Holders and beneficial holders, as the case may be, of temporary Notes shall be entitled to all of the benefits accorded to Holders or beneficial holders, respectively, of Notes under this Indenture.

Section 2.11 Cancellation.

        The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

Section 2.12 Defaulted Interest.

        If the Company defaults in a payment of interest which is payable on the Notes on any Interest Payment Date, it shall pay the defaulted interest (1) in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, or (2) at the Company's (or a Guarantor's, as the case may be) option, to the Persons who are Holders on a subsequent Special Record Date for the payment of such defaulted interest, in each case at the rate provided in the Notes and in Section 4.01 hereof. In the case of (2) above, the Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section 2.12. The Trustee shall fix or cause to be fixed each such Special Record Date for the payment of such defaulted interest; provided, that no such Special Record Date shall be less than 10 days prior to the related payment date for such defaulted interest. The Trustee shall promptly notify the Company of such Special Record Date. At least 10 days before the Special Record Date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed, first-class postage prepaid, to each Holder a notice at his or her address as it appears in the Note Register that states the special record date, the related payment date and the amount of such interest to be paid.

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        Subject to the foregoing provisions of this Section 2.12, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

Section 2.13 Issuance of Additional Notes.

        The Company shall be entitled, upon delivery of an Officer's Certificate, Opinion of Counsel and Authentication Order, subject to its compliance with Sections 4.11 and 4.12 hereof, to issue Additional Notes under this Indenture which shall have identical terms as the Initial Notes issued on the Issue Date, other than with respect to the date of issuance and issue price. The Initial Notes issued on the Issue Date, any Additional Notes and all Exchange Notes issued with respect thereto shall be treated as a single class for all purposes under this Indenture.

        With respect to any Additional Notes, the Company shall set forth in a resolution of its Board of Directors and an Officer's Certificate, a copy of each which shall be delivered to the Trustee, the following information:

        (a)   the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

        (b)   the issue price, the issue date and the CUSIP number of such Additional Notes; and

        (c)   whether such Additional Notes shall be transfer restricted Notes and issued in the form of Initial Notes as set forth in Section 2.02 of this Indenture or shall be issued in the form of Exchange Notes.

ARTICLE 3.

REDEMPTION

Section 3.01 Notices to Trustee.

        If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price.

Section 3.02 Selection of Notes to be Redeemed.

        If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by such other method the Trustee considers fair and appropriate and in accordance with the rules of the Depository. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption.

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        The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of US$1,000 or whole multiples of US$1,000; no Notes of US$1,000 or less can be redeemed in part, except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of US$1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.

Section 3.03 Notice of Redemption.

        Subject to Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date (except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 13 hereof) the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address as it appears in the Note Register.

        The notice shall identify the Notes to be redeemed and shall state:

        (a)   the redemption date;

        (b)   the redemption price;

        (c)   if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note representing the same Indebtedness to the extent not redeemed shall be issued in the name of the Holder of the Notes upon cancellation of the original Note;

        (d)   the name and address of the Paying Agent;

        (e)   that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

        (f)    that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

        (g)   the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

        (h)   that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

        At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided that the Company shall have delivered to the Trustee, at least 40 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04 Effect of Notice of Redemption.

        Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the applicable redemption date at the applicable redemption price. A notice of redemption may not be conditional. On and after the redemption date, interest ceases to accrue on Notes or portions of Notes called for redemption.

Section 3.05 Deposit of Redemption Price.

        On or prior to 11:00 a.m. Eastern Time on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any

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money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest on, all Notes to be redeemed.

        If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after a Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest accrued to the redemption date not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06 Notes Redeemed in Part.

        Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered representing the same indebtedness to the extent not redeemed provided that each new Note will be a principal amount of US$1,000 or an integral multiple of US$1,000.

Section 3.07 Optional Redemption; Redemption for Changes in Canadian Withholding Taxes.

        (a)   At any time prior to January 15, 2008, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture, calculated after giving effect to the issuance of Additional Notes, if any, at a redemption price of 109'% of the principal amount, plus accrued and unpaid interest and Special Interest, if any, to the redemption date (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), with the net cash proceeds of one or more Public Equity Offering; provided that:

        (i)    at least 65% of the aggregate principal amount of Notes issued under this Indenture, calculated after giving effect to the issuance of Additional Notes, if any, remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Affiliates); and

        (ii)   the redemption occurs within 60 days of the date of the closing of the relevant sale of Common Stock.

        (b)   Except pursuant to clause (a) above and as described below under clause (d) of this Section 3.07, the Notes will not be redeemable at the Company's option before January 15, 2009.

        (c)   After January 15, 2009, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Special Interest, if any, on the Notes redeemed, to the applicable redemption date (subject to the right of holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), if redeemed during the twelve-month period beginning on January 15 of the years indicated below:

Year	Percentage
2009	104.813%
2010	102.406%
2011 and thereafter	100.000%

        (d)   The Company may redeem all, but not less than all, of the Notes at any time at 100% of the aggregate principal amount of the Notes, plus accrued and unpaid interest and Special Interest, if any, on the Notes redeemed to the applicable redemption date, if the Company has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any

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Additional Amounts as a result of a change in the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any change in any official position of any Governmental Agency, taxing authority or regulatory authority regarding the application or interpretation of such laws or regulations, which change is announced or becomes effective on or after December 10, 2004.

        (e)   Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08 No Mandatory Redemption.

        The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

Section 3.09 Repurchase at the Option of Holders: Change of Control; Asset Sales.

        (a)   In the event that, pursuant to Section 4.14, 4.15, 4.17 or 11.02(a) hereof, the Company shall or shall be required to commence an Asset Sale Offer, Change of Control Offer or other offer to repurchase Notes, as the case may be, (each, a "Repurchase Offer"), it shall follow the procedures specified below.

        (b)   The Repurchase Offer shall remain open for a period of at least 20 Business Days and not more than 60 days following its commencement (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall accept for payment the principal amount of Notes required to be or offered to be purchased pursuant to Section 4.14, 4.15, 4.17 or 11.02(a) and properly tendered pursuant to such Section, as applicable, (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.

        (c)   If the Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Repurchase Offer.

        (d)   Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall state:

        (i)    that the Repurchase Offer is being made pursuant to this Section 3.09 and Section 4.14, 4.15, 4.17 or 11.02(a), as applicable, the length of time the Repurchase Offer shall remain open. If the Repurchase Offer is a Change of Control Offer made pursuant to Section 4.17 such notice shall describe the transaction or transactions that constitute the Change of Control and that all Notes tendered will be accepted for payment;

        (ii)   the Offer Amount, the Asset Sale Payment or Change of Control Payment, as applicable, and the Purchase Date;

        (iii)  that any Note not tendered or accepted for payment shall continue to accrete or accrue interest;

        (iv)  that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Repurchase Offer shall cease to accrete or accrue interest after the Purchase Date;

        (v)   that Holders electing to have a Note purchased pursuant to a Repurchase Offer may elect to have Notes purchased in integral multiples of US$1,000 only;

        (vi)  that Holders electing to have a Note purchased pursuant to any Repurchase Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if

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appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

        (vii) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

        (viii) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount required pursuant to Section 4.14, the Company shall select the Notes to be purchased pursuant to Section 3.02 (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of US$1,000, or integral multiples thereof, shall be purchased); and

        (ix)  that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.

        (e)   On or before the Purchase Date, the Company shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment or Asset Sale Payment, as applicable, in respect of all Notes, or portions thereof, properly tendered, and (3) shall deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating that the aggregate principal amount of Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09.

        (f)    The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or cause to be transferred by book entry such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered representing the same indebtedness to the extent not repurchased if any; provided that each new Note shall be in a principal amount of US$1,000 or an integral multiple of US$1,000. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Repurchase Offer on or as soon as practicable after the Purchase Date.

        Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

ARTICLE 4.

COVENANTS

Section 4.01 Payment of Notes.

        The Company will pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest will be considered paid on the date due if the Paying Agent, if other than the Company or a Restricted Subsidiary thereof, holds as of 1:00 p.m. Eastern Time on the due date, money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company will pay all Special Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.

        The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law, to the extent lawful) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy

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Law) on overdue installments of interest and Special Interest (without regard to any applicable grace period) at the same rate to the extent lawful.

Section 4.02 Maintenance of Office or Agency.

        The Company shall maintain in the Borough of Manhattan, in The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

        The Company may also from time to time designate one or more other offices or agencies (in or outside the Borough of Manhattan in The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, in the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

        The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03 Corporate Existence.

        Subject to Article 5 and Section 4.14 and 4.15 hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Company in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders.

Section 4.04 Money for Security Payments to Be Held in Trust.

        (a)   If the Company or any Guarantor acts at any time as Paying Agent hereunder, it will, on or before each due date of the principal of (and premium, if any) or interest and Special Interest, if any, on any of the Notes, segregate and hold in trust for the benefit of the Person entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums are paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act.

        (b)   Whenever the Company has one or more Paying Agents for the Notes, it will, on or before each due date of the principal of (and premium, if any) or interest and Special Interest, if any, on any Notes, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest and Special Interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest and the Company will promptly notify the Trustee of such action or any failure so to act.

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        (c)   The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent will agree with the Trustee, subject to the provisions of this Section 4.04, that such Paying Agent will:

        (i)    hold all sums held by it for the payment of the principal of (and premium, if any) or interest and Special Interest, if any, on Notes in trust for the benefit of the Persons entitled thereto until such sums are paid to such Persons or otherwise disposed of as herein provided;

        (ii)   give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest and Special Interest, if any; and

        (iii)  at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

        (d)   The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order, direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and upon such payment by any Paying Agent to the Trustee, such Paying Agent will be released from all further liability with respect to such money.

        Any money deposited with the Trustee or any Paying Agent, or then held by the Company or any Guarantor, in trust for the payment of the principal of (and premium, if any) or interest and Special Interest, if any, on any Note and remaining unclaimed for two years after such principal (and premium, if any) or interest and Special Interest, if any has become due and payable will be paid to the Company on Company request, unless an abandoned property law designates another person, or (if then held by the Company or any Guarantor) will be discharged from such trust; and the Holder of such Note will thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as Trustee thereof, will thereupon cease; provided that the Trustee or such Paying Agent, before being required to make any such repayment, will at the written direction and at the expense of the Company, cause to be published once, in the New York Times or The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

Section 4.05 Maintenance of Properties.

        The Company will cause all properties owned by the Company or any Restricted Subsidiary and used or useful in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section will prevent the Company or any Restricted Subsidiary from discontinuing the maintenance of any of such properties if such discontinuance is, as determined by the Company or such Restricted Subsidiary in good faith, desirable in the conduct of its business or the business of any Restricted Subsidiary and not disadvantageous in any material respect to the Holders.

Section 4.06 Maintenance of Insurance.

        The Company will, and will cause its Restricted Subsidiaries to, keep at all times all of their properties which are of an insurable nature (including the Note Collateral) insured against loss or damage with insurers believed by the Company to be responsible to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties in accordance with customary business practice. The Company and each Guarantor shall furnish to the Trustee, upon written request, full information as to its property and liability insurance carriers.

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Section 4.07 Taxes.

        The Company will pay, and will cause each of its Restricted Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate negotiations or proceedings or where the failure to effect such payment is not adverse in any material respect to the holders of the Notes.

Section 4.08 Stay, Extension and Usury Laws.

        The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.09 Compliance Certificate.

        (a)   The Company will deliver to the Trustee, within 90 days after the end of each fiscal year ending after the date hereof, an Officers' Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every condition and covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions, covenants and conditions of this Indenture (or, if a Default or Event of Default will have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto).

        (b)   So long as any of the Notes are outstanding, the Company shall deliver to the Trustee, promptly (and in any event within 10 days) upon any Officer becoming aware of the occurrence of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

Section 4.10 Restricted Payments.

        (a)   The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

        (i)    declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or other payments or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company);

        (ii)   purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;

        (iii)  make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the Notes or the Guarantees (other than any subordinated Indebtedness held by the Company or any Guarantor), except payments of interest or principal at the Stated Maturity thereof; or

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        (iv)  make any Restricted Investment (all such payments and other actions set forth in these clauses (a) through (d) above being collectively referred to as "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

        (1)   no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; and

        (2)   the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.11(a); and

        (3)   such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (vi), (vii), (ix), (xi), (xii), (xiii), (xiv) and (xv) of the next succeeding paragraph), is less than the sum, without duplication, of:

        (A)  50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from January 1, 2007 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

        (B)  100% of the aggregate net cash proceeds received by the Company after the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock or Flow-through Stock), including the net cash proceeds received from the sale of marketable securities or other property received by the Company in exchange for such Equity Interests, or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus

        (C)  to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) 100% of the aggregate amount received in cash and the Fair Market Value of property other than cash received (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus

        (D)  to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the date of this Indenture, the lesser of (i) the fair market value of the Company's or any Restricted Subsidiary's Investment in such Subsidiary as of the date of such redesignation and (ii) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary, plus

        (E)  the lesser of (i) the Fair Market Value of or (ii) the amount of Restricted Investments made subsequent to the date of the Indenture by the Company or any Restricted Subsidiary in a Person (other than an Unrestricted Subsidiary) at the time such Person becomes a Restricted Subsidiary as a result of or in connection with an additional Investment by the Company or a Restricted Subsidiary, plus

        (F)  $5.0 million.

        (b)   So long as no Default has occurred and is continuing or would be caused thereby, Section 4.10(a) hereof will not prohibit:

        (i)    the payment of any dividend or distribution on, or redemption of, Equity Interests, within 60 days after the date of declaration of such dividend or distribution or the giving of an irrevocable and

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unconditional notice of such redemption, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture;

        (ii)   the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness that is subordinated to the Notes or the Guarantees or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (3) (B) of the preceding paragraph (a) of this Section 4.10;

        (iii)  the defeasance, redemption, repurchase or other acquisition of Indebtedness that is subordinated to the Notes or the guarantees in exchange for, or with the net cash proceeds from, an incurrence of Permitted Refinancing Indebtedness;

        (iv)  the payment of any dividend by a Restricted Subsidiary of the Company that is not a Wholly Owned Restricted Subsidiary to the holders of its Equity Interests on a pro rata basis;

        (v)   so long as no default or Event of Default will have occurred and be continuing, at the time of or immediately after giving effect to such payment, the repurchase, redemption, repayment, retirement, defeasance or other acquisition for value by the Company or any of its Restricted Subsidiaries of any Equity Interests (other than Disqualified Stock) of the Company or any Parent, in each case, held by officers, directors or employees of the Company or its Restricted Subsidiaries (or permitted transferees of such Persons or the estates of such Persons or any permitted transferees or beneficiaries under their estates) pursuant to the terms of an employee benefit plan or any other agreement pursuant to which such Equity Interests were issued; provided that the aggregate cash consideration paid or distributions or payments made pursuant to this clause (v) in any calendar year will not exceed $2.0 million;

        (vi)  repurchases of Equity Interests deemed to occur upon the exercise of stock options if such Equity Interests represent a portion of the exercise price thereof;

        (vii) payments or distributions required by a final determination of a court of competent jurisdiction to satisfy dissenters' rights, pursuant to or in connection with a consolidation, merger or transfer of assets of the Company that complies with Section 5.01;

        (viii) the payment of cash in lieu of the issuance of fractional shares of Capital Stock upon exercise or conversion of securities exercisable or convertible into Capital Stock of the Company;

        (ix)  repurchases, redemptions, acquisitions, cancellations and other retirements for a nominal value per right of any rights granted pursuant to any shareholders' rights plan;

        (x)   the distribution, as a dividend or otherwise, of Equity Interests of, or Indebtedness owed to the Company or a Restricted Subsidiary by, any Unrestricted Subsidiary that has been designated as an Unrestricted Subsidiary after the Issue Date;

        (xi)  Permitted Payments to Parent;

        (xii) any payments made in connection with the consummation of the Transactions;

        (xiii) any payments made to employees in connection with the Company's profit sharing plan;

        (xiv) so long as no default or Event of Default shall have occurred and be continuing, any Structured Arrangement;

        (xv) loans or advances to executive officers, directors or employees of the Company or any Restricted Subsidiary in the ordinary course of business and consistent with the past practice of the Company or any Restricted Subsidiary, as the case may be, not to exceed $1.0 million in the aggregate principal amount outstanding at any one time; or

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        (xvi) so long as no default or Event of Default shall have occurred and be continuing, Restricted Payments not to exceed $2.0 million in the aggregate after the date of this Indenture.

        (c)   The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.

Section 4.11 Incurrence of Indebtedness and Issuance of Preferred Stock.

        (a)   The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Indebtedness), and the Company will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company or any Restricted Subsidiary may incur Indebtedness (including Acquired Indebtedness), the Company may issue Disqualified Stock and any Restricted Subsidiary may issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or preferred stock had been issued, as the case may be, at the beginning of such four-quarter period;

        (b)   Notwithstanding the foregoing, Section 4.11(a) hereof will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Indebtedness"):

        (i)    the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness and letters of credit under Credit Facilities, in an aggregate principal amount at any one time outstanding under this clause (i) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and the Restricted Subsidiaries thereunder) not to exceed the greater of:

        (1)   $70.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Restricted Subsidiaries since the Issue Date to repay term Indebtedness under a Credit Facility or to repay revolving credit Indebtedness and effect a corresponding commitment reduction under a Credit Facility, in each case, pursuant to Section 4.14 hereof; or

        (2)   the amount of the Borrowing Base as of the date of such incurrence;

        (ii)   the incurrence by the Company and its Restricted Subsidiaries of Existing Indebtedness;

        (iii)  the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Guarantees to be issued pursuant to the Registration Rights Agreement;

        (iv)  the incurrence by the Company or any Restricted Subsidiary of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (d) or Existing Indebtedness consisting of Capital Lease Obligations, mortgage financings or purchase money obligations, not to exceed, at any time outstanding, the greater of (x) $45.0 million and (y) 5% of Total Assets;

        (v)   the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be

46

incurred under clause (a) of this Section 4.11 hereof or clause (ii), (iii), (iv) or (xvi) of this Section 4.11(b);

        (vi)  the incurrence by the Company or a Restricted Subsidiary of Indebtedness to any Restricted Subsidiary of the Company or the incurrence by any Restricted Subsidiary of the Company of Indebtedness to the Company or any Restricted Subsidiary of the Company; provided, however, that:

        (1)   such Indebtedness owing by the Company or any Restricted Subsidiary to a Restricted Subsidiary that is not the Company or a Guarantor must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Guarantee of the Notes, in the case of a Guarantor; and

        (2)   (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company, or (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vi);

        (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations;

        (viii) the guarantee by the Company or any Guarantor of Indebtedness of the Company or any Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.11;

        (ix)  the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock or preferred stock in the form of additional shares of the same class of Disqualified Stock or preferred stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred stock for purposes of this Section 4.11; provided, in each such case, that the amount thereof is included in the Fixed Charges of the Company as accrued;

        (x)   the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation obligations and other statutory or regulatory requirements; trade contracts, letters of credit, banker's acceptances, surety or appeal bonds, performance or return-of-money bonds or other obligations of a like nature (including without limitation, performance guarantees under concentrate or metal supply agreements) entered into in the ordinary course of business or pursuant to self-insurance obligations and not in connection with the borrowing of money; and the obtaining of advances or credit or the payment of the deferred purchase price of property;

        (xi)  the incurrence by the Company or any Restricted Subsidiary of Indebtedness consisting of customary indemnities or obligations in respect of purchase price adjustments, earn outs or similar obligations, in each case, incurred in connection with the acquisition or disposition of any property or assets, including, without limitation, Equity Interests in accordance with the provisions of this Indenture;

        (xii) the issuance of preferred stock of a Restricted Subsidiary of the Company issued to the Company or another Restricted Subsidiary of the Company; provided that any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than the Company or a Restricted Subsidiary of the Company and any sale or other transfer of any such preferred stock to a Person that is not either the Company or a Restricted Subsidiary of the Company will be deemed to constitute an issuance of such preferred stock that was not permitted by this clause (xii) of Section 4.11(b) hereof;

47

        (xiii) the incurrence by the Company or any Restricted Subsidiary of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds;

        (xiv) the issuance of Indebtedness or preferred stock in connection with a Structured Arrangement;

        (xv) the incurrence of Indebtedness by the Company or any Guarantor that is unsecured, bears no interest and has a stated maturity date not earlier than 91 days after the stated maturity of the Notes; and

        (xvi) the issuance or incurrence, as the case may be, by the Company or any Restricted Subsidiary of the Company of additional preferred stock or Indebtedness in an aggregate principal amount (or accreted value or liquidation preference, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (xvi) of Section 4.11(b) hereof, not to exceed $10.0 million.

        (c)   The Company will not incur, and will not permit any Restricted Subsidiary to incur, any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in right of payment to any other Indebtedness of the Company or such Restricted Subsidiary unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Guarantee on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company or any Restricted Subsidiary solely by virtue of being unsecured or by virtue of being secured on a junior lien basis.

        (d)   For purposes of determining compliance with Section 4.11, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xvi) of Section 4.11(b) hereof, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence in any manner that complies with this covenant. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture will be deemed to have been incurred pursuant to the category of Permitted Indebtedness described in Section 4.11(b)(i) hereof.

Section 4.12 Liens.

        The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or Attributable Debt (i) on any item of Note Collateral other than Permitted Liens and (ii) on any other property of the Company or of any of its Restricted Subsidiaries, whether owned on the date hereof or acquired after the date hereof, or on any income or profits therefrom, or assign or otherwise convey any right to receive income or profits thereon, without at the same time causing the Notes to be secured equally and ratably with, or prior to, any Indebtedness or Attributable Debt secured by such Liens, other than Permitted Liens.

Section 4.13 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

        (a)   The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

        (i)    pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries;

        (ii)   make loans or advances to the Company or any of its Restricted Subsidiaries; or

        (iii)  transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

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        (b)   Notwithstanding the foregoing, Section 4.13(a) will not apply to encumbrances or restrictions existing under or by reason of:

        (i)    agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings of such instrument are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such agreement on the date of this Indenture;

        (ii)   this Indenture, the Notes, the Additional Notes, the Exchange Notes and the Guarantees, or encumbrances or restrictions in any other instrument governing Indebtedness or preferred stock of the Company incurred or issued in compliance with Section 4.11 hereof that are no more restrictive, taken as a whole, than those contained in this Indenture, the Notes and the Guarantees;

        (iii)  any applicable law, rule, regulation, order, approval, license or permit;

        (iv)  any instrument of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent was created or otherwise caused or suffered to exist in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of an instrument governing Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;

        (v)   customary provisions in leases, licenses and other agreements entered into in the ordinary course of business restricting assignment or subletting of any lease or assignment of any license or other contract or restricting transfers of non-cash assets;

        (vi)  purchase money obligations and Capital Lease Obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in Section 4.13(a)(iii) hereof;

        (vii) any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

        (viii) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

        (ix)  reasonable and customary borrowing base, net worth and similar covenants set forth in agreements evidencing Indebtedness otherwise permitted by this Indenture;

        (x)   customary provisions in joint venture or similar agreements or other arrangements with minority investors in Restricted Subsidiaries; provided, however, that such encumbrance or restriction is applicable only to such Restricted Subsidiary; and provided, further, that (i) in the case of joint ventures existing on the Issue Date, the encumbrances or restrictions in any amendment, renewal or other modification of the joint venture arrangement are no more onerous, taken as a whole, than those existing on the Issue Date and (ii) in all other cases, (a) the encumbrance or restriction is not materially more disadvantageous to the holders of the Notes than is customary in comparable agreements and (b) the Company determines that any such encumbrance or restriction will not materially affect the ability of the Company to make any anticipated payments of principal or interest on the Notes;

        (xi)  Liens securing Indebtedness otherwise permitted to be incurred in accordance with Section 4.12 hereof that limit the right of the debtor to dispose of the assets subject to such Liens;

        (xii) any encumbrances or restrictions required by any governmental or regulatory authority having jurisdiction over the Company or any of its Restricted Subsidiaries or any of their businesses in

49

connection with any grant made or other assistance provided to the Company or any of its Restricted Subsidiaries by such governmental or regulatory authority;

        (xiii) reasonable and customary covenants contained in Production and Capacity Arrangements, Third Party Mining Arrangements and Structured Arrangements;

        (xiv) agreements governing Credit Facilities, provided such restrictions are not materially more restrictive, taken as a whole, than customary provisions in comparable financings;

        (xv) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business; and

        (xvi) any encumbrance or restriction of the type referred to in clauses 4.13(a)(i) through 4.13(a)(iii) above imposed by any extension, amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing of any agreement, contract, instrument or obligation referred to in clauses (iv) or (vi) above that is not materially more restrictive, taken as a whole, than the encumbrance or restriction imposed by the applicable predecessor agreement, contract, instrument or obligation (as determined by the Board of Directors of the Company in its good faith judgment).

Section 4.14 Asset Sales.

        (a)   The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale in any single transaction or series of related transactions unless:

        (i)    the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of;

        (ii)   at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents, property or assets for use in a Permitted Business or Capital Stock of a Person who, as a consequence of such Investment, becomes a Restricted Subsidiary. For purposes of this provision, each of the following will be deemed to be cash:

        (1)   any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and

        (2)   any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents within 90 days of the receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion.

        (b)   Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may apply those Net Proceeds at its option:

        (i)    to repay term or revolving credit Indebtedness under a Credit Facility (other than any such Indebtedness that is subordinate in right of payment to the Notes) and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;

        (ii)   to permanently repay Indebtedness of a Restricted Subsidiary that is not a Guarantor;

        (iii)  to redeem the Notes in accordance with Section 3.07

        (iv)  to acquire all or substantially all of the assets of, or a majority of the Voting Stock of a Person engaged in, a Permitted Business;

        (v)   to make a capital expenditure; or

        (vi)  to acquire other long-term assets that are used or useful in a Permitted Business.

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        Pending the final application of any Net Proceeds, the Company or such Restricted Subsidiary may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.

        (c)   Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company is required to make an Asset Sale Offer to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem such Indebtedness with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. In the Asset Sale Offer the Company will offer an purchase price in cash equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase (the "Asset Sale Payment"). If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company or such Restricted Subsidiary may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

        (d)   Notwithstanding the provision of Section 4.14(c), with respect to the proceeds of an Asset Sale arising from the issuance of Equity Interests of any of the Company's Restricted Subsidiaries ("Issuance Proceeds")

        (i)    prior to the day following the fifth anniversary of the original issuance of the Notes, the Company shall not be required to use Issuance Proceeds to make an offer to purchase Notes in an amount in excess of 25% of the original aggregate principal amount of the Notes less the aggregate principal amount of Notes previously purchased pursuant to a purchase offer using Issuance Proceeds. To the extent the aggregate principal amount of Notes tendered exceeds the permitted amount of the offer, the tendered Notes shall be selected for repurchase on a pro rata basis; and

        (ii)   promptly after the fifth anniversary of the original issuance of the Notes, the Company shall be required to make an offer to purchase the Notes in accordance with the requirements set forth in the immediately preceding paragraph, in an aggregate amount equal to the aggregate amount of Issuance Proceeds in excess of 25% of the principal amount of the Notes that was not applied to an Asset Sale Offer pursuant to the provisions of this paragraph.

        (e)   The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and will be deemed not to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such conflict.

Section 4.15 Limitation on Collateral Asset Sales.

        (a)   The Company will not, and will not permit any Guarantor to, consummate a Collateral Asset Sale in any single transaction or series of related transactions unless:

        (i)    the Company (or the Guarantor, as the case may be) receives consideration at the time of the Collateral Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of;

        (ii)   for Collateral Asset Sales having a Fair Market Value of greater than $10.0 million, at least 75% of the consideration received in the Collateral Asset Sale by the Company or such Guarantor is in the form of cash, Cash Equivalents, real and immovable property (including leasehold interests and any other interest or right in any real property), together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all

51

other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto for use in a Permitted Business. For purposes of this clause (ii), each of the following will be deemed to be cash:

        (1)   any liabilities, as shown on the Company's or such Guarantor's most recent balance sheet, of the Company or any Guarantor (other than contingent liabilities and liabilities that are by their term subordinated to the Notes or any Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Guarantor from further liability; and

        (2)   any securities, notes or other obligations received by the Company or any such Guarantor from such transferee that are converted by the Company or such Guarantor into cash or Cash Equivalents within 90 days of the receipt thereof to the extent of the cash or Cash Equivalents received in that conversion;

        (iii)  all Net Proceeds from the Collateral Asset Sale attributable to First Lien Collateral being disposed of in such Collateral Asset Sale ("Net Available Proceeds") are deposited directly by the purchaser into the Trust Monies Account, pending application in accordance with paragraph (b) of this covenant; and

        (iv)  the Company or any Guarantor takes such other actions, at its sole expense, as shall be required to permit the Collateral Agent to release the First Lien Collateral being disposed of from the Lien under this Indenture and the Security Documents and to ensure that the Collateral Agent has, for the benefit of the Trustee and the Holders, (i) from the date of completion of such Collateral Asset Sale, a Lien pursuant to the Security Documents on such Net Available Proceeds in the Trust Monies Account and (ii) within 30 days of the completion of such Collateral Asset Sale, a Lien pursuant to the Security Documents on any other Property received in connection with the Collateral Asset Sale to the extent attributable to the First Lien Collateral disposed of (which Property shall be deemed to be First Lien Collateral).

        (b)   Trust Monies may be used by the Company or a Guarantor, at its option,

        (i)    for the purpose of acquiring, developing or investing in real and immovable property (including leasehold interests and any other interest or right in any real property) of the Company or a Guarantor, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto for use in a Permitted Business (a "First Lien Collateral Investment"); or

        (ii)   to make an Asset Sale Offer to all Holders, to purchase such principal amount of outstanding Notes as the Company shall determine.

        In the Asset Sale Offer the Company will offer an Asset Sale Payment in cash equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase. If the aggregate principal amount of Notes tendered into such Asset Sale Offer exceeds the principal amount of Notes for which the Company made the Asset Sale Offer, the Trustee will select the Notes to be purchased on a pro rata basis. If any Trust Monies derived from Collateral Asset Sales remain after consummation of the Asset Sale Offer, they shall be retained in the Trust Monies Account, and subject to the Lien thereon, pending further use in accordance with this Section 4.15(b).

        (c)   If the Company or a Guarantor sells, leases, conveys or otherwise disposes of First Lien Collateral in connection with any transaction excluded from the definition of Collateral Asset Sale by virtue of the second paragraph thereof, and as consideration for such sale, lease, conveyance or other disposition of First Lien Collateral receives Property (including an interest in income or profits from Property), such Property, to the extent attributable to the sale, lease, conveyance or other disposition of such First Lien Collateral, shall become First Lien Collateral and the Company or such Guarantor will take such actions, as shall be required to ensure that within 30 days of receipt of such Property, the Collateral Agent for the benefit of the holders of the Note Obligations, has, a Lien upon such Property pursuant to this Indenture.

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Section 4.16 Additional Amounts.

        (a)   All payments made by the Company under or with respect to the Notes, or by any Guarantor pursuant to the Guarantees, will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the Government of Canada or of any province or territory thereof or by any authority or agency therein or thereof having power to tax (hereinafter, the "Taxes"), unless the Company or such Guarantor, as the case may be, is required to withhold or deduct Taxes by law or by the interpretation or administration thereof. If the Company or any Guarantor is required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Notes, the Company or such Guarantor will pay, or cause to be paid, such additional amounts (the "Additional Amounts") as may be necessary so that the net amount received by each Holder (in respect of the beneficial holder thereof) (including Additional Amounts) after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts will be payable with respect to a payment made to a Holder in respect of the beneficial holder thereof (an "Excluded Holder") (i) with which the Company or such Guarantor does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment, (ii) which is subject to such Taxes by reason of its being connected with Canada or any province or territory thereof otherwise than solely by reason of the holder's activity in connection with purchasing or disposing of the Notes, by the mere holding of Notes or by reason of the receipt of payments thereunder. The Company or such Guarantor will also (a) make such withholding or deduction and (b) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law.

        (b)   The Company or the Guarantor will furnish the Holders, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Company or such Guarantor. The Company or any Guarantor will, upon written request of a Holder (other than an Excluded Holder), indemnify each such holder for the amount of (x) any Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Notes, and (y) any Taxes so levied or imposed with respect to any reimbursement under the foregoing clause (x) but excluding any such Taxes on such Holder's net income so that the net amount received by such Holder (net of payments made under or with respect to the Notes) after such reimbursement will not be less than the net amount the holder would have received if Taxes on such reimbursement had not been imposed.

        (c)   At least 30 days prior to each date on which any payment under or with respect to the Notes is due and payable, if the Company or any Guarantor will be obligated to pay Additional Amounts with respect to such payment, the Company or such Guarantor will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to holders on the payment date. Whenever in this Indenture there is mentioned, in any context, the payment of principal, premium, if any, redemption price, Change of Control Payment, Asset Sale Payment, interest or any other amount payable under or with respect to any Note, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

        (d)   The Company or a Guarantor will pay any present or future stamp, court, documentary or other similar Taxes, charges or levies that arise in any taxing jurisdiction from the execution, delivery or registration of, or enforcement of rights under, the Notes, this Indenture, any Guarantee or any related document ("Documentary Taxes").

        (e)   The obligation to pay any Additional Amounts (and any associated reimbursement) under the terms and conditions described above will survive any termination, defeasance or discharge of this Indenture.

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Section 4.17 Change of Control.

        (a)   Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to US$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased plus accrued and unpaid interest and Special Interest, if any, thereon, to the date of repurchase (the "Change of Control Payment").

        (b)   Within 30 days following any Change of Control, the Company will mail a notice to each Holder, at its registered address appearing in the Note Register, describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on a date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date the notice is mailed, pursuant to the procedures required by Section 3.09 hereof and described in the notice. Any Change of Control Offer shall be made in accordance with Section 3.09 hereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with Sections 3.09 or 4.17 of this Indenture, the Company will comply with the applicable securities laws and regulations and will be deemed not to have breached its obligations hereunder by virtue of such conflict.

        (c)   Notwithstanding anything to the contrary in this Section 4.17, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.17 and Section 3.09 hereof and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.

Section 4.18 Designation of Restricted and Unrestricted Subsidiaries.

        (a)   The Board of Directors of the Company may designate any Restricted Subsidiary of the Company to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under Section 4.10(a) or under Permitted Investments. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. In addition, no such designation may be made unless the proposed Unrestricted Subsidiary does not own any Capital Stock in any Restricted Subsidiary that is not simultaneously subject to designation as an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.

        (b)   Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.10. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.11, hereof the Company will be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness could be incurred pursuant to the Fixed Charge Coverage Ratio test described in Section 4.11 hereof, calculated on a

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pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.

Section 4.19 Transactions with Affiliates.

        (a)   The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:

        (i)    the Affiliate Transaction is on terms that are, taken as a whole, no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and

        (ii)   the Company delivers to the Trustee:

        (1)   with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an officers' certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors (provided that if there are no disinterested members of the Board of Directors, the Company shall obtain an opinion as described in clause (2) below of this paragraph (ii)); and

        (2)   with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing in Canada or the United States.

        (b)   The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 4.19(a) hereof:

        (i)    compensation, employment or termination agreements or arrangements (including stock options) entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto;

        (ii)   transactions between or among the Company and/or its Restricted Subsidiaries provided, however, that any transaction with a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be in the ordinary course of business and on terms that are no less favorable to the Company or its Restricted Subsidiaries than those that could have been obtained in comparable transactions by the Company or such Restricted Subsidiaries with a Person that is not an Affiliate;

        (iii)  payment of reasonable fees to, and indemnity provided on behalf of, directors, officers, employees or consultants of the Company or any Restricted Subsidiary who are not otherwise Affiliates of the Company;

        (iv)  purchases of metal concentrate and the sale or exchange of concentrate or treatment or refining services by the Company or its Restricted Subsidiaries, in each case, in the ordinary course of business and on terms no less favorable to the Company or such Restricted Subsidiary than those that could have been obtained in comparable transactions with a Person that is not an Affiliate;

        (v)   (x) guarantees of performance by the Company and its Restricted Subsidiaries of Unrestricted Subsidiaries in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests of Unrestricted Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries;

        (vi)  transactions pursuant to any arrangement, contract or agreement in effect as of the date of this Indenture as amended, restated, renewed, extended, refinanced, refunded or replaced from time to time on terms and conditions not materially less favorable, taken as a whole, to the Company and its Restricted Subsidiaries than the arrangement, contract or agreement in existence on the Issue Date;

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        (vii) loans and advances to officers, directors and employees of the Company or any Subsidiary for entertainment, travel and moving and other relocation expenses and similar expenditures, in each case in the ordinary course of business;

        (viii) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, either directly or through a Restricted Subsidiary, an Equity Interest in such Person;

        (ix)  any tax-sharing agreement or arrangement and payments pursuant thereto among the Company and its Subsidiaries and any other Person with which the Company or any of its Subsidiaries is required or permitted to file a consolidated tax return or with which the Company or any of its Subsidiaries is part, or could be a part, of a consolidated group for tax purposes in amounts not otherwise prohibited by this Indenture;

        (x)   sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company; and

        (xi)  Permitted Investments or Restricted Payments that are permitted by Section 4.10 hereof.

Section 4.20 Limitation on Disposition of Capital Stock of Restricted Subsidiaries.

        The Company will not, and will not permit any Restricted Subsidiary to, issue, transfer, convey, lease or otherwise dispose of, directly or indirectly, any shares of Capital Stock of a Restricted Subsidiary or securities convertible or exchangeable into, or options, warrants, rights or any other interest with respect to, Capital Stock of a Restricted Subsidiary if as a result of such transaction such Restricted Subsidiary would cease to be a Restricted Subsidiary, unless such transaction (1) consists of a sale of all of the Capital Stock of such Restricted Subsidiary owned by the Company and its Restricted Subsidiaries and (2) complies with Section 4.14 hereof, to the extent such provisions apply.

Section 4.21 Additional Guarantees.

        If the Company or any of its Restricted Subsidiaries acquires or creates another Restricted Subsidiary that is a Domestic Subsidiary after the date of this Indenture, then that newly acquired or created Restricted Subsidiary shall:

        (a)   execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall fully and unconditionally guarantee on a senior basis all of the Company's obligations under the Notes and this Indenture on the terms set forth in this Indenture;

        (b)   execute and deliver to the Collateral Agent Security Documents upon substantially the same terms as the Security Documents delivered in connection with the issuance of the Notes, granting a first priority Lien upon the Note Collateral of such Subsidiary, other than Credit Facility Collateral, subject to Permitted Prior Liens, and a second priority lien upon the Credit Facility Collateral of such Subsidiary, subject to Permitted Prior Liens, in each case in favor of the Collateral Agent for the benefit of the holders of Note Obligations;

        (c)   cause the Liens granted in such Security Documents to be duly perfected in any manner permitted by law and cause each other Lien upon such Note Collateral to be (a) released, unless it is a Permitted Lien or (b) subordinated to the Collateral Agent's Lien if it is a Permitted Lien but not a Permitted Prior Lien; and

        (d)   deliver to the Trustee an opinion of counsel reasonably satisfactory to the Trustee, confirming as to such supplemental indenture, Security Documents and Liens the matters set forth as to the supplemental indenture, security documents and Liens in the opinions of counsel delivered on behalf of the Company to the initial purchasers on the date of this Indenture in connection with the original issuance of the Notes and, if the property subject to such security documents is an interest in real estate, such local counsel opinions, title insurance policies, surveys and other supporting documents as may have been delivered to the initial purchasers on the date of this Indenture in connection with the original issuance of the Notes, all as the Trustee may reasonably request and in form and substance reasonably satisfactory to the Trustee.

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Section 4.22 Sale and Leaseback Transactions.

        The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or any of its Restricted Subsidiaries may enter into a sale and leaseback transaction if:

        (a)   after giving pro forma effect to the application of the proceeds from such transaction, the Company or that Restricted Subsidiary, as applicable, could have (i) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in the first paragraph of Section 4.11 hereof and (ii) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof; and

        (b)   the transfer of assets in such sale and leaseback transaction is permitted by Section 4.14.

Section 4.23 Business Activities.

        The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.

Section 4.24 Payments for Consent.

        The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid to all Holders and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Section 4.25 Reports.

        Whether or not required by the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders and the Trustee (or make available through the SEC's EDGAR system), within the time periods specified in the SEC's rules and regulations:

        (a)   all quarterly and annual financial information that the Company would have been required to file with the SEC (i) on Form 10-Q or 10-K, if the Company was required to file on such Forms, or (ii) on Form 20-F or 40-F, as applicable, if the Company was permitted to file on such Form and as if it was a reporting issuer under the securities laws of the Province of Ontario, including in each case a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by independent chartered accountants; and

        (b)   all current reports that the Company would have been required to (i) file with the SEC on Form 8-K, if the Company was required to file such reports, or (ii) furnish to the SEC on Form 6-K, if the Company was permitted to furnish such reports and as if it was a reporting issuer under the securities laws of the Province of Ontario.

        If, at any time after consummation of the exchange offer contemplated by the Registration Rights Agreement, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing (or furnishing, as applicable) the reports specified in the preceding paragraph with the SEC within the time periods specified above unless the SEC will not accept such a filing. The Company agrees that it will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings for any reason, the Company will post the reports referred to in the preceding paragraph on its website within the time periods that would apply if the Company was required to file those reports with the SEC. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

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        If at any time the Company is exempted from the obligation to file reports with the SEC pursuant to the provisions of Rule 12h-5 of the Exchange Act (or any successor provision thereto) or, if applicable, pursuant to an exemption under (or relief from) the corresponding rules under Canadian securities laws, then compliance by the parent company of the Company with the provisions of this Section 4.25 will constitute compliance by the Company.

Section 4.26 Business Prior to Amalgamation

        Prior to the Amalgamation, the Company will not carry on any business other than to execute this Indenture, issue the Notes and complete the Acquisition and the Amalgamation. Notwithstanding the previous sentence, the Company may provide funding in the ordinary course to Hudson Bay Mining and Smelting Co., Limited.

ARTICLE 5.

SUCCESSORS

Section 5.01 Merger, Consolidation or Sale of Assets.

        (a)   The Company may not, directly or indirectly: (1) consolidate, amalgamate with or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person; unless:

        (i)    either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of Canada or any province or territory thereof, the United States, any state of the United States or the District of Columbia;

        (ii)   the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all of the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

        (iii)  immediately after such transaction no Default or Event of Default exists; and

        (iv)  the Company or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made:

        (1)   will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and

        (2)   will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.11(a) hereof

        (b)   The Company will not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 will not apply to a merger, amalgamation or consolidation, or a sale, assignment, transfer, conveyance or other disposition of assets, between or among the Company and any of its Wholly Owned Restricted Subsidiaries, provided that the surviving entity of any transaction involving the Company shall be a corporation organized and existing under the laws of Canada or any province or territory thereof, the United States, any state of the United States or the District of Columbia.

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Section 5.02 Successor Corporation Substituted.

        Upon any consolidation, amalgamation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or amalgamation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, amalgamation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Company shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest and Special Interest, if any, on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Company's assets that meets the requirements of Section 5.01 hereof.

ARTICLE 6.

EVENTS OF DEFAULT

Section 6.01 Events of Default.

        An "Event of Default" wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

        (a)   Default in the payment when due of the principal of, or premium, if any, on the Notes;

        (b)   Default in the payment when due of interest on, or Special Interest with respect to the Notes, which default continues for 30 consecutive days or more;

        (c)   failure by the Company or any of its Restricted Subsidiaries to comply with Sections 3.09, 4.14, 4.17 or 5.01 hereof

        (d)   failure by the Company or any of its Restricted Subsidiaries for 30 days after notice to comply with any of the other agreements in this Indenture;

        (e)   Default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default results in the acceleration of such Indebtedness prior to its expressed maturity, and the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $10.0 million or more;

        (f)    failure by the Company or any of its Restricted Subsidiaries to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $10.0 million, net of applicable insurance coverage, provided that the Company or such Restricted Subsidiary has submitted a claim for the judgment and the provider of such insurance has not disputed such coverage and has the ability to perform, which judgments are not paid, discharged or stayed for a period of 60 days;

        (g)   except as permitted by this Indenture, any Guarantee of a Significant Subsidiary will be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Subsidiary, or any Person acting on behalf of any such Guarantor, shall deny or disaffirm its obligations under its Guarantee;

        (h)   any Security Document for any reason shall cease to be in full force and effect, or cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby, or any Collateral Agent's Lien purported to be granted thereby on any one or more items of Note Collateral having an aggregate Fair Market Value in excess of $10.0 million ceases to be enforceable or valid, in whole or in part,

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or ceases for any reason (other than pursuant to a release that is delivered or becomes effective as set forth in this Indenture) to be fully enforceable and perfected with the priority set forth in the applicable Security Document and, in each case, such default continues for 10 days after the Company has received written notice thereof;

        (i)    The Company or any Restricted Subsidiary, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Company or any Restricted Subsidiary set forth in or arising under any Security Documents;

        (j)    if the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, pursuant to or within the meaning of Bankruptcy Law:

        (i)    commences proceedings to be adjudicated bankrupt or insolvent;

        (ii)   consents to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under applicable Bankruptcy Law;

        (iii)  consents to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or other similar official of it or for all or substantially all of its property;

        (iv)  makes a general assignment for the benefit of its creditors; or

        (v)   admits in writing its inability to pay its debts generally as they become due; and

        (k)   if a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

        (i)    is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, in a proceeding in which the Company or any such Restricted Subsidiaries, that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, is to be adjudicated bankrupt or insolvent;

        (ii)   appoints a receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

        (iii)  orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary;

        and the order or decree remains unstayed and in effect for 60 consecutive days.

Section 6.02 Acceleration.

        (a)   In the case of an Event of Default specified in clause (j) or (k) of Section 6.01 hereof, with respect to the Company, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequence if the rescission would not conflict with any judgment or decree and if an existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived.

        (b)   If an Event of Default occurs by reason of any willful action or inaction taken (or not taken) by or on behalf of the Company or any of its Restricted Subsidiaries with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes

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pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law. If an Event of Default occurs prior to January 15, 2009, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to January 15, 2009, then, upon acceleration of the Notes, the premium set forth in Section 3.07 hereof shall become immediately due and payable, to the extent permitted by law.

        (c)   At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as provided in this Article, the Holders of a majority in aggregate principal amount of the Notes outstanding, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:

        (i)    the Company or the Guarantors have paid or deposited with the Trustee a sum sufficient to pay;

        (1)   all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

        (2)   all overdue interest on all outstanding Notes;

        (3)   all unpaid principal of (and premium, if any, on) any outstanding Notes which has become due otherwise than by such declaration of acceleration, and interest on such unpaid principal at the rate borne by the Notes; and

        (4)   to the extent that payment of such interest is lawful, interest on overdue interest and overdue principal at the rate borne by the Notes, which has become due otherwise than by such declaration of acceleration; and

        (ii)   no such rescission would conflict with any judgment or decree of a court of competent jurisdiction; and

        (iii)  all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on the Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.04.

        No such rescission shall affect any subsequent Default or impair any right consequent thereon.

        (d)   Notwithstanding the preceding paragraph, in the event of a declaration of acceleration in respect of the Notes because of an Event of Default specified in Section 6.01(e) shall have occurred and be continuing, such declaration of acceleration shall be automatically annulled if the Indebtedness that is the subject of such Event of Default has been discharged or the Holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness, and written notice of such discharge or rescission, as the case may be, shall have been given to the Trustee by the Company and countersigned by the Holders of such Indebtedness or a trustee, fiduciary or agent for such Holders, within 30 days after such declaration of acceleration in respect of the Notes, and no other Event of Default has occurred during such 30-day period which has not been cured or waived during such period.

Section 6.03 Other Remedies.

        If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

        The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

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Section 6.04 Waiver of Past Defaults.

        Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Special Interest, if any, or interest on, the Notes (including in connection with a Repurchase Offer); provided that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05 Control by Majority.

        Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability. The Trustee may withhold from Holders notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal or interest or Special Interest.

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Section 6.06 Limitation on Suits.

        Subject to Section 6.07, a Holder may pursue a remedy with respect to this Indenture or the Notes only if:

        (a)   such Holder shall have previously given to the Trustee written notice of a continuing Event of Default;

        (b)   the Holders of at least 25% in principal amount of the then outstanding Notes shall have made a written request to the Trustee to pursue the remedy;

        (c)   such Holder or Holders shall have offered and, if requested, shall have provided to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

        (d)   the Trustee for 60 days after receipt of such notice, request and offer and, if requested, provision of indemnity shall have failed to pursue any such remedy; and

        (e)   during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes shall not have given the Trustee a direction inconsistent with such written request.

        A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

Section 6.07 Rights of Holders of Notes to Receive Payment.

        Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium and Special Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with a Repurchase Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08 Collection Suit by Trustee.

        If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Special Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09 Restoration of Rights and Remedies.

        If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceedings, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted.

Section 6.10 Rights and Remedies Cumulative.

        Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.07, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

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Section 6.11 Delay or Omission Not Waiver.

        No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

Section 6.12 Trustee May File Proofs of Claim.

        The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes including the Guarantors), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.13 Priorities.

        If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order:

        (a)   to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

        (b)   to Holders for amounts due and unpaid on the Notes for principal, premium and Special Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Special Interest, if any and interest, respectively; and

        (c)   to the Company or to such party as a court of competent jurisdiction shall direct including a Guarantor, if applicable.

        The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.13.

Section 6.14 Undertaking for Costs.

        In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

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ARTICLE 7.

TRUSTEE

Section 7.01 Duties of Trustee.

        (a)   If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

        (b)   Except during the continuance of an Event of Default:

        (i)    the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

        (ii)   in the absence of bad faith or willful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

        (c)   The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

        (i)    this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

        (ii)   the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved in a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and

        (iii)  the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

        (d)   Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.

        (e)   No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

        (f)    The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02 Rights of Trustee.

        (a)   The Trustee may conclusively rely upon any document, whether in its original or facsimile form believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

        (b)   Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel

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of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

        (c)   The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.

        (d)   The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

        (e)   Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

        (f)    The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

        (g)   The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

        (h)   In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

        (i)    The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

        (j)    The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

Section 7.03 Individual Rights of Trustee.

        The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

Section 7.04 Trustee's Disclaimer.

        The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05 Notice of Defaults.

        If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a

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Default or Event of Default in payment of principal of, premium, if any, or interest or Special Interest, if any, on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders and the Trustee shall withhold the notice of any Default under Section 6.01(d) hereof until 30 days after notice under such section is given.

Section 7.06 Reports by Trustee to Holders.

        Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA § 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

        A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07 Compensation and Indemnity.

        The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree in writing from time to time. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in accordance with this Indenture in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.

        The Company and the Guarantors, jointly and severally, shall indemnify and hold harmless the Trustee and its officers, directors, employees and agents against any and all losses, liabilities, obligations, losses, claims, damages, penalties, actions, suits, judgements, costs, expenses or disbursements of any kind (including reasonable attorney's fees and expenses) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, the Note Documents or the Collateral Agency Agreement including the costs and expenses of enforcing this Indenture, the Note Documents or the Collateral Agency Agreement against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company and / or Guarantors shall pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent shall not be unreasonably withheld.

        The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee.

        To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.

        When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(j) or (k) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

        The Trustee shall comply with the provisions of TIA § 313(b)(2) to the extent applicable.

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        The Company's and Guarantors' obligations under this Section 7.07 shall survive the resignation or removal of the Trustee, any termination of this Indenture, including any termination or rejection of this Indenture in any insolvency or similar proceeding and the repayment of all the Notes.

Section 7.08 Replacement of Trustee.

        A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08.

        The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

        (a)   the Trustee fails to comply with Section 7.10 hereof;

        (b)   the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

        (c)   a custodian or public officer takes charge of the Trustee or its property; or

        (d)   the Trustee becomes incapable of acting.

        If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

        If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the Company's expense), the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

        If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

        A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided, all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

Section 7.09 Successor Trustee by Merger, etc.

        If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

Section 7.10 Eligibility; Disqualification.

        There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.

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        This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other notes or certificates of interest or participation in other notes of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

Section 7.11 Preferential Collection of Claims Against Company.

        The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

Section 7.12 Appointment of Co-Trustee.

        It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture, and in particular in case of the enforcement thereof on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted or take any action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an individual or institution as a separate or co-trustee. The following provisions of this Section 7.12 are adopted to these ends.

        In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and only to the extent that the Trustee by the laws of any jurisdiction is incapable of exercising such powers, rights and remedies and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. So long no Event of Default shall have occurred and be continuing, any such appointment shall be pursuant to such terms and conditions as are agreed with the Company and the Guarantors.

        Should any instrument in writing from the Company be required by the separate or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Company; provided, that if an Event of Default shall have occurred and be continuing, if the Company does not execute any such instrument within fifteen (15) days after request therefor, the Trustee shall be empowered as an attorney-in-fact for the Company to execute any such instrument in the Company's name and stead. In case any separate or co-trustee or a successor to either shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate or co-trustee.

        Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

        (a)   all rights and powers, conferred or imposed upon the Trustee shall be conferred or imposed upon and may be exercised or performed by such separate trustee or co-trustee; and

        (b)   no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder.

        Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article 7.

        Any separate trustee or co-trustee may at any time appoint the Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this

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Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

        Notwithstanding anything contained herein to the contrary, the right of the Trustee to perform any discretionary act enumerated herein or in any other Note Document to which it is a party (including the right to consent to or approve of any action or document which requires its consent or approval and the right to waive any provision of, or consent to any change or amendment to, any of the Note Documents) shall not be construed as giving rise to any expressed or implied duty owed by the Trustee, and the Trustee shall not be answerable in connection with any of the foregoing for, or have any liability whatsoever as a result of, (i) its refusal to perform, consent or approve of such discretionary acts without the prior consent or direction of the applicable percentage of the Holders that would be required if such consent or direction was obtained under this Indenture or (ii) its performance of any such discretionary act (except for any negligence or willful misconduct in the performance of such acts). In connection with any such discretionary acts, the Trustee may in its sole discretion (but shall not, except as otherwise provided in this Indenture or as otherwise required by applicable law, have any obligation to) request the approval of the Trustee as Holders.

ARTICLE 8.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.

        The Company may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight.

Section 8.02 Legal Defeasance and Discharge.

        Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes and Guarantees on the date the conditions set forth in Section 8.04 are satisfied ("Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Guarantees), which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes, the Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.05 hereof, and as more fully set forth in such Section, payments in respect of the principal of, or interest or premium and Special Interest, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2, Section 4.02, and Section 4.04 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. If the Company exercises its Legal Defeasance option, payment of the Notes may not be accelerated because of an Event of Default

Section 8.03 Covenant Defeasance.

        Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and its Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.05 through 4.07, 4.09 through 4.15, 4.17 through 4.25 hereof and clause (iv) of Section 5.01(a) hereof, and the Guarantors shall be released from their Obligations under Section 12.04 hereof, with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied ("Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act

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of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(e), 6.01(f) and 6.01(g) hereof shall not constitute Events of Default.

Section 8.04 Conditions to Legal or Covenant Defeasance.

        The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes:

        In order to exercise either Legal Defeasance or Covenant Defeasance:

        (a)   The Company shall irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Special Interest, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;

        (b)   in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

        (c)   in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

        (d)   in the case of an election under Section 8.02 or Section 8.03, the Company shall have delivered to the Trustee an Opinion of Counsel in Canada to the effect that Holders of the outstanding Notes will not recognize income, gain or loss for Canadian federal or provincial income tax or other tax purposes as a result of such Legal Defeasance or Covenant Defeasance, as applicable, and will be subject to Canadian federal or provincial income tax and other tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance or Covenant Defeasance, as applicable, had not occurred (which condition may not be waived by any Holder or the Trustee);

        (e)   no Default or Event of Default may have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit);

        (f)    such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

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        (g)   The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and

        (h)   the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.

        Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or a Guarantor acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Special Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

        The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

        Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06 Repayment to Company.

        Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium and Special Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium and Special Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times or The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

Section 8.07 Reinstatement.

        If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided that, if the Company makes any payment of principal of, premium and Special Interest, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

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ARTICLE 9.

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01 Without Consent of Holders of the Notes.

        Notwithstanding Section 9.02 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes, the Guarantees or the Security Documents without the consent of any Holder:

        (a)   to cure any ambiguity, defect or inconsistency;

        (b)   to provide for uncertificated Notes in addition to or in place of certificated Notes;

        (c)   to provide for the assumption of the Company's or the Guarantors' obligations to Holders of Notes by a successor to the Company pursuant to Article 5;

        (d)   to make any change that would provide any additional rights or benefits to the Holders or that in the good faith opinion of the Board of Directors of the Company (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) does not adversely affect the rights under this Indenture of any such Holder;

        (e)   to add guarantees or security with respect to the notes or confirm and evidence the release, termination or discharge of any security or guarantee when such release, termination or discharge is permitted by this Indenture or the Security Documents;

        (f)    to issue Additional Notes in compliance with the provisions of this Indenture;

        (g)   to evidence and provide for the acceptance of appointment by a successor Trustee;

        (h)   to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

        (i)    to provide any additional collateral for the benefit of the Holders; or

        (j)    to make, complete or confirm any grant of Note Collateral permitted or required by this Indenture or any of the Security Documents or any release of Note Collateral that becomes effective as set forth in this Indenture or any of the Security Documents.

        Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise.

Section 9.02 With Consent of Holders of Notes.

        (a)   Except as provided below in this clause (a) of Section 9.02, the Company and the Trustee may amend or supplement this Indenture, the Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium and Special Interest, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes).

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        Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.

        It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

        After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver.

        (b)   Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

        (i)    reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

        (ii)   reduce the principal of or change the fixed maturity of any Note or alter the provisions (except those in Section 3.03) with respect to the redemption of the Notes (other than provisions under Sections 3.09, 4.14 and 4.17 hereof);

        (iii)  reduce the rate of or change the time for payment of interest on any Note, including Additional Amounts;

        (iv)  waive a Default or Event of Default in the payment of principal of, or interest or premium, or Special Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

        (v)   make any Note payable in money other than that stated in the Notes;

        (vi)  make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Special Interest, if any, on the Notes;

        (vii) waive a redemption payment with respect to any Note (other than a payment required by Section 3.09, 4.14 or 4.17 hereof);

        (viii) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Guarantee or this Indenture, except in accordance with the terms of the Indenture;

        (ix)  affect the ranking, or with respect to Note Collateral, the priority of the Notes, in each case in a manner adverse to the Holders;

        (x)   except as expressly permitted under other provisions of this Indenture, release all or substantially all of the Note Collateral from the Liens securing the Notes; and

        (xi)  make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions of Section 9.02(b).

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Section 9.03 Compliance with Trust Indenture Act.

        Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect.

Section 9.04 Revocation and Effect of Consents.

        Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

        The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement, or waiver. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date unless the consent of the requisite number of Holders has been obtained.

Section 9.05 Notation on or Exchange of Notes.

        The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

        Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06 Trustee to Sign Amendments, etc.

        The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment, supplement or waiver until the Board of Directors approves it. In executing any amendment, supplement or waiver, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 14.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

Section 9.07 Amendments, Waivers and Consents Under Credit Facility Documents.

        Notwithstanding Section 9.02 or any other provisions of this Article 9, any waiver or consent granted by the Credit Facility Agent or amendment made by it under the Credit Facilities will be deemed to have been given or made by the Trustee or the Collateral Agent under the Security Documents, insofar as they apply to the Common Collateral, without the consent of or notice to any Holder and without any action by the Company or any Guarantor or any Holder.

ARTICLE 10.

COLLATERAL AND SECURITY

Section 10.01 Security Documents; Collateral; Additional Collateral.

        (a)   In order to secure the due and punctual payment of the principal of, premium and Special Interest, if any, and interest on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, purchase, repurchase, redemption or otherwise, and interest on the overdue principal of, premium and Special Interest, if any, and interest on the Notes and the

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performance of all other obligations of the Company and the Guarantors to the Holders or the Trustee under this Indenture, the Notes, the Guarantees and any other documents contemplated hereby, the Company, the Guarantors and the Trustee have simultaneously with the execution of this Indenture entered into the Security Documents. The Trustee, the Company and the Guarantors hereby agree that the Collateral Agent holds its interest in the Note Collateral in trust for the benefit of the Trustee and ratable benefit of the Holders pursuant to the terms of the Security Documents.

        (b)   Subject to the release of any Property that is the subject of the Collateral Agent's Lien pursuant to the provisions of this Indenture or any of the Security Documents, the Company and the Guarantors shall, pursuant to the Security Documents, grant to the Collateral Agent, for the benefit of the Trustee and for the ratable benefit of the Holders, a Lien upon (i) all First Lien Collateral and (ii) all Second Lien Collateral, in each case other than Excluded Assets and subject to Permitted Prior Liens. For the avoidance of doubt, no cash on hand of the Company or any Guarantor on the date of this Indenture shall constitute Second Lien Collateral. As provided in the Intercreditor Agreement, the Collateral Agent's Lien upon the Second Lien Collateral securing the Note Obligations is junior in priority to the Lien of the Credit Facility Agent in the Credit Facility Collateral securing the Credit Facility Obligations (to the extent that Second Lien Collateral also constitutes Credit Facility Collateral) and Permitted Prior Liens. Property that is both Second Lien Collateral and Credit Facility Collateral is referred to as 'Common Collateral'.

        (c)   When the Company, or its successor, enters into a Credit Facility, the Trustee and the Collateral Agent, on behalf of the Trustee and the Holders, will enter into an Intercreditor Agreement with the Credit Facility Agent. To the extent the Company or any of its Restricted Subsidiaries intends to incur a Lien upon Credit Facility Collateral to secure further Indebtedness pursuant to an extension, refinancing, renewal, replacement, defeasance or other amendment of an existing Credit Facility or under a new or additional Credit Facility, and such Lien would not otherwise be addressed by the Intercreditor Agreement, the Trustee and the Collateral Agent, on behalf of the Trustee and the Holders, will enter into an amendment of or replacement to the Intercreditor Agreement or a new Intercreditor Agreement, in each case confirming the priority of such Lien and establishing that the rights and procedures with respect to the enforcement of such Lien and the Collateral Agent's Lien will be the same as contained in the existing Intercreditor Agreement.

        (d)   If the Company or any Guarantor shall

        (i)    acquire any Property described in the definition of First Lien Collateral that is not subject to the Collateral Agent's Lien;

        (ii)   receive Property (other than Net Available Proceeds) as consideration in connection with a Collateral Asset Sale pursuant to clause (iv)(2) of Section 4.15(a); or

        (iii)  sell, lease, convey or otherwise dispose of First Lien Collateral in connection with any transaction excluded from the definition of Collateral Asset Sale by virtue of the second paragraph thereof, and as consideration for such sale, lease, conveyance or other disposition of First Lien Collateral receive Property (including an interest in income or profits from Property);

        in the case of clause (i) above, such Property shall become First Lien Collateral, and in the case of clauses (ii) and (iii) above, to the extent attributable to the sale, lease, conveyance or other disposition of such First Lien Collateral (such Property acquired or received being referred to as "After Acquired Property"), such Property shall become First Lien Collateral, and in each case:

        (i)    within 30 days of such acquisition, the Company (or such Guarantor, as the case may be) and the Trustee shall and shall cause the Collateral Agent to take such actions and enter into such amendments or supplements to the Security Documents, or additional Security Documents, in each case in recordable or registerable form (the "Additional Security Documents"), as are necessary in order to grant to the Collateral Agent, for the benefit of the Trustee and the Holders a Lien upon such After-Acquired Property, subject to Permitted Prior Liens; and

        (ii)   the Company shall also deliver to the Trustee evidence of payment of all filing fees, recording and registration charges, transfer taxes and other costs and expenses, including reasonable legal fees

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and disbursements of counsel for the Trustee (and any local counsel), that may be incurred to validly and effectively subject the After-Acquired Property to the Lien of any applicable Security Document and perfect such Lien.

        (e)   Each Holder, by accepting a Note, (1) agrees to all the terms and provisions of the Security Documents, including the Intercreditor Agreement and the Additional Security Documents, as the same may be amended from time to time pursuant to the provisions of the Security Documents, the Additional Security Documents and this Indenture, (2) authorizes and directs the Trustee to enter into and perform its obligations and exercise its rights under the Intercreditor Agreement and the other Security Documents, including the Additional Security Documents, in accordance therewith; provided, however, that if any provisions of the Security Documents limit, qualify or conflict with the requirements of the TIA, the TIA will control; and (3) agrees that it will not, other than in accordance with Section 6.06 hereunder, pursue any remedy with respect to this Indenture or any Security Document or the Collateral Agent's Lien thereunder and appoints, authorizes and expressly directs the Trustee to be the sole entity entitled to pursue (or to cause the Collateral Agent to pursue) any such remedy on behalf of such Holder, subject to the rights of such Holder provided for in Section 6.06 hereunder.

Section 10.02 Recording, Registration and Opinions.

        (a)   The Company and each Guarantor shall take or cause to be taken all action required to perfect, maintain, preserve and protect the Collateral Agent's Lien on the Note Collateral granted by the Security Documents, including without limitation, the filing of financing statements, continuation statements and any instruments of further assurance, in such manner and in such places as may be required by law fully to preserve and protect the rights of the Holders and the Trustee under this Indenture, the Security Documents and the Additional Security Documents to all property comprising the Note Collateral. The Company and each Guarantor shall from time to time promptly pay all financing and continuation statement recording, registration and/or filing fees, charges and taxes relating to this Indenture and the Security Documents, any amendments thereto and any other instruments of further assurance required pursuant to the Security Documents. The Trustee shall not be responsible for any failure to so register, file or record.

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        (b)   To the extent required by Section 314(b) of the TIA, the Company and each Guarantor shall furnish to the Trustee, at the time of execution and delivery of this Indenture, Opinion(s) of Counsel either (a) substantially to the effect that, in the opinion of such counsel, subject to customary qualifications, this Indenture has been properly recorded and filed to the extent necessary to make effective the Collateral Agent's Lien in the Note Collateral created by the Security Documents and reciting the details of such action, or (b) to the effect that, in the opinion of such counsel, no such action is necessary to make such Lien effective. The Company and each Guarantor shall furnish to the Trustee, at the time of execution and delivery of any Additional Security Document(s), Opinion(s) of Counsel either substantially to the effect set forth in clause (a) of the immediately preceding sentence (but relating only to such Additional Security Documents and the related After-Acquired Property) or to the effect set forth in clause (b) thereof.

        (c)   To the extent required by Section 314(b) of the TIA, the Company and each Guarantor shall furnish to the Trustee within 15 days after December 31 in each year, beginning with December 31, 2005, an Opinion of Counsel, dated as of such date, either (i) stating that, in the opinion of such counsel, action has been taken with respect to the recording, filing, re-recording, and refiling of this Indenture (including all supplemental indentures) as is necessary to maintain the Collateral Agent's Lien in the Note Collateral created by the Security Documents and the details of such action or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien.

Section 10.03 Further Assurances

        The Company and each Guarantor will do or cause to be done all acts and things which may be required, or which the Trustee from time to time may reasonably request, to assure and confirm that the Collateral Agent holds for the benefit of the Trustee and the Holders duly created, enforceable and perfected Liens (subject to Permitted Prior Liens) upon the Note Collateral as contemplated by the Note Documents.

Section 10.04 Release of Collateral.

        (a)   The Trustee shall not at any time release Collateral from the security interest created by the Security Documents unless such release is in accordance with the provisions of this Indenture, the Intercreditor Agreement and the Security Documents.

        (b)   At any time when an Event of Default shall have occurred and be continuing, no release of Collateral pursuant to the provisions of this Indenture and the Security Documents shall be effective as against the Holders.

        (c)   The release of any Collateral pursuant to the terms of this Indenture or the Security Documents shall not be deemed to impair the security under the Security Documents in contravention of the provisions hereof and thereof if and to the extent the Collateral is released pursuant to this Indenture and the applicable Security Documents.

Section 10.05 Possession and Use of Collateral.

        Subject to and in accordance with the provisions of this Indenture and the Security Documents, so long as no Event of Default shall have occurred and be continuing, the Company and the Guarantors shall have the right to remain in possession and retain exclusive control of the Note Collateral (other than Trust Monies held by the Collateral Agent), to sell or otherwise dispose of inventory in the ordinary course of business, to collect, sell, factor or otherwise dispose of accounts receivable in the ordinary course of business, to sell financial assets from time to time credited to the Company's or any Guarantor's deposit accounts, to make cash payments or investments from deposit or other accounts of the Company or any Guarantor and to operate, manage, develop, lease, use, consume and enjoy the Note Collateral (other than Trust Monies held by the Trustee), and to collect, receive, use, invest and dispose of the reversions, remainders, interest, rents, lease payments, issues, profits, revenues, proceeds and other income thereof in accordance with the terms of this Indenture, all without release or consent by the Trustee or the Collateral Agent.

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Section 10.06 Specified Releases of Collateral.

        (a)   The Collateral Agent's Lien on the Note Collateral will no longer secure the Notes or any Note Obligations, and the right of the holders of the Note Obligations to the benefits and proceeds of the Collateral Agent's Lien on the Note Collateral will terminate and be discharged without any action of the part of the Company, the Guarantors, the Trustee or the Collateral Agent and without the consent of, or notice to any Holder:

        (i)    upon payment in full and discharge of the Notes and all other Note Obligations that are outstanding, due and payable at the time the notes are paid in full and discharged;

        (ii)   upon compliance with the conditions precedent for satisfaction and discharge of the indenture as set forth under Article 13 hereof; or

        (iii)  upon compliance with the conditions precedent for a Legal Defeasance or Covenant Defeasance as set forth under Article 8 hereof.

Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel, each to the effect that such conditions precedent have been complied with (and which may be the same Officers' Certificate and Opinion of Counsel required by Article 8 or 13, as applicable), the Trustee shall forthwith take and shall cause the Collateral Agent to take all necessary action (at the request of and the expense of the Company) to evidence the termination and discharge of the Collateral Agent's Lien and shall release and reconvey, or cause to be released and reconveyed, to the Company and the Guarantors all of the Note Collateral, and shall deliver, or cause to be delivered, such Note Collateral in its and the Collateral Agent's possession to the Company and the Guarantors including, without limitation, the execution and delivery of releases and satisfactions wherever required by the Trustee or the Collateral Agent, as applicable.

        (b)   The Company and the Guarantors will be entitled to releases from the Collateral Agent's Lien of Property included in First Lien Collateral that is sold, leased, conveyed or otherwise disposed of by the Company or any Guarantor in accordance with or in a manner that does not violate Section 4.15 hereof ("Released Collateral"), provided that the Company shall have delivered to the Trustee the following:

        (i)    A Company Order requesting release of the Released Collateral, such Company Order (A) specifically describing the proposed Released Collateral, (B) specifying the value of such Released Collateral on a date within 60 days of the Company Order (the "Valuation Date"), (C) stating that the release of such Released Collateral will not interfere with or impede the Trustee's ability to realize the value of the remaining First Lien Collateral and will not impair the maintenance and operation of the remaining First Lien Collateral, (D) certifying that such sale, lease, conveyance or other disposition complies with the terms and conditions of or is not in violation of Section 4.15 hereof and (E) in the event that there is to be a substitution of Property for the First Lien Collateral sold, leased, conveyed or otherwise disposed of, specifying the Property intended to be substituted for the First Lien Collateral to be disposed of;

        (ii)   An Officers' Certificate certifying that (A) such sale, lease, conveyance or other disposition covers only the Released Collateral, (B) all Net Available Proceeds from the sale, lease, conveyance or other disposition of any of the Released Collateral will be applied pursuant to Section 4.15, (C) there is no Default or Event of Default in effect or continuing on the date thereof, the Valuation Date or the date of such Asset Sale, (D) the release of the First Lien Collateral will not result in a Default or Event of Default hereunder and (E) all conditions precedent to such release have been complied with; and

        (iii)  All certificates, opinions and other documentation required by the TIA, if any, prior to the release of First Lien Collateral by the Trustee, and, in the event there is to be a substitution of Property for the First Lien Collateral sold, leased, conveyed or otherwise disposed of, all documentation necessary to effect the substitution of such new First Lien Collateral, including without limitation the documents required by Section 10.01(d).

Upon compliance by the Company and the Guarantors with, to the extent applicable, the conditions precedent set forth above, the Trustee shall cause to be released and reconveyed to the Company and the Guarantors the Released Collateral and shall forthwith take and shall cause the Collateral Agent to take all

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necessary action (at the request of and the expense of the Company) to evidence the termination and discharge of the Collateral Agent's Lien and shall release and reconvey, or cause to be released and reconveyed, to the Company and the Guarantors the Released Collateral, and shall deliver, or cause to be delivered, such Released Collateral in its and the Collateral Agent's possession to the Company and the Guarantors including, without limitation, the execution and delivery of releases and satisfactions wherever required by the Trustee or the Collateral Agent, as applicable.

        (c)   The Collateral Agent's Lien on the Property included in the Note Collateral will terminate and be discharged under any one or more of the following circumstances:

        (i)    any First Lien Collateral that is sold, conveyed, leased or otherwise disposed of by the Company or any Guarantor in accordance with or in a manner that does not violate Section 4.15 will be released at the time of such sale lease, conveyance or other disposition;

        (ii)   if any Guarantor is released from its Guarantee, the assets of that Guarantor will also be released concurrently with the release of the Guarantee;

        (iii)  if any asset which is an Excluded Asset becomes subject to the Collateral Agent's Lien, that asset will be released;

        (iv)  in respect of any joint venture interest of the Company or a Guarantor, in which the terms of the joint venture arrangement contain customary terms that require that the respective parties' interests in the venture be pledged in favor of the other joint venture party or parties as security for the pledging party's obligations thereunder, such joint venture interest will be released if the Company or Guarantor, as the case may be, defaults in its obligations under the venture and, as a result, forfeits all or a portion of its interest in the venture, to the extent of such forfeiture; or

        (v)   if any Property is released by the Credit Facility Agent from the Lien under the Credit Facility, the Property so released, to the extent it constitutes Common Collateral, will also be released from the Collateral Agent's Lien; provided that the release by the Credit Facility Agent is not given in connection with a repayment in full of the Credit Facility Obligations;

provided that in the case of clauses (i), (ii), (iv) and (v) above, the Company shall have delivered to the Trustee the following:

        (x)   A Company Order requesting release of the applicable Property, such Company Order specifically describing the proposed Property to be released;

        (y)   An Officers' Certificate certifying that (A) there is no Default or Event of Default in effect or continuing on the date thereof, or the date of release, and (B) all conditions precedent to such release have been complied with; and

        (z)   All certificates, opinions and other documentation required by the TIA if any, prior to the release of Note Collateral by the Trustee;

provided, further, that in the case of clause (iii) above, only to the extent the applicable Excluded Asset is not released from the Collateral Agent's Lien by the terms of the applicable Security Document, the Company shall have delivered to the Trustee a Company Order requesting release of the applicable Excluded Asset, such Company Order specifically describing the Excluded Asset to be released.

Upon compliance by the Company and the Guarantors with, to the extent applicable, the conditions precedent set forth above, the Trustee shall cause to be released and reconveyed to the Company and the Guarantors the aforementioned items of Note Collateral and shall forthwith take and shall cause the Collateral Agent to take all necessary action (at the request of and the expense of the Company) to evidence the termination and discharge of the Collateral Agent's Lien and shall release and reconvey, or cause to be released and reconveyed, to the Company and the Guarantors such Note Collateral, and shall deliver, or cause to be delivered, such Note Collateral in its and the Collateral Agent's possession to the Company and the Guarantors including, without limitation, the execution and delivery of releases and satisfactions wherever required by the Trustee or the Collateral Agent, as applicable.

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        (d)   The Company and any Guarantor shall be entitled to obtain a release of, and the Trustee shall release or cause to be released, as applicable, items of Note Collateral taken by eminent domain or expropriation or sold pursuant to the exercise by Canada, the United States of America or any State, municipality, province or other governmental authority thereof of any right which it may then have to purchase, or to designate a purchaser or to order a sale of, all or any part of the Note Collateral, upon compliance with the conditions precedent that the Company shall have delivered to the Trustee the following:

        (i)    An Officers' Certificate certifying that (A) such Note Collateral has been taken by eminent domain or expropriation and the amount of the award therefore, or that such property has been sold pursuant to a right vested in Canada, the United States of America, or a State, municipality, province or other governmental authority thereof to purchase, or to designate a purchaser, or order a sale of such Note Collateral and the amount of the proceeds of such sale, and (B) all conditions precedent to such release have been complied with; and

        (ii)   Cash equal to the amount of the award for such property or the proceeds of such sale, shall be held as Trust Monies subject to the disposition thereof pursuant to Article 11 hereof.

Upon compliance by the Company and the Guarantors with, to the extent applicable, the conditions precedent set forth above, the Trustee shall cause to be released and reconveyed to the Company and the Guarantors the aforementioned items of Note Collateral and shall forthwith take and shall cause the Collateral Agent to take all necessary action (at the request of and the expense of the Company) to evidence the termination and discharge of the Collateral Agent's Lien and shall release and reconvey, or cause to be released and reconveyed, to the Company and the Guarantors such Note Collateral, and shall deliver, or cause to be delivered, such Note Collateral in its and the Collateral Agent's possession to the Company and the Guarantors including, without limitation, the execution and delivery of releases and satisfactions wherever required by the Trustee or the Collateral Agent, as applicable.

        (e)   If the Company at any time delivers to the Trustee an Officers' Certificate stating that the Company or any Guarantor intends to incur a Permitted Prior Lien (other than a Permitted Lien set forth in clause (1) of the definition of "Permitted Liens") upon certain property identified therein with reasonable specificity, then the Trustee shall, or shall cause the Collateral Agent to, deliver to the Company, upon the incurrence of such Lien, a lien subordination agreement in form and substance reasonably satisfactory to the Collateral Agent confirming that the Collateral Agent's Lien upon such property is subject and subordinate to such Lien.

Section 10.07 Disposition of Collateral Without Release.

        So long as no Event of Default shall have occurred and be continuing or would result, the Company may, without any prior release or consent by the Trustee, conduct ordinary course activities in respect of the Note Collateral which do not individually or in the aggregate adversely affect the value of the Note Collateral: including selling or otherwise disposing of Inventory in the ordinary course of business; collecting, selling or otherwise disposing of Receivables in the ordinary course of business; abandoning, terminating, canceling, or releasing any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims in the ordinary course of business; or granting a nonexclusive license of any intellectual property.

Section 10.08 Form and Sufficiency of Release.

        In the event that the Company or a Guarantor has sold, exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Note Collateral that under the provisions of Section 10.05, 10.06 or 10.07 may be sold, exchanged or otherwise disposed of by the Company or a Guarantor, and the Company requests the Trustee to furnish a written disclaimer, release or quitclaim of any interest in such property under this Indenture and the Security Documents or to file any discharge or termination of any financing statement or any other applicable registration, upon being satisfied that the Company or Guarantor is selling, exchanging or otherwise disposing of the Note Collateral under Section 10.05, 10.06 or 10.07, the Trustee shall execute, acknowledge and deliver and file or cause to be executed, acknowledged, delivered and filed, as

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applicable, to the Company or Guarantor (in proper and recordable or registrable form) such an instrument and such discharge or termination of any financing statement or registration, as applicable, promptly after satisfaction of the conditions set forth herein for delivery of any such release. Notwithstanding the preceding sentence, all purchasers and grantees of any property or rights purporting to be released herefrom shall be entitled to reply upon any release executed by the Trustee hereunder or by the Collateral Agent as sufficient for the purpose of this Indenture and as constituting a good and valid release of the property therein described from the Lien of the Security Documents.

Section 10.09 Purchaser Protected.

        In no event shall any purchaser or transferee of any property or rights purporting to be released from the Collateral Agent's Lien be bound to ascertain the authority of the Trustee to, or to direct the Collateral Agent to, execute the release or to inquire as to the existence of any conditions herein prescribed for the exercise of such authority or the satisfaction of such conditions to see to the application of any consideration given by such purchaser to the transferee. Nor shall any purchaser or other transferee of any property or rights permitted to be sold by this Article 10 be under any obligation to ascertain or inquire into the authority of the Issuer or any Guarantor to make any such sale or other transfer.

Section 10.10 Authorization of Actions to be Taken by the Trustee Under the Security Documents.

        Subject to the provisions of the Security Documents, (a) the Trustee may, in its sole discretion and without the consent of the Holders, take all actions as it deems necessary or appropriate in order to (i) enforce any of the terms of the Security Documents and (ii) collect and receive any and all amounts payable in respect of the obligations of the Company and the Guarantors hereunder and (b) the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Note Collateral by any act that may be unlawful or in violation of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Note Collateral (including the power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest thereunder or be prejudicial to the interests of the Holders or the Trustee). No duty beyond that of a reasonably prudent Person shall rest upon the Trustee in taking any such action or instituting and maintaining any such suits or proceedings pursuant to this Section 10.10.

Section 10.11 Authorization of Receipt of Funds by the Trustee Under the Security Documents.

        The Trustee is authorized to receive any funds for the benefit of Holders distributed under the Security Documents, and to make further distributions of such funds to the Holders in accordance with the provisions of Article 11 and the other provisions of this Indenture.

Section 10.12 Certain TIA Requirements

        (a)   The Company will comply with the applicable provisions of Section 314 of the TIA.

        (b)   To the extent applicable, the Company will cause §313(b) of the TIA, relating to reports, and §314(d) of the TIA, relating to the release of property or securities or relating to the substitution therefore of any property or securities to be subjected to the Collateral Agent's Lien, to be complied with. Any certificate or opinion required by §314(d) may be made by an officer of the Company or a Guarantor except in cases where §314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the Trustee.

        (c)   Notwithstanding anything to the contrary contained in this Section 10.12:

        (i)    the Company and the Guarantors shall not be required to comply with Section 314(d)(1) of the TIA in respect of transactions undertaken pursuant to Section 10.07, provided that the Company shall deliver to the Trustee within 60 days following each December 31 and June 30 thereafter a

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certificate (signed by an Officer) to the effect that all of the transactions undertaken by the Company pursuant to Section 10.07 during the preceding semi-annual period were in the ordinary course of the Company's business and that the proceeds therefrom were used by the Company as permitted by this Indenture and the Security Documents;

        (ii)   the Company will not be required to comply with all or any portion of §314(d) if it determines, in good faith based on advice of counsel, that under the terms of §314(d) and/or any interpretation or guidance as to the meaning thereof of the SEC and its staff, including 'no action' letters or exemptive orders, all or any portion of §314(d) is inapplicable to one or a series of released Note Collateral; and

        (iii)  the fair value of Note Collateral released from the Collateral Agent's Lien pursuant to Section 10.07 hereof shall not be considered in determining whether the aggregate fair value of Note Collateral released from the Collateral Agent's Lien in any calendar year exceeds the 10% threshold specified in Section 314(d)(1) of the TIA; provided that the right of the Company and the Guarantors to rely on this sentence at any time is conditioned upon the Company having furnished to the Trustee the certificates described in subsection (b) of this Section that were required to be furnished to the Trustee at or prior to such time.

It is expressly understood that subsection (b) of this Section and this subsection (c) relate only to the Company's obligations under the TIA and shall not restrict or otherwise affect the rights or abilities of the Company and the Guarantors to release Collateral pursuant to the terms of this Indenture and the Security Documents or otherwise permitted by the Trustee under this Indenture and the Security Documents.

Section 10.13 Appointment of Collateral Agent

        The Trustee may designate and appoint the Collateral Agent as collateral agent to act as specified in the Collateral Agency Agreement and in the Security Documents. The Trustee may authorize the Collateral Agent to take such action on behalf of the Trustee under the provisions of Articles 10 and 11 of the Indenture, and under the provisions of the Collateral Agency Agreement, the Security Documents and any other instruments and agreements referred to therein, and to exercise such powers and to perform such duties thereunder as are specifically authorized by the Trustee. The Collateral Agent shall be an independent contractor and shall have no authority to act for or represent the Trustee except as expressly set forth in the Collateral Agency Agreement. The Collateral Agent shall hold or be deemed to hold any Collateral to which it comes into possession in trust for the Trustee on behalf of the Holders of the Securities.

ARTICLE 11.

APPLICATION OF TRUST MONIES

Section 11.01 "Trust Monies" Defined.

        (a)   All cash and Cash Equivalents received by the Trustee or the Collateral Agent:

        (i)    for application under this Article 11 as provided in Section 4.15;

        (ii)   as the proceeds of fire or casualty insurance upon any Inventory or First Lien Collateral; or

        (iii)  as compensation for or proceeds of the sale of all or any part of the Note Collateral taken by eminent domain or expropriation or purchased by, or sold pursuant to any order or, a governmental authority, or otherwise disposed of;

together with investment earnings on any of the foregoing (all such moneys being herein sometimes called "Trust Monies"; provided, however, that Trust Monies shall not include any property deposited with the Trustee for any Change of Control Offer or pursuant to Article 8 or delivered to or received by the Trustee for application in accordance with section 6.13 hereof), shall be delivered to and held by the Collateral Agent for the benefit of the Holders as a part of the Note Collateral and, upon the occurrence and continuation of an Event of Default, said Trust Monies shall be applied in accordance with Section 6.13; but, prior to any such occurrence and continuation of an Event of Default, all or any part of the Trust

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Monies may be withdrawn, and shall be released, paid or applied by the Trustee, from time to time as provided in this Article 11; provided further, however, and for the avoidance of doubt, any such proceeds of fire and casualty insurance upon Inventory referred to in clause (ii) shall be junior in priority to the Lien of the Credit Facility Agent in the Common Collateral, in accordance with the provisions of the Intercreditor Agreement, and to Permitted Prior Liens. Notwithstanding anything to the contrary in this Indenture or the Security Documents and for the avoidance of doubt, Trust Monies shall not include any cash, securities, obligations or Cash Equivalents or the investment earnings thereon which arise out of any transaction permitted by Section 10.05 or 10.07.

        (b)   On the date hereof there shall be established and, at all times hereafter until this Indenture shall have terminated, there shall be maintained with the Collateral Agent an account which shall be entitled the Trust Monies Account (the "Trust Monies Account"). The Trust Monies Account shall be established and maintained by the Collateral Agent at its corporate trust office or such other location as may be designated by the Trustee. All Trust Monies which are received by the Trustee or the Collateral Agent shall be deposited in the Trust Monies Account and thereafter shall be held, applied and/or disbursed by the Trustee in accordance with the terms of this Article 11 and Section 4.15, as applicable.

Section 11.02 Withdrawal of Trust Monies to Fund an Asset Sale Offer or Similar Offers Relating to Proceeds of Insurance or Expropriation.

        (a)   Trust Monies that arise from clause (ii) or (iii) of Section 11.01(a) may be used to make a Repurchase Offer, in accordance with the requirements of Section 3.09, at a purchase price in cash equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase. If any Trust Monies remain after consummation of the Repurchase Offer, they shall be retained in the Trust Monies Account, and subject to the Lien thereon, pending further use in accordance with this Article 11.

        (b)   To the extent a Repurchase Offer, including an Asset Sale Offer, has been made in accordance with the terms of the Indenture, Trust Monies may be withdrawn by the Company and shall be paid by the Collateral Agent to whomever is acting as paying agent for the Repurchase Offer (or as otherwise directed by the Trustee) upon a Company Order to the Trustee and upon receipt by the Trustee of an Officers' Certificate, dated not more than five days prior to the date of purchase of the Notes, certifying:

        (i)    that no Default or Event of Default exists; and

        (ii)   (A) that the Company has made a Repurchase Offer as permitted by the terms of the Indenture, (B) the amount of money to be applied to the repurchase of the Notes pursuant to the Repurchase Offer, and (C) the date of purchase of the Notes; and

        (iii)  that all conditions precedent and covenants herein provided for relating to such application of Trust Monies have been complied with.

        Upon compliance with the foregoing provisions of this Section 11.02, the Trustee shall cause the Collateral Agent to pay the Trust Monies to whomever is acting as paying agent for the Repurchase Offer and such paying agent shall apply the Trustee Monies as directed and specified by such Company Order.

Section 11.03 Withdrawal of Trust Monies for a First Lien Collateral Investment.

        (a)   Trust Monies that arise from clause (ii) or (iii) of Section 11.01(a) may be used to make a First Lien Collateral Investment.

        (b)   To the extent the Company intends to invest any Trust Monies in a First Lien Collateral Investment consistent with the requirements of the Indenture (such Trust Monies, as so released, "Released Trust Monies"), such Released Trust Monies may be withdrawn by the Company (or as otherwise directed by the Company) upon a Company Order to the Trustee and upon receipt by the Trustee of the following:

        (i)    An Officers' Certificate, dated not more than five days prior to the application for the withdrawal and payment of such Trust Monies, certifying that (i) the release of the Released Trust Monies complies with the terms and conditions of, and the Released Trust Monies will be used in

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accordance with, Section 4.15 of this Indenture, (ii) there is no Default or Event of Default in effect or continuing on the date thereof, (iii) the release of the Released Trust Monies will not result in a Default or Event of Default hereunder and (iv) all conditions precedent to such release have been complied with; and

        (ii)   All documentation necessary to subject such First Lien Collateral Investment to a valid first priority Lien and security interest in favor of the Collateral Agent, subject to Permitted Liens in respect of the relevant item of First Lien Collateral for the benefit of the Holders pursuant to the Security Documents, including without limitation documents required by Section 10.01(d).

        Upon compliance with the foregoing provisions of this Indenture, the Trustee shall cause the Collateral Agent to apply the Released Trust Monies as directed and specified by such Company Order.

Section 11.04 Investment of Trust Monies.

        So long as no Default or Event of Default shall have occurred and be continuing, all or any part of any Trust Monies held by the Collateral Agent shall from time to time be invested or reinvested by the Collateral Agent in any Cash Equivalents pursuant to written instructions of the Company to the Collateral Agent, which shall specify the Cash Equivalents in which Trust Monies shall be invested and the amount thereof. The Trustee shall have no liability whatsoever for any loss, fee, tax or other charge incurred in connection with any investment, reinvestment or liquidation of an investment of Trust Monies.

Section 11.05 Withdrawal of Trust Monies Representing Second Lien Collateral

        Trust Monies that arise from clause (ii) or (iii) of Section 11.01(a), to the extent that they arise from or constitute Common Collateral, may be withdrawn by the Company upon, and in accordance with, the instruction of the Credit Facility Agent in accordance with the Intercreditor Agreement upon a Company Order to the Trustee and upon receipt by the Trustee of written evidence of the instruction of the Credit Facility Agent. Upon compliance with the foregoing, the Trustee shall cause the Collateral Agent to pay such Trust Monies to or as directed by the Credit Facility Agent.

ARTICLE 12.

GUARANTEES

Section 12.01 Guarantee.

        Subject to this Article 12, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, (the "Guarantee") that: (a) the principal, interest, premium and Special Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee under this Indenture and the Notes shall be promptly paid in full or performed, all in accordance with the terms under this Indenture and the Notes; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

        The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor; provided, however, that notwithstanding the foregoing no such waiver or consent or circumstance shall without the written consent of the

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Guarantors increase the principal amount of a Note or the interest rate thereon or change the currency of payment with respect to any Note, or alter the Stated Maturity thereof. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to any Note or the Indebtedness evidenced thereby and all demands whatsoever and covenant that this Guarantee shall not be discharged except by complete with respect to any Note or the Indebtedness evidenced thereby performance of the obligations contained in the Notes and this Indenture.

        The obligations of the Guarantor under its Guarantee are independent of the obligations guaranteed by such Guarantor hereunder, and a separate action or actions may be brought and prosecuted by the Trustee on behalf of, or by, the Holders, subject to the terms and conditions set forth in this Indenture against a Guarantor to enforce the Guarantee, irrespective of whether any action is brought against the Company or whether the Company is joined in any such action or actions.

        The Guarantor hereby agrees that, in the event of a default in payment of principal (or premium and Special Interest, if any) or interest on a Note, whether at its stated maturity, by acceleration, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Note, subject to the terms and conditions set forth in this Indenture, directly against each of the Guarantors to enforce such Guarantor's Guarantee without first proceeding against the Company or any other Guarantor.

        The Guarantor agrees that if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Notes, to collect interest on the Notes, or to enforce or exercise any other right or remedy with respect to the Notes, such Guarantor shall pay to the Trustee for the account of the Holder, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders.

        If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

        Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the guarantee.

        Each Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation, reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must other-wise be restored or returned by any obligee on the Notes or Guarantees, whether as a "void-able preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

        In case any provision of any Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

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        The Guarantee issued by any Guarantor shall be a general obligation of such Guarantor, ranking pari passu with any other future senior Indebtedness of such Guarantor. Each Guarantee will be secured by: (i) first priority Liens in the First Lien Collateral of such Guarantor, subject to Permitted Prior Liens; and (ii) second priority Liens in the Credit Facility Collateral of such Guarantor, subject to Permitted Prior Liens.

        Each payment to be made by a Guarantor in respect of its Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

Section 12.02 Limitation on Guarantor Liability.

        Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the guarantee by each Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar United States federal or state law or Canadian federal, provincial or territorial law relating to fraudulent transfer or conveyance. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Guarantor under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law. Each Guarantor that makes a payment or distribution under a guarantee shall be entitled to a contribution from each other Guarantor in a proportional amount based on the net assets of each Guarantor, determined in accordance with GAAP.

Section 12.03 Execution and Delivery of Guarantee.

        To evidence its Guarantee set forth in Section 12.01, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form included in Exhibit D shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by an Officer of such Guarantor by manual or facsimile signature.

        Each Guarantor hereby agrees that its Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee.

        If an Officer whose signature is on this Indenture or on the Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless.

        The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors.

        In the event that the Company creates or acquires any new Restricted Subsidiaries, other than Non-Guarantor Restricted Subsidiaries, subsequent to the date of this Indenture, if required by Section 4.21 hereof, the Company shall cause such Restricted Subsidiaries to execute supplemental indentures to this Indenture and Guarantees in accordance with Section 4.21 hereof and this Article 12, to the extent applicable.

Section 12.04 Guarantors May Consolidate, etc., on Certain Terms.

        Except as otherwise provided in Section 12.05 hereof, no Guarantor may sell or other-wise dispose of all or substantially all of its assets to, or consolidate, amalgamate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor unless:

        (a)   immediately after giving effect to that transaction, no Default or Event of Default exists; and

        (b)   either:

        (i)    the Guarantor is the surviving Person, or the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation, amalgamation or merger assumes all the obligations of that Guarantor under this Indenture, its Guarantee and the Registration

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Rights Agreement pursuant to a supplemental indenture satisfactory to the Trustee and completes all other required documentation; or

        (ii)   the Net Proceeds of such sale or other disposition are applied in accordance with the provisions of Section 4.14 hereof;

        In case of any such consolidation, amalgamation, merger, sale or conveyance and upon the assumption by the successor Person (where applicable), by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Guarantees had been issued at the date of the execution hereof.

        Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor.

Section 12.05 Release of Guarantees

        The Guarantee of a Guarantor will be released:

        (a)   in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of consolidation, amalgamation or merger) to a Person that is not (either before or after giving effect to such transaction) a Guarantor, if the sale or other disposition complies with the Section 4.14 and/or Section 4.15 hereof;

        (b)   in connection with any sale of all of the Capital Stock of such Guarantor to a Person that is not (either before or after giving effect to such transaction) a Guarantor, if the sale complies with Section 4.14 and/or Section 4.15 hereof;

        (c)   if the Company designates any Guarantor as an Unrestricted Subsidiary in accordance with Section 4.18 hereof;

        (d)   upon Legal Defeasance or satisfaction and discharge of the Indenture pursuant to Article 8 or Article 13 hereof; and

        (e)   upon the consolidation or amalgamation or merger of such Guarantor with or into the Company if the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Issuer) assumes all of the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement in accordance with the requirements of clause (ii) of Section 5.01(a) of this Indenture.

        Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that all conditions precedent to such release have been complied with the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Guarantee.

        Any Guarantor not released from its obligations under its Guarantee shall re-main liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 12.

Section 12.06 Subrogation.

        Each Guarantor shall be subrogated to all rights of Holders of Notes against the Company in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 12.01; provided that, if an Event of Default

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has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Company under this Indenture or the Notes shall have been paid in full.

Section 12.07 Benefits Acknowledged.

        Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.

ARTICLE 13.

SATISFACTION AND DISCHARGE

Section 13.01 Satisfaction and Discharge.

        This Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder and the Guarantees thereon, when:

        (a)   either:

        (i)    all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been irrevocably deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or

        (ii)   all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Special Interest, if any, and accrued interest to the date of maturity or redemption;

        (b)   no Default or Event of Default shall have occurred and be continuing on the date of the deposit or shall occur as a result of the deposit (other than a Default or an Event of Default arising from the borrowing of the funds to be applied to such deposit) and the deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;

        (c)   The Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and

        (d)   The Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

        In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

        Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (2) of clause (a) of this Section 13.01, the provisions of Section 13.02 and Section 8.06 hereof shall survive.

Section 13.02 Money Held in Trust.

        Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 13.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its

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own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Special Interest, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

        If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 13.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 13.01 hereof; provided that if the Company has made any payment of principal of, premium and Special Interest, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE 14.

MISCELLANEOUS

Section 14.01 Trust Indenture Act Controls.

        To the extent if any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with another provision (an "incorporated provision") included in this Indenture by operation of TIA §310 to §318 inclusive, incorporated herein in accordance with Section 1.03 hereof, such imposed duties or incorporated provision shall control.

Section 14.02 Notices.

        Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address:

If to the Company and/or any Guarantor:

HudBay Mining and Smelting Inc.
2200-201 Portage Avenue
Winnipeg, Manitoba
Canada, R3B 3L3
Telecopier No.: (204) 942-8177
Attention: Chief Financial Officer

With a copy to:

Cassels, Brock & Blackwell LLP
2100 Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3C2
Telecopier No.: (416) 360-8877
Attention: Cameron Mingay

and

Shearman & Sterling LLP
Commerce Court West
Suite 4405, P.O. Box 247
Toronto, Ontario
M5L 1E8
Telecopier No. (416) 360-2958
Attention: Christopher J. Cummings

90

If to the Trustee:

The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Telecopier No.: (212) 815-5803
Attention: Corporate Trust Administration

        The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications.

        All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery; provided that any notice or communication delivered to the Trustee shall be deemed effective upon actual receipt thereof and may be given via facsimile.

        Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

        If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

        If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

Section 14.03 Communication by Holders of Notes with Other Holders of Notes.

        Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

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Section 14.04 Certificate and Opinion as to Conditions Precedent.

        (a)   Upon any request or application by the Company or any of the Restricted Subsidiaries to the Trustee to take any action under this Indenture, the Company or such Guarantor, as the case may be, shall furnish to the Trustee an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

        (b)   An Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 below) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section 14.05 Statements Required in Certificate or Opinion.

        Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to Section 4.04 hereof or TIA § 314(a)(4)) shall comply with the provisions of TIA § 314(e) and shall include:

        (a)   a statement that the Person making such certificate or opinion has read such covenant or condition;

        (b)   a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

        (c)   a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with (and, in the case of an Opinion of Counsel, may be limited to reliance on an Officers Certificate as to matters of fact); and

        (d)   a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

Section 14.06 Rules by Trustee and Agents.

        The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 14.07 No Personal Liability of Directors, Officers, Trustees, Employees, Shareholders, Partners and Principals.

        No past, present or future director, officer, employee, incorporator or shareholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

Section 14.08 Governing Law.

        THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES.

Section 14.09 Waiver of Jury Trial.

        EACH OF THE COMPANY, THE GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

92

Section 14.10 Force Majeure.

        In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of god, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.

Section 14.11 No Adverse Interpretation of Other Agreements.

        This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or their Restricted Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 14.12 Successors.

        All agreements of the Company in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 12.05.

Section 14.13 Agent for Service; Submission to Jurisdiction; Waiver of Immunities.

        By the execution and delivery of this Indenture, the Company and each of the non-U.S. Guarantors (i) acknowledges that it has, by separate written instrument, irrevocably designated and appointed CT Corporation System, 111 Eighth Avenue, 13th Floor, New York, New York 10011 as its authorized agent upon which process may be served in any suit, action or proceeding arising out of or relating to the Notes, the Guarantees or this Indenture that may be instituted in any U.S. federal or state court located in the Borough of Manhattan in The City of New York, or brought under federal or state securities laws, and acknowledges that CT Corporation System has accepted such designation, (ii) submits to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding, and (iii) agrees that service of process upon CT Corporation System and written notice of said service to it (mailed or delivered to its General Counsel at its principal office in Winnipeg, Manitoba as specified in Section 14.02 hereof), shall be deemed in every respect effective service of process upon it in any such suit or proceeding. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment in full force and effect so long as this Indenture shall be in full force and effect.

        To the extent that any of the Company or the Guarantors has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each of the Company and the Guarantors hereby irrevocably waives such immunity in respect of its obligations under this Indenture and the Notes, to the extent permitted by law.

Section 14.14 Conversion of Currency.

        (a)   (i) If for the purpose of obtaining judgment in, or enforcing the judgment of, any court in any country, it becomes necessary to convert into any other currency (the "judgment currency") an amount due in U.S. dollars, then the conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which the judgment is given or the order of enforcement is made, as the case may be (unless a court shall otherwise determine). (ii) If there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given or an order of enforcement is made, as the case may be (or such other date as a court shall determine), and the date of receipt of the amount due, the Company will pay such additional (or, as the case may be, such lesser) amount, if any, as may be necessary so that the amount paid in the judgment currency when converted at the rate of exchange prevailing on the date of receipt will produce the amount in U.S. dollars originally due.

        (b)   In the event of the winding-up of the Company at any time while any amount or damages owing under the Notes, Guarantees or this Indenture, or any judgment or order rendered in respect thereof, shall

93

remain outstanding, the Company shall indemnify and hold the Holders and the Trustee harmless against any deficiency arising or resulting from any variation in rates of exchange between (1) the date as of which the equivalent of the amount in U.S. dollars due or contingently due under the Notes, Guarantees or this Indenture (other than under this Subsection (b)) is calculated for the purposes of such winding-up and (2) the final date for the filing of proofs of claim in such winding-up. For the purpose of this Clause (b), the final date for the filing of proofs of claim in the winding-up of the Company shall be the date fixed by the liquidator or otherwise in accordance with the relevant provisions of applicable law as being the latest practicable date as at which liabilities of the Company may be ascertained for such winding-up prior to payment by the liquidator or otherwise in respect thereto.

        (c)   The obligations contained in Clauses (a)(ii) and (b) of this Section 14.14 shall constitute separate and independent obligations of the Company from its other obligations under the Notes, Guarantees and this Indenture, shall give rise to separate and independent causes of action against the Company, shall apply irrespective of any waiver or extension granted by any Holder or Trustee or either of them from time to time and shall continue in full force and effect notwithstanding any judgment or order or the filing of any proof of claim in the winding-up of the Company for a liquidated sum in respect of amounts due hereunder (other than under Clause (b) above) or under any such judgment or order. Any such deficiency as aforesaid shall be deemed to constitute a loss suffered by the Holders or the Trustee, as the case may be, and no proof or evidence of any actual loss shall be required by the Company, the Guarantors or the liquidator or otherwise. In the case of Clause (b) above, the amount of such deficiency shall not be deemed to be reduced by any variation in rates of exchange occurring between the said final date and the date of any liquidating distribution.

        (d)   The term "rate(s) of exchange" shall mean the rate of exchange quoted by the Federal Reserve Bank of New York, noon buying rate on the date of determination for purchases of U.S. dollars with the judgment currency other than U.S. dollars referred to in Clauses (a) and (b) above and includes any premiums and costs of exchange payable.

        (e)   The Trustee shall have no duty or liability with respect to monitoring or enforcing this Section 14.14.

Section 14.15 Currency Equivalent.

        Except as provided in Section 14.14, for purposes of the construction of the terms of this Indenture or of the Notes and Guarantees, in the event that any amount is stated herein in the currency of one nation (the "First Currency"), as of any date such amount shall also be deemed to represent the amount in the currency of any other relevant nation (the "Other Currency") which is required to purchase such amount in the First Currency at the rate of exchange quoted by the Federal Reserve Bank of New York, noon buying rate on the date of determination.

Section 14.16 Severability.

        In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14.17 Counterpart Originals.

        The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

Section 14.18 Table of Contents, Headings, etc.

        The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

[Signatures on following page]

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SIGNATURES

HUDBAY MINING AND SMELTING INC.
By:	/s/ H. Douglas Scharf Name: H. Douglas Scharf Title: Vice President
152640 CANADA INC., as Guarantor
By:	/s/ H. Douglas Scharf Name: H. Douglas Scharf Title: Vice President
HUDSON BAY MINING AND SMELTING CO., LIMITED, as Guarantor
By:	/s/ H. Douglas Scharf Name: H. Douglas Scharf Title: Vice President
HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED, as Guarantor
By:	/s/ H. Douglas Scharf Name: H. Douglas Scharf Title: Vice President

THE BANK OF NEW YORK, as Trustee.
By:	/s/ Michael Pitfick Name: Michael Pitfick Title: Assistant Vice President

EXHIBIT A

[Face of Note]

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Regulation S Legend, if applicable pursuant to the provisions of the Indenture]

A-1

[Rule 144A Note CUSIP:    •    ]
[Rule 144A Note ISIN:    •    ]
[Regulations S Note CUSIP:    •    ]
[Regulation S Note ISIN:    •    ]

9⁵/8% Senior Secured Notes due January 15, 2012

No. US$

HUDBAY MINING AND SMELTING INC.

promises to pay to
or registered assigns,

the principal sum of

Dollars on January 15, 2012.

Interest Payment Dates: January 15 and July 15

Record Dates: January 1 and July 1

A-2

        IN WITNESS HEREOF, the Company has caused this instrument to be duly executed.

Dated:

HUDBAY MINING AND SMELTING INC.
By:	Name: Title:

This is one of the Notes referred to in the within-mentioned Indenture:

The Bank of New York     as Trustee
By:	Authorized Signatory

A-3

[Back of Note]
9⁵/8% Senior Secured Notes due January 15, 2012

        Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

        1.     Interest.    HudBay Mining and Smelting Inc., a corporation formed under the laws of Canada (the "Company"), promises to pay interest on the principal amount of this Note at 9?% per annum from December 21, 2004 until maturity [and shall pay the Special Interest payable pursuant to the Registration Rights Agreement referred to below]^*. The Company will pay interest [and Special Interest]* semi-annually in arrears on January 15 and July 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided, that the first Interest Payment Date shall be July 15, 2005. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law to the extent lawful) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law to the extent lawful) on overdue installments of interest [and Special Interest]* as provided in the Indenture. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. For the purposes of disclosure under the Interest Act (Canada), the yearly rate of interest which is equivalent to the rate payable hereunder is the rate payable multiplied by the actual number of days in the year divided by 360.

        2.     Method of Payment.    The Company will pay interest on the Notes (except defaulted interest) [and Special Interest]* to the Persons who are registered Holders of Notes at the close of business on the immediately preceding January 1 and July 1 (whether or not a Business Day), as the case may be, next preceding the Interest Payment Date, even if such Notes are canceled after such Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium [and Special Interest]*, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest [and Special Interest]* may be made by check mailed to the Holders at their addresses set forth in the Note Register, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium [and Special Interest]* on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

        3.     Paying Agent and Registrar.    Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to the Holders. The Company or any of the Guarantors may act in any such capacity.

        *      To be modified if the Note is an Exchange Note to reflect the absence of Special Interest and registration rights.

A-4

        4.     Indenture.    The Company issued the Notes under an Indenture dated as of December 21, 2004 (the "Indenture") among the Company, 152640 Canada Inc. ("152640 Canada"), Hudson Bay Mining and Smelting Co., Limited ("HBMS"), Hudson Bay Exploration and Development Company Limited ("HBED") and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general obligations of the Company limited to US$225,000,000 in aggregate principal amount.

        5.     Optional Redemption.

        (a)   At any time prior to January 15, 2008 the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes, calculated after giving effect to the issuance of Additional Notes, if any, at a redemption price of 109⁵/8% of the principal amount, plus accrued and unpaid interest [and Special Interest]^*, if any, to the redemption date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date), with the net cash proceeds of one or more Public Equity Offerings; provided that:

        (1)   at least 65% of the aggregate principal amount of Notes theretofor issued under the Indenture, calculated after giving effect to the issuance of Additional Notes, if any, remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Affiliates); and

        (2)   the redemption occurs within 60 days of the date of the closing of the relevant sale of Common Stock.

        (b)   Except pursuant to the preceding paragraph and as described below under clause (d) hereof, the Notes will not be redeemable at the Company's option before January 15, 2009.

        (c)   After January 15, 2009, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest [and Special Interest,]* if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on January 15 of the years indicated below:

Year	Percentage
2009	104.813%
2010	102.406%
2011 and thereafter	100.000%

        (d)   The Company may redeem all, but not less than all, of the Notes at any time at 100% of the aggregate principal amount of the Notes, together with accrued and unpaid interest [and Special Interest,]^* if any, on the Notes redeemed to the applicable redemption date, if the Company has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Notes, any Additional Amounts as a result of a change in the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any change in any official position of any governmental agency, taxing authority or regulatory authority regarding the application or interpretation of such laws or regulations, which change is announced or becomes effective on or after December 10, 2004.

        *      To be modified if the Note is an Exchange Note to reflect the absence of Special Interest and registration rights.

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        6.     Mandatory Redemption.

        The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

        7.     Repurchase at Option Holder; Change of Control; Asset Sales:

        (a)   Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to US$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount of the Notes repurchased plus accrued and unpaid interest [and Special Interest thereon, if any,]* to the date of purchase (the "Change of Control Payment"). Within thirty (30) days following any Change of Control, the Company shall mail a notice to each Holder at its registered address appearing in the Note Register setting forth the procedures governing the Change of Control Offer in accordance with sections 3.09 and 4.17 of the Indenture.

        (b)   If the Company or any of its Restricted Subsidiaries consummates an Asset Sale, within thirty (30) days of each date on which the aggregate amount of Excess Proceeds exceeds Cdn$5,000,000, the Company shall commence an offer (an "Asset Sale Offer") to all Holders of Notes and all Holders of other Indebtedness that is pari passu with the Notes pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including any Additional Notes) and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest [and Special Interest thereon, if any,]* to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes.

        (c)   If the Company or any Guarantor consummates a Collateral Asset Sale, the Company may commence an Asset Sale Offer to all Holders of Notes pursuant to Section 3.09 and 4.15 of the Indenture to purchase the principal amount of Notes determined by the Company at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest [and Special Interest thereon, if any,]^* to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture.

        8.     Notice of Redemption.    Subject to Section 3.09 of the Indenture, notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date (except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 13 of the Indenture) to each Holder whose Notes are to be redeemed at its registered address at it appears in the Note Register. Notes in denominations larger than US$1,000 may be redeemed in part but only in whole multiples of US$1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

        9.     Denominations, Transfer, Exchange.    The Notes are in registered form without coupons in denominations of US$1,000 and integral multiples of US$1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

        *      To be modified if the Note is an Exchange Note to reflect the absence of Special Interest and registration rights.

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        10.   Persons Deemed Owners.    The registered Holder of a Note may be treated as its owner for all purposes.

        11.   Amendment, Supplement and Waiver.    Subject to certain exceptions, the Indenture, the Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class, and any existing default or compliance with any provision of the Indenture, the Guarantees or the Notes may be waived (other than a Default or Event of Default in the payment of the principal of, premium [and Special Interest, if any,]^* or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) with the consent of the Holders of a majority in principal amount of the then outstanding Notes and Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger, consolidation or sale of all or substantially all assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to add a Guarantor or security, to release or discharge security or a guarantee when permitted by the Indenture, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, to provide for the Issuance of Additional Notes in accordance with the limitations set forth in the Indenture to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes.

        12.   Defaults and Remedies.    The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium [or Special Interest, if any,]* or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest [or Special Interest on]*, or the principal of, premium [and Special Interest, if any,]* or interest on, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

        13.   Authentication.    This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

        *      To be modified if the Note is an Exchange Note to reflect the absence of Special Interest and registration rights.

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        14.   [Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes. In addition to the rights provided to Holders of [Initial] [Additional] Notes under the Indenture, Holders of the [Initial][Additional] Notes shall have all the rights set forth in the Registration Rights Agreement, dated as of [            ], between the Company, the Guarantors and the parties named on the signature pages thereof (the "Registration Rights Agreement"), including the right to receive Special Interest (as defined in the Registration Rights Agreement).]^*

        15.   Governing Law.THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES.

        16.   CUSIP Numbers.    Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

        The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to:

Hudson Bay Mining & Smelting Co., Ltd.
2200-201 Portage Avenue
Winnipeg, Manitoba
Canada, R3B 3L3
Attention: Chief Financial Officer

        *      To be modified if the Note is an Exchange Note to reflect the absence of Special Interest and registration rights.

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ASSIGNMENT FORM

        To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:
	(Insert assignee's legal name)

(Insert assignee's soc. sec. or tax I.D. no.)

(Print or type assignee's name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)

Signature guarantee*:

*

Participant in a recognized Signature guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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OPTION OF HOLDER TO ELECT PURCHASE

        If you want to elect to have this Note purchased by the Company pursuant to Section 4.14 or 4.17 of the Indenture, check the appropriate box below:

o Section 4.14                        o Section 4.17

        If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.14 or Section 4.17 of the Indenture, state the amount you elect to have purchased:

US$

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)

Tax Identification No.:

Signature guarantee*:

*

Participant in a recognized Signature guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-10

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE¹

        The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of decrease in Principal Amount Amount of increase in Principal Amount Principal Amount of this Global Note following such decrease (or increase) Signature of authorized officer of Trustee or Note Custodian

1

This schedule should be included only if the Note is issued in global form.

A-11

EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

HudBay Mining and Smelting Inc.
2200-201 Portage Avenue
Winnipeg, Manitoba
Canada R3B 3L3
Attention: Vice President, Finance

The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Telecopier No. (212) 815-5803
Attention: Corporate Trust Administration

        Re:    9⁵/8% Senior Secured Notes due 2012

        Reference is hereby made to the Indenture, dated as of December 21, 2004 (the "Indenture"), among HudBay Mining and Smelting Inc., a corporation formed under the laws of Canada (the "Company"), 152640 Canada Inc. ("152640 Canada"), Hudson Bay Mining and Smelting Co. ("HBMS"), and Hudson Bay Exploration and Development Company Limited ("HBED") (each of 152640 Canada, HBMS and HBED a "Guarantor" and together the "Guarantors") and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                     , (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of US$                              in such Note[s] or interests (the "Transfer"), to                               (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

        1.     o    Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A.    The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

        2.     o    Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S.    The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or

B-1

benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Regulation S Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act.

        3.     o    Check and complete if Transferee will take delivery of a beneficial interest in a Global Note or of a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S.     The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

        (a)   such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or

        (b)   such Transfer is being effected to the Company or a subsidiary thereof; or

        (c)   such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.

        4.     o    Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

        (a)   o    Check if Transfer is pursuant to Rule 144.    (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

        (b)   o    Check if Transfer is Pursuant to Regulation S.    (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

        (c)   o    Check if Transfer is Pursuant to Other Exemption.    (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

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        This certificate and the statements contained herein are made for your benefit and the benefit of the Company.

	[Insert Name of Transferor]
	By:	Name: Title:
Dated:

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

5.

The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a)

o    a beneficial interest in the:



(i)

o    144A Global Note (CUSIP                              ), or



(ii)

o    Regulation S Global Note (CUSIP                               ), or



(b)

o    a Restricted Definitive Note.

6.

After the Transfer the Transferee will hold:

        [CHECK ONE]

(a)

o    a beneficial interest in the:



(i)

o    144A Global Note (CUSIP                              ), or



(ii)

o    Regulation S Global Note (CUSIP                               ), or



(iii)

o    Unrestricted Global Note (CUSIP                               ); or



(b)

o    a Restricted Definitive Note; or



(c)

o    an Unrestricted Definitive Note,

in accordance with the terms of the Indenture.

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

HudBay Mining and Smelting Inc.
2200-201 Portage Avenue
Winnipeg, Manitoba
Canada R3B 3L3
Attention: Vice President, Finance

The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Telecopier No. (212) 815-5803
Attention: Corporate Trust Administration

        Re:    9⁵/8% Senior Secured Notes due 2012

        Reference is hereby made to the Indenture, dated as of December 21, 2004 (the "Indenture"), among HudBay Mining and Smelting Inc., a corporation formed under the laws of Canada (the "Company"), 152640 Canada Inc. ("152640 Canada"), Hudson Bay Mining and Smelting Co. ("HBMS"), and Hudson Bay Exploration and Development Company Limited ("HBED") (each of 152640 Canada, HBMS and HBED a "Guarantor" and together the "Guarantors") and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                                          , (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of US$                              in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that:

1)

Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note

a)

o    Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note.    In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

b)

o    Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note.    In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

c)

o    Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange for a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and

C-1

in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

d)

o    Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

2)

Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

a)

o    Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note.    In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

b)

o    Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note.    In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the 144A Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

        This certificate and the statements contained herein are made for your benefit and the benefit of the Company and are dated                                                   .

	[Insert Name of Transferor]
	By:	Name: Title:
Date:

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EXHIBIT D

[FORM OF NOTATION OF GUARANTEE]

        For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture (as defined below) and subject to the provisions in the Indenture dated as of December 21, 2004 (the "Indenture") among HudBay Mining and Smelting Inc., a corporation existing under the laws of Canada, the Guarantors and The Bank of New York, as Trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium and Special Interest, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium and to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders and to the Trustee pursuant to this guarantee and the Indenture are expressly set forth in the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee. Each Holder by accepting the same, agrees to and shall be bound by such provisions.

The laws of the State of New York shall govern and be used to construe this Guarantee.

[NAME OF GUARANTOR(S)]
By:
	Name: Title:

D-1

EXHIBIT E

HUDBAY MINING AND SMELTING INC.

and

152640 CANADA INC.

HUDSON BAY MINING AND SMELTING CO., LIMITED

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

                                          as Guarantors

and

THE BANK OF NEW YORK

                                          as Trustee

and

BNY TRUST COMPANY OF CANADA

                                          as Collateral Agent

CANADIAN COLLATERAL AGENCY AGREEMENT

Dated as of December 21, 2004

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TABLE OF CONTENTS

		Page
1.	Appointment	1
2.	Nature of Duties	2
3.	Approval	3
4.	Action of Collateral Agent	3
5.	Responsibilities of Collateral Agent	3
6.	Reliance	4
7.	Indemnification	4
8.	The Collateral Agent in Its Individual Capacity	4
9.	Resignation by and Removal of the Collateral Agent	5
10.	Further Assurances	6
11.	Amendments	6
12.	Remedies; Waiver	6
13.	Survival	7
14.	Successors and Assigns	7
15.	Notices	7
16.	Entire Understanding; Counterparts	7
17.	Severability of Terms; Headings	7
18.	Costs	7
19.	GOVERNING LAW	8
20.	Trustee May Perform	8
21.	Collateral Agent Generally	8

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CANADIAN COLLATERAL AGENCY AGREEMENT

        CANADIAN COLLATERAL AGENCY AGREEMENT (the "Agreement") dated as of December 21, 2004, among HUDBAY MINING AND SMELTING INC. (the "Company"), 152640 CANADA INC., HUDSON BAY MINING AND SMELTING CO., LIMITED and HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED (collectively, the "Guarantors"), THE BANK OF NEW YORK, as trustee (the "Trustee") under the Indenture (as defined below) and BNY TRUST COMPANY OF CANADA, as collateral agent (the "Collateral Agent"). Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Indenture (as defined below).

R E C I T A L S:

        A.    The Company is issuing secured notes in an aggregate principal amount of US$175,000,000 pursuant to the terms of an indenture, dated as of December 21, 2004, among the Company, the Guarantors and the Trustee, as trustee, as such may be amended or supplemented from time to time in accordance with the provisions thereof (the "Indenture");

        B.    To secure the payment of the Company's obligations under the Notes and the performance and observance of all of the Company's obligations under the terms of the Indenture and the Notes, each of the Company and the Guarantors has executed certain Security Documents with respect to the Note Collateral owned by it and has taken such action as is necessary to grant to the Collateral Agent a valid, fully perfected security interest in each item of the Note Collateral for the benefit of the Trustee and the Holders of the Notes (collectively, as applicable, the "Secured Parties") in accordance with and subject to the terms of the Indenture; and

        C.    The Company desires the Trustee to appoint the Collateral Agent to hold and administer the Note Collateral on behalf of the Secured Parties as provided herein, in the Indenture and in the Security Documents.

A G R E E M E N T:

        NOW, THEREFORE in consideration of the mutual covenants and premises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto and in order to induce the purchasers of the Notes to purchase the Notes, the parties hereto agree as follows;

1.

Appointment

        The Trustee hereby designates and appoints the Collateral Agent as collateral agent to act as specified herein and in the Security Documents. The Trustee hereby irrevocably authorizes the Collateral Agent to take such action on behalf of the Trustee under the provisions of this Agreement, the Security Documents and any other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder as are specifically authorized by the Trustee. The Collateral Agent may execute any of its duties under this Agreement or any other Security Documents by or through its agents, nominees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents, nominees or attorneys in-fact selected by it with reasonable care. The Collateral Agent is an independent contractor and shall have no authority to act for or represent the Trustee except as expressly set forth herein. The Collateral Agent shall hold or be deemed to hold any Note Collateral to which it comes into possession in trust for the Trustee on behalf of the Holders of the Notes.

2.

Nature of Duties

        The Collateral Agent shall have no duties or responsibilities with respect to the Note Collateral except those expressly set forth herein or in the Security Documents to which it is a party. None of the Collateral Agent nor any of its officers, directors, employees, agents, nominees or attorneys-in-fact shall be liable for any action taken or omitted to be taken by it hereunder or under the Security Documents or in connection herewith or therewith, unless caused by its or their gross negligence, bad faith or willful misconduct. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have, by reason

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of this Agreement or the Security Documents or otherwise, a fiduciary relationship in respect of any other Secured Party; and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Security Document or otherwise exist against the Collateral Agent, and nothing in this Agreement or any Security Document, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of any Security Document except as expressly set forth herein or therein. Notwithstanding anything contained herein or in the Security Documents, the Collateral Agent shall have no responsibility for (i) the validity or value of any of the Note Collateral or any of the instruments constituting any of the Note Collateral, or (ii) the value of or title to any of the Note Collateral or of any property subject to any instrument constituting part of the Note Collateral, or (iii) the insurance of any such Note Collateral or property, or (iv) the value of any Security Document or for any failure of the Company to perform its obligations under this Agreement or any Security Document. The Collateral Agent shall not be under any obligation to any Person to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or any Security Document, or to inspect the properties, books or records of the Company. Without limitation of anything contained in this Agreement, in carrying out its obligations and duties hereunder and under the Security Documents, the Collateral Agent shall be entitled to all of the same rights, indemnities, exculpation and immunities, and shall be subject to the same exceptions and qualifications thereto, as would apply to the Trustee under the Indenture, in its capacity as Trustee and such rights, indemnities, exculpations and immunities shall inure to the benefit of the Collateral Agent and are hereby incorporated by reference herein. The Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be responsible for any loss or diminution in value of any Collateral, by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Collateral Agent in good faith.

        Both before and after an Event of Default, the Trustee shall have no duty to supervise or monitor the Collateral Agent or its performance, and the Trustee shall not be liable for any act or omission of the Collateral Agent.

3.

Approval

        In performance of its duties hereunder, the Collateral Agent shall take any actions or refrain from taking any actions in connection with any Security Document as are specified herein or in such Security Document and as instructed by the Trustee, and the Collateral Agent shall have no duty to verify or inquire beyond the content of the same and shall not incur liability to any person by reason of such action or failure to act unless such shall be contrary to the instructions or the directions of the Trustee and unless such action or failure to act was the result of the gross negligence, bad faith or willful misconduct of the Collateral Agent. Without limiting the foregoing, no Secured Party shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder or under the Security Documents in accordance with such requests or instructions of the Trustee, and the Company shall fully indemnify and save harmless the Collateral Agent in connection with any claim by such a Secured Party.

4.

Action of Collateral Agent

        The Collateral Agent shall only act at the request of and upon receipt of written instructions from the Trustee and take such action as shall be specified in such written instructions (subject to Section 5 and subject to its right to indemnification under Section 7 hereof by the Company).

5.

Responsibilities of Collateral Agent

        The Collateral Agent may consult with, and obtain advice from, reputable legal counsel with respect to any question, as to any of the provisions hereof or of the Security Documents or its duties hereunder or under the Security Documents, or any matter of law relating hereto, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Collateral Agent reasonably and in good faith in accordance with the opinion and directions of such counsel; the reasonable costs of such services to be reimbursed by the Company or by the Trustee if the Trustee has received reimbursement pursuant to Section 7.07 of the Indenture. No provision of this Agreement or the Security Documents and no request of the Trustee shall require the Collateral Agent to expend or risk its own funds, or

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to take any legal or other action under this Agreement which might in its reasonable judgment involve any expense or any financial or other liability unless the Collateral Agent shall be furnished with indemnification reasonably acceptable to it, including the advance of funds sufficient in the judgment of the Collateral Agent to satisfy such liability, costs and expenses. The permissive right of the Collateral Agent to take any action under this Section 5 shall not be construed as a duty.

6.

Reliance

        The Collateral Agent shall be entitled to rely, shall have no duty to verify or inquire beyond the content of, and shall be fully protected in relying upon (whether original or facsimile), any note, writing, resolution, notice, consent, statement, certificate, telex, teletype or telecopier message, cablegram, order or other document signed, sent or made by anyone purportedly acting on behalf of a Person not only as to its due execution and validity, but also as to the truth and accuracy of the matters contained therein unless the Collateral Agent is aware of facts or circumstances that contradict or dispute such.

7.

Indemnification

        The Company and the Guarantors, jointly and severally, will reimburse, indemnify and hold harmless the Collateral Agent and its officers, directors, employees and agents (the "Indemnified Parties") for and against any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and expenses of legal counsel) (collectively, "Claims") which may at any time (including following the payment of all obligations under the Indenture) be imposed on, incurred by or asserted against the Indemnified Parties in connection with the Collateral Agent performing its duties or exercising its rights or remedies hereunder or under the Security Documents, provided that neither the Company nor the Guarantors shall be liable to an Indemnified Party for any portion of the Collateral Agent's Claims to the extent but only to the extent that such Claims may be attributable to such Indemnified Party's gross negligence, bad faith or willful misconduct. The Collateral Agent shall notify the Company promptly of any Claim for which it may seek indemnity. Failure by the Collateral Agent to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the Claim and the Collateral Agent shall cooperate in the defense. The Collateral Agent may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. Neither Company nor any Guarantor need pay for any settlement without its consent which consent shall not be unreasonably withheld.

8.

The Collateral Agent in Its Individual Capacity

        The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Company or any Affiliate or Subsidiary of the Company as if it were not performing the duties specified herein, and may accept fees and other consideration from the Company for services in connection with the Security Documents and otherwise without having to account for the same to the other Secured Parties.

9.

Resignation by and Removal of the Collateral Agent

        (a)   The Collateral Agent may resign from the performance of all its functions and duties under this Agreement at any time by giving 30 days' prior written notice to each of the Company and the Trustee. Such resignation shall take effect upon the appointment of a successor Collateral Agent by the Trustee, but in no case more than 30 days following such notice. Upon receipt of such notice the Trustee shall use its reasonable best efforts to appoint a successor Collateral Agent as soon as practicable. If no successor Collateral Agent shall have been appointed by the Trustee as required in this Section 9 within 30 days after the retiring Collateral Agent's giving of notice, then the retiring Collateral Agent may apply to a court of competent jurisdiction to designate a successor Collateral Agent, the expenses of such action to be reimbursed by the Company.

        (b)   The Trustee may remove the Collateral Agent at any time upon twenty (20) days written notice to the Collateral Agent. Such removal shall take effect upon the appointment of a successor Collateral Agent by the Trustee. Such removal shall not affect the Collateral Agent's rights with respect to the payment by the Company of all fees and expenses of the Collateral Agent under this Agreement or any other agreement between the parties, including fees and expenses of legal counsel. The Company shall have no right or

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power to remove or seek the removal of the Collateral Agent or to contest the validity of the Collateral Agent's or any successor's appointment hereunder.

        (c)   If the Collateral Agent consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Collateral Agent.

        (d)   Upon acceptance of appointment as Collateral Agent by a successor Collateral Agent, such successor shall thereupon and forthwith succeed to and become vested with all the rights, powers, privileges, immunities, indemnities and duties of the retiring Collateral Agent hereunder, at which point the retiring Collateral Agent shall be discharged from its duties and obligations hereunder other than any such obligations that shall have arisen as a result of such former Collateral Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction and authority, as to which such former Collateral Agent shall remain solely liable and accountable.

        (e)   Upon the performance or payment in full of all outstanding obligations of the Company under the Notes, the Indenture and the Security Documents, the Collateral Agent shall, upon written notice from the Trustee and none other, be released of all of its obligations hereunder subject to Section 14 hereof, except such obligations as shall have arisen from the gross negligence, bad faith or willful misconduct of the Collateral Agent, as to which the Collateral Agent shall remain solely liable and accountable.

10.

Further Assurances

        The Company and the Collateral Agent shall promptly and diligently take all such further actions and execute such further documents necessary or advisable in the reasonable judgment of the Trustee to carry out the express and implied purposes of this Agreement and the Security Documents and to enforce, preserve and protect the Secured Parties' rights to and interest in the Note Collateral hereunder and under the Security Documents. The Collateral Agent shall not be required to execute any documents which would adversely affect its powers, privileges, rights, immunities, indemnities or duties.

11.

Amendments

        This Agreement may be amended only with the prior written consent of the Collateral Agent, the Company, the Guarantors and the Trustee, which consent shall not be unreasonably withheld.

12.

Remedies; Waiver

        (a)   No remedy herein conferred upon or reserved to the Collateral Agent, the Trustee or the other Secured Parties is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement, the Indenture or the Security Documents, or any other agreement entered into pursuant hereto or thereto, or now or hereafter existing at law, in equity or by statute.

        (b)   No delay or omission to exercise any right or power accruing upon the occurrence of any Default or Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient.

        (c)   No failure or delay on the part of the Collateral Agent or the Trustee in exercising any right, power or remedy hereunder, under this Agreement or otherwise shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

        (d)   The Collateral Agent shall, upon receipt of written instructions from the Trustee, waive an existing Default or Event of Default. Such waiver shall not extend to any subsequent or other Default or Event of Default nor impair any right consequent thereto.

        (e)   In the event any term or provision contained in this Agreement shall be breached by the Company or the Collateral Agent and thereafter duly waived by the Trustee, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

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13.

Survival

        The obligations of the Company to indemnify the Collateral Agent under this Agreement shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent.

14.

Successors and Assigns

        This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties. The provisions of this Agreement are intended to be for the benefit of the Collateral Agent, the Trustee and each of the other Secured Parties. Except pursuant to Section 9(c), the Collateral Agent shall not assign any of its rights or obligations under this Agreement without the prior written consent of the Trustee, which consent shall not be unreasonably withheld. The Company shall not assign any of its obligations hereunder.

15.

Notices

        All communications under this Agreement shall be given as provided and in accordance with Section 12.02 of the Indenture. Notices to the Collateral Agent shall be addressed as follows:

BNY Trust Company of Canada
4 King Street West,
Suite 1101,
Toronto, Ontario M5K 1A9
Fax No.: (416) 360-1711
Attention: George A. Bragg
Vice President

16.

Entire Understanding; Counterparts

        This Agreement, along with the Indenture and the Security Documents, constitutes the entire agreement among the parties hereto with respect to the powers and duties of the Collateral Agent and supersedes all prior agreements and understandings, both written and oral, among the parties. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

17.

Severability of Terms; Headings

        The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections in this Agreement or the application thereof shall not affect the validity or enforceability of the remaining portions of this Agreement or any part thereof. The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction and interpretation thereof.

18.

Costs

        The Company shall be responsible for and to promptly pay all fees due to the Collateral Agent set forth in a side letter and all reasonable legal fees and expenses, costs, expenses and collection fees of the Trustee and the Collateral Agent arising out of or in connection with the enforcement of the rights of the Collateral Agent, the Trustee or the Secured Parties under this Agreement, the Indenture and the Security Documents. To the extent the Indenture entitles the Trustee to a senior claim or preferred claim for any of the fees, costs, expenses and collection fees payable to or incurred by the Collateral Agent pursuant to this Agreement, the Trustee agrees to include such amounts in the claims it asserts pursuant to the terms of the Indenture and upon receipt thereof to pay such amounts to the Collateral Agent. The Collateral Agent agrees to provide to the Trustee, on a timely basis, details of the amounts it is owed in respect of the foregoing fees, costs and expenses. In the event that the Trustee receives any amounts pursuant to Section 7.07 of the Indenture as reimbursement for disbursements, expenses or advances (including fees and expenses of counsel) originally paid by the Collateral Agent, the Trustee shall receive such amounts in trust for the Collateral Agent and shall forthwith pay such amounts to the Collateral Agent; provided, however, that the Trustee shall otherwise have no obligation with respect to the payment of any such amounts to the Collateral Agent.

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19.

GOVERNING LAW

        THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.

20.

Trustee May Perform

        If the Collateral Agent shall refuse or be incapable of performing any right or remedy provided for herein or in the Security Documents, the Trustee may take such actions, or cause such actions to be taken, on behalf of the Collateral Agent as appropriate to protect the interests of the Trustee, the Collateral Agent and the other Secured Parties hereunder and thereunder and shall be entitled, in addition to the rights of the Collateral Agent, to all of the immunity, indemnity and reimbursement provisions hereof and thereof to which the Collateral Agent would be entitled, regardless of any prior act or omission by the Collateral Agent.

21.

Collateral Agent Generally

        Beyond the exercise of reasonable care in the custody thereof, the Collateral Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Collateral Agent shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral.

        The Collateral Agent shall not be responsible for, makes no representations with respect to and shall not have a duty to determine or pass upon the validity, binding effect, execution (other than its own) or sufficiency of this Agreement, the Security Documents or any agreement amendatory or supplemental hereto. In addition, the Collateral Agent shall not be responsible for, makes no representations with respect to and hereby specifically disclaims any liability for or with respect to the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority, enforceability, binding effect or sufficiency of the security interest created by the Security Documents, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, or for the validity of the title of the Company to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise for the maintenance of the Collateral.

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered under seal as of the day and year first above written.

HUDBAY MINING AND SMELTING INC.
By:	Name: Title:
152640 CANADA INC., as Guarantor
By:	Name: Title:
HUDSON BAY MINING AND SMELTING CO., LTD., as Guarantor
By:	Name: Title:
HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED, as Guarantor
By:	Name: Title:

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BNY TRUST COMPANY OF CANADA, as Collateral Agent
By:	Name: Title:
By:	Name: Title:
THE BANK OF NEW YORK, as Trustee
By:	Name: Title:

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EXHIBIT F

1.	Definitions and Interpretation
1.1	Definitions
	In this Agreement:
	"Business Day" means any day which is neither a Saturday nor a Sunday nor a legal holiday on which banks are authorized or required to be closed in Toronto.
	"Cdn.$" mean the lawful currency of Canada in immediately available funds.
	"Charges" means the Senior Charges and the Junior Charges.
	"Common Collateral" means the property and assets of the Obligors that constitute both Senior Collateral and Second Lien Junior Collateral.
	"Company" means HUDSON BAY MINING AND SMELTING CO., LIMITED, the corporation continuing from the amalgamation of Hudson Bay Mining and Smelting Co., Limited, 152460 Canada Inc. and Hudson Bay Mining and Smelting Inc.
	"First Lien Junior Charges" means all Liens created or to be created by the Obligors in favour of the Trustee upon the First Lien Junior Collateral pursuant to the Junior Security Documents.
	"First Lien Junior Collateral" means, with respect to the Company and any Note Guarantor, all real and immovable property (including leasehold interests and any other interest or right in any real and immovable property) now or hereafter owned or acquired by the Company or such Note Guarantor in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, other than Excluded Assets as defined in the Note Indenture as of the date hereof and, notwithstanding the foregoing, and for greater certainty, excluding from this definition of First Lien Junior Collateral all Inventory of the Company and any Guarantor set forth in clause (i) of the definition of Inventory herein. The First Lien Junior Collateral will also, subject to the limitation contained in this definition, include any property or assets of the nature described above that become part of the First Lien Collateral in circumstances described under Section 4.15 of the Note Indenture.
	"Guarantors" means the guarantors under the Senior Finance Documents.
	"Junior Charges" means all Liens created or to be created by the Obligors pursuant to the Junior Security Documents, together with all Liens which the Trustee may now or in the future have or obtain from the Obligors in respect of all or any part of the Junior Debt.
	"Junior Debt" means all obligations of the Obligors under the Note Indenture, the Notes, the Note Guarantees and the Junior Security Documents.
	"Junior Discharge Date" means the date on which all Junior Debt has been unconditionally and irrevocably paid and discharged in full to the satisfaction of the Trustee, whether or not as a result of an enforcement, and all commitments of the Trustee under or in respect of the Junior Security Documents have been terminated.
	"Trustee" means THE BANK OF NEW YORK, as indenture trustee on behalf of the holders of the Notes and BNY TRUST COMPANY OF CANADA as Collateral Agent (collectively, together with their respective successors in such capacities.
	"Junior Security Documents" means all documents now or hereafter entered into providing for the Junior Charges, as the same may be amended, supplemented, renewed or restated from time to time.
	"Inventory" means all inventory of the Company and the Guarantors as defined and provided for under the Senior Finance Documents.

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"Lenders" means the Senior Lender and the Trustee and a "Lender" means either of them.

"Lien" means any deed of trust, title retention, mortgage, charge, hypothec, assignment, pledge, lien or other security interest or encumbrance of whatever kind or nature, regardless of form and whether consensual or arising by law (statutory or otherwise), that secures the payment of any indebtedness or liability or the observance or performance of any obligation.

"Note Guarantees" means the guarantee by the Note Guarantors of the Company's payment obligations under the Note Indenture and the Notes, executed pursuant to the Note Indenture.

"Note Guarantors" means the "Guarantors" as defined in the Note Indenture.

"Note Indenture" means the indenture, dated as of December 21, 2004, pursuant to which the Notes are issued, as such indenture may hereafter be amended, supplemented, revised, replaced or restated from time to time.

"Notes" means the 9⁵/8% Senior Secured Notes due January 15, 2012 of the Borrower issued pursuant to the Note Indenture in the original principal amount of $175,000,000, together with any "Additional Notes" and "Exchange Notes", each as defined in the Note Indenture.

"Obligors" means the Company and a Guarantor.

"Pledged Equity" means all shares in the capital of Hudson Bay Exploration and Development Company, Limited, together with certificates representing such shares, and all other share capital and share certificates in any subsidiary of the Company pledged to the Senior Lender pursuant to the Senior Finance Documents.

"Receivables" means all receivables of the Company and the Guarantors, and all security therefor, as defined and provided for under the Senior Finance Documents.

"Receiver" means a receiver, receiver and manager or administrative receiver appointed by either Lender to enforce its Charges.

"Second Lien Junior Collateral" means "Inventory" and "Receivables", as those terms are defined in the Note Indenture, and such other property that is the subject of the Senior Charges other than Pledged Equity.

"Senior Collateral" means the Inventory, Receivables, all cash received from Receivables, and the Pledged Equity.

"Senior Charges" means all Liens created or to be created by the Obligors in favour of the Senior Lender on the Senior Collateral and do not and will not include Liens over the First Lien Junior Collateral.

"Senior Debt" means all present and future indebtedness of the Obligors to the Senior Lender under the Senior Finance Documents, plus interest thereon, fees and expenses in respect thereof, yield payments and any other amounts secured by the Senior Charges (other than the principal amount of any indebtedness), including any indemnified amounts.

"Senior Discharge Date" means the date on which all Senior Debt (other than any indemnified amounts) has been unconditionally and irrevocably paid and discharged in full, whether or not as a result of an enforcement, and all commitments of the Senior Lender under or in respect of the Senior Finance Documents have been permanently terminated.

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	"Senior Finance Documents" means the [Credit Agreement]* dated as of l originally among the Senior Lender, [as administrative agent and lender]*, the Company, as borrower, and Hudson Bay Exploration and Development Company Limited, as guarantor, and all documents now or hereafter entered into in connection therewith, including the documents providing for the Senior Charges, as the same may be amended, supplemented, renewed or restated from time to time.
	(*)    To be modified as applicable.
	"Senior Lender" means •.
	"Standstill Default" means any of the Events of Default set out in the Senior Finance Documents.
	"Standstill Notice" has the meaning specified in Section 4.3.
	"Standstill Period" means that period of time which (a) commences with the delivery of the Standstill Notice to the Trustee and (b) expires on the date which is the earlier of (i) 120 days from the date of such delivery; and (ii) the date of termination of the Standstill Period in accordance with Section 4.5.
2.	Priorities
2.1	Ranking of Security
2.1.1	As between the Senior Lender and Trustee, the Senior Charges shall rank prior and senior to the Junior Charges with respect to the Common Collateral.
2.2	Priorities Not Affected
	The priorities referred to in Section 2.1 and the status of the Charges as continuing security will not be affected by:

2.2.1	the priorities otherwise accorded to the Senior Charges and the Junior Charges, in each case with respect to the Common Collateral, by any applicable laws;
2.2.2	the respective date or dates upon which amounts may be or have been advanced or become owing or payable or secured under the Junior Debt or the Senior Debt;
2.2.3	the time or order of attachment or perfection of the Liens forming part of any of the Senior Charges or the Junior Charges;
2.2.4	the time or order of registration of any of the Senior Charges or the Junior Charges, in each case with respect to the Common Collateral, or the filing of financing statements or other instruments and documents with respect thereto;
2.2.5	the giving of or the failure to give any notice to any of the Obligors or to any other person;
2.2.6	any provision contained in any of the Junior Security Documents or the Senior Finance Documents or any other document other than this Agreement, or amendment, extension, renewal, or restatement of any of the Senior Finance Documents or the Junior Security Documents or any other document;
2.2.7	the appointment of any liquidator, Receiver, administrator or other similar officer in respect of any of the Obligors or over all or any part of such Obligors' assets; or
2.2.8	any fluctuation from time to time in the amounts of the Senior Debt or the Junior Debt owing and, in particular, but without limitation, any reduction to nil of such amounts or any other circumstances.

F-3

2.3	Further Actions to Evidence Priority
	If:
	2.3.1	the Senior Lender or the Trustee takes any collateral, additional or substituted security from any of the Obligors for all or any part of the Senior Debt or the Junior Debt, respectively; or
	2.3.2	for any reason it is not possible for the priority of any such security to be regulated by the provisions of this Agreement,

	the Senior Lender, the Trustee and the Obligors undertake to execute such documents and do such other acts or things as may be necessary or desirable to give effect to the priorities provided for or intended to be provided for in this Agreement.
2.4	Application of Insurance Proceeds
	Any moneys received by any of the Parties prior to the Senior Discharge Date in respect of any insurance policy in respect of which any Lien has been granted over the Common Collateral shall, if the Senior Lender shall so direct, promptly be applied in repayment of the Senior Debt.
2.5	Moneys Wrongly Received
	If the Trustee or any person on its behalf shall receive any (x) payment of proceeds from the sale or other disposition of any property or asset that forms part of the Common Collateral or (y) distribution of assets that forms part of the Common Collateral from any Obligor, then the Trustee shall, and shall cause such other person to, receive and hold such payment or distribution in trust for the benefit of the Senior Lender and promptly pay the same over or deliver to the Senior Lender in precisely the form received by the Trustee or such other person on its behalf, (except for any necessary endorsement or assignment) and such payment or distribution shall be applied by the Senior Lender, at its discretion, to the repayment of the Senior Debt; such payment shall be treated as not having been received from the Obligors by the Trustee but shall be treated as having been received from the Obligors by the Senior Lender.
2.6	Refunded Amounts
	For the purposes of this Clause 2, no Lender shall be treated as having received an amount if it is required to refund such amount by virtue of any law or provision relating to bankruptcy, winding-up or liquidation.
2.7	Receivership Realisations
	The Parties agree that moneys received by a Receiver from the transfer, sale or other disposition or conversion of any Common Collateral (after payment of his remuneration and receivership expenses and after providing for all costs, charges, expenses and liabilities and other payments, the payment of which ranks in priority to the payment of any sums payable to the Lenders) shall be applied in accordance with Section 7.
2.8	Certain Consents
	Prior to the Senior Discharge Date, the Senior Lender or its agents, representatives or invitees or any interim Receiver, Receiver, receiver-manager or other similar official appointed in respect of any property or asset subject to the Senior Charge may enter upon any property or premises subject to a Junior Charge at any time without any charge or interference by the Trustee to inspect or remove any or all of any property or asset subject to the Senior Charge, including, without limitation, by public auction or private sale.
3.	Perfection of Priorities
	The Lenders will co-operate with a view to reflecting the priority of the security conferred by the Charges by virtue of this Agreement in any register or with any filing or registration authority and in giving notice to insurers and debtors liable for receivables covered by the security conferred by the Charges and other persons.

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4.	Enforcement Standbys, Standstills
4.1	Subject to Sections 4.2 and 4.4, notwithstanding any provisions to the contrary contained in the Junior Security Documents, the Trustee hereby covenants and agrees that it shall not be entitled to, and it shall not, exercise any remedies (including enforcement) under any of the Junior Security Documents (other than with respect to the First Lien Junior Collateral as hereinafter provided in Section 4.2) until the Senior Discharge Date. In the event that the Senior Lender demands repayment of the Senior Debt before its stated maturity, the Trustee shall be entitled to accelerate and demand payment on the Junior Debt, but shall not in any event, notwithstanding such acceleration, be entitled to, and it shall not, exercise any remedies (including enforcement) under any of the Junior Security Documents (other than with respect to the First Lien Junior Charges as hereinafter provided in Section 4.2) until the Senior Discharge Date.
4.2	The Trustee agrees that the Trustee will not exercise any right it may have to enforce the First Lien Junior Charges until the earlier to occur of (i) the expiry of 10 days from the date the Senior Lender is given written notice by the Trustee of any default or event of default under the Note Indenture if the Senior Lender has not delivered notice of a Standstill Period pursuant to this Agreement during such 10 day period; (ii) the expiry of any existing Standstill Period; (iii) the seeking of an order by or against the Company or any Note Guarantor in a bankruptcy or insolvency proceeding, the appointment of a receiver, trustee, custodian, monitor or similar official or the making of a general assignment for the benefit of its creditors, or (iv) the Senior Discharge Date.
4.3	Upon the occurrence of a Standstill Default, the Senior Lender may commence a Standstill Period by delivering a written notice to the Trustee (the "Standstill Notice"), notifying the Trustee that a Standstill Default has occurred and is continuing and specifying, in reasonable detail, the circumstances giving rise to such Standstill Default. Notwithstanding the foregoing, (a) the Senior Lender may not deliver a Standstill Notice within 30 days of the expiry of the most recent Standstill Period, and (b) the aggregate number of days in any 365-day period in which a Standstill Period is in effect may not exceed 240 days (the "Annual Standstill Period Limit") unless the last Standstill Period in such 365-day period has been in force for less than 60 days, in which case the Annual Standstill Period Limit shall be extended by the number of days remaining in such 60-day minimum period.
4.4	During a Standstill Period, the Trustee may not take any action in respect of the property or assets which is subject to the Senior Charges or the Junior Charges or any of the Borrower's other property or assets. Notwithstanding the provisions of this Clause 4, subject to Clause 7 herein, both before and during a bankruptcy, insolvency or liquidation proceeding, the holders of the Notes and the Trustee may take any actions and exercise any and all rights that would be available to a holder of unsecured claims, including, without limitation, the commencement of a bankruptcy, insolvency or liquidation proceeding against any Obligor in accordance with applicable law, and if any bankruptcy, insolvency or liquidation proceeding shall be commenced against any Obligor, the Trustee shall be entitled to file proofs of claim and commence other proceedings in order to evidence and protect its interest in the First Lien Junior Collateral or the Second Lien Junior Collateral.
4.5	If during the Standstill Period, the Standstill Defaults have been cured or waived in writing by the Senior Lender in accordance with the Senior Finance Documents, then (i) the Standstill Period shall expire; (ii) Section 4.1 shall again apply to the exercise of any rights or remedies of the Trustee in respect of the Junior Debt as if no Standstill Notice had been given; and (iii) all accelerations of payment by the Senior Lender shall be deemed to have been withdrawn and amounts outstanding shall again be payable in accordance with the relevant Senior Finance Documents, as if such accelerations had not occurred.
5.	Negative Undertakings of Trustee
	Subject to Sections 4.2 and 4.4, until the Senior Discharge Date, the Trustee will not, without the prior written consent of the Senior Lender:

5.1.1
contest the validity, enforcement, perfection or priority of the Senior Charges or the Senior Debt;

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5.1.2	exercise any of its rights or remedies against the property and assets subject to the Senior Charge upon a default or event of default under the Note Indenture;
5.1.3	seek to foreclose or realize upon (judicially or non-judicially) the Junior Charges or assert any claims or interest therein (including, without limitation, by setoff or notification of account debtors); or
5.1.4	request judicial relief, in a bankruptcy, insolvency or liquidation proceeding, that would hinder, delay, limit or prohibit the lawful exercise or enforcement of any right or remedy otherwise available to the Senior Lender in respect of any Senior Charge or that would limit, invalidate, avoid or set aside any Senior Charge.

6.	Administration and Enforcement of Security
6.1	Administration and Enforcement by Senior Lender
	As between the Senior Lender and the Trustee, and with respect to (i) the Trustee, until the Junior Discharge Date and (ii) the Senior Lender, until the Senior Discharge Date, the Senior Lender will have the sole and exclusive right to control, administer, account for and otherwise deal with all or any part of the Credit Facility Collateral (whether or not it also constitutes Common Collateral), and to determine the manner of every sale or other disposition of the Credit Facility Collateral upon enforcement of the Senior Lender's interest therein or the enforcement of any other right or remedy with respect thereto. The Senior Lender may foreclose on the Credit Facility Collateral in any order in which it in its sole discretion deems appropriate.
6.2	Marshalling
	The Senior Lender shall not be obliged to marshall in favour of the Trustee any of the Senior Finance Documents or any funds of assets that the Senior Lender may be entitled to receive or upon which the Senior Lender may have a claim.
6.3	Release of Security
	The Trustee shall, at the request of the Senior Lender, execute all necessary releases in relation to the disposal of any asset constituting Common Collateral which is permitted under or consented to in accordance with the Senior Charges whether such disposal is effected by the Senior Lender, any Receiver or any of the Obligors at the request of the Senior Lender including, without limitation:

6.3.1	any formal release in respect of any asset which the Senior Lender, in its absolute discretion, considers necessary or desirable in connection with that disposal;
6.3.2	any release of any guarantee given under any Junior Finance Document or any other document referred to therein where all the shares in the capital of the party giving such guarantee are so disposed of in accordance with the terms of and without any breach of the Senior Finance Documents; and
6.3.3	any release of any security given by any subsidiary of the Company which is sold in accordance with the terms of and without any breach of the Senior Finance Documents.
The Trustee authorises the Senior Lender to execute on behalf of the Trustee, without the need for any further referral to, or authority from, the Trustee, all such releases.

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7.	Liquidation, Dissolution, Bankruptcy etc.
7.1	Distribution of Proceeds
	In the event of distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the assets of any of the Obligors, or the proceeds thereof, to creditors in connection with the bankruptcy, liquidation or winding-up of such Obligor or in connection with any compromise with creditors or scheme of arrangement to which such Obligor is a party, the Senior Lender shall be entitled to receive payment in full (including interest accruing to the date of receipt of such payment at the applicable rate whether or not allowed as a claim in any such proceeding) of the Senior Debt before the Trustee is entitled to receive any direct or indirect payment or distribution of any cash or other assets of such Obligor on account of any transfer, sale or other disposition or conversion of the Common Collateral, and the Senior Lender shall be entitled to receive directly, for application in payment of such Senior Debt (to the extent necessary to pay all Senior Debt in full after giving effect to any substantially concurrent payment or distribution to the Senior Lender in respect of the Senior Debt), any payment or distribution of any kind or character, whether in cash or other assets, which shall be payable or deliverable upon or with respect to the Common Collateral. To the extent any payment of the Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of set-off or otherwise) is declared by a trustee, receiver or other similar person to be a fraudulent preference or otherwise preferential, set aside or required to be paid to a trustee, receiver or other similar person under any bankruptcy, insolvency, receivership or similar law, then if such payment is recoverable by, or paid over to, such trustee, receiver or other person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred.
7.2	Proof of Claim; Voting
	In order to enable the Senior Lender to enforce its rights hereunder in any of the actions or proceedings described in Section 7.1, upon the failure of the Trustee to make and present on a timely basis a proof of claim against any of the Obligors on account of the Junior Debt or other motion or pleading as may be expedient or proper to establish the Trustee's entitlement to payment of any Junior Debt, the Senior Lender is hereby irrevocably authorized and empowered, in its discretion, to make and present for and on behalf of the Trustee such proofs of claims or other motions or pleadings and to demand, receive and collect any and all dividends or other payments or disbursements made thereon in whatever form the same may be paid or issued and to apply the same on account of the Senior Debt. The Trustee hereby covenants and agrees to exercise any voting right or other privilege that it may have from time to time in any of the actions or proceedings described in Section 7.1 in a manner, including in connection with any plan, proposal, compromise, arrangement or similar transaction, which facilitates and is consistent with the right of the Senior Lender to receive payments and distributions otherwise payable or deliverable upon or with respect to the Junior Debt (other than any Excluded Junior Payment) so long as any Senior Debt remains outstanding.
7.3	Application of Proceeds
	The net proceeds received from the transfer, sale or other disposition or conversion of the Common Collateral in connection with any of the actions or proceedings described in Section 7.1, shall be paid and applied in the following order:

7.3.1	first, to the Senior Lender and the Trustee for the payment of their respective fees and expenses incurred in connection with the exercise of any right of enforcement or other right or remedy with respect to the Common Collateral (and not, for greater certainty, any First Lien Junior Collateral);
7.3.2	second, to the Senior Lender for payment of all Senior Debt until the Senior Debt has been paid in full in cash, in such order as may be provided in the Senior Finance Documents;
7.3.3	third, to the Trustee for payment of all Junior Debt until the Junior Debt has been paid in full in cash, in such order as may be provided in the Indenture; and

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7.3.4
fourth, to the Company or the Note Guarantors, as the case may be, its successors or assigns, or as required by applicable law.

8.	Subrogation to Rights of the Senior Lender
8.1	Subrogation
	Subject to the payment in full of all Senior Debt, the Trustee shall be subrogated to the rights of the Senior Lender to receive payments or distribution of assets of the Obligor resulting from the enforcement of Liens against the Common Collateral, to the extent of the application thereto of monies or other assets which would have been received by the Trustee pursuant to the Junior Security Documents or otherwise but for this Agreement until the Junior Debt shall be paid in full. As between the Obligors and their creditors, other than the Senior Lender and the Trustee, no such payment or distribution made to the Senior Lender by virtue of this Agreement which otherwise would have been made to the Trustee shall be deemed to be a payment by the Obligors on account of such Senior Debt. It is understood that the provisions of this Agreement are intended solely for the purpose of defining the relative rights of the Senior Lender and the Trustee and nothing in this Agreement is intended to or shall impair (as among the Obligors and their creditors other than the Senior Lender and the Trustee) the obligation of the Obligors to pay the Senior Debt and the Junior Debt as may become due and payable in accordance with their respective terms or affect the relative rights of the Senior Lender, the Trustee and creditors of the Obligors (other than the Senior Lender and the Trustee).
8.2	Excess Payments
	If any payment or distribution to which the Trustee would otherwise have been entitled but for the provisions of this Agreement shall have been applied, pursuant to the provisions hereof, to the payment in full of the Senior Debt, the Trustee shall be entitled to receive from the Senior Lender any payments or distributions received by or on behalf of the Senior Lender in excess of the amount sufficient to pay in full all of the Senior Debt.
9.	No Waiver of Subordination Provisions.
9.1	Rights Not Prejudiced
	No right of the Senior Lender to enforce the subordination as provided in this Agreement shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any of the Obligors or by any act or failure to act by any of the Senior Lender or any agent of or trustee for the Senior Lender, or by any non-compliance by any of the Obligors with any of the agreements or instruments relating to the Junior Debt or the Senior Debt, regardless of any knowledge thereof which the Senior Lender may have or be otherwise charged with. Without limitation of the foregoing, but in no way relieving the Obligors of their obligations under this Agreement, the Senior Lender may, at any time and from time to time, without the consent of the Trustee and without impairing or releasing the subordination and other benefits provided in this Agreement or the obligations hereunder of the Trustee to the Senior Lender, but subject always to applicable laws and the terms of the Senior Finance Documents, do any one or more of the following:

9.1.1	amend the Senior Finance Documents, subject to Section 15.3.1;
9.1.2	sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner any Common Collateral or any liability of the Obligors to the Senior Lender, or any liability incurred directly or indirectly in respect thereof;
9.1.3	settle or compromise any Senior Debt or any other liability of the Obligors to the Senior Lender, or any security thereof or any liability incurred directly or indirectly in respect thereof, and apply any sums by whomsoever paid and however realized, to the Senior Debt in any manner or order; and

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9.1.4
exercise or delay in or refrain from exercising any right or remedy against the Company or any guarantor of the Senior Debt or any security or any other person, and elect any remedy and otherwise deal freely with the Obligors and with any security.

	No loss of or in respect of any of the Senior Charges or otherwise or any carelessness or neglect by the Senior Lender in asserting their rights or any other thing whatsoever, including without limitation the loss by operation of law of any right of the Senior Lender against the Obligors or the loss or destruction of any security, shall in any way impair or release the subordination and other benefits provided by this Agreement.
10.	Waivers of the Trustee
	All of the Senior Debt shall be deemed to have been made or incurred and continued in reliance upon this Agreement. The Trustee agrees (i) that the Senior Lender has made no representations or warranties with respect to the due execution, legality, validity, completeness or enforceability of any agreement or instrument relating to the Senior Debt or the collectibility of the Senior Debt, (ii) that, subject to Section 15.3.1 the Senior Lender shall be entitled to manage and supervise its loans and other financial accommodation to the Obligors in accordance with applicable law and its usual practices, modified from time to time as it deems appropriate under the circumstances, or otherwise, without regard to the existence of any rights that the Trustee may now or hereafter have in or to any of the assets of the Obligors, save for compliance with applicable law, and (iii) that the Senior Lender shall have no liability to the Trustee for, and the Trustee hereby waives any claims which the Trustee may now or hereafter have against the Senior Lender out of, any and all actions which the Senior Lender, in compliance with Section 15.3.1, if applicable, takes or omits to take (including, without limitation, actions with respect to the occurrence of any default under any agreement or instrument relating to the Senior Debt), with respect to the release or depreciation of, or failure to realize upon, any assets securing payment of the Senior Debt, actions with respect to the collection of any claims or all or any part of the Senior Debt from any account debtor, guarantor or any other person, with respect to the Senior Debt and any agreement or instrument related thereto or with respect to the collection of the Senior Debt and any agreement or instrument related thereto or with respect to the collection of the Senior Debt or the valuation, use, protection or release of any assets securing payment of the Senior Debt.
11.	Appointment of Receiver, etc.
	Any of the Senior Lender or a Receiver with respect to all or any part of the property and assets of any of the Obligors (herein referred to as a "senior receiver"), appointed by or on behalf of the Senior Lender shall be entitled, subject to the terms of this Agreement, to the exclusive custody and control of the Common Collateral assets and to dispose of the same in accordance with the terms of the Senior Charges held by or on behalf of the Senior Lender. Any Receiver appointed by the Trustee shall immediately surrender custody and control of any Common Collateral to any senior receiver subsequently appointed by or on behalf of the Senior Lender with respect to such property and assets. The Senior Lender will instruct any senior receiver to provide the Trustee with all information reasonably requested by the Trustee.
12.	Notice of Default
12.1	Notification by the Trustee
	The Trustee shall deliver to the Senior Lender written notification, before or at the same time as such notice is delivered to an Obligor, of (i) any notice of any default or event of default pursuant to the Note Indenture or the Junior Security Documents or event which with notice or the lapse of time or both would constitute a default or event of default pursuant to such Note Indenture or the Junior Security Documents, (ii) any notice of an acceleration of the Junior Debt, (iii) any demand for payment made upon the Obligors pursuant to the Junior Debt or (iv) any notice of its intention to realize on the Junior Charges.

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12.2	Notification by the Senior Lender
	The Senior Lender shall deliver written notification to the Trustee, before or at the same time as such notice is delivered by the Senior Lender to an Obligor, of (i) any notice of any default or event of default pursuant to the Senior Finance Documents, or event which with notice or the lapse of time or both would constitute a default or event of default pursuant to the Senior Finance Documents, (ii) any notice of an acceleration of any Senior Debt, (iii) any demand for payment made upon the Obligor pursuant to the Senior Finance Documents, (iv) any notice of an intention to realize on the Senior Charges or (v) the commencement of a Standstill Period in accordance with Section 4.3.
12.3	Failure to Give Notice
	The failure to give any notice pursuant to this Section 12 shall not affect the priorities established herein and shall not impair or release the subordination and other benefits provided by this Agreement or delay or invalidate any enforcement by the Senior Lender or the Trustee (to the extent such enforcement otherwise complies with this Agreement).
13.	Payment of the Senior Debt
	For purposes of this Agreement, the Senior Debt shall be considered to be paid in full when the aggregate of the cash payments, and fair market value of non-cash payments, as determined by the Senior Lender, acting reasonably, received by the Senior Lender is equal to the Senior Debt notwithstanding that any applicable limitation period for a claim for fraudulent preference or similar claim contemplated by the last sentence of Section 7.1 has not expired; provided that, if at the time of a proposed payment or distribution to the Trustee, a trustee, Receiver or other third party has made or threatened to make a claim of fraudulent preference or any other similar claim contemplated by the last sentence of Section 7.1, the Senior Lender may require that any amount equal to such claim, together with the Senior Lender's anticipated reasonable costs and expenses relating thereto, be held back from such distribution or payment to the Trustee until such claim has been resolved. The Trustee shall have the right, but not the obligation, to pay out the Senior Debt in full subsequent to the Senior Lender issuing to an Obligor a Notice of Intention to Enforce Security pursuant to the Bankruptcy and Insolvency Act (Canada). Following such pay-out, the Trustee shall be entitled at its option to require the Senior Lender to either discharge the Senior Charges or assign them to the Trustee without bonus, premium or penalty.
14.	Exchange of Information
	Each Lender, if requested by the other Lender, and upon written notice to the Company, shall provide to the requesting Lender such information respecting the Senior Finance Documents or the Junior Security Documents and Note Indenture, as the case may be, including (without limitation) evidence as to the aggregate amount outstanding thereunder, as the requesting Lender may from time to time request. The Company acknowledges that each of the Lenders shall be authorized to provide such information or any other information with respect to Obligors, to each of the Lenders in accordance with this Agreement.
15.	Acknowledgements
15.1	Consent to Security

	15.1.1	The Senior Lender consents to the creation and subsistence of the Junior Charges.
	15.1.2	The Trustee consents to the creation and subsistence of the Senior Charges.
15.2	Limitation of Liabilities
	Neither Lender nor any of their respective directors, officers, employees or agents shall, except in the case of gross negligence or wilful misconduct, be held responsible for failing to make an enquiry concerning the performance or observance of any of the terms, provisions or conditions contained in the Charges.

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15.3	Waivers by Senior Lender
	15.3.1	Any waiver or consent granted by the Senior Lender or amendment made by it under the Senior Finance Documents will be deemed to have been given or made by the Trustee under the applicable Junior Security Documents, insofar as the Junior Security Documents apply to the Common Collateral (on the same terms and conditions, mutatis mutandis) without the consent of or notice to any holder of the Notes and without any action by the Obligors or any holder of the Notes, provided that no such amendment, waiver or consent changes the priority of the Charges or the scope of the Junior Charges or, except as provided in Section 6.3, results in the release or discharge of any of the Junior Charges.
	15.3.2	The Trustee shall not have any remedy against the Senior Lender by reason of any transaction entered into between the Senior Lender and any of the Obligors or any requirement or condition imposed by the Senior Lender on any of the Obligors which violates, or constitutes or causes a default under, any agreement or arrangement between the Trustee and such Obligor provided that such transaction, requirement or condition is not in breach of the terms of this Agreement.
15.4	Acknowledgement of the Obligors
	Each of the Obligors acknowledges the priorities recorded in this Agreement and undertakes with each Lender to observe the provisions of this Agreement at all times and not in any way to prejudice or adversely affect the enforcement of such provisions.
15.5	The Company Acting on Behalf of the Guarantors
	Each Guarantor irrevocably authorises the Company (and any person nominated by the Company):
	15.5.1	to give all notices and instructions and make such agreements expressed to be capable of being given or made by the Company on behalf of the Guarantor under this Agreement; and
	15.5.2	to agree on behalf of the Guarantor to the terms of any consents or waivers given or required under this Agreement and all amendments made thereto,
	notwithstanding in either case that they may affect rights and obligations of the Guarantor and in either case without further reference to or the consent of the Guarantor and the Guarantor shall, as regards each of the other parties to this Agreement, be bound hereby as though it had itself given such notice of instruction, made such agreement or agreed such consent, waiver or amendment
15.6	No Rights of Company
	No Obligor shall have any rights under this Agreement and none of the representations, warranties or undertakings herein on the part of the Lenders are given or shall be deemed to be given to or for the benefit of any of the Obligors.
15.7	Reliance on Advice
	The Lenders acknowledge that they may act or refrain from taking action in reliance upon the advice of any professional adviser or other person (whether or not instructed by any particular Lender) believed by it in good faith to be competent.
16.	Duration
	This Agreement shall cease to have effect as regards the Senior Lender or the Trustee respectively on the earlier of the Senior Discharge Date or the Junior Discharge Date.
17.	Governing Law
	This Agreement is governed by the laws of the province of Ontario and the federal laws of Canada applicable therein.

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QuickLinks

Exhibit 7.1
Final Execution Version
CROSS-REFERENCE TABLE
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
ARTICLE 2. THE NOTES
ARTICLE 3. REDEMPTION
ARTICLE 4. COVENANTS
ARTICLE 5. SUCCESSORS
ARTICLE 6. EVENTS OF DEFAULT
ARTICLE 7. TRUSTEE
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER
ARTICLE 10. COLLATERAL AND SECURITY
ARTICLE 11. APPLICATION OF TRUST MONIES
ARTICLE 12. GUARANTEES
ARTICLE 13. SATISFACTION AND DISCHARGE
ARTICLE 14. MISCELLANEOUS
SIGNATURES
[Rule 144A Note CUSIP: • ] [Rule 144A Note ISIN: • ] [Regulations S Note CUSIP: • ] [Regulation S Note ISIN: • ]
HUDBAY MINING AND SMELTING INC.
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE¹
FORM OF CERTIFICATE OF TRANSFER
ANNEX A TO CERTIFICATE OF TRANSFER
FORM OF CERTIFICATE OF EXCHANGE
[FORM OF NOTATION OF GUARANTEE]
TABLE OF CONTENTS
CANADIAN COLLATERAL AGENCY AGREEMENT
R E C I T A L S
A G R E E M E N T

EX-7.2

Exhibit 7.2

        FIRST SUPPLEMENTAL INDENTURE (this "First Supplemental Indenture"), dated as of April 20, 2005, among Hudson Bay Mining and Smelting Co., Limited, a corporation existing under the laws of Canada and the resulting company from the Amalgamation referred to below ("HBMS"), Hudson Bay Exploration and Development Company Limited ("HBED"), as Guarantor, and The Bank of New York, as trustee (the "Trustee").

W I T N E S S E T H

        WHEREAS, on December 21, 2004, Hudbay Mining and Smelting Inc. (the "Company") acquired from Anglo American International, S.A. (the "Acquisition") all of the issued and outstanding shares of 152640 Canada Inc. ("152640 Canada");

        WHEREAS, the Company, 152640 Canada, Hudson Bay Mining and Smelting Co., Limited ("Original HBMS") and HBED (each of 152640 Canada, Original HBMS and HBED a "Guarantor" and together the "Guarantors") and the Trustee executed an indenture dated as of December 21, 2004 (the "Indenture") providing for the issuance by the Company of 9⁵/8% Senior Secured Notes due January 15, 2012 (the "Notes") unconditionally guaranteed by the Guarantors pursuant to Guarantees provided for in the Indenture;

        WHEREAS, on December 21, 2004, the Company, 152640 Canada and Original HBMS amalgamated under the Canada Business Corporations Act (the "Amalgamation") in accordance with Section 5.01 of the Indenture;

        WHEREAS, pursuant to Section 12.05(e) of the Indenture, upon the amalgamation of a Guarantor with or into the Company, if the person formed by the such amalgamation (if other than the Company) assumes all of the obligations of the Company under the Notes, the Indenture and the Registration Rights Agreement (all such obligations of the Company, the "Assumed Obligations") pursuant to Section 5.01(a)(ii) of the Indenture, the Guarantee of such Guarantor shall be released;

        WHEREAS, effective upon the consummation of the Amalgamation, HBMS has by operation of Canadian law assumed the Assumed Obligations in accordance with Section 5.01(a)(ii) of the Indenture and now wishes to release the Guarantees of 152640 Canada and Original HBMS pursuant to Section 12.05(e) of the Indenture; and

        WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this First Supplemental Indenture;

        NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, HBMS, HBED and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

        1.    DEFINITIONS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. The rules of construction set forth in Section 1.04 of the Indenture shall apply to this First Supplemental Indenture mutatis mutandis. On and after the effectiveness of this First Supplemental Indenture, each reference in the Indenture to "this Indenture", "herein", "hereof", "hereunder" and other words of similar import shall mean and be a reference to such Indenture as a whole, as modified by this First Supplemental Indenture, and not to any particular Article, Section, clause or other subdivision.

        2.    ASSUMED OBLIGATIONS. HBMS hereby acknowledges that, effective upon the consummation of the Amalgamation, by operation of Canadian law, it has assumed all of the Assumed Obligations. From and after the consummation of the Amalgamation, all references in the Notes, the Indenture (including, for the avoidance of doubt, the Guarantees contained in the Indenture and the notations of Guarantees endorsed on the Notes) and the Registration Rights Agreement to "the Company" shall be deemed to be references to "HBMS".

        3.    TERMINATION AND RELEASE OF GUARANTEES. The Guarantees of, and the notations of such Guarantees endorsed on each of the Notes pursuant to Section 12.03 of the Indenture by, each of 152640 Canada and Original HBMS are hereby terminated and released in full for all purposes under the Indenture and the Notes notwithstanding any provision contained therein providing for the reinstatement thereof under certain circumstances; such Guarantees and notations of Guarantees shall have no further force or effect and neither 152640 Canada nor Original HBMS shall have any further liability or obligation thereunder whatsoever.

        4.    FURTHER ASSURANCES. The Trustee agrees to take, and to cause the Collateral Agent to take, such further actions as HBMS shall reasonably request in connection herewith to evidence the termination and release of Guarantees herein contained.

        5.    EFFECT OF FIRST SUPPLEMENTAL INDENTURE. This First Supplemental Indenture is a supplemental indenture within the meaning of Section 9.01 of the Indenture, and the Indenture shall be read together with this First Supplemental Indenture and shall have the same effect over the Notes and the Guarantees as if the provisions of the Indenture and this First Supplemental Indenture were contained in the same instrument. The Indenture (including, for the avoidance of doubt, the Guarantee by HBED contained therein), as modified by this First Supplemental Indenture, is and shall continue to be in full force and effect and is hereby ratified and confirmed.

        6.    THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or in respect of the recitals contained herein, all of which recitals are made solely by HBMS and HBED, as Guarantor.

        7.    SUCCESSORS. All agreements of HBMS in this First Supplemental Indenture shall bind its successors. All agreements of the Trustee in this First Supplemental Indenture shall bind its successors.

        8.    NO WAIVER. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this First Supplemental Indenture shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and are not exclusive of any other rights, remedies or benefits which either may have under this First Supplemental Indenture at law, in equity, by statute or otherwise.

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        9.    MODIFICATION. No modification, amendment or waiver of any provision of this First Supplemental Indenture, nor the consent to any departure by HBMS therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

        10.    MISCELLANEOUS. All notices, requests, demands or other communications pursuant to this Article Ten shall be made in accordance with Section 14.02 of the Indenture.

        11.    EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

        12.    COUNTERPARTS. The parties may sign any number of copies of this First Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

        13.    SEVERABILITY. In case any provision in this First Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

        14.    GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

[the remainder of this page has been left blank intentionally]

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        IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to be duly executed as of the date first written above.

HUDSON BAY MINING AND SMELTING CO., LIMITED
By:	/s/ John L. Knowles Name: John L. Knowles Title: Vice President and Chief Financial Officer
HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED, as Guarantor
By:	/s/ John L. Knowles Name: John L. Knowles Title: Treasurer

THE BANK OF NEW YORK, as Trustee
By:	/s/ Michael Pitfick Name: Michael Pitfick Title: Vice President

EX-7.3

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Exhibit 7.3

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)    o

THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)

New York	13-5160382
(State of incorporation if not a U.S. national bank)	(I.R.S. employer identification no.)
One Wall Street, New York, N.Y.	10286
(Address of principal executive offices)	(Zip code)

Hudson Bay Mining and Smelting Co., Limited
(Exact name of obligor as specified in its charter)

Canada	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

HudBay Minerals Inc.
(Exact name of obligor as specified in its charter)

Ontario, Canada	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

Hudson Bay Exploration and Development Company Limited
(Exact name of obligor as specified in its charter)

Canada	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)
201 Portage Avenue, Suite 2200 Winnipeg, Manitoba R3B 3L3 Canada	Not Applicable
(Address of principal executive offices)	(Zip code)

9⁵/8% Senior Secured Notes due 2012
(Title of the indenture securities)

1.

General information. Furnish the following information as to the Trustee:

(a)

Name and address of each examining or supervising authority to which it is subject.

Name	Address
Superintendent of Banks of the State of New York	One State Street, New York, N.Y. 10004-1417, and Albany, N.Y. 12223
Federal Reserve Bank of New York	33 Liberty Street, New York, N.Y. 10045
Federal Deposit Insurance Corporation	Washington, D.C. 20429
New York Clearing House Association	New York, New York 10005

(b)

Whether it is authorized to exercise corporate trust powers.

Yes.

2.

Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

16.

List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d).

1.

A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.)



4.

A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-121195.)



6.

The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-106702.)



7.

A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

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SIGNATURE

        Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 12th day of April, 2005.

THE BANK OF NEW YORK
By:	/s/ Beata Hryniewicka Name: Beata Hryniewicka Title: Assistant Treasurer

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Exhibit 7

Consolidated Report of Condition of

THE BANK OF NEW YORK

of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business December 31, 2004, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.

		Dollar Amounts In Thousands
ASSETS
Cash and balances due from depository institutions:
	Noninterest-bearing balances and currency and coin	$	3,866,500
	Interest-bearing balances		8,455,170
Securities:
	Held-to-maturity securities		1,885,665
	Available-for-sale securities		20,781,508
Federal funds sold and securities purchased under agreements to resell
	Federal funds sold in domestic offices		3,730,007
	Securities purchased under agreements to resell		847,805
Loans and lease financing receivables:
	Loans and leases held for sale		0
	Loans and leases, net of unearned income		36,195,743
	LESS: Allowance for loan and lease losses		587,611
	Loans and leases, net of unearned income and allowance		35,608,132
Trading Assets			4,174,521
Premises and fixed assets (including capitalized leases)			949,424
Other real estate owned			754
Investments in unconsolidated subsidiaries and associated companies			268,366
Customers' liability to this bank on acceptances outstanding			52,800
Intangible assets
	Goodwill		2,746,404
	Other intangible assets		758,137
Other assets			8,013,234
Total assets		$	92,138,427

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LIABILITIES
Deposits:
	In domestic offices	$	41,480,131
	Noninterest-bearing		16,898,525
	Interest-bearing		24,581,606
	In foreign offices, Edge and Agreement subsidiaries, and IBFs		24,028,722
	Noninterest-bearing		576,431
	Interest-bearing		23,452,291
Federal funds purchased and securities sold under agreements to repurchase
	Federal funds purchased in domestic offices		1,040,432
	Securities sold under agreements to repurchase		491,007
Trading liabilities			2,724,930
Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)			4,780,573
Not applicable
Bank's liability on acceptances executed and outstanding			54,517
Subordinated notes and debentures			2,390,000
Other liabilities			6,901,014
Total liabilities		$	83,891,326
Minority interest in consolidated subsidiaries			140,499
EQUITY CAPITAL
Perpetual preferred stock and related surplus			0
Common stock			1,135,284
Surplus (exclude all surplus related to preferred stock)			2,087,221
Retained earnings			4,892,420
Accumulated other comprehensive income			–8,323
Other equity capital components			0
Total equity capital			8,106,602
Total liabilities, minority interest, and equity capital		$	92,138,427

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        I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

Thomas J. Mastro,
Senior Vice President and Comptroller

        We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

Thomas A. Renyi	)
Gerald L. Hassell	)	Directors
Alan R. Griffith	)

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Exhibit 7.3

EX-99.1

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Exhibit 99.1

PARENT GUARANTEE

        PARENT GUARANTEE dated as of March 24, 2005 made by HudBay Minerals Inc., a corporation existing under the laws of the Province of Ontario (the "Parent Guarantor"), in favor of the Trustee and the Holders (as defined in the Indenture referred to below).

        PRELIMINARY STATEMENTS.

        WHEREAS, on December 21, 2004, Hudbay Mining and Smelting Inc., a wholly-owned subsidiary of the Parent Guarantor (the "Company"), acquired from Anglo American International, S.A. (the "Acquisition") all of the issued and outstanding shares of 152640 Canada Inc. ("152640 Canada");

        WHEREAS, the Company, 152640 Canada, Hudson Bay Mining and Smelting Co., Limited ("Original HBMS"), Hudson Bay Exploration and Development Company Limited ("HBED") (each of 152640 Canada, Original HBMS and HBED a "Guarantor" and together the "Guarantors") and The Bank of New York, as trustee (the "Trustee") executed an indenture dated as of December 21, 2004 (as amended or supplemented from time to time, the "Indenture") providing for the issuance by the Company of 9⁵/8% Senior Secured Notes due January 15, 2012 (the "Notes") unconditionally guaranteed by the Guarantors pursuant to the Guarantees provided for in the Indenture;

        WHEREAS, on December 21, 2004, the Company, 152640 Canada and Original HBMS amalgamated under the Canada Business Corporations Act (the "Amalgamation") in accordance with Section 5.01 of the Indenture, and the resulting company from such Amalgamation was Hudson Bay Mining and Smelting Co., Limited ("HBMS") (now a wholly owned subsidiary of the Parent Guarantor);

        WHEREAS, the Parent Guarantor will derive substantial direct and indirect benefits from the transactions contemplated by the Indenture, the Notes and the Registration Rights Agreement;

        NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the adequacy of which is hereby acknowledged, the Parent Guarantor hereby agrees as follows:

        Section 1.    Definitions.    Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Indenture. As used in this Parent Guarantee, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

        "Senior Indebtedness" means, with respect to the Parent Guarantor, any Indebtedness of the Parent Guarantor, excluding:

        (a)   any Indebtedness of the Parent Guarantor to any of its Subsidiaries; or

        (b)   any trade payables.

        "Obligations" means any principal, premium (if any), interest (including special interest), if any, and interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Parent Guarantor or HBMS (whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages (including special interest), guarantees and other liabilities or amounts payable under the documentation governing any Senior Indebtedness or in respect thereof).

        "Permitted Junior Securities" means: (1) Equity Interests in the Parent Guarantor or any other business entity provided for by a plan of reorganization; and (2) debt securities of the Parent Guarantor or any other business entity provided for by a plan of reorganization that are subordinated to all Senior Indebtedness and any debt securities issued in exchange for Senior Indebtedness to the same extent as, or to a greater extent than, the Parent Guarantee is subordinated to Senior Indebtedness.

        Section 2.    Guarantee.    (a) The Parent Guarantor hereby, jointly and severally, unconditionally guarantees (the "Parent Guarantee") to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of HBMS thereunder, that: (i) the principal, interest, premium and Special Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other

obligations of HBMS to the Holders or the Trustee under the Indenture and the Notes shall be promptly paid in full or performed, all in accordance with the terms under the Indenture and the Notes; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise (the "Guaranteed Obligations"). Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Parent Guarantor shall be obligated to pay or perform the same immediately. The Parent Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

        (b)   The Parent Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the absence of any action to enforce the Notes, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against HBMS, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor; provided, however, that notwithstanding the foregoing no such waiver or consent or circumstance shall without the written consent of the Parent Guarantor be binding upon the Parent Guarantor to increase the principal amount of a Note or the interest rate thereon or change the currency of payment with respect to any Note, or alter the Stated Maturity thereof. The Parent Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of HBMS, any right to require a proceeding first against HBMS, protest or notice with respect to any Note or the Indebtedness evidenced thereby and all demands whatsoever and covenant that this Parent Guarantee shall not be discharged except by complete with respect to any Note or the Indebtedness evidenced thereby performance of the obligations contained in the Notes and the Indenture.

        (c)   The obligations of the Parent Guarantor under this Parent Guarantee are independent of the obligations guaranteed by the Parent Guarantor hereunder, and a separate action or actions may be brought and prosecuted by the Trustee on behalf of, or by, the Holders, subject to the terms and conditions set forth in the Indenture against the Parent Guarantor to enforce this Parent Guarantee, irrespective of whether any action is brought against HBMS or whether HBMS is joined in any such action or actions.

        (d)   The Parent Guarantor hereby agrees that, in the event of a default in payment of principal (or premium and Special Interest, if any) or interest on a Note, whether at its stated maturity, by acceleration, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Note, subject to the terms and conditions set forth in the Indenture, directly against the Parent Guarantor to enforce the Parent Guarantor's Parent Guarantee without first proceeding against HBMS or the Guarantors.

        (e)   If any Holder or the Trustee is required by any court or otherwise to return to HBMS, the Guarantors, the Parent Guarantor or any custodian, trustee, liquidator or other similar official acting in relation to either HBMS, the Guarantors or the Parent Guarantor, any amount paid either to the Trustee or such Holder, this Parent Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

        (f)    The Parent Guarantor agrees that, as between the Parent Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Parent Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Parent Guarantor for the purpose of this Parent Guarantee. The Parent Guarantor shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Parent Guarantee.

        (g)   The Parent Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against HBMS for liquidation, reorganization, should HBMS become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of HBMS' assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to

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applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes, the Guarantees or this Parent Guarantee, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

        (h)   In case any provision of this Parent Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

        (i)    Each payment to be made by Parent Guarantor in respect of the Parent Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

        Section 3.    Additional Amounts.    (a) All payments made by the Parent Guarantor pursuant to this Parent Guarantee, will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the Government of Canada or of any province or territory thereof or by any authority or agency therein or thereof having power to tax (hereinafter, the "Taxes"), unless the Parent Guarantor is required to withhold or deduct Taxes by law or by the interpretation or administration thereof. If the Parent Guarantor is required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Notes, the Parent Guarantor will pay, or cause to be paid, such additional amounts (the "Additional Amounts") as may be necessary so that the net amount received by each Holder (in respect of the beneficial holder thereof) (including Additional Amounts) after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts will be payable with respect to a payment made to a Holder in respect of the beneficial holder thereof (an "Excluded Holder") (i) with which the Parent Guarantor does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment or (ii) which is subject to such Taxes by reason of its being connected with Canada or any province or territory thereof otherwise than solely by reason of the holder's activity in connection with purchasing or disposing of the Notes, by the mere holding of Notes or by reason of the receipt of payments thereunder. The Parent Guarantor will also (a) make such withholding or deduction and (b) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law.

        (b)   The Parent Guarantor will furnish the Holders, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Parent Guarantor. The Parent Guarantor will, upon written request of a Holder (other than an Excluded Holder), indemnify each such holder for the amount of (x) any Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Notes, and (y) any Taxes so levied or imposed with respect to any reimbursement under the foregoing clause (x) but excluding any such Taxes on such Holder's net income so that the net amount received by such Holder (net of payments made under or with respect to the Notes) after such reimbursement will not be less than the net amount the holder would have received if Taxes on such reimbursement had not been imposed.

        (c)   On each date on which any payment in respect of any Guaranteed Obligation is made under this Parent Guarantee, if the Parent Guarantor will be obligated to pay Additional Amounts with respect to such payment, the Parent Guarantor will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to holders on the applicable payment date. Whenever in this Parent Guarantee there is mentioned, in any context, the payment of principal, premium, if any, interest or any other amount payable under or with respect to any Note, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

        (d)   The Parent Guarantor will pay any present or future stamp, court, documentary or other similar Taxes, charges or levies that arise in any taxing jurisdiction from the execution, delivery or registration of, or

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enforcement of rights under, the Notes, the Indenture, this Parent Guarantee or any related document ("Documentary Taxes").

        Section 4.    Amendments, Etc.    No amendment or waiver of any provision of this Parent Guarantee and no consent to any departure by the Parent Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Parent Guarantor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

        Section 5.    Subrogation.    The Parent Guarantor shall be subrogated to all rights of Holders of Notes against HBMS in respect of any amounts paid by the Parent Guarantor pursuant to this Parent Guarantee; provided that, if an Event of Default has occurred and is continuing under the Indenture, the Parent Guarantor shall not be entitled to enforce or receive any payment arising out of, or based upon, such right of subrogation until all amounts then due and payable by HBMS under the Indenture or the Notes shall have been paid in full.

        Section 6.    Termination; Enforcement.    (a) This Parent Guarantee shall remain in full force and effect until the earlier of (i) the payment in full of the Guaranteed Obligations and all other amounts, if any, payable under this Parent Guarantee, and (ii) the date on which the Parent Guarantor owns less than a majority of the Voting Stock of HBMS, at which time this Parent Guarantee will terminate, immediately without any further action on the part of the Parent Guarantor or any other Person.

        (b)   Until its termination in accordance with clause (a) of this Section 6, this Parent Guarantee shall inure to the benefit of, and be enforceable (in the same manner, including the same restrictions on enforcement, as provided in the Indenture with respect to the Guarantees) by, the Trustee and the Holders, their successors and transferees.

        Section 7.    Subordination of Parent Guarantee.    (a) Payments under this Parent Guarantee shall, to the extent and in the manner set forth in this Section 7, be subordinated and junior in right of payment to the prior payment in full in cash or cash equivalents of all Obligations arising under Senior Indebtedness of the Parent Guarantor, including Senior Indebtedness of the Parent Guarantor Incurred after the date hereof.

        (b)   The holders of Senior Indebtedness of the Parent Guarantor will be entitled to receive payment in full in cash or Cash Equivalents of all Obligations due in respect of Senior Indebtedness of the Parent Guarantor (including interest after the commencement of any bankruptcy proceeding at the rate specified in the documentation for the applicable Senior Indebtedness of the Parent Guarantor) before the Holders of Notes will be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities), in the event of any distribution to creditors of the Parent Guarantor in connection with (1) any liquidation or dissolution of the Parent Guarantor; (2) any bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Parent Guarantor or its property; (3) any assignment for the benefit of creditors; or (4) any marshaling of the Parent Guarantor's assets and liabilities.

        (c)   No direct or indirect payment by or on behalf of the Parent Guarantor in respect of any of the Guaranteed Obligations shall be made (except in Permitted Junior Securities), if, at the time of such payment, there exists (1) a default (a "Payment Default") in the payment of all or any portion of the Obligations on any Senior Indebtedness, whether at maturity, on account of mandatory redemption or prepayment, acceleration or otherwise or (2) any other default (a "Non-Payment Default") on any Senior Indebtedness of the Parent Guarantor that permits holders of that Senior Indebtedness of the Parent Guarantor to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from a representative of the holders of such Senior Indebtedness, and, in the case of a Payment Default, such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Senior Indebtedness or, in the case of a Non-Payment default on Senior Indebtedness of the Parent Guarantor, the earlier of (x) the date on which such default is cured or waived, (y) 179 days after the date on which the applicable Payment Blockage Notice is received and (z) the date the Trustee receives notice from the representative for such Senior Indebtedness rescinding the Payment Blockage Notice, unless, in each case, the maturity of such Senior Indebtedness of the Parent Guarantor has been accelerated.

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        Section 8.    Benefits Acknowledged.    The Parent Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Parent Guarantee and waivers made by it pursuant to this Parent Guarantee are knowingly made in contemplation of such benefits.

        Section 9.    Notices, Etc.    All notices and other communications required by the provisions of this Parent Guarantee (including, with respect to the enforcement provisions, such notices and other communications required by the provisions of the Indenture provided for in the Indenture) shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered to it, if to the Parent Guarantor, addressed to it in care of the Borrower at the Borrower's address specified in Section 14.02 of the Indenture or if to the Trustee, at its address specified in Section 14.02 the Indenture, or, in each case, to any party at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively. Delivery by telecopier of an executed counterpart of a signature page to any amendment or waiver of any provision of this Parent Guarantee shall be effective as delivery of an original executed counterpart thereof.

        Section 10.    Execution in Counterparts.    This Parent Guarantee and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

        Section 11.    Governing Law; Waiver of Immunities.    (a) This Parent Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York.

        (b)   To the extent that the Parent Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Parent Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Parent Guarantee, to the extent permitted by law.

        [the remainder of this page has been left blank intentionally]

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        IN WITNESS WHEREOF, the Parent Guarantor has caused this Parent Guarantee to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

HUDBAY MINERALS INC., as Parent Guarantor
By	/s/ John L. Knowles John L. Knowles Vice President and Chief Financial Officer
By	/s/ Brian D. Gordon Brian D. Gordon Vice President and General Counsel

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Exhibit 99.1
PARENT GUARANTEE

EX-99.2

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Exhibit 99.2

HUDBAY MINING AND SMELTING INC.

and

152640 CANADA INC.

HUDSON BAY MINING AND SMELTING CO., LIMITED

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

                                                 as Guarantors

and

THE BANK OF NEW YORK

                                                 as Trustee

and

BNY TRUST COMPANY OF CANADA

                                                 as Collateral Agent

CANADIAN COLLATERAL AGENCY AGREEMENT

Dated as of December 21, 2004

TABLE OF CONTENTS

		Page
1.	Appointment	1
2.	Nature of Duties	1
3.	Approval	2
4.	Action of Collateral Agent	2
5.	Responsibilities of Collateral Agent	2
6.	Reliance	3
7.	Indemnification	3
8.	The Collateral Agent in Its Individual Capacity	3
9.	Resignation by and Removal of the Collateral Agent	3
10.	Further Assurances	4
11.	Amendments	4
12.	Remedies; Waiver	4
13.	Survival	5
14.	Successors and Assigns	5
15.	Notices	5
16.	Entire Understanding; Counterparts	5
17.	Severability of Terms; Headings	5
18.	Costs	5
19.	GOVERNING LAW	6
20.	Trustee May Perform	6
21.	Collateral Agent Generally	6

CANADIAN COLLATERAL AGENCY AGREEMENT

        CANADIAN COLLATERAL AGENCY AGREEMENT (the "Agreement") dated as of December 2 1,2004, among HUDBAY MINING AND SMELTING INC. (the "Company"), 152640 CANADA INC., HUDSON BAY MINING AND SMELTING CO., LIMITED and HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED (collectively, the "Guarantors"), THE BANK OF NEW YORK, as trustee (the "Trustee") under the Indenture (as defined below) and BNY TRUST COMPANY OF CANADA, as collateral agent (the "Collateral Agent"). Capitalized terms used herein and not defined shall have the meaning ascribed to such terms in the Indenture (as defined below).

R E C I T A L S:

A.    The Company is issuing secured notes in an aggregate principal amount of US$175,000,000 pursuant to the terms of an indenture, dated as of December 2 1,2004, among the Company, the Guarantors and the Trustee, as trustee, as such may be amended or supplemented from time to time in accordance with the provisions thereof (the "Indenture");

B.    To secure the payment of the Company's obligations under the Notes and the performance and observance of all of the Company's obligations under the terms of the Indenture and the Notes, each of the Company and the Guarantors has executed certain Security Documents with respect to the Note Collateral owned by it and has taken such action as is necessary to grant to the Collateral Agent a valid, fully perfected security interest in each item of the Note Collateral for the benefit of the Trustee and the Holders of the Notes (collectively, as applicable, the "Secured Parties") in accordance with and subject to the terms of the Indenture; and

C.    The Company desires the Trustee to appoint the Collateral Agent to hold and administer the Note Collateral on behalf of the Secured Parties as provided herein, in the Indenture and in the Security Documents.

A G R E E M E N T:

        NOW, THEREFORE in consideration of the mutual covenants and premises set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto and in order to induce the purchasers of the Notes to purchase the Notes, the parties hereto agree as follows;

1.

Appointment

        The Trustee hereby designates and appoints the Collateral Agent as collateral agent to act as specified herein and in the Security Documents. The Trustee hereby irrevocably authorizes the Collateral Agent to take such action on behalf of the Trustee under the provisions of this Agreement, the Security Documents and any other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder as are specifically authorized by the Trustee. The Collateral Agent may execute any of its duties under this Agreement or any other Security Documents by or through its agents, nominees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents, nominees or attorneys in-fact selected by it with reasonable care. The Collateral Agent is an independent contractor and shall have no authority to act for or represent the Trustee except as expressly set forth herein. The Collateral Agent shall hold or be deemed to hold any Note Collateral to which it comes into possession in trust for the Trustee on behalf of the Holders of the Notes.

2.

Nature of Duties

        The Collateral Agent shall have no duties or responsibilities with respect to the Note Collateral except those expressly set forth herein or in the Security Documents to which it is a party. None of the Collateral Agent nor any of its officers, directors, employees, agents, nominees or attorneys-in-fact shall be liable for any action taken or omitted to be taken by it hereunder or under the Security Documents or in connection herewith or therewith, unless caused by its or their gross negligence, bad faith or willful misconduct. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have, by reason of this Agreement or the Security Documents or otherwise, a fiduciary relationship in respect of any other Secured Party; and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Security Document or otherwise exist against the Collateral Agent, and nothing in this Agreement or any Security Document, expressed or implied, is intended to or shall be so

construed as to impose upon the Collateral Agent any obligations in respect of any Security Document except as expressly set forth herein or therein. Notwithstanding anything contained herein or in the Security Documents, the Collateral Agent shall have no responsibility for (i) the validity or value of any of the Note Collateral or any of the instruments constituting any of the Note Collateral, or (ii) the value of or title to any of the Note Collateral or of any property subject to any instrument constituting part of the Note Collateral, or (iii) the insurance of any such Note Collateral or property, or (iv) the value of any Security Document or for any failure of the Company to perform its obligations under this Agreement or any Security Document. The Collateral Agent shall not be under any obligation to any Person to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or any Security Document, or to inspect the properties, books or records of the Company. Without limitation of anything contained in this Agreement, in carrying out its obligations and duties hereunder and under the Security Documents, the Collateral Agent shall be entitled to all of the same rights, indemnities, exculpation and immunities, and shall be subject to the same exceptions and qualifications thereto, as would apply to the Trustee under the Indenture, in its capacity as Trustee and such rights, indemnities, exculpations and immunities shall inure to the benefit of the Collateral Agent and are hereby incorporated by reference herein. The Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be responsible for any loss or diminution in value of any Collateral, by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Collateral Agent in good faith.

        Both before and after an Event of Default, the Trustee shall have no duty to supervise or monitor the Collateral Agent or its performance, and the Trustee shall not be liable for any act or omission of the Collateral Agent.

3.

Approval

        In performance of its duties hereunder, the Collateral Agent shall take any actions or refrain from taking any actions in connection with any Security Document as are specified herein or in such Security Document and as instructed by the Trustee, and the Collateral Agent shall have no duty to verify or inquire beyond the content of the same and shall not incur liability to any person by reason of such action or failure to act unless such shall be contrary to the instructions or the directions of the Trustee and unless such action or failure to act was the result of the gross negligence, bad faith or willful misconduct of the Collateral Agent. Without limiting the foregoing, no Secured Party shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder or under the Security Documents in accordance with such requests or instructions of the Trustee, and the Company shall fully indemnify and save harmless the Collateral Agent in connection with any claim by such a Secured Party.

4.

Action of Collateral Agent

        The Collateral Agent shall only act at the request of and upon receipt of written instructions from the Trustee and take such action as shall be specified in such written instructions (subject to Section 5 and subject to its right to indemnification under Section 7 hereof by the Company).

5.

Responsibilities of Collateral Agent

        The Collateral Agent may consult with, and obtain advice from, reputable legal counsel with respect to any question, as to any of the provisions hereof or of the Security Documents or its duties hereunder or under the Security Documents, or any matter of law relating hereto, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Collateral Agent reasonably and in good faith in accordance with the opinion and directions of such counsel; the reasonable costs of such services to be reimbursed by the Company or by the Trustee if the Trustee has received reimbursement pursuant to Section 7.07 of the Indenture. No provision of this Agreement or the Security Documents and no request of the Trustee shall require the Collateral Agent to expend or risk its own funds, or to take any legal or other action under this Agreement which might in its reasonable judgment involve any expense or any financial or other liability unless the Collateral Agent shall be furnished with indemnification reasonably acceptable to it, including the advance of funds sufficient in the judgment of the Collateral Agent to

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satisfy such liability, costs and expenses. The permissive right of the Collateral Agent to take any action under this Section 5 shall not be construed as a duty.

6.

Reliance

        The Collateral Agent shall be entitled to rely, shall have no duty to verify or inquire beyond the content of, and shall be fully protected in relying upon (whether original or facsimile), any note, writing, resolution, notice, consent, statement, certificate, telex, teletype or telecopier message, cablegram, order or other document signed, sent or made by anyone purportedly acting on behalf of a Person not only as to its due execution and validity, but also as to the truth and accuracy of the matters contained therein unless the Collateral Agent is aware of facts or circumstances that contradict or dispute such.

7.

Indemnification

        The Company and the Guarantors, jointly and severally, will reimburse, indemnify and hold harmless the Collateral Agent and its officers, directors, employees and agents (the "Indemnified Parties") for and against any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any fund or nature whatsoever (including, without limitation, reasonable fees and expenses of legal counsel) (collectively, "Claims") which may at any time (including following the payment of all obligations under the Indenture) be imposed on, incurred by or asserted against the Indemnified Parties in connection with the Collateral Agent performing its duties or exercising its rights or remedies hereunder or under the Security Documents, provided that neither the Company nor the Guarantors shall be liable to an Indemnified Party for any portion of the Collateral Agent's Claims to the extent but only to the extent that such Claims may be attributable to such Indemnified Party's gross negligence, bad faith or willful misconduct. The Collateral Agent shall notify the Company promptly of any Claim for which it may seek indemnity. Failure by the Collateral Agent to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the Claim and the Collateral Agent shall cooperate in the defense. The Collateral Agent may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. Neither Company nor any Guarantor need pay for any settlement without its consent which consent shall not be unreasonably withheld.

8.

The Collateral Agent in Its Individual Capacityt

        The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Company or any Affiliate or Subsidiary of the Company as if it were not performing the duties specified herein, and may accept fees and other consideration from the Company for services in connection with the Security Documents and otherwise without having to account for the same to the other Secured Parties.

9.

Resignation by and Removal of the Collateral Agent

        (a)   The Collateral Agent may resign from the performance of all its functions and duties under this Agreement at any time by giving 30 days' prior written notice to each of the Company and the Trustee. Such resignation shall take effect upon the appointment of a successor Collateral Agent by the Trustee, but in no case more than 30 days following such notice. Upon receipt of such notice the Trustee shall use its reasonable best efforts to appoint a successor Collateral Agent as soon as practicable. If no successor Collateral Agent shall have been appointed by the Trustee as required in this Section 9 with 30 days after the retiring Collateral Agent's giving of notice, then the retiring Collateral Agent may apply to a court of competent jurisdiction to designate a successor Collateral Agent, the expenses of such action to be reimbursed by the Company.

        (b)   The Trustee may remove the Collateral Agent at any time upon twenty (20) days written notice to the Collateral Agent. Such removal shall take effect upon the appointment of a successor Collateral Agent by the Trustee. Such removal shall not affect the Collateral Agent's rights with respect to the payment by the Company of all fees and expenses of the Collateral Agent under this Agreement or any other agreement between the parties, including fees and expenses of legal counsel. The Company shall have no right or power to remove or seek the removal of the Collateral Agent or to contest the validity of the Collateral Agent's or any successor's appointment hereunder.

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        (c)   If the Collateral Agent consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Collateral Agent.

        (d)   Upon acceptance of appointment as Collateral Agent by a successor Collateral Agent, such successor shall thereupon and forthwith succeed to and become vested with all the rights, powers, privileges, immunities, indemnities and duties of the retiring Collateral Agent hereunder, at which point the retiring Collateral Agent shall be discharged from its duties and obligations hereunder other than any such obligations that shall have arisen as a result of such former Collateral Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction and authority, as to whch such former Collateral Agent shall remain solely liable and accountable.

        (e)   Upon the performance or payment in full of all outstanding obligations of the Company under the Notes, the Indenture and the Security Documents, the Collateral Agent shall, upon written notice from the Trustee and none other, be released of all of its obligations hereunder subject to Section 14 hereof, except such obligations as shall have arisen from the gross negligence, bad faith or willful misconduct of the Collateral Agent, as to which the Collateral Agent shall remain solely liable and accountable.

10.

Further Assurances

        The Company and the Collateral Agent shall promptly and diligently take all such further actions and execute such further documents necessary or advisable in the reasonable judgment of the Trustee to carry out the express and implied purposes of this Agreement and the Security Documents and to enforce, preserve and protect the Secured Parties' rights to and interest in the Note Collateral hereunder and under the Security Documents. The Collateral Agent shall not be required to execute any documents which would adversely affect its powers, privileges, rights, immunities, indemnities or duties.

11.

Amendments

        This Agreement may be amended only with the prior written consent of the Collateral Agent, the Company, the Guarantors and the Trustee, which consent shall not be unreasonably withheld.

12.

Remedies; Waiver

        (a)   No remedy herein conferred upon or reserved to the Collateral Agent, the Trustee or the other Secured Parties is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement, the Indenture or the Security Documents, or any other agreement entered into pursuant hereto or thereto, or now or hereafter existing at law, in equity or by statute.

        (b)   No delay or omission to exercise any right or power accruing upon the occurrence of any Default or Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient.

        (c)   No failure or delay on the part of the Collateral Agent or the Trustee in exercising any right, power or remedy hereunder, under this Agreement or otherwise shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

        (d)   The Collateral Agent shall, upon receipt of written instructions from the Trustee, waive an existing Default or Event of Default. Such waiver shall not extend to any subsequent or other Default or Event of Default nor impair any right consequent thereto.

        (e)   In the event any term or provision contained in this Agreement shall be breached by the Company or the Collateral Agent and thereafter duly waived by the Trustee, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

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13.

Survival

        The obligations of the Company to indemnify the Collateral Agent under this Agreement shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent.

14.

Successors and Assigns

        This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties. The provisions of this Agreement are intended to be for the benefit of the Collateral Agent, the Trustee and each of the other Secured Parties. Except pursuant to Section 9(c), the Collateral Agent shall not assign any of its rights or obligations under this Agreement without the prior written consent of the Trustee, which consent shall not be unreasonably withheld. The Company shall not assign any of its obligations hereunder.

15.

Notices

        All communications under thrs Agreement shall be given as provided and in accordance with Section 12.02 of the Indenture. Notices to the Collateral Agent shall be addressed as follows:

BNY Trust Company of Canada
4 King Street West,
Suite 1101,
Toronto, Ontario MSK 1A9
Fax No.: (416) 360-1711
Attention: George A. Bragg
                 Vice President

16.

Entire Understanding; Counterparts

        This Agreement, along with the Indenture and the Security Documents, constitutes the entire agreement among the parties hereto with respect to the powers and duties of the Collateral Agent and supersedes all prior agreements and understandings, both written and oral, among the parties. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

17.

Severability of Terms; Headings

        The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections in this Agreement or the application thereof shall not affect the validity or enforceability of the remaining portions of this Agreement or any part thereof. The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction and interpretation thereof.

18.

Costs

        The Company shall be responsible for and to promptly pay all fees due to the Collateral Agent set forth in a side letter and all reasonable legal fees and expenses, costs, expenses and collection fees of the Trustee and the Collateral Agent arising out of or in connection with the enforcement of the rights of the Collateral Agent, the Trustee or the Secured Parties under this Agreement, the Indenture and the Security Documents. To the extent the Indenture entitles the Trustee to a senior claim or preferred claim for any of the fees, costs, expenses and collection fees payable to or incurred by the Collateral Agent pursuant to this Agreement, the Trustee agrees to include such amounts in the claims it asserts pursuant to the terms of the Indenture and upon receipt thereof to pay such amounts to the Collateral Agent. The Collateral Agent agrees to provide to the Trustee, on a timely basis, details of the amounts it is owed in respect of the foregoing fees, costs and expenses. In the event that the Trustee receives any amounts pursuant to Section 7.07 of the Indenture as reimbursement for disbursements, expenses or advances (including fees and expenses of counsel) originally paid by the Collateral Agent, the Trustee shall receive such amounts in trust for the Collateral Agent and shall forthwith pay such amounts to the Collateral Agent; provided, however, that the Trustee shall otherwise have no obligation with respect to the payment of any such amounts to the Collateral Agent.

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19.

GOVERNING LAW

        THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.

20.

Trustee May Perform

        If the Collateral Agent shall refuse or be incapable of performing any right or remedy provided for herein or in the Security Documents, the Trustee may take such actions, or cause such actions to be taken, on behalf of the Collateral Agent as appropriate to protect the interests of the Trustee, the Collateral Agent and the other Secured Parties hereunder and thereunder and shall be entitled, in addition to the rights of the Collateral Agent, to all of the immunity, indemnity and reimbursement provisions hereof and thereof to which the Collateral Agent would be entitled, regardless of any prior act or omission by the Collateral Agent.

21.

Collateral Agent Generally

        Beyond the exercise of reasonable care in the custody thereof, the Collateral Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Collateral Agent shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral.

        The Collateral Agent shall not be responsible for, makes no representations with respect to and shall not have a duty to determine or pass upon the validity, binding effect, execution (other than its own) or sufficiency of this Agreement, the Security Documents or any agreement amendatory or supplemental hereto. In addition, the Collateral Agent shall not be responsible for, makes no representations with respect to and hereby specifically disclaims any liability for or with respect to the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority, enforceability, binding effect or sufficiency of the security interest created by the Security Documents, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, or for the validity of the title of the Company to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise for the maintenance of the Collateral.

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered under seal as of the day and year first above written.

HUDBAY MINING AND SMELTING INC.
By:	/s/ Doug Scharf Name: Doug Scharf Title: Vice-President
152640 CANADA INC., as Guarantor
By:	/s/ Doug Scharf Name: Doug Scharf Title: Vice-President
HUDSON BAY MINING AND SMELTING CO., LTD., as Guarantor
By:	/s/ Doug Scharf Name: Doug Scharf Title: Vice-President
HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED, as Guarantor
By:	/s/ Doug Scharf Name: Doug Scharf Title: Vice-President
BNY TRUST COMPANY OF CANADA, as Collateral Agent
By:	/s/ George A. Bragg Name: George A. Bragg Title: Vice-President
By:	Name: Title:

THE BANK OF NEW YORK, as Trustee
By:	/s/ Michael Pitfick Name: Michael Pitfick Title: Assistant Vice President

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Exhibit 99.2
TABLE OF CONTENTS
CANADIAN COLLATERAL AGENCY AGREEMENT

EX-99.3

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Exhibit 99.3

HUDSON BAY MINING AND SMELTING CO., LIMITED

BNY TRUST COMPANY OF CANADA

TRUST MONIES ACCOUNT HYPOTHECATION AGREEMENT

December 21, 2004

TRUST MONIES ACCOUNT HYPOTHECATION AGREEMENT

THIS AGREEMENT is made as of the 21^st day of December, 2004,

B E T W E E N:

HUDSON BAY MINING AND SMELTING CO., LIMITED, a corporation existing under the laws of Canada and having its chief executive office at 2200 - 201 Portage Avenue, Winnipeg, Manitoba

(together with its successors and permitted assigns, the "Corporation")

-and-

BNY TRUST COMPANY OF CANADA, as collateral agent for the benefit of the Trustee and the ratable benefit of the holders of the Notes referred to below

(the "Agent")

WHEREAS HudBay Mining and Smelting Inc., entered into the Indenture with The Bank of New York (together with its successors and permitted assigns, the "Trustee");

AND WHEREAS it is proposed that on the date hereof HudBay Mining and Smelting Inc. amalgamate with 152640 Canada Inc. and the Corporation to continue under the name Hudson Bay Mining and Smelting Co., Limited, and such continuing corporation will become bound by the terms of the Indenture, as supplemented by the First Supplemental Indenture to the Indenture and by the terms of this Agreement;

AND WHEREAS the Agent, on behalf of the Trustee, has established the Trust Monies Account to be operated and maintained by the Agent in accordance with the terms of the Indenture and this Agreement;

AND WHEREAS it is a requirement of the Indenture that the Corporation enter into this Agreement pursuant to which the interest of the Corporation in the Trust Monies Account is to be pledged to the Agent, on behalf of the Trustee, as additional security for the Obligations (as defined herein);

NOW THEREFORE in consideration of the sum of $1.00 and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Parties hereto agree as follows:

ARTICLE 1 — INTERPRETATION

1.1    Definitions

In this Agreement:

"this Agreement", "hereto", "herein", "hereof', "hereby", "hereunder" and any similar expressions refer to this Agreement as it may be amended or supplemented from time to time, and not to any particular Article, section or other portion hereof;

"Indenture" means the indenture dated the date hereof between HudBay Mining and Smelting Inc. and the Trustee and the Guarantors (as defined therein), as amended or supplemented from time to time in accordance with the terms thereof;

"Obligations" means all of the obligations, liabilities and indebtedness of the Corporation to the Holders, the Trustee and the Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency or otherwise, under or in respect of:

(i)

the Notes (as defined in the Indenture); and



(ii)

the Indenture;

"Pledged Collateral" has the meaning specified in section 3.1 and any reference to Pledged Collateral is deemed to be a reference to "Pledged Collateral or any part of the Pledged Collateral", except where otherwise specifically provided;

"PPSA" means the Personal Property Security Act (Ontario) as amended from time to time and any Act substituted therefor and amendments thereto;

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"Proceeds" means identifiable or traceable personal property in any form derived directly or indirectly from any dealing with the Pledged Collateral or the proceeds therefrom, and includes any payment representing indemnity or compensation for loss of or damage to the Pledged Collateral or proceeds therefrom;

"Security Interest" has the meaning attributed to such term in section 3.1; and

"Trust Monies Account" has the meaning set forth in the Recitals to this Agreement;

1.2    Other Defined Terms

Capitalized terms used by not otherwise defined herein shall have the respective meanings given to them in the Indenture.

1.3    Headings

The inclusion of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation hereof.

1.4    References to Articles and Sections

Whenever in this Agreement a particular Article, section or other portion thereof is referred to then, unless otherwise indicated, such reference pertains to the particular Article, section or portion thereof contained herein.

1.5    Gender and Number

In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders.

1.6    Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof.

1.7    Amendment, Waiver

No amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

1.8    Governing Law, Attornment

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and the Corporation hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.

ARTICLE 2 — TRUST MONIES ACCOUNT

2.1    Establishment of Trust Monies Account

The Agent, on behalf of the Trustee, shall establish, maintain and operate the Trust Monies Account in accordance with and subject to the provisions of the Indenture and the provisions of this Agreement, as applicable. The Trust Monies Account shall be established and maintained by the Agent at its corporate trust office at 4 King Street West, Suite 1101, Toronto, Ontario, M5N 1K9 in the name of the Corporation. The term "Trust Monies Account" as used in this Agreement shall also include any other account in the name of the Corporation at any office of the Agent now or hereafter designated by the Corporation with the consent of the Agent and the Trustee to be a Trust Monies Account pursuant to this Agreement, and all other accounts in the

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name of the Corporation at any office of the Agent established or maintained in substitution for all or any part of any account which is, at the time of substitution, a Trust Monies Account.

The Corporation expressly acknowledges and agrees that the Trust Monies Account will be established, operated and maintained in accordance with the foregoing.

ARTICLE 3 — SECURITY INTEREST

3.1    Creation of Security Interest

The Corporation hereby grants to the Agent, on behalf of the Trustee, by way of security interest, mortgage, pledge, charge, assignment and hypothec a security interest (the "Security Interest") in the following (the "Pledged Collateral"):

(a)

the Trust Monies Account, the credit balances at any time in the Trust Monies Account and all amounts from time to time on deposit in the Trust Monies Account;



(b)

all cash or other personal property at any time deposited, delivered to the Corporation for deposit, transferred or otherwise credited to any of the Trust Monies Account;



(c)

all interest at any time accruing on any of the Trust Monies Account;



(d)

all certificates of deposit and instruments issued by the Agent evidencing the Trust Monies Account;



(e)

all personal property of any kind acquired at any time by the Corporation or by the Agent on behalf of the Corporation from funds deposited, transferred or otherwise credited to any of the Trust Monies Account;



(f)

all personal property of any kind acquired at any time by the Corporation in renewal of, substitution for, as owner of, or as a result of the exercise of any rights relating to, any of the property described in this section;



(g)

all dividends, income or other distributions, whether paid or distributed in cash, securities or other property at any time paid or distributed in respect of any of the property described in this section;



(h)

all Proceeds (including Proceeds of Proceeds) of any of the property described in this section; and



(i)

all security or certificates for or evidencing any of the property described in this section.

3.2    Attachment

The attachment of the Security Interest has not been postponed and the Security Interest shall attach to any particular Pledged Collateral as soon as the Corporation has rights in such Pledged Collateral.

3.3    Obligations Secured

The Security Interest granted by the Corporation in section 3.1 secures payment, performance and satisfaction of the Obligations.

ARTICLE 4 — SPECIAL CONDITIONS AND RESTRICTIONS APPLICABLE TO THE TRUST MONIES ACCOUNT AND THE PLEDGED COLLATERAL

4.1    Special Conditions Applicable to the Trust Monies Account

Notwithstanding any other provision herein or the terms of any other agreement, whether express or implied, between the Corporation and the Agent including without limitation any operating account agreement relating to any of the Trust Monies Account, as long as any Obligations exist:

(a)

subject to section 5.1, the Agent is not indebted or liable to make any payment to the Corporation in respect of any credit balance in any of the Trust Monies Account other than as directed by the Trustee in accordance with the provisions of Article 11 of the Indenture; and

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(b)

except as permitted by the Indenture, the Corporation has no right to withdraw any credit balance in any of the Trust Monies Account, to draw cheques, bills of exchange or other instruments or other orders for the payment of money against any of the Trust Monies Account, or to assign, transfer, create a Lien (other than Permitted Liens) upon or otherwise deal with any credit balance in any of the Trust Monies Account or any interest of the Corporation in any of the Trust Monies Account.

4.2    Actual Practices Irrelevant

The provisions of section 4.1 shall apply notwithstanding that fact that:

(a)

the Agent's records and statements of account or other documents prepared for the Corporation from time to time indicate the existence of credit balances in any of the Trust Monies Account;



(b)

the Agent from time to time may permit the Corporation to take any of the actions described in clause 4.1(b); or



(c)

any other statement, practice or evidence inconsistent with section 4.1.

4.3    Pledged Collateral in Name of Agent

At the request of the Agent, the Corporation will cause such of the Pledged Collateral as is registrable to be registered in the name of the Agent, on behalf of the Trustee, or its nominee and authorizes the Agent to transfer such Pledged Collateral into the name of the Agent or its nominee, so that the Agent or its nominee may appear as the sole owner of record of such Pledged Collateral. At the request of the Agent, the Corporation will deliver to the Agent appropriate powers of attorney for transfer in blank, duly executed, in respect of such of the Pledged Collateral as is registrable.

4.4    Notices and Other Communication in Respect of Pledged Collateral

The Corporation will deliver promptly to the Agent copies of all notices or other communications received by the Corporation in respect of the Pledged Collateral. The Corporation waives all rights to receive any notices or communications received by the Agent or its nominee in respect of the Pledged Collateral.

4.5    Delivery of Pledged Collateral to the Agent

All Pledged Collateral received at any time by or on behalf of the Corporation will be received and held by or on behalf of the Corporation in trust for the Agent, on behalf of the Trustee, and shall be delivered to the Agent immediately on receipt.

4.6    Registrations and Deliveries

(a)

Forthwith after the execution of this Agreement and after the execution of each instrument supplemental or ancillary hereto, the Corporation shall, as applicable, register, file or record the same or a financing statement or other prescribed statement in respect thereof at all offices where, in the opinion of counsel, such registration, filing or recording may be necessary or advisable to preserve or protect the Security Interest.



(b)

Promptly after any such registration, filing, recording or renewal, the Corporation shall cause to be delivered to the Agent certificates establishing such registration, filing, recording or renewal and opinion of counsel evidencing that the provisions of the section have been complied with in respect of this Agreement or such supplemental or ancillary instrument, as the case may be.



(c)

Forthwith after execution of this Agreement and after the execution of each instrument supplemental or ancillary hereto, the Corporation shall deliver to the Agent such documents as, in the opinion of counsel, are necessary or appropriate to preserve or protect the Security Interest.

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4.7    Further Assurances

(a)

The Corporation, at its own expense, will do, execute, acknowledge and deliver or cause to be done executed, acknowledged and delivered all further acts, security agreements, pledges, charges, assignments, hypothecs, powers of attorney and assurances (including instruments supplemental or ancillary to this agreement) and financing statements as the Agent may reasonably request from time to time or as in the opinion of counsel are necessary to assure and perfect its security on the Pledged Collateral.



(b)

At such times as the Agent may reasonably request, the Corporation shall cause to be delivered to the Agent an opinion of counsel, subject to customary qualifications, stating that, in the opinion of such counsel, all such action has been taken including, but not limited to, the execution and delivery and the registration, filing, re-registration, refilling or re-recording of this Agreement and all instruments supplemental or ancillary hereto, as is necessary or of advantage to validly give to the Agent, on behalf of the Trustee, and to maintain the Security Interest granted hereby.

4.8    Verification of Pledged Collateral

The Agent shall have the right at any time and from time to time to verify the existence and state of the Pledged Collateral in any manner the Agent may, acting reasonably, consider appropriate and the Corporation agrees to furnish all assistance and information and to perform all such acts as the Agent may reasonably request in connection therewith and for such purpose to grant to the Agent or its agents access to all places where Pledged Collateral may be located and to all premises occupied by the Corporation.

4.9    Expenses

The Corporation shall pay to the Agent on demand all of the Agent's reasonable costs, charges and expenses (including, without limitation, legal fees on a solicitor and his own client basis) in connection with the preparation, registration or amendment of this Agreement, the perfection or preservation of the Security Interest, the enforcement by any means of any of the provisions hereof or the exercise of any rights, powers or remedies hereunder, including, without limitation, all such costs, charges and expenses in connection with taking possession of Pledged Collateral, together with interest on such costs, charges and expenses from the dates incurred to the date of payment at the rate normally charged by the Agent on similar accounts.

4.10    Investment of Pledged Collateral.

So long as no Default or Event of Default shall have occurred and be continuing, all or any part of the Pledged Collateral held by the Agent shall from time to time be invested or reinvested by the Agent in any Cash Equivalents pursuant to written instructions of the Corporation, which shall specify the Cash Equivalents in which Pledged Collateral shall be invested and the amount thereof. The Agent shall not be liable or responsible for any loss resulting from any such investments or reinvestments except only for its own gross negligence, willfid misconduct and criminal acts and omissions in complying with this Section 4.10.

ARTICLE 5 — SET-OFF, ENFORCEMENT AND REMEDIES

5.1    Set-Off

Notwithstanding the provisions of the Indenture or any of the Security Documents or any other agreement, upon the Notes becoming due and payable, the Agent shall be entitled when directed to do so by the Trustee and without prior notice to the Corporation to immediately set-off, consolidate, appropriate and apply all or any portion of the credit balance in the Trust Monies Account, whether matured or unmatured, against and in reduction of all or any part of the Obligations, all in such order of application as the Trustee may from time to time determine, and the Agent is hereby irrevocably authorized and empowered to take all such action.

5.2    Remedies Available in Addition to Set-Off and Collection of Debts

Upon the Notes becoming due and payable, the Agent when directed to do so by the Trustee, either directly or through its agents or nominees, may (but shall not be obligated to) sell or otherwise dispose of, or concur in

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selling or otherwise disposing of, whether by public sale, private sale or otherwise, Pledged Collateral in any manner and on any terms as it considers to be commercially reasonable. In addition, the Agent will have the following rights, powers and remedies:

(a)

to make payments to any Person having, notwithstanding the terms hereof, prior rights or Liens on the Pledged Collateral;



(b)

to give notice of the Security Interest to any Person obligated to pay any debt or liability constituting Pledged Collateral and to direct such Person to make all payments on account of any such debt or liability to the Agent; and



(c)

to demand, commence, continue or defend proceedings in the name of the Agent or in the name of the Corporation for the purpose of protecting, seizing, collecting, realizing or obtaining possession or payment of, or otherwise enforcing rights, powers or remedies with respect to, the Pledged Collateral and to give receipts and discharges for the Pledged Collateral.

In addition, upon the Notes becoming due and payable, the Agent shall have the right to accept the Pledged Collateral in full or partial satisfaction of the Obligations by complying with applicable laws governing the exercise of this right.

In addition to the rights granted in this Agreement and in any other agreement at any time in effect between the Corporation and the Agent and in addition to any other rights the Agent may have at law or in equity or otherwise, the Agent shall have, both before and after the Notes becoming due and payable, all rights and remedies of a secured party under the PPSA.

The Agent may incur reasonable expenses in the exercise of its rights, powers and remedies under this Agreement and may exercise the same either directly or through agents or nominees.

5.3    Possession of Pledged Collateral

The Corporation acknowledges that the Agent may take possession of Pledged Collateral wherever it may be located and by any method permitted by law, after the occurrence and during the continuance of an Event of Default and the Corporation agrees upon request in writing from the Agent to assemble and deliver possession of Pledged Collateral at such place or places as directed.

5.4    Remedies Not Exclusive

All rights, powers and remedies of the Agent under this Agreement may be exercised separately or in combination and shall be in addition to, and not in substitution for, any other security now or hereafter held by the Agent and any other rights, powers and remedies of the Agent however created or arising. No single or partial exercise by the Agent of any of the rights, powers and remedies under this Agreement or under any other security now or hereafter held by the Agent shall preclude any other and further exercise of any other right, power or remedy pursuant to this Agreement or any other security or at law, in equity or otherwise. The Agent shall have the right to proceed against Pledged Collateral or any other security in such order and in such manner as it shall determine without waiving any rights, powers or remedies which the Agent may have with respect to this Agreement or any other security or at law, in equity or otherwise. No delay or omission by the Agent in exercising any right, power or remedy hereunder or otherwise shall operate as a waiver thereof or of any other right, power or remedy.

5.5    Corporation Liable for Deficiency

The Corporation shall remain liable to the Agent, the Holders and the Trustee for any deficiency after any set-off, consolidation, appropriation and application made by the Agent pursuant to section 5.1 or otherwise and after the proceeds of any sale or other disposition of Pledged Collateral are received by the Agent.

5.6    Exclusion of Liability of Agent

Except for gross negligence, willful misconduct and criminal acts and omissions, the Agent shall not be liable for any exercise or any failure to exercise its rights, powers or remedies arising hereunder or otherwise, including,

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without limitation, any failure to take possession of, collecting, enforcing, realizing, selling, leasing or otherwise disposing of, preserving or protecting the Pledged Collateral, carrying on all or any part of the business of the Corporation relating to the Pledged Collateral or taking any steps or proceedings for any such purposes or any failure to do any of the foregoing. The Agent shall not have any obligation to take any steps or proceedings to preserve rights against prior parties to or in respect of Pledged Collateral whether or not in the Agent's possession and the Agent shall not be liable for failure to do so.

5.7    Notice of Sale

Unless required by law, the Agent shall not be required to give the Corporation any notice of any sale or other disposition of the Pledged Collateral, the date, time and place of any public sale of Pledged Collateral or the date after which any private disposition of Pledged Collateral is to be made.

ARTICLE 6 — APPLICATION OF PROCEEDS

6.1    Application of Proceeds

The Proceeds arising from the enforcement of the Security Interest as a result of the possession by the Agent of the Pledged Collateral or from any sale, lease or other disposition of, or realization of security on, the Pledged Collateral (except following acceptance of Pledged Collateral in satisfaction of the Obligations) shall be applied by the Agent in the following order, except to the extent otherwise required by law or by any other agreement entered into by the Agent and/or the Trustee, the Corporation, and any other creditor of the Corporation:

(a)

first, in payment of the Agent's reasonable costs, charges and expenses (including legal fees on a solicitor and his own client basis) incurred in the exercise of all or any of the rights, powers or remedies granted to it under this Agreement;



(b)

second, in payment of amounts paid by the Agent pursuant to clause 5.2(a);



(c)

third, in payment of all money borrowed or advanced by the Agent, if any, pursuant to the exercise of the rights, powers or remedies set out in this Agreement and any interest thereon;



(d)

fourth, in payment of the remainder of the Obligations in such order of application as the Trustee may determine;



(e)

fifth, subject to sections 6.2 and 6.3, to any Person who has a security interest in the Pledged Collateral that is subordinate to that of the Agent and whose interest,



(i)

was perfected by possession, the continuance of which was prevented by the Agent taking possession of the Pledged Collateral, or



(ii)

was, immediately before the sale or other disposition by the Agent, perfected by registration;



(f)

sixth, subject to sections 6.2 and 6.3, to any other Person with an interest in such Proceeds who has delivered a written notice to the Agent of the interest before the distribution of such Proceeds; and



(g)

the balance if any, subject to sections 6.2 and 6.3, to the Corporation or any other Person who is known by the Agent to be an owner of the Pledged Collateral.

6.2    Proof of Interest

The Agent may require any Person mentioned in clauses 6.1(e), 6.1(f) or 6.1(g), to furnish proof of that Person's interest, and unless the proof is furnished within ten days after demand by the Agent, the Agent need not pay over any portion of the Proceeds referred to therein to such Person.

6.3    Payment Into Court

Where there is a question as to who is entitled to receive payment under clauses 6.1 (e), 6.1 (f) or 6.1 (g), the Agent may pay the Proceeds referred to therein into court.

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6.4    Monies Actually Received

The Corporation shall be entitled to be credited only with the actual Proceeds arising from the possession, sale, other disposition of, or realization of security on, the Pledged Collateral when received by the Agent and such actual Proceeds shall mean all amounts received in cash by the Agent upon such possession, sale or other disposition of, or realization of security on, the Pledged Collateral.

ARTICLE 7 — GENERAL

7.1    Entries to Records

The Agent is authorized and shall be entitled to make such debits, credits, correcting entries and other entries to the Trust Monies Account and the Agent's records relating to the Corporation as the Agent thinks fit in order to give effect to this Agreement, including without limitation the Agent's rights, powers and remedies under sections 3.1, 4.1 and 5.1, and the Corporation agrees that such entries shall constitute prima facie evidence of the matters recorded.

7.2    Power of Attorney

The Corporation hereby appoints the Agent as the Corporation's attorney, with full power of substitution, in the name and on behalf of the Corporation at any time that an Event of Default shall have occurred and be continuing, to execute, deliver and do all such acts, deeds, leases, documents, transfers, demands, conveyances, assignments, contracts, assurances, consents, financing statements and things as the Corporation has herein agreed to execute, deliver and do or as may be required by the Agent, acting reasonably, to give effect to this Agreement or in the exercise of any rights, powers or remedies hereby conferred on the Agent, and generally to use the name of the Corporation in the exercise of all or any of the rights, powers or remedies hereby conferred on the Agent. This appointment, coupled with an interest, shall not be revoked by the insolvency, bankruptcy, dissolution, liquidation or other termination of the existence of the Corporation or for any other reason.

7.3    Dealings with Others

The Agent may grant extensions of time and other indulgences, take and give up security, accept compositions, make settlements, grant releases and discharges and otherwise deal with the Corporation, debtors of the Corporation, sureties and other Persons and with the Pledged Collateral and other security as the Agent sees fit, without prejudice to the liability of the Corporation to the Agent or the rights, powers and remedies of the Agent under this Agreement.

7.4    No Obligation to Advance

Nothing herein contained shall in any way obligate the Agent to advance any funds, or otherwise make or continue to make any credit available, to the Corporation.

7.5    Perfection of Security

The Corporation authorizes the Agent to file such financing statements and other documents and do such acts, matters and things as the Agent may consider appropriate to perfect and continue the Security Interest, to protect and preserve the interest of the Agent in the Pledged Collateral and to realize upon the Security Interest, but the Agent shall not be obligated to, or be liable for, any failure to take any such acts.

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7.6    Communication

Any notice or other communication, including a demand or a direction, required or permitted to be given hereunder shall be given in accordance with the provisions of the Indenture and if to the Agent to:

BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, Ontario M5N 1K9
Attention:	George A. Bragg Vice-President
Facsimile No.:	416-360-1711

Notwithstanding the foregoing, if the PPSA requires that a notice or other communication be given in a specified manner, then any such notice or communication shall be given in such manner.

7.7    Successors and Assigns

This Agreement shall be binding on the Corporation and its successors and shall enure to the benefit of the Agent and its successors and assigns. This Agreement shall be assignable by the Agent free of any set-off, counter-claim or equities between the Corporation and the Agent, and the Corporation shall not assert against an assignee of the Agent any claim or defense that the Corporation has against the Agent, unless it relates to the Obligations.

7.8    Copy Received

The Corporation hereby acknowledges receipt of a copy of this Agreement and a copy of the financing statement/verification statement registered under the PPSA in respect of the Security Interest.

7.9    Conflicts

In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Indenture, the provisions of the Indenture shall govern and prevail.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first written above.

HUDSON BAY MINING AND SMELTING CO., LIMITED
By	/s/ H. Douglas Scharf
BNY TRUST COMPANY OF CANADA
By	/s/ George A. Bragg

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Exhibit 99.3
ARTICLE 1 — INTERPRETATION
ARTICLE 2 — TRUST MONIES ACCOUNT
ARTICLE 3 — SECURITY INTEREST
ARTICLE 4 — SPECIAL CONDITIONS AND RESTRICTIONS APPLICABLE TO THE TRUST MONIES ACCOUNT AND THE PLEDGED COLLATERAL
ARTICLE 5 — SET-OFF, ENFORCEMENT AND REMEDIES
ARTICLE 6 — APPLICATION OF PROCEEDS
ARTICLE 7 — GENERAL

EX-99.4

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Exhibit 99.4

SECURITY AGREEMENT

DATE: December 21, 2004

1.

DEFINITIONS

(a)

"Collateral" has the meaning set forth in Section 2(a) hereof;

(b)

"Debtor" means HudBay Mining and Smelting Inc. together with its successors and permitted assigns;

(c)

"Event of Default" has the meaning attributed to such term in the Trust Indenture;

(d)

"Inventory" means all inventory comprising minerals and mineral bearing substances after they have been extracted, recovered or removed from a deposit and all work in progress and finished mineral products therefrom;

(e)

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any option or other agreement to sell or give a security interest in such asset;

(f)

"Obligations" means all of the obligations, liabilities and indebtedness of the Debtor to the Holders, the Trustee and the Collateral Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency or otherwise, under or in respect of:

(i)

the Notes;

(ii)

the Trust Indenture; and

(iii)

the Security Documents (including this Security Agreement and the lntercreditor Agreement),

and any other document or agreement executed by the Debtor in connection therewith.

(g)

"Permitted Liens" shall have the meaning set forth in the Trust Indenture.



(h)

"Receivables" means all debts, claims, demands and choses in action (including all book debts and accounts) of the Debtor due from any sale or other disposition of any lnventory and all books and records pertaining thereto, together with the benefit of all judgments and all securities for such debts, claims, demands and choses in action and all other rights and benefits in respect thereto to which the Debtor is now or may hereafter become entitled.



(i)

"Trust Indenture" means the trust indenture between the Debtor, The Bank of New York and the Guarantors (as defined therein) dated the date hereof, as may be supplemented, amended or restated from time to time;

2.

SECURITY INTEREST

(a)

For value received the Debtor hereby grants to BNY Trust Company of Canada in its capacity as collateral agent for the benefit of the Trustee and the Holders under the Trust Indenture together with its successors in such capacity (hereinafter referred to as the "Collateral Agent"), by way of mortgage, charge, assignment and transfer, a security interest (the "Security Interest") in

(i)

all lnventory of the Debtor whether now owned or hereafter acquired and all insurance policies in respect thereof and all proceeds in respect of such policies; and

(ii)

all Receivables of the Debtor whether now owned or hereafter acquired.

All of the foregoing being hereinafter collectively called the "Collateral". Notwithstanding the foregoing, the Collateral shall not include any Excluded Assets and the Security Interest shall not extend, by operation of law or otherwise, to any Proceeds of Collateral (other than, for certainty, proceeds from the insurance policies referred to in Section 2(a)(i) above) that are not Collateral.

(b)

Unless otherwise limited herein, the terms, "Chattel Paper", "Documents of Title", "Instruments", "Proceeds" whenever used herein shall be interpreted pursuant to their respective meanings when used in The Personal Property Security Act (Manitoba), as amended from time to time, which Act, including amendments thereto and any Act substituted therefor and amendments thereto is herein referred to as the "PPSA". Any reference herein to "Collateral" shall, unless the context otherwise requires, be deemed a reference to "Collateral or any part thereof".



(c)

Capitalized terms used but not otherwise defined herein shall have the meanings given to them under the Trust Indenture.

3.

OBLIGATIONS SECURED

        The Security Interest secures payment and satisfaction of any and all Obligations of the Debtor. If the Security Interest in the Collateral is not sufficient in the Event of Default to satisfy all Obligations of the Debtor, the Debtor acknowledges and agrees that it shall continue to be liable for any Obligations remaining outstanding and the Collateral Agent shall be entitled to pursue full payment thereof.

4.

REPRESENTATIONS AND WARRANTIES OF THE DEBTOR

(a)

All representations and warranties of the Debtor contained in the Trust lndenture shall be incorporated herein.

(b)

The Debtor does not have or use a French form of name or a combined English or French form of name.

(c)

The address of the Debtor's chief executive office is 6 Adelaide Street East, Suite 300, Toronto, Ontario M5C 1H6.

(d)

The Debtor does not own any assets comprising the Collateral.

5.

COVENANTS OF THE DEBTOR

(a)

All covenants of the Debtor contained in the Trust lndenture shall be incorporated herein.

(b)

So long as this Security Agreement remains in effect the Debtor covenants and agrees:

(i)

to deliver to the Collateral Agent from time to time promptly upon request:

A.

any Documents of Title, Instruments, Securities and Chattel Paper constituting, representing or relating to the Collateral;

B.

all books of account and all records, ledgers, reports, correspondence, schedules, documents, statements, lists and other writings relating to the Collateral for the purpose of inspecting, auditing or copying the same;

C.

all policies and certificates of insurance relating to the Collateral; and

D.

such information concerning the Collateral, the Debtor and the Debtor's business and affairs as Collateral Agent may reasonably request.

(c)

The Debtor shall notify the Collateral Agent promptly of any change in the information contained in this Agreement.

(d)

The Debtor shall not change its name without giving prior written notice to the Collateral Agent of the new name and the date upon which such change of name is to take effect.

6.

USE AND VERIFICATION OF COLLATERAL

        The Debtor may, provided no Event of Default has occurred and is continuing, possess, collect, use and enjoy and deal with the Collateral in the ordinary course of the Debtor's business in any manner not inconsistent with the provisions hereof, or the Trust Indenture; provided always that the Collateral Agent shall have the right at any time and from time to time upon reasonable notice and during normal business hours to verify the existence and state of the Collateral in any manner the Collateral Agent may consider appropriate and the Debtor agrees to furnish all assistance and information and to perform all such acts as the Collateral Agent may

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reasonably request in connection therewith and for such purpose to grant to the Collateral Agent or its agents access to all places where the Collateral may be located and to all premises occupied by the Debtor.

7.

COLLECTION OF DEBTS

        At any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may notify all or any person (an "Account Debtor") obligated to pay any Collateral of the Security Interest and may also direct such Account Debtors to make all payments on the Collateral to the Collateral Agent. The Debtor acknowledges that any payments on account of Collateral received by it from Account Debtors after notification of this Security Interest to Account Debtors shall be held by the Debtor separate from all other property of the Debtor in trust for, and shall be promptly paid over to, the Collateral Agent, in form received with all necessary endorsements or transfers.

8.

DISPOSITION OF MONIES

        Subject to any applicable requirements of the PPSA, upon and during the continuance of an Event of Default, all monies collected or received by the Collateral Agent pursuant to or in exercise of any right it possesses with respect to the Collateral shall be applied on account of the Obligations in such manner as the Collateral Agent deems best or, at the option of the Collateral Agent, released to the Debtor, all without prejudice to the liability of the Debtor or the rights of the Collateral Agent hereunder, and any surplus shall be accounted for as required by law.

9.

REMEDIES

        Upon and during the continuance of any Event of Default, the Collateral Agent shall have the following rights and remedies:

(a)

The Collateral Agent may appoint or reappoint, by instrument in writing, any person or persons, whether an officer or officers or an employee or employees of the Collateral Agent or not, to be a receiver or receivers (hereinafter called a "Receiver", which term when used herein shall include a receiver and manager) of the Collateral and may remove any Receiver so appointed and appoint another in his stead. Any such Receiver, shall, so far as concerns responsibility for his acts, be deemed the agent of the Debtor and not the Collateral Agent, and except for gross negligence, willful misconduct and criminal acts and omissions, the Collateral Agent shall not be in any way responsible for any misconduct, negligence, or nonfeasance on the part of any such Receiver, his servants, agents or employees. Subject to the provisions of the instrument appointing him, any such Receiver shall have power to take possession of the Collateral, to preserve the Collateral or its value, to carry on or concur in carrying on all or any part of the business of the Debtor and to sell, lease or otherwise dispose of or concur in selling, leasing or otherwise disposing of the Collateral. To facilitate the foregoing powers, any such Receiver may, to the exclusion of all others, including the Debtor, enter upon, use and occupy all premises owned or occupied by the Debtor wherein the Collateral may be situate, maintain the Collateral upon such premises, borrow money on a secured or unsecured basis and use the Collateral directly in carrying on the Debtor's business or as security for loans or advances to enable him to carry on the Debtor's business or otherwise, as such Receiver shall, in his discretion, determine. Except as may be otherwise directed by the Collateral Agent, all monies received from time to time by such Receiver in carrying out his appointment shall be received in trust for and paid over to the Collateral Agent. Every such Receiver may, in the discretion of the Collateral Agent, be vested with all or any of the rights and powers of the Collateral Agent.



(b)

The Collateral Agent may, either directly or through its agents or nominees, exercise any or all of the powers and rights given to a Receiver by virtue of the foregoing sub-clause (a).



(c)

The Collateral Agent may take possession of, collect, demand, sue on, enforce, recover and receive the Collateral and give valid and binding receipts and discharges therefor and in respect thereof, may sell, lease or otherwise dispose of the Collateral in such manner, at such time or times and place or places, for such consideration and upon such terms and conditions as to the Collateral Agent may seem reasonable.

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(d)

In addition to those rights granted herein and in any other agreement now or hereafter in effect between the Debtor and the Collateral Agent and in addition to any other rights the Collateral Agent may have at law or in equity, the Collateral Agent shall have, both before and after default, all rights and remedies of a secured party under the PPSA and The Personal Property Security Act, 1993 (Saskatchewan) (the "Saskatchewan PPSA"), provided always that the Collateral Agent shall not be liable or accountable for any failure to exercise its remedies, take possession of, collect, enforce, realize, sell, lease or otherwise dispose of the Collateral or to institute any proceedings for such purposes. Furthermore, the Collateral Agent shall have no obligation to take any steps to preserve rights against prior parties to any Instrument or Chattel Paper, whether or not in the Collateral Agent's possession and shall not be liable or accountable for failure to do so.



(e)

The Debtor acknowledges that the Collateral Agent or any Receiver appointed by it may take possession of the Collateral and all books and records pertaining thereto wherever it may be located and by any method permitted by law and the Debtor agrees upon request from the Collateral Agent or any such Receiver to assemble and deliver possession of the Collateral and all books and records pertaining thereto at such place or places as directed.



(f)

The Debtor agrees to pay all costs, charges and expenses reasonably incurred by the Collateral Agent or any Receiver appointed by it, whether directly or for services rendered (including reasonable solicitors and auditors costs and other legal expenses and Receiver remuneration), in operating the Debtor's accounts, in preparing or enforcing this Security Agreement, taking custody of, preserving, repairing, processing, preparing for disposition and disposing of the Collateral and in enforcing or collecting the Obligations and all such costs, charges and expenses together with any monies owing as a result of any borrowing by the Collateral Agent or any Receiver appointed by it, as permitted hereby, shall be a first charge on the proceeds of realization, collection or disposition of the Collateral and shall be secured hereby.



(g)

The Collateral Agent will give the Debtor such notice of the date, time and place of any public sale or of the date after which any private disposition of the Collateral is to be made, as may be required by the PPSA or the Saskatchewan PPSA, as applicable.

10.

MISCELLANEOUS

(a)

The Debtor hereby agrees to file such financing statements and other documents and do such acts, matters and things (including completing and adding schedules hereto identifying the Collateral or any Permitted Liens affecting the Collateral or identifying the locations at which the Debtor's business is carried on and the Collateral records relating thereto are situate) as the Collateral Agent may deem appropriate to perfect and continue the Security Interest, to protect and preserve the Collateral and to realize upon the Security Interest and the Debtor hereby irrevocably constitutes and appoints the Collateral Agent, at any time that an Event of Default shall have occurred and be continuing, its true and lawful attorney, with full power of substitution, to do any of the foregoing in the name of the Debtor whenever and wherever it may be deemed necessary or expedient.

(b)

In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Trust Indenture, the provisions of the Trust Indenture shall govern and prevail.

(c)

Upon the Debtor's failure to perform any of its duties hereunder, the Collateral Agent may, but shall not be obligated, to, perform any or all of such duties, and the Debtor shall pay to the Collateral Agent, forthwith upon written demand therefor, an amount equal to the reasonable expenses incurred by the Collateral Agent in so doing plus interest thereon from the date such expense is incurred until it is paid at the annual rate of interest payable under the Notes.

(d)

The Collateral Agent may grant extensions of time and other indulgences, take and give up security, accept compositions, compound, compromise, settle, grant releases and discharges and otherwise deal with the Debtor, debtors of the Debtor, sureties and others and with the Collateral and other security as the Collateral Agent may see fit without prejudice to the liability of the Debtor or the Collateral Agent's right to hold and realize the Security Interest. Furthermore, at any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may demand, collect and sue on

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the Collateral in either the Debtor's or the Collateral Agent's name, at the Collateral Agent's option, and may endorse the Debtor's name on any and all cheques, commercial paper, and any other Instruments constituting the Collateral.

(e)

No delay or omission by the Collateral Agent in exercising any right or remedy hereunder or with respect to any Obligations shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. Furthermore, the Collateral Agent may remedy any default by the Debtor hereunder or with respect to any Obligations in any reasonable manner without waiving the default remedied and without waiving any other prior or subsequent default by the Debtor. All rights and remedies of the Collateral Agent granted or recognized herein are cumulative and may be exercised at any time and from time to time independently or in combination.



(f)

The Debtor waives protest of any Instrument constituting the Collateral at any time held by the Collateral Agent on which the Debtor is in any way liable and, subject to Clause 9(g) hereof, notice of any other action taken by the Collateral Agent.



(g)

The Debtor hereby irrevocably constitutes and appoints the Collateral Agent and each of its officers holding office from time to time as the true and lawful attorney of the Debtor at any time after an Event of Default shall have occurred and be continuing with power of substitution in the name of the Debtor to do any and all such acts and things or execute and deliver all such agreements, documents and instruments as the Collateral Agent reasonably considers necessary or desirable to carry out the provisions and purposes of this Agreement or to exercise any of its rights and remedies hereunder and to perfect the Security Interest created hereunder, and to do all acts or things necessary to realize or collect the Collateral, and the Debtor hereby ratifies and agrees to ratify all acts of any such attorney taken or done in accordance with this Section 10(g). Without in any way limiting the generality of the foregoing, the Collateral Agent shall have the right to execute, for and in the name of the Debtor, all financing statements, financing change statements, conveyances, transfers, assignments, consents and other instruments as may be required for such purposes. This power of attorney shall not be revoked or terminated by any act or thing other than the termination of this Agreement.



(h)

This Security Agreement shall ensure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. In any action brought by an assignee of this Security Agreement and the Security Interest or any part thereof to enforce any rights hereunder, the Debtor shall not assert against the assignee any claim or defence which the Debtor now has or hereafter may have against the Collateral Agent unless it arises under or in respect of any Credit Documents.



(i)

Save for any schedules which may be added hereto pursuant to the provisions hereof, no modification, variation or amendment of any provision of this Security Agreement shall be made except by a written agreement, executed by the parties hereto and no waiver of any provision hereof shall be effective unless in writing.



(j)

Whenever either party hereto is required or entitled to notify or direct the other or to make a demand or request upon the other, such notice, direction, demand or request shall be in writing and shall be sufficiently given only if delivered to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto or if sent by prepaid registered mail addressed to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto. Either party may notify the other pursuant hereto of any change in such party's principal address to be used for the purposes hereof.

If to the Debtor:

HudBay Mining and Smelting Inc.
6 Adelaide Street East, Suite 300,
Toronto, Ontario M5C 1H6

5

If to the Collateral Agent:

4 King Street West, Suite 1101
Toronto, Ontario M5H 1B6

(k)

This Security Agreement and the security afforded hereby is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent, and is intended to be a continuing Security Agreement and shall remain in full force and effect until all Obligations contracted for, and any extensions or renewals thereof together with interest accruing thereon shall be paid in full.



(l)

The headings used in this Security Agreement are for convenience only and are not to be considered a part of this Security Agreement and do not in any way limit or amplify the terms and provisions of this Security Agreement.



(m)

When the context so requires, the singular number shall be read as if the plural were expressed and the provisions hereof shall be read with all grammatical changes necessary dependant upon the person referred to being a male, female, firm or corporation.



(n)

In the event any provision of this Security Agreement, as amended from time to time, shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this Security Agreement shall remain in full force and effect.



(o)

Nothing herein contained shall in any way obligate the Collateral Agent to grant, continue, renew, extend time for payment of or accept anything which constitutes or would constitute the Obligations.



(p)

The Security Interest created hereby is intended to attach when this Security Agreement is signed by the Debtor and delivered to the Collateral Agent.



(q)

This Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the Province of Manitoba as the same may from time to time be in effect, including, where applicable, the PPSA.



(r)

The Limitation of Civil Rights Act (Saskatchewan) shall have no application to this Security Agreement or any agreement renewing, extending or collateral to this Security Agreement.



(s)

The Debtor will do or cause to be done all acts and things which may be required, or which the Trustee from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the Trustee and the Holders, duly created, enforceable and perfected Liens upon the Collateral.

11.

COPY OF AGREEMENT

        The Debtor hereby acknowledges receipt of a copy of this Security Agreement. The Debtor further waives its right under the PPSA and the Saskatchewan PPSA to obtain a copy of the financing statement (including any financing change statement, renewal or discharge) registered concerning this Security Agreement and a copy of the verification statement issued to confirm such registration.

IN WITNESS WHEREOF the Debtor has executed this Security Agreement as of the date first above written.

HUDBAY MINING AND SMELTING INC.
Per:	/s/ H. Douglas Scharf
Per:

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Exhibit 99.4
SECURITY AGREEMENT

EX-99.5

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Exhibit 99.5

SECURITY AGREEMENT

DATE: December 21, 2004

1.

DEFINITIONS

        (a)   "Collateral" has the meaning set forth in Section 2(a) hereof;

        (b)   "Debtor" means 152640 Canada Inc. together with its successors and permitted assigns;

        (c)   "Event of Default" has the meaning attributed to such term in the Trust Indenture;

        (d)   "Inventory" means all inventory comprising minerals and mineral bearing substances after they have been extracted, recovered or removed from a deposit and all work in progress and finished mineral products therefrom;

        (e)   "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or othewise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any option or other agreement to sell or give a security interest in such asset;

        (f)    "Obligations" means, prior to the amalgamation of Hudson Bay Mining and Smelting Co., Limited, HudBay Mining and Smelting Inc. and the Debtor, all of the obligations, liabilities and indebtedness of the Debtor to the Holders, the Trustee and the Collateral Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency, under or in respect of its Guarantee and all documents delivered in connection with such Guarantee and, following such amalgamation, all of the obligations, liabilities and indebtedness of the Issuer to the Holders, the Trustee and the Collateral Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency, under the Trust Indenture and all documents delivered in connection therewith;

        (g)   "Permitted Liens" shall have the meaning set forth in the Trust Indenture;

        (h)   "Receivables" means all debts, claims, demands and choses in action (including all book debts and accounts) of the Debtor due from any sale or other disposition of any Inventory and all books and records pertaining thereto, together with the benefit of all judgments and all securities for such debts, claims, demands and choses in action and all other rights and benefits in respect thereto to which the Debtor is now or may hereafter become entitled;

        (i)    "Trust Indenture" means the trust indenture between the Debtor, The Bank of New York and the Guarantors (as defined therein) dated the date hereof, as may be supplemented, amended or restated from time to time.

2.

SECURITY INTEREST

        (a)   For value received the Debtor hereby grants to BNY Trust Company of Canada in its capacity as collateral agent for the benefit of the Trustee and the Holders under the Trust Indenture together with its successors in such capacity (hereinafter referred to as the "Collateral Agent"), by way of mortgage, charge, assignment and transfer, a security interest (the "Security Interest") in

(i)

all Inventory of the Debtor whether now owned or hereafter acquired and all insurance policies in respect thereof and all proceeds in respect of such policies; and



(ii)

all Receivables of the Debtor whether now owned or hereafter acquired.

All of the foregoing being hereinafter collectively called the "Collateral". Notwithstanding the foregoing, the Collateral shall not include any Excluded Assets and the Security Interest shall not extend, by operation of law or otherwise, to any Proceeds of Collateral (other than, for certainty, proceeds from the insurance policies referred to in Section 2(a)(i) above) that are not Collateral.

        (b)   Unless otherwise limited herein, the terms, "Chattel Paper", "Documents of Title", "Instruments", "Proceeds" whenever used herein shall be interpreted pursuant to their respective meanings

when used in The Personal Property Security Act (Manitoba), as amended from time to time, which Act, including amendments thereto and any Act substituted therefor and amendments thereto is herein referred to as the "PPSA". Any reference herein to "Collateral" shall, unless the context otherwise requires, be deemed a reference to "Collateral or any part thereof".

        (c)   Capitalized terms used but not otherwise defined herein shall have the meanings given to them under the Trust Indenture.

3.

OBLIGATIONS SECURED

        The Security lnterest secures payment and satisfaction of any and all Obligations of the Debtor. If the Security lnterest in the Collateral is not sufficient in the Event of Default to satisfy all Obligations of the Debtor, the Debtor acknowledges and agrees that it shall continue to be liable for any Obligations remaining outstanding and the Collateral Agent shall be entitled to pursue full payment thereof.

4.

REPRESENTATIONS AND WARRANTIES OF THE DEBTOR

        (a)   All representations and warranties of the Debtor contained in the Trust lndenture shall be incorporated herein.

        (b)   The Debtor does not have or use a French form of name or a combined English or French form of name.

        (c)   The address of the Debtor's chief executive office is 201 Portage Avenue, Suite 2200, Winnipeg, Manitoba, R3B 3L3.

        (d)   The Debtor does not own any tangible assets comprising the Collateral.

5.

COVENANTS OF THE DEBTOR

        (a)   All covenants of the Debtor contained in the Trust lndenture shall be incorporated herein.

        (b)   So long as this Security Agreement remains in effect the Debtor covenants and agrees:

(i)

to deliver to the Collateral Agent from time to time promptly upon request:



A.

any Documents of Title, Instruments, Securities and Chattel Paper constituting, representing or relating to the Collateral;



B.

all books of account and all records, ledgers, reports, correspondence, schedules, documents, statements, lists and other writings relating to the Collateral for the purpose of inspecting, auditing or copying the same;



C.

all policies and certificates of insurance relating to the Collateral; and



D.

such information concerning the Collateral, the Debtor and the Debtor's business and affairs as Collateral Agent may reasonably request.

        (c)   The Debtor shall notify the Collateral Agent promptly of any change in the information contained in this Agreement.

        (d)   The Debtor shall not change its name without giving prior written notice to the Collateral Agent of the new name and the date upon which such change of name is to take effect.

6.

USE AND VERIFICATION OF COLLATERAL

        The Debtor may, provided no Event of Default has occurred and is continuing, possess, collect, use and enjoy and deal with the Collateral in the ordinary course of the Debtor's business in any manner not inconsistent with the provisions hereof, or the Trust Indenture; provided always that the Collateral Agent shall have the right at any time and from time to time upon reasonable notice and during normal business hours to verify the existence and state of the Collateral in any manner the Collateral Agent may consider appropriate and the Debtor agrees to furnish all assistance and information and to perform all such acts as the Collateral Agent may reasonably request in connection therewith and for such purpose to grant to the Collateral Agent or its agents access to all places where the Collateral may be located and to all premises occupied by the Debtor.

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7.

COLLECTION OF DEBTS

        At any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may notify all or any person (an "Account Debtor") obligated to pay any Collateral of the Security Interest and may also direct such Account Debtors to make all payments on the Collateral to the Collateral Agent. The Debtor acknowledges that any payments on account of Collateral received by it from Account Debtors after notification of this Security Interest to Account Debtors shall be held by the Debtor separate from all other property of the Debtor in trust for, and shall be promptly paid over to, the Collateral Agent, in form received with all necessary endorsements or transfers.

8.

DISPOSITION OF MONIES

        Subject to any applicable requirements of the PPSA, upon and during the continuance of an Event of Default, all monies collected or received by the Collateral Agent pursuant to or in exercise of any right it possesses with respect to the Collateral shall be applied on account of the Obligations in such manner as the Collateral Agent deems best or, at the option of the Collateral Agent, released to the Debtor, all without prejudice to the liability of the debtor or the rights of the Collateral Agent hereunder, and any surplus shall be accounted for as required by law.

9.

REMEDIES

        Upon and during the continuance of any Event of Default, the Collateral Agent shall have the following rights and remedies:

        (a)   The Collateral Agent may appoint or reappoint, by inytrument in writing, any person or persons, whether an officer or officers or an epployee or employees of the Collateral Agent or not, to be a receiver or receivers (hereinafter called a "Receiver", which term when used herein shall include a receiver and manager) of the Collateral and may remove any Receiver so appointed and appoint another in his stead. Any such Receiver, shall, so far as concerns responsibility for his acts, be deemed the agent of the Debtor and not the Collateral Agent, and except for gross negligence, willful misconduct and criminal acts and omissions, the Collateral Agent shall not be in any way responsible for any misconduct, negligence, or nonfeasance on the part of any such Receiver, his servants, agents or employees. Subject to the provisions of the instrument appointing him, any such Receiver shall have power to take possession of the Collateral, to preserve the Collateral or its value, to carry on or concur in carrying on all or any part of the business of the Debtor and to sell, lease or otherwise dispose of or concur in selling, leasing or otherwise disposing of the Collateral. To facilitate the foregoing powers, any such Receiver may, to the exclusion of all others, including the Debtor, enter upon, use and occupy all premises owned or occupied by the Debtor wherein the Collateral may be situate, maintain the Collateral upon such premises, borrow money on a secured or unsecured basis and use the Collateral directly in carrying on the Debtor's business or as security for loans or advances to enable him to carry on the Debtor's business or otherwise, as such Receiver shall, in his discretion, determine. Except as may be otherwise directed by the Collateral Agent, all monies received from time to time by such Receiver in carrying out his appointment shall be received in trust for and paid over to the Collateral Agent. Every such Receiver may, in the discretion of the Collateral Agent, be vested with all or any of the rights and powers of the Collateral Agent.

        (b)   The Collateral Agent may, either directly or through its agents or nominees, exercise any or all of the powers and rights given to a Receiver by virtue of the foregoing sub-clause (a).

        (c)   The Collateral Agent may take possession of, collect, demand, sue on, enforce, recover and receive the Collateral and give valid and binding receipts and discharges therefor and in respect thereof, may sell, lease or otherwise dispose of the Collateral in such manner, at such time or times and place or places, for such consideration and upon such terms and conditions as to the Collateral Agent may seem reasonable.

        (d)   In addition to those rights granted herein and in any other agreement now or hereafter in effect between the Debtor and the Collateral Agent and in addition to any other rights the Collateral Agent may have at law or in equity, the Collateral Agent shall have, both before and after default, all rights and remedies of a secured party under the PPSA and The Personal Property Security Act, 1993 (Saskatchewan)

3

(the "Saskatchewan PPSA"), provided always that the Collateral Agent shall not be liable or accountable for any failure to exercise its remedies, take possession of, collect, enforce, realize, sell, lease or otherwise dispose of the Collateral or to institute any proceedings for such purposes. Furthermore, the Collateral Agent shall have no obligation to take any steps to preserve rights against prior parties to any Instrument or Chattel Paper, whether or not in the Collateral Agent's possession and shall not be liable or accountable for failure to do so.

        (e)   The Debtor acknowledges that the Collateral Agent or any Receiver appointed by it may take possession of the Collateral and all books and records pertaining thereto wherever it may be located and by any method permitted by law and the Debtor agrees upon request from the Collateral Agent or any such Receiver to assemble and deliver possession of the Collateral and all books and records pertaining thereto at such place or places as directed.

        (f)    The Debtor agrees to pay all costs, charges and expenses reasonably incurred by the Collateral Agent or any Receiver appointed by it, whether directly or for services rendered (including reasonable solicitors and auditors costs and other legal expenses and Receiver remuneration), in operating the Debtor's accounts, in preparing or enforcing this Security Agreement, taking custody of, preserving, repairing, processing, preparing for disposition and disposing of the Collateral and in enforcing or collecting the Obligations and all such costs, charges and expenses together with any monies owing as a result of any borrowing by the Collateral Agent or any Receiver appointed by it, as permitted hereby, shall be a first charge on the proceeds of realization, collection or disposition of the Collateral and shall be secured hereby.

        (g)   The Collateral Agent will give the Debtor such notice of the date, time and place of any public sale or of the date after which any private disposition of the Collateral is to be made, as may be required by the PPSA or the Saskatchewan PPSA, as applicable.

10.

MISCELLANEOUS

        (a)   The Debtor hereby agrees to file such financing statements and other documents and do such acts, matters and things (including completing and adding schedules hereto identifying the Collateral or any Permitted Liens affecting the Collateral or identifying the locations at which the Debtor's business is carried on and the Collateral records relating thereto are situate) as the Collateral Agent may deem appropriate to perfect and continue the Security Interest, to protect and preserve the Collateral and to realize upon the Security Interest and the Debtor hereby irrevocably constitutes and appoints the Collateral Agent, at any time that an Event of Default shall have occurred and be continuing, its true and lawful attorney, with full power of substitution, to do any of the foregoing in the name of the Debtor whenever and wherever it may be deemed necessary or expedient.

        (b)   In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Trust Indenture, the provisions of the Trust Indenture shall govern and prevail.

        (c)   Upon the Debtor's failure to perform any of its duties hereunder, the Collateral Agent may, but shall not be obligated, to, perform any or all of such duties, and the Debtor shall pay to the Collateral Agent, forthwith upon written demand therefor, an amount equal to the reasonable expenses incurred by the Collateral Agent in so doing plus interest thereon from the date such expense is incurred until it is paid at the annual rate of interest payable under the Notes.

        (d)   The Collateral Agent may grant extensions of time and other indulgences, take and give up security, accept compositions, compound, compromise, settle, grant releases and discharges and otherwise deal with the Debtor, debtors of the Debtor, sureties and others and with the Collateral and other security as the Collateral Agent may see fit without prejudice to the liability of the Debtor or the Collateral Agent's right to hold and realize the Security Interest. Furthermore, at any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may demand, collect and sue on the Collateral in either the Debtor's or the Collateral Agent's name, at the Collateral Agent's option, and may endorse the Debtor's name on any and all cheques, commercial paper, and any other Instruments constituting the Collateral.

4

        (e)   No delay or omission by the Collateral Agent in exercising any right or remedy hereunder or with respect to any Obligations shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. Furthermore, the Collateral Agent may remedy any default by the Debtor hereunder or with respect to any Obligations in any reasonable manner without waiving the default remedied and without waiving any other prior or subsequent default by the Debtor. All rights and remedies of the Collateral Agent granted or recognized herein are cumulative and may be exercised at any time and from time to time independently or in combination.

        (f)    The Debtor waives protest of any Instrument constituting the Collateral at any time held by the Collateral Agent on which the Debtor is in any way liable and, subject to Clause 9(g) hereof, notice of any other action taken by the Collateral Agent.

        (g)   The Debtor hereby irrevocably constitutes and appoints the Collateral Agent and each of its officers holding office from time to time as the true and lawful attorney of the Debtor at any time after an Event of Default shall have occurred and be continuing with power of substitution in the name of the Debtor to do any and all such acts and things or execute and deliver all such agreements, documents and instruments as the Collateral Agent (easonably considers necessary or desirable to carry out the provisions and purposes of this Agreement or to exercise any of its rights and remedies hereunder and to perfect the Security Interest created hereunder, and to do all acts or things necessary to realize or collect the Collateral, and the Debtor hereby ratifies and agrees to ratify all acts of any such attorney taken or done in accordance with this Section 10(g). Without in any way limiting the generality of the foregoing, the Collateral Agent shall have the right to execute, for and in the name of the Debtor, all financing statements, financing change statements, conveyances, transfers, assignments, consents and other instruments as may be required for such purposes. This power of attorney shall not be revoked or terminated by any act or thing other than the termination of this Agreement.

        (h)   This Security Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. In any action brought by an assignee of this Security Agreement and the Security Interest or any part thereof to enforce any rights hereunder, the Debtor shall not assert against the assignee any claim or defence which the Debtor now has or hereafter may have against the Collateral Agent unless it arises under or in respect of any Credit Documents.

        (i)    Save for any schedules which may be added hereto pursuant to the provisions hereof, no modification, variation or amendment of any provision of this Security Agreement shall be made except by a written agreement, executed by the parties hereto and no waiver of any provision hereof shall be effective unless in writing.

        (j)    Whenever either party hereto is required or entitled to notify or direct the other or to make a demand or request upon the other, such notice, direction, demand or request shall be in writing and shall be sufficiently given only if delivered to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto or if sent by prepaid registered mail addressed to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto. Either party may notify the other pursuant hereto of any change in such party's principal address to be used for the purposes hereof.

If to the Debtor:

152640 Canada Inc.
201 Portage Avenue
Suite 2200
Winnipeg, Manitoba R3B 3L3

5

If to the Collateral Agent:

4 King Street West, Suite 1101
Toronto, Ontario M5H 1B6

        (k)   This Security Agreement and the security afforded hereby is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent and is, and is intended to be a continuing Security Agreement and shall remain in full force and effect until all Obligations contracted for, and any extensions or renewals thereof together with interest accruing thereon shall be paid in full.

        (l)    The headings used in this Security Agreement are for convenience only and are not to be considered a part of this Security Agreement and do not in any way limit or amplify the terms and provisions of this Security Agreement.

        (m)  When the context so requires, the singular number shall be read as if the plural were expressed and the provisions hereof shall be read with all grammatical changes necessary dependant upon the person referred to being a male, female, firm or corporation.

        (n)   In the event any provision of this Security Agreement, as amended from time to time, shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this Security Agreement shall remain in full force and effect.

        (o)   Nothing herein contained shall in any way obligate the Collateral Agent to grant, continue, renew, extend time for payment of or accept anything which constitutes or would constitute the Obligations.

        (p)   The Security Interest created hereby is intended to attach when this Security Agreement is signed by the Debtor and delivered to the Collateral Agent.

        (q)   This Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the Province of Manitoba as the same may from time to time be in effect, including, where applicable, the PPSA.

        (r)   The Limitation of Civil Rights Act (Saskatchewan) shall have no application to this Security Agreement or any agreement renewing, extending or collateral to this Security Agreement.

        (s)   The Debtor will do or cause to be done all acts and things which may be required, or which the Trustee from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the Trustee and the Holders, duly created, enforceable and perfected Lienp upon the Collateral.

11.

COPY OF AGREEMENT

        The Debtor hereby acknowledges receipt of a copy of this Security Agreement. The Debtor further waives its right under the PPSA and the Saskatchewan PPSA to obtain a copy of the financing statement (including any financing change statement, renewal or discharge) registered concerning this Security Agreement and a copy of the verification statement issued to confirm such registration.

IN WITNESS WHEREOF the Debtor has executed this Security Agreement as of the date first above written.

152640 CANADA INC.
Per:	/s/ H. Douglas Scharf
Per:

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Exhibit 99.5
SECURITY AGREEMENT

EX-99.6

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Exhibit 99.6

SECURITY AGREEMENT

DATE: December 21,2004

1.    DEFINITIONS

        (a)   "Collateral" has the meaning set forth in Section 2(a) hereof;

        (b)   "Debtor" means Hudson Bay Mining and Smelting Co., Limited together with its successors and permitted assigns;

        (c)   "Event of Default" has the meaning attributed to such term in the Trust Indenture;

        (d)   "Inventory" means all inventory comprising minerals and mineral bearing substances after they have been extracted, recovered or removed from a deposit and all work in progress and finished mineral products therefrom;

        (e)   "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any option or other agreement to sell or give a security interest in such asset;

        (f)    "Obligations" means, prior to the amalgamation of the Debtor, HudBay Mining and Smelting Inc. and 152640 Canada Inc., all of the obligations, liabilities and indebtedness of the Debtor to the Holders, the Trustee and the Collateral Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency under or in respect of its Guarantee and all documents delivered in connection with such Guarantee and, following such amalgamation, all of the obligations, liabilities and indebtedness of the Issuer to the Holders, the Trustee and the Collateral Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency under or in respect of the Trust Indenture and all documents delivered in connection therewith;

        (g)   "Permitted Liens" shall have the meaning set forth in the Trust Indenture.

        (h)   "Receivables" means all debts, claims, demands and choses in action (including all book debts and accounts) of the Debtor due from any sale or other disposition of any Inventory and all books and records pertaining thereto, together with the benefit of all judgments and all securities for such debts, claims, demands and choses in action and all other rights and benefits in respect thereto to which the Debtor is now or may hereafter become entitled.

        (i)    "Trust Indenture" means the trust indenture between the Debtor, The Bank of New York and the Guarantors (as defined therein) dated the date hereof, as may be supplemented, amended or restated from time to time;

2.    SECURITY INTEREST

        (a)   For value received the Debtor hereby grants to BNY Trust Company of Canada in its capacity as collateral agent for the benefit of the Trustee and the Holders under the Trust Indenture together with its successors in such capacity (hereinafter referred to as the "Collateral Agent"), by way of mortgage, charge, assignment and transfer, a security interest (the "Security Interest") in

(i)

all Inventory of the Debtor whether now owned o i hereafter acquired and all insurance policies in respect therebf and all proceeds in respect of such policies; and



(ii)

all Receivables of the Debtor whether now owned or hereafter acquired

All of the foregoing being hereinafter collectively called the "Collateral". Notwithstanding the foregoing, the Collateral shall not include any Excluded Assets and the Security lnterest shall not extend, by operation of law or otherwise, to any Proceeds of Collateral (other than, for certainty, proceeds from the insurance policies referred to in Section 2(a)(i) above) that are not Collateral.

        (b)   Unless otherwise limited herein, the terms, "Chattel Paper", "Documents of Title", "Instruments", "Proceeds" whenever used herein shall be interpreted pursuant to their respective meanings when used in The Personal Property Security Act (Manitoba), as amended from time to time, which Act, including amendments thereto and any Act substituted therefor and amendments thereto is herein referred to as the "PPSA". Any reference herein to "Collateral" shall, unless the context otherwise requires, be deemed a reference to "Collateral or any part thereof".

        (c)   Capitalized terms used but not otherwise defined herein shall have the meanings given to them under the Trust Indenture.

3.    OBLIGATIONS SECURED

        The Security lnterest secures payment and satisfaction of any and all Obligations of the Debtor. If the Security lnterest in the Collateral is not sufficient in the Event of Default to satisfy all Obligations of the Debtor, the Debtor acknowledges and agrees that it shall continue to be liable for any Obligations remaining outstanding and the Collateral Agent shall be entitled to pursue full payment thereof.

4.    REPRESENTATIONS AND WARRANTIES OF THE DEBTOR

        (a)   All representations and warranties of the Debtor contained in the Trust lndenture shall be incorporated herein.

        (b)   The Debtor does not have or use a French form of name or a combined English or French form of name other than "La Compagnie Miniere et Metallurgique de la Baie D'Hudson Limitee".

        (c)   The address of the Debtor's chief executive office is 201 Portage Avenue, Suite 2200, Winnipeg, Manitoba, R3B 3L3.

        (d)   With the exception of Inventory in transit, all tangible assets comprising the Collateral are situate in the Provinces of Ontario, Manitoba and Saskatchewan.

5.    COVENANTS OF THE DEBTOR

        (a)   All covenants of the Debtor contained in the Trust lndenture shall be incorporated herein.

        (b)   So long as this Security Agreement remains in effect the Debtor covenants and agrees:

        (i)    to deliver to the Collateral Agent from time to time promptly upon request:

A.

any Documents of Title, Instruments, Securities and Chattel Paper constituting, representing or relating to the Collateral;



B.

all books of account and all records, ledgers, reports, correspondence, schedules, documents, statements, lists and other writings relating to the Collateral for the purpose of inspecting, auditing or copying the same;



C.

all policies and certificates of insurance relating to the Collateral; and



D.

such information concerning the Collateral, the Debtor and the Debtor's business and affairs as Collateral Agent may reasonably request.

        (c)   The Debtor shall notify the Collateral Agent promptly of any change in the information contained in this Agreement.

        (d)   The Debtor shall not change its name without giving prior written notice to the Collateral Agent of the new name and the date upon which such change of name is to take effect.

6.    USE AND VERIFICATION OF COLLATERAL

        The Debtor may, provided no Event of Default has occurred and is continuing, possess, collect, use and enjoy and deal with the Collateral in the ordinary course of the Debtor's business in any manner not inconsistent

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with the provisions hereof, or the Trust Indenture; provided always that the Collateral Agent shall have the right at any time and from time to time upon reasonable notice and during normal business hours to verify the existence and state of the Collateral in any manner the Collateral Agent may consider appropridte and the Debtor agrees to furnish all assistance and information and to perforjm all such acts as the Collateral Agent may reasonably request in connection therewith and for such purpose to grant to the Collateral Agent or its agents access to all places where the Collateral may be located and to all premises occupied by the Debtor.

7.    COLLECTION OF DEBTS

        At any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may notify all or any person (an "Account Debtor") obligated to pay any Collateral of the Security lnterest and may also direct such Account Debtors to make all payments on the Collateral to the Collateral Agent. The Debtor acknowledges that any payments on account of Collateral received by it from Account Debtors after notification of this Security lnterest to Account Debtors shall be held by the Debtor separate from all other property of the Debtor in trust for, and shall be promptly paid over to, the Collateral Agent, in form received with all necessary endorsements or transfers.

8.    DISPOSITION OF MONIES

        Subject to any applicable requirements of the PPSA, upon and during the continuance of an Event of Default, all monies collected or received by the Collateral Agent pursuant to or in exercise of any right it possesses with respect to the Collateral shall be applied on account of the Obligations in such manner as the Collateral Agent deems best or, at the option of the Collateral Agent, released to the Debtor, all without prejudice to the liability of the Debtor or the rights of the Collateral Agent hereunder, and any surplus shall be accounted for as required by law.

9.    REMEDIES

        Upon and during the continuance of any Event of Default, the Collateral Agent shall have the following rights and remedies:

        (a)   The Collateral Agent may appoint or reappoint, by instrument in writing, any person or persons, whether an officer or officers or an employee or employees of the Collateral Agent or not, to be a receiver or receivers (hereinafter called a "Receiver", which term when used herein shall include a receiver and manager) of the Collateral and may remove any Receiver so appointed and appoint another in his stead. Any such Receiver, shall, so far as concerns responsibility for his acts, be deemed the agent of the Debtor and not the Collateral Agent, and except for gross negligence, willful misconduct and criminal acts and omissions, the Collateral Agent shall not be in any way responsible for any misconduct, negligence, or nonfeasance on the part of any such Receiver, his servants, agents or employees. Subject to the provisions of the instrument appointing him, any such Receiver shall have power to take possession of the Collateral, to preserve the Collateral or its value, to carry on or concur in carrying on all or any part of the business of the Debtor and to sell, lease or otherwise dispose of or concur in selling, leasing or othewise disposing of the Collateral. To facilitate the foregoing powers, any such Receiver may, to the exclusion of all others, including the Debtor, enter upon, use and occupy all premises owned or occupied by the Debtor wherein the Collateral may be situate, maintain the Collateral upon such premises, borrow money on a secured or unsecured basis and use the Collateral directly in carrying on the Debtor's business or as security for loans or advances to enable him to carry on the Debtor's business or otherwise, as such Receiver shall, in his discretion, determine. Except as may be otherwise directed by the Collateral Agent, all monies received from time to time by such Receiver in carrying out his appointment shall be received in trust for and paid over to the Collateral Agent. Every such Receiver may, in the discretion of the Collateral Agent, be vested with all or any of the rights and powers of the Collateral Agent.

        (b)   The Collateral Agent may, either directly or through its agents or nominees, exercise any or all of the powers and rights given to a Receiver by virtue of the foregoing sub-clause (a).

        (c)   The Collateral Agent may take possession of, collect, demand, sue on, enforce, recover and receive the Collateral and give valid and binding receipts and discharges therefor and in respect thereof,

3

may sell, lease or otherwise dispose of the Collateral in such manner, at such time or times and place or places, for such consideration and upon such terms and conditions as to the Collateral Agent may seem reasonable.

        (d)   In addition to those rights granted herein and in any other agreement now or hereafter in effect between the Debtor and the Collateral Agent and in addition to any other rights the Collateral Agent may have at law or in equity, the Collateral Agent shall have, both before and after default, all rights and remedies of a secured party under the PPSA and The Personal Property Security Act, 1993 (Saskatchewan) (the "Saskatchewan PPSA"), provided always that the Collateral Agent shall not be liable or accountable for any failure to exercise its remedies, take possession of, collect, enforce, realize, sell, lease or otherwise dispose of the Collateral or to institute any proceedings for such purposes. Furthermore, the Collateral Agent shall have no obligation to jake any steps to preserve rights against prior parties to any Instrument or Chattel Paper, whether or not in the Collateral Agent's possession and shall not be liable or accountable for failure to do so.

        (e)   The Debtor acknowledges that the Collateral Agent or any Receiver appointed by it may take possession of the Collateral and all books and records pertaining thereto wherever it may be located and by any method permitted by law and the Debtor agrees upon request from the Collateral Agent or any such Receiver to assemble and deliver possession of the Collateral and all records pertaining thereto at such place or places as directed.

        (f)    The Debtor agrees to pay all costs, charges and expenses reasonably incurred by the Collateral Agent or any Receiver appointed by it, whether directly or for services rendered (including reasonable solicitors and auditors costs and other legal expenses and Receiver remuneration), in operating the Debtor's accounts, in preparing or enforcing this Security Agreement, taking custody of, preserving, repairing, processing, preparing for disposition and disposing of the Collateral and in enforcing or collecting the Obligations and all such costs, charges and expenses together with any monies owing as a result of any borrowing by the Collateral Agent or any Receiver appointed by it, as permitted hereby, shall be a first charge on the proceeds of realization, collection or disposition of the Collateral and shall be secured hereby.

        (g)   The Collateral Agent will give the Debtor such notice of the date, time and place of any public sale or of the date after which any private disposition of the Collateral is to be made, as may be required by the PPSA or the Saskatchewan PPSA, as applicable.

10.    MISCELLANEOUS

        (a)   The Debtor hereby agrees to file such financing statements and other documents and do such acts, matters and things (including completing and adding schedules hereto identifying the Collateral or any Permitted Liens affecting the Collateral or identifying the locations at which the Debtor's business is carried on and the Collateral records relating thereto are situate) as the Collateral Agent may deem appropriate to perfect and continue the Security Interest, to protect and preserve the Collateral and to realize upon the Security Interest and the Debtor hereby irrevocably constitutes and appoints the Collateral Agent, at any time that an Event of Default shall have occurred and be continuing, its true and lawful attorney, with full power of substitution, to do any of the foregoing in the name of the Debtor whenever and wherever it may be deemed necessary or expedient.

        (b)   In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Trust Indenture, the provisions of the Trust Indenture shall govern and prevail.

        (c)   Upon the Debtor's failure to perform any of its duties hereunder, the Collateral Agent may, but shall not be obligated, to, perform any or all of such duties, and the Debtor shall pay to the Collateral Agent, forthwith upon written demand therefor, an amount equal to the reasonable expenses incurred by the Collateral Agent in so doing plus interest thereon from the date such expense is incurred until it is paid at the annual rate of interest payable under the Notes.

4

        (d)   The Collateral Agent may grant extensions of time and other indulgences, take and give up security, accept compositions, compound, compromise, settle, grant releases and discharges and otherwise deal with the Debtor, debtors of the Debtor, sureties and others and with the Collateral and other security as the Collateral Agent may see fit without prejudice to the liability of the Debtor or the Collateral Agent's right to hold and realize the Security Interest. Furthermore, at any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may demand, collect and sue on the Collateral in either the Debtor's or the Collateral Agent's name, at the Collateral Agent's option, and may endorse the Debtor's name on any and all cheques, commercial paper, and any other Instruments constituting the Collateral.

        (e)   No delay or omission by the Collateral Agent in exercising any right or remedy hereunder or with respect to any Obligations shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. Furthermore, the Collateral Agent may remedy any default by the Debtor hereunder or with respect to any Obligations in any reasonable manner without waiving the default remedied and without waiving any other prior or subsequent default by the Debtor. All rights and remedies of the Collateral Agent granted or recognized herein are cumulative and may be exercised at any time and from time to time independently or in combination.

        (f)    The Debtor waives protest of any Instrument constituting the Collateral at any time held by the Collateral Agent on which the Debtor is in any way liable and, subject to Clause 9(g) hereof, notice of any other action taken by the Collateral Agent.

        (g)   The Debtor hereby irrevocably constitutes and appoints the Collateral Agent and each of its officers holding office from time to time as the true and lawful attorney of the Debtor at any time after an Event of Default shall have occurred and be continuing with power of substitution in the name of the Debtor to do any and all such acts and things or execute and deliver all such agreements, documents and instruments as the Collateral Agent reasonably considers necessary or desirable to carry out the provisions and purposes of this Agreement or to exercise any of its rights and remedies hereunder and tq perfect the Security lnterest created hereunder, and to do all acts or things necessary to realize or collect the Collateral, and the Debtor hereby ratifies and agrees to ratify all acts of any such attorney taken or done in accordance with this Section 10(g). Without in any way limiting the generality of the foregoing, the Collateral Agent shall have the right to execute, for and in the name of the Debtor, all financing statements, financing change statements, conveyances, transfers, assignments, consents and other instruments as may be required for such purposes. This power of attorney shall not be revoked or terminated by any act or thing other than the termination of this Agreement.

        (h)   This Security Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. In any action brought by an assignee of this Security Agreement and the Security Interest or any part thereof to enforce any rights hereunder, the Debtor shall not assert against the assignee any claim or defence which the Debtor now has or hereafter may have against the Collateral Agent unless it arises under or in respect of any Credit Documents.

        (i)    Save for any schedules which may be added hereto pursuant to the provisions hereof, no modification, variation or amendment of any provision of this Security Agreement shall be made except by a written agreement, executed by the parties hereto and no waiver of any provision hereof shall be effective unless in writing.

        (j)    Whenever either party hereto is required or entitled to notify or direct the other or to make a demand or request upon the other, such notice, direction, demand or request shall be in writing and shall be sufficiently given only if delivered to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto or if sent by prepaid registered mail addressed to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto. Either party may notify the other pursuant hereto of any change in such party's principal address to be used for the purposes hereof.

5

If to the Debtor:

Hudson Bay Mining and Smelting Co., Limited
201 Portage Avenue Suite 2200
Winnipeg, Manitoba R3B 3L3

If to the Collateral Agent:

4 King Street West, Suite 1101
Toronto, Ontario M5H 1B6

        (k)   This Security Agreement and the security afforded hereby is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent and is, and is intended to be a continuing Security Agreement and shall remain in full force and effect until all Obligations contracted for, and any extensions or renewals thereof together with interest accruing thereon shall be paid in full.

        (l)    The headings used in this Security Agreement are for convenience only and are not to be considered a part of this Security Agreement and do not in any way limit or amplify the terms and provisions of this Security Agreement.

        (m)  When the context so requires, the singular number shall be read as if the plural were expressed and the provisions hereof shall be read with all grammatical changes necessary dependant upon the person referred to being a male, female, firm or corporation.

        (n)   In the event any provision of this Security Agreement, as amended from time to time, shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this Security Agreement shall remain in full force and effect.

        (o)   Nothing herein contained shall in any way obligate the Collateral Agent to grant, continue, renew, extend time for payment of or accept anything which constitutes or would constitute the Obligations.

        (p)   The Security Interest created hereby is intended to attach when this Security Agreement is signed by the Debtor and delivered to the Collateral Agent.

        (q)   This Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the Province of Manitoba as the same may from time to time be in effect, including, where applicable, the PPSA.

        (r)   The Limitation of Civil Rights Act (Saskatchewan) shall have no application to this Security Agreement or any agreement renewing, extending or collateral to this Security Agreement.

        (s)   The Debtor will do or cause to be done all acts and things which may be required, or which the Trustee from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the Trustee and the Holders, duly created, enforceable and perfected Liens ppon the Collateral.

11.    COPY OF AGREEMENT

        The Debtor hereby acknowledges receipt of a copy of this Security Agreement. The Debtor further waives its right under the PPSA and the Saskatchewan PPSA to obtain a copy of the financing statement (including any financing change statement, renewal or discharge) registered concerning this Security Agreement and a copy of the verification statement issued to confirm such registration.

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IN WITNESS WHEREOF the Debtor has executed this Security Agreement as of the date first above written.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/    H. Douglas Scharf
Per:

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Exhibit 99.6
SECURITY AGREEMENT

EX-99.7

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Exhibit 99.7

DEBENTURE DELIVERY AGREEMENT (MANITOBA)

        Agreement made as of December 21, 2004 by HUDSON BAY MINING AND SMELTING CO., LIMITED, with and in favour of BNY TRUST COMPANY OF CANADA in its capacity as collateral agent for the benefit of BNY (as hereinafter defined) and note holders under the Trust Indenture (as hereinafter defined).

        For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer hereby agrees with and in favour of the Holder as follows:

ARTICLE 1

INTERPRETATION

        1.01    Definitons.    In this agreement:

(a)

"BNY" means The Bank of New York, in its capacity as trustee under the Trust Indenture and its successors in such capacity;



(b)

"Debentures" means the demand debentures made by the Issuer in favour of the Holder each in the principal amount of $300,000,000.00 USD and more particularly described in Schedule "A" hereto, as such debentures may from time to time be amended, supplemented, restated or otherwise modified and "Debenture" means any one of them;



(c)

"Event of Default" means an Event of Default as such term is defined in the Trust Indenture;



(d)

"Holder" means BNY Trust Company of Canada, in its capacity as collateral agent for the benefit of BNY and note holders under the Trust Indenture and its successors in such capacity;



(e)

"Issuery" means Hudson Bay Mining and Smelting Co., Limited, together with its successors and permitted assigns;



(f)

"Obligations" means, prior to the amalgamation of Hudson Bay Mining and Smelting Co., Limited, HudBay Mining and Smelting Inc. and 152640 Canada Inc., the obligations of Hudson Bay Mining and Smelting Co., Limited under its guarantees of the obligations of HudBay Mining and Smelting Inc. under the Trust Indenture and all documents delivered in connection with such guarantees and, following such amalgamation, all obligations of the Issuer under the Trust Indenture and all documents delivered in connection therewith,



(g)

"Person" means an individual, firm, body corporate or other legal entity;



(h)

"Trust Indenture" means the Trust Indenture between HudBay Mining and Smelting Inc., the Issuer, Hudson Bay Exploration and Development Company Limited, 152640 Canada Inc. and BNY dated December 21, 2004, as such Trust Indenture may from time to time be amended, supplemented, restated or otherwise modified.

        1.02    Division and Headings.    The division of this agreement into articles and sections and the insertion of headings are for convenience only and shall not affect the interpretation of this agreement.

ARTICLE 2

TERMS OF DELIVERY

        2.01    Delivery.    The Debentures are hereby delivered to the Holder to be held by it in accordance with the terms of this agreement as general and continuing collateral security for the payment and performance of the Obligations. The aggregate amount claimed by the Holders of the Debentures pursuant thereto (whether for principal or interest or both) shall not exceed the amount of the Obligations.

        2.02    Remedies.    The security constituted by the Debentures shall become enforceable upon an Event of Default. If the security constituted by the Debentures shall become enforceable then the Holder or its nominee shall be entitled to realize upon the security of the Debentures and to otherwise exercise and enforce all the rights and remedies of the Holder under the terms of the Debentures free from any control of the Issuer, provided, however, that the Holder shall not be bound to deal with the Debentures in any way or to exercise any

rights or remedies in respect thereof and shall not be liable for any loss which may be occasioned by any failure to do so. If the proceeds of realization fiom the Debentures are insufficient to repay the Obligations in full, the Issuer shall pay the deficiency to the Holder, upon demand.

        2.03    Dealings by Holder.    The Holder may grant extensions of time and other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Issuer and all other parties and securities as the Holder may see fit, all without prejudice to the Obligations or to the rights of the Holder in respect of the Debentures or under this agreement.

        2.04    Additional Security.    The Debentures and this agreement are in addition to and not in substitution for any other security now or hereafter held by the Holder and shall not operate as a merger of any simple contract debt or suspend the fulfillment of, or affect the rights, remedies or powers of the Holder in respect of any Obligations or any securities now or hereafter held by the Holder for the payment or fulfillment thereof.

        2.05    Discharge.    Upon payment and performance in full of all of the Obligations, this agreement and the liens created hereby and by the Debentures shall be discharged and terminated and the Holder shall deliver up the Debentures to the Issuer and shall execute and deliver to the Issuer all such discharges, financing change statements, deeds and other instruments as the Issuer may reasonably require to discharge and terminate the liens created hereby and by the Debentures.

ARTICLE 3

GENERAL

        3.01    Severability.    In the event that any provisions of this agreement shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this agreement shall remain in full force and effect.

        3.02    Successors, Assigns and Governing Law.    This agreement shall enure to the benefit of and be binding upon the respective successors and assigns of the Issuer and the Holder and shall be governed by the laws of Manitoba.

HUDSON BAY MINING AND SMELTING CO., LIMITED
By	/s/ Brian D. Gordon	c/s
	Authorized Signing Officer

SCHEDULE "A"

1.

$300,000,000 USD Demand Debenture (Material Properties — Manitoba), dated December 10, 2004.

2.

$300,000,000 USD Demand Debenture (Immaterial Properties — Manitoba), dated December 17, 2004.

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Exhibit 99.7
DEBENTURE DELIVERY AGREEMENT (MANITOBA)
ARTICLE 1 INTERPRETATION
ARTICLE 2 TERMS OF DELIVERY
ARTICLE 3 GENERAL
SCHEDULE "A"

EX-99.8

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Exhibit 99.8

DEBENTURE DELIVERY AGREEMENT (SASKATCHEWAN)

        Agreement made as of December 21, 2004 by HUDSON BAY MINING AND SMELTING CO., LIMITED, with and in favour of BNY TRUST COMPANY OF CANADA in its capacity as collateral agent for the benefit of BNY (as hereinafter defined) and note holders under the Trust Indenture (as hereinafter defined).

        For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer hereby agrees with and in favour of the Holder as follows:

ARTICLE 1

INTERPRETATION

        1.01    Defmitions.    In this agreement:

(a)

"BNY" means The Bank of New York, in its capacity as trustee under the Trust Indenture and its successors in such capacity;



(b)

"Debentures" means the demand debentures made by the Issuer in favour of the Holder each in the principal amount of $300,000,000.00 USD and more particularly described in Schedule "A" hereto, as such debentures may from time to time be amended, supplemented, restated or otherwise modified and "Debenture" means any one of them;



(c)

"Event of Default" means an Event of Default as such term is defined in the Trust Indenture;



(d)

"Holder" means BNY Trust Company of Canada, in its capacity as collateral agent for the benefit of BNY and note holders under the Trust Indenture and its successors in such capacity;



(e)

"Issuer" means Hudson Bay Mining and Smelting Co., Limited, together with its successors and permitted assigns;



(f)

"Obligations" means, prior to the amalgamation of Hudson Bay Mining and Smelting Co., Limited, HudBay Mining and Smelting Inc. and 152640 Canada Inc., the obligations of Hudson Bay Mining and Smelting Co., Limited under its guarantees of the obligations of HudBay Mining and Smelting Inc. under the Trust Indenture and all documents delivered in connection with such guarantees and, following such amalgamation, all obligations of the Issuer under the Trust Indenture and all documents delivered in connection therewith;



(g)

"Person" means an individual, firm, body corporate or other legal entity;



(h)

"Trust Indenture" means the Trust Indenture between HudBay Mining and Smelting Inc., the Issuer, Hudson Bay Exploration and Development Company Limited, 152640 Canada Inc. and BNY dated December 21, 2004, as such Trust Indenture may from time to time be amended, supplemented, restated or otherwise modified.

        1.02    Division and Headings.    The division of this agreement into articles and sections and the insertion of headings are for convenience only and shall not affect the interpretation of this agreement.

ARTICLE 2

TERMS OF DELIVERY

        2.01    Delivery.    The Debentures are hereby delivered to the Holder to be held by it in accordance with the terms of this agreement as general and continuing collateral security for the payment and performance of the Obligations. The aggregate amount claimed by the Holders of the Debentures pursuant thereto (whether for principal or interest or both) shall not exceed the amount of the Obligations.

        2.02    Remedies.    The security constituted by the Debentures shall become enforceable upon an Event of Default. If the security constituted by the Debentures shall become enforceable then the Holder or its nominee shall be entitled to realize upon the security of the Debentures and to otherwise exercise and enforce all the rights and remedies of the Holder under the terms of the Debentures free from any control of the Issuer, provided, however, that the Holder shall not be bound to deal with the Debentures in any way or to exercise any

rights or remedies in respect thereof and shall not be liable for any loss which may be occasioned by any failure to do so. If the proceeds of realization from the Debentures are insufficient to repay the Obligations in full, the Issuer shall pay the deficiency to the Holder, upon demand.

        2.03    Dealings by Holder.    The Holder may grant extensions of time and other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Issuer and all other parties and securities as the Holder may see fit, all without prejudice to the Obligations or to the rights of the Holder in respect of the Debentures or under this agreement.

        2.04    Additional Security.    The Debentures and this agreement are in addition to and not in substitution for any other security now or hereafter held by the Holder and shall not operate as a merger of any simple contract debt or suspend the fulfillment of, or affect the rights, remedies or powers of the Holder in respect of any Obligations or any securities now or hereafter held by the Holder for the payment or fulfillment thereof.

        2.05    Discharge.    Upon payment and performance in full of all of the Obligations, this agreement and the liens created hereby and by the Debentures shall be discharged and terminated and the Holder shall deliver up the Debentures to the Issuer and shall execute and deliver to the Issuer all such discharges, financing change statements, deeds and other instruments as the Issuer may reasonably require to discharge and terminate the liens created hereby and by the Debentures.

ARTICLE 3

GENERAL

        3.01    Severability.    In the event that any provisions of this agreement shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this agreement shall remain in full force and effect.

        3.02    Successors, Assigns and Governing Law.    This agreement shall enure to the benefit of and be binding upon the respective successors and assigns of the Issuer and the Holder and shall be governed by the laws of Saskatchewan.

HUDSON BAY MINING AND SMELTING CO., LIMITED
By	/s/ Brian D. Gordon	c/s
	Authorized Signing Officer

SCHEDULE "A"

1.

$300,000,000 USD Demand Debenture (Material Properties — Saskatchewan), dated December 10, 2004.

2.

$300,000,000 USD Demand Debenture (Immaterial Properties — Saskatchewan), dated December 10, 2004.

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Exhibit 99.8
DEBENTURE DELIVERY AGREEMENT (SASKATCHEWAN)
ARTICLE 1 INTERPRETATION
ARTICLE 2 TERMS OF DELIVERY
ARTICLE 3 GENERAL
SCHEDULE "A"

EX-99.9

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Exhibit 99.9

SECURITY AGREEMENT

DATE: December 21, 2004

1.     DEFINITIONS

        (a)   "Collateral" has the meaning set forth in Section 2(a) hereof;

        (b)   "Debtor" means Hudson Bay Exploration and Development Company Limited together with its successors and permitted assigns;

        (c)   "Event of Default" has the meaning attributed to such term in the Trust Indenture;

        (d)   "Inventory" means all inventory comprising minerals and mineral bearing substances after they have been extracted, recovered or removed from a deposit and all work in progress and finished mineral products therefrom;

        (e)   "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, and any option or other agreement to sell or give a security interest in such asset;

        (f)    "Obligations" means all of the obligations, liabilities and indebtedness of the Debtor to the Holders, the Trustee and the Collateral Agent from time to time, whether present or future, absolute or contingent, liquidated or unliquidated, of whatsoever nature or kind, in any currency or otherwise, under or in respect of the Debtor's Guarantee and all documents delivered in connection with such Guarantee;

        (g)   "Permitted Liens" shall have the meaning set forth in the Trust Indenture;

        (h)   "Receivables" means all debts, claims, demands and choses in action (including all book debts and accounts) of the Debtor due from any sale or other disposition of any Inventory and all books and records pertaining thereto, together with the benefit of all judgments and all securities for such debts, claims, demands and choses in action and all other rights and benefits in respect thereto to which the Debtor is now or may hereafter become entitled;

        (i)    "Trust Indenture" means the trust indenture between the Debtor, The Bank of New York and the Guarantors (as defined therein) dated the date hereof, as may be supplemented, amended or restated from time to time.

2.     SECURITY INTEREST

        (a)   For value received the Debtor hereby grants to BNY Trust Company of Canada in its capacity as collateral agent for the benefit of the Trustee and the Holders under the Trust Indenture together with its successors in such capacity (hereinafter referred to as the "Collateral Agent"), by way of mortgage, charge, assignment and transfer, a security interest (the "Security Interest") in

(i)

all Inventory of the Debtor whether now owned or hereafter acquired and all insurance policies in respect thereof and all proceeds in respect of such policies; and



(ii)

all Receivables of the Debtor whether now owned or hereafter acquired

All of the foregoing being hereinafter collectively called the "Collateral". Notwithstanding the foregoing, the Collateral shall not include any Excluded Assets and the Security lnterest shall not extend, by operation of law or otherwise, to any Proceeds of Collateral (other than, for certainty, proceeds from the insurance policies referred to in Section 2(a)(i) above) that are not Collateral.

        (b)   Unless otherwise limited herein, the terms, "Chattel Paper", "Documents of Title", "Instruments", "Proceeds" whenever used herein shall be interpreted pursuant to their respective meanings when used in The Personal Property Security Act (Manitoba), as amended from time to time, which Act, including amendments thereto and any Act substituted therefor and amendments thereto is herein referred

to as the "PPSA". Any reference herein to "Collateral" shall, unless the context otherwise requires, be deemed a reference to "Collateral or any part thereof".

        (c)   Capitalized terms used but not otherwise defined herein shall have the meanings given to them under the Trust lndenture.

3.     OBLIGATIONS SECURED

        The Security lnterest secures payment and satisfaction of any and all Obligations of the Debtor. If the Security lnterest in the Collateral is not sufficient in the Event of Default to satisfy all Obligations of the Debtor, the Debtor acknowledges and agrees that it shall continue to be liable for any Obligations remaining outstanding and the Collateral Agent shall be entitled to pursue full payment thereof.

4.     REPRESENTATIONS AND WARRANTIES OF THE DEBTOR

        (a)   All representations and warranties of the Debtor contained in the Trust lndenture shall be incorporated herein.

        (b)   The Debtor does not have or use a French form of name or a combined English or French form of name other than "La Compagnie d'Exploration et de Développement de la Baie d'Hudson Limitée".

        (c)   The address of the Debtor's chief executive office is 201 Portage Avenue, Suite 2200, Winnipeg, Manitoba, R3B 3L3.

        (d)   The Debtor does not own any tangible assets comprising the Collateral.

5.     COVENANTS OF THE DEBTOR

        (a)   All covenants of the Debtor contained in the Trust lndenture shall be incorporated herein.

        (b)   So long as this Security Agreement remains in effect the Debtor covenants and agrees:

(i)

to deliver to the Collateral Agent from time to time promptly upon request:



A.

any Documents of Title, Instruments, Securities and Chattel Paper constituting, representing or relating to the Collateral;



B.

all books of account and all records, ledgers, reports, correspondence, schedules, documents, statements, lists and other writings relating to the Collateral for the purpose of inspecting, auditing or copying the same;



C.

all policies and certificates of insurance relating to the Collateral; and



D.

such information concerning the Collateral, the Debtor and the Debtor's business and affairs as Collateral Agent may reasonably request.

        (c)   The Debtor shall notify the Collateral Agent promptly of any change in the information contained in this Agreement.

        (d)   The Debtor shall not change its name without giving prior written notice to the Collateral Agent of the new name and the date upon which such change of name is to take effect.

6.     USE AND VERIFICATION OF COLLATERAL

        The Debtor may, provided no Event of Default has occurred and is continuing, possess, collect, use and enjoy and deal with the Collateral in the ordinary course of the Debtor's business in any manner not inconsistent with the provisions hereof, or the Trust Indenture; provided always that the Collateral Agent shall have the right at any time and from time to time upon reasonable notice and during normal business hours to verify the existence and state of the Collateral in any manner the Collateral Agent may consider appropriate and the Debtor agrees to furnish all assistance and information and to perform all such acts as the Collateral Agent may reasonably request in connection therewith and for such purpose to grant to the Collateral Agent or its agents access to all places where the Collateral may be located and to all premises occupied by the Debtor.

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7.     COLLECTION OF DEBTS

        At any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may notify all or any person (an "Account Debtor") obligated to pay any Collateral of the Security Interest and may also direct such Account Debtors to make all payments on the Collateral to the Collateral Agent. The Debtor acknowledges that any payments on account of Collateral received by it from Account Debtors after notification of this Security Interest to Account Debtors shall be held by the Debtor separate from all other property of the Debtor in trust for, and shall be promptly paid over tol, the Collateral Agent, in form received with all necessary endorsements or transfers.

8.     DISPOSITION OF MONIES

        Subject to any applicable requirements of the PPSA, upon and during the continuance of an Event of Default, all monies collected or received by the Collateral Agent pursuant to or in exercise of any right it possesses with respect to the Collateral shall be applied on account of the Obligations in such manner as the Collateral Agent deems best or, at the option of the Collateral Agent, released to the Debtor, all without prejudice to the liability of the Debtor or the rights of the Collateral Agent hereunder, and any surplus shall be accounted for as required by law.

9.     REMEDIES

        Upon and during the continuance of any Event of Default, the Collateral Agent shall have the following rights and remedies:

        (a)   The Collateral Agent may appoint or reappoint, by instrument in writing, any person or persons, whether an officer or officers or an employee or employees of the Collateral Agent or not, to be a receiver or receivers (hereinafter called a "Receiver", which term when used herein shall include a receiver and manager) of the Collateral and may remove any Receiver so appointed and appoint another in his stead. Any such Receiver, shall, so far as concerns responsibility for his acts, be deemed the agent of the Debtor and not the Collateral Agent, and except for gross negligence, willful misconduct and criminal acts and omissions, the Collateral Agent shall not be in any way responsible for any misconduct, negligence, or nonfeasance on the part of any such Receiver, his servants, agents or employees. Subject to the provisions of the instrument appointing him, any such Receiver shall have power to take possession of the Collateral, to preserve the Collateral or its value, to carry on or concur in carrying on all or any part of the business of the Debtor and to sell, lease or otherwise dispose of or concur in selling, leasing or otherwise disposing of the Collateral. To facilitate the foregoing powers, any such Receiver may, to the exclusion of all others, including the Debtor, enter upon, use and occupy all premises owned or occupied by the Debtor wherein the Collateral may be situate, maintain the Collateral upon such premises, borrow money on a secured or unsecured basis and use the Collateral directly in carrying on the Debtor's business or as security for loans or advances to enable him to carry on the Debtor's business or otherwise, as such Receiver shall, in his discretion, determine. Except as may be otherwise directed by the Collateral Agent, all monies received from time to time by such Receiver in carrying out his appointment shall be received in trust for and paid over to the Collateral Agent. Every such Receiver may, in the discretion of the Collateral Agent, be vested with all or any of the rights and powers of the Collateral Agent.

        (b)   The Collateral Agent may, either directly or through its agents or nominees, exercise any or all of the powers and rights given to a Receiver by virtue of the foregoing sub-clause (a).

        (c)   The Collateral Agent may take possession of, collect, demand, sue on, enforce, recover and receive the Collateral and give valid and binding receipts and discharges therefor and in respect thereof, may sell, lease or otherwise dispose of the Collateral in such manner, at such time or times and place or places, for such consideration and upon such terms and conditions as to the Collateral Agent may seem reasonable.

        (d)   In addition to those rights granted herein and in any other agreement now or hereafter in effect between the Debtor and the Collateral Agent and in addition to any other rights the Collateral Agent may have at law or in equity, the Collateral Agent shall have, both before and after default, all rights and

3

remedies of a secured party under the PPSA and The Personal Property Security Act, 1993 (Saskatchewan) (the "Saskatchewan PPSA"), provided always that the Collateral Agent shall not be liable or accountable for any failure to exercise its remedies, take possession of, collect, enforce, realize, sell, lease or otherwise dispose of the Collateral or to institute any proceedings for such purposes. Furthermore, the Collateral Agent shall have no obligation to take any steps to preserve rights against prior parties to any Instrument or Chattel Paper, whether or not in the Collateral Agent's possession and shall not be liable or accountable for failure to do so.

        (e)   The Debtor acknowledges that the Collateral Agent or any keceiver appointed by it may take possession of the Collateral and all books and records pertaining thereto wherever it may be located and by any method permitted by law and the Debtor agrees upon request from the Collateral Agent or any such Receiver to assemble and deliver possession of the Collateral and all books and records pertaining thereto at such place or places as directed.

        (f)    The Debtor agrees to pay all costs, charges and expenses reasonably incurred by the Collateral Agent or any Receiver appoqnted by it, whether directly or for services rendered (including reasonable solicitors and auditors costs and other legal expenses and Receiver remuneration), in operating the Debtor's accounts, in preparing or enforcing this Security Agreement, taking custody of, preserving, repairing, processing, preparing for disposition and disposing of the Collateral and in enforcing or collecting the Obligations and all such costs, charges and expenses together with any monies owing as a result of any borrowing by the Collateral Agent or any Receiver appointed by it, as permitted hereby, shall be a first charge on the proceeds of realization, collection or disposition of the Collateral and shall be secured hereby.

        (g)   The Collateral Agent will give the Debtor such notice of the date, time and place of any public sale or of the date after which any private disposition of the Collateral is to be made, as may be required by the PPSA or the Saskatchewan PPSA, as applicable.

10.   MISCELLANEOUS

        (a)   The Debtor hereby agrees to file such financing statements and other documents and do such acts, matters and things (including completing and adding schedules hereto identifying the Collateral or any Permitted Liens affecting the Collateral or identifying the locations at which the Debtor's business is carried on and the Collateral records relating thereto are situate) as the Collateral Agent may deem appropriate to perfect and continue the Security Interest, to protect and preserve the Collateral and to realize upon the Security Interest and the Debtor hereby irrevocably constitutes and appoints the Collateral Agent, at any time that an Event of Default shall have occurred and be continuing, its true and lawful attorney, with full power of substitution, to do any of the foregoing in the name of the Debtor whenever and wherever it may be deemed necessary or expedient.

        (b)   In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Trust Indenture, the provisions of the Trust Indenture shall govern and prevail.

        (c)   Upon the Debtor's failure to perform any of its duties hereunder, the Collateral Agent may, but shall not be obligated, to, perform any or all of such duties, and the Debtor shall pay to the Collateral Agent, forthwith upon written demand therefor, an amount equal to the reasonable expenses incurred by the Collateral Agent in so doing plus interest thereon from the date such expense is incurred until it is paid at the annual rate of interest payable under the Notes.

        (d)   The Collateral Agent may grant extensions of time and other indulgences, take and give up security, accept compositions, compound, compromise, settle, grant releases and discharges and otherwise deal with the Debtor, debtors of the Debtor, sureties and others and with the Collateral and other security as the Collateral Agent may see fit without prejudice to the liability of the Debtor or the Collateral Agent's right to hold and realize the Security Interest. Furthermore, at any time that an Event of Default shall have occurred and be continuing, the Collateral Agent may demand, collect and sue on the Collateral in either the Debtor's or the Collateral Agent's name, at the Collateral Agent's option, and may endorse the

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Debtor's name on any and all cheques, commercial paper, and any other Instruments constituting the Collateral.

        (e)   No delay or omission by the Collateral Agent in exercising any right or remedy hereunder or with respect to any Obligations shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. Furthermore, the Collateral Agent may remedy any default by the Debtor hereunder or with respect to any Obligations in any reasonable manner without waiving the default remedied and without waiving any other prior or subsequent default by the Debtor. All rights and remedies of the Collateral Agent granted or recognized herein are cumulative and may be exercised at any time and from time to time independently or in combination.

        (f)    The Debtor waives protest of any Instrument constituting the Collateral at any time held by the Collateral Agent on which the Debtor is in any way liable and, subject to Clause 9(g) hereof, notice of any other action taken by the Collateral Agent.

        (g)   The Debtor hereby irrevocably constitutes and appoints the Collateral Agent and each of its officers holding office from time to time as the true and lawful attorney of the Debtor at any time after an Event of Default shall have occurred and be continuing with power of substitution in the name of the Debtor to do any and all such acts and things or execute and deliver all such agreements, documents and instruments as the Collateral Agent reasonably considers necessary or desirable to carry out the provisions and purposes of this Agreement or to exercise any of its rights and remedies hereunder and to perfect the Security Interest created hereunder, and to do all acts or things necessary to realize or collect the Collateral, and the Debtor hereby ratifies and agrees to ratify all acts of any such attorney taken or done in accordance with this Section 10(g). Without in any way limiting the generality of the foregoing, the Collateral Agent shall have the right to execute, for and in the name of the Debtor, all financing statements, financing change statements, conveyances, transfers, assignments, consents and other instruments as may be required for such purposes. This power of attorney shall not be revoked or terminated by any act or thing other than the termination of this Agreement.

        (h)   This Security Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. In any action brought by an assignee of this Security Agreement and the Security Interest or any part thereof to enforce any rights hereunder, the Debtor shall not assert against the assignee any claim or defence which the Debtor now has or hereafter may have against the Collateral Agent unless it arises under or in respect of any Credit Documents.

        (i)    Save for any schedules which may be added hereto pursuant to the provisions hereof, no modification, variation or amendment of any provision of this Security Agreement shall be made except by a written agreement, executed by the parties hereto and no waiver of any provision hereof shall be effective unless in writing.

        (j)    Whenever either party hereto is required or entitled to notify or direct the other or to make a demand or request upon the other, such notice, direction, demand or request shall be in writing and shall be sufficiently given only if delivered to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto or if sent by prepaid registered mail addressed to the party for whom it is intended at the principal address of such party set forth below or as changed pursuant hereto. Either party may notify the other pursuant hereto of any change in such party's principal address to be used for the purposes hereof.

If to the Debtor:

Hudson Bay Exploration and Development Company Limited.
201 Portage Avenue
Suite 2200
Winnipeg, Manitoba R3B 3L3

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If to the Collateral Agent:

4 King Street West, Suite 1101
Toronto, Ontario M5H 1B6

        (k)   This Security Agreement and the security afforded hereby is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent and is, and is intended to be a continuing Security Agreement and shall remain in full force and effect until all Obligations contracted for, and any extensions or renewals thereof together with interest accruing thereon shall be paid in full.

        (l)    The headings used in this Security Agreement are for convenience only and are not to be considered a part of this Security Agreement and do not in any way limit or amplify the terms and provisions of this Security Agreement.

        (m)  When the context so requires, the singular number shall be read as if the plural were expressed and the provisions hereof shall be read with all grammatical changes necessary dependant upon the person referred to being a male, female, firm or corporation.

        (n)   In the event any provision of this Security Agreement, as amended from time to time, shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this Security Agreement shall remain in full force and effect.

        (o)   Nothing herein contained shall in any way obligate the Collateral Agent to grant, continue, renew, extend time for payment of or accept anything which constitutes or would constitute the Obligations.

        (p)   The Security Interest created hereby is intended to attach when this Security Agreement is signed by the Debtor and delivered to the Collateral Agent.

        (q)   This Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the Province of Manitoba as the same may from time to time be in effect, including, where applicable, the PPSA.

        (r)   The Limitation of Civil Rights Act (Saskatchewan) shall have no application to this Security Agreement or any agreement renewing, extending or collateral to this Security Agreement.

        (s)   The Debtor will do or cause to be done all acts and things which may be required, or which the Trustee from time to time may reasonably request, to assure and confirm that the Collateral Agent holds, for the benefit of the Trustee and the Holders, duly created, enforceable and perfected Liens upon the Collateral.

11.   COPY OF AGREEMENT

        The Debtor hereby acknowledges receipt of a copy of this Security Agreement. The Debtor further waives its right under the PPSA and the Saskatchewan PPSA to obtain a copy of the financing statement (including any financing change statement, renewal or discharge) registered concerning this Security Agreement and a copy of the verification statement issued to confirm such registration.

IN WITNESS WHEREOF the Debtor has executed this Security Agreement as of the date first above written.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/ H. Douglas Scharf
Per:

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Exhibit 99.9
SECURITY AGREEMENT

EX-99.10

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Exhibit 99.10

DEBENTURE DELIVERY AGREEMENT (MANITOBA)

        Agreement made as of December 21, 2004 by HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED with and in favour of BNY TRUST COMPANY OF CANADA in its capacity as collateral agent for the benefit of BNY (as hereinafter defined) and note holders under the Trust Indenture (as hereinafter defined).

        For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer hereby agrees with and in favour of the Holder as follows:

ARTICLE 1
INTERPRETATION

        1.01    Definitions.    In this agreement:

(a)

"BNY" means The Bank of New York, in its capacity as trustee under the Trust Indenture and its successors in such capacity;



(b)

"Debentures" means the demand debentures made by the Issuer in favour of the Holder each in the principal amount of $300,000,000.00 USD and more particularly described in Schedule "A" hereto, as such debentures may from time to time be amended, supplemented, restated or otherwise modified and "Debenture" means any one of them;



(c)

"Event of Default" means an Event of Default as such term is defined in the Trust Indenture;



(d)

"Holder" means BNY Trust Company of Canada, in its capacity as collateral agent for the benefit of BNY and note holders under the Trust Indenture and its successors in such capacity;



(e)

"Issuer" means Hudson Bay Exploration and Development Company Limited, together with its successors and permitted assigns;



(f)

"Obligations" means the obligations of the Issuer under its guarantees of the obligations of HudBay Mining and Smelting Inc. under the Trust Indenture and all documents delivered in connection with such guarantees;



(g)

"Person" means an individual, firm, body corporate or other legal entity;



(h)

"Trust Indenture" means the Trust Indenture between HudBay Mining and Smelting Inc., the Issuer, Hudson Bay Mining and Smelting Co., Limited, 152640 Canada Inc. and BNY dated December 21, 2004, as such Trust Indenture may from time to time be amended, supplemented, restated or otherwise modified.

        1.02    Division and Headings.    The division of this agreement into articles and sections and the insertion of headings are for convenience only and shall not affect the interpretation of this agreement.

ARTICLE 2
TERMS OF DELIVERY

        2.01    Delivery.    The Debentures are hereby delivered to the Holder to be held by it in accordance with the terms of this agreement as general and continuing collateral security for the payment and performance of the Obligations. The aggregate amount claimed by the Holders of the Debentures pursuant thereto (whether for principal or interest or both) shall not exceed the amount of the Obligations.

        2.02    Remedies.    The security constituted by the Debentures shall become enforceable upon an Event of Default. If the security constituted by the Debentures shall become enforceable then the Holder or its nominee shall be entitled to realize upon the security of the Debentures and to otherwise exercise and enforce all the rights and remedies of the Holder under the terms of the Debentures free from any control of the Issuer, provided, however, that the Holder shall not be bound to deal with the Debentures in any way or to exercise any rights or remedies in respect thereof and shall not be liable for any loss which may be occasioned by any failure

to do so. If the proceeds of realization from the Debentures are insufficient to repay the Obligations in full, the Issuer shall pay the deficiency to the Holder, upon demand.

        2.03    Dealings by Holder.    The Holder may grant extensions of time and other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Issuer and all other parties and securities as the Holder may see fit, all without prejudice to the Obligations or to the rights of the Holder in respect of the Debentures or under this agreement.

        2.04    Additional Security.    The Debentures and this agreement are in addition to and not in substitution for any other security now or hereafter held by the Holder and shall not operate as a merger of any simple contract debt or suspend the fulfillment of, or affect the rights, remedies or powers of the Holder in respect of any Obligations or any securities now or hereafter held by the Holder for the payment or fulfillment thereof.

        2.05    Discharge.    Upon payment and performance in full of all of the Obligations, this agreement and the liens created hereby and by the Debentures shall be discharged and terminated and the Holder shall deliver up the Debentures to the Issuer and shall execute and deliver to the Issuer all such discharges, financing change statements, deeds and other instruments as the Issuer may reasonably require to discharge and terminate the liens created hereby and by the Debentures.

ARTICLE 3
GENERAL

        3.01    Severability.    In the event that any provisions of this agreement shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this agreement shall remain in full force and effect.

        3.02    Successors, Assigns and Governing Law.    This agreement shall enure to the benefit of and be binding upon the respective successors and assigns of the Issuer and the Holder and shall be governed by the laws of Manitoba.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
By	/s/    Brian D. Gordon	c/s
	Authorized Signing Officer

SCHEDULE "A"

1.

$300,000,000 USD Demand Debenture (Material Properties — Manitoba), dated December 10, 2004.

2.

$300,000,000 USD Demand Debenture (Immaterial Properties — Manitoba), dated December 17, 2004.

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Exhibit 99.10

EX-99.11

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Exhibit 99.11

DEBENTURE DELIVERY AGREEMENT (SASKATCHEWAN)

        Agreement made as of December 21, 2004 by HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED with and in favour of BNY TRUST COMPANY OF CANADA in its capacity as collateral agent for the benefit of BNY (as hereinafter defined) and note holders under the Trust Indenture (as hereinafter defined).

        For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer hereby agrees with and in favour of the Holder as follows:

ARTICLE 1
INTERPRETATION

        1.01    Definitions.    In this agreement:

(a)

"BNY" means The Bank of New York, in its capacity as trustee under the Trust Indenture and its successors in such capacity;



(b)

"Debentures" means the demand debentures made by the Issuer in favour of the Holder each in the principal amount of $300,000,000.00 USD and more particularly described in Schedule "A" hereto, as such debentures may from time to time be amended, supplemented, restated or otherwise modified and "Debenture" means any one of them;



(c)

"Event of Default" means an Event of Default as such term is defined in the Trust Indenture;



(d)

"Holder" means BNY Trust Company of Canada, in its capacity as collateral agent for the benefit of BNY and note holders under the Trust Indenture and its successors in such capacity;



(e)

"Issuer" means Hudson Bay Exploration and Development Company Limited, together with its successors and permitted assigns;



(f)

"Obligations" means the obligations of the Issuer under its guarantees of the obligations of HudBay Mining and Smelting Inc. under the Trust Indenture and all documents delivered in connection with such guarantees;



(g)

"Person" means an individual, h, body corporate or other legal entity;



(h)

"Trust Indenture" means the Trust Indenture between HudBay Mining and Smelting Inc., the Issuer, Hudson Bay Mining and Smelting Co., Limited, 152640 Canada Inc. and BNY dated December 21, 2004, as such Trust Indenture may from time to time be amended, supplemented, restated or otherwise modified.

        1.02    Division and Headings.    The division of this agreement into articles and sections and the insertion of headings are for convenience only and shall not affect the interpretation of this agreement.

ARTICLE 2
TERMS OF DELIVERY

        2.01    Delivery.    The Debentures are hereby delivered to the Holder to be held by it in accordance with the terms of this agreement as general and continuing collateral security for the payment and performance of the Obligations. The aggregate amount claimed by the Holders of the Debentures pursuant thereto (whether for principal or interest or both) shall not exceed the amount of the Obligations.

        2.02    Remedies.    The security constituted by the Debentures shall become enforceable upon an Event of Default. If the security constituted by the Debentures shall become enforceable then the Holder or its nominee shall be entitled to realize upon the security of the Debentures and to otherwise exercise and enforce all the rights and remedies of the Holder under the terms of the Debentures free from any control of the Issuer, provided, however, that the Holder shall not be bound to deal with the Debentures in any way or to exercise any rights or remedies in respect thereof and shall not be liable for any loss which may be occasioned by any failure to do so. If the proceeds of realization from the Debentures are insufficient to repay the Obligations in full, the Issuer shall pay the deficiency to the Holder, upon demand.

        2.03    Dealings by Holder.    The Holder may grant extensions of time and other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Issuer and all other parties and securities as the Holder may see fit, all without prejudice to the Obligations or to the rights of the Holder in respect of the Debentures or under this agreement.

        2.04    Additional Security.    The Debentures and this agreement are in addition to and not in substitution for any other security now or hereafter held by the Holder and shall not operate as a merger of any simple contract debt or suspend the fulfillment of, or affect the rights, remedies or powers of the Holder in respect of any Obligations or any securities now or hereafter held by the Holder for the payment or fulfillment thereof.

        2.05    Discharge.    Upon payment and performance in full of all of the Obligations, this agreement and the liens created hereby and by the Debentures shall be discharged and terminated and the Holder shall deliver up the Debentures to the Issuer and shall execute and deliver to the Issuer all such discharges, financing change statements, deeds and other instruments as the Issuer may reasonably require to discharge and terminate the liens created hereby and by the Debentures.

ARTICLE 3
GENERAL

        3.01    Severability.    n the event that any provisions of this agreement shall be deemed invalid or void, in whole or in part, by any Court of competent jurisdiction, the remaining terms and provisions of this agreement shall remain in full force and effect.

        3.02    Successors, Assigns and Governing Law.    This agreement shall enure to the benefit of and be binding upon the respective successors and assigns of the Issuer and the Holder and shall be governed by the laws of Saskatchewan.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
By	/s/    Brian D. Gordon	c/s
	Authorized Signing Officer

SCHEDULE "A"

1.

$300,000,000 USD Demand Debenture (Immaterial Properties — Saskatchewan), dated December 10, 2004.

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Exhibit 99.11

EX-99.12

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Exhibit 99.12

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, ON MSN 1K9
By:	Hudson Bay Mining and Smelting Co., Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3
FIXED CHARGE
		$300,000,000.00 USD DEMAND DEBENTURE (MATERIAL PROPERTIES — MANITOBA)

HUDSON BAY MINING AND SMELTING CO., LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for value received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00) in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment.

        As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting the generality of the foregoing, all of its interest and estate in fee simple in the lands described in Part 1 of Schedule A hereto, all of its interest and estate in the claims described in Part 2 of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 3 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

        THIS DEBENTURE is issued subject to and with the benefit of the Conditions and Schedule attached hereto, all of which are to be deemed part of this Debenture. The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it acquires thereafter as soon as the Issuer acquires rights therein.

        IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 10th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon Name:    Brian Gordon Title:      Vice-President and General Counsel

2

THE CONDITIONS HEREINBEFORE REFERRED TO

1.    The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York, as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2.    The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3.    The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terms of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4.    In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely:

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;



(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;



(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress warrant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;



(d)

to preserve, to maintain, to operate and to carry on the Collateral or any portion or portions thereof;



(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;



(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and possess the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is made in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such sale or disposition so made upon credit until the Holder has received actual payment in full;



(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case may be a leasehold interest in the Collateral and any portion or portions thereof; and

3

(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof, and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer,

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deems expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5.    If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not, to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;



(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;



(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;



(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the Issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

6.    The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collateral together with interest at the rate provided for in this Debenture from the date of payment of such expenditures.

4

7.    The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8.    The Holder may in its discretion:

(a)

release any Collateral from the Charge;



(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;



(c)

agree to accept any other properties or securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9.    This Debenture and all amendments and supplements thereto are and shall at all times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;



(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10.    This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof, executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11.    The Issuer hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12.    This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Manitoba, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

        These conditions are part of the Debenture executed by the Issuer dated the 10th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon Name:    Brian Gordon Title:      Vice-President and General Counsel

5

Part 1 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004

PARCEL 1. TITLE NO. 1789274

All those portions of Sections 6 and 7-67-29 WPM
and being those portions of mineral claims:
Unique … Lot 2
Extension … Lot 10
Lakeview … Lot 12
Eola … Lot 19
Flin Slam … Lot 25
La Salle … Lot 26
Schenley Fractional … Lot 215
Amaryllis … Lot 216
Craiggi Fractional … Lot 217
Grizzly Fractional … Lot 218
All in Group 421 shown as RLY right-of-way and
Station Grounds Plan 572 PLTO (N Div), EXC
Firstly: All those portions of said mineral claims:
Lakeview … Lot 12
Flin Slam … Lot 25
La Salle … Lot 26
Craiggi Fractional … Lot 217
Taken for RLY right-of-way and yards as shown bordered
pink on Plan 831 PLTO (N Div)
Secondly: All mines and minerals
Subject to the reservations contained in the Provincial Lands Act

SUBJECT TO: Caveat Nos. 1026084 and 1076674
Personal Property Security Notice Nos. 1026251 and 1076675

PARCEL 2. TITLE NO. 1789910

All that portion of Section 6-67-29 WPM described as follows bounded on the north by the production of the NLY limit of Parcel A Plan 2609 PLTO (N Div), ELY to the WLY limit of Ross Lake, bounded on the west by the ELY limit said Parcel A, on the south by the NYL limit of the pipeline right-of-way, as same is described in Certificate of Title 44356, bounded on the east by the WLY shore of Ross Lake, excepting:

Firstly: Pipeline right-of-way Plan 2727 PLTO (N Div)
Secondly: All mines and minerals
Subject to the reservations contained in the Crown Lands Act

SUBJECT TO: NIL

PARCEL 3. TITLE NO. 1790039

Parcel 1: All that portion of 6-67-29 WPM and of the road allowance adjoining said section to the west bounded as follows: on the west by the boundary between the provinces of Manitoba and Saskatchewan: on the east by the west limit of Parcel A Plan 2609 PLTO (N Div): on the north by the production in a straight line SWLY of the northern limit of the WLY portion of said parcel A and on the south by the production in a straight line WLY of the south limit of said Parcel A

6

Parcel 2: All that portion of 6-67-29 WPM and of the road allowance adjoining said section to the south bounded as follows: on the south by the boundary between the provinces of Manitoba and Saskatchewan: on the north by the south limit of Parcel A Plan 2609 PLTO (N Div) and its production in a straight line WLY: on the east by the production in a straight line SLY of the western limit of Creighton Street as shown on Plan 591 PLTO (N Div): and on the west by the boundary between the said provinces of Manitoba and Saskatchewan
Subject to the reservations contained in the Crown Lands Act
Exc subsection 1(A) of section 4 of Said Act

SUBJECT TO: Caveat Nos. 1027114 and 1076674
Personal Property Security Notice Nos. 1027187 and 1076675

PARCEL 4. TITLE NO. 1790115

All that portion of 6-67-29 WPM bordered pink on Plan 2727 PLTO (N Div) which lies to the south of the production in a straight line ELY of the NLY limit of Parcel A Plan 2609 PLTO (N Div)
Exc all mines and minerals
Subject to the reservations contained in the Crown Lands Act

SUBJECT TO: NIL

PARCEL 5. TITLE NO. 1801931

At Flin Flon and being
Parcel 1: Parcel A Plan 2609 PLTO (N Div) in 6-67-29 WPM, exc
Firstly: Public Lane Plan 3032 PLTO (N Div)
Secondly: Right-of-way Parcels 9 and 11 Plan 604 PLTO (N Div)
Thirdly: All that portion lying between the south limit of said lane and the south limit of said Parcel A and which is adjacent on either side of said Parcel 11
Fourthly: That portion lying between the east limit of said lane and the east and south limits of said Parcel A and west of said Parcel 9
Fifthly: Plan 6095 PLTO (N Div)
Sixthly: Parcel 1 Plan 4304 PLTO (N Div)
Seventhly: Parcels 5 and 6 Plan 4976 PLTO (N Div)
Eighthly: Road Plans 5550 PLTO (N Div) and 34324 PTLO
Ninethly: All mines and minerals
Subject to the reservations contained in the Provincial Lands Act

Parcel 2: Parcels 5 and 6 Plan 4976 PLTO (N Div) in 6-67-29 WPM exc all mines and minerals
Subject to the reservations contained in the Provincial Lands Act

Parcel 3: Parcel 1 Plan 4304 PLTO (N Div) in 6-67-29 WPM, exc
Firstly: Road Plans 5550 PLTO (N Div) and 34034 PLTO
Secondly: All mines and minerals
Subject to the reservations contained in the Provincial Lands Act

SUBJECT TO:	Caveat No. 1026084, 1076674, 37307N
	Personal Property Security Notice No. 1026251, 1076675

7

PARCEL 6. TITLE NO. 1801942

All that portion 6-67-29 WPM described as follows: Commencing at the intersection of the ELY limit of Parcel A Plan 2609 PLTO (N Div) and the NWLY limit of a public lane Plan 3032 PLTO (N Div) thence NLY 20.25 Feet along the ELY limit of said Parcel A to the SWLY corner of the area covered by Certificate of Title 44356, thence NELY 12.93 Feet along the SELY limit of the area covered by Certificate of Title 44356, to its intersection with the NWLY limit of said lane; thence SWLY 26.33 Feet along the NWLY limit of said lane to the point of commencement
Exc all mines and minerals
Subject to the reservations contained in the Crown Lands Act

SUBJECT TO: NIL

PARCEL 7. TITLE NO. 2050586

At Flin Flon and being
Lots 1 and 2 SP Plan 43220 PLTO
IN N ¹/2 6-67-29 WPM
Exc all mines and minerals
Subject to the reservations contained in the Crown Land Act

SUBJECT TO: NIL

PARCEL 8. TITLE NO. 1537383

At Snow Lake and being:
Block 24 Plan 747 PLTO (N Div) in 68-17 WPM, exc
Firstly: Plan 35325 PLTO
Secondly: All mines, minerals and other reservations
As contained in the Crown Lands Act

SUBJECT TO: Caveat No. 34665N

PARCEL 9. TITLE NO. 1701609

RLY right-of-way Plan 854 PLTO (N Div)
In 68-16 & 17 WPM and 69-15 & 16 WPM, exc
Firstly: Parcels shown as A and B on said Plan 854 PLTO (N Div)
Secondly: All mines, minerals and other reservations as contained in the Crown Lands Act

SUBJECT TO: Miscellaneous No. 1925170SN

PARCEL 10. TITLE NO. 1770544

Parcel G Plan 4592 PLTO (N Div) in 68-17 WPM
Exc all mines, minerals and other reservations as contained in the Crown Lands Act

SUBJECT TO:	Miscellaneous No. 1925 17OSN
	Caveat Nos. 414O7N and 95-7064

8

PARCEL 11. TITLE NO. 1823056

At Snow Lake and being
Lot 11 Block 10 Plan 646 PLTO (N Div) in 68-17 WPM
Subject to the reservations contained in the Crown Lands Act

SUBJECT TO: Caveat Nos. 23920N, 34136N and 34665N

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon Name:    Brian Gordon Title:      Vice-President and General Counsel

9

Part 2 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004

Claims
Claim	37247	OUTLET NO. 1
Claim	37248	OUTLET NO. 2
Claim	37642	OUTLET NO. 3
Claim	CB10185	TOP
Claim	CB10194	TOP 1
Claim	CB7033
Claim	CB7103
Claim	CB7105
Claim	C87265
Claim	CB7458
Claim	CB7459
Claim	CB7460
Claim	CB7461
Claim	CB7475
Claim	CB7476
Claim	CB7478
Claim	CB7479
Claim	CB7480
Claim	CB7481
Claim	CB7482
Claim	CB7483
Claim	CB7484
Claim	CB7489
Claim	CB7888
Claim	CB8502
Claim	CB8514
Claim	CB8515
Claim	CB8520
Claim	CB8521
Claim	CB8522
Claim	CB8523
Claim	CB8524
Claim	CB8928
Claim	CB8929
Claim	CB9029
Claim	CB9030
Claim	W45261	BEV 1 FR.
Claim	W45262	BEV 2 FR.
Claim	W45263	BEV 3 FR.
Claim	W45290	ZAP FR.
Claim	W48657	TYKE 1
Claim	W48658	TYKE 2

10

Part 3 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004

Leases and Permits

Surface Leases
Surface Lease	6SL	LA SALLE SURFACE LEASE
Surface Lease	M45SL	BED BUG
Surface Lease	M46SL	FLIN FLON FR
Surface Lease	M47SL	B. NO. 47 FR
Surface Lease	M48SL	B. NO. 46
Surface Lease	M56SL	THE PAS 22
Surface Lease	M60SL	THE PAS 29
Surface Lease	M61SL	THE PAS 30
Surface Lease	M62SL	THE PAS 31
Surface Lease	M63SL	THE PAS 32
Surface Lease	M64SL	THE PAS 33
Surface Lease	M65SL	THE PAS 34
Surface Lease	M66SL	THE PAS 35
Surface Lease	M67SL	THE PAS 36
Surface Lease	M78SL	THE PAS 23
Surface Lease	M79SL	THE PAS 24
Surface Lease	M85SL	CRAIGGI FR
Surface Lease	M86SL	SCHENLEY FR
Surface Lease	M103SL	ASTRA 18
Surface Lease	M110SL	ASTRA 25, CHACO 13 & 14
Surface Lease	M112SL	RAM 346 FR
Surface Lease	M151SL	RAM 347 FR
Surface Lease	2SL	PHOTO SURFACE LEASE
Surface Lease	7SL	CHISEL N INTERM VENT
Surface Lease	8SL	CHISEL N MAIN EXH RA
Surface Lease	9SL	CHISEL N DOWNCAST R
Surface Lease	M104SL	OX 35
Surface Lease	M105SL	OX 36
Surface Lease	M106SL	OX 50
Surface Lease	M107SL	OX 51
Surface Lease	M108SL	WAW 39
Mineral Leases
Mineral Lease	ML319	FLIN FLON MIN LEASE
Mineral Lease	ML320	FLIN FLON MIN LEASE
Mineral Lease	ML321	FLIN FLON MIN LEASE
Mineral Lease	ML051	CALLINAN MIN LEASE
Mineral Lease	ML052	CALLINAN MIN LEASE
Mineral Lease	ML053	CALLINAN MIN LEASE
Mineral Lease	ML054	CALLINAN MIN LEASE
Mineral Lease	ML055	CALLINAN MIN LEASE
Mineral Lease	ML046	TROUT MINING LEASE
Mineral Lease	ML047	TROUT MINING LEASE
Mineral Lease	ML048	TROUT MINING LEASE

11

Surface Permits
Surface Permit	GOLDEN POPPY	GOLDEN POPPY PERMIT
Miscellaneous Leases
Misc Lease	MSC3351	MlSC LEASE 3351
Misc Lease	MSC3486	MlSC LEASE 3486
Misc Lease	MSC3721	MISC LEASE 3721
Misc Lease	MSC3238	MISC LEASE 3238
Misc Lease	MSC3537	MISC LEASE 3537
Misc Lease	MSC3877	MISC LEASE 3877
Misc Lease	MSC3793	MISC LEASE 3793
Misc Lease	MSC3794	MISC LEASE 3794
Misc Lease	MSC3239	MISC LEASE 3239
Misc Lease	MSC3240	MISC LEASE 3240
Misc Lease	MSC3792	MISC LEASE 3792
Misc Lease	MSC3954	MISC LEASE 3954
OIC Leases
OIC	11	NANCY
OIC	12	VICTORIA
OIC	13	APEX
OIC	14	UNIQUE
OIC	15	OUTLOOK
OIC	16	LAKEVIEW
OIC	17	EXTENSION
OIC	180	BURKE
OIC	21	SNOWSHOE FR
OIC	22	SUNSHINE FR
OIC	303	THE PAS 16
OIC	330	FOX FR
OIC	331	THE PAS 33
OIC	332	THE PAS 30
OIC	333	THE PAS 29
OIC	334	THE PAS 19
OIC	335	THE PAS 26
OIC	336	THE PAS 13
OIC	337	THE PAS 15
OIC	338	THE PAS 10
OIC	339	THE PAS 12
OIC	340	THE PAS 1
OIC	341	THE PAS 2
OIC	342	THE PAS 3
OIC	343	THE PAS 11
OIC	344	THE PAS 14
OIC	345	THE PAS 27
OIC	346	THE PAS 31
OIC	347	THE PAS 32
OIC	348	THE PAS 4
OIC	349	THE PAS 6
OIC	350	THE PAS 7
OIC	351	THE PAS 8
OIC	352	THE PAS 9

12

OIC	353	THE PAS 17
OIC	354	THE PAS 18
OIC	361	GRIZZLY FR
OIC	400	THE PAS 34
OIC	407	THE PAS 39
OIC	408	THE PAS 22
OIC	409	THE PAS 25
OIC	410	THE PAS 23
OIC	416	THE PAS 36
OIC	417	THE PAS 24
OIC	418	THE PAS 35
OIC	419	THE PAS 37
OIC	420	THE PAS 21
OIC	421	THE PAS 38
OIC	426	THE PAS 28
OIC	427	THE PAS 20
OIC	466	LASALLE
OIC	467	FLIN SLAM
OIC	470	THE PAS NO. 5
OIC	576	BED BUG
OIC	608	SCHENLEY FR
OIC	611	HOLY SMOKE
OIC	623	RAINBOW FR
OIC	629	FOG
OIC	630	FORT PITT
OIC	632	CRAIGGI FR
OIC	677	VENUS FR
OIC	678	BEAR FR
OIC	M18	B NO. 25 FR
OIC	M3	CATHERINE
OIC	M4408	BORDER FR
OIC	M86	B NO. 46
OIC	M87	B NO. 47 Fr.
OIC	M88	B NO. 48
OIC	M90	Flin Flon FR
OIC	M907	B NO. 24
OIC	M908	B NO. 49
OIC	M7394	OX NO. 426 FR
OIC	M5724	OX NO. 108 (7SL)
OIC	M5725	OX NO. 127
OIC	M5726	OX 139
OIC	M5727	OX 140
OIC	M5728	OX 141
OIC	M5729	OX 157
OIC	M5730	OX 158
OIC	M5731	OX 159
OIC	M5732	OX 160
OIC	M5733	OX NO. 161 FR
OIC	M5734	OX NO. 421 FR
OIC	M5735	OX NO. 422 FR
OIC	M5736	OX NO. 423 FR
OIC	M5737	OX NO. 424 FR
OIC	M5738	OX NO. 425 FR
OIC	M5739	OX NO. 439

13

OIC	M5740	OX NO. 440
OIC	M5741	OX NO. 441
OIC	M5765	OX NO. 40 FR
OIC	M5766	OX NO. 41 FR
OIC	M5767	OX NO. 42
OIC	M5768	OX NO. 43
OIC	M5769	OX NO. 44
OIC	M5770	OX NO. 45
OIC	M5771	OX NO. 66
OIC	M5772	OX NO. 67
OIC	M5773	OX NO. 68
OIC	M5774	OX NO. 69
OIC	M5775	OX NO. 76
OIC	M5776	OX NO. 95
OIC	M5777	OX NO. 152
OIC	M5778	OX NO. 153
OIC	M5779	OX NO. 154
OIC	M5780	OX NO. 155
OIC	M5781	OX NO. 156
OIC	M5782	OX NO. 352
OIC	M5783	OX NO. 353
OIC	M5784	OX NO. 354
OIC	M5785	OX NO. 355 FR
OIC	M5786	OX NO. 356
OIC	M5787	OX NO. 357
OIC	M5788	OX NO. 358
OIC	M5789	OX NO. 359
OIC	M5790	OX NO. 360
OIC	M5791	OX NO. 377 FR
OIC	M5792	OX NO. 415
OIC	M5793	OX NO. 416
OIC	M5794	OX NO. 427
OIC	M5795	OX NO. 428
OIC	M5796	OX NO. 429
OIC	M5797	OX NO. 430
OIC	M5798	OX NO. 431
OIC	M5799	OX NO. 432
OIC	M5800	OX NO. 434
OIC	M5801	OX NO. 435
OIC	M5802	OX NO. 436
OIC	M5803	OX NO. 437
01C	M5804	OX NO. 438
OIC	M5805	OX NO. 442 FR
OIC	M5806	OX NO. 443 FR
OIC	M5807	OX NO. 444 FR
OIC	M5808	OX NO. 445 FR
OIC	M5809	OX NO. 446
OIC	M5810	OX NO. 447 FR
OIC	M5811	OX NO. 448
OIC	M5812	OX NO. 449
OIC	M5813	OX NO. 450 FR
OIC	M5814	OX NO. 451
OIC	M5815	OX NO. 452 FR
OIC	M5816	OX NO. 453

14

OIC	M5817	OX NO. 454
OIC	M5818	OX NO. 455
OIC	M7157	OX NO. 1 FR
OIC	M7158	OX NO. 1
OIC	M7159	OX NO. 3 FR
OIC	M7160	OX NO. 4
OIC	M7161	OX NO. 5
OIC	M7162	OX NO. 6
OIC	M7163	OX NO. 7 FR
OIC	M7164	OX NO. 8 FR
OIC	M7165	OX NO. 9
OIC	M7166	OX NO. 10
OIC	M7167	OX NO. 11
OIC	M7168	OX NO. 12
OIC	M7169	OX NO. 13
OIC	M7170	OX NO. 14
OIC	M7171	OX NO. 15
OIC	M7172	OX NO. 16
OIC	M7173	OX NO. 17
OIC	M7174	OX NO. 18
OIC	M7175	OX NO. 19
OIC	M7176	OX NO. 20
OIC	M7177	OX NO. 21
OIC	M7178	OX NO. 22
OIC	M7179	OX NO. 23 FR
OIC	M7180	OX NO. 24
OIC	M7181	OX NO. 25
OIC	M7182	OX NO. 26
OIC	M7183	OX NO. 27
OIC	M7184	OX NO. 28
OIC	M7185	OX NO. 29
OIC	M7186	OX NO. 30
OIC	M7187	OX NO. 31
OIC	M7188	OX NO. 32
OIC	M7189	OX NO. 33
OIC	M7190	OX NO. 34
OIC	M7191	OX NO. 35
OIC	M7192	OX NO. 36
OIC	M7193	OX NO. 37
OIC	M7194	OX NO. 38
OIC	M7195	OX NO. 39 FR
OIC	M7196	OX NO. 46
OIC	M7197	OX NO. 47 FR
OIC	M7198	OX NO. 48
OIC	M7199	OX NO. 49
OIC	M7200	OX NO. 50
OIC	M7201	OX NO. 51
OIC	M7202	OX NO. 52
OIC	M7203	OX NO. 53
OIC	M7204	OX NO. 54
OIC	M7205	OX NO. 55
OIC	M7206	OX NO. 56
OIC	M7207	OX NO. 57
OIC	M7208	OX NO. 58

15

OIC	M7209	OX NO. 59
OIC	M7210	OX NO. 60
OIC	M7211	OX NO. 61 (9SL)
OIC	M7212	OX NO. 62 (9SL)
OIC	M7213	OX NO. 63
OIC	M7214	OX NO. 64
OIC	M7215	OX NO. 65
OIC	M7216	OX NO. 70
OIC	M7217	OX NO. 71
OIC	M7218	OX NO. 72
OIC	M7219	OX NO. 73
OIC	M7220	OX NO. 74
OIC	M7221	OX NO. 75
OIC	M7222	OX NO. 77 (8SL)
OIC	M7223	OX NO. 78 (9SL)
OIC	M7224	OX NO. 79
OIC	M7225	OX NO. 80
OIC	M7226	OX NO. 81
OIC	M7227	OX NO. 82
OIC	M7228	OX NO. 83
OIC	M7229	OX NO. 84
OIC	M7230	OX NO. 87
OIC	M7231	OX NO. 88
OIC	M7232	OX NO. 89
OIC	M7233	OX NO. 90
OIC	M7234	OX NO. 91
OIC	M7235	OX NO. 92
OIC	M7236	OX NO. 93
OIC	M7237	OX NO. 94 (8SL)
OIC	M7238	OX NO. 96
OIC	M7239	OX NO. 97
OIC	M7240	OX NO. 98
OIC	M7241	OX NO. 99
OIC	M7242	OX NO. 100
OIC	M7243	OX NO. 101
OIC	M7244	OX NO. 102
OIC	M7245	OX NO. 103
OIC	M7246	OX NO. 104
OIC	M7247	OX NO. 105
OIC	M7248	OX NO. 106
OIC	M7249	OX NO. 107
OIC	M7250	OX NO. 109
OIC	M7251	OX NO. 110
OIC	M7252	OX NO. 111
OIC	M7253	OX NO. 112
OIC	M7254	OX NO. 113
OIC	M7255	OX NO. 114
OIC	M7256	OX NO. 115
OIC	M7257	OX NO. 116
OIC	M7258	OX NO. 119
OIC	M7259	OX NO. 120
OIC	M7260	OX NO. 121
OIC	M7261	OX NO. 122
OIC	M7262	OX NO. 123

16

OIC	M7263	OX NO. 124
OIC	M7264	OX NO. 125
OIC	M7265	OX NO. 126
OIC	M7266	OX NO. 128
OIC	M7267	OX NO. 129
OOC	M7268	OX NO. 130
OIC	M7269	OX NO. 131
OIC	M7270	OX NO. 132
OIC	M7271	OX NO. 133 FR
OIC	M7272	OX NO. 134 FR
OIC	M7273	OX NO. 135
OIC	M7274	OX NO. 136 FR
OIC	M7275	OX NO. 137 FR
OIC	M7276	OX NO. 138 FR
OIC	M7277	OX NO. 142
OIC	M7278	OX NO. 143
OIC	M7279	OX NO. 144
OIC	M7280	OX NO. 145
OIC	M7281	OX NO. 146
OIC	M7282	OX NO. 147
OIC	M7283	OX NO. 341 FR
OIC	M7284	OX NO. 342 FR
OIC	M7285	OX NO. 347
OIC	M7286	OX NO. 348
OIC	M7287	OX NO. 349
OIC	M7288	OX NO. 350 FR
OIC	M7289	OX NO. 433 FR
OIC	M7290	OX NO. 456 FR
OIC	M7291	OX NO. 693
OIC	M7307	WAW NO. 1 FR
OIC	M7308	WAW NO. 2 FR
OIC	M7309	WAW NO. 3 FR (7SL)
OIC	M7310	WAW NO. 4 FR
OIC	M7311	WAW NO. 5 FR
OIC	M7312	WAW NO. 6 FR
OIC	M7313	WAW NO. 7 FR
OIC	M7314	WAW NO. 8 FR
OIC	M7315	WAW NO. 9 FR
OIC	M7316	WAW NO. 10 FR
OIC	M7317	WAW NO. 11 FR
OIC	M7318	WAW NO. 12 FR
OIC	M7319	WAW NO. 13 FR
OIC	M7320	WAW NO. 14 FR
OIC	M7321	WAW NO. 15 FR
OIC	M7322	WAW NO. 16 FR
OIC	M7323	WAW NO. 17 FR
OIC	M7324	WAW NO. 18 FR
OIC	M7325	WAW NO. 19 FR
OIC	M7326	WAW NO. 20 FR
OIC	M7327	WAW NO. 21 FR
OIC	M7328	WAW NO. 22 FR
OIC	M7329	WAW NO. 23 FR
OIC	M7330	WAW NO. 24 FR
OIC	M7331	WAW NO. 25 FR

17

OIC	M7332	WAW NO. 26 FR
OIC	M7333	WAW NO. 27 FR
OIC	M7334	WAW NO. 28 FR
OIC	M7335	WAW NO. 29 FR
OIC	M7336	WAW NO. 30 FR
OIC	M7337	WAW NO. 31 FR
OIC	M7338	WAW NO. 32 FR
OIC	M7339	WAW NO. 33 FR
OIC	M7340	WAW NO. 34 FR
OIC	M7341	WAW NO. 35 FR
OIC	M7342	WAW NO. 36 FR
OIC	M7343	WAW NO. 37 FR
OIC	M7344	WAW NO. 38 FR
OIC	M7345	WAW NO. 39 FR
OIC	M7346	WAW NO. 40 FR
OIC	M7347	WAW NO. 41 FR
OIC	M7390	OX NO. 417
OIC	M7391	OX NO. 418 FR
OIC	M7392	OX NO. 419 FR
OIC	M7393	OX NO. 420 FR
OIC	M5706	ASTRA NO. 1 FR
OIC	M5707	ASTRA NO. 2
OIC	M5708	ASTRA NO. 3
OIC	M5709	ASTRA NO. 4
OIC	M5710	ASTRA NO. 12
OIC	M5711	ASTRA NO. 13
OIC	M5712	ASTRA NO. 14
OIC	M5713	ASTRA NO. 15
OIC	M5714	ASTRA NO. 16
OIC	M5715	ASTRA NO. 17
OIC	M5716	ASTRA NO. 18
OIC	M5717	ASTRA NO. 19
OIC	M5718	ASTRA NO. 20
OIC	M5719	ASTRA NO. 21
OIC	M5720	ASTRA NO. 22
OIC	M5721	ASTRA NO. 25 FR
OIC	M5722	ASTRA NO. 29
OIC	M5723	ASTRA NO. 30
OIC	M5742	RAM NO. 235 FR
OIC	M5743	RAM NO. 237 FR
OIC	M5744	RAM NO. 238
OIC	M5745	RAM NO. 239 FR
OIC	M5746	RAM NO. 240 FR
OIC	M5747	RAM NO. 251 FR
OIC	M5748	RAM NO. 252
OIC	M5749	RAM NO. 263
OIC	M5750	RAM NO. 255 FR
OIC	M5751	RAM NO. 256
OIC	M5752	RAM NO. 257
OIC	M5753	RAM NO. 258
OIC	M5754	RAM NO. 259 FR
OIC	M5755	RAM NO. 291 FR
OIC	M5756	RAM NO. 292 FR
OIC	M5757	RAM NO. 293

18

OIC	M5758	RAM NO. 312
OIC	M5759	RAM NO. 313
OIC	M7292	RAM NO. 314
OIC	M7293	RAM NO. 315
OIC	M7294	RAM NO. 318 FR
OIC	M7295	RAM NO. 319 FR
OIC	M7296	RAM NO. 339
OIC	M7297	RAM NO. 340
OIC	M7298	RAM NO. 341
OIC	M7299	RAM NO. 342
OIC	M7300	RAM NO. 343
OIC	M7301	RAM NO. 344
OIC	M7302	RAM NO. 346 FR
OIC	M7303	RAM NO. 347 FR
OIC	M7304	RAM NO. 348 FR
OIC	M7305	RAM NO. 349
OIC	M7306	RAM NO. 350
OIC	M7348	ASTRA NO. 31
OIC	M7349	ASTRA NO. 32
OIC	M7350	ASTRA NO. 33
OIC	M7351	ASTRA NO. 34
OIC	M7352	ASTRA NO. 35
OIC	M7353	ASTRA NO. 36
OIC	M7354	CHALCO NO. 1
OIC	M7355	CHALCO NO. 2
OIC	M7356	CHALCO NO. 3
OIC	M7357	CHALCO NO. 4
OIC	M7358	CHALCO NO. 5
OIC	M7359	CHALCO NO. 6
OIC	M7360	CHALCO NO. 7
OIC	M7361	CHALCO NO. 8
OIC	M7362	CHALCO NO. 9
OIC	M7363	CHALCO NO. 10
OIC	M7364	CHALCO NO. 11
OIC	M7365	CHALCO NO. 12
OIC	M7366	CHALCO NO. 13
OIC	M7370	RAM NO. 204
OIC	M7371	RAM NO. 205
CIIC	M7372	HAM NO. 260
OIC	M7373	RAM NO. 268 FR
OIC	M7374	RAM NO. 269 FR
OIC	M7375	RAM NO. 289
OIC	M7376	RAM NO. 290
OIC	M7377	RAM NO. 294
OIC	M7378	RAM NO. 310
OIC	M7380	RAM NO. 311
OIC	M7381	RAM NO. 316
OIC	M7382	RAM NO. 317
OIC	M7383	RAM NO. 626 FR
OIC	M7388	PEG NO. 73
OIC	M7491	CHALCO NO. 14
OIC	M7492	CHALCO NO. 15
OIC	M7493	CHALCO NO. 16
OIC	M7494	CHALCO NO. 17

19

OIC	M7495	CHALCO NO. 18
OIC	M7496	ASTRA NO. 5
OIC	M7497	ASTRA NO. 6
OIC	M7498	ASTRA NO. 9
OIC	M7499	ASTRA NO. 10
OIC	M7500	ASTRA NO. 23 FR
OIC	M7501	ASTRA NO. 24 FR
OIC	M7502	ASTRA NO. 26
OIC	M7503	ASTRA NO. 28 FR
OIC	M7504	ASTRA NO. 38
OIC	M7505	ASTRA NO. 39
OIC	M7506	ASTRA NO. 40
OIC	M7507	ASTRA NO. 41
OIC	M7508	ASTRA NO. 44 FR
OIC	M7509	ASTRA NO. 45 FR
OIC	M7510	ASTRA NO. 46 FR
OIC	M7511	ASTRA NO. 47 FR
OIC	M7512	ASTRA NO. 48 FR
OIC	M7513	ASTRA NO. 49 FR
OIC	M7514	ASTRA NO. 50 FR
OIC	M7515	ASTRA NO. 51 FR
OIC	M7516	RAM NO. 627 FR
OIC	M7517	RAM NO. 628 FR

20

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Exhibit 99.12

EX-99.13

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Exhibit 99.13

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, ON M5N 1K9
By:	Hudson Bay Mining and Smelting Co., Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3
FIXED CHARGE
		$300,000,000,00 USD DEMAND DEBENTURE (IMMATERIAL PROPERTIES-MANITOBA)

HUDSON BAY MINING AND SMELTING CO., LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for value received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00) in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment.

        As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting the generality of the foregoing, all of its interest and estate in fee simple in the lands described in Part 1 of Schedule A hereto, all of its interest and estate in the claims described in Part 2 of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 3 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

        THIS DEBENTURE is issued subject to and with the benefit of the Conditions and Schedule attached hereto, all of which are to be deemed part of this Debenture. The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it acquires thereafter as soon as the Issuer acquires rights therein.

        IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 17th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon Name:    Brian Gordon Title:      Vice-President and General Counsel

THE CONDITIONS HEREINBEFORE REFERRED TO

1.    The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York, as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2.    The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3.    The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terms of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4.    In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely:

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;



(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;



(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress wmant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;



(d)

to preserve, to maintain, to operate and to carry on the Collateral or any portion or portions thereof;



(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;



(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and possess the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is made in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such sale or disposition so made upon credit until the Holder has received actual payment in full;



(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case may be a leasehold interest in the Collateral and any portion or portions thereof; and

2

(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof, and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer;

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deems expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5.    If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not, to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;



(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;



(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;



(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the Issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

6.    The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collateral together with interest at the rate provided for in this Debenture from the date of payment of such expenditures.

3

7.    The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8.    The Holder may in its discretion:

(a)

release any Collateral from the Charge;



(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;



(c)

agree to accept any other properties or securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9.    This Debenture and all amendments and supplements thereto are and shall at all times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;



(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10.    This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof, executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11.    The Issuer hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12.    This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Manitoba, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

        These conditions are part of the Debenture executed by the Issuer dated the 17th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon Name:    Brian Gordon Title:      Vice-President and General Counsel

4

Part 1 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 17, 2004

Parcel 1. Title No. 1701618

The off-take ditches plan 4933 PLTO (N Div)
In 67-17 & 18 WPM and 68-18 WPM
EXC all mines, minerals and other reservations as
Contained in the Crown Lands Act

Subject To: NIL

Parcel 2. Title No. 1701794

RLY Right-of-Way and extra Right-of-Way
Plan 772 PLTO (N DIV)
In 66-20 and 21 WPM
EXC all mines, minerals and other provisoes,
including reservations regarding future road allowances,
as set forth in a grant from the Crown filed
as Real Property Application 19868 PLTO (N DIV)

Subject To: NIL

Parcel 3. Title No. 1701814

RLY Right-of-Way and extra Right-of-Way
Plan 774 PLTO (N DIV)
IN 66-21, 22, 23 and 24 WPM
EXC all mines, minerals and other provisoes,
including reservations regarding future road allowances,
as set forth in a grant from the Crown filed
as Real Property Application 19869 (N DIV)

Subject To: NIL

Parcel 4. Title No. 1701 838

RLY Extra Right-of-way, WYE,
Station Grounds and Yard Plan 773 PLTO (N DIV)
IN 66-19 & 20 WPM and 67-18 & 19 WPM
EXC all mines, minerals and other provisoes,
including reservations regarding future road allowances,
as set forth in a grant from the Crown filed
as Real Property Application 19870 PLTO (N DIV)

Subject To: NIL

Parcel 5. Title No. 1701897

Off-Take ditches,
Plan 4899 PLTO (N DIV)
IN 66-21 WPM
EXC all mines, minerals and other
reservations as contained in the
Crown Lands Act

Subject To: NIL

5

Parcel 6. Title No. 1701906

Off-Take ditches,
Plan 4901 PLTO (N DIV)
IN 66-22 WPM
EXC all mines, minerals and other
reservations as contained in the
Crown Lands Act

Subject To: NIL

Parcel 7. Title No. 1701920

Off-Take ditches,
Plan 4898 PLTO (N DIV)
IN 66-20 WPM
EXC all mines, minerals and other
reservations as contained in the
Crown Lands Act

Subject To: NIL

Parcel 8. Title No. 1701923

Off-Take ditches,
Plan 4900 PLTO (N DIV)
IN 66-and 67-19 WPM and 67-18 WPM
EXC all mines, minerals and other
reservations as contained in the
Crown Lands Act

Subject To: NIL

Parcel 9. Title No. 1701932

RLY Right-of-Way
Plan 794 PLTO (N DIV)
IN 67-17 & 18 WPM and 68-17 & 18 WPM
EXC all mines, minerals and other provisoes,
including reservations regarding future road allowances,
as set forth in a grant from the Crown filed
as Real Property Application 20231 PLTO (N DIV)

Subject To: NIL

Parcel 10. Title No. 1701951

RLY Station Grounds Plan 794 PLTO (N DIV)
IN 67-17 & 18 WPM and 68-17 & 18 WPM
EXC all mines, minerals and other
reservations as contained in the
Crown Lands Act

Subject To: NIL

6

Parcel 11. Title No. 1775562

At Snow Lake and being
Lot 6 Block 1 Plan 6575 PLTO (N DIV)
IN 68-17 WPM
EXC all mines, minerals and other
reservations as contained in the
Crown Lands Act,
EXC Subsection 1(A) of Section 4 of said Act

Subject To:	Miscellaneous No. 192517OSN Re: The supply of light, power and other matters
	Caveat No. 80-50315N From/By: Hudson Bay Mining & Smelting Go. Limited

Parcel 12. Title No. 1823051

At Flin Flon and being
Lot 2 Plan 6737 PLTO (N DIV)
IN NW 1/4 5-67-29 WPM
EXC all mines and minerals

Subject To: Caveat No. 80-50593N
From/By: The Manitoba Hydro-Electric Board/Man. Telephone System

Parcel 13. Title No. 1823054

RLY Right of Way and extra Right of Way
Plan 762 PLTO (N DIV)
IN 66-24, 25 and 26 WPM and 67-25 WPM
EXC all mines, minerals and other provisoes,
including reservations regarding future road allowances,
as set forth in a grant from the Crown filed
as Real Property Application 19565 PLTO (N DIV)

Subject To: NIL

Parcel 14. Title No. 1823055

At Flin Flon and being
Block G Plan 3087 PLTO (N DIV)
IN 6-67-29 WPM, EXC
1STLY: Road Plan 5213 PLTO (N DIV)
2NDLY: All mines minerals and other reservations
as contained in the Crown Lands Act

Subject To: Caveat No. 81-11127N
From/By: The City of Flin Flon

7

Parcel 15. Title No. 2036008

At Snow Lake and being
NLY 180 Feet Perp of
Lot 2 Block 6 Plan 646 PLTO (N DIV)
IN 68-17 WPM
Subject to the reservations contained in
the Crown Lands Act

Subject To:	Caveat No. 23920N Description: Easement From/By: Howe Sound Exploration Co. Ltd.
	Caveat No. 34136N Description: Easement From/By: Hudson Bay Mining & Smelting Co. Limited et al
	Caveat No. 34665N Description: Easement and other matters as set forth in the Caveat From/By: Hudson Bay Mining & Smelting Co. Limited et al

Parcel 16. Title No. 2048863

At Snow Lake and being
Lot 4 Block 3 Plan 6575 PLTO (N DIV)
IN 68-17 WPM
EXC all mines minerals and other reservations
as contained in the Crown Lands Act
EXC subsection (1)(A) of Section 4 of said Act

Subject To:	Request Correction No. 1080092 Description:  The purpose of this request is to correct Title 2048863 in order to change the name of the registered owner from "LTD.", in error, to "LIMITED"
	Miscellaneous No. 192517OSN Description: Re The supply of light, power and other matters From/By: Hudson Bay Mining & Smelting Co Limited et al

Parcel 17. Title No. 1909662

All mines and minerals in
Parcel 1: Fractional NE 1/4 17-17-29 WPM
EXC: That portion which lies NELY of a line drawn
Parallel with and Perp distant 100 feet SWLY from the
Centre line of Railway Plan 40 NLTO

Parcel 2: NW 1/4 17-17-29 WPM
As set forth in transfer 145665 NLTO

Subject To:	Caveat No. 39578 From/By: Ernest Robert Hayden
	Caveat No. 97-6334 From/By: Ernest Robert Hayden and Marie Irma Hayden

8

Parcel 18. Title No. 2028449

That portion of Plan 5516 (N DIV) in Township 86 and
Ranges 14-17 WPM lying East of Plan 898 PLTO (N DIV), Exc
1STLY: Road Plans 42417 PLTO & 42913 PLTO
2NDLY: All mines, minerals and other reservations
as contained in The Crown Lands Act

Subject To: Caveat No. 43465N
From/By: H.M. The Queen (Manitoba) A/S

Parcel 19. Title No. 1823057

At Flin Flon and being
Lots 14 and 15 Block 4 Plan 7634 PLTO (N DIV)
in W 1/2 6-67-29 WPM
EXC all mines, minerals and other reservations
as contained in The Crown Lands Act.

Subject To:	Caveat No. 1034175 Description: Agreement to build & maintain pipes/sidewalks etc. From/By: The City of Flin Flon
	Caveat No. 84-8821N From/By: Manitoba Hydro-Electric Board/Manitoba Telephone System
	Caveat No. 93-4221 From/By: The City of Flin Flon

Parcel 20. Title No. 1904344

At Snow Lake and being
Lot 3 Block 34 Plan 804 PLTO (N DIV)
in 68-17 WPM
EXC all mines and minerals

Subject To: Caveat No. 34665N
Description: Easement and other matters as set forth in the Caveat.
From/By: Hudson Bay Mining & Smelting Co. Limited et al

Parcel 21. Title No. 2005396

At Snow Lake and being
Parcel A Plan 5168 PLTO (N DIV)
in 68-17 WPM
EXC all mines, minerals and other reservations
as contained in The Crown Lands Act

Subject To: Caveat No. 34665N
Description: Easement and other matters as set forth in the Caveat.
From/By: Hudson Bay Mining & Smelting Co. Limited et al

9

Parcel 22. Title No. 2005545

At Snow Lake and being
Lot 2 Block 34 Plan 804 PLTO (N DIV)
in 68-17 WPM
EXC all mines and minerals

Subject To: Caveat No. 34665N
Description: Easement and other matters as set forth in the Caveat.
From/By: Hudson Bay Mining & Smelting Co. Limited et al

Parcel 23. Title No. 2005677

At Flin Flon and being
Lot 9 Block 138 Plan 902 PLTO (N DIV)
in NE 1/4 5 and SE 1/4 8-67-29 WPM
EXC all mines, minerals and other reservations
as contained in The Crown Lands Act

Subject To:	Caveat No. 44201N Description: Easement From/By: Northern Manitoba Power Company Limited
	Caveat No. 44230N Description: Easements, Development Agreement and other matters From/By: The City of Flin Flon

Parcel 24. Title No. 1701824

RLY Right-of-way Plan 773 PLTO (N DIV)
In 66-19 & 20 WPM and 67-18 & 19 WPM
EXC all mines, minerals and other provisoes, including
reservations regarding future road allowances, as set forth
in a grant from the Crown filed as Real Property
Application No. 19868 PLTO (N DIV)

Subject To: NIL

10

Parcel 25. Tile No. 2005716

At Flin Flon and being
Lot 16 Block 135 Plan 902 PLTO (N DIV)
in NE 1/4 5 and SE 1/4 8-67-29 WPM
EXC all mines, minerals and other reservations
as contained in The Crown Lands Act

Subject To:	Caveat No. 44201N Description: Easement From/By: Northern Manitoba Power Company Limited
	Caveat No. 44230N Description: Easement, Development Agreement and other matters From/By: The City of Flin Flon

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon Name:    Brian Gordon Title:      Vice-President and General Counsel

11

Part 2 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 17, 2004.

Claims
Claim	23139	EOLA	HBMS
Claim	CB4752		HBMS
Claim	CB4897	BIG	HBMS
Claim	CB4898	BIG	HBMS
Claim	P3623E	BIG 1 FR.	HBMS
Claim	P3624E	BIG 2 FR.	HBMS
Claim	P3625E	BIG 3 FR.	HBMS
Claim	P3627E	BIG 5 FR.	HBMS
Claim	P3628E	BIG 6 FR.	HBMS
Claim	CB13367	RES 13367	HBMS
Claim	CB13368	RES 13368	HBMS
Claim	CB13370	RES 13370	HBMS
Claim	CB13371	RES 13371	HBMS
Claim	P4963E	RES 4963	HBMS
Claim	P4964E	RES 4964	HBMS
Claim	CB13425	RAG 13425	HBMS
Claim	CB13426	RAG 13426	HBMS
Claim	CB13435	RAG 13435	HBMS
Claim	CB13436	RAG 13436	HBMS
Claim	CB13437	RAG 13437	HBMS
Claim	CB13441	RAG 13441	HBMS
Claim	CB13442	RAG 13442 FR.	HBMS
Claim	CB5318	RAG	HBMS
Claim	CB5319	RAG	HBMS
Claim	CB5320	RAG	HBMS
Claim	CB5321	RAG	HBMS
Claim	CB5322	RAG	HBMS
Claim	CB5323	RAG	HBMS
Claim	CB5324	RAG	HBMS
Claim	P5655D	RAG #1	HBMS
Claim	P5656D	RAG #2	HBMS
Claim	P5657D	RAG #3	HBMS
Claim	P5658D	RAG #4	HBMS
Claim	P5659D	RAG #5	HBMS
Claim	P5660D	RAG #6	HBMS
Claim	P5661D	RAG #7	HBMS
Claim	P7843E	RAG 7843	HBMS
Claim	P7844E	RAG 7844	HBMS
Claim	P7845E	RAG 7845	HBMS
Claim	CB11285	HANNELE	HBMS
Claim	CB11287	LISE	HBMS
Claim	CB11288	DANIELLE	HBMS
Claim	CB11289	KAREN	HBMS
Claim	CB11290	KAROLYN	HBMS
Claim	CB11291	MIRANDA	HBMS
Claim	CB11292	PATTY	HBMS
Claim	CB11293	LINDA	HBMS
Claim	CB11294	GOLDIE	HBMS
Claim	CB11295	BONNIE	HBMS

12

Claim	CB8696		HBMS
Claim	CB8697		HBMS
Claim	CB8698		HBMS
Claim	CB8699		HBMS
Claim	P7214E	RUT 7214	HBMS
Claim	P7244E	RUT 7244	HBMS
Claim	W54056	RUT 54056	HBMS
Claim	W54063	RUT 54063	HBMS
Claim	W54499	RUT 54499	HBMS
Claim	GP1484	GENERAL PERMIT 1484	HBMS
Claim	GP4041	GENERAL PERMIT 4041	HBMS

13

Part 3 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 17, 2004.

OIC Leases
OIC	1119	MABEL	HBMS
OIC	1122	WREN	HBMS
OIC	1130	PIT	HBMS
OIC	1131	SCHIST	HBMS
OIC	18	MAYBE	HBMS
OIC	19	RYAN	HBMS
OIC	20	OLD SAFETY	HBMS
OIC	364	HEBRON	HBMS
OIC	365	MANITOBA 10	HBMS
OIC	366	MANITOBA 12	HBMS
OIC	367	MANITOBA 11	HBMS
OIC	368	MANITOBA 13	HBMS
OIC	369	MANITOBA 9	HBMS
OIC	589	MARGARET	HBMS
OIC	593	SS	HBMS
OIC	600	ACME	HBMS
OIC	61	CALCITE	HBMS
OIC	62	MAGNESITE	HBMS
OIC	63	BLENDE	HBMS
OIC	64	GALENA	HBMS
OIC	65	CLAUDlUS	HBMS
OIC	66	PAPOOSE	HBMS
OIC	67	CEASAR	HBMS
OIC	68	CUPRITE	HBMS
OIC	69	PYRITE	HBMS
OIC	70	ZIRCON	HBMS
OIC	71	MARCASITE	HBMS
OIC	72	CASSlUS NO. 2	HBMS
OIC	73	JULIUS	HBMS
OIC	74	CHALCOCITE	HBMS
OIC	75	MANDY	HBMS
OIC	76	BRUTUS	HBMS
OIC	M 1	TOM	HBMS
OIC	M 10	B NO. 5	HBMS
OIC	M 11	B NO. 6	HBMS
OIC	M 1138	JEFF	HBMS
OIC	M 12	B NO. 7	HBMS
OIC	M 13	B NO. 8	HBMS
OIC	M 1367	R FR	HBMS
OIC	M 1368	R 1	HBMS
OIC	M 1369	R 2	HBMS
OIC	M 1370	R 3	HBMS
OIC	M 1371	R 4	HBMS
OIC	M 1372	R 5	HBMS
OIC	M 1373	R 6	HBMS
OIC	M 1374	R 7	HBMS
OIC	M 1375	R 8	HBMS
OIC	M 1376	R 9	HBMS
OIC	M 1377	R 10	HBMS

14

OIC	M 1378	R 11	HBMS
OIC	M 1379	R 12	HBMS
OIC	M 1380	R 13	HBMS
OIC	M 1381	R 14	HBMS
OIC	M 1382	R 15	HBMS
OIC	M 1383	R 16	HBMS
OIC	M 1384	R 17	HBMS
OIC	M 14	B NO. 9	HBMS
OIC	M 1445	R NO. 18	HBMS
OIC	M 1446	R NO. 19	HBMS
OIC	M 1447	R NO. 20	HBMS
OIC	M 1448	R NO. 21	HBMS
OIC	M 1449	R NO. 22	HBMS
OIC	M 1450	R NO. 23	HBMS
OIC	M 1451	R NO. 24	HBMS
OIC	M 1452	R NO. 25	HBMS
OIC	M 1453	R NO. 26	HBMS
OIC	M 1454	B NO. 52 FR	HBMS
OIC	M 15	B NO. 11 FR	HBMS
OIC	M 1518	B NO. 51 FR	HBMS
OIC	M 16	B NO. 16	HBMS
OIC	M 17	B NO. 17 FR	HBMS
OIC	M 1733	B NO. 54 FR	HBMS
OIC	M 1743	B NO. 53 FR	HBMS
OIC	M 19	B NO. 26	HBMS
OIC	M 2	EHTEL FR	HBMS
OIC	M 20	B NO. 27	HBMS
OIC	M 2093	B NO. 55	HBMS
OIC	M 2094	B NO. 56	HBMS
OIC	M 21	B NO. 31 FR	HBMS
OIC	M 22	B NO. 44	HBMS
OIC	M 23	B NO. 21	HBMS
OIC	M 2596	R NO. 27	HBMS
OIC	M 2597	R NO. 51	HBMS
OIC	M 2598	R NO. 55	HBMS
OIC	M 2599	R NO. 47	HBMS
OIC	M 2660	R NO. 32	HBMS
OIC	M 2601	R NO. 31	HBMS
OIC	M 2602	R NO. 30	HBMS
OIC	M 2603	R NO. 29	HBMS
OIC	M 2604	R NO. 28	HBMS
OIC	M 2900	R. NO. 33	HBMS
OIC	M 2901	R. NO. 34	HBMS
OIC	M 2902	R. NO. 35	HBMS
OIC	M 2903	R. NO. 36	HBMS
OIC	M 2904	R. NO. 37	HBMS
OIC	M 2905	R. NO. 38	HBMS
OIC	M 2906	R. NO. 39	HBMS
OIC	M 2907	R. NO. 42	HBMS
OIC	M 2908	R. NO. 43	HBMS
OIC	M 2909	R. NO. 44	HBMS
OIC	M 2910	R. NO. 45	HBMS
OIC	M 2911	R. NO. 46	HBMS
OIC	M 2912	R. NO. 48	HBMS

15

OIC	M 2913	R. NO. 49	HBMS
OIC	M 2914	R. NO. 50	HBMS
OIC	M 2915	R. NO. 52	HBMS
OIC	M 2916	R. NO. 53	HBMS
OIC	M 2917	R. NO. 54	HBMS
OIC	M 2918	R. NO. 56	HBMS
OIC	M 2919	R. NO. 57	HBMS
OIC	M 2920	R. NO. 58	HBMS
OIC	M 2921	R. NO. 59	HBMS
OIC	M 2922	R. NO. 60	HBMS
OIC	M 2923	R. NO. 61	HBMS
OIC	M 2924	R. NO. 62	HBMS
OIC	M 2925	R. NO. 63	HBMS
OIC	M 2926	R. NO. 64	HBMS
OIC	M 2927	R. NO. 65	HBMS
OIC	M 2928	R. NO. 67	HBMS
OIC	M 2942	R NO. 81	HBMS
OIC	M 2999	R NO. 66	HBMS
OIC	M 3000	R NO. 82	HBMS
OIC	M 3472	ACE FR	HBMS
OIC	M 3473	ACE NO. 1	HBMS
0IC	M 3474	ACE NO. 4	HBMS
OIC	M 3475	ACE NO. 3	HBMS
OIC	M 3476	SPOT	HBMS
OIC	M 3568	INLET NO. 1	HBMS
OIC	M 3569	INLET NO. 2	HBMS
OIC	M 3570	INLET NO. 3	HBMS
OIC	M 3571	INLET NO. 4	HBMS
OIC	M 3572	INLET NO. 5	HBMS
OIC	M 4133	IRON HORSE NO. 1	HBMS
OIC	M 4134	IRON HORSE NO. 2	HBMS
OIC	M 4135	IRON HORSE NO. 3	HBMS
OIC	M 4136	IRON HORSE NO. 4	HBMS
OIC	M 4137	CITY DEEP	HBMS
OIC	M 4138	BLUE FR	HBMS
OIC	M 7	B NO. 1	HBMS
OIC	M 77	B NO. 10	HBMS
OIC	M 78	B NO. 12	HBMS
OIC	M 79	B NO. 13	HBMS
OIC	M 8	B NO. 2	HBMS
OIC	M 80	B NO. 4	HBMS
OIC	M 81	B NO. 14	HBMS
OIC	M 82	B NO. 15	HBMS
OIC	M 83	B NO. 22	HBMS
OIC	M 84	B NO. 30 FR	HBMS
OIC	M 85	B NO. 23	HBMS
OIC	M 9	B NO. 3	HBMS
OIC	M 900	A NO. 31	HBMS
OIC	M 901	B NO. 41	HBMS
OIC	M 905	B NO. 18	HBMS
OIC	M 906	B NO. 19	HBMS
OIC	M3759	O NO. 1	HBMS
OIC	M3760	O NO. 3	HBMS
OIC	M3761	O NO. 5	HBMS

16

OIC	M3762	O NO. 6	HBMS
OIC	M3763	O NO. 7	HBMS
OIC	M3764	O NO. 8	HBMS
OIC	M3765	O NO. 9	HBMS
OIC	M3766	O NO. 10	HBMS
OIC	M3767	O NO. 11	HBMS
OIC	M3768	O NO. 12	HBMS
OIC	M3769	PEG NO. 1	HBMS
OIC	M3770	PEG NO. 2	HBMS
OIC	M3771	PEG NO. 3	HBMS
OIC	M3772	PEG NO. 4	HBMS
OIC	M3773	PEG NO. 6	HBMS
OIC	M3774	PEG NO. 7	HBMS
OIC	M3775	PEG NO. 8	HBMS
OIC	M3776	PEG NO. 9	HBMS
OIC	M3777	PEG NO. 10	HBMS
OIC	M3778	PEG NO. 11	HBMS
OIC	M3779	PEG NO. 12	HBMS
OIC	M3780	PEG NO. 13	HBMS
OIC	M3781	PEG NO. 14	HBMS
OIC	M3782	PEG NO. 16	HBMS
OIC	M3783	PEG NO. 22	HBMS
OIC	M3784	PEG NO. 23	HBMS
OIC	M3785	PEG NO. 29	HBMS
OIC	M3786	PEG NO. 36	HBMS
OIC	M3787	PEG NO. 44	HBMS
OIC	M3788	PEG NO. 51	HBMS
OIC	M3789	PINE NO. 13	HBMS
OIC	M3790	PINE NO. 14	HBMS
OIC	M3791	PINE NO. 15	HBMS
OIC	M3792	PINE NO. 16	HBMS
OIC	M3793	PINE NO. 17	HBMS
OIC	M3798	O NO. 2	HBMS
OIC	M3799	O NO. 4	HBMS
OIC	M3800	PEG NO. 5	HBMS
OIC	M3801	PEG NO. 15	HBMS
OIC	M3802	PEG NO. 30	HBMS
OIC	M3803	PEG NO. 37	HBMS
OIC	M3804	PEG NO. 45	HBMS
OIC	M3805	PEG NO. 46	HBMS
OIC	M3806	PEG NO. 52	HBMS
OIC	M7384	PEG NO. 58	HBMS
OIC	M7385	PEG NO. 59 FR	HBMS
OIC	M7386	PEG NO. 66	HBMS
OIC	M7387	PEG NO. 67	HBMS
OIC	M3789	PEG NO. 74	HBMS
OIC	M7395	RAM NO. 150 FR	HBMS
OIC	M7396	RAM NO. 151	HBMS
OIC	M7397	RAM NO. 172	HBMS
OIC	M7398	RAM NO. 173	HBMS
OIC	M7399	PINE NO. 18	HBMS
OIC	M7400	PINE NO. 19	HBMS
OIC	M7401	PINE NO. 20	HBMS
OIC	M7402	PINE NO. 21	HBMS

17

OIC	M7403	PINE NO. 22	HBMS
OIC	M7404	PINE NO. 23	HBMS
OIC	M7405	PEG NO. 132	HBMS
OIC	M7406	PEG NO. 133	HBMS
OIC	M7407	PEG NO. 134	HBMS
OIC	M7408	PEG NO. 135 FR	HBMS
OIC	M7409	PEG NO. 136	HBMS
OIC	M7410	PEG NO. 137	HBMS
OIC	M7411	PEG NO. 138	HBMS
OIC	M7412	PEG NO. 139	HBMS
OIC	M7413	PEG NO. 140	HBMS
OIC	M7414	PEG NO. 141	HBMS
OIC	M7415	PEG NO. 142	HBMS
OIC	M7416	PEG NO. 143	HBMS
OIC	M7417	PEG NO. 144	HBMS
OIC	M7418	PEG NO. 145	HBMS
OIC	M7419	DOT NO. 1 FR	HBMS
OIC	M7420	DOT NO. 2 FR	HBMS
OIC	M7421	DOT NO. 3 FR	HBMS
OIC	M7422	DOT NO. 6 FR	HBMS
OIC	M7423	DOT NO. 7 FR	HBMS
OIC	M7424	DOT NO. 8 FR	HBMS
OIC	M7425	DOT NO. 9 FR	HBMS
OIC	M7426	DOT NO. 10 FR	HBMS
OIC	M3563	BAKER NO. 7	HBMS
OIC	M3564	BAKER NO. 12	HBMS
OIC	M3565	BAKER NO. 15 FR	HBMS
OIC	M3566	GEO NO. 9	HBMS
OIC	M3567	GEO NO. 10	HBMS
OIC	M3575	LOU NO. 2	HBMS
OIC	M3576	LOU NO. 3	HBMS
OIC	M3577	LOU NO. 4	HBMS
OIC	M3644	GEO NO. 3	HBMS
OIC	M3645	GEO FR	HBMS
OIC	M3647	BAKER NO. 10	HBMS
OIC	M3648	BAKER NO. 9	HBMS
OIC	M3649	BAKER NO. 6	HBMS
OIC	M3650	BAKER NO. 6	HBMS
OIC	M3651	BAKER NO. 4	HBMS
OIC	M3680	BAKER NO. 1	HBMS
OIC	M3681	BAKER NO. 8	HBMS
OIC	M3682	BAKER NO. 11	HBMS
OIC	M3687	GEO NO. 4	HBMS
OIC	M3688	GEO NO. 5	HBMS
OIC	M3689	GEO NO. 6	HBMS
OIC	M3690	GEO NO. 8	HBMS
Mineral Leases
Mineral Lease	ML308	JUNGLE MlNlNG LEASE	HBMS
Mineral Lease	ML039	WESTARM MlNlNG LEASE	HBMS
Mineral Lease	ML042	RUTTAN MINERAL LEASE	HBMS
Mineral Lease	ML043	RUTTAN MlNlNG LEASE	HBMS
Mineral Lease	ML044	RUlTAN MlNlNG LEASE	HBMS

18

Mineral Lease	ML045	RUTTAN MlNlNG LEASE	HBMS
Mineral Lease	ML049	NAMEW MlNlNG LEASE	HBMS
Mineral Lease	ML050	NAMEW MlNlNG LEASE	HBMS
Quarry Leases
Quarry Lease	QL754	QL754 QUARRY LEASE	HBMS
Quarry Lease	QL755	QL755 QUARRY LEASE	HBMS
Surface Leases
Surface Lease	13SL	PAPOOSE FR	HBMS
Surface Lease	14SL	MANDY	HBMS
Surface Lease	15SL	BRUTUS	HBMS
Surface Lease	M53SL	JEFF (HBED)	HBMS
Surface Lease	M82SL	B. NO. 16	HBMS
Surface Lease	M84SL	RYAN	HBMS
Surface Lease	M7394	OX NO. 426 FR	HBMS
Surface Lease	M83SL	MAYBE	HBMS
Surface Lease	M100SL	O NO. 3	HBMS
Surface Lease	M101SL	PINE 15	HBMS
Surface Lease	M111SL	O NO. 5	HBMS
Surface Lease	M136SL	PINE 16	HBMS
Casual Quarry Permits
Casual Quarry Permit	2004-213C	THREEHOUSE LAKE	HBMS
Casual Quarry Permit	2004-214	EDWARDS LAKE	HBMS
Miscellaneous Leases
Misc Lease	MSC3955	MISC LEASE 3955	HBMS
Misc Lease	MSC3724	MISC LEASE 3724	HBMS
Misc Lease	MSC3516	MISC LEASE 3516	HBMS
Misc Lease	MSC3735	MISC LEASE 3735	HBMS

19

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Exhibit 99.13

EX-99.14

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Exhibit 99.14

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, ON M5N 1K9
By:	Hudson Bay Mining and Smelting Co., Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3

FIXED CHARGE

$300,000,000.00 USD

DEMAND DEBENTURE

(MATERIAL PROPERTIES SASKATCHEWAN)

HUDSON BAY MINING AND SMELTING CO, LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for value received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00) in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment.

As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting the generality of the foregoing, all of its interest and estate in fee simple in the lands described in Part 1of Schedule A hereto, all of its interest and estate in the claims described in Part 2 of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 3 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

THIS DEBENTURE is issued subject to and with the benefit of the Conditions and Schedule attached hereto, all of which are to be deemed part of this Debenture. The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it acquires thereafter as soon as the Issuer acquires rights therein.

IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 10th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO, LIMITED
Per:	/s/ Brian Gordon Name: Brian Gordon Title:  Vice-President and General Counsel

THE CONDITIONS HEREINBEFORE REFERRED TO

1.  The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York, as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2.  The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3.  The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terms of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4.  In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely:

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;



(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;



(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress warrant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;



(d)

to preserve, to maintain, to operate and to canyon the Collateral or any portion or portions thereof;



(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;



(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and possess the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is made in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such sale or disposition so made upon credit until the Holder has received actual payment in full;



(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case maybe a leasehold interest in the Collateral and any portion or portions thereof; and

2

(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof, and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer;

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deem expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5.  If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not, to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;



(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;



(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;



(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the Issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

6.  The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collateral together with interest at the rate provided for in this Debenture born the date of payment of such expenditures.

3

7.  The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8.  The Holder may in its discretion:

(a)

release any Collateral from the Charge;



(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;



(c)

agree to accept any other properties or securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9.  This Debenture and all amendments and supplements thereto am and shall at ail times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;



(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10.  This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof, executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11.  The Issuer hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12.  The Issuer hereby declares and covenants that:

(a)

The Land Contracts (Actions) Act (Saskatchewan) shall have no application to any actions, as defined in The Land Contracts (Actions) Act, with respect to this Debenture; and



(b)

The Limitation of Civil Rights Act (Saskatchewan) shall have no application to:



(i)

this Debenture;



(ii)

any mortgage, charge or other security for the payment of money made, given or created by this Debenture;



(iii)

any agreement or instrument renewing or extending or collateral to this Debenture or renewing or extending or collateral to any mortgage, charge or other security referred to or mentioned in clause (ii) of this subparagraph (b); or



(iv)

the rights, powers or remedies of the Holder under this Debenture or under any mortgage, charge or other security, agreement or instrument referred to or mentioned in clauses (ii), (iii) or (iv) of this subparagraph (b).

4

13.  This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Saskatchewan, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

        These conditions are part of the Debenture executed by the Issuer dated the 10th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO, LIMITED
Per:	/s/    Brian Gordon Name: Brian Gordon Title:  Vice-President and General Counsel

5

Part 1 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004.

Lands

CT#	Brief Legal Description	Brief Description
112958185	Plan No. BC2024 Ext 6 as described on CT 67PA14872 (now 112958185), description 6	West of Flin Flon Plant Site
112958208	Plan No. BC2024 Ext 3 as described on CT 67PA14871 (now 112958208), description 3	Flin Flon, Plant Site
112958220	Plan No. BC2024 Ext 4 as described on CT 67PA14871 (now 112958220), description 4	Flin Flon, Plant Site
112958242	SE Sec 12 Twp 67 Rte 30 W1 Plan No. 862024 Ext 5 as described on CT 67PA14871 (now 112958242), description 5	Flin Flon, Plant Site
121830397	Blk/Par A, Plan No. 101832768 Ext 6 as described on CT 61PA14413 (now 121830397, description 6	Southwest of Flin Flon Plant
125869360	Blk/Par B, Plan No. BP3815 Extension 0 as described on CT#92PA20998(1)	Flin Flon, Plant Site
126986563	Blk/Par A, Plan No. 8053 Ext 1 as described on CT 61PA14413 (now 126986563)	Southwest of Flin Flon Plant
126986574	Blk/Par A, Plan No. BQ53 Ext 4 as described on CT 61PA14413 (now 126986574	Southwest of Flin FIon Plant
128384657	Blk/Par A Plan No 101832757 Extension 2 as described on CT#92PA20098(1)	Flin Flon Plant Site
128384668	Blk/Par B Plan No 101832757 Extension 3 as described on CT#92PA20998(1)	Flin Flon Plant Site
128570980	Blk/Par C Plan No BQ5718 Ext 0 as described on CT#92PA20963	Southwest of Flin Flon Plant
128412020	Blk/Par A Plan No BQ53 Ext 6 as shown on Plan 101782087	Southwest of Flin Flon Plant

6

Part 2 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BnY Trust Company of Canada dated December 10, 2004.

Claims

NIL

Part 3 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004.

Leases and Permits

Surface Leases:
Surface Lease with The Town of Creighton	(formerly MSL34, MSL35, MSL36, MSL37, MSL38 and MSL39)	JANUARY SURF LEASE JANETTE SURF LEASE B #29 FR SURF LEASE OWENS SURFACE LEASE DAN SURFACE LEASE A #1 FR SURF LEASE
Mineral Surface Lease	200026	MS 52 (Malachite)
Mineral Surface Lease	200031	MS 80 (ROYAL CAZAZA)
Surface Lease	200099	KONUTO SURFACE LEASE

7

Mineral Leases
Mineral Surface Lease	Q-1312	B49
Mineral Surface Lease	Q-4097	A38FR
Mining Lease	ML 5518	FFN LEASE
Mineral Surface Lease	Q-952	MONROE
Mineral Surface Lease	Q-1010	RHINOCEROS
Mineral Surface Lease	Q-1020	DARNING NEEDLE
Mineral Surface Lease	Q-1053	TORPEDO
Mineral Surface Lease	Q-1063	RED TOP
Mineral Surface Lease	Q-1074	WEE RED TOP
Mineral Surface Lease	Q-1076	4 QUEENS
Mineral Surface Lease	Q-1084	MARGUERITE
Mineral Surface Lease	Q-1104	SKY PILOT
Mineral Surface Lease	Q-1105	JOHNNY BARON
Mineral Surface Lease	Q-1112	B.M. JUNIOR
Mineral Surface Lease	Q-1145	BATTLESHIP
Mineral Surface Lease	Q-1146	TWO BITS
Mineral Surface Lease	Q-1160	LITTLE RED TOP FR.
Mineral Surface Lease	Q-1164	RED ROSE
Mineral Surface Lease	Q-1258	JANUARY LEASE
Mineral Surface Lease	Q-1260	JANNETTE
Mineral Surface Lease	Q-1273	EOLA
Mineral Surface Lease	Q-1278	LILLY
Mineral Surface Lease	Q-1281	VIRGINIA
Mineral Surface Lease	Q-1282	1920
Mineral Surface Lease	Q-1289	FOX TROT
Mineral Surface Lease	Q-1290	AMARYLLIS
Mineral Surface Lease	Q-1302	OH DON'T
Mineral Surface Lease	Q-1303	MARY E.
Mineral Surface Lease	Q-1527	GENERAL HEPBURN
Mineral Surface Lease	Q-1933	DAN
Quarry Leases: Saskatchewan
Quarry Lease	Y4172	Y-4172R5 (500024)
Quarry Lease	Y4173	Y-4173R5 (500227)
Quarry Surface Leases: Saskatchewan
Quarry Surface Lease	500024	Y-4172R5 SURF LEASE
Quarry Surface Lease	500227	Y-4173R5 SURF LEASE
Mining Lease: Saskatchewan
Mining Lease	ML 5517	KONUTO LEASE

8

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Exhibit 99.14
FIXED CHARGE
$300,000,000.00 USD
DEMAND DEBENTURE
(MATERIAL PROPERTIES SASKATCHEWAN)

EX-99.15

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Exhibit 99.15

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, ON M5N 1K9
By:	Hudson Bay Mining and Smelting Co., Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3

FIXED CHARGE

$300,000,000.00 USD

DEMAND DEBENTURE

(IMMATERIAL PROPERTIES —
SASKATCHEWAN)

HUDSON BAY MINING AND SMELTING CO., LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for value received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00) in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment

        As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mined and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting the generality of the foregoing, all of its interest and estate in fee simple in the lands described in Part 1 of Schedule A hereto, all of its interest and estate in the claims described in Part 2 of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 3 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

        THIS DEBENTURE is issued subject to and with the benefit of the Conditions and schedule attached hereto, all of which are to be deemed part of this Debenture. The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it acquires thereafter as soon as the Issuer acquires rights therein.

        IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 10th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian D. Gordon
	Name: Title:

2

THE CONDITIONS HEREINBEFORE REFERRED TO

1.  The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York, as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2.  The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3.  The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terns of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4.  In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;



(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;



(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress warrant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;



(d)

to preserve, to maintain, to operate and to carry on the Collateral or any portion or portions thereof;



(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;



(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and possess the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is ma& in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such salt or disposition so made upon credit until the Holder bas received actual payment in full;



(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case may be a leasehold interest in the Collateral and any portion or portions thereof; and

3

(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof, and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer,

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deems expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5.  If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not, to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;



(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;



(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;



(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the Issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

6.  The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collated together with interest at the rate provided for in this Debenture from the date of payment of such expenditures.

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7.  The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8.  The Holder may in its discretion:

(a)

release any Collateral from the Charge;



(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;



(c)

agree to accept any other properties or securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9.  This Debenture and all amendments and supplements thereto an and shall at all times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking. realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;



(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10.  This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof, executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11.  The Issuer hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12.  The Issuer hereby declares and covenants that:

(a)

The Land Contracts (Actions)Act (Saskatchewan) shall have no application to any actions, as defined in The Land Contracts (Actions) Act, with respect to this Debenture; and



(b)

The Limitation of Civil Rights Act (Saskatchewan) shall have no application to:



(i)

this Debenture;



(ii)

any mortgage, charge or other security for the payment of money made, given or created by this Debenture;



(iii)

any agreement or instrument renewing or extending or collateral to this Debenture or renewing or extending or collateral to any mortgage, charge or other security referred to or mentioned in clause (ii) of this subparagraph (b); or



(iv)

the rights, powers or remedies of the Holder under this Debenture or under any mortgage, charge or other security, agreement or instrument referred to or mentioned in clauses (ii), (iii) or (iv) of this subparagraph (b).

5

13.  This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Saskatchewan, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

        These conditions are part of the Debenture executed by the Issuer dated the 10^th day of December, 2004.

HUDSON BAY MINING AND SMELTING CO., LIMITED
Per:	/s/ Brian Gordon
	Name: Brian Gordon Title: Vice-President and General Counsel

6

Part 1 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada Act December 10, 2004

7

Part 2 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004

8

Part 3 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Mining and Smelting Co., Limited to BNY Trust Company of Canada dated December 10, 2004

9

SCHEDULE A

HUDSON BAY MINING AND SMELTING CO., LIMITED

NON-MATERIAL PROPERTIES

SASKATCHEWAN

Part 1

Lands

Nil

Part 2

Claims

Claim S-99623 NER 99623 HBMS

Part 3

Leases and Permits

Quarry Leases
	Quarry Lease	Y5941	Y-5941R5 (550254)	HBMS
	Quarry Lease	Y5942	Y-5942R5 (550255)	HBMS
	Quarry Lease	Y6751	Y-6751R4 (500002)	HBMS
	Quarry Lease	Y6752	Y-6752R4 (500073)	HBMS
	Quarry Lease	Y6753	Y-6753R4 (500003)	HBMS
	Quarry Lease	Y6754	Y-6754R4 (500004)	HBMS
	Quarry Lease	Y6755	Y-6755R4 (500005)	HBMS
	Quarry Lease	Y6792	Y-6792R4 (500245)	HBMS
	Quarry Lease	Y7098	Y-7098R3 (500163)	HBMS
	Quarry Lease	Y7099	Y-7099R3 (500162)	HBMS
	Quarry Lease	Y7738	Y-7738 (500542)	HBMS
	Quarry Lease	Y7739	Y-7739 (500543)	HBMS
	Quarry Lease	Y7740	Y-7740 (500544)	HBMS
	Quarry Lease	Y7741	Y-7741 (500545)	HBMS

Surface Quarry Leasee
	Surface Quarry Lease	500002	Y-6751R4 SURF LEASE	HBMS
	Surface Quarry Lease	500003	Y-6753R4 SURF LEASE	HBMS
	Surface Quarry Lease	500004	Y-6754R4 SURF LEASE	HBMS
	Surface Quarry Lease	500005	Y-6755R4 SURF LEASE	HBMS
	Surface S&G Lease	500015	Y-5909R2 SUR LEASE	HBMS
	Surface S&G Lease	500016	Y-5910R2 SURF LEASE	HBMS
	Surface S&G Lease	500017	Y-5911R2 SURF LEASE	HBMS
	Surface S&G Lease	500019	Y-5919R2 SURF LEASE	HBMS
	Surface S&G Lease	500020	Y-5920R2 SURF LEASE	HBMS
	Surface S&G Lease	500021	Y-5921 R2 SURF LEASE	HBMS
	Surface S&G Lease	500022	Y-5924R2 SURF LEASE	HBMS
	Surface S&G Lease	500023	Y-5925R2 SURF LEASE	HBMS
	Surface Quarry Lease	500073	Y-6752R4 SURF LEASE	HBMS
	Surface S&G Lease	500090	Y-6880 SURF LEASE	HBMS
	Surface S&G Lease	500091	Y-6879 SURF LEASE	HBMS
	Surface Quarry Lease	500162	Y-7099R3 SURF LEASE	HBMS
	Surface Quarry Lease	500163	Y-7098R3 SURF LEASE	HBMS
	Surface S&G Lease	500236	Y-5912R2 SURF LEASE	HBMS
	Surface S&G Lease	500237	Y-5915RR2 SURF LEASE	HBMS
	Surface S&G Lease	500238	Y-5916R2 SURF LEASE	HBMS
	Surface S&G Lease	500239	Y-5923R2 SURF LEASE	HBMS
	Surface S&G Lease	500241	Y-5914R2 SURF LEASE	HBMS
	Surface S&G Lease	500242	Y-5913R2 SURF LEASE	HBMS
	Surface S&G Lease	500244	Y-5922R2 SURF LEASE	HBMS
	Surface Quarry Lease	500245	Y-6792R4 SURF LEASE	HBMS
	Surface Quarry Lease	500542	Y-7738 SURF LEASE	HBMS
	Surface Quarry Lease	500543	Y-7739 SURF LEASE	HBMS
	Surface Quarry Lease	500544	Y-7740 SURF LEASE	HBMS
	Surface Quarry Lease	500545	Y-7741 SURF LEASE	HBMS
	Surface Quarry Lease	500548	500548 SURF LEASE	HBMS
	Surface Quarry Lease	500549	500549 SURF LEASE	HBMS
	Surface Quarry Lease	500085	Y-6809 SURF LEASE	HBMS
Mining Leases
	Mining Lease	ML 5515	BIRCH LAKE	HBMS

2

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Exhibit 99.15
FIXED CHARGE
THE CONDITIONS HEREINBEFORE REFERRED TO
SCHEDULE A HUDSON BAY MINING AND SMELTING CO., LIMITED NON-MATERIAL PROPERTIES SASKATCHEWAN

EX-99.16

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Exhibit 99.16

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, OR M5N 1K9
By:	Hudson Bay Exploration and Development Company Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3

FIXED CHARGE

$300,000,000.00 USD

DEMAND DEBENTURE

(MATERIAL PROPERTIES —
MANITOBA)

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for due received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00) in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment.

        As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting generality of the foregoing, all of its interest and estate in the claims described in Part 1 of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 2 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

        THIS DEBENTURE is issued subject to and with the benefit of the Conditions and Schedule attached hereto, all of which are to be deemed part of this Debenture. The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it acquires thereafter as soon as the Issuer acquires rights therein.

        IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 10th day of December, 2004.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/ Brian Gordon
	Name: Brian Gordon Title: Secretary

2

THE CONDITIONS HEREINBEFORE REFERRED TO

1.

The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York, as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2.

The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3.

The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terms of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4.

In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely:

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;

(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;

(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress warrant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;

(d)

to preserve, to maintain, to operate and to carry on the Collateral or any portion or portions thereof;

(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;

(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and posses the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is made in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such sale or disposition so made upon credit until the Holder has received actual payment in full;

3

(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case may be a leasehold interest in the Collateral and any portion or portions thereof; and



(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof, and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer;

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deems expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5.

If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not, to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;

(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;

(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;

(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the Issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

4

6.

The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collateral together with interest at the rate provided for in this Debenture from the date of payment of such expenditures.

7.

The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8.

The Holder may in its discretion:

(a)

release any Collateral from the Charge;

(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;

(c)

agree to accept any other properties or securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9.

This Debenture and all amendments and supplements thereto are and shall at all times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;

(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10.

This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof, executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11.

The Issuer hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12.

This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Manitoba, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

5

        These conditions are part of the Debenture executed by the Issuer dated the 10th day of December, 2004.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/ Brian Gordon
	Name: Brian Gordon Title: Secretary

6

        Part 1 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Exploration and Development Company Limited to BNY Trust Company of Canada dated December 10, 2004

Claims
Claim	28390	HIGH FLYER
Claim	28391	FOX TROT
Claim	29171	OH DON'T
Claim	29524	VIRGINIA
Claim	34600	MARY E
Claim	CB8516
Claim	P4771E	NU 1
Claim	P5060E	NU 2
Claim	P5061E	NU 3
Claim	P5062E	NU 4
Claim	P5063E	NU 5
Claim	P5064E	NU 6 FR.

7

        Part 2 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Exploration and Development Company Limited to BNY Trust Company of Canada dated December 10, 2004

Surface Permits
Surface Permit	DAN	DAN PERMIT

8

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Exhibit 99.16
FIXED CHARGE
THE CONDITIONS HEREINBEFORE REFERRED TO

EX-99.17

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Exhibit 99.17

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, ON M5N 1K9
By:	Hudson Bay Mining and Development Company Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3
FIXED CHARGE
		$300,000,000.00 USD DEMAND DEBENTURE (IMMATERIAL PROPERTIES — MANITOBA)

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for value received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00)in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment.

        As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting the generality of the foregoing, all of its interest and estate in the claims described in Part 1of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 2 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

        THIS DEBENTURE is issued subject to and with the benefit of the Conditions and Schedule attached hereto, all of which are to be deemed part of this Debenture. 'The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it squires thereafter as soon as the Issuer acquires rights therein.

        IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 17th day of December, 2004.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/    Brian Gordon Name: Brian Gordon Title:  Secretary

THE CONDITIONS HEREINBEFORE REFERRED TO

1.    The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2.    The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3.    The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terms of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4.    In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely:

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;



(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;



(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress warrant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;



(d)

to preserve, to maintain, to operate and to carry on the Collateral or any portion or portions thereof;



(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;



(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and possess the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is made in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such sale or disposition so made upon credit until the Holder has received actual payment in full;



(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case may be a leasehold interest in the Collateral and any portion or portions thereof; and

2

(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer;

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deems expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5.    If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not, to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;



(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;



(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;



(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

6.    The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collateral together with interest at the rate provided for in this Debenture from the date of payment of such expenditures.

3

7.    The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8.

The Holder may in its discretion:

(a)

release any Collateral from the Charge;

(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;

(c)

agree to accept any other properties or Securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9.    This Debenture and all amendments and supplements thereto are and shall at all times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;



(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10.    This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof; executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11.    The Issuer hereby covenants and agtees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12.    This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Manitoba, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

        These conditions are part of the Debenture executed by the Issuer dated the 17^th day of December, 2004.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/    Brian Gordon Name: Brian Gordon Title:  Secretary

4

Part 1 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Exploration and Development Company Limited to BNY Trust Company of Canada dated December 17, 2004

Claims
Claim	P4592	E.D. 1	HBED
Claim	P4593	E.D. 2	HBED
Claim	P4594	E.D. NO. 3	HBED
Claim	CB10565	ZYL10565	HBED
Claim	CB9243	ZYL	HBED
Claim	CB9244	ZYL	HBED
Claim	CB9246	ZYL	HBED
Claim	P1769F	ZYL 1769	HBED
Claim	P1770F	ZYL 1770	HBED
Claim	P2872E	ZYL 65 FR.	HBED
Claim	P2873E	ZYL 66 FR.	HBED
Claim	P2874E	ZYL 67 FR.	HBED
Claim	P2914E	ZYL 64	HBED
Claim	P9507C	ZYL 53	HBED
Claim	P9508C	ZYL 54 FR.	HBED
Claim	P9509C	ZYL 55 FR.	HBED
Claim	P9510C	ZYL 56	HBED
Claim	P98670	WIM 880	HBED
Claim	P98957	NEW 9	HBED
Claim	W49947	WIN 49947	HBED
Claim	W49948	WIN 49948	HBED
Claim	W54437	ZYL 54437	HBED
Claim	W54438	ZYL 54438	HBED
Claim	W54439	ZYL 54439	HBED
Claim	W54443	ZYL 54443	HBED
Claim	W54450	ZYL 54450	HBED
Claim	W54451	ZYL 54451	HBED
Claim	W54452	ZYL 54452	HBED
Claim	CB10611	WAN 10611	HBED
Claim	CB10634	WAN 10634	HBED
Claim	CB10789	WAN 10789	HBED
Claim	CB5304	WAN	HBED
Claim	CB5305	WAN	HBED
Claim	CB5325	WAN	HBED
Claim	CB5358	WAN	HBED
Claim	CB5359	WAN	HBED
Claim	CB5360	WAN	HBED
Claim	CB6024	WAN	HBED
Claim	CB6025	WAN	HBED
Claim	CB6081	WAN	HBED
Claim	CB6082	WAN	HBED
Claim	CB6084	WAN	HBED
Claim	CB6088	WAN	HBED
Claim	MB2539	WAN 2539	HBED
Claim	P1455E	DAP 1	HBED
Claim	P1456E	DAP 2	HBED
Claim	P1457E	DAP 3	HBED
Claim	P1744D	WAN 306	HBED

5

Claim	P1745D	WAN 307	HBED
Claim	P2920E	WAN 311	HBED
Claim	P2921E	WAN 312	HBED
Claim	P2922E	WAN 313	HBED
Claim	P3852E	WAN 323 FR.	HBED
Claim	P3853E	WAN 324	HBED
Claim	P4153E	WAN 4153	HBED
Claim	P4285A	WAN 170 FR.	HBED
Claim	P4437C	WAN 173 FR.	HBED
Claim	P4438C	WAN 174 FR.	HBED
Claim	P4439C	WAN 175	HBED
Claim	P4445C	WAN 181	HBED
Claim	P4446C	WAN 182	HBED
Claim	P4552A	WAN 141	HBED
Claim	P4553A	WAN 142	HBED
Claim	P7821E	WAN 7821	HBED
Claim	P863F	ARROW FR.	HBED
Claim	P9288C	WAN 219	HBED
Claim	P9289C	WAN 220	HBED
Claim	P9290C	WAN 221 FR.	HBED
Claim	P9291C	WAN 222 FR.	HBED
Claim	P9292C	WAN 223	HBED
Claim	P9293C	WAN 224	HBED
Claim	P9294C	WAN 225	HBED
Claim	P9295C	WAN 226	HBED
Claim	CB5799	MUD	HBED
Claim	CB5800	MUD	HBED
Claim	P1765F	ED 1765	HBED
Claim	P1766F	ED 1766	HBED
Claim	P1767F	ED 1767	HBED
Claim	P2871E	MUD 73 FR.	HBED
Claim	P2906E	MUD 66	HBED
Claim	P2915E	MUD 67	HBED
Claim	P5651D	MUD 74	HBED
Claim	P98692	MUD 4 FR.	HBED
Claim	P98693	MUD 5	HBED
Claim	P98730	MUD 42	HBED
Claim	P98731	MUD 43	HBED
Claim	P99020	MUD 62	HBED
Claim	P99021	MUD 63 FR.	HBED
Claim	CB13407	PEN 13407	HBED
Claim	CB13408	PEN 13408	HBED
Claim	CB13413	PEN 13413	HBED
Claim	CB146	PEN	HBED
Claim	CB6478	PEN	HBED
Claim	CB6479	PEN	HBED
Claim	CB6480	PEN	HBED
Claim	CB6481	PEN	HBED
Claim	CB6482	PEN	HBED
Claim	CB6488	PEN	HBED
Claim	CB6489	PEN	HBED
Claim	CB6490	PEN	HBED

6

Claim	P1584F	PEN 1584 FR	HBED
Claim	P1585F	PEN 1585	HBED
Claim	P1586F	PEN 1586	HBED
Claim	P3918E	PEN 405 FR.	HBED
Claim	P3919E	PEN 406	HBED
Claim	P4645E	PEN 4645	HBED
Claim	P4647E	PEN 4647	HBED
Claim	P4650E	PEN 4650	HBED
Claim	P4651E	PEN 4651	HBED
Claim	P4824E	PEN 4824 FR.	HBED
Claim	P4825E	PEN 4825	HBED
Claim	P4826E	PEN 4826 FR.	HBED
Claim	P4896E	PEN 4896 FR.	HBED
Claim	P5106E	KIX 15	HBED
Claim	P612F	PEN 612 FR	HBED
Claim	P7315A	PEN 84	HBED
Claim	P7316A	PEN 85	HBED
Claim	P7317A	PEN 86	HBED
Claim	P7318A	PEN 87	HBED
Claim	P7337A	PEN 88	HBED
Claim	P7338A	PEN 89	HBED
Claim	P7342A	PEN 93	HBED
Claim	P7343A	PEN 94	HBED
Claim	P7344A	PEN 95	HBED
Claim	P7449E	PEN 7449	HBED
Claim	P7450E	PEN 7450	HBED
Claim	P7451E	PEN 7451	HBED
Claim	W54067	PEN 54067	HBED
Claim	P7823E	LAW 7823	HBED
Claim	W54662	LAW 54662	HBED
Claim	CB10610	BUR 10610	HBED
Claim	CB10639	BUR 10639	HBED
Claim	CB10739	BUR 10739	HBED
Claim	CB10740	BUR 10740	HBED
Claim	CB10741	BUR 10741	HBED
Claim	CB12411	BUR 12411	HBED
Claim	CB12412	BUR 12412	HBED
Claim	CB13359	BUR 13359	HBED
Claim	CB13360	BUR 13360	HBED
Claim	CB13361	BUR 13361	HBED
Claim	CB13384	BUR 13384	HBED
Claim	CB13385	BUR 13385	HBED
Claim	CB13446	BUR 13446	HBED
Claim	CB6067	BUR	HBED
Claim	CB6103	BUR	HBED
Claim	CB6104	BUR	HBED
Claim	CB6472	BUR	HBED
Claim	CB7030	BUR	HBED
Claim	CB9247	BUR	HBED
Claim	CB9248	BUR	HBED
Claim	CB9249	BUR	HBED
Claim	CB9252	BUR	HBED

7

Claim	CB9253	BUR	HBED
Claim	P1335B	KIK 135 FR	HBED
Claim	P1779F	BUR 1779	HBED
Claim	P1792C	BUR 1	HBED
Claim	P1965D	BUR 13 FR.	HBED
Claim	P1966D	BUR 12 FR	HBED
Claim	P1996E	BUR 217 FR	HBED
Claim	P2601C	BUR 2 FR.	HBED
Claim	P2602C	BUR 3 FR.	HBED
Claim	P2603C	BUR 4	HBED
Claim	P2604C	BUR 5	HBED
Claim	P2908F	BUR 2908	HBED
Claim	P4062C	BUR 6	HBED
Claim	P4063C	BUR 7	HBED
Claim	P4064C	BUR 8 FR.	HBED
Claim	P4065C	BUR 9 FR.	HBED
Claim	P4066C	BUR 10 FR.	HBED
Claim	P4067C	BUR 11 FR.	HBED
Claim	P5143A	KIK 9	HBED
Claim	P5144A	KIK 10	HBED
Claim	P5616A	KIK 69	HBED
Claim	P5620A	KIK 73 FR.	HBED
Claim	P5621A	KIK 74	HBED
Claim	P5920A	KIK 49	HBED
Claim	P5922A	KIK 51	HBED
Claim	P5923A	KIK 52	HBED
Claim	P5935A	KIK 64	HBED
Claim	6028A	KIK 31 FR.	HBED
Claim	P6029A	KIK 32 FR.	HBED
Claim	P6030A	KIK 33	HBED
Claim	P6031A	KIK 34 FR.	HBED
Claim	P6034A	KIK 37	HBED
Claim	P6035A	KIK 38	HBED
Claim	P6036A	KIK 39	HBED
Claim	P6037A	KIK 40	HBED
Claim	P6045A	KIK 48	HBED
Claim	P7815E	BUR 7815	HBED
Claim	P7816E	BUR 7816	HBED
Claim	P7817E	BUR 7817	HBED
Claim	P7856E	BUR 7856	HBED
Claim	P9345D	BUR 64	HBED
Claim	P9346D	BUR 65	HBED
Claim	P9352D	BUR 71	HBED
Claim	P9353D	BUR 72	HBED
Claim	P9354D	BUR 73	HBED
Claim	P9355D	BUR 74 FR.	HBED
Claim	P9356D	BUR 75 FR.	HBED
Claim	P9357D	BUR 76	HBED
Claim	P9411D	BUR 216 FR.	HBED
Claim	P9501D	BUR 29 FR.	HBED
Claim	P9502D	BUR 30	HBED
Claim	P9503D	BUR 31 FR.	HBED

8

Claim	P9504D	BUR 32	HBED
Claim	P9505D	BUR 33	HBED
Claim	P9506D	BUR 34	HBED
Claim	P9508D	BUR 36	HBED
Claim	P9509D	BUR 37	HBED
Claim	P9510D	BUR 38	HBED
Claim	P9511D	BUR 39	HBED
Claim	P9512D	BUR 40 FR.	HBED
Claim	P9531D	BUR 41 FR.	HBED
Claim	P9532D	BUR 42 FR.	HBED
Claim	P9533D	BUR 43	HBED
Claim	P9534D	BUR 44	HBED
Claim	P9535D	BUR 45	HBED
Claim	P9536D	BUR 46	HBED
Claim	P9537D	BUR 47	HBED
Claim	P9538D	BUR 48	HBED
Claim	P9539D	BUR 49	HBED
Claim	P9540D	BUR 50	HBED
Claim	P9541D	BUR 51	HBED
Claim	P9542D	BUR 52	HBED
Claim	P9543D	BUR 53	HBED
Claim	P9544D	BUR 54	HBED
Claim	P9545D	BUR 55 FR.	HBED
Claim	P9546D	BUR 56 FR.	HBED
Claim	P9547D	BUR 57	HBED
Claim	P9548D	BUR 58	HBED
Claim	P9552D	BUR 170 FR.	HBED
Claim	P9603D	BUR 77	HBED
Claim	P9604D	BUR 78	HBED
Claim	P9605D	BUR 79	HBED
Claim	P9606D	BUR 80	HBED
Claim	P9607D	BUR 81	HBED
Claim	P9608D	BUR 82	HBED
Claim	P9609D	BUR 83	HBED
Claim	P9610D	BUR 84	HBED
Claim	P9611D	BUR 85	HBED
Claim	P9612D	BUR 86	HBED
Claim	P9613D	BUR 87 FR.	HBED
Claim	P9624D	BUR 206	HBED
Claim	P9625D	BUR 207	HBED
Claim	P9626D	BUR 208	HBED
Claim	P9627D	BUR 209 FR.	HBED
Claim	P9834D	BUR 211	HBED
Claim	P9835D	BUR 212	HBED
Claim	W54453	BUR 54453	HBED
Claim	GP 3624	GENERAL PERMIT	GENERAL PERMIT 3624
Claim	CB6444	BUD	HBED
Claim	CB6445	BUD	HBED
Claim	CB9416	BUD 51	HBED
Claim	CB9417	BUD 52	HBED
Claim	P3942E	BUD #50	HBED

9

Claim	P4999E	BUD 42	HBED
Claim	P5000E	BUD 43	HBED
Claim	P5001E	BUD 44	HBED
Claim	P5002E	BUD 45 FR.	HBED
Claim	P5003E	BUD 46 FR.	HBED
Claim	P5004E	BUD 47 FR.	HBED
Claim	P5005E	BUD 48 FR.	HBED
Claim	P5006E	BUD 49 FR.	HBED
Claim	P5594B	BUD 19	HBED
Claim	P5595B	BUD 20	HBED
Claim	P6570B	BUD 14	HBED
Claim	P6571B	BUD 15	HBED
Claim	P6572B	BUD 16	HBED
Claim	P6573B	BUD 17	HBED
Claim	P6574B	BUD 18	HBED
Claim	MB2236	KUS 2236	HBED
Claim	MB2262	KUS 2262	HBED
Claim	MB2518	KUS 2518	HBED
Claim	MB262	KUS 262	HBED
Claim	MB263	KUS 263	HBED
Claim	MB265	KUS 265	HBED
Claim	MB266	KUS 266	HBED
Claim	MB267	KUS 267	HBED
Claim	MB268	KUS 268	HBED
Claim	P1633F	KUS 1633	HBED
Claim	P1634F	KUS 1634	HBED
Claim	P1639F	KUS 1639	HBED
Claim	P1643F	KUS 1643	HBED
Claim	P1644F	KUS 1644	HBED
Claim	P1652F	KUS 1652	HBED
Claim	P1653F	KUS 1653	HBED
Claim	P1654F	KUS 1654	HBED
Claim	P1655F	KUS 1655	HBED
Claim	P1656F	KUS 1656	HBED
Claim	P1657F	KUS 1657	HBED
Claim	P1658F	KUS 1658	HBED
Claim	P1659F	KUS 1659	HBED
Claim	P1731F	KUS 1731	HBED
Claim	P1732F	KUS 1732	HBED
Claim	P1761F	KUS 1761	HBED
Claim	P1762F	KUS 1762	HBED
Claim	P1799F	KUS 1799	HBED
Claim	P1805F	KUS 1805	HBED
Claim	P1812F	KUS 1812	HBED
Claim	P1813F	KUS 1813	HBED
Claim	P1814F	KUS 1814	HBED
Claim	P1815F	KUS 1815	HBED
Claim	P1816F	KUS 1816	HBED
Claim	P1817F	KUS 1817	HBED
Claim	P1818F	KUS 1818	HBED
Claim	P1820F	KUS 1820	HBED
Claim	P1821F	KUS 1821	HBED

10

Claim	P1822F	KUS 1822	HBED
Claim	P1824F	KUS 1824	HBED
Claim	P1825F	KUS 1825	HBED
Claim	P2876F	KUS 2876	HBED
Claim	P2877F	KUS 2877	HBED
Claim	P2880F	KUS 2880	HBED
Claim	P2881F	KUS 2881	HBED
Claim	P2882F	KUS 2882	HBED
Claim	P2961F	KUS 2961	HBED
Claim	P2962F	KUS 2962	HBED
Claim	P7119E	KUS 7119	HBED
Claim	P7805E	KUS 7805	HBED
Claim	W54039	KUS 54039	HBED
Claim	W54055	KUS 54055	HBED
Claim	W54475	KUS 54475	HBED
Claim	MB2281	MAW 2281	HBED
Claim	MB270	MAW 270	HBED
Claim	P3617F	MAW 3617	HBED
Claim	P3618F	MAW 3618	HBED
Claim	P3619F	MAW 3619	HBED
Claim	P3620F	MAW 3620	HBED
Claim	P3621F	MAW 3621	HBED
Claim	P3622F	MAW 3622	HBED
Claim	P3624F	MAW 3624	HBED
Claim	W54015	MAW 54015	HBED
Claim	W54016	MAW 54016	HBED
Claim	W54017	MAW 54017	HBED
Claim	W54018	MAW 54018	HBED
Claim	W54091	MAW 54091	HBED
Claim	W54092	MAW 54092	HBED
Claim	W54096	MAW 54096	HBED
Claim	W54679	MAW 54679	HBED
Claim	W54680	MAW 54680	HBED
Claim	W54681	MAW 54681	HBED
Claim	W54682	MAW 54682	HBED
Claim	W54683	MAW 54683	HBED
Claim	W54684	MAW 54684	HBED
Claim	W54685	MAW 54685	HBED
Claim	W54687	MAW 54687	HBED
Claim	W54688	MAW 54688	HBED
Claim	W54689	MAW 54689	HBED
Claim	W54690	MAW 54690	HBED
Claim	W54753	MAW 54753	HBED
Claim	W54842	MAW 54842	HBED
Claim	W54843	MAW 54843	HBED
Claim	W54845	MAW 54845	HBED
Claim	W54846	MAW 54846	HBED
Claim	W54847	MAW 54847	HBED
Claim	P1673F	YAP 1673	HBED
Claim	W54476	YAP 54476	HBED
Claim	W54477	YAP 54477	HBED
Claim	W54478	YAP 54478	HBED

11

Claim	CB159	EEL	HBED
Claim	CB2698	EEL	HBED
Claim	CB2700	EEL	HBED
Claim	CB2701	EEL	HBED
Claim	MB2237	EEL 2237	HBED
Claim	P1782F	EEL 1782	HBED
Claim	P2644F	EEL 150 FR.	HBED
Claim	P2645E	EEL 151 FR.	HBED
Claim	P5646D	EEL 193 FR.	HBED
Claim	P5647D	EEL 194 FR.	HBED
Claim	P5648D	EEL 195 FR.	HBED
Claim	RMR50		HBED
Claim	W54072	EEL 54072	HBED
Claim	W54074	EEL 54074	HBED
Claim	W54075	EEL 54075	HBED
Claim	W54076	EEL 54076	HBED
Claim	W54085	EEL 54085	HBED
Claim	W54093	EEL 54093	HBED
Claim	W54094	EEL 54094	HBED
Claim	W54095	EEL 54095	HBED
Claim	P1733F	WAY 1733	HBED
Claim	MB324	YES 324	HBED
Claim	W54462	YES 54462	HBED
Claim	W54463	YES 54463	HBED
Claim	W54466	YES 54466	HBED
Claim	W54470	YES 54470	HBED
Claim	W54472	YES 54472	HBED
Claim	W54474	YES 54474	HBED
Claim	MB348	NIM 348	HBED
Claim	P2921F	NIM 2921	HBED
Claim	P2922F	NIM 2922	HBED
Claim	P2928F	NIM 2928	HBED
Claim	P2929F	NIM 2929	HBED
Claim	P2931F	NIM 2931	HBED
Claim	P2932F	NIM 2932	HBED
Claim	P2933F	NIM 2933	HBED
Claim	P2951F	NIM 2951	HBED
Claim	P3501F	NIM 3501	HBED
Claim	P3507F	NIM 3507	HBED
Claim	P3510F	NIM 3510	HBED
Claim	W54433	NIM 54433	HBED
Claim	W54456	NIM 54456	HBED
Claim	W54766	NIM 54766	HBED
Claim	W54769	NIM 54769	HBED
Claim	W54800	NIM 54800	HBED
Claim	P8715E	ARBOUR 40	HBED
Claim	P8808E	ARBOUR 38	HBED
Claim	P8809E	ARBOUR 39	HBED
Claim	W48161	ARBOUR 7	HBED
Claim	W48162	ARBOUR 8	HBED
Claim	P23989	JULY 1	HBED
Claim	P23990	JULY 2	HBED

12

Claim	P4444	LODE EXT. NO. 3	HBED
Claim	P4628	ALF 10	HBED
Claim	P4629	ALF NO. 14	HBED
Claim	P4673	ALF 1	HBED
Claim	P5859	HBED 10	HBED
Claim	P5862	HBED NO. 13	HBED
Claim	P5863	HBED NO. 14	HBED
Claim	P5864	HBED NO. 15	HBED
Claim	P5865	HBED NO. 16	HBED
Claim	P5866	HBED NO. 17	HBED
Claim	P5867	HBED NO. 18	HBED
Claim	P5868	HBED NO. 20	HBED
Claim	P5869	HBED NO. 21	HBED
Claim	P5871	HBED NO. 23	HBED
Claim	P5876	HBED 28	HBED
Claim	P5877	HBED 29	HBED
Claim	P5878	HBED 30 FR.	HBED
Claim	P5879	HBED 31 FR.	HBED
Claim	P5880	HBED 32	HBED
Claim	P5881	HBED 33	HBED
Claim	P5882	HBED 34	HBED
Claim	P5883	HBED 35	HBED
Claim	P5884	HBED 36	HBED
Claim	P5889	HBED 41	HBED
Claim	P5890	HBED 42	HBED
Claim	P5891	HBED NO. 43	HBED
Claim	P5893	HBED 45	HBED
Claim	P5894	HBED NO. 46	HBED
Claim	P5896	HBED 50	HBED
Claim	P5897	HBED NO. 51	HBED
Claim	P5898	HBED NO. 52	HBED
Claim	P6038	HBED NO. 49	HBED
Claim	P6039	HBED NO. 60	HBED
Claim	P6040	HBED NO. 61	HBED
Claim	P6041	HBED NO. 62	HBED
Claim	P6042	HBED NO. 63	HBED
Claim	P6043	HBED NO. 64	HBED
Claim	P6044	HBED NO. 65	HBED
Claim	P6045	HBED NO. 66	HBED
Claim	P6046	HBED NO. 68	HBED
Claim	P6047	HBED NO. 69	HBED
Claim	P6048	HBED NO. 70	HBED
Claim	P6060	HBED NO. 19 FR.	HBED
Claim	P6061	HBED NO. 48 FR.	HBED
Claim	P6062	HBED NO. 67 FR.	HBED
Claim	P6152	HBED NO. 92	HBED
Claim	P6159	HBED NO. 93	HBED
Claim	P6162	HBED 86	HBED
Claim	P6163	HBED 88	HBED
Claim	P6168	HBED 87	HBED
Claim	P6169	HBED 85	HBED
Claim	P6177	HBED 90	HBED

13

Claim	P6178	HBED 89	HBED
Claim	W49827	NEK 1	HBED
Claim	MB2240	ROS 2240	HEED
Claim	MB2241	ROS 2241	HBED
Claim	MB901	ROS 901	HBED
Claim	MB902	ROS 902	HBED
Claim	MB903	ROS 903	HBED
Claim	MB904	ROS 904	HBED
Claim	MB905	ROS 905	HBED
Claim	MB907	ROS 907	HBED
Claim	MB908	ROS 908	HBED
Claim	MB909	ROS 909	HBED
Claim	MB910	ROS 910	HBED
Claim	MB911	ROS 911	HBED
Claim	MB914	ROS 914	HBED
Claim	MB917	ROS 917	HBED
Claim	MB918	ROS 918	HBED
Claim	MB919	ROS 919	HBED
Claim	MB920	ROS 920	HBED
Claim	MB921	ROS 921	HBED
Claim	P4898E	ROS 4898	HBED
Claim	P4899E	ROS 4899	HBED
Claim	P4900E	ROS 4900	HBED
Claim	P4901E	ROS 4901	HBED
Claim	W54059	ROS 54059	HBED
Claim	W54060	ROS 54060	HBED
Claim	W54061	ROS 54061	HBED
Claim	W54425	ROS 54425	HBED
Claim	CB12595	FUD CB 12595	HBED
Claim	CB12596	FUD 12596	HBED
Claim	MB241	FUD 241	HBED
Claim	P1737F	FUD 1737	HBED
Claim	P1747F	FUD 1747	HBED
Claim	P1748F	FUD 1748	HBED
Claim	P1753F	FUD 1753	HBED
Claim	P1754F	FUD 1754	HBED
Claim	P2965F	FUD 2965	HBED
Claim	P2966F	FUD 2966	HBED
Claim	P2967F	FUD 2967	HBED
Claim	P4605E	FUD 1 FR.	HBED
Claim	P4606E	FUD 2	HBED
Claim	P4609E	FUD 5	HBED
Claim	W54487	FUD 54487	HBED
Claim	W54488	FUD 54488	HBED
Claim	W54489	FUD 54489	HBED
Claim	W54490	FUD 54490	HBED
Claim	W54492	FUD 54492	HBED
Claim	W54493	FUD 54493	HBED
Claim	W54498	FUD 54498	HBED
Claim	W54656	FUD 54656	HBED
Claim	W54664	FUD 54664	HBED
Claim	W54665	FUD 54665	HBED

14

Claim	W54666	FUD 54666	HBED
Claim	W54668	FUD 54668	HBED
Claim	W54669	FUD 54669	HBED '
Claim	W54670	FUD 54670	HBED
Claim	W54671	FUD 54671	HBED
Claim	W54672	FUD 54672	HBED
Claim	W54673	FUD 54673	HBED
Claim	W54674	FUD 54674	HBED
Claim	W54675	FUD 54675	HBED
Claim	W54676	FUD 54676	HBED
Claim	W54678	FUD 54678	HBED
Claim	W54696	FUD 54696	HBED
Claim	W54697	FUD 54697	HBED
Claim	W54698	FUD 54698	HBED
Claim	W54849	FUD 54849	HBED
Claim	P1889C	PIN 2 FR.	HBED
Claim	P1890C	PIN 3 FR.	HBED
Claim	P1891C	PIN 4	HBED
Claim	P1892C	PIN 5	HBED
Claim	P1894C	PIN 7 FR.	HBED
Claim	P1895C	PIN 8	HBED
Claim	P1896C	PIN 9	HBED
Claim	P1897C	PIN 10 FR.	HBED
Claim	P2001E	PIN 18 FR.	HBED
Claim	P3924E	PIN 19 FR.	HBED
Claim	P4078C	PIN 16 FR.	HBED
Claim	P4079C	PIN 17 FR.	HBED
Claim	P94728	TAL 1 FR.	HBED
Claim	P94729	TAL 2 FR.	HBED
Claim	P94730	TAL 3 FR.	HBED
Claim	P94731	TAL 4 FR.	HBED
Claim	P94732	TAL 5 FR.	HBED
Claim	P94733	TAL 6 FR.	HBED
Claim	P94734	TAL 7	HBED
Claim	P94735	TAL 8	HBED
Claim	P94736	TAL 9	HBED
Claim	P94737	TAL 10	HBED
Claim	P94738	TAL 11	HBED
Claim	P94739	TAL 12 FR.	HBED
Claim	P94740	TAL 13 FR.	HBED
Claim	P94741	TAL 14 FR.	HBED
Claim	P94742	TAL 15 FR.	HBED
Claim	P94743	TAL 16 FR.	HBED
Claim	P94744	TAL 17 FR.	HBED
Claim	P94745	TAL 18 FR.	HBED
Claim	CB13362	BIG 13362	HBED
Claim	CB3020	BIG	HBED
Claim	CB5354	BIG	HBED
Claim	CB5355	BIG	HBED
Claim	CB5356	BIG	HBED
Claim	CB5357	BIG	HBED
Claim	CB5354	BIG	HBED

15

Claim	CB5355	BIG	HBED
Claim	CB5356	BIG	HBED
Claim	CB5357	BIG	HBED
Claim	P4313E	BIG 7	HBED
Claim	MB305	RES 305	HBED
Claim	MB316	RES 316	HBED
Claim	P1674F	RES 1674	HBED
Claim	P7025E	RES 7025	HBED
Claim	W54407	RES 54407	HBED
Claim	W54839	RES 54839	HBED
Claim	MB2256	DYC 2256	HBED
Claim	MB2257	DYC 2257	HBED
Claim	MB2258	DYC 2258	HBED
Claim	MB2259	DYC 2259	HBED
Claim	MB2260	DYC 2260	HBED
Claim	MB2261	DYC 2261	HBED
Claim	MB2540	DYC 2540	HBED
Claim	MB2541	DYC 2541	HBED
Claim	MB321	DYC 321	HBED
Claim	MB387	DYC 387	HBED
Claim	P3484F	DYC 3484	HBED
Claim	P3485F	DYC 3485	HBED
Claim	P3604F	DYC 3604	HBED
Claim	P3605F	DYC 3605	HBED
Claim	P3607F	DYC 3607	HBED
Claim	P3609F	DYC 3609	HBED
Claim	P3612F	DYC 3612	HBED
Claim	P3613F	DYC 3613	HBED
Claim	P3614F	DYC 3614	HBED
Claim	P3615F	DYC 3615	HBED
Claim	P3616F	DYC 3616	HBED
Claim	W54019	DYC 54019	HBED
Claim	W54020	DYC 54020	HBED
Claim	W54021	DYC 54021	HBED
Claim	W54022	DYC 54022	HBED
Claim	W54023	DYC 54023	HBED
Claim	W54026	DYC 54026	HBED
Claim	W54027	DYC 54027	HBED
Claim	W54028	DYC 54028	HBED
Claim	W54029	DYC 54029	HBED
Claim	W54031	DYC 54031	HBED
Claim	W54032	DYC 54032	HBED
Claim	W54036	DYC 54036	HBED
Claim	W54695	DYC 54695	HBED
Claim	P74157	PAR #203	HBED
Claim	P74158	PAR #204	HBED
Claim	P74159	PAR #205	HBED
Claim	P74168	PAR #214	HBED
Claim	P74169	PAR #215	HBED
Claim	P74170	PAR #216	HBED
Claim	P74195	PAR #241	HBED
Claim	P74196	PAR #242	HBED

16

Claim	P74197	PAR #243	HBED
Claim	29408	C.C.	HBED
Claim	29409	JAY	HBED
Claim	CB10603	DUB 10603	HBED
Claim	CB10604	DUB 10604	HBED
Claim	CB10605	DUB 10605	HBED
Claim	CB10606	DUB 10606	HBED
Claim	CB10607	DUB 10607
Claim	CB10608	DUB 10608	HBED
Claim	CB4991	DUB	HBED
Claim	CB4992	DUB	HBED
Claim	CB5361	DUB	HBED
Claim	CB5778	DUB	HBED
Claim	CB5779	DUB	HBED
Claim	CB5780	DUB	HBED
Claim	CB5781	DUB	HBED
Claim	CB5782	DUB	HBED
Claim	CB5791	DUB	HBED
Claim	CB5792	DUB	HBED
Claim	CB5793	DUB	HBED
Claim	CB5794	DUB	HBED
Claim	CB6080	DUB	HBED
Claim	CB6085	DUB	HBED
Claim	CB7064	DUB	HBED
Claim	DUB 10603	DUB	HBED
Claim	CB10660	FUD 10660	HBED
Claim	CB10661	FUD 10661	HBED
Claim	CB10662	FUD 10662	HBED
Claim	CB13403	FUD 13403	HBED
Claim	P52038	CARL 1	HBED
Claim	P52039	CARL 2	HBED
Claim	P52040	CARL 3	HBED
Claim	P52041	CARL 4	HBED
Claim	P52042	CARL 5	HBED
Claim	P52043	CARL 6	HBED
Claim	W49950	HUD 49950	HBED
Claim	W54005	HUD 54005	HBED
Claim	W54006	HUD 54006	HBED
Claim	W54007	HUD 54007	HBED
Claim	CB12425	FRE 12425	HBED
Claim	CB12426	FRE 12426	HBED
Claim	CB12439	FRE 12439	HBED
Claim	CB13386	FRE 13386	HBED
Claim	CB13390	FRE 13390	HBED
Claim	CB13391	FRE 13391	HBED
Claim	CB5458	FRE	HBED
Claim	CB5459	FRE	HBED
Claim	CB5460	FRE	HBED
Claim	CB5473	FRE	HBED
Claim	CB5478	FRE	HBED
Claim	CB5479	FRE	HBED
Claim	CB5503	FRE	HBED

17

Claim	CB5573	FRE	HBED
Claim	P4397E	REED NO. 2	HBED
Claim	P4408E	REED NO. 13	HBED
Claim	P4409E	REED NO. 14	HBED
Claim	P4410E	REED NO. 15	HBED
Claim	P4411 E	REED NO. 16	HBED
Claim	P4426E	REED NO. 31	HBED
Claim	P4427E	REED NO. 32	HBED
Claim	P4428E	REED NO. 33	HBED
Claim	P4429E	REED NO. 34	HBED
Claim	P4444E	REED NO. 49	HEED
Claim	P4445E	REED NO. 50	HBED
Claim	P5030E	FRE 5030	HBED
Claim	P7818E	FRE 7818	HBED
Claim	W54008	FRE 54008	HBED
Claim	W54009	FRE 54009	HEED
Claim	W54010	FRE 54010	HBED
Claim	W54011	FRE 54011	HBED
Claim	W54012	FRE 54012	HBED
Claim	W54013	FRE 54013	HBED
Claim	W54014	FRE 54014	HEED
Claim	W54078	FRE 54078	HEED
Claim	W54080	FRE 54080	HBED
Claim	W54081	FRE 54081	HBED
Claim	W54083	FRE 54083	HEED
Claim	W54084	FRE 54084	HEED
Claim	MB2211	RUT 2211	HBED
Claim	MB2212	RUT 2212	HBED
Claim	MB2213	RUT 2213	HBED
Claim	MB2251	RUT 2251	HBED
Claim	MB2252	RUT 2252	HBED
Claim	MB2253	RUT 2253	HEED
Claim	MB2254	RUT 2254	HBED
Claim	MB2255	RUT 2255	HBED
Claim	MB279	RUT 279	HBED
Claim	MB280	RUT 280	HBED
Claim	MB283	RUT 283	HBED
Claim	MB284	RUT 284	HBED
Claim	MB285	RUT 285	HBED
Claim	MB286	RUT 286	HBED
Claim	MB287	RUT 287	HBED
Claim	MB288	RUT 288	HBED
Claim	MB289	RUT 289	HBED
Claim	MB297	RUT 297	HBED
Claim	MB298	RUT 298	HBED
Claim	MB299	RUT 299	HBED
Claim	MB388	RUT 388	HBED
Claim	MB389	RUT 389	HBED
Claim	MB390	RUT 390	HBED
Claim	MB392	RUT 392	HBED
Claim	MB393	RUT 393	HEED
Claim	MB394	RUT 394	HBED

18

Claim	MB395	RUT 395	HBED
Claim	MB396	RUT 396	HBED
Claim	MB397	RUT 397	HBEP
Claim	MB398	RUT 398	HBED
Claim	MB399	RUT 399	HBED
Claim	MB400	RUT 400	HBED
Claim	MB912	RUT 912	HBED
Claim	MB913	RUT 913	HBED
Claim	MB922	RUT 922 F	HBED
Claim	W54058	RUT 54058	HBED
Claim	W54402	RUT 54402	HBED
Claim	W54408	RUT 54408	HBED
Claim	W54409	RUT 54409	HEED
Claim	W54410	RUT 54410	HEED
Claim	W54411	RUT 54411	HBED
Claim	W54412	RUT 54412	HBED
Claim	W54413	RUT 54413	HBED
Claim	W54414	RUT 54414	HBED
Claim	W54416	RUT 54416	HBED
Claim	W54417	RUT 54417	HBED
Claim	W54418	RUT 54418	HBED
Claim	W54419	RUT 54419	HBED
Claim	W54431	RUT 54431	HBED
Claim	W54432	RUT 54432	HBED
Claim	W54436	RUT 54436	HBED
Claim	W54500	RUT 54500	HBED
Claim	W54611	RUT 54611	HBED
Claim	CB6728	ALF	HBED
Claim	CB6735	EAGLE	HBED
Claim	CB9770	ROSE	HBED
Claim	W46951	ARBOUR 27	HBED
Claim	W48169	ARBOUR 15	HBED
Claim	W48170	ARBOUR 16	HBED
Claim	W48171	ARBOUR 17	HBED
Claim	W48173	ARBOUR 19	HEED
Claim	W48174	ARBOUR 20	HBED
Claim	W49122	ARBOUR 33	HBED
Claim	CB4764		HBED
Claim	CB5374	DYC	HBED
Claim	CB5376	DYC	HBED
Claim	CB5379		HBED
Claim	CB5380		HBED
Claim	CB5381		HBED
Claim	CB5832		HEED
Claim	CB5384		HBED
Claim	CB12812	LIM 2	HBED
Claim	CB12815	LIM 4	HBED
Claim	CB12816	LIM 6	HBED
Claim	CB12817	LIM 7	HBED
Claim	CB12819	LIM 9	HBED
Claim	CB12820	LIM 8	HBED
Claim	CB12821	MOO 1	HBED

19

Claim	CB12822	MOO 2	HBED
Claim	CB12824	MOO 6	HEED
Claim	CB12825	MOO 5	HBED
Claim	CB12826	MOO 4	HBED
Claim	CB12827	MOO 7	HBED
Claim	CB12828	MOO 8	HBED
Claim	P9956E	BLUE 1	HBED
Claim	P9957E	BLUE 2	HBED
Claim	P9960E	BLUE 5	HBED
Claim	P9963E	BLUE 8	HBED
Claim	P8865E	BLUE 10	HBED
Claim	P99664	BLUE 11	HEED
Claim	P6977E	STACK 4	HBED
Claim	P8397E	STACK 5	HBED
Claim	W47077	STACK 2	HBED
Claim	CB6558		HBED
Claim	CB6560		HBED
Claim	CB6568		HBED
Claim	CB6570		HBED
Claim	CB6571		HBED
Claim	CB6572		HBED
Claim	CB6573		HBED
Claim	MB2210	HAR 2210	HBED
Claim	MB2243	HAR 2243	HBED
Claim	MB2244	HAR 2244	HBED
Claim	MB2245	HAR 2245	HBED
Claim	MB2246	HAR 2246	HBED
Claim	MB2247	HAR 2247	HBED
Claim	MB2248	HAR 2248	HBED
Claim	MB2249	HAR 2249	HBED
Claim	MB2250	HAR 2250	HBED
Claim	MB2264	HAR 2264	HBED
Claim	MB 2282	HAR 2282	HBED
Claim	MB2283	HAR 2283	HBED
Claim	MB2284	HAR 2284	HBED
Claim	MB2285	HAR 2285	HBED
Claim	MB 2291	HAR 2291	HBED
Claim	MB2292	HAR 2292	HBED
Claim	MB2293	HAR 2293	HBED
Claim	MB2294	HAR 2294	HBED
Claim	MB2295	HAR 2295	HBED
Claim	MB2296	HAR 2296	HBED
Claim	MB245	HAR 245	HBED
Claim	MB246	HAR 246	HBED
Claim	MB247	HAR 247	HBED
Claim	MB 248	HAR 248	HBED
Claim	MB249	HAR 249	HBED
Claim	MB250	HAR 250	HBED
Claim	MB2501	HAR 2501	HBED
Claim	MB2502	HAR 2502	HBED
Claim	MB2503	HAR 2503	HBED
Claim	MB2505	HAR 2505	HBED

20

Claim	MB2506	HAR 2506	HBED
Claim	MB251	HAR 251	HBED
Claim	MB2513	HAR 2513	HBED
Claim	MB2514	HAR 2514	HBED
Claim	MB2515	HAR 2515	HBED
Claim	MB2516	HAR 2516	HBED
Claim	MB2517	HAR 2517	HBED
Claim	MB2519	HAR 2519	HBED
Claim	MB252	HAR 252	HBED
Claim	MB2520	HAR 2520	HBED
Claim	MB2521	HAR 2521	HBED
Claim	MB2522	HAR 2522	HBED
Claim	MB2523	HAR 2523	HBED
Claim	MB2524	HAR 2524	HBED
Claim	MB2525	HAR 2525	HBED
Claim	MB2526	HAR 2526	HBED
Claim	MB2527	HAR 2527	HBED
Claim	MB2528	HAR 2528	HBED
Claim	MB2529	HAR 2529	HBED
Claim	MB253	HAR 253	HBED
Claim	MB2530	HAR 2530	HBED
Claim	MB2531	HAR 2531	HBED
Claim	MB2532	HAR 2532	HBED
Claim	MB2533	HAR 2533	HBED
Claim	MB2534	HAR 2534	HBED
Claim	MB2535	HAR 2535	HBED
Claim	MB2536	HAR 2536	HBED
Claim	MB2537	HAR 2537	HBED
Claim	MB2538	HAR 2538	HBED
Claim	MB254	HAR 254	HBED
Claim	MB255	HAR 255	HBED
Claim	MB256	HAR 256	HBED
Claim	MB257	HAR 257	HBED
Claim	MB258	HAR 258	HBED
Claim	MB259	HAR 259	HBED
Claim	MB260	HAR 260	HBED
Claim	MB276	HAR 276	HBED
Claim	MB277	HAR 277	HBED
Claim	MB278	HAR 278	HBED
Claim	MB281	HAR 281	HBED
Claim	MB296	HAR 296	HBED
Claim	MB301	HAR 301	HBED
Claim	MB306	HAR 306	HBED
Claim	MB311	HAR 311	HBED
Claim	MB312	HAR 312	HBED
Claim	MB322	HAR 322	HBED
Claim	MB223	HAR 323	HBED
Claim	MB325	HAR 325	HBED
Claim	MB326	HAR 326	HBED
Claim	MB327	HAR 327	HBED
Claim	MB328	HAR 328	HBED
Claim	MB329	HAR 329	HBED

21

Claim	MB330	HAR 330	HBED
Claim	MB331	HAR 331	HBED
Claim	MB332	HAR 332	HBED
Claim	MB333	HAR 333	HBED
Claim	MB334	HAR 334	HBED
Claim	MB335	HAR 335	HBED
Claim	MB336	HAR 336	HBED
Claim	MB337	HAR 337	HBED
Claim	MB338	HAR 338	HBED
Claim	MB339	HAR 339	HBED
Claim	MB340	HAR 340	HBED
Claim	MB346	HAR 346	HBED
Claim	MB369	HAR 369	HBED
Claim	MB370	HAR 370	HBED
Claim	MB371	HAR 371	HBED
Claim	MB374	HAR 374	HBED
Claim	MB376	HAR 376	HBED
Claim	MB380	HAR 380	HBED
Claim	MB381	HAR 381	HBED
Claim	MB382	HAR 382	HBED
Claim	MB923	HAR 923	HBED
Claim	MB924	HAR 924	HBED
Claim	MB925	HAR 925	HBED
Claim	MB926	HAR 926	HBED
Claim	MB927	HAR 927	HBED
Claim	MB938	HAR 938	HBED
Claim	MB939	HAR 939	HBED
Claim	MB940	HAR 940	HBED
Claim	MB941	HAR 941	HBED
Claim	MB953	HAR 953	HBED
Claim	MB954	HAR 954	HBED
Claim	MB963	HAR 963	HBED
Claim	MB967	HAR 967	HBED
Claim	MB968	HAR 968	HBED
Claim	MB991	HAR 991	HBED
Claim	MB992	HAR 992	HBED
Claim	MB993	HAR 993	HBED
Claim	MB994	HAR 994	HBED
Claim	MB996	HAR 996	HBED
Claim	MB997	HAR 997	HBED
Claim	P2939F	NIM 2939	HBED
Claim	P2944F	NIM 2944	HBED
Claim	P2945F	NIM 2945	HBED
Claim	P2946F	NIM 2946	HBED
Claim	P2947F	NIM 2947	HBED
Claim	P2948F	NIM 2948	HBED
Claim	P2949F	NIM 2949	HBED
Claim	MB201	NIM 201	HBED
Claim	MB203	NIM 203	HBED
Claim	MB207	NIM 207	HBED
Claim	MB208	NIM 208	HBED
Claim	MB209	NIM 209	HBED

22

Claim	MB210	NIM 210	HBED
Claim	MB211	NIM 211	HBED
Claim	MB217	NIM 217	HBED
Claim	MB2297	HAR 2297	HBED
Claim	MB2298	HAR 2298	HBED
Claim	MB2299	HAR 2299	HBED
Claim	MB2300	HAR 2300	HBED
Claim	W54829	NIM 54829	HBED
Claim	W54830	NIM 54830	HBED
Claim	MB3542	WAN2542	HBED
Claim	MB2543	WAN 2543	HBED
Claim	M2544	WAN 2544	HBED
Claim	M2545	WAN 2545	HBED
Claim	M2546	WAN 2546	HBED
Claim	M2547	WAN 2547	HBED
Claim	M2548	WAN 2548	HBED
Claim	M2549	WAN 2549	HBED
Claim	M2550	WAN 2550	HBED

Part 2 of SCHEDULE "A" to $300,000,000 USD Fixed Charge Demand Debenture from Hudson Bay Exploration and Development Company Limited to BNY Trust Company of Canada dated December 17, 2004

Mineral Leases
Mineral Lease	ML037	RAIL MINING LEASE	HBED

Miscellaneous Leases
Misc Lease	MSC3722	MISC LEASE 3722	HBED
Misc Lease	MSC3578	MISC LEASE 3578	HBED

23

QuickLinks

Exhibit 99.17

EX-99.18

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Exhibit 99.18

Issued to:	BNY Trust Company of Canada 4 King Street West, Suite 1101 Toronto, ON M5N 1K9
By:	Hudson Bay Exploration and Development Company Limited 2200-201 Portage Avenue Winnipeg, MB R3B 3L3

FIXED CHARGE

$300,000,000.00 USD

DEMAND DEBENTURE

(IMMATERIAL PROPERTIES —
SASKATCHEWAN)

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

together with its successors and permitted assigns (hereinafter called "the Issuer") for value received hereby promises to pay to or to the order of BNY TRUST COMPANY OF CANADA, who and whose successors and assigns are herein and in the attached conditions hereto called the "Holder", on demand, the sum of Three Hundred Million Dollars ($300,000,000.00) in lawful money of the United States of America, at the office of the Holder specified above, or at such other place or places as the Holder may from time to time designate and will pay on demand at said location to the Holder interest thereon or on so much thereof as is from time to time outstanding at the rate of 30% per annum calculated semi-annually in arrears and payable, both before and after demand and judgment.

        As continuing security for payment of all monies from time to time owing hereunder (including without limitation, interest and all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture), the Issuer hereby mortgages and charges to and in favour of the Holder, its successors and assigns, as and by way of a fixed and specific mortgage and charge (collectively, the "Charge"), all real and immovable property (including leasehold interests and any other interest or right in real or immovable property) now or hereafter owned or acquired by the Issuer and situate in the Provinces of Manitoba or Saskatchewan, together with any claims, permits, licenses, privileges, benefits, easements, rights of way, mineral and surface rights, minerals and mineral claims, and all other rights, estate, title or interests of any kind or nature whatsoever pertaining thereto, and including without limiting the generality of the foregoing, all of its interest and estate in the claims described in Part 1 of Schedule A hereto and all of its interest and estate in the leases and permits described in Part 2 of Schedule A hereto (the property subject to the Charge, being collectively, the "Collateral").

        THIS DEBENTURE is issued subject to and with the benefit of the Conditions and Schedule attached hereto, all of which are to be deemed part of this Debenture. The Issuer intends that the security interests created by this Debenture will attach property in which it has rights on its execution of this Debenture and will attach property which it acquires thereafter as soon as the Issuer acquires rights therein.

        IN WITNESS WHEREOF the Issuer has caused its corporate seal to be affixed hereto, duly attested by the hands of its proper officers in that regard, and this Debenture is dated the 10th day of December, 2004.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/ Brian Gordon
	Name: Brian Gordon Title: Secretary

2

THE CONDITIONS HEREINBEFORE REFERRED TO

1. The Charge shall not extend to or apply to, and the Collateral shall not include, (i) the last day of the term of any lease or agreement therefor but if the Charge should become enforceable the Issuer shall stand possessed of such last day in trust to assign the same to any person acquiring such term; (ii) any Collateral that is excluded from the Charge by the Holder in writing and (iii) any Excluded Assets (as that term is defined in the Indenture to be entered into between HudBay Mining and Smelting Inc. and The Bank of New York, as the same may be amended, supplemented or otherwise varied from time to time (the "Indenture").

2. The principal monies and interest hereby secured and other monies from time to time owing hereunder will be paid without regard to any equities between the Issuer and the original or any intermediate holder hereof or any right of set-off or cross-claim.

3. The Holder may waive any breach by the Issuer of any of the provisions contained in this Debenture or any default by the Issuer in the observance or performance of any covenant or conditions required to be observed or performed by the Issuer under the terms of this Debenture, provided always that no such waiver of the Holder shall extend to or be taken in any manner whatsoever to affect any subsequent breach or default or the rights resulting therefrom.

4. In the event that the Issuer fails to pay any amount payable hereunder when due or the notes issued under the Indenture have become due and payable, the Charge shall become and be enforceable immediately without the necessity of any further act or formality and the Holder without limiting or restricting any other rights, powers, privileges and remedies which the Holder may at any time have under this Debenture, contract, at law, in equity or howsoever otherwise, shall have the following described rights, powers, privileges and remedies, namely:

(a)

to enter upon and to possess all of or any portion or portions of the Collateral with the power to exclude the Issuer and its officers, employees and agents therefrom;



(b)

to collect the rents, revenues, profits and incomes of and from the Collateral and any portion or portions thereof;



(c)

to seize and distrain upon any of the Collateral which is real and immoveable property or any portion or portions thereof and by distress warrant to recover by way of rent reserved as in the case of a demise of real property the indebtedness hereby secured or any portion or portions thereof together with all of the Holder's costs, charges and expenses attendant upon the levying of such distress as in like manner of distress for rent, provided however that nothing in this subparagraph or anything done pursuant thereto by or on behalf of the Holder shall result in the Holder being or being deemed to be a mortgagee in possession or liable for the performance of any of the obligations of a landlord;



(d)

to preserve, to maintain, to operate and to carry on the Collateral or any portion or portions thereof;



(e)

to make such replacements of or for and such additions to the Collateral and any portion or portions thereof as the Holder shall deem advisable;



(f)

to sell, to lease or to otherwise dispose of from time to time the Collateral and any portion or portions thereof whether by public auction or by private sale or otherwise and either for cash or on credit or partly for cash and partly for credit and on such terms and conditions as the Holder may determine, provided however that it shall not be incumbent on the Holder to sell, lease or otherwise dispose of the Collateral or any portion or portions thereof but the Holder may peaceably use and possess the Collateral or any portion or portions thereof without hindrance or interruption by the Issuer or by any other person or persons whomsoever, and provided further however that wherever any sale or other disposition is made in whole or in part upon credit, the Holder shall not be taken or deemed to have received payment or satisfaction with respect to that portion of any such sale or disposition so made upon credit until the Holder has received actual payment in full;



(g)

to convey, to transfer, to lease and to assign to and to vest in the purchaser or purchasers, or as the case may be the lessee or lessees, the title to or ownership of or as the case may be a leasehold interest in the Collateral and any portion or portions thereof; and

3

(h)

to commence and pursue such legal action, suit, remedy or proceeding against the Issuer, the Collateral or any portion or portions thereof as may be authorized or permitted hereunder or at law or in equity including proceedings in any court of competent jurisdiction for the appointment of a receiver or for sale of the Collateral or any portion or portions thereof, and to file such proofs of claim and other documents as may be necessary or advisable in order to have its claim lodged in any bankruptcy, winding-up or other judicial proceedings relative to the Issuer;

and the Holder may exercise the foregoing rights, powers, privileges and remedies (and any other rights, powers, privileges and remedies to which the Holder is entitled) or any of them at such time or times following the occurrence of any one or more events of default in such manner as the Holder in its sole discretion deems expedient.

        Provided always that the Holder shall not be bound (whether before or after default hereunder) to collect, dispose of, realize or enforce the Charge against the Collateral or any portion or portions thereof and except for gross negligence, willful misconduct and criminal acts or omissions, the Holder shall not be liable or responsible for any loss or damage which may accrue or be sustained in consequence of the Holder's negligence or the negligence of any officer, servant, agent, solicitor, counsel or other attorney or receiver employed by or appointed by the Holder in the collection, disposition, realization or enforcement of the security hereby constituted, and the Holder shall not be liable or accountable for any failure to exercise any of its rights, powers, privileges and remedies aforesaid or any of them at any time and from time to time.

        Provided further however that notwithstanding the realization of the security hereby constituted, the Issuer shall nevertheless remain fully liable to the Holder for any deficiency or deficiencies owing to the Holder with respect to the indebtedness hereby secured.

5. If the Charge shall become enforceable, the Holder may, by instrument in writing, appoint any person or persons, whether an officer or officers or employee or employees of the Holder or not to be a receiver or receiver-manager of all or any part of the Collateral and may remove any receiver or receiver-manager so appointed and appoint another or others in his or their stead. Any such receiver or receiver-manager so appointed to the extent permitted by law, shall have power:

(a)

to take possession of, collect and get in the Collateral and for that purpose to take any proceedings in the name of the Issuer or otherwise;



(b)

to carry on or concur in carrying on the business of the Issuer and for that purpose to raise money on the Collateral in priority to this Debenture or otherwise;



(c)

to sell or concur in selling any of the Collateral and carry any such sale into effect by conveying in the name or on behalf of the Issuer or otherwise;



(d)

to make any arrangement or compromise which he or it shall think expedient in the interest of the Holder.

        Any receiver or receiver-manager so appointed shall be deemed to be the agent of the Issuer and the Issuer shall be solely responsible for his or its or their acts or defaults and for his or its or their remuneration and expenses, and except for gross negligence, willful misconduct and criminal acts and omissions, the Holder shall not be in any way responsible for any misconduct or negligence on the part of any such receiver or receiver-manager.

        All monies received by such receiver or receiver-manager from any realization of all or any part of the Collateral after providing for payment of charges ranking prior to this Debenture and for all costs, charges and expenses of or incidental to the exercise of any of the powers of such receiver or receiver-manager shall be applied in or towards satisfaction of this Debenture. The rights and powers conferred by this section are in supplement of and not in substitution for any rights the Holder may from time to time have.

6. The Issuer agrees to pay to the Holder forthwith upon demand all expenses incurred by the Holder in recovering or enforcing payment of monies owing hereunder or realizing upon this Debenture or any other securities for such monies, including expenses of taking possession, protecting and realizing upon any Collateral together with interest at the rate provided for in this Debenture from the date of payment of such expenditures.

4

7. The principal, interest and other monies payable hereunder shall be paid in lawful money of the United States of America.

8. The Holder may in its discretion:

(a)

release any Collateral from the Charge;



(b)

agree to any modification, compromise, release or waiver of the rights of the Holder against the Issuer or against any Collateral, whether such rights shall arise under the Debenture or otherwise;



(c)

agree to accept any other properties or securities instead of the Debenture;

and the exercise of such discretion shall not diminish the obligation of the Issuer to perform any of the covenants contained in this Debenture.

9. This Debenture and all amendments and supplements thereto are and shall at all times be and be deemed to be in addition to and not in substitution for any other security or securities ("Other Securities") now or hereafter held or acquired by the Holder in connection with or to secure the obligations hereby secured or any part or parts thereof and:

(a)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under the Debenture shall not release or affect or create any merger or alter or prejudice or derogate from the Other Securities or any of them and the obligations hereby secured;



(b)

to the maximum extent permitted by applicable law, the taking, realization, foreclosure, alteration or cancellation of or any other dealing or dealings with or actions taken or omissions made under any of the Other Securities shall not release or affect or create any merger or alter or prejudice or derogate from this Debenture and the obligations hereby secured.

10. This Debenture is issued to the Holder as security to secure the indebtedness, obligations and liabilities of the Issuer existing from time to time as described in the debenture delivery agreement dated the date hereof, executed by the Issuer in favour of the Holder, as such agreement may be amended, supplemented, restated or replaced from time to time.

11. The Issuer hereby covenants and agrees that it will at all times do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all and singular all such further acts, deeds, mortgages, hypothecs, transfers, assignments and assurances in law as the Holder may require for the better assuring, mortgaging, hypothecating, charging, transferring, assigning and confirming unto the Holder the property and assets hereby mortgaged and charged or intended so to be or which the Issuer may hereafter become bound to mortgage, hypothecate, transfer, assign and charge in favour of the Holder and for the better accomplishing and effectuating of this Debenture.

12. The Issuer hereby declares and covenants that:

(a)

The Land Contracts (Actions) Act (Saskatchewan) shall have no application to any actions, as defined in The Land Contracts (Actions) Act, with respect to this Debenture; and



(b)

The Limitation of Civil Rights Act (Saskatchewan) shall have no application to:



(i)

this Debenture;



(ii)

any mortgage, charge or other security for the payment of money made, given or created by this Debenture;



(iii)

any agreement or instrument renewing or extending or collateral to this Debenture or renewing or extending or collateral to any mortgage, charge or other security referred to or mentioned in clause (ii) of this subparagraph (b); or



(iv)

the rights, powers or remedies of the Holder under this Debenture or under any mortgage, charge or other security, agreement or instrument referred to or mentioned in clauses (ii), (iii) or (iv) of this subparagraph (b)

5

13. This Debenture and all its provisions shall be governed by and construed in accordance with the laws of Saskatchewan, shall enure to the benefit of the Holder, and its respective successors and assigns, and shall be binding upon the Issuer, its successors and assigns.

        These conditions are part of the Debenture executed by the Issuer dated the 10^th day of December, 2004.

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED
Per:	/s/ Brian Gordon
	Name: Brian Gordon Title: Secretary

6

SCHEDULE A

HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED

NON-MATERIAL PROPERTIES

SASKATCHEWAN

Part 1

Claims
Claim	S-99567	CAB 99567	HBED
Claim	S-99616	CAB 99616	HBED
Claim	S-102621	CAB 102621	HBED
Claim	S-102622	CAB S102622	HBED
Claim	S-102623	CAB S102623	HBED
Claim	S102624	CAB S102624	HBED
Claim	S108774	CAB 108774	HBED
Claim	S-105854	TYR 105854	HBED
Claim	CBS 3856	FON 3856	HBED
Claim	CBS 3857	FON 3857	HBED
Claim	CBS 3859	FON 3859	HBED
Claim	CBS 3860	FON 3860	HBED
Claim	CBS 3865	FON 3865	HBED
Claim	CBS 3866	FON 3866	HBED
Claim	CBS 3867	FON 3867	HBED
Claim	CBS 3868	FON 3868	HBED
Claim	CBS 3869	FON 3869	HBED
Claim	CBS 3870	FON 3870	HBED
Claim	CBS 3871	FON 3871	HBED
Claim	CBS 3872	FON 3872	HBED
Claim	CBS 3873	FON 3873	HBED
Claim	CBS 3874	FON 3874	HBED
Claim	CBS 3876	FON 3876	HBED
Claim	CBS 3877	FON 3877	HBED
Claim	CBS 3878	FON 3878	HBED
Claim	CBS 3880	FON 3880	HBED
Claim	CBS 3881	FON 3881	HBED
Claim	CBS 3882	FON 3882	HBED
Claim	CBS 3883	FON 3883	HBED
Claim	CBS 3886	FON 3886	HBED
Claim	CBS 3887	FON 3887	HBED
Claim	CBS 3888	FON 3888	HBED
Claim	CBS 3890	FON 3890	HBED
Claim	CBS 3892	FON 3892	HBED
Claim	CBS 3893	FON 3893	HBED
Claim	CBS 3895	FON 3895	HBED
Claim	CBS 3896	FON 3896	HBED
Claim	CBS 3897	FON 3897	HBED
Claim	CBS 3898	FON 3898	HBED
Claim	CBS 3899	FON 3899	HBED
Claim	CBS 3900	FON 3900	HBED
Claim	CBS 3901	FON 3901	HBED
Claim	S-98950	FON 98950	HBED
Claim	S-99551	FON 99551	HBED

1

Claim	S-99552	FON 99552	HBED
Claim	S-99559	FON 99559	HBED
Claim	S-101045	FON 101045	HBED
Claim	S-105851	FON 105851	HBED
Claim	S-105863	FON 105863	HBED
Claim	S-105866	FON 105866	HBED
Claim	S-105867	FON 105867	HBED
Claim	S-105868	FON 105868	HBED
Claim	S-105869	FON 105869	HBED
Claim	S-105876	FON 105876	HBED
Claim	S-105899	FON S105899	HBED
Claim	S-105901	FON S105901	HBED
Claim	S-105902	FON S105902	HBED
Claim	S-105903	FON S105903	HBED
Claim	S-105904	FON S105904	HBED
Claim	S-105905	FON S10505	HBED
Claim	S-105906	FON S10506	HBED
Claim	S-108794	FON 108794	HBED
Claim	S-108810	FON 108810	HBED
Claim	S-108813	FON 108813	HBED
Claim	S-108814	FON 108814	HBED
Claim	S-108815	FON 108815	HBED
Claim	S-108816	FON 108816	HBED
Claim	S-108819	FON 108819	HBED
Claim	S-108820	FON 108820	HBED
Claim	S-108821	FON 108821	HBED
Claim	S-108822	FON 108822	HBED
Claim	S-108833	FON 108833	HBED
Claim	S-108843	FON 108843	HBED
Claim	S-108844	FON 108844	HBED
Claim	S-108845	FON 108845	HBED
Claim	S-108846	FON 108846	HBED
Claim	S-108847	FON 108847	HBED
Claim	S-98942	WAG 98942	HBED
Claim	S-99571	WAG 99571	HBED
Claim	S-105898	WAG S105898	HBED
Claim	S-105907	WAG S105907	HBED
Claim	S-105908	WAG S105908	HBED
Claim	S-105909	WAG Sl05909	HBED
Claim	S-105910	WAG S105910	HBED
Claim	S-105911	WAG Sl05911	HBED
Claim	S-105912	WAG S105912	HBED
Claim	S-105914	WAG 105914	HBED
Claim	S-108776	WAG	HBED
Claim	S-108785	WAG 108786	HBED
Claim	S-108790	WAG 108790	HBED
Claim	S-105913	NER S105913	HBED
Claim	CBS 3902	NER 3902	HBED
Claim	CBS 3903	NER 3903	HBED
Claim	S-98693	NER 79	HBED
Claim	S-98694	NER 80	HBED
Claim	S-98697	NER 83	HBED
Claim	S-98698	NER 84	HBED
Claim	S-98931	NER 98931	HBED

2

Claim	S-98932	NER 98932	HBED
Claim	S-98937	NER 98937	HBED
Claim	S-99555	NER 99555	HBED
Claim	S-99558	NER 99558	HBED
Claim	S-99572	NER 99572	HBED
Claim	S-99573	NER 99573	HBED
Claim	S-99574	NER 99574	HBED
Claim	S-99575	NER 99575	HBED
Claim	S-99576	NER 99576	HBED
Claim	S-99602	NER 99602	HBED
Claim	S-99603	NER 99603	HBED
Claim	S-99604	NER 99604	HBED
Claim	S-99605	NER 99605	HBED
Claim	S-99606	NER 99606	HBED
Claim	S-99609	NER 99609	HBED
Claim	S-99610	NER 99610	HBED
Claim	S-99611	NER 99611	HBED
Claim	S-99617	NER 99617	HBED
Claim	S-99619	NER 99619	HBED
Claim	S-99625	NER 99625	HBED
Claim	S-99629	NER 99629	HBED
Claim	S-99630	NER 99630	HBED
Claim	S-99631	NER 99631	HBED
Claim	S-99632	NER 99632	HBED
Claim	S-101041	NER 101041	HBED
Claim	S-101042	NER 101042	HBED
Claim	S-101043	NER 101043	HBED
Claim	S-101044	NER 101044	HBED
Claim	S-102067	NER 49	HBED
Claim	S-102068	NER 50	HBED
Claim	S-102069	NER 51	HBED
Claim	S-102070	NER 52	HBED
Claim	S-102071	NER 53	HBED
Claim	S-102072	NER 54	HBED
Claim	S-102073	NER 55	HBED
Claim	S-102074	NER 56	HBED
Claim	S-102554	NER 61	HBED
Claim	S-105856	NER 105867	HBED
Claim	S-105857	NER 105857	HBED
Claim	S-105858	NER 105858	HBED
Claim	S-105859	NER 105859	HBED
Claim	S-105860	NER 105860	HBED
Claim	S-105861	NER 105861	HBED
Claim	S-105865	NER 105865	HBED
Claim	S-105870	NER 105870	HBED
Claim	S-105872	NER 105872	HBED
Claim	S-105873	NER 105873	HBED
Claim	S-105874	NER 105874	HBED
Claim	S-105877	NER 105877	HBED
Claim	S-105878	NER 105878	HBED
Claim	S-105879	NER 105879	HBED
Claim	S-105880	NER 105880	HBED
Claim	S-105881	NER 105881	HBED
Claim	S-105882	NER 105882	HBED

3

Claim	S-105883	NER 105883	HBED
Claim	S-105884	NER 105884	HBED
Claim	S-105885	NER 105885	HBED
Claim	S-105886	NER 105886	HBED
Claim	S-105887	NER 105887	HBED
Claim	S-105888	NER 105888	HBED
Claim	S-105889	NER 105889	HBED
Claim	S-105890	NER 105890	HBED
Claim	S-105891	NER 105891	HBED
Claim	S-105892	NER 105892	HBED
Claim	S-105893	NER S105893	HBED
Claim	S-105894	NER S105894	HBED
Claim	S-105895	NER Sl05895	HBED
Claim	S-105896	NER S105896	HBED
Claim	S-105897	NER S105897	HBED
Claim	S-105900	NER 105900	HBED
Claim	S-108778	NER 108778	HBED
Claim	S-108783	NER 108783	HBED
Claim	S-108799	NER 108799	HBED
Claim	CBS 3879	FON 3879	HBED
Claim	CBS 3894	FON 3894	HBED
Claim	S-108824	FON 108824	HBED
Claim	CBS 3165	FON	HBED
Claim	CBS 3179	FON 3179	HBED
Claim	CBS 3718	FON 3718	HBED
Claim	CBS 3719	FON 3719	HBED
Claim	S-98670	FON 131	HBED
Claim	S-98671	FON 132	HBED
Claim	S-98672	FON 133	HBED
Claim	S-98673	FON 134	HBED
Claim	S-98674	FON 135	HBED
Claim	S-98675	FON 136	HBED
Claim	S-98676	FON 137	HBED
Claim	S-98677	FON 138	HBED
Claim	S-98678	FON 139	HBED
Claim	S-98679	FON 140	HBED
Claim	S-98680	FON 141	HBED
Claim	S-98681	FON 142	HBED
Claim	S-98682	FON 143	HBED
Claim	S-99594	FON 99594	HBED
Claim	S-102565	FON 125	HBED
Claim	S-102566	FON 126	HBED
Claim	S-102567	FON 127	HBED
Claim	S-102568	FON 128	HBED
Claim	S-102569	FON 129	HBED
Claim	S-102570	FON 130	HBED
Claim	S-99585	RYE 99585	HBED
Claim	S-99614	RY3 99614	HBED

4

Part 2

Leases and Permits

Mineral Surface Leases
Mineral Surface Lease	Q-1109	TURKEY TRACK	HBED

5

QuickLinks

Exhibit 99.18
FIXED CHARGE
THE CONDITIONS HEREINBEFORE REFERRED TO
SCHEDULE A HUDSON BAY EXPLORATION AND DEVELOPMENT COMPANY LIMITED NON-MATERIAL PROPERTIES SASKATCHEWAN